Ask Arlis.com

How IS the Market?

2008-07-17T15:15:00.001-06:00

I’m often asked (as are all agents) about the state of the real estate market. The national news reports that the market is ‘down’. While that may be true for the nation as a whole, I want people to understand that there really is no such thing as a national market!

There are three types of markets to learn about and understand:
· Macro
· Metro
· Micro

The ‘macro’ market refers to an entire nation. This can sometimes be used to refer to an entire global market as several nations together. For example, the northern hemisphere’s market can be compared to that of the southern hemisphere. When all of the sales figures are added together and averaged, this is how we receive the national news that the market is down (or up as was the case in 2004 and 2005, remember?).

A ‘metro’ market refers to a smaller region or city. In Idaho where I live and work, our metro market area consists of Boise, Meridian, Eagle, Star, Kuna, Nampa and Caldwell (along with several other small towns). Our area is often referred to as the “Treasure Valley” or southwestern Idaho. This is only an example but you can see that ‘metro’ is a decidedly smaller area, geographically, than a ‘macro’ market. The same rule of sales averaging applies. Take the entire inventory and sales of real estate in the cities and towns of the Treasure Valley and the averages may look very different from the national figures that are reported.

Finally, a ‘micro’ market is a very small area within a metro market. Again, using Boise as an example, the historic north end is one micro market, while the west side of the city is another. If you compare sales in the north end with those of the west side, you will likely see two completely different reports. Yet they are within the same metro market and macro market, aren’t they?

The next time you are curious about the state of your particular real estate market, ask your favorite realtor to do a little research on all three markets. All three markets are important to watch, but none as important as your own little corner of the world!

For more information on this and other real estate or communication related articles, contact Arlis at: dynadame@msn.com.

What IS Fear, anyway?

2008-03-07T15:13:00.001-07:00

What is fear? Dictionary.com defines it this way: “a distressing emotion aroused by impending danger, evil, pain, etc., whether the threat is real or imagined; the feeling or condition of being afraid.” I think fear is our anticipation of a negative outcome and what we do psychologically and physiologically to insure that very thing! This is quite common when we need to get a price reduction, ask the buyer for more financial information, or even when we need to talk to our broker. We expect the worst – and very often get it because we’ve prepared for it.

For example, you plan to have a discussion with a seller about a price reduction. You imagine the seller getting angry and aggressive in response. Before you ever make the call you experience sweaty palms and heart palpitations (physiological). Once you do have the conversation, the seller responds negatively – just as you anticipated (psychological). See what I mean? We are conditioned to imagine the worst. No wonder it shows up over and over again.

In the movie The Secret, we learned how important it is to focus on what we want - on the expected positive outcome. Imagine yourself exchanging information with your seller in a caring, positive and professional way. Imagine the seller asking questions and responding positively to your suggestions as you move forward together toward a successful sale. You’re more likely to get that outcome if you anticipate it, aren’t you?

Anytime you think about a potential interaction with someone, notice if your palms get sweaty, hands get shaky, your heart starts to race and you hold your breath. Also notice if you’re making assumptions about how that person will behave or respond. Stop, take a deep breath and imagine a positive win-win outcome, then proceed. You will be amazed at how much more effective you’ll be with buyers, sellers, fellow agents and yes, even your broker!

Has this market caused you a little fear?

2008-02-21T12:01:00.002-07:00

Here's a thought:

"Fears are educated into us, and can, if we wish, be educated out."

--Dr. Karl Menninger

The PERFECT Shifting Market Quote!

2008-02-03T09:58:00.001-07:00

The difference between try and triumph is a little umph. -- Source unknown

Mortgage Relief Act - the actual document

2008-01-24T13:53:00.000-07:00

For your fireside reading enjoyment, click here. The summary will follow. Stay tuned!

We're #1 locally and #2 internationally with Keller Williams!

2008-01-21T13:44:00.000-07:00

Congratulations to all of you who worked so tirelessly last year in this shifting market. In spite of everything, you managed to remain first in firm ranking and in office ranking (see below). It is interesting to note that on the office ranking report we are almost double the closest competitor!

Also - we managed to end 2007 in second place, both in total profits and profit sharing, losing only to the Austin Southwest market center.

Here's to an abundant and successful 2008. Keep up the GREAT work!

Another report showing we're #1!

2008-01-21T13:34:00.000-07:00

Click to enlarge...

Notice we're almost double the next closest competitor:

Keller Williams Boise: We're number one!

2008-01-21T12:31:00.000-07:00

Click to enlarge...

"It's the Sellers, Stupid!"

2008-01-16T15:38:00.000-07:00

An editorial from the Real Estate Executive Summary. Long, but EXCELLENT.

We read everyday about the "shortage of buyers" in today's market place. We'll take the other side of that scenario and say there is a shortage of sellers-at least of "realistic" sellers.

A look at recent market history will help put that into perspective.
During the 13-year period 1987 through 2000, the median home price had risen from $75,000 to $125,000, for an average year-to-year appreciation of approximately 4 percent. But in the 7 years between 2000 and 2007, .the median home price climbed from $125,000 to $225,000, or an average year-to-year appreciation of a little over 8 percent In many areas, double-digit appreciation occurred in each of those years. . .

A seller who purchased his/her home in 2000, for $125,000 (the median home price that year) and who sold that home today at $200;000, would have realized a little over 6 percent appreciation each year-50 percent higher than the average during the preceding 13 years. In today's market, attempting to sell that home at $225,000 (the median price going into 2007) will likely mean that the home will be on the market for an excessive period of time.

One of the problems obviously lies with those who purchased somewhere in middle or later part of that last seven-year period of unrealistic appreciation. If forced to sell today, those folks will not be able to realize much appreciation, and may even suffer a loss.

Fueling the fire is a media barrage of stories about foreclosures and other distressed sales situations. Prospective buyers, particularly those who are not pressured to buy at this time, will obviously be "bargain hunting," so that the differential between the unrealistic expectations of both buyers and sellers becomes an immense chasm that cannot easily be bridged.

Adding to the problem during the price run-up was the unrealistic willingness of lenders to extend credit to buyers who previously (and today) would not have been able to qualify. Many of those loans were adjustable with very low "teaser" rates, 9 year interest-only loans with short-term balloon features. Those who purchased in the middle of the upswing and who are now finding themselves forced to sell (because they can't afford the increased payments and can't qualify to refinance) are listing their homes at prices that are unrealistic to today's buyers.

And where are these dispossessed families going to go? If they escape their current plight with any cash and without going through foreclosure or bankruptcy, they may have a chance to downsize into more modest homes. The plight of the distressed seller presents two commissionable events for an agent who knows how to work with distressed sellers, and that involves both convincing the sellers to list in tune with the market and the ability to work with lenders who are prepared to deal with the same realities. The "short sale" can bail out some foreclosure-bound owners, and there are mortgage products available today for buyers who have had some credit or foreclosure problems.

Enter the real estate agent. Both sellers' agents and buyers' agents will have to have a very keen sense of the real “today’s market” and know how to convey that sense of realism to their clients. Not an easy task. But those who are not doing that are adding to the problem. Too many homes are listed at unrealistically high prices and shouldn't even be on the market. Their aging "For Sale" signs are fueling the buyer's perception of a glutted market. Too many buyers are expecting bargain basement prices. And the increasing volume of foreclosures and "short" sales are driving average sales prices down.

As veteran real estate guru Joe Klock puts it, "No home in history has ever sold for a penny more than the best offer obtainable from the best buyer available in the then-current market." And most buyers today are not willing to pay inflated prices, as there are plenty of homes that can be purchased much more reasonably. (These are the ones whose sellers understand the market cycles and who are satisfied with a reasonable annual appreciation rate.)

So what is all this telling us as real estate brokers? If ever there was a need for highly educated real estate agents both sellers’ agents and buyers' agents - it is in the marketplace we have just headed into. Listing homes at unrealistic prices just because the sellers "have to" get them, makes no sense. But agents who are fearful that their business is drying up become desperate and do desperate things. Similarly, agents working with bottom-feeding buyers are not doing anything to help the situation.

Today's marketplace requires exceptional skills and expertise on the part of the real estate agent. Those who have taken the time to gain knowledge and designations such as the Accredited Buyer Representative (ABR) or the Seller Representative Specialist (SRS) should have a considerable edge. Knowing how to make a property stand out among the competing listings is also important. Professional property "stagers" are gaining popularity. USA Today recently reported· that a review of sales of 2,800 properties in eight different cities revealed that listings that had been "staged" sold almost twice as fast as non-staged houses, and on average, at substantially higher prices. Designations denoting proficiency in home staging have also cropped up, including the Accredited Staging Professional (ASP) and Accredited Home Staging.

Agents who blindly buy into everything they read in the newspapers and see on television will not be mentally conditioned to take the steps necessary to become part of the solution. A recent Time magazine feature, "Cracks in the Economy" opened with a page--and-a-half montage of real estate signs, showing "Foreclosure," "Reduced Pricing" and "Amazing Pricing" riders. The subhead: 'The real estate slump has no quick fix - and could expand into a full-blown recession." The article also noted that "Houses are now sitting on the market for an average of 9.6 months, more than double the lag of two years ago;" and "Housing prices can go down too. And they may have a long way to fall."

Just putting one's head in the sand and refusing to be subjected to such media foreboding is not the answer, however, as our clients and customers are seeing and hearing the same things. Rather, we need to be able to take an informed," analytical approach to marketplace statistics. For example, Michael Moran, chief economist for Daiwa Securities America Inc., provides a different perspective on the current subprime problems. He says reporting by the media has been "exaggerated" and "sensationalized," noting that subprime mortgages comprise only 13.5 percent of the market, and that only 20 percent of the subprime market is currently under stress. "That's only 3 percent of the total mortgage market. But you won't see many such comments in the press.

As for foreclosures, the picture is not as bleak as the raw statistics suggests, according to John Robbins, CEO of American Mortgage Network and former chairman of the Mortgage Bankers Association of America. "Half of loans going to foreclosures never go completely through the process. And every major servicer has a dedicated group that does nothing but loan modifications.” Robins says the new Fannie Mae, Freddie Mac and FHA programs for subprime borrowers are also going to have a positive impact.

Lawrence Yun, NAR vice president of research, notes that for every two new jobs that are created, we historically see one new home buyer. The economy has created 4.3 million new jobs in the past two years. "Right now we're not seeing those new home buyers because they're sitting on the fence,” observes Yun. "Once they look past the headlines, they'll see that this is actually a very good time to buy.”

As Realtors, we have to study the facts of the current marketplace carefully and analyze them critically. Then we have to learn how to translate the realities of the marketplace into a compelling message that will bring buyers and sellers into a more reasonable negotiation position.

The Real Estate Executive Summary is published monthly. Visit North America Consulting Group for more information.

The "Starfish!"

2008-01-02T13:39:00.000-07:00

Check out this terrific article by Jack Miller, Top Producer and technology coach.

What about CASH back at CLOSING?

2007-12-27T11:12:00.000-07:00

When Receiving Cash Back at Closing is Legal

Commentary by Ralph R. Roberts
courtesy of RISMEDIA, Dec. 27, 2007

In response to my article, “Realtor Caught in Cash-Back-at-Closing’s Crosshairs,” a newly licensed associate broker from Washington state e-mailed me asking whether a cash back at closing deal could ever be legal. His question applied to the following scenario:

The seller is facing foreclosure and his highly motivated to sell. The buyer has good credit, a suitable down payment, and a desire to make a deal. The home is listed and has been appraised at $480,000. The seller is willing to discount the home by $80,000. (The seller loses some equity in the home but dodges the foreclosure bullet and saves part of his credit in the process.)
Instead of purchasing the home for $80,000 less, the buyer agrees to pay the full price of $480,000 with the agreement that the seller will pay back an “incentive” at closing of $80,000. This would give the buyer the necessary funds to fix up the property.

The buyer delivers a real cash down payment that is proven to be in his bank account prior to the purchase, as per the bank’s requirements.

The bank has approved the loan based on its own appraiser’s evaluation and receives a suitable down payment of 5-20% depending on the loan requirements.

The broker then followed up with a couple of questions: “How can this be inappropriate or wrong if the seller takes a loss but is happy with the deal? Where is the harm if all is fully disclosed, and the bank is not put at any risk?”

Consumers and professionals often justify such deals by claiming that the true market value of the home shows that the bank is receiving sufficient collateral.

However, the true market value of the home is the lesser of the appraised price or the actual price paid for the property. In this case, the true market value of the property is not $480,000. It is actually the price the seller is willing to accept-$400,000. Presenting to the bank that the actual sales price is $480,000 is misleading and constitutes fraud.

As real estate brokers, we are often told that “As long as the information is presented on the HUD statement, the transaction is legal.” What happens in almost all situations such as the scenario presented here, is that the professionals involved create two HUD statements-one for the closing and another that is sent to the bank or they camouflage the $80,000 junior lien or a recently created obligation of the seller. In other words, all is not being fully disclosed.

This is obviously a deceptive practice designed to mislead the bank into approving a loan it would otherwise reject. If you have to create two HUD statements-one for the closing table and one for the lender or one that is camouflaged in some way to justify a transaction, then what you are doing is illegal. If the HUD was a person then it could be accused or indicted as a co-conspirator.

I know of only a handful of situations in which receiving cash back at closing is legal: 1. You refinance your mortgage to cash out some or all of the equity in your home.2. Your agent agrees to refund a portion of his or her commission at closing.3. The buyer makes a deposit into the escrow fund, obtains a 100% loan, and then receives a credit back. This isn’t considered cash back at closing, because it is the buyer’s own money.

Other than scenarios such as these, cash back at closing deals are unethical and illegal. Now you might argue that illegal acts such as these are victimless crimes, but they do have the potential of causing harm. Consider the following:

- The buyer’s mortgage payment is higher than it needs to be, making it more difficult for the buyer to afford and more likely that the buyer will ultimately default on the mortgage.- The bank approves a loan for $80,000 more than the true market value of the home. If the bank must foreclose on the home in the future, it may not be able to sell the home for enough money to cover the remaining balance of the debt.- The inflated sales price influences the prices of homes in the same area, making housing in the area less affordable and boosting property taxes.

As you can see, there are good reasons behind the rules and regulations that govern real estate transactions. When we begin to bend those rules under the false assumption that nobody is getting hurt, we compromise the very integrity of the real estate industry and damage the industry on which we make a living.

Ralph Roberts is a real estate fraud expert and activist and author.

Latest article about the mortgage industry

2007-12-20T15:58:00.000-07:00

From Charles Schwab.

Cruella deVille and her Dalmatians!

2007-12-04T13:35:00.000-07:00