Lest We Forget!

My Momma told me, "It is never good to talk about religion or politics in class or in public."  I hope Momma will forgive me for breaking her rule.  We are now in the count down to the runoff for our elected officials: especially regarding who will be the Republican Congressman from Northwest Arkansas and the western part of the River Valley. The winner will most likely be the Congressman for the next two years.  We Realtors put a whole lot of effort in staying in touch with our elected officials in Washington.

When business was really tough in the last year, the local Boards of Realtors and the NWA Home Builders Association put a lot of time and money in an advertising campaign named, "It's a good time to buy a home in Northwest Arkansas."  We all should remember the person who stepped forward to be the spokesperson for that campaign.  Mayor Steve Womack proved to be a great friend of our industry then and will continue to be.

 All of us that make a living in the Real Estate Industry need a friend in Washington D.C. to help and protect us.  Mayor Womack proved his friendship last year, and we need to return the favor on June the 8^th.  Let's continue that friendship and keep it going into the future. 

On another note:  Have you seen the discussion on the Credit Consequences of Short Sales?  It seems that a Short Sale, unless done very carefully, can affect that person's credit report for up to Seven years.  A Foreclosure will affect the credit report for only Five years.  It all depends upon how the financial instruction reports the occurrence.  There have also been discussions about distressed homeowners being hit with Default Judgments after Foreclosures.  The idea that we Realtors can give advice or council distressed homeowners should be strongly reconsidered.

I will be attending the Real Estate Educators Convention in San Antonia the middle of this month so I will be up to date on the newest things happening in the Real Estate Industry.

Look what can be obtain from the Internet!!

By now a great many of us in the Real Estate industry are fully aware of the power of Social Networks. They are a large part of many Realtors' marketing efforts. The regular standbys of "Facebook", "Plaxo" and "Linkedin," I hear from daily. (I don't "Twitter", yet.)

There are some other sites that can be very valuable to one's professional growth, and dedicated Realtors need to be aware and use them too. From a national and daily prospective there are some good list servers. "Real Talk" can help one stay abreast of general business conversations across a wide spectrum. It is monitored by some long time pros of Real Estate and the internet. "Active Rain" is a group of enlightened and productive Real Estate agents from around the country that blog about situations and thoughts from their perspectives. Sometimes funny, sometimes serious, and always thought provoking. Once a week there is Information from NAR sent out by Realtor.org. This has valuable information about legal situations Realtors encounter. The CRS website has great information about helpful and educational Webinars. If you are not a CRS, try "Real Estate Brainchain" that has a weekly video and other offerings in the practice of Real Estate.  Another is John Mayfield a well known Tech guy who puts out a weekly webinar about using Technology effectively. The "Swanepoel Reports" are tuned to point out trends in the Industry so we can have an idea where it's going. A Canadian friend, Gord Garrie, puts out marketing tips on a daily basis on how to manage your business base. Closer to home the "Arkansas Realtor Blog" will give reports on the market in our state. For local Northwest Arkansas market insight, it's hard to beat Paul Bynum's "Mount Data" with his monthly snapshot of the MLS activity.

For helpful non-Real Estate info, a look at the national economy report coming from "Marcus and Millichap" and a good site for personal care is "Every Day Health." The internet has become an extremely helpful source for so many of us in the Real Estate profession. How quickly that has happened!

Realtor Profile of Buyers and Sellers

Before analyzing the NAR profile 2009 we need to look at the current demographics of the US population by generations currently in our market.  Boomers born between 1946 and 1964 make up about 70 million people. They may buy one or two more houses in their remaining life time and that will usually be downsizing. Gen. "X" born between 1965 and 1980 make up about 32 million of the US population. They will buy three to four houses in their remaining life time. usually upsizing as families expand. The Minimum or "Y" generation born between 1980 and 2000 already outnumber the Boomers and in five to ten years will make up over 93 million of the working US population. They will buy eight to ten houses in their life time. The "Greatest Generation" those born before 1946 have probably bought their last home.

Now let us look at what the NAR Survey tells us: 61% of all buyers in 2009 were less than 44 years of age. 40% were under 34, with 25% being single females and 12% single males. Nearly half of all buyers were first timers. 65% of the first time buyers were under 35 with a median age being 30. (Think about half of them being under 30 years of age in nearly a quarter of all sales.)  All buyers 55 years of age and up represented a little more the 20% of the sales. The under 30s bought 5% more homes than the over 55s. (What is the average age of the Realtors in your market?)

Why did the first timers (about half the buyers) buy a home last year? The American Dream:  62% wanted to own their one home. 10% thought it was a most affordable time to buy and only 6% said it was because of the tax credit. 61% of first timers bought under $200 thousand with the most popular range being between $125 and $150 thousand.

What was the first step taken in the home buying process? 33% actually went to the internet to figure out the process and 11% researched the actual process on line, only 18% talked to a real estate agent to figure out the "How to." The good news is 81% of the buyers found the Agent very useful in the process and 77% found the internet very useful last year the percentage w as equal. Internet usage was over 90% with 76% using it frequently and reported that they found an agent that way. 60% of the buyers were inclined to walk through the houses they liked on the internet. (That is probably how they found their agent.) The median age of internet users was 37; they spent twice as much time on home searches and looked at three times more houses.  For all buyers, 40% looked on line first, 21% looked for an agent first, 10% drove by houses, and 5% attended open houses. For the under 40 age group, 55% went to the internet first, 12% went to an agent, and 11% went to a lender, 8% drove by or visited an open house, 12% talked to a friend or relative.  Internet searchers wanted pictures first 80% of the time and 63% liked virtual tours. The public MLS was the favorite site. The most important thing a buyer looked for in an agent was honesty 31%, reputation 23%, a friend 13%, care 10%, and a good firm 3%.

There is a whole lot more an agent can learn from the 2009 Survey of Buyers and Sellers and the complete book can be found at www.Realtor.org.

A survey is completed every year by NAR of Home Buyers and Sellers. They interview 120,000 buyers and sellers between July of the previous year and June of the current year. (This survey is now available for download at www.Realtor.org.) Fifty-six percent of the buyers last year were between 25 and 44 years of age with Forty-seven percent of all home buyers being first time buyers. By far the largest group of these first time buyers was in the 25 to 34 age range.  I think this is significant, because when I look at my Board of Realtors, I do not see many Realtors representing this age group (only a very few.)

 Forty-four percent of buyers found the Realtor they worked with by referral from friends or relatives. It was the "Sphere of Influence" we all talk about.  How deep is your "Sphere of Influence" in the age group that makes up the buyers of today and tomorrow?

The survey also pointed out that buyers want most from their agent:  first Honesty and then Representation. This seems to add up to "Trust."

 So let's see what some other surveys say.  A Gallup Poll, just released, rated the public's perception of the honesty and ethics of various professions. Nurses rated highest followed by Druggists and MDs. the lowest being Stock Brokers at 21^st and HMO Managers at 22^nd.  Although Real Estate Agents were not ranked in November of 2009, using our 2008 ranking, we would have come in at 14 behind Bankers but ahead of Lawyers. (It might have been beneficial not to be ranked after the bad market of 2009.) The Harris Poll organization did a poll on professions in late 2009 also. This was a ranking of the public's perception of Prestigious Occupations.  Again the most prestigious were Firefighters (62%), Scientist (57%) and Doctors (56%.)  The bottom three were somewhat of a surprise to me: Stock Broker (13%), Accountant (11%) and Real Estate agent/broker (5%).

I am not sure how to put this all together.  It looks like 17 % of the population trusts in us but not a lot of respect for us at 5%.  This might give a clue to a final statistic that came from the NAR poll.  About two-thirds of the buyers and sellers were satisfied with the service they received in their transaction (not great) but only 17% used the same agent for their next transaction.

Perception is reality!

                                                        Déjà Vu all over again

          In the old days (before home inspectors) we Realtors carried a tool bag in our car. There was a wooden mallet for driving in those horrible wooden driver stakes that were supposed to hold up yard signs.  There was a flash light for checking under the house for leaks and in the attic for insulation. There was a screwdriver and pliers for fixing minor things we found in the house before showings. There was also a 25 foot tape and a 100 foot tape for measuring rooms, as well as lot sizes.  Some offices even had metal detectors to mark lot corners without the aid of surveyors. Most city lots had to be surveyed (cost $150) before closing any way. You see we Realtors were thought to be the experts regarding "a good, safe house."

          Here is what is quickly coming at us.  Buyers will receive a copy of  the Appraisal Report any time between 10 days and 3 days PRIOR to closing.  If a house is quoted in the MLS or in a Realtor ad as being for sale at, let's say, $92 per square foot and the appraisal report says the house is 50 or 100 feet smaller than advertised; that could cause a problem just before closing (if the buyer wants the quoted per square foot price.)

          I do not think the county is particularly accurate in their measurements. Many home owners have little idea of square footage, only what they have been told. This is where the old 100 foot tape gets back in the Realtor tool bag. You must learn to measure a house accurately, or pay someone to do it for you. It would be wise to stop quoting a home for sale as priced at so much a foot. Remember, not all square feet are created equal anyway.

          Some of the sharper Buyer Agents are making offers with a price on page one of the real estate contract, then going to page nine in paragraph 27 "other" and qualifying that offer based on a price per square foot.  How do you advise your seller now?  Some appraisers offer home measuring services to Realtors and/or sellers for $100 to $150.

In times past, we Realtors were the arbiters of house sizes.  Sometimes changes bring back old ways.

2010 Contracts may not be out till after Christmas!

Although the 2010 Contracts may arrive just in time for the New Year, that should not present much of a problem as there were not many changes.

 Four of the changes had to do with the "Broker Service Fee." It was simply removed from that paragraph in the Agency contracts. It will be negotiated with the Commission.  Companies that collect that additional fee will need a new script to explain the charge.

There will be no choices for a buyer or seller to make on a "Closing Protection Letter." It will simply be mentioned in the boiler plate that it may be required by a Lender.

The "Enhanced Title Policy" will be handled in much the same way.  If a 50/50 split is chosen for a combination policy both buyer and seller will split the cost of the Enhanced Policy due to new HUD-1.

There will be a new paragraph in all listing agreements where by a seller can instruct their agent as to the use of the information on the Internet. If a seller wishes their listing to be shared with other Real Estate sites on the net, other than MLS, there will be four questions to do with Blogging, Address, and Automatic Valuations to be addressed.

In addition to a few other minor changes, there will be two new forms. There is now a "Sellers Property Disclosure (Commercial)" and a "Real Estate Contract (New Construction)." The New Construction Contract is 13 pages including the FTC Insulation Requirements. It is to be used when a house has never been lived in, with the exception of a builder's own house that has only been occupied a relatively short time. The discussion about a "Punch List" is much better than the paragraph 15, b.

There will be a CE, Salesperson, and Broker course on January 5, 6, &7 using the New Forms at the AIRE classroom in Lowell/Cave Springs (Ark Hwy 264). Register and pay by credit card on our web site www.aire.us  or show up and bring a check.

   My wife Wendy and I got back from a Real Estate Educators Convention in Portland, Oregon. It was held in Portland because the title for the conference was "Going Green." Portland is reported to be the Greenest large city in the US of A. It truly has the most LEED Certified Buildings of any major city and the public transportation could be the envy of any metropolitan area. Most of the central city transport was street cars running on electricity and free. To go on longer trips to the suburbs it only costs about $4.50 both ways. All of that was pretty impressive until we learned the sun really did not come out till mid May and we never saw it for the week we were there until around 4:30 PM and some times from 6:30 AM until 7 AM.  However, there were Solar Collectors on some of the roofs.

   It is always interesting to get outside of one's area and find out what the rest of the country is doing. As for sustainability, the West is really into it. There was recycling everywhere, the produce in the local Farmers Market was almost all Organically Grown, and we went to a Winery that was almost completely solar. Nine months of the year (except for the Crush) they actually put electric power into the grid and the electric utility paid them for it.

   The Midwest was wrestling with a multitude of empty houses. 15% of the homes unoccupied, 9% of the homes built since 2000 unoccupied, homes over $500K are just as likely to be vacant as homes under $100K. Michigan, Illinois, Ohio and Indiana were not expected to turn around till 2015 or beyond. Thankfully Arkansas, Texas, Tennessee and Oklahoma were predicted to come out of recession this year.

   Another phenomenon that was explored was Social Networking. We learned that Twitter was like an on-going Cocktail Party with a lot of chit-chat similar to what would occur at a party. It was useful to some in keeping clients informed about the purchase and selling process, but only if they appreciated Tweets, more helpful, it seemed, in the big cities.  Face Book seemed the most productive for Realtors, again mostly in the larger cities.  But I do see some of my FBF (Face Book Friends) that are using the medium effectively in NWA.  It depends quite a lot on the audience. I notice a good many fellow Realtors wanting to be friends, but don't hear much from them after the initial Hookup. A good Real Estate site is "Active Rain" with helpful information on the daily blogs. There was a mention of Plaxo and LinkedIn as a good way to connect with other professions and may be even to find jobs.

   All total, to a country boy, it seems that once again things happen other places and finally get here, and certain thing work a whole lot better where there is a large concentration of people.  In regard to "Hard Times," we are a whole lot better off than most

I have a lot of random thoughts and a Tweet only gives you 140 characters. Not being sure how many characters each of my random thoughts would use, I decided to distribute those thoughts on good old e-mail (with emphasis on old.)

The Government is sure borrowing a lot of money. Interest rates will surely rise. I remember the last time, when Carter was President.  The fear is that some deserving folks will get left out.

Inflation is good for the Real Estate business but bad for the economy as a whole.  Saving is good for the individual but bad for the economy as a whole.  What an interesting time we live in!

Did you notice what HUD (government) has done about the $8,000 tax rebate? First it could be clamed with a re-filing of an individual's tax return.  Then it could be clamed at the closing table. That second option lasted less than a day, as some wise person figured it would lead the housing market right down a path we had just left. Some banks were loaning the money in return for the assignment of the tax credit, but that mess up the borrower's ratios.  Now some financial intuitions are making a kind of Bridge Loan to help "First timers" buy a house.

I noticed a superior court ruling in Alabama that declared the Broker Service Fee was a violation of RESPA, deciding it was an unearned fee. When that paragraph was first placed in our ARA forms, Andy Schaus warned Brokers to clearly define the specific service that the Broker Service Fee covered. It was not the paper work or the closing of the transaction.

Your closings may take longer than in past times. In order to assist the borrower in understanding the mortgage transaction and to prevent loan originators from pressuring appraisers about values, originators and appraisers have a fire wall between them now. A third party now selects the appraiser, and the buyers should get a copy of the appraisal to approve three to ten days before closing, depending on the lender's guidelines.

I know some loan originators that have a hard time understanding the appraisal forms. Will there be classes for home buyers on how to judge the validly of the collateral they are using for the mortgage?  Add ten days to your projected closing time.

On a personnel note:  I went to two CE classes this month. Yes, CE Instructors must do CE too. The first was sponsored by the Arkansas CRS Chapter. It was an excellent presentation on the anatomy of a Short Sale and dealing with REO (foreclosed) Property. We must thank those Realtors that tackle that tough part of the market.  The faster those properties get out of the market, the quicker we will return to a semblance of order.

The second class was presented by Paul Bynum. It was the most carefully researched presentation on the causes of the Mortgage/Credit Crisis I have seen or read. He may present it again in this market area.  It is worth a day's time. Get ready for information overload. I am still wondering what a Credit Default Swap was ever concocted to accomplish.

Speaking of CE, Tina Daniel and I will be presenting a six hour CE class the first Friday of every month at the Metro Board of Realtors and the first Tuesday, Wednesday and Thursday at our Lowell classroom on AR Hwy. 264 West, 3.6 miles west of the Lowell exit off I-540. We will be presenting weekend classes on the second and third weekends in July.  Call me for start times. You may register at the door.

A couple of weeks ago, Wendy and I got to go to Cancun, Mexico; not to lie on the beach, but to give away Wheelchairs for Rotary and The Wheelchair Foundation.  I was impressed by the extent to which the area had gone in order to reduce their energy use in the hotels and commercial buildings. Everywhere the lighting was fluorescent. In the hotel, all of the lights were compact fluorescents and the power turned off when you left the room.

It occurred to me that in that area of Mexico, they were far ahead of us in Arkansas in the "Green Revolution."

While we were gone, tax day and the "Tea Parties" happened as well as Earth Day. From the pictures I saw in the papers, the participants in the Tea Parties were a whole generation apart from the participants in Earth Day. It seemed the older generation (Boomers and Silents) were complaining because the Federal Government deficit was so high that it will be passed on to the next generation and beyond. The people involved in Earth Day were calling for Greener Earth, a reduction in greenhouse gasses and reducing the depletion of our natural recourses.

The newspapers also reported that eleven of eleven "Land Farmers" were polluting central Arkansas streams and the water table with the waste water and chemicals left over from drilling for gas in the Fayetteville Shale.  What a contrast - the older generation worried about the national debt which is only money and the younger generation worried about the health of planet earth and its air, water, and recourses.  I kind of think I am on the younger generation's team.  I hope we in Arkansas can become Greener and continue the good life for our children and grandchildren. Air and water are critically important.  We can always print more money.

Almost every one knows the Golden Rule. In a large part it is the basis for our Realtor Ethics and is quoted in the Preamble to the Code. The Platinum Rule challenges us to look beyond ourselves - not to treat others as we like, but as to their preference of treatment. The only way we will know how to treat them or communicate with them is to ask and observe. Many great observations come from the NAR "Profile of Buyers and Sellers" published each year. Knowing that the median age of first time home buyers in 2008 was 30 and the median age of repeat buyers was 41, should give a Realtor evidence that a newer, younger generation is becoming our Client/Customer. They perhaps do not desire to be treated nor communicated with the same way as the Boomer generation, of which most of us are a part.

Look at the wealth of information that can be gleaned from the Internet. Look at the length of time buyers spend looking before contacting a Realtor. (Nearly one year!) 94% of the buyers find the internet a "most helpful tool." Today's buyer did, most of the time, eventually purchase the home with the assistance of a Realtor. They did, however, narrow their search and almost 50% of the time find that Realtor looking on the Internet first.

Think hard about your presence on the World Wide Web:  Is it all it could be?  Do you have a whole bunch of pictures? Are they professionally done? Is your information correct, and how many sites does it appear on?  Did you know there are web sites that are free and world wide in exposure in a language for a specific country?

In order to get with the buyers of now and in the future, we must communicate with them in the way that they want to communicate.

New Market report for February at www.ChadKumpe.com .