Real Estate And Our Responsibility To Our Veterans

Last week I had a situation that got me really thinking about our returning Vets and what we as property owners and Realtors have to do.  I’ve got this lease listing in Thousand Oaks (search for listings here) which means I’m charged with helping the owners find quality tenant.  One day I get a call from an agent and the conversation starts like this: “I don’t want to waste anyone’s time, but I have a tenant looking for a home: He has a dog, a wife and two kids but his credit is terrible.  He’s got a new job working for the Feds in West LA and can’t find a home.  By the way, he served two tours in Afghanistan.  veteran homeIs there any way your landlord might consider them?  The wife and kids are living with her family 5 hours away and no one will rent them a place.  They’re desperate.”

My listing is gorgeous with wood floors and in amazing condition and as the landlord’s rep, I need to find a great tenant for them.  The first thing I heard the agent say was: dog, then bad credit, both things that often dissuade a landlord from considering the tenant candidate and clearly this was what was happening to this family.  The thing that stood out however was his military service.  So I say, “Send it over, I’ll look.”  She thanks me and that’s it.  When I get the application it came with a nice letter of explanation.  Turns out the candidate had lost his analyst job and was out of work for 6 months.  With two kids and a wife, he did what he had to, to survive but his credit was badly damaged as a result.  In reading his application I see his contract of employment showed good income.  I see that there is a letter from VA Benefits stating he gets a monthly payment for disability from injuries sustained at war.  I gulp.  I suddenly I find myself looking at an application from a full blown American hero that is separated from his family because no one stateside is going out on a limb to help.  I think, “I want to help, but the credit…”

Whenever I get an application for rent I verify employment, call references which are always good; heck I’m sure Charles Manson would give me the name of a reference that would say glowing things about him… ultimately I’ll make a recommendation to the landlord.  So I begin my due diligence and check up on him.  Paid rent on time.  House was left immaculate, the previous landlord says.  Yes the employer says, he works here and makes what he said.  I call a Lt. Col. (ret.) listed as a reference; he says “Fine young man, a family man and a fine soldier.”  Special Forces he says.  But that credit…  At this point I don’t have any other applicants so I ask the landlord, would he consider such an applicant.  They say they’ll get back to me and then, it happens:  I get a second app.  The new prospective tenant has much better credit and makes twice as much.  I have no choice, I have to send the landlord the new application.

In my job as a real estate broker, I am only the middle man.  I am not a principle, owner or tenant.  I’m neither the buyer nor seller, just the facilitator in the middle.  What influence can I really have when it comes to what offer to purchase to accept, what tenant to rent to?  I feel for our veteran but it’s not up to me, it’s not my house.  I could have accepted this argument and left it alone and the landlord just chooses.  But I don’t feel right about this and feel I’ve got to do something but it’s not my call, not my house… what to do?  I call the landlord, he says “Tim what would you do?”  And I told him honestly, “Every tenant is a bit of a gamble.  You never really know how they’ll be and you sometimes just have to choose.” “OK, Tim, so choose,” my landlord says to me.  He senses I’m favoring the Vet.  “I can’t be the one to choose, but let’s go over the apps.  The second one has better credit and has more income so they are the stronger tenant candidate,” I say.  “However, I can’t help but feel this vet, this war hero, needs a break and I have a soft spot for vets,” I say to him.  What happened next this was amazing.  My landlord says, “I was in the Taiwan Navy myself and feel the same way.  Rent it to them.”  Wow!  What happened was my landlord was thinking as I was but just needed me, the real estate professional, to reinforce and validate his thoughts.  Had I not said this and pushed the other more obvious applicant instead, he would have rented it to them.

The point I’d like to make, is that we have to give our Veterans, the benefit of the doubt.  We need to extend a hand even when they might not fit into the “box” we want.  As Realtors, we need to emphasize to landlords and sellers, that our Vets bring something to the table that the average citizen does not and that’s sacrifice and that counts for something.  As Realtors, we need to pull the emotional card when we submit an offer with VA financing.  As listing agents receiving offers from buyers using VA financing, we need to let our sellers know that VA financing is just as good as any other; not more difficult and the buyers while maybe light on down payment, are no less qualified to buy.  Did you know for example that zero down VA financing can go up to the high balance conforming loan amount for that given county?  In LA that enables a Vet to buy with no money down, a home in excess of $625,000 and with some money down, as high as $1,000,000? (Contact Tim for a great lender referral).  Often times Vets are competing for lower priced homes; competing with investors and other buyers with substantial down payments.  In multiple offer situations service to our country should be worth more than a large down payment.  As sellers I get it, it’s about the money.  It’s your biggest investment and business is business.  I know as Realtors, we can’t push our sellers to do what they don’t want to nor should we.  It’s not our house.  Our responsibility, our fiduciary duty, is to our client.  But sometimes people just need a little help to see things from a different perspective.  Sometimes, just like my landlord, a client just wants to know that doing the noble thing is sound business.  Sometimes the Realtor just has to say, renting and selling to Vets is good business.

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Case Shiller at the end of 2014

Today’s Case Shiller numbers show a mixed bag of data.  There are some very strong indicators that the market is ready to break out; 8 cities were up over last month and the average annual appreciation was 4.5%.  CaseShillerOctoberMoreover the monthly increase of .8% puts the average over the next 12 months at nearly 10%.  These are pretty exciting figures.  That said, the sales declines (NAR’s October pending sales were slowed down for the month) within the context of historically low interest rates, suggest something a bit less optimistic.  So how is it our GDP was up 5% for the 3rd quarter yet home sales are not following along?

We have several factors at work affecting home sales and home value appreciation.  First, while it is true the economy appears to be improving rapidly, the Federal Reserve has chosen to keep rates down for the foreseeable future.  Why?  The likely answer is that while the economy is growing, inflation is not and most specifically wage inflation.  Without income growth, homes cannot appreciate.  Secondly available inventory is low and is restricting buying activity.  Ask any home lender/mortgage broker and they will tell you they have files filled with preapproval letters but their clients cannot find homes to buy.  Further, with new home construction only modestly picking up, the availability of new homes is contributing rather than easing the low inventory concern (search available inventory here).  New homes are often a catalyst for existing homeowners to “sell-to-buy.”  The dearth of new homes, especially in “In town” locations most popular with the ever growing Millennial demographic buyer pool, is further exacerbating the sense that there is nothing to buy.  Without adequate inventory, sales cannot accelerate.  And don’t forget that the participation of Wall Street in the residential home rental market (ie: Blackstone) means that 100,000’s of homes that could be up for sale, are not, rather they are locked up as rentals in REIT’s (Real Estate Investment Trusts).  REIT’s cannot sell property as easily as you or I, since they have restrictions placed on them within the rules to qualify as a REIT.

So where does that leave us and what should we expect going forward in 2015?  More of the same is what I expect.  I feel there is a tension between buyers and sellers favoring neither and leaving both frustrated.  Sellers want their appreciation and in fact many need it as there are still a lot of homes at or just under water, owing more than they can sell for after costs and commissions.  Buyers for their part, want nice properties and will pay a premium for these, but these are in ever short supply.  KitchenThis in part can be attributed to the lack of disposable income to be used on home improvement, so many homes currently on the market have perhaps been a little more neglected over the past 7 years than they might otherwise have been, making them less desirable to prospective buyers.  As the economy improves so will the stock prices of home improvement companies Home Depot and Lowes and suppliers like Masco.  Interestingly this could mean better improved homes coming up for sale or it could mean fewer sellers as more people opt to fix their existing home rather than sell and try to buy from a very limited inventory of available homes.  This in turn will continue the trend of tight inventory and slower sales but hopefully fuel a little appreciation to motivate would be sellers to list and sell.  One last thought, a reminder really, that real estate is always local.  What happens in Park City, Utah may have little bearing on Palm Springs and what’s happening in Brentwood, Ca little effect on Thousand Oaks where a leading employer is downsizing.

Lastly I would suggest that if you are in the market to buy or sell, finding a local area, full time, experienced real estate professional will never be more important than it is today (click here to contact Tim).  Even with all the online information, buyers and seller are best served by someone who can discern value; recognize opportunity, counsel accordingly and manage the process to a successful conclusion.  The more confusing the marketplace, the more important your choice of Realtor becomes.

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Santa Wants a One Story Home

In honor of the season, I reworked the lyrics to this holiday classic.  Click on the picture to check out the listing and by all means, sing along!

FrontOh you better watch out

You better not cry

He’s selling his place

I’m telling you why

Santa wants a one story home.

 

He’s counted the steps

At his home at the poleDSC_0040

He’s tired of climbing

One level’s his goal

Santa wants a one story home.

 

 

He knows upstairs he’s sleeping

But his knees they always ache

The years of climbing chimneys

No more stairs for goodness sake!

 

 

Front DoorOh you better watch out

You better not cry

He’s selling his place

I’m telling you why

Santa wants a one story home

 

Santa wants a one story home… who doesn’t?

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What’s It Really Like To Be A Realtor?

 What’s it like to be a Realtor?  I suppose a question like this is best answered: It depends who you ask. Like anything, there are those who are successful and those who are not.  A real estate agent is an entrepreneur who wakes up every morning unemployed.  There’s no store front, there’s no brand other than what you make (you can see my website here), no salary, no 401K and no vested stock options. You can’t get fired and you don’t have to go to work if you don’t want to.  But then you won’t make any money either.  It’s the Wild West, it’s a precipice; it’s sky diving without a parachute.  It’s not for the weak of will or heart and like every sales position, it’s not for everyone, even though just about everyone tries.  Makes you wonder, “Who’s crazy enough to think this is a career?”

self-confidence3One day my son was speaking to my mom after landing his first job selling TV’s for Sears over the summer.  He said, “Nana, being a sales person is easy, you just talk to people and help them find what they’re looking for.”  My mom disagreed, she said, “Adam, being able to speak with people and be comfortable talking to strangers, is a skill and a gift.  Not everyone can do it.”  My son didn’t see it.  “Anyone can do it, it’s easy.  You just talk to them.”   Ah from the mouths of babes.  What my mom understood but my fearless young adult son did not, is that selling is a skill and not everyone is good at it or cut out for it.  It’s not always easy to understand what people need, what they want and how best to help them.  This is especially true when your livelihood is dependent on you selling them something.  This is why so many people fear a salesperson is more concerned about earning a commission, than helping them.  Staying true to the belief that you can only be your best when you are helping others can’t just be lip service, it has to be real and sincere.  Another pitfall is that salespeople need to be “up” all the time, but it’s not easy to be “up” all the time, especially when you haven’t closed enough deals and  money is tight.  All sales is tough racket but that’s why sales people in every industry are paid well.  It’s high risk and high reward and real estate sales are especially difficult.  You just never know where the next buyer or seller will come from.

It’s said in real estate that 90% of the money is made by 10% of the agents.  This means that 90% of the agents are fighting for a mere 10% of the commissions.  If you’re in the 10%, real estate is a good business and if you’re in the top 5% it’s a great business, but most people starve.  This is why you find so many part time real estate agents; they need a real job to pay their bills.  You can’t blame people for trying out real estate.  Tim and the 7 seriesRealtors drive nice cars, it’s not that hard to get a real estate license, you don’t need a lot of money to get started and those big commissions!  Realtors drive nice cars it is true, especially in Los Angeles, it’s really a basic tool of the job.   We’ve all heard the phrase, “Dress for Success” and to a Realtor a car is an extension of that theme.  Most people will tell me that they wouldn’t hire a Realtor just because of the car they drive.  Yet, a car is an easy way to prejudge a Realtor’s success and when it comes to your most important financial decision and investment, hiring a successful agent is essential.  With so many amateurs with real estate licenses (think of the 90/10 rule) appearance really does matter.  Is this superficial?  Yes.  Is it still important?  Absolutely.  A real estate agent has to be the first or second agent thought of; being third means you never get the call.

Early this year I had a buyer in escrow on a $900,000 property.  He had read in the local weekly paper that I sold $26M in real estate last year.  He says, “Is that true?”  I said, “Yes it was.”  He said “I want your job.  I did the math and $26M times 3% means you made…”  I stopped him right there.  “That’s just not how it works.”  Why?  Because I don’t get all that.  I’ve got to spend literally tens of thousands marketing myself and my listings.  And even though I am a broker, I still work under a broker and that broker takes a cut.  So does the Company and sometimes there are referral fees due.  What made the conversation so ironic was that we had been working together for over a year.  We’d written some offers and even been in escrow before this one.  Then when it came time to put his money up and lift his contingencies, 4 days before close, he called to tell me to cancel.  As I hung up I said to him, “So, you still want my job?”  Nice homes and sometimes not so nice homes; fancy cars, an occasional suit and tie but usually casual dress.  It all sounds pretty good or would if not for the fact that you work for free until you actually close something.  That’s right, for free.  No retainer, no stipend, no per diem, nada.

On a typical day I’m working on marketing – who to reach out to, what mail pieces do I mail…  I write letters to clients, make calls, write in my blog… A good day is a listing opportunity.  A great day is a sale and a “Woo-Hoo” day, a closing.  Listings are the business.  Think about it, in a weekend I can work with 2 maybe 3 buyers in a day if each is only looking at a few homes.  How many listings can I have on any given weekend… 5, 10, a 100?  So it’s all about listings.  When I meet with a prospective seller, I have already started assessing how to help them from our initial phone conversation and now in more depth, in person.  I have to rest their fears, understand their motivation and goals and I have to be able to do this within an hour interaction.  I pride myself on being able to listen and know how best to advise them.  I know my market as well as any and better than most.  Every seller is different.  Many times I am faced with this situation:  Tell a seller what they want to hear and get the listing or tell them what I think they need to know, understanding that this honesty could cost me the listing.  “Obvious” you say, but not as easy as it sounds.  Imagine saying this: “Mr. & Mrs. Seller, I understand what you need from the sale of this home to buy your new home: you need me to sell your home for 10% above the market.”  That doesn’t go over real well.  But over pricing a listing could mean an agent is going to spend a bunch of money and not sell, eventually losing the listing to someone else who undoubtedly gets the seller to list for a more realistic price.  The prevailing opinion is, “Take the listing and you can always get the seller to reduce later; after all it’s their home…”   It takes a lot of savvy to be able to sit there across the table across from a would-be seller and set them straight, knowing that a competitor is almost certainly going to pander to them and offer to list the home at whatever it takes to get the seller to sign.  But after so many years of seeing what results from that approach, I’ve learned I just have to stand tall and come correct, (contact me here).  If that doesn’t work, you have to able able to live with yourself and hope you’ve demonstrated you’re still the agent to hire and if not, that you’ll be the agent they call when the home doesn’t sell and the listing expires.

Real estate coaches teach, the real estate business is not so much about the houses or marketing, it’s all about prospecting.  Getting a client is the first and most difficult part of every day I’m a Realtor.  Some agents door knock; they’re always around the neighborhood, saying “hi” and handing out pads or magnets.  This is a very effective type of marketing.  Other agents build special relationships with past clients.  They know your birthday, they send your kid’s birthday cards, and invite you to poetry readings and bunko games, wine tasting.  They are like family and who better to trust?

Me, I approach real estate more like an account or attorney.  It’s a professional services business and that’s how I approach it.  I’ve been doing this a long time and most of my business comes from referrals and past clients though do I specialize in a few neighborhoods, so that makes me the area expert.  Of course mine is just one approach, I just happen to think it the best.  I’m friends with my clients, there when they need me, but they know when it comes to real estate I’m all business and that’s why they hire me.

It’s funny really, I see lots of homes, lots of décor and get to drive a cool car; this is the persona of a Realtor.  Being a Realtor is about helping people, but it’s also about understanding the numbers; knowing how to negotiate successfully, how market and sell property, how to manage the process and after all that, getting out there prospecting for future business.  That’s the life of this Realtor.  It’s a tough racket my father in law used to say.  It’s rewarding, it’s terrifying, but I wouldn‘t trade it for anything… this week anyway.

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Market Update: The Conejo Valley and Beyond

Wow, where to start.  As is with communities across our great land, when a large employer announces substantive changes to the number of people they are going to employ in that area, every aspect of the local economy is affected.  Such is the case here, along the Los Angeles/Ventura County line.  When rumors began circulating that Amgen, the area’s largest employer, was preparing to lay off a large part of their workforce, you could almost hear the gears of the local economy, grinding to a halt.  amgen for sale cropWhat would the impact be?  Home prices would have to come down as all those laid off employees scramble to list and sell their homes as they’re forced to relocate to other biotech hubs like Boston and San Francisco, right?  The sudden shadow that hung over our valley seemed to reach every corner and the attitude of home buyers moved from optimistic as inventory was increasing and prices appreciation stabilizing, to trepidatious and cautious.

At the time of the rumors, I focused on the math: how many people would actually be laid off locally, that would have to sell and move to find employment?  The number kept running around 1,000.  Then right when we were preparing for the worst, Amgen’s CEO announced an additional 1,100 people would lose their jobs and the market reacted as one might expect, it shut down right?  Wrong.  It is true, the market has softened, traffic at open houses slowed and the number of closed sales declined – somewhat.  In fact given the time of year and the overall health of the real estate market nationally, we actually don’t seem all that different and are simply mirroring everyone else.  We are not substantially slower, the sky has not fallen and if you ask my buyers, there’s still not very much on the market.  So what gives, because that makes no sense at all?

Tile Door Detail  One thing we can all agree on is that real estate is local, for more information click here.  But to understand locally we must first look at the broader market to better frame our discussion.  Nationally the market is slowing and appreciation, abating.  It’s slowing because 2013 brought broad based and rapid property price appreciation as the attitude shifted from, “We’ll never see homes appreciate again,” to, “I think we can all agree we have already bounced off the bottom.”  So the appreciation we experienced was a combination of large swaths of investors, be it “Mom and Pops” or institutional investors like Blackrock buying cheap homes and the herd mentality that “It must be safe to buy now.” This continued until June 2013 when Federal Reserve Chairperson Janet Yellen, announced the end of QE (Quantitative Easing) in the form of the Fed’s bond buying.  Interest rates jumped nearly a full percentage point and the market cooled.  There would be no “irrational exuberance” here, to borrow a phrase from Ms. Yellen’s predecessor Alan Greenspan.  She put the brakes on the housing recovery and it worked.  The market cooled, but it did not halt.  In fact as the economy and consumer sentiment improved, property values and sales gently increased into 2014.  Something however was missing.  Traditional first time buyers (mid 20’s to early 30’s) in many parts of the country had been priced out of the market due to 2013’s rapid appreciation.  Moreover, many of the Millennial’s were and are, still living in their parent’s basements.  Household formation, the key component of first time home ownership, was not happening at the pace it historically does.  In his article yesterday, syndicated columnist Lew Sichelman cites NAR statistics that less than 30% of 2014 buyers are first time buyers.  The historical average he states is 40%.  Without first time buyers buying the fixer/older homes he reasons, the market cannot achieve its full potential.  He goes on to attribute this to the lack of move up buyers due to a shortage of new homes, often the catalyst for existing homeowners to sell: they want a new home.  And while I agree with this idea, it doesn’t go far enough.

The reasons these first time buyers aren’t buying homes has as much to do with a lack of income growth as it does to available inventory.  Moreover, analysts love to point to the fact that our young would-be buyers are saddled with student loan debt making qualifying more difficult.  Add to this tighter lending standards in general, despite near historical low interest rates and a shift in where this demographic wants to live (ie: close in, not out in the burbs somewhere) and you get a buying foundation akin to sand.  The lower end and first time buyer market is the foundation for all property values and appreciation, without them, the whole market is shaky.  This means that typical first time buyer-fixer type homes are not only not appreciating, they may even be dropping.  Thus inventory declines as sellers decide to wait for a higher prices or in many cases wait because they are still upside down having not yet climbed out of the hole from the housing crash and simply cannot sell.  This in turn has changed what first time buyers look like.  First time buyers are not late 20 and early 30 year olds as they once were at all, they are 35-40 with 2 small kids coming much later in life than in years past and they are dual income with no time nor interest in fixing a home up.  So instead of buying older fixers where they can use their sweat equity to build equity, first time buyers are buying turnkey properties and these properties are far and few between as compared with older properties that need a little TLC.  First time buyers look different and act different and this has changed the dynamic of homeownership.  The impact of this is that we should expect prices to remain flat until such time as incomes grow, household formation gets back on track and builders start building more homes to motivate more homeowners to sell.

So back to our local market… It is true that there is great unease amongst buyers and we have already experienced a 5% drop in values since summer. But there are still buyers out there.  In fact there are lots of them, even here where we are bracing for substantive job losses.  How do I know?  Ask a lender if they have any preapproval letters out and they will tell you they have files filled with them, but that those buyers just aren’t buying.  I held an open house a couple of weekends ago and I had 4 noncontigent buyers come into my open house, none of whom worked for Amgen but all of them in the market for a home.

So what does this all mean?  The way I see it, there will be pressure on prices until all those who were laid off either decide to sell or stay.  I expect this to become clearer in the spring.  In fact I expect that spring will bring a lot of new listings to the market place and this will offset the typical spring “bump” we get in prices.  But that also means that there may be no better time to buy than , click here to search for homes.  It means as a buyer, you want to be a little more aggressive on your offers and if you’re a seller, a little more open to negotiate.  Herein lies the key to navigating this market: be a participant, not an idle bystander.  If you are a seller today, don’t wait until spring because you will have more competition and they’ll have the benefit of seeing how long you’ve sat and price their home accordingly.  If you are a buyer, don’t be afraid to make your deal today if you find a home you want.  One thing is certain, the future is never predictable whereas the present is, well, the present.

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Pitfalls And The Process of Buying And Selling Real Estate

It’s a delicate balance, a real estate transaction.  There are a lot of things that can and do go right but a lot that can and do go wrong.  Just this past Friday the escrow company a seller picked out sent the wrong wiring instructions to my buyer’s lender and when the bank funded the loan they sent $400,000 to the wrong title company.  Talk about a mess.  Fortunately the money was retrieved and we closed on time.  Speaking of money, have you ever wondered how the money gets exchanged in a real estate transaction?  Some states have the two parties and their attorney’s sit opposite one another at the closing table to exchange the money for title.  In California we use a neutral third party called escrow to effect the transaction. When speaking with a client, I like to describe the fundamental role of escrow this way:  Picture me holding out both arms.  To one side the buyer hands me a bag of money one, and the other the seller hands me the deed.  Then picture me crossing my arms.  This is escrow’s most fundamental task.  Without this service one could imagine the exchange as the buyer gingerly holds out the money and hopes the seller doesn’t grab it real quick and run away.  So escrow is a facilitator.

Escrow is also charged with coordinating the required paperwork for the title company.  The escrow officer orders the preliminary title report often referred to as the “Prelim” from the title company.  The prelim tells everyone who owns the property, what liens are held against the property, including tax liens and mortgage liens.  The prelim could also show any recorded judgments against the seller as well.  The title company provides the insurance that the buyer is purchasing the home with clear title.  Escrow also receives the lender’s paperwork like the loan documents from the buyer’s lender and they ensure the buyer receives all the necessary reports and disclosures to complete their due diligence.  These might include items like home owner’s association minutes and budgets, rules and regs; the clear termite report if that was negotiated; the natural hazard disclosure report which in California includes everything from earthquake zone disclosures, to red legged frog protected habitat disclosures.  The NHD as it is often referred, will also have important information like radon zone classification and ratings and most recently the additional disclosure of gas transmission line disclosures.

Once a home sale is successfully negotiated by the parties, the real estate agent(s) will forward the contract to the designated escrow company.  This is referred to as “opening escrow.”  So who pays for this service?  Customarily this is shared or “split 50/50.”  Like all aspects of a real estate transaction, this needs to be written in the purchase agreement and is a negotiated item.  I one time had to pay the buyer’s side of escrow because I missed the line that called out a 50/50 split and since it was my fault, I picked up the cost rather than my seller.  It only takes one time; I haven’t made that mistake again.  By the way, escrow companies are regularly audited, at least in California, by the Department of Corporations.  This ensures they have the appropriate bonds to protect the parties in the event someone makes a critical mistake or an unscrupulous employee try’s something fraudulent or illegal.  For the most part the risks to both buyer and seller have been largely mitigated by these audits and the Association of Realtor standard Residential Purchase Agreement or RPA.  Of course “For Sale by Owner” transactions do not have the safeguards in place like transactions where licensed real estate brokers and agents are involved; a pretty good reason to not sell your home on your own.

There is however, one point in almost every transaction where there are no protections, where there is risk for the buyer: When the buyer actually takes possession and sees the property for the first time, without the seller and their stuff inside.  Per the California Association of Realtors RPA, the seller is required to deliver the home to the buyer in substantially the same condition the buyer bought it in.  The fixtures and everything negotiated for is still there, left behind for the buyer.  The buyer will almost always conduct a final property verification or walk through prior to the close of escrow.  But what happens when a seller takes the drapes or they remove a light fixture when they move out?  What’s the buyer supposed to do and what can the agents do?  You might think that the buyer would hold up the close of escrow and demand either the return of the items or some form of compensation.  But more often than not, the buyer doesn’t actually see the empty home until the seller has moved out the day of closing.  Unless negotiated otherwise, a seller is not required to vacate their property prior to close of escrow and the money exchanged and the deed recorded in the buyer’s name.  Thankfully, the removal of included items doesn’t happen very often.  What does happen however, is that a seller moves their stuff out and they leave damage behind that either no one knew about and no one anticipated.  I recently had a transaction where the seller moved out and left behind a 2’ water damaged portion of hardwood floor.  There had been a large potted plant that hadn’t been move in years and once moved, revealed that the pot had leaked and the floor was a buckled and stained.  In this case I had the seller and had to tell them they were going to have to compensate the buyer or have the floor repaired.  It turned out a repair meant refinishing the entire wood floor.  The seller had no interest nor willingness in giving their buyer a brand new floor, and since every home is sold “as is,” a negotiation ensued whereby the seller agreed to write a check to the buyer in the amount of $1,000; roughly a third of the cost to replace or refinish the floor.  Luckily I had an upstanding seller and an understanding buyer, but can you imagine if the seller said, “Go pound sand,” and walked away from their responsibility?   On occasion this does happen.  More common examples of issues at close are when a seller takes away their area rug revealing a faded and sun damaged wood floor that was not evident when the carpet was down.  Or when a flat screen TV is removed and the wall behind was never painted.  Even little things like picture frame hangers and nail holes can be a problem.  One time I had a seller conscientiously pull out all the nails and meticulously patch and paint every hole with a small roller.  But when the paint dried it became clear that the walls had faded and the touch up made the walls look like a Dalmatian.  The seller was gone and the buyer had to repaint and boy were they pissed.   Even the best intentions can sometimes cause a problem with a transaction.  I think of all points in a transaction, this is the one I am always most nervous about.  Usually resolution falls on the shoulders of the Realtors involved.  I make a call, the other agent makes a call.  Most of the time it’s little dollars and the situation gets resolved amicably.  Just another example that using a well-respected Realtor for representation doesn’t cost, rather it saves.

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RAW: My Approach To A Changing Market

RAW: Recognition Acceptance Willingness.

I met with a couple the other night who are considering putting their home up for sale.  As I prepared for the meeting, I began in my usual way, by assembling the comparable sales data. This would allow me to assess our market and in this case, make and substantiate the argument that our market was going through another correction.  When the market is changing, pricing and marketing strategy become of paramount importance.  The ability to recognize, plan and ultimately strategize an approach when the market is in flux, is why the real estate industry will never be a purely online enterprise because the market is always in flux.  To use a military phrase, boots on the ground, will always trump an aerial flyby for accurate data collection and interpretation.

I meet all kinds of people in my business.  Every client is different which means I have to be ready for any one of a thousand different scenarios when sitting with a potential buyer or seller.  The reasons a seller is selling affect how we approach selling.  Timing, equity and urgency all factor into the approach, but in the end has little to do with the ultimate sales price.  The “I need to get ‘X’ out of my home to make this worthwhile” idea, bears little relevance on how the market views a property nor what it will sell for, only what the seller would be willing to sell for.  Everyone has their own motivations and because of this, I need to quickly assess that motivation and determine if I can help them and ultimately if I can be successful.  If a seller wants an impossible amount for their home, I will likely decline the listing.  Admittedly this doesn’t happen very often, but it does happen.  There’s an old saying that goes: “It’s better to be the second wife and the third Realtor.”  Funny, but as is with such old jokes, not so far from the truth.

As it turned out the couple were very sweet, thoughtful and inquisitive.  They weren’t thrilled with my current outlook but seemed sincerely appreciative of my candor.  With the market correcting, I wasn’t about to “buy” this listing.  This would just hurt my sellers and cost me money.  “Buying a listing” is the practice of a Realtor overstating the value of a property so that when a seller is thinking about which agent they’ll hire, they say, “Well that agent said we could get $30,000 more,” and this often sways a seller to hire the agent that says they can sell for more.  Unethical?  Perhaps.  But since pricing a home for sale is not an exact science, it can really come down to a matter of opinion.  However, if you know you are competing for a listing, it can be very hard to resist the temptation of adding a few extra bucks when you sense the seller isn’t of the same mind set as you regarding price.  Predicting a higher sales price than your competition isn’t always wrong though.  When the market is on the rise, predicting a movement to the upside is to your client’s benefit.  I’ve prided myself on recognizing this before my competitors and in doing so have helped my buyers and sellers to get better prices.  But when a market is in a correction and prices are flat to softening, buying a listing does no one any good.  It gets the seller committed to an agent and when they are unsuccessful, the agent simply approaches the seller with a price reduction.  That’s not to say all Realtors do this or that I am never wrong or have never taken a listing that I believe was priced incorrectly.  But when I do take such a listing, I am pretty forthright with my sellers.  It doesn’t mean they’ll listen to me but I do make my opinion known.  It’s a little funny really that I am hired for my experience and expertise, yet sometimes my sellers just feel they know more than me.  What can I do?  It’s ultimately their home and every decision theirs.  The only decision I control is whether I take the listing.

When the market is transitioning from one favoring buyers to one favoring sellers, I encourage my buyers to pay a little more to get the house and the sellers to ask a little more than the last comparable sale.  But when the market shifts from sellers to favoring buyers, the dialog is a lot more complex.  For my sellers I try to get them to understand that a declining market is like a game of musical chairs: the goal is to get a chair, any chair, before there are no chairs left.  For buyers the obvious temptation is to say, “Wait, prices are coming down.”  But this is not necessarily the right advice.  Take the market we have today. It is clear to me that prices are in a retreat; that we are giving up some of the 2013 gains.  As I wrote in my last blog, the market trend lines in real estate are never straight up or down, nor are they smooth when looked at month to month.  On the contrary, they are jaggedy little devils that go up and down and side to side, one week to the next.  But here’s the thing… if you find a home you like, you should buy it, or at least try to anyway.  If the price doesn’t seem consistent with the market’s direction and you believe the market is going down, as a buyer I recommend offering less.  And the longer the home has been on the market for sale, the lower you should offer.  That is not to say you are going to steal the home.  “Stealing a home” to use that rather unsavory phrase, requires the presence of duress.  That is, the seller must be under undo stress to get out of the property.  This could be purely financial maybe because they are going into foreclosure or perhaps personal like a divorce or death or imminent job loss or transfer, but in any event there has to be duress.  By definition however, this is not market value.  Market value is what a willing buyer and a willing seller agree on without the presence of duress.  So if the market is in decline and a seller can’t sell for what they thought they could and makes the decision to accept an offer from a would be buyer for less than asking without the presence of duress, that is by definition the market value of that home at that time and place.  So when the market is softening as it is now, a savvy seller is going to be more aggressive on their price in hopes that they’ll capture that one buyer in the market for a home like theirs.  Since they are competing with all the other sellers in their market for that same buyer, it is not advisable to be offering the same value as everyone else, you have to offer more.  The property that offers the most for the least is going to be the one that sells first.

Meanwhile the savvy buyer is going to write a more aggressive offer on the home they like not because they are trying to steal it, rather because they want it.  They just want it for less than the seller is listed at.  A buyer can’t be afraid to write in a softening market and a seller can’t be too quick to say no.  Ultimately the two sides have to come to an understanding if there is to be a deal.  Thus the key to a changing market be it up or down comes down to the RAW truth: Recognition, Acceptance and Willingness.  So with that, go out and make the deal, because a buyer should never lose a dream home over a few bucks and a seller should never walk away from a sure thing when the next one could be months away.  Remember, it’s always better to get a chair, any chair, than to be left standing when the music stops.

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