Real estate agents are sometimes described in the same category as used car salespeople! Now I've known a few used car sales folks and they weren't all that bad, so why don't we REALTORS get any respect?
First, remember that there is a difference between a real estate agent and a REALTOR. REALTORS are members of the National Association fo REALTORS and follow a code of ethics. Many of us are continually updating our skills with education and seminars to better serve our clients. Designations like GRI and MASTER of Real Estate describe agents that have made significant investments (more than 1 year of classes for each designation) in their skills beyond the minimum needed to become licensed by the state.
I had two recent experiences that may shed some light on this subject. The first was yesterday when a listing client decided out of the blue that he really didn't want to sell his property even though we were just about to receive two very competitive offers on his home! It wasn't the fact that he decided not to sell that shocked me. It was that he had made up his mind a few weeks ago, never told me and then on the verge of success, killed the deal. But that's not the point of this example! Rather it was that this morning he called and said he really did want to sell and could we still get those offers? Now I'm not a miracle worker and in this market where entry level homes are moving quickly with multiple offers I wasn't sure if the buyers would come back. I couldn't promise him anything but that I would try and salvage the offers. A few minutes later after many mea culpas to the buyers' agents, I think we will get the offers. Whew! Still isn't a done deal but we are still in the game! Yes, REALTORS ride the emotional roller coaster everyday! We have lifetime passes!
The second experience was last week when I was able to inform a young couple, who had been outbid several times on a new home, that they were indeed in contract on a nice 2300 sf, 9 year new home. The husband looked at me and said, "Tim, I never thought I could get my wife such a nice place." We aren't closed yet but in a few weeks they will "be home!"
This latter kind of experience is what powers me and many REALTORS through the roller coaster days! The lost transactions, the showings where the buyers never show up, the rainy day Open Homes, the cancelled listings after you've spent hundreds, if not thousands, of dollars trying to market the property, and the buyers who "got a deal" using another agent after you work with them for months!
All of those tough days are more than compensated by one minute with a thrilled client. Yes, there are agents that aren't motivated that way. Too bad for them. They are missing out on one of life's greatest treasures- the feeling that comes when you help someone else and place their interests before your own. The good REALTORS really do care. If you don't have one that you know works that way, get a new one! You deserve it! And so does the better agent!
Thursday, February 26, 2009
Monday, February 23, 2009
Don't Believe All You Read!
There, I've said it! Don't Believe All You Read!
Now you should at least think about what you read here because I try to give you the rationale behind my comments. But, in general, alot of what's printed about the real estate market is either an attempt to grab reader's attention, an editor or writer's opinions, or, at best, just old news.
I continually have clients, and visitors at open homes, remark that they think the real estate market is still in free-fall. Prices are plummeting if you believe these folks and the articles they read. But keep in mind that the news you read in the paper is usually based on reports and analysis that uses data which is a minimum of 6 to 8 weeks old. For example, we have just received the December numbers on single-family home sales. The "news" here is that pending sales were up in a traditionally slow month. Readers of this blog and those who receive my bi-monthly market updates knew this at least 4 weeks ago! In a market where everyone is awaiting the "bottom", reading that the bottom happened a month or two ago is of somewhat diminished value! Oops, sorry! You missed it!
Then there is the fact that every real estate market is local. What is happening in San Jose is NOT what may be happening in Palo Alto or Gilroy. Take the situation in Gilroy and Morgan Hill in the $400,000 and lower price ranges. We have seen a huge increase in the number of sales at this price point since November coinciding with the availability of 5% and sub-5% mortgages. Why hasn't this happened in parts of San Jose yet? Well, it's due simply to the fact that prices have to decline in any area to a point where a buyer can obtain a conforming (non-jumbo) mortgage and the low rates now offered on these loans. The true conforming limit of $417,000 (not the in-between conforming limit of $625,000 or soon $729,000 for high-cost areas) offers the lowest mortgage rates. Add a minimum of 3% down payment (preferably more!) and you see that to generate the highest incentive to buy (a combination of lowest rates, affordable prices on quality properties, and reasonable availability of same) prices need to be about $430,000 or less. Once prices on quality, livable homes fell to this range and mortgage rates went to 5%, homes started flying off the market in the South County. In general, prices have not reached this level in most of the more desirable areas of San Jose and certainly not in most of Silicon Valley. Even many Silicon Valley condos are above this price point. While the entry-level market in the South County is afire, the entry market in San Jose is vastly different. Guess which one gets the most press?? Don't believe all you read!!
Now you should at least think about what you read here because I try to give you the rationale behind my comments. But, in general, alot of what's printed about the real estate market is either an attempt to grab reader's attention, an editor or writer's opinions, or, at best, just old news.
I continually have clients, and visitors at open homes, remark that they think the real estate market is still in free-fall. Prices are plummeting if you believe these folks and the articles they read. But keep in mind that the news you read in the paper is usually based on reports and analysis that uses data which is a minimum of 6 to 8 weeks old. For example, we have just received the December numbers on single-family home sales. The "news" here is that pending sales were up in a traditionally slow month. Readers of this blog and those who receive my bi-monthly market updates knew this at least 4 weeks ago! In a market where everyone is awaiting the "bottom", reading that the bottom happened a month or two ago is of somewhat diminished value! Oops, sorry! You missed it!
Then there is the fact that every real estate market is local. What is happening in San Jose is NOT what may be happening in Palo Alto or Gilroy. Take the situation in Gilroy and Morgan Hill in the $400,000 and lower price ranges. We have seen a huge increase in the number of sales at this price point since November coinciding with the availability of 5% and sub-5% mortgages. Why hasn't this happened in parts of San Jose yet? Well, it's due simply to the fact that prices have to decline in any area to a point where a buyer can obtain a conforming (non-jumbo) mortgage and the low rates now offered on these loans. The true conforming limit of $417,000 (not the in-between conforming limit of $625,000 or soon $729,000 for high-cost areas) offers the lowest mortgage rates. Add a minimum of 3% down payment (preferably more!) and you see that to generate the highest incentive to buy (a combination of lowest rates, affordable prices on quality properties, and reasonable availability of same) prices need to be about $430,000 or less. Once prices on quality, livable homes fell to this range and mortgage rates went to 5%, homes started flying off the market in the South County. In general, prices have not reached this level in most of the more desirable areas of San Jose and certainly not in most of Silicon Valley. Even many Silicon Valley condos are above this price point. While the entry-level market in the South County is afire, the entry market in San Jose is vastly different. Guess which one gets the most press?? Don't believe all you read!!
Tuesday, February 17, 2009
Jump-Starting the Real Estate Market
Well the U.S. Congress has passed the Obama "stimulus" package at last. While we can debate the merits of this legislation and whether it is a stimulus or a spending package, we all are hopeful that it will help our bedraggled economy.
The bill included a bone for new home buyers. The tax credit for first time home buyers was increased from $7500 to $8000 with the following great changes:
1) the credit does not ever have to be re-paid (unless home sold within first 3 years)
2) the tax credit is retroactive for all purchases that closed or will close escrow in 2009.
3) There are income limits ($75,000 for single owners and $140,000 for married)
Although this is another great stimulus for the entry level of the market, it unfortunately won't help the middle or upper price tiers.
What's needed for these market segments (and the entire real estate market) is free-flowing capital at rates that are a real incentive to purchase. I'm talking 5% (or lower) fixed-rate, 30 year mortgages that are available to every qualified buyer who has some reasonable down payment. I am not a fan of the re-structuring of existing mortgages, especially when the principal is changed (aka "cram down" restructuring), because in many, if not most, of these re-structurings the qualifications of the borrower are not sufficiently examined. It is NOT enough to keep existing borrowers in their homes. If borrowers cannot qualify for their existing loans nor any loan even remotely close to the terms of their present loan, then unfortunately these people will likely have to lose their homes. It calls to question whether they ever should have been given loans (or loans of that magnitude) in the first place.
The second item that should be required for ALL buyers regardless of price point is that they must have some reasonable down-payment. Without "skin in the game" there is no incentive for an owner to maintain a property or stick it out through good and bad times. An absolute minimum should be 5 % of the purchase price. This is not excessive historically and makes good business sense.
The recent surge in home sales in the entry level of the market testifies to the existence of ready, willing and hopefully able buyers in the market. I believe similar pent-up demand exists through out the entire real estate market. If loan rates were rolled back across the entire home loan spectrum to the levels we are seeing in the entry segment (5% approximately), I bet there would be a similar surge in sales at all price ranges. Until the government (Federal and State) supports the housing market by making affordable, market-stimulating loans (including refinances) available across all price points, we are in for slow, and likely unsteady, progress out of the significant inventories of unsold homes.
The bill included a bone for new home buyers. The tax credit for first time home buyers was increased from $7500 to $8000 with the following great changes:
1) the credit does not ever have to be re-paid (unless home sold within first 3 years)
2) the tax credit is retroactive for all purchases that closed or will close escrow in 2009.
3) There are income limits ($75,000 for single owners and $140,000 for married)
Although this is another great stimulus for the entry level of the market, it unfortunately won't help the middle or upper price tiers.
What's needed for these market segments (and the entire real estate market) is free-flowing capital at rates that are a real incentive to purchase. I'm talking 5% (or lower) fixed-rate, 30 year mortgages that are available to every qualified buyer who has some reasonable down payment. I am not a fan of the re-structuring of existing mortgages, especially when the principal is changed (aka "cram down" restructuring), because in many, if not most, of these re-structurings the qualifications of the borrower are not sufficiently examined. It is NOT enough to keep existing borrowers in their homes. If borrowers cannot qualify for their existing loans nor any loan even remotely close to the terms of their present loan, then unfortunately these people will likely have to lose their homes. It calls to question whether they ever should have been given loans (or loans of that magnitude) in the first place.
The second item that should be required for ALL buyers regardless of price point is that they must have some reasonable down-payment. Without "skin in the game" there is no incentive for an owner to maintain a property or stick it out through good and bad times. An absolute minimum should be 5 % of the purchase price. This is not excessive historically and makes good business sense.
The recent surge in home sales in the entry level of the market testifies to the existence of ready, willing and hopefully able buyers in the market. I believe similar pent-up demand exists through out the entire real estate market. If loan rates were rolled back across the entire home loan spectrum to the levels we are seeing in the entry segment (5% approximately), I bet there would be a similar surge in sales at all price ranges. Until the government (Federal and State) supports the housing market by making affordable, market-stimulating loans (including refinances) available across all price points, we are in for slow, and likely unsteady, progress out of the significant inventories of unsold homes.
Thursday, February 12, 2009
Feeling Sorry for "Nadine"
With the recent surge in the percentage of short-sales in the entry-level market here in the South County, I happily invested a couple of hours attending a seminar on new short-sales techniques the other day. The major impression I returned with from the seminar was that the lenders holding under-water mortgages still don't get it! And while there are some very positive steps being taken by the major real estate brokerages, in many ways they are missing the boat as well.
Yes, the loan negotiators (one ficticiously named "Nadine"was used as an example throughout the discussion) are over worked, burdened by tons (literally) of paperwork, stressed out beyond belief and harassed by their managers and by real estate agents trying to hurry the process. They also have to deal with agents who don't know or follow what little process exists in closing a short-sale.
Nonetheless, the lenders don't seem to get the fact that a short-sale is the best and fastest way for them to minimize thier financial risk and maximize the possible return on their precarious investment. Instead of implementing processes (for example, having the loss mitigation folks talk to the foreclosure folks, consistent documentation requirements, etc.) that would speed up the process (the typical short-sale still takes from 8 to 12 weeks or more just to get approval on an offered price before the offer can begin moving through escrow), most lenders respond to their frustrating position by stone-walling qualified, ready and willing buyers and their agents.
The major brokerages should band together and submit a standard short-sale documentation set and step-by-step flow sheet to the major lenders to achieve some organization in the process. At present shorts-sales are defined by the phrase "the only thing certain about a short-sale is that there is alot of uncertainty". With lenders receiving on average 70 to 80 percent of the total outstanding loans on completed short-sales compared to 50 to 70 percent of total loans in a foreclosure, there is definite financial rationale for meaking short-sales work rather than going to foreclsoure.
Yes, I feel sorry for all the Nadines, but I also see that lenders and brokerages are missing an opportunity by not cleaning up the short-sales "process". Lenders need to recognize that short-sales are indeed their best way to exit a bad situation. Rather than developing proprietary documentation packages to gain an "edge" competitively, brokerages should get together and drive the organization and facilitation of the approval process. Improvement is needed and it would be in everyone's best interest, especially the buyers.
Yes, the loan negotiators (one ficticiously named "Nadine"was used as an example throughout the discussion) are over worked, burdened by tons (literally) of paperwork, stressed out beyond belief and harassed by their managers and by real estate agents trying to hurry the process. They also have to deal with agents who don't know or follow what little process exists in closing a short-sale.
Nonetheless, the lenders don't seem to get the fact that a short-sale is the best and fastest way for them to minimize thier financial risk and maximize the possible return on their precarious investment. Instead of implementing processes (for example, having the loss mitigation folks talk to the foreclosure folks, consistent documentation requirements, etc.) that would speed up the process (the typical short-sale still takes from 8 to 12 weeks or more just to get approval on an offered price before the offer can begin moving through escrow), most lenders respond to their frustrating position by stone-walling qualified, ready and willing buyers and their agents.
The major brokerages should band together and submit a standard short-sale documentation set and step-by-step flow sheet to the major lenders to achieve some organization in the process. At present shorts-sales are defined by the phrase "the only thing certain about a short-sale is that there is alot of uncertainty". With lenders receiving on average 70 to 80 percent of the total outstanding loans on completed short-sales compared to 50 to 70 percent of total loans in a foreclosure, there is definite financial rationale for meaking short-sales work rather than going to foreclsoure.
Yes, I feel sorry for all the Nadines, but I also see that lenders and brokerages are missing an opportunity by not cleaning up the short-sales "process". Lenders need to recognize that short-sales are indeed their best way to exit a bad situation. Rather than developing proprietary documentation packages to gain an "edge" competitively, brokerages should get together and drive the organization and facilitation of the approval process. Improvement is needed and it would be in everyone's best interest, especially the buyers.
Monday, February 9, 2009
Feeding Frenzy in Entry Level Homes
Since mid-November we have seen a breathtaking jump in sales of single-family homes in the South County in the entry price ranges ($400,000 and down). From a point where we had about 175 homes on the market in mid-November with only about 50 under contract in this price range, we have moved to about 180 homes on the market with more than half under contract! Many of these sales were foreclosures and were driven by the recent decline in conforming mortgage interest rates (below 5%). We have been seeing multiple offer situations on the nicer properties with many selling for more than the list price. A real feeding frenzy out there!
One new wrinkle I have noticed the past few weeks has been the lack of new foreclsoures coming to this market! Of the twenty or so most recent listings in this price range, only one has been a -foreclosure. The remaining nineteen are short sales. This may have an interesting effect in that prices have been set primarily by the foreclosures and what a bank is willing to take for a property to clear it off their books. If the short-sale dominance in listings continues, look for a possible rise in list prices as sellers and agents set prices (to be confirmed by the lender eventually), not the banks. In general, banks are getting 70 t0 80 cents on the dollar of total loans outstanding on a short sale and 50 to 60 cents on the dollar of total loans outstanding for a foreclosure.
One new wrinkle I have noticed the past few weeks has been the lack of new foreclsoures coming to this market! Of the twenty or so most recent listings in this price range, only one has been a -foreclosure. The remaining nineteen are short sales. This may have an interesting effect in that prices have been set primarily by the foreclosures and what a bank is willing to take for a property to clear it off their books. If the short-sale dominance in listings continues, look for a possible rise in list prices as sellers and agents set prices (to be confirmed by the lender eventually), not the banks. In general, banks are getting 70 t0 80 cents on the dollar of total loans outstanding on a short sale and 50 to 60 cents on the dollar of total loans outstanding for a foreclosure.
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