I was reading an old newsletter from 1982 that stated that the bad news in real estate was: Business is slow – interest rates are high and going higher, sellers can’t get their equity out, buyers can’t come up with sufficient down payment or monthly payments.

And the good news in real estate was: Business is slow – interest rates are high and going higher, sellers can’t get their equity out, buyers can’t come up with sufficient down payment or monthly payments.

The point of the article then and the current truth is the news is good or bad depending on our reality. Buyers and sellers have always had problems to solve and needs to be met. Sometimes the pendulum swings in favor of the buyer sometimes in favor of the seller. I took notice to the cycle, because we heard the same thing in the 90’s and now we hear it again. The more things change the more they stay the same. Whether the glass is half full or half empty depends on your reality what is a problem for one is an opportunity for another. I found this view particularly interesting when later I read “real estate is changing radically in the ‘80’s’. Sound familiar?

In actuality I don’t think real estate ever really changes, it comes down to identifying and satisfying the needs of a buyer and a seller - this is our rose of success. What changes is the number of thorns surrounding the rose and developing the skill to enjoy the rose without getting pricked along the way. Sales contracts have been getting longer and longer, disclosures now cover everything from weeds to meth-labs. The need to educate and problem solve for the client will never go away. I doubt that we will ever stop saying that real estate is radically changing and I doubt that the industry will ever stop evolving.

We are now faced with a new set of challenges as the sub-prime mortgage market goes through a melt-down and some of the big names in the mortgage business have closed their doors. First time buyers are going to be faced with more challenges finding finances, while the move up seller will have to be more patient selling their current home. Some of the fall out according to recent reports is that over 300,000 real estate agents will leave the business in the next 18 months. It appears the culling out of the weak has begun in both the mortgage and agent ranks. All of this will provide opportunity for the competent and strengthen the industry and the market to the benefit of all.

Tales From School      

As I mentioned in other Blogs I teach the First Time Home Buyers Class for Douglas County. Anytime you teach you find that you also learn, it helps to keep you at the top of your game. While most questions are routine, from time-to-time you either get a stickler or one that provides insights to the audience. Lately I have listed two properties that are both short sale, what this means to the seller is that they can’t sell their home for what they owe on it and if they’re no longer able to meet the mortgage the property will eventually go into foreclosure. This is not what home ownership is all about and a point that raises my passions when I’m in front of a first time home buyer class.

While most of the class was working with Realtors® to find their home a few were still just shopping on the internet. As part of this Q&A the question came up about some of the on-line services touting the ability to accurately price a property. Interestingly the class perception is that these services are fool proof, while my experience has been they can off by as much as plus or minus 10%-15%. On a $200,000 property this equates to $20,000 - $30,000, so my advice was yes they can be used for a quick and dirty approximation, but do you want to base a purchase decision on the information?

That’s how I use these sites, simply as a sanity check and I generally cross reference two or more sites. I do find them helpful in cross checking comparable sales, but there are simply too many variables to trust an algorithm to get it right. Now that previous sentence may sound a little geeky, but in my previous life I wrote software for everything from real time control systems to database data extraction. So I have a pretty good idea of what you can and can’t do with a program. The problem is the data is presented in a very glitzy format with maps and aerial views giving it a gospel appeal, but I believe there should be an additional disclaimer about accuracy. In the computer world it’s know as GIGO – Garbage In / Garbage Out. The data presented is no more accurate than what was fed from the county records, which were fed from the MLS, which were provided by the real estate agents. Along the way stuff happens and without a set of experienced eyes looking at the information you can make some very bad decisions on your sale or purchase.

As I read through some of blogs on this site, I ran into a number of Tales of Dark Side titles, which describe buyers, sellers and agents that you would rather not have the pleasure to deal with. I term this the 2% Rule, which simply states that 2% of the people cause 98% of the problems. I find the rule is pretty universal whether you’re dealing with a real estate transaction or your next door neighbor. My partner and I sponsor a real estate web site www.RockyMtnMLS.com which allows subscribers / clients to search for homes on the MLS. The site is designed to be cooperative; that is as clients find homes of interest they can book mark the property and allow us to research the details and set showings. As part of this process when a client determines they want to put an offer on a home we do a comparative market analysis of the neighborhood to insure the price offered is consistent with current values.

As I stated earlier we have both clients and subscribers, clients are persons we have met with and have an idea of their time frame for moving, price range, etc. and had an opportunity to counsel regarding inspections, warranties, and contracts. Subscribers have found our site via a search engine, flyer, or advertisement and may be simply shopping and may vanish or they give us a call to meet with us and see homes.

I was contacted by one subscriber who would either call me or send me e-mails regarding various communities and sub-divisions. After a couple of months it was obvious that he was ready to start previewing homes and was getting serious about buying, so I suggested we meet for a cup of coffee to discuss his plans. It was at this point it became obvious I had a hit one of the 2% that was going to be a problem. He told me he had already visited a number of homes and was either dealing directly with the listing agent or builder or just having agents run him around to see homes with no buyers agency contract. When I attempted to explain this was not in his best interest, that the listing agent had a responsibility by contract to get the highest possible price for their seller and without a buyers agency contract we were limited to the information we could share with him. His response was that he was a Managing Director for his company, he knew how to negotiate and he had no need for an agent. What he failed to realize was he didn’t have all the information, time on market and previous sold history of similar properties are key to determining an offering price. He soon vanished from our web site and I let it go as “you can lead the horse to water, but you can’t make him drink.”

Recently I was checking sales in a sub-division that I keep a close track of and discovered lo and behold he had purchased a home there. Out of curiosity I ran a market analysis on previous sales and compared it to what he paid. Sometimes the universe has a great sense of justice he had paid over $45,000 above market for his home. Assuming a little bickering goes on in any transaction I suspect we would have saved him $25,000 - $30,000 all for a cup of coffee. I think the financial commercial says it all. It pictures a patient on the phone to his doctor while he’s holding a scalpel. The doctor is instructing him to make an incision between the second and third abdominal muscle and he’s asking “shouldn’t you be doing this?’ The message is clear financial mistakes can be just as painful.

As part of the Douglas County Housing Partnership, I volunteer to teach their First Time Home Buyer Class. After attending the class participants are eligible to receive up to $20,000 in down payment and closing cost assistance. Along with eligibility for other grants from counties and programs sponsored by the Colorado Association of Realtors.

While attendance to the class provides an immediate financial benefit to participants, the long term goal is to provide a more educated consumer. The press is full of stories of foreclosure, loan scams, and over priced properties. These have an overall negative effect on home ownership and the over all health of the real estate market. Foreclosures not only hurt the owner's immediate financial state, but hurt them long term in ruined credit, making it often impossible to purchase another home for many years to come. In addition, they hurt the surrounding neighborhood by depressing home values.

The loan companies represented in the class have been prescreened and approved by the County to administer their programs. The intent is to provide the first time buyer with solid loan programs that aren't loaded with hidden fees and interest rates that are free of bait and switch tactics that have proven disastrous to the consumer.

The real estate market has become ever more complex and too many peoples dream of home ownership turn into a nightmare from not taking the time to understand the basics. This class provides the forum for participants to get their questions answered as well as listen to others questions. Whether you are attempting to buy a resale home or a new build the class provides the insights to help you make better financial decisions.

 

For more information on the class and its schedule please contact me.

I recently had to ship a package internationally and was trying to get the cost for the shipment. Our receptionist was kind enough to call our vendor's 800 number to get my question answered. As I stood there it was obvious that she had encountered one of those voice response systems, as she dutifully answered "yes, international" etc trying to navigate through the system. After many levels of trying to get to a human being and punching various numbers into the phones key pad she finally reached a real person. After she hung up I realized I had more questions about what was needed to get my package shipped internationally, but I couldn't bear watching the torture unfold again. So with package in hand I went over to the local FEDEX store, had my questions answered by a real person, and the package on its way in less time than she spent on the phone.

Now I once had a credit card that advertises unmercifully on the television and had occasion to call them about an unauthorized charge. After navigating their voice response system I finally reached a real person, but by the quality of the connection and the accent it was clear that I was speaking to someone on the other side of planet. After that experience I cancel their card and opened an account with our local bank. They have a 24 hour customer hotline that connects you to a real person with one touch.

Since I worked many years in the technology sector, I understand more than most how beneficial technology can be. There are enormous informational resources on the internet that can answer most factual questions. But what do you do when you need help? Can you imagine a 911 service that used a voice response system? As part of my real estate business, I occasionally have to set showings for homes that are listed by limited services agencies and have to deal with yet another voice response system before I can get to someone to give me the information I need. A recent survey by the National Association of Realtors shows that limited service agencies have dropped their market share from 5.7% to 3.7 %. Can the answer be lack of service? When your dealing with your largest investment, do you want to hear "How can I help you..." or "press 1 if your would like to sell your home". Today's technology is one of greatest tools in real estate, more pictures, more information, to more people. But it has to be understood and used wisely by both consumer and provider.

Property Search Tips

When it comes to buying a home everyone wants to be a smart buyer and of course everyone thinks they are. So how do you know the difference? Today there is great hullabaloo that more than 80% of home buyers begin their search on the internet. The key phrase is beginning their search; smart buyers are using the internet to get themselves educated about markets and neighborhoods. But there may be a period of months before the transition from shopper to buyer occurs. Unfortunately too many never realize the transition and continue to rely on the internet to make a purchasing decision.

Once the transition occurs, internet shopping has little value because the important information about a property is not available to the public. Key to making a smart purchasing decision is to know the background of the property. For example, time on market, listing history, the original price paid by the current owner, and current amount owed on the property are all important in determining a market price. In addition with this information in hand a level of insight into the seller's level of motivation can be gained. As an example a seller who has no real motivation to move may put their property on the market at an inflated price with the strategy that if your dumb enough to pay the price they're dumb enough to move. Contrast this with a seller who just received a job transfer and needs to be out of state in 30 days. Who's going to deal and who's not? There are a number of prices associated with any property, and they can vary wildly, the tax assessor, the appraiser, and the owner all have different values. The one that matters to the buyer is the market value and that can vary by time of year and number of homes on the market.

Benchmark Property Advisors provides a great internet tool to begin your shopping experience www.RockyMtnMLS.com provides you with all the properties available, complete with maps, photo's, virtual tours, links to schools and community data. But its power lies in being able to bookmark properties, and the group of professionals to counsel and guide you that are available once you transition from shopper to buyer.

Creating Wealth

The old adage buy low and sell high could never be more true than it is today in real estate. The number of lender owned properties has made this one of the best buyer's markets that the Denver metro area has seen since the 80's. While every investor that owns stock is happy to see the DOW breaking 13000, there are not many bargains to be found. Conversely the real estate market is lagging behind, with all indicators showing that the market has bottomed and is due for a turn around.

But how do you take advantage of this opportunity? While you can watch late night info-commercials that tout get rich schemes, simply by buying their 12 step book and DVD which is a business in itself. A more common sense approach is the concept of real estate investment club. Do you have a group of friends that talk about how they want more control of their retirement future or who are looking for additional income? And who you already have a level of trust and confidence in their judgment? Then an investment club may be what you're looking for. It provides a lower point of entry for investment and helps to not only pool capital but knowledge. You can work together to invest in more properties, diversify risk and share ideas. This model not only benefits the more seasoned investor it helps to mentor those who are new to real estate investment.

Our group Benchmark Property Advisors affiliate of Keller Williams Real Estate, LLC provides access to properties having investment opportunity and the necessary loan programs to provide funding. In contrast to the traditional buy / sell broker we provide an in-depth real estate counseling service that is supplemented by access to high quality financial planners and a group of over a 100 real estate property exchange brokers that offer income properties that are not available on the internet or through traditional brokers. We provide the insight and due diligence on the quality of the investment opportunity, but keep you in control of the decisions. If this is something you would like to learn more about please contact me. We would be happy to talk to your club about the benefits of real estate investment.