Brendan's Blog

Some buyers think they own the house long before closing...

Brendan Murphy, Broker, CRS, GRI, ASP, e-Pro (Raving Real Estate) — Tue, 22 Jul 2008 22:03:30 -0500

I've learned an interesting lesson the last few weeks.

It's foolish to assume that you can control either side of the transaction, no matter what is at stake. I imagine there are a lot of "well duh"'s out there after reading that sentence. But I hope I'm not the only one that had to learn this the hard way.

Also... it seems some buyers think it's okay to simply look up the seller's number and start calling him/her directly, I mean, a lowly agent like myself cannot be trusted, it's best to go around me lol.

Some buyers think it's okay to just send people to check out the house the sellers still own and live in.... with no notice to the agent or the seller in any fashion. You're doing dishes enjoying yourself one minute, and the next, someone's stomping around on your roof... ok...

Some buyers think it's okay to just come on over to the sellers house that they live in and own and go ahead and mow the lawn without permission or regard for general manners and basic respect or that little thing called "trespassing".

The list is quite endless actually, and some buyers apparently do ALL of these things.

What happened to common courtesy, a simple phone call to the agent, basic "requests", permission, etc.?

Some folks remind me that some things just don't have a price on them, the simple answer is "no".

Even though showing the proper respect generally gets a quick "yes".

I guess some folks are above the rules and I cannot control that.

4120 Kiowa Drive, Laramie, Wyoming, 82072

Brendan Murphy, Broker, CRS, GRI, ASP, e-Pro (Raving Real Estate) — Sun, 06 Jul 2008 01:16:10 -0500

For additional details and a virtual tour, go to: www.4120kiowa.com

Tucked away on a quiet street, between Indian Hills and Alta Vista sits a beautiful home, on a huge lot, right across the street from Kiowa Park!
This house has been completely remodeled, including a new roof, a new stucco finish with new paint and already had excellent landscaping!
The inside has a remodeled kitchen, with sila stone counters, stainless steel appliances and a breakfast bar! The wood floors have been refinished, the rest of the house has new carpet. New fixtures have been installed everywhere, including overhead fans in the upstairs bedrooms!
This house looks new, take a look and see if it's your home...

1001 Sheridan Street, Laramie, Wyoming, 82070

Brendan Murphy, Broker, CRS, GRI, ASP, e-Pro (Raving Real Estate) — Sun, 06 Jul 2008 01:07:18 -0500

For additional details and a virtual tour, go to: www.1001sheridan.com

This is an amazing mix of historical charm and modern amenities. This home is in the historic and sought after "tree area" of Laramie, Wyoming. This house has been completely remodeled, from the basement to the attic!
The main floor has Brazilian Walnut Floors, a fireplace, a huge kitchen with custom cabinetry and stainless steel appliances, and a huge pantry!
The master bedroom is huge and has a spiral staircase leading up to a large dressing room and master bath. The master bath has matching vanities, a 2-person jetted tub (with waterfall!) and plenty of space!
The basement has two additional bedrooms, a large family room and much more. Much of the wiring and plumbing are new, the furnace is only a year old!!

3428 Alta Vista, Laramie, Wyoming 82072

Brendan Murphy, Broker, CRS, GRI, ASP, e-Pro (Raving Real Estate) — Sun, 06 Jul 2008 00:54:43 -0500

For details and a virtual tour, go to: www.3428altavista.com

In one of Laramie's finest neighborhoods, this home has approximately 3,229 square feet, with 4 bedrooms and 3.5 bathrooms! Huge Lot, mature landscaping, a fireplace, and beautiful wood floors. A large patio off the dining room, plus a study with french doors, a large family room, a wet bar, and even a recreational room. And if you're still not satisfied, the basement is only partial, you can always dig out the crawl space if you run out of room!

Marketing Salvadore Dali's house.... ? Need Advice

Brendan Murphy, Broker, CRS, GRI, ASP, e-Pro (Raving Real Estate) — Sun, 06 Jul 2008 00:39:11 -0500

I met with a seller today that has some very rare property. Both are either mixed use or primarily commercial buildings with multiple uses...restaurant, retail, residential, mixed, bar, liquor store.

However, the seller is an artist, and quite an impressive one. He and She have done so much to these properties that they have almost become works of art. It reminded me of an artist near my home growing up, named "Starrkempf". Mr. Starrkempf's yard was full of HUGE metal sculptures, loaded with ball bearings. Mostly they were birds, and with the wind they would swivel and parts would twirl and so on. Some of them were over 30 feet tall. The interior of the home was just as artistic as the yard, which had perhaps 8 of these huge sculptures.

The seller today has this daliesque thing going on. If you're NOT familiar with Salvadore Dali, he was a famous Spanish artist who designed his own home and the improvement (house) itself was a piece of art.

This seller's buildings were like this, pieces of art as much as pieces of real estate. Now this man, nor his wife are not famous but that is not the whole issue. For example, if I have an interior designer come in and pay them $50,000 to decorate a home, and then sell it furnished.... surely that creative addition of the decorator has a value all by itself. So that is kind of how I was considering it. The seller believes his buildings are worth about double what they would be by a comparative analysis. And I am inclined to agree, there are NO comparables, not in this town.

So, to my question: Is there some place I might find comparables in OTHER cities like this? Real Estate, be it residential, commercial, mixed use that has a premium on top for the creative genius and talent of the decorator. Any ideas on how to price such a thing? I was just looking for some experience so as not to re-invent the wheel as I've never dealt with any thing like this. Please add what you can if it may help!

Multiple Regression Analysis in the CMA

Brendan Murphy, Broker, CRS, GRI, ASP, e-Pro (Raving Real Estate) — Sun, 06 Jul 2008 00:30:28 -0500

Any fellow economist agents here? I've always wanted to incorporate MRA (Multiple Regression Analysis) into my CMAs, or at least my valuation studies. Both for functional use of pricing and also for basic accuracy studies to see how well it might work.

However, I am in a non-disclosure state (sold prices are not disclosed) and of course the agents and appraisers have access to these sold prices but no outside 3rd party does. This means we would have to create an MRA model manually, particular to our market and then manually add in data points. Also, many of the data points would not be accounted for on the basic MLS data sheet.

A good MRA model for real estate might have over 100 variables, including many dummy variables. So hypothetically, one would have to go to each of these houses and check all these extra features out to create enough variables to make it accurate and give it a good p value, t value, or whatever test you are using to attain statistical viability.

Now to the question: Does anyone here USE MRA? If so, how? How many variables? Where do you get them? Any ideas on how this could be successfully utilized for the purposes of pricing? I ask that last one as I KNOW it has been used for economic studies. For example, one of my professors when I was in school was working on a model for at least a year to try to build a model that valued trees. I was always interested to read the results and find out where the point of diminishing returns happened (what number of trees per square foot). And which trees were a liability on average, which were an asset and so on.

This is just one example, but it reveals how interesting MRA could make a CMA and how much more in depth it could get. Call me an egg head, call me a silly economist with a real estate license, or call me and tell me what I yearn to know: How can one use MRA in real estate brokerage with limited data and especially in a non-disclosure state?

Ethics of Business - Working Expired Listings?

Brendan Murphy, Broker, CRS, GRI, ASP, e-Pro (Raving Real Estate) — Sun, 06 Jul 2008 00:16:26 -0500

I simply wanted to hear feedback from agents on the issue of "agents who work expired listings".

I recently was in a discussion where the concept was nearly horrifying to an agent. I said there was nothing wrong with it and he called me a "bottom feeder". After I was done laughing, I asked him to back it up and explain what was wrong with this practice. I also asked him to explain how it was wrong to comply with the NAR COE, he ignored all my valid questions and offered only redundant rhetoric that did not address any of my points.

I work in a small town, but always assumed this was quite common in big cities. I work expireds sometimes, depending on the listing and my needs, etc. And I can't even fathom the argument against it. I wonder if these agents are aware of anti-trust laws and so forth. To be against this idea of working expireds is to be against free trade & fair competition and in favor of monopolies. That IS what we are talking about here.

Do agents realize that this whole issue in the COE is about avoiding monopoly and complying with anti-trust laws? This is the same reason that an MLS would have trouble turning down any member that had complied with all requirements. I've seen them try to do so and always wonder why they would even mess with something so dangerous. I guess some folks are just afraid of competition.

Personally, this is how I see it: The agent who already has the listing, most likely for 4-6 months really has a HUGE advantage. They have the inside track, and have had perhaps 6 months to build a relationship, trust, and confidence from their seller. If they are even doing half their job, a stranger agent really should be no threat at all. And if a strange agent CAN come in after this period of time and establish more confidence in a five minute phone call than the previous agent did in 6 months, then we should look more closely at the first agent in my opinion for they must be doing something drastically wrong.

What do YOU think?

Who are your heros that guide you in your Real Estate quest and Life?

Brendan Murphy, Broker, CRS, GRI, ASP, e-Pro (Raving Real Estate) — Mon, 30 Jun 2008 10:41:26 -0500

We're a crazy breed, we do things that no other profession would consider doing.

I was wondering who Real Estate agents have as heros, those people in your lives, or ones from the past that inspire you as Agents and as human beings, and WHY?

Mine are:

1/ Roald Amundsen, famous explorer, and first man to the South Pole. I like Mr. Amundsen because he went against all odds and was competing against the most powerful nation (G.B.) at the time (about a hundred years ago) and they had all the advantages over him. He also showed the power of humility in any quest. Even though those British had all the advantages, their arrogance led to not only a loss, but actually a major tragedy (the final party of 5, led by Captain Scott all perished in Antarctica and are still buried in the ice there today).

2/ Nikola Tesla, I like that this man may be the most important inventor of the modern age, yet it appears due to Edison's efforts, no one really seems to know who he is. Quite the creative Genius, he brought us many major inventions and many day-to-day things we take for granted, we owe a big thank you to Mr. Tesla.

3/ Bill Gates, who showed that business savvy is more important than brains. He took a thing from Apple and made himself the richest man on the planet. Perhaps the most successful business transaction in history.

4/ Sam Walton, who almost single-handedly switched all the power in Retail from the manufacturers to the Retailer (wal-mart). Who redesigned the low cost business strategy and became the model to follow and schooled many European nations on GNP.

Now let's hear about yours?

Floor Plan creation advice?

Brendan Murphy, Broker, CRS, GRI, ASP, e-Pro (Raving Real Estate) — Mon, 30 Jun 2008 01:22:02 -0500

I really want to incorporate floor plans into my online marketing. Looking for an easy way to do this, perhaps an online service? Specific software? I've looked into a few softwares but since I'm new at this, I'd like to hear what others have to say. Seems like a lot of work, but I do get a lot of internet requests for floor plans, so I'd like to make it a staple of my marketing, little help?

Thanks!

www.ravingrealestate.com

Video Tours

Brendan Murphy, Broker, CRS, GRI, ASP, e-Pro (Raving Real Estate) — Mon, 30 Jun 2008 01:19:22 -0500

Looking for some help with video tours. Other than youtube, and embedding tours from a youtube hosting of them, what other methods do you use? What formats? How big is TOO big for a video file on a web page? How long do you think they should be. Should it be a POV (point of view) video or do you think the REALTOR should be IN the shot, selling face to face the whole time.

Any ideas from veterans or at least amateurs in this relatively new field very welcome. Much appreciated!

www.ravingrealestate.com

Feedback on my Virtual Tours?

Brendan Murphy, Broker, CRS, GRI, ASP, e-Pro (Raving Real Estate) — Mon, 30 Jun 2008 01:16:23 -0500

I just wanted to hear from some other professionals and get some feedback and/or constructive criticism of my virtual tour methods and presentation.

Here is an example:

www.3428altavista.com

Please let me know what you think, if you think I should add anything to these web sites, any other ideas or improvements you might have. I always listen, thanks for any help!

www.ravingrealestate.com

BPO Companies you Trust? Tell Me!

Brendan Murphy, Broker, CRS, GRI, ASP, e-Pro (Raving Real Estate) — Mon, 30 Jun 2008 01:11:55 -0500

I'm always looking for BPO companies that pay well and quickly. I've heard many stories about BPO companies that stiff you and want to avoid them, although so far I've been very lucky.

If you've had great luck with a company, please let me know who they were and provide a link to their site if possible so I can sign up.

Likewise, if one has not paid you or been difficult somehow, please let me know who to avoid.

Ones I like: protk.com, pcvmurcor, marktomarket are the ones I can think of off the top of my head.

Please take a moment and help out, thanks!

Do Not Call Lists, HELP!?

Brendan Murphy, Broker, CRS, GRI, ASP, e-Pro (Raving Real Estate) — Mon, 30 Jun 2008 01:03:07 -0500

I was looking for advice about complying with Do-Not-Call registries and how cheapest to do this.

Any links, and help would be appreciated. I work FSBOs and Expireds a lot and don't want to be fined $11,000 by a tricky one, nor to I want to harass anyone who has specifically asked for no telemarketers.... which IS what we are when we do this!

Most of the services and options I've seen only allow you a few area codes, yet many times I'm calling someone out of state and so how to check them as well, etc.?

Any ideas, tips, knowledge?

Thanks!

www.ravingrealestate.com

"Just Listed" and "Just Sold" mailers - FARMING HELP?

Brendan Murphy, Broker, CRS, GRI, ASP, e-Pro (Raving Real Estate) — Mon, 30 Jun 2008 00:59:25 -0500

I was hoping to get some feedback from other agents and brokers on what internet site or method they use for quality mailers for farming.

I've seen a few options available and wanted some feedback from those who have already "invented the wheel" before I made a final decision.

What/Who do you use, how much is it, why do you like them, what made you choose them? Quality of the postcards? Front AND Back? How personalized are they, graphics you're allowed to customize them with, etc? I definitely think the ones that build farm lists are good to go with. What are your thoughts please?

Thanks much!

www.ravingrealestate.com

Gas Prices and Real Estate Marketing - walkscore.com

Brendan Murphy, Broker, CRS, GRI, ASP, e-Pro (Raving Real Estate) — Mon, 30 Jun 2008 00:37:33 -0500

Gas Prices are changing everything it seems. I just got a lecture from a carpet salesman about how the price went up due to it being a "petroleum bi-product". News to me, but carpet was never my business. Just one example but I think we've all noticed food prices, and had similar speeches from someone about petroleum bi-products or freight/shipping costs increasing.

It's quite terrible and I'll keep my politics to myself as that is not the point of this entry. The point rather, is that first, I am glad I live in the small town of Laramie, Wyoming which is only 5 miles in diameter and has basically everything I need in the city limits. I cannot imagine those poor folks in Denver or other large cities with weak public transportation. Sitting in gridlock traffic on the highway while the dollars go up in smoke, doing nothing for you but keeping you cool as you run your AC in heavy traffic.

I imagine we've just scraped the surface too, things will get worse; it costs $94.00 to fill my tank, and I'm lucky, again I live in a small town and have a somewhat efficient truck. So for those who have to commute across the big city everyday and buy 4 tanks a week, I fear for their futures and lifestyles.

Interestly, I recently saw an article where they had literally created a scale for a property's proximity to the various stores; staples in daily life. This is quite interesting and something one should indeed consider. If you'd like to read up on it, go to www.walkscore.com. This is a new idea, but clearly one with a lot of merit and something that will increasingly catch on, especially in the big cities.

Very interesting dynamic of the gas price issue if you think about it... Certain locations just took a big hit because they are so far from the grocery stores and other commerce one may need on a daily or at least weekly basis. Who would have predicted that ten years ago?

So go see what your house's walkscore is. Make this part of your analysis when you choose what to buy.

www.ravingrealestate.com

Does one have to be Crazy to be in Real Estate?

Brendan Murphy, Broker, CRS, GRI, ASP, e-Pro (Raving Real Estate) — Mon, 30 Jun 2008 00:26:44 -0500

Well, anyone who has been to the Christmas party of a bunch of Real Estate agents might say yes...

However, I wanted to point out one thing:

In what other profession would a person take a call from a complete STRANGER and agree to meet them in the middle of nowhere in an empty house in some rural area, all alone, in the middle of the night?

Only a Real Estate Agent would do this without a second thought!

With that in mind, a little bit of "crazy" must be part of the equation.

Crazy is generally a good thing though. Personally, I rarely say no. I'm part roofer, part marriage-counselor, part negotiator, part landscaper, part stager, part salesman, part gopher, part researcher, part coordinator. I have so many parts, I really never know what my job may be from day to day.

I do know I won't give legal advice, or accounting advice, or many other types of advice that could land me into trouble (of course that marriage counseling stuff is a grey area...) but generally I'll do what it takes to get the job done.

I remember last year I was working for a Seller and we had this millionaire buyer from some other state that was dragging his feet and causing delays. He'd quit answering the other agent's phone calls (he was working with the other agent). I finally asked for permission to call him directly and the other agent said it was fine. I quickly realized the buyer didn't really keep his agreements (like to fax papers the next day, etc.). He would even get angry at me for calling at a previously agreed-upon time. Then he began dodging my phone calls. So I called him unavailable. He quickly caught onto this and started dodging those calls too. Then I finally went and bought a calling card as they show up as crazy phone numbers on the other person's phone. When I reached him on the calling card he finally said, sounding defeated, "you're not going to quit calling until I send those papers, are you?" Ultimately, he sent all the papers and became cooperative and we closed the deal.

However, only persistence allowed it to happen (I would say it was boarderline harassment, but he actually never told me to quit calling him). Real Estate is a diverse business and a good agent is priceless!

www.ravingrealestate.com

Preparing to Sell an Investment Property

Brendan Murphy, Broker, CRS, GRI, ASP, e-Pro (Raving Real Estate) — Mon, 30 Jun 2008 00:11:49 -0500

Investment Property (rental) Selling, is much different than selling your home. The buyer of your Home is driven by emotions and amenities and other things. The buyer of an investment property is typically not very emotionally driven. They are profit driven, big difference.

Thus it is a numbers game and you need to optimize your numbers before worrying about the appearance of the property in my opinion. However, the two can be connected. The most important thing to do is to maximize your rents. This of course may require that you do some work to improve the appearance of your rental units. So do what you need to do to make them look their best, then raise the rents as high as you can, while avoiding excessive vacancy. You should also try to get tenants to pay variable costs like utilities. So ultimately it's just like when YOU owned it: Maximize the gross income and minimize the expenses. But it is different because it has never been more important than when you put it on the market.

You're essentially selling a business so you have to make it look as profitable as it can be, which you should have been doing all along, but better late than never. Now that you've done that you should treat the rest of it as you would residential real estate: Clean it up where you can, fix any major deferred maintenance that you can afford to and maximize that curb appeal. Once you get them past the numbers there is of course a minor emotional element you also need to maximize to get your best price.

Some landlords are too nice and refuse to raise rents, but they might be willing to do it if they realized they stood to make $1,000s more at the time of the sale. They instead may see it as "it's not worth the confrontation with the tenant when I'm only getting $50 more a month", etc. But really because a financial valuation method is used by the investor AND the appraiser they need to realize the $50/month is raising the value of the building which can translate into much, much more in the final sales price.

So raise those rents as is possible, and THEN put it on the market! As an investment property, the main place it has to look good is on paper...

www.ravingrealestate.com

Why is Staging important before putting your house on the market?

Brendan Murphy, Broker, CRS, GRI, ASP, e-Pro (Raving Real Estate) — Sun, 29 Jun 2008 23:56:49 -0500

Staging is common in the West, they almost don't put a house on the market in California unless it is staged.

If you're trying to get a date, you might shower, comb your hair, and wear your best clothes to give it your best shot. Likewise, if you're going to sell your car, typically you're going to wash it and pay $125 to get it detailed. Why? Because like in many transactions in life, you are trying to maximize your return in the exchange, whatever that exchange is.

Yet with our (typically) biggest asset, our HOME we frequently overlook this concept of putting the best foot first of this unique and valuable product. A house is an item for sale, like any other, so treat it the same way.

I don't think there are really any "secrets" but I do think there is more to it than common sense, but common sense goes a long way. For example, if you have a room full of boxes, it might be good to consider getting a storage unit or sticking them in the garage. If you have five cats, you might consider boarding them and erasing the trace of them in the home until it sells. This may sound drastic to the cat lovers out there, but if I said "Mr. Cat Lover Seller, would you board those cats for two months if I offered you $4,000?" I bet he might say "yes". This is an extreme example, but it makes the point.

Some of this is very obvious, yet you might need to be told how important it is by an outside party. It makes me think of a Simpsons episode I saw once. The simpsons are forced by DSS to take a class on parenting, and the instructor says "People, and I cannot stress this enough, put your garbage in a garbage can... don't just throw it out the window!" Funny, but somewhat true in the point that it makes.

Ultimately, many markets do not incorporate much staging into the marketing and/or service. Just recently I walked into a house, that had nothing but kids' toys scattered everywhere from the moment I opened the door. And that is all I remember about that house, "oh right, the one with the toys everywhere". Needless to say, if I were a buyer, I would have passed it up I think.

This means that if yours is among the FEW houses that are staged, it has a much better shot of cutting in line in the Real Estate check out line to get to the register. This is true. I also hear resistance from sellers at times; they don't realize or they don't believe how important it is. Look at it this way: When you go shopping and you are reaching for a canned good, and find it has a dent in it, don't you put it back and get a clean looking can with no chance of a hole in it? I know I do. This is the same concept. Make sure your home is the clean looking can and someone will reach for it soon.

While again, I think common sense can go a long way, I highly recommend that you hire an ASP, or Accredited Staging Professional. An agent with this designation not only cares about this valuable concept but he/she cared enough to take a 2 day course to become specialized at it. Anyone can talk about staging, but personally I want a specialist in any important job I hire someone to do. I also recommend asking your prospective agents about how they plan to stage your home. If it is obvious the thought hadn't crossed their mind then you might want to keep looking until you find one that knows how important it is!

www.ravingrealestate.com

Importance of a Final Walk-Through

Brendan Murphy, Broker, CRS, GRI, ASP, e-Pro (Raving Real Estate) — Sun, 29 Jun 2008 22:49:05 -0500

A final walk-through is a chance for a buyer to give a final okay to the property just before closing. It is preferably done on the same day of the closing, shortly before heading to the bank or title company to actually close the deal.

Many things can happen in a house from the day you get a contract and the day it actually closes (usually 30 days or more later). Pipes can break (especially true in Winter months of course), appliances can fail, damage can be done, etc.

Another reason is that maybe once the Seller has moved out all their furniture, pictures, and other personal effects, you might find some holes in the wall or something else you didn't know was there.

The point is, you don't want to go buy your house, then come HOME and find a problem, perhaps even a serious one. So to avoid those surprises, you should always request to do that final walk-through with the agent working with/for you. If you want to make an issue of something, it's always better to do it BEFORE you give that big check over.

Typically any seller responsibility will not "survive closing", in other words, after you leave the closing table you're not really holding too many cards anymore. Thus, it's best to make sure you are satisfied before heading to the actual closing. Typically appliances and some other things are guaranteed by a contract to be working on the day of closing, so I think that is a big one.

Keeping that in mind, make sure during the walk-through, you flush those toilets, test the water heater and furnace, and all the appliances. In most cases everything is fine, but it's better to be sure.

Now if on the day AFTER closing the heat exchanger on the furnace goes out, or the water heater liner cracks and leaks everywhere, there is nothing you can really ask of anyone. You have simply received a quick lesson in the downside of Home Ownership-the liabilities. There is no landlord to call anymore, but that is negligible compared to the respective assets of Home Ownership.

So even if your agent doesn't offer the final walk-through, tell him/her you want to do one and again, preferably an hour or so before the closing. The last thing you need after the "high" of a purchase is a big surprise when you walk through the door of your new home!

Pricing Investment Properties.

Brendan Murphy, Broker, CRS, GRI, ASP, e-Pro (Raving Real Estate) — Sat, 28 Jun 2008 01:22:09 -0500

I frequently see people valuing an investment property (rental) by using a comparative market analysis. I cannot imagine how I might price one using this method. One SHOULD consider other multi-units in the initial analysis, but I think a financial analysis is MUCH more important to price it properly to sell.

Now this isn't always the case of course. Many times our multi-unit seller is just fine and simply fishing for price X in which case he/she will sell but otherwise is perfectly comfortable continuing to collect rent until they get their price.

But if our intention IS to sell it in a reasonable marketing time, we better look at the numbers, and THEN look at other comparables for the final pricing. Why? Because again, we must understand how it looks to a buyer. And in this case, that buyer is usually an investor. The investor wants to know about comparative CASH FLOWS, profit margins, Net Operating Incomes, Capitalization Rates, etc.

So your agent better know financial analysis if you're hiring him/her to sell your multi-unit. (And likewise if you're using them to help you find the "best deal".) Even if they get lucky and price it right, they still need to answer these types of questions to most prospective purchasers and all the better if they can answer intelligently.

I've been investing for 10 years and the first valuation method I learned was the "person-on-the-street" valuation. Which essentially is that the gross monthly rent X 100 should be greater than or equal to the purchase price. A very nice simple method for determining what is typically a "good deal" or not. No guarantee as it's not really that simple, but it's truly a good rule of thumb and a good starting point. And I am not one for rules of thumb as many of them are poor. This one for example only would apply to rentals as they tend to have reasonably similar operating costs (percentage-wise).

When I look at many multi-units in a market, I frequently find no mention of GRM or Cap Rate or NOI, this means I have to figure it out myself. At that point I hope at least they've given me the Gross Rents as I can figure out an approximate Cap Rate from that, but only with some reasonable assumptions which are usually true or close.

One also has to be reasonable in an analysis. Even if a Seller says his/her vacancy rate is 0% for the last X years, I'm still going to stick 5% in that column, why? Because the investor will. That investor will want to know that in the "worst case scenario" it's STILL a pretty good deal.

You might be able to find an agency that will manage property for 5%, but I still will stick in 10% as I think it is perceived as the most common rate. Etc.

Doing a proper analysis such as this and then handing an investor REASONABLE numbers on a page will also build trust regardless of who you work for.

The point is that multi-unit pricing is very different from residential pricing. Personally I think it is much easier, the Price is LITERALLY based on other EXACT numbers and thus once you understand these numbers, it's very easy to price and also pretty easy to decide WHAT to buy. Residential Property however is MUCH more subjective and thus harder to price and harder to decide what is a bargain (unless it's very obvious).

Again, I cannot reiterate enough, if you don't understand these things thoroughly, make sure your agent does whether buying or selling.

Odd-Even Pricing In Real Estate

Brendan Murphy, Broker, CRS, GRI, ASP, e-Pro (Raving Real Estate) — Sat, 28 Jun 2008 00:44:28 -0500

Pricing is one of the most crucial elements of selling your home. Some call it "positioning" on the market. Where is your house positioned on the shelf next to similarly priced homes? Quite crucial to the time it will stay on the shelf (market) obviously.

This is one of the most difficult parts of the job for an agent. First, doing a proper CMA or Comparative Market Analysis to choose the best range of prices for the home, and then narrowing it to the BEST price and lastly convincing the Seller of this.

I don't want to go into the dynamics of how the higher price may in fact lower your end contract price as it is lengthy and a conversation I generally only like to have except as necessary!

I want to discuss odd-even pricing. This is a basic business concept that has proven true in pretty much every single industry. From candy bars to Real Estate you'll see it.

Odd-Even Pricing is what is going on when you see a candy bar for $0.89. It's really about $0.90 right? Shaving that one penny off reveals a huge return on a typical economic analysis of buyers and what is called "price elasticity". This concept measures the percentage increase in demand for product x given price drop of unit Y essentially. This is the methodology behind odd-even pricing.

Now with Real Estate, I have also found it is true. I didn't used to think so, but a buyer mentioned once to me that houses without the "3 zeros" in the price always seemed to catch his eye more. Now I have a business and economics degree and know all about odd-even pricing but really originally felt it didn't really apply to such high dollar items.

I gave it some more thought and tests and changed my mind, I think it does matter, a lot.

For example. Recently I obtained a listing right next to a house that was already listed. The house next door was listed at $370,000. My seller thought his/her house should be listed around $390,000. But my seller only wanted about $375,000. The market analysis suggested it would be worth $365,000-$375,000. But my motivation for convincing him/her to price just below $380,000 was the house next door. I knew what his/her needs and desires were, so my hope was to get that maximum amount within the possible price range (appraisable value). So I convinced him/her to odd-even price in the $370's. We priced it at $379,600 and it worked: The house next door sold my listing I believe. They appeared to be priced about the same ($370k). Yet my listing looked like it was worth $20,000 more to me, thus a "bargain" compared to the one next door. My listing sold in 3 weeks very close to the list price. The one next door, is STILL on the market and has since dropped in price. While I won't speculate why the one next door hasn't sold, I will attest that it was wise to USE it when pricing mine, crucial perhaps.

Every number is important in pricing and I would make one other point about positioning: When looking at closed sales, we are considering appraisable value. Within that range, we now should look at actives (houses for sale on the market) for the sake of POSITIONING on the market. When we do this, we should look at ALL types of houses in that price range, why? Because the buyer sure will. So on closed (recently SOLD) comparables, one should of course look at houses just like the one you are pricing. So if it's a bi-level, you better not be considering ranches or 2 story houses, etc.

But, when you look at its positioning, you sure want to consider ALL types of houses because the actives are considered through the BUYER's eyes, NOT the appraiser's. So remember that. If your CMA actives sheet/s only show similar HOUSES instead of similar PRICES, you might be positioning BLINDLY essentially. And that ultimately could cause it to stay on the market much longer, and likely cost you $ in the end.

Be realistic and work with your agent. After all you are likely paying her/him $1,000's for a job you believe they are specialized at, so listen and do what you believe is best. Doing things right from the beginning will make you more money in the end. I dread the words "well, let's just try it at price X" or "We can't go up, but we can always go down".....these phrases are usually famous last words that cost a seller THOUSANDS in the end.

Listening Key in Negotiation

Brendan Murphy, Broker, CRS, GRI, ASP, e-Pro (Raving Real Estate) — Sat, 28 Jun 2008 00:04:44 -0500

Again and again I find that the best negotiators are excellent listeners, they also ask a lot of questions.

Sometimes I say something, just to test an agent, see if they will ask a follow up question, if they were listening they WOULD ask a question I think. I do this as later in the transaction, I am more prepared for how they may tend to negotiate.

I am no expert, but I have learned how important listening is to successful negotiation. This is because one MUST understand motives of both their principle (the person they work for) as well as the person on the other side of the transaction, be it the other party or their agent.

If I know what motivates a request, it allows me the option to find OTHER routes to fulfilling that same need.

For example, say we are negotiating for a piece of food and we get stuck at $10 vs $8. I want the food for $8 and the seller continues to insist on $10. Let's say I ask him WHY he requires $10. What if he says "Because the only change I have is my lucky $2 bill that my Aunt Sara gave me when I was 6 years old and I cannot part with it." Well.... that changes everything doesn't it, now we see that he doesn't care about the price, but simply about holding on to his lucky $2 bill. So I run and get change for my $10 and he gladly gives me the food for my exact amount of $8, and kept his $2.

Notice: Both people got what they wanted, and both were happy with the transaction. It was a "WIN-WIN" solution, as most successful negotations are, some would say they are NOT successful UNLESS it is "win-win".

More importantly, note that if I had not inquired about the WHY, he may have never told me, and I may have moved to another vendor to get a similar or substitute piece of food, and clearly HE would not be as happy as he didn't make the profit part of the $8 and perhaps I had to pay $9 or $9.50 at the other vendor. Ultimately it was win-win because I quit caring about MY needs for 2 minutes and asked about HIS needs.

This is a big part of effective negotiation. It is also an aspect that we as human beings frequently overlook, costing ourselves a good outcome due to greed or selfishness. Ironic but true. Greed can hurt. One can be greedy I suppose, but they need to learn how to forget their own motive of greed long enough to understand the other party.

This concept is also quite in line with Game-Theory in Economics. We have to think about the group outcome, not just our own as usually the optimum group outcome is the best for the individuals IN that group as well. If you want to understand more of this aspect of it (economics) try googling "prisoner's dilemma" and you'll get the idea in this simple 4 outcome situation. I would reiterate it for convenience, but I don't want John Nash coming after me!

All this being said, this is a fundamental component of negotiation and I recommend testing your potential agents in the early interviews to see how well they listen. If they cannot listen... how well can they possibly negotiate? Tip of the iceberg theories work well in many situations, this is no exception.

So remember, Listen, Ask Questions, THEN consider how best to propose what is important to you.

Ultimately, you'll find negotiation can be fun.... like solving a puzzle, there's usually some solution that works for everyone and allows an optimal outcome for all.

What's with all the acronyms? (those letters behind an agent's name)

Brendan Murphy, Broker, CRS, GRI, ASP, e-Pro (Raving Real Estate) — Fri, 27 Jun 2008 23:35:13 -0500

I find that many agents don't know what this or that acronym means such as "CRS" or "CCIM" behind a agent's name. With that in mind, obviously the general public (those without a Real Estate License) probably know even less about them, so let's talk about it!

First of all these letters are not a guarantee of any designations. I met an agent once who had "DMA" after his name, and I asked him what it stood for. He smiled and said "Doesn't Mean Anything". While I found this very funny, I also questioned the ethics as even it was meant in good humor, it might have the effect of deception on some buyer, somewhere.

That being said, I would also point out that while ACTUAL designations clearly indicate one SHOULD be more specialized, this isn't always the case either: I was speaking with a friend of mine recently, and she told me how she chose an agent because that agent had the most acronyms after her name of anyone in that agent's marketplace. Seemed to make sense to me, being an agent with 4 acronyms and growing.

But, as it turned out, she said she simply found that the agent was an education junkie and really didn't do a very good job at all. The agent was excellent at taking classes, poor at real estate, or so it was on that transaction at least.

I point out these two cases as I'm a fair guy and don't like absolutes on anything. I also know agents who have designation "XXX" and I can see that they don't really put it to work for them. What is that old saying about the world being full of educated derelicts? Perhaps. Anyway, the point is that as with ALL education, it's quite worthless unless the agent actually USES it in his/her vocation.

That being said, I personally don't think designations mean a thing, only actions do. For example, CRS is the designation I am most proud of having behind my name. A big part of it is strategy on building referral networks. However, I know many agents WITHOUT the CRS designation that are better at referral networks than I am. Talent can certainly fill in for lack of classroom time in some cases. So can common sense.

With all this in mind, let's now discuss designations when they ARE valuable and how valuable they can be to the person an agent works for.

In Residential Real Estate, in my opinion, the 2 most important designations would be CRS (Certified Residential Specialist) and GRI (Graduate of REALTOR Institute). They are both very difficult to obtain and require almost 100 hours each of unrequired education for the REALTOR (note, only REALTORS can get these designations, not just any agent). Again, that's a lot of classroom time, but pretty meaningless unless one USES it.

GRI is a set of 5 classes, one day of professional standards. The other four classes are all 2 day classes and are generally designed to increase the knowledge of the REALTOR. For example, one of the 4 segments is 2 days of construction. We learn all about how houses are built and how water is the most common cause of deferred maintenance and it seemed like 95% of the class was about water. Personally, this was a crucial class for me as my construction knowledge was weak before this class. GRI also covers 1031 tax exchanges, technology issues, and investment properties and their valuations.

CRS or Certified Residential Specialist is considered by many to be the most elite designation one can obtain in Residential Real Estate. Not only do you have to have several dozens of hours of classes, but you also need 25-75 transactions in a limited amount of time. There are core classes and also electives, all of them are designed to make one a better agent AND a better "business". The core classes are the best in my opinion, as they concentrate for 2 days (16 hours) on one subject, like "listing" or "referrals" and so on.
Keep in mind, only 4% of REALTORS have the CRS designation (it's not easy to get) yet those 4% do 25% of the business, that means that only 1 in 25 agents are CRS agents, yet those agents do 1 in 4 of the transactions....pretty amazing franky, clearly they must be on to something and obviously it benefits their clients as they are selling houses.

There are many other important designations for Residential Real Estate, I would specifically call attention to the designations that focus on one form of agency or another, such as "ABR" which stands for "Accredited Buyer Representative". If you have a Buyer's Agent, wouldn't you prefer one that took the time to get more specialized at working for YOU (the buyer)? I know I would.

Another good example is "ASP" or Accredited Staging Professional. This one isn't easy to get in my opinion. I'm close to the end of the Earth in Laramie, Wyoming and many classes one needs for designations just don't show up near us very often. However, once it shows up, it's pretty easy, it's one 2-day class to learn how to stage a home so it is best prepared to sell. Clearly this is an important designation for a Seller's Agent (Listing agent). I began using what I learned immediately and it's quite amazing. The statistics also show how much quicker a staged home sells than a non-staged home. Most of the big cities in California have markets where staging is the norm. These are all examples.

Ultimately however, my advice would be to ask the agent about designations in the interview. Who cares if they have the XYZ and ABC after their name if they don't put them to work for you. So ask them what they mean and what they learned and how they will use it listing your house or working for you as a Buyer's Agent. Just as a Bachelor of Science might have forgotten all he learned in college so long ago....unless he's been using it and incorporated it into his job.

I have four designations, and always feel like I could squeeze more out of them. I frequently go back through my text books and pull out something new. I like to make sure I get my money's worth. After all, I took those classes to be a better agent, so I better use them. Same with college, sometimes I go back into a law book or a business book to brush up on some facet of finance or strategy or whatever I find useful at the time.

I would also stress the importance of the CCIM designation, this is the prestigious designation for a Commercial REALTOR and it is VERY difficult to get, and VERY expensive to take those classes. I don't have one, but maybe some day...

Ultimately I would say for myself: I have all these designations (CRS, GRI, ASP, e-Pro...and I'm not done yet) because my personal business strategy is: HUMILITY. I am never done learning and always seek to improve. I want to be the best and know that only action and effort can get me there. One can always polish a mirror a little more. I listen to what ANYONE says. If a buyer gives me a suggestion, I listen closely and many times find he/she is right and incorporate what they said into my business strategy. I also watch my fellow agents and if I see something good I incorporate it. The person who sits down, will soon enough be passed in any field of life (not just business), don't forget the turtle and the hare.... I'm not sure which I am, but I AM always on the move!