Homes are Not Overpriced - They are Priced Wrong!

There are a lot of homes for sale in Atlanta, but really there aren't!  A lot of folks think Atlanta home prices are falling; for the most part they are not.  Many Atlanta homes were simply overpriced by inexperienced real estate agents.  Atlanta experienced a 300% increase in the number of real estate agents in the last few years, and most of them have never sold even one home.  In short the inexperience of the agent ads to the dysfunction of the current real estate market.  There appear to be too many homes for sale, but part of the reason is that many of the homes are not really for sale.  Some homes are overpriced by as much as 25%.  You can list a home for $450K in a $325K neighborhood all day long, but it isn't going to be shown or sold anytime soon.  No experienced agent is going to waste their client's time, or place their own reputation on the line to try and sell a loser of a deal!  If a grossly overpriced home does get a contract after several months, the home simply will not appraise.  It is a total waste of everyone's time.  An experienced real estate agent that has worked soft markets before will not take every listing.  What's the point?  Do you want to develop a reputation amongst your peers in real estate as a total loser?  Do you really need the signs out on non saleable inventory?  Do you think that to list 20 homes is a contest of abilities?  It isn't.  A professional agent is conducting the interview to see if they are taking on a salable home into their inventory. 

The professional listing agent's goal is to see if the seller:

•1.       Is motivated to sell a home

•2.       Understands what the current sales that have taken place in the last 3 months

•3.       The seller is willing to price the home at a market price or below.

•4.       Realize they'll have to make concessions on price, and contributions toward buyer's closing costs.

•5.       Is aware that appraisal may have limitations.

Has the High Cost of Gas Cut into the Home Buyer Pool?

I noticed recently that spring homebuyers have all but disappeared off the radar.  I do not think the reason for  their disappearance is from the evening news on real estate, but rather that the price of gasoline is now so painful to most Americans, that they are just not going out. It is a reluctance to take on more pain! I've noticed if I go out to eat, I am not waiting to be seated, and the restaurants are not overly crowded.  In regards to real estate, home buyers are not as sophisticated as most of us give them credit for.  Because real esate is our livlihood, we scour the news, blogs and statistics for anything that is real estate related, and make our observations.  Home buyers do not.  They work real jobs everyday, commute, come home, have dinner, catch the news get a  shower and try to squeeze in a few hours of life before they start the entire routine over again. 

Recently the gallon of gas has cut deep into consumer wallets, and disposable income.  Many of them that have lived without much of a pad for their expenses are now realizing they do not have enough cash to make it without getting a second job.  They are not thinking of taking on new debt, and so they are just not in the market to buy a home.  As an industry...we feel the effects immediately because our phones are not ringing and sales are not being made.  The entire mess we are in is not a bad press on real estate issues.  It is a more universal problem as restaurants are closing, and stores are closing or curtailing their hours.  The best thing we can do is conserve or own finances, and start contacting our elected representatives.  Wemust make or officals know they are sittling by doing nothing.  Perhaps America should be bold enough to have a national strike day to demonstrate our displeasure with the current state of affairs in America.  In the late 70's truckers and farmers descended on Washington DC and tied traffic into knots as they protested the high cost of fuel and its impact.   Today Americans are much more passive and seem interested in American Idol or Lost. 

An Interesting Story on Lou Dobbs Tonight

I was watching Lou Dobbs this evening (5/8/2008), and was surprised when he reported that over 15.5 Million Americans are behind on paying their utility bills.  That is an incredible amount.  That amounts to 15% of all Americans are more than 30 days late in paying their utility bills, natural gas, oil, and electric.  Since inflation has not set in yet, the main culprit must be the rising cost of energy, fuel for transportation and heating.  That is an ominous report.  If a person does not have the money to provide the essentials they are not going to increase spending on consumables.   It is a contraction of the money supply, also known as a reverse multiplier.  In a growing economy dollars made or profit create more dollars, when an economy contracts... fewer dollars likewise absorb other dollars from the economy.  If you have less dollars you are less likely to dine out at extravagant restaurants, purchase big ticket items, ansspend less on retail no essential purchases.  In my own opinion, less money in circulation because more of our disposable dollars are being spend on high gas prices does not help those trying to save up a down payment to buy a home or real estate.

Mortgage Aid - Why Didn't We Help These Folks Instead?

Everyone is talking about the bailouts and bills that are moving through Congress.  They will spend our taxpayers money to rescue banks and lenders that made risky loans to unworthy borrowers.  So why the big to-do?  Banks that made bad loans should pay the price, and so should homeowners that got themselves into a real pickle.  It is not the problem of the citizens of the USA.  If the banks fail, it is the price of bad decisions, and it is a norm in capitalism.  Healthy and smart companies survive, not the losers.

If as a nation we have become so magnanimous what about all the others that will not be helped in rough times not of their choosing?  What about a helping hand for those that have worked all their lives, not missed a payment on their taxes, never took a vacation, and now they are laid off or have no hospitalization.  Suppose their spouse had cancer, and they have exhausted their medical and hospital coverage?  What about those dying of AIDS?  Will we cut them a break?  The answer is no.  Chances are that is you have gone up against hard times in life and applied for assistance or food stamps the answer you will receive is "No, you own a home!"  You are ineligible for aid if you lived a responsible life. 

So where does the US Congress get off placing more taxpayer money at extreme risk making such offerings?  Reduce the principle, extend the terms?  This is a bank bailout disguised as an assistance for the consumer. Since when does the government care?  No one else has ever gotten that treatment in spite of having to make a 20 or 30% down payment years ago.  There was no subsidy of the 16 and 17.5% mortgages...now we are sushing to the aid of no money down bad risk borrowers?  I have a major problem wiht this,a dn I will be calling my representatives tomorrow!

Atlanta Real Estate Statistics Actives, Solds March 2008

Alpharetta Wal-Mart Change Store Hours - No Longer Open 24 Hours

I went shopping at the Wal-Mart last night in Alpharetta to get a few things and I was surprised to see how empty the store was.  There were no crowds on every aisle as usual.  In fact I thought it was Cinco de Mayo, but even the restaurants around the store were not packed.  When we went to check out another unusual thing happened, I noticed was that no one was at any of the check outs.  In fact the cashiers had walked to the front of their lanes to ask if I was checking out.  I am used to always getting in a line at Wal-Mart, so this was an oddity.  As I left the store the greeter advised me that the store was no longer open 24 hours.  A sign of the times, and the direct result of high gas prices eroding disposable income. 

When you think about it is kind of scary.  Wal-Mart is a big store with loads of perishables - they are now shutting the store for a third of the normal operating hours.  The shoppers are just not out there no matter how cheap Wal-Mart prices are.  Recently I noticed that a lot of the restaurants that I've dined at over the years have closed.  Weekdays, at lunch hour there are fewer lines in most of the local eateries.  Eating out is now a treat, and persons seem to treat themselves on a Friday evening or a Saturday.  Eating lunch out seems to have been curtailed during the week. I guess folks are back to brown bagging.  I'm sure this is not a great time to be in the restaurant business with rising food costs. A few years ago it was very common in Atlanta to buy gas for less than a dollar a gallon.  The Atlanta area at that time boasted itself as the place where dining out was a way of life.  More people dined out than any place in the country.  Those days are long gone. 

Win Win is a Loser!

The big term for the last several years was "Win..Win!"  In today's market it is a total loser.  It represents an agent that does not know the basics of negotiating, and is a capitulation in representing your client's needs.  If an agent has a signed agency with a buyer or seller, the responsibility of the agent is to get the best possible terms.  It does not mean that there should be concern for the other party that you have absolutely no obligation to represent under the law.  You should treat them fairly, and in a professional matter.  However, you can only represent your clients issue under the law.  This is real estate 101, and the way it always used to be before it got stupid.

So many of today's agents whine when they get a low offer, they should be grateful.  Then next thing they need to do is roll up their sleeves and prepare to work for their client's best interest until the deal closes.  Remember those big commissions we are paid?  There is a reason that we paid so much, it is our skill.  There is an old saying in real estate that was forgotten in the recent markets.  It is making a big comeback, and it is called "Everything is negotiable!"  Get used to it; it's going to be around for a real long time.  Whatever both parties agree to, as long as it is legal is fair game.  Closing costs, transfer tax, home warranties, repairs, termite bonds etc.  If you do not know how to ask, you cannot ever get them!  Remember nothing is sacred!  Sellers need to stop pouting when they get a low offer, it is not an insult - they need to get over it real quick and turn on the news.  Take a number you are not alone.  The key is to have a strategy to obtain the best possible outcome for your own clients needs.

• Make sure your agent has lots of experience.  (At least 30 - 40 closed deals)
• Have agent provide references and testimonials.  
• Offers are not insults - it is the current market we are in.
• Deal with the contract facts - do not read more into them.
• Verify all items - qualifications etc.
• Do not posture that you have other offers.
• Try to find out the other parties needs or hot buttons.
• Go for a quick close 2-3 weeks when possible.
• Do not allow a pre-occupancy ever.
• Never negotiate out of weakness.
• Before you list your home, understand the realities of your market adn price range.
• Listen to the advice of your experienced agent.

The Price is Right!

It has been said that everything in this life has a price.  For real estate sales, let's call it the "Right price!"  When things are priced correctly, all things are able to be sold.  Equilibrium is the point in which the seller agrees to sell and a buyer agrees to buy.  It is a meeting of the minds in which the terms, location, and price have been put into a binding contract with a pledge of all parties to perform as promised.  In this current market this point of equilibrium is a grey area.  The sellers feel they deserve more in price, and the buyer is afraid the prices are moving lower.  The buyers fear is that they will overpay if prices continue to fall.    In retail sometimes a promise or a pledge that if a better price is found, the retailer will honor the new price and pay you the difference.  With a home, there is no way to do that.  A home is just too expensive.  There is no safety net to protect future value, and so we have a stalemate.  Falling prices, buyer bonuses, and incentives are not enough to sway the reluctant buyer.   The toughest part of the entire equation is to educate the sellers and buyers with facts, and truth.  Most real estate contracts affirm that as real estate agents we cannot gaurentee future values.  Appreciation is not a given, but with compromise movement in price and terms  a sale can become reality.

How Many Agents Does It Take To Screw in a Light Bulb?

How Many Agents Does It Take To Screw in a Light Bulb?  There was a time that the answer to this question could be "As many as it takes!"  I think that we all agree the real estate market is now moving in a very different direction.  The Atlanta area had about 8500 agents in the 1990's when we averaged about 3500 home sales a month.  Around 2004-2004 we still only had about 12500 agents and sales had climbed to about 4500 a month.  We then rose to over 45000 agents by 2007, a 300% increase in real estate agents in 3 years.  Total monthly sales still never exceeded 6000 a month.  Now the monthly sales have fallen back to about 3900 single family home sales per month, and the numbers of actively licensed agents are still at 42000.  Wow!  Enough is enough!  That is still a big number.  In fact it is an unsustainable number.  Most of those agents must have another source of income, because it is not enough money to raise a family or pay the bills, and a car payment.  What about providing hospitalization?  OK, where is the money coming from to market your listings?  Oh so that why all the talk is about "Craigslist" and other freebies!  There's no money!

What I am seeing is a collapse of real estate companies in Atlanta.  In recent boom times the numbers of agents and offices rose to unsustainable levels.  Recently, many Atlanta real estate offices have closed their doors calling them "A consolidation!"  That is BS.  Profit has disappeared.  There are not enough deals closing to pay a broker and staff and pay the rent.  No real estate company is immune from it.  For the more established firms, agents cannot afford to pay their bills so they leave the bigger companies to go to an unknown company where they can hang their license until this all blows over.  They are like an atheist at a funeral, all dressed up and no place to go.  Companies such as Prudential, REMAX, Coldwell Banker, C-21 were just a few of the big players to close underperforming offices...,but wait, there are more to come.  No one in the short term will be able to survive if they do not have other funds available.  Staff cuts in this market are more than just trimming the fat, they are placing a tourniquet on a mortal wound.  Sales need to turn around and start rising before we get back on a healthy footing.  My prediction for the coming year is that many Atlanta real estate companies will close the doors, including many discount brokers whose passive marketing will not work in this current market.  The numbers of agents will start to decrease dramatically as soon as the reality sinks in that our market is not going to come back quickly.  That still is going to take a while, and in the mean time the markets will remain very dysfunctional with loads of inexperienced agents that never sold one home advising buyers and sellers.  This is going to be a very rough road ahead for the time being.

Home Seller Brings Cash To Closings

Is it a buyer's market? Yes it is! Get used to it!  The times have changed in most real estate markets.  The recent frenzy in real estate where seller's called all the shots are now but a fading memory.   We are in a changing real estate market that is marked by softening home prices, excess of inventory, tightened lending standards, a dwindling pool of buyers, declining home values, negative equity positions, and finance terms that are correcting.   What does all that mean?  It means the sellers may be upside down and owe more on the home than the home is worth.  It is a bitter pill for many sellers that can still quote last years neighborhood home values.  Too bad those numbers cannot be attained this year.  The tighter loan requirements, dual appraisals are blocking the way to higher sales and appreciating home values.  To sell their homes in this current real estate market, it is not unheard of for homes to sell below what they were purchased for just a short time ago.  For sellers that are selling today and participated in 100% financing... that means there was no pad to absorb the drop in value.  To sell the home in today's market means they will have to absorb the dollar loss in value, pay the commission to both real estate agents, and pay the concessions of closing costs for the purchaser.  The dollars can quickly ad up and compound an already stressful position, and the reality for the home sellers could mean they will have to take money out of savings to make up the difference.  Sometimes it is a few hundred dollars, and sometimes it is 20 or 40K!  That can hurt. 

If a person has the cash to pay the loss and not damage their credit, that may be the wisest course of action.  For me it is always about getting from Point "A" to point "B!"  If a loss is made on one home, chances are they can be recouped on the next purchase.  The quicker the seller acts the better.  If real estate markets continue to devalue, the losses will start to snowball, and the losses and expenses to the seller will be greater.  If the sellers fall to act, this will further exacerbate the situation.  Those that have a limited or no equity position will fall into foreclosure, and others will have to bring bigger amounts of cash to closings to walk away from the deal financially intact.