Attorneys and Real Estate Transactions

First of all, lest you think I'm going to trash attorneys, let me assure you that I have good friends who are attorneys! The rest of this post is the "however"!

My interactions with attorneys have always been negative. Notice I said "always". I don't use the word lightly!

In part, it is, of course, the nature of the attorney's role. Attorneys advocates for their clients and that usually seems to end up meaning they take adversarial positions. And while that sounds like exactly what you'd want, someone aggressively fighting for your interests, that's not exactly always true. For example, a good guard dog will protect you and warn you of intruders. But if a guard dog treats every visitor to your home as a threat to life and limb and attacks viciously, that's not good! Attorneys often pursue getting you the "win" over getting you what you really want. I don't necessarily blame that on the individual attorneys. That's how they were trained. And, many clients aren't all that good at communicating what we really want!

Some attorneys also seem to be more interested in justifying their fees than in getting their clients the house they want or the sale they need. They can take a standard contract that's worked pefectly well for millions of transactions and convince a client that they need to insert special language to protect them. This is very, very, very rarely necessary! (By the way, these standard contracts were put together over years time, using untold scores of attorneys!)

Attorneys, at least in this area, are most often generalists. They work on real estate but certainly not exclusively. I see a lot more real estate contracts than most attorneys do. That doesn't make me a legal expert. But it does make me a real estate contract expert.

Attorneys who don't view this as their main source of income often don't treat it as the tremendously important event it is to the client. I've had an attorney call within a week of settlement and say he forgot to mention that he was on vacation and his office would be closed on the day we were supposed to settle! And, it can take days to get an attorney to review a contract, even when it is a standard contract with very little in the way of revisions.

So, my advice to my clients is always to use a settlement company rather than an attorney. Settlement companies do this for a living and they take each deal very seriously.

I've had this point driven home to me again this week when an attorney became involved in a contract negotiation for a client. Suddenly a client who still believes in deals done with a handshake is worried she needs a whole new contract to protect her interests because the one that the buyers presented, according to her attorney, is incredibly biased towards the buyers. I'm now spending a lot of time pouring oil on troubled waters.

Lastly, I've had several clients after settlement say that they should have used a settlement company rather than an attorney. I've never had anyone tell me the reverse!

Looking at Houses

There are a lot of different styles out there in terms of how real estate agents do their jobs. That's not a bad thing. We're all different and we all gravitate to different styles, different personalities. Occasionally I get the chance to watch another real estate agent work, to be a fly on the wall. And that's always interesting.

I've had the chance recently to watch another agent show a home to potential buyers. And I actually found it very funny. The potential clients may have loved it, I don't know their perspective. The agent was clearly acting as tour guide/cheer leader for the house. "And this is the kitchen" lines always make me laugh. So what gave it away, the big stainless steel refrigerator?! "Look at that great fireplace!" You may have heard the spiel yourselves.

If your my buyer, I'm probably not going to point out which room is the kitchen. I'm guessing you don't need me for that! And most of the good stuff you'll see for yourself, or it's pointed out in the listing and the brochures, etc. What you need me for is to look for the stuff that's not so obvious, the stuff that doesn't look good. I'm looking for either actual flaws or things that will make this house hard for you to resell.

And when I point these things out, I'm not telling you not to buy this house. I just want to make sure you have all the facts you need to make a wise decision.

When you're looking at a house as a potential buyer, if the house has been properly prepared for sale, the good stuff is going to hit you in the face. Smart sellers and their smart agents emphasize the good stuff and find ways to minimize the bad. But as the buyer you need to know it all, good and bad. And I see that as my job!

You can notice the great stone fireplace. And the brochure in the house will probably tell you how nice and cozy it will be on a cold winter night.  But if I know you and your family are neat freaks I'm going to point out that it's wood burning and you've said you prefer gas to minimize the mess. Of course, I'll probably also talk about whether it might be feasible to convert it to gas if everything else about the house is perfect for you.

I'm not a tour guide and I'm not a cheerleader for any particular house. If I'm doing my job right, I'm a cheerleader for you and your family and what you want. But if you can't figure out which room is the kitchen I'll be happy to help!

Story of A House

So we've spent the last several days looking at the data on a county level. We've been essentially looking at the forest. But sometimes looking at a specific tree can be more instructional. So today I'd like to take a look at a specific house and it's recent history in search of a buyer.

This home is in the subdivision of Erinbrook in northern Culpeper County.

 This home is a three bedroom, two and a half bath rambler with a bonus room over the two car garage. It has a very open floor plan with vaulted celings in the main living area. It sits on 1.6 acres with most of the property in the front of the house. There is a pool and hot tub in the back yard. There's a fenced yard as well as a storage shed. And the back of the house is beautifully landscaped. The house was built in 1990.

The house was originally purchased in September of 2003 by two real estate agents. The purchase price was $349,900. They put $30,000 down and got a mortgage for the remaining $319,900. The house was on the market 108 days when they bought it. In September of 2003 that was a fairly long time. But the house was sold in "as is" condition so it would have been considered less desirable than properties that allowed a home inspection contingency.

The house was put back on the market for sale in March of 2006. The list price was $524,900. The listing agents were the two agents who had bought the house two and a half years earlier. The listing indicates that the HVAC was new at this time. It's also likely that the kitchen was remodeled during that time since it mentions Corian countertops. The listing price was eventually lowered to $479,900. And, after 304 days on the market the listing shows that it expired.

In actuality, at that point in time, the property went into foreclosure.

It was relisted with the bank as the owner in March of 2007. The asking price had now dropped $80,000 to $399,900. That shows you how aggressively banks price a foreclosure property! The current listing price is $379,900 and I'm unable to find any comps that support even that price. My estimate is that the price should be dropped again to $340,000. It will probably sell for about $200,000 less than it was listed for almost a year and a half ago.

So, what's wrong with the house, you want to know! Basically, nothing! It started wildly overpriced in a market where you can't get by with that. Once that happens in a falling market you're forever chasing the market down and never quite getting there. The open floor plan is very nice, but it can make furniture placement awkward and that may have dissuaded some buyers. A pool is a plus to about half the population and a negative to the other half. In effect it adds no additional value to the home from a pricing perspective (in this area).

The home, since it's owned by a bank, is sold "as is". That's a serious disadvantage in this market. It means potential buyers can not make their offer contingent on a home inspection. And while the house may be in great condition, there is so much inventory that no one needs to bother with one where you can't back out if you uncover problems later.

There have also been some water issues in this subdivision. I don't know to what extent they've impacted this particular property, as it does vary house to house. But it's something else that may make potential buyers think twice.

As is often true with empty homes, this one is getting a very neglected look. Yes, the lawn gets mowed, although not as regularly as if it was occupied. But the weeds are growing up through the walkway and the whole grounds have a "shaggy" feel to them.

Sooner or later, this property will sell. Banks hate to carry houses on the books and they will continue to drop the price until they can get it off their hands. I suspect, eventually, someone will get a very good deal. I also suspect that it will be a very long time before this house is worth $524,900!

Prince William County May Numbers

Prince William county's May numbers don't differ much from what we've already seen, other than in terms of volume. Here too, inventory is very high. New listings coming on the market were up again in May. The good news was the slight increase in new contracts in May. It's too soon to tell if this is a trend.

What you do see here, and have for some time, is an inventory that is, proportionally, less overwhelming. At current sales levels the inventory is just under a year's worth. And, as you move closer to DC that is the trend. Inventory levels are less extreme further in. If families are going to move this far out and commute in and pay high gas prices to do it, as well as sit in hours of traffic daily, they want a great deal on the house.

What the overall pictures shows us is that the average buyer does not yet see the homes in the outlying counties as a great bargain. Surely there are more price declines to come!

MONTH	ACTIVE	NEW LISTINGS	NEW CONTRACTS	SOLD
02/06	3354	1443	637	513
03/06	4015	2078	780	699
04/06	4686	2000	681	608
05/06	5227	2042	709	661
06/06	5481	1884	647	732
07/06	5559	1616	537	567
08/06	5348	1410	529	530
09/06	5061	1267	446	470
10/06	4770	1222	479	434
11/06	4248	959	386	411
12/06	3695	710	463	457
01/07	3739	1336	474	391
02/07	3928	1172	488	360
03/07	4527	1764	508	418
04/07	5073	1668	471	427
05/07	5431	1698	509	432

Rappahannock May Numbers

Now we move on to the Rappahannock County housing numbers for May. As we've noted in the past, there is less volatility in Rappahannock County. While we do see a drop in new listings and total active listings here, as elsewhere, remains high, there's not as much change as we've seen in Culpeper or Fauquier County.

The connecting theme is too much inventory. Selling two homes a month will require about three years to clear out current inventory. But the inventory is a little different in Rappahannock as well with a higher percentage of the market taken up by larger properties with higher price tags that do typically sell more slowly.

MONTH	ACTIVE	NEW LISTINGS	NEW CONTRACTS	SOLD
02/06	42	10	3	4
03/06	49	16	7	3
04/06	58	17	6	5
05/06	68	21	5	7
06/06	68	16	7	2
07/06	70	12	2	5
08/06	74	19	3	3
09/06	78	19	8	4
10/06	84	25	5	5
11/06	81	8	6	7
12/06	75	6	5	6
01/07	64	10	5	5
02/07	64	13	5	3
03/07	66	10	3	5
04/07	81	22	3	3
05/07	80	10	2	2

May Fauquier Market Update

Today we spotlight the May market data for Fauquier County, Virginia. Try as I might I'm barely able to find a bright spot in this mess. True, the new listings hitting the market are slightly down. Very slightly! And inventory jumped again and now is at it's highest point since the market shifted. We're looking at about 16 months to absorb current inventory.

The bottom line here is that it may be true, as some have reported, that the market has bottomed out. But there's surely no way to know that from these numbers. Like all of you I'm wildly hopeful that we've reached bottom.

If any one sees something to inspire more optimism here I'm all ears!

MONTH	ACTIVE	NEW LISTINGS	NEW CONTRACTS	SOLD
02/06	489	149	64	54
03/06	610	296	91	61
04/06	692	254	94	77
05/06	732	237	107	87
06/06	781	218	78	90
07/06	816	190	62	54
08/06	823	206	79	79
09/06	794	162	62	61
10/06	821	197	51	55
11/06	723	105	59	44
12/06	643	71	36	54
01/07	656	171	60	42
02/07	676	135	71	53
03/07	723	212	94	62
04/07	804	217	66	68
05/07	867	206	53	55

Culpeper May Numbers

The May numbers are in for Culpeper County. I've put in the entire table going back to February of 2006 so you can see the historic trends.

It would be a stretch to read any good news into these numbers. While I've been talking about seeing increasing activity in the marketplace you'd never know it by looking at these numbers. Inventory is now at it's highest level since the market shift began. It will take almost two years to absorb current inventory at current sales levels.

The other bad news is that the number of new contracts is down quite a bit after seeing slightly higher numbers in March and April.

On the good news front, the number of new listings coming on the market has dropped quite a bit this month. Thank heavens!

Now, we may just not be seeing the effects of the increased activity in the numbers yet. Increased showings don't always immediately result in more contracts. But my personal experience also includes more contracts. Looking at these numbers, you'd have to say that looks like a fluke. But maybe I'm just on the leading edge of a new trend. We can all hope!

MONTH	ACTIVE	NEW LISTINGS	NEW CONTRACTS	SOLD
02/06	465	133	65	49
03/06	556	204	74	58
04/06	592	177	70	67
05/06	689	226	72	65
06/06	738	183	53	64
07/06	759	140	48	43
08/06	751	151	43	40
09/06	723	138	64	44
10/06	705	121	32	44
11/06	625	81	39	38
12/06	612	80	30	38
01/07	640	165	41	19
02/07	623	91	48	36
03/07	643	145	54	52
04/07	740	211	53	32
05/07	788	165	37	40

The Costs of Owning A Home

I was speaking with a friend this week about how unprepared many first time home buyers are for the true costs of home ownership. When people set out to determine if they can afford a home the look at whether they can afford the mortgage payment including taxes and insurance. And, maybe they include the cost of utilities. But I don't believe most people consider whether they can afford the real costs of home ownership.

By that I mean that inevitably almost as soon as you move into a house something breaks down! And, generally speaking, repairs cost money. Each succeeding generation seems to get a little less handy, a little less knowledgeable about how to fix anything. That means calling a repair person when something breaks and shelling out your hard earned dollars for both the parts and the repair.

Houses need constant maintenance. If you have any hope of selling your home for more than you bought it for, you'll have to keep it in good condition. You'll have to paint regularly, clean gutters, have the furnace/air conditioner serviced and a host of other things. In a world where most of us have very little spare time this often gets contracted out. Again, you're talking about needing money to pay for that.

Very little is done to prepare people for the true costs of home ownership. Many people don't think about these things until they own a house and then wonder where they'll get the money when something breaks. Or, they live with the things that break and adjust accordingly and don't really think about it until they decide to sell. Then a real estate agent is going to come through and tell you that your home is unlikely to sell at the price you want until you fix those things.

The mortgage industry certainly isn't doing much to prepare people for these financial realities. And, in truth, neither are real estate agents. I think it's time to change that!

Market Conditions and Interest Rates

We have our first guest blogger today. It's Chuck Cornwell, the owner/broker at REMAX Regency in Warrenton. I'm happy to say he's my broker and always has something interesting to contribute. Here's what he's got to share with us today. Thanks for your contribution, Chuck!

Vacation Blogging

As you're reading this I'm far away on vacation! I'll be gone for a couple of weeks. But you won't be forgotten while I'm out of town. I've written a couple of blog posts in advance. And there will be a few guest bloggers while I'm gone.

I'll also pop in with updates on May's numbers by county so that the statistics junkies amongst you don't go into withdrawal!

Meanwhile, I hope you're having at least half as much fun as I am! I'll be back with you all full time in a couple of weeks!

If you need immediate real estate assistance while I'm gone you can contact Robin Garbe at 703-307-5092 or my assistant, Carolyn Payne at 540-272-6227.

Residential Energy Audits

There's an organization in Charlottesville that's doing some good work on helping people make their homes more ecologically friendly and energy efficient. It's called Green Matters. And over the course of two years they're sponsoring a series of workshops to educate and inform people about green building and design principles.

All the sessions are free and open to the public so you might want to go to their website now and make a note of the dates and the programs. The entire series has already been scheduled so you've got plenty of time to plan!

All events are in Charlottesville at the Habitat Store at 1221 Harris Street. In case you're not familiar with the store it's a great place to pick up new and recycled building supplies while supporting Habitat for Humanity. All the events start with a social hour from 5-6 p.m. The program follows from 6 to 7:30. And then there's another half hour reserved for socializing/discussing from 7:30-8:00.

Right now I'd like to bring to your attention the July 11th program on residential energy audits. If you're unfamiliar with home energy audits, they typically analyze your current energy usage in your home. If you know how much energy you currently use, where you're unintentionally wasting energy, you can start to make decisions that correct the problems. It may mean increasing insulation or replacing windows. It could be as simple as replacing incandescent light bulbs with the new, much more efficient compact fluorescent bulbs. This program promises to help you figure out how to do your own energy audit.

Charlottesville unfortunately is a bit of a trip for most of us. I'd love to see a similar series closer to home. But until that happens, it's a good excuse to spend some time in a great city!

Where Do I Put All My Stuff?

When someone is getting ready to sell their home and we start to look at what they need to do to get it ready, number one on the list is often decluttering! All of us accumulate an awful lot of stuff over the years. But when faced with the need to get it out of the way many people are overwhelmed. They don't know what to do with the stuff or where to start.

So, here are some suggestions. And I suggest being ruthless when trying to determine how much to clear out. Get rid of everything you can stand to pack up or eliminate. Then go back and get rid of that same amount again!

First the easy solutions:

You're moving anyway so pack it up now! Put it in moving boxes (appropriate labeled!) and store it. Ideally, you should rent a storage unit.  If you are agressive enough at clearing stuff out you'll net more money than the storage unit will cost you!

If you really, really can't or won't rent a storage unit, put the boxes in the garage. Or store them with friends or realtives. And, as a last resort, put them in the basement.

Now the harder remedies:

• Have a garage sale
• Sell it on ebay
• Give it away through freecycle
• Donate it to a charitable organization
• Sell it on Craigs List
• Sell it in Valley Trader (vtfreead@visuallink.com)
• Take it to the landfill (Last resort)

OK, that should get you started! Trust me, you'll feel better when it's done. And, I know your house will sell better!

What avenues for disposal have I missed? Tell me your favorites!

The Ugly Side

As long as we're talking about old real estate adages, here's one that I was shocked to hear in my very first real estate training course after getting my license..."Buyers are liars."

My initial reaction was horror. And after all these years in the business I still believe that was the right response. I was horrified that people thought so badly about their clients and customers and even more horrified that they would state such opinions out loud to a roomful of agents who were brand new to the business.

I was also shocked that people who felt like that would choose to stay in the business! After all, we're talking about self-employed people here! They're not hanging on to get the gold watch and the pension after 50 years!

And by now you're probably thinking some pretty bad things about real estate agents! In actuality I think this is another case of misunderstanding.

The phrase is used to describe a fairly common occurrence. An agent will sit down with a buyer and get them to describe in detail exactly what they want. The agent then shows them 10 homes that exactly meet all their criteria. And a week later the client calls and says "we've got to see the house at 123 Main Street". Of course, the house meets absolutely none of their requirements, which is why it wasn't on the original list to show them. And, of course, they immediately fall in love with the house and buy it!

Agents get frustrated with these situations. And I understand why! We work hard to try and find the perfect house for our buyers. We listen carefully and search exhaustively. But everything we do is based on what they tell us they want. If that's not really want they want, we've wasted a lot of time and, more importantly, we've got no shot at actually satisfying the client!

But from a buyer's perspective I think many buyers come in with a list of exactly what they want. The problem is that a home is an emotional purchase, however much we try to tell ourselves otherwise. And, so we fall in love with a house that doesn't at all fit what our practical list said we wanted. And after we fall in love we find good, solid, logical reasons to justify buying this particular house. Buyers aren't liars! They change their mind! And, don't we all!

As an agent the trick is to realize that very few buyers make a decision about a home based entirely on logic. Emotions will play an important role. Buyers will change their minds, sometimes several times. And if you put yourself in their shoes, if you remember when you went house hunting the first time, you'll be a lot more helpful and a lot less frustrated.

And you won't end up, 20 years down the road, sounding like someone who should really have moved on to some other line of work a long time ago!

Tell me your stories! Have you ever bought a house that wasn't at all what you initially said you wanted? Do you remember why? Was it a good decision?

Local Differences

There is an oft-quoted saying amongst real estate agents, "All real estate is local".

While from a consumer perspective you'd probably think that's referring to the old dictum "location, location, location"; it actually has a much larger meaning to most real estate professionals. It means that laws and custom vary widely by area. Practicing real estate in Virginia is not the same as practicing real estate in Maryland or DC for example.

But I was reminded again this last week of how extreme this definition of local can get!

Real estate transactions are very complex transactions involving large amounts of money and many highly complex legal forms. I've invested a great deal of time, training and even money to make sure that I know exactly how to fill out those forms and how to dot every "i" and cross every "t". In the greater Piedmont area, generally speaking, agents take these documents seriously.

But there are some areas where the paperwork is considered more of an afterthought! I truly believe that some agents would do a deal on a handshake if they thought they could get it to fly!

When I get involved in a transaction with someone from that school of thought it tends to make me a little annoyed! Considering that I have check lists for everything to make sure nothing falls through the cracks, I'm bound to think of that more casual approach as asking for trouble!

No doubt this used to be less of a problem. 10 or 20 years ago most agents covered a smaller geographic area. Computers have definitely made it easier to expand the area you work in. But that doesn't mean it's erased the differences in how we all work.

While these transactions can be frustrating the important thing is to do my job thoroughly, protect my clients interests and be as flexible as possible when local customs don't interfere with those items. Professionalism does NOT mean making everyone else do business your way!

If we all stay focused on taking care of our clients, I believe we'll survive the differences in our approach to the process!

Guarantees

This is the next installment in our series on how to choose a real estate agent.

One of the questions I believe you should ask any potential agent is "Do you guarantee satisfaction with your services in writing and if I'm not satisifed, will you release me from our agreement?"

All of my listings have an Easy Exit Guarantee. It says simply that if you're not satisfied with the work I'm doing in trying to sell your home, you can cancel the listing agreement at any time.

And, if you're a buyer working with me, the Exclusive Buyer Agency agreement can also be cancelled with written notice.

No agent with an ounce of sense should ever try to hold a buyer or a seller to an agreement when they're not happy. (For what it's worth, I've also terminated agreements with clients when I believed we were not a good fit!)

And while common sense will tell you that any agent should let a client go when they get such a request, it doesn't always happen. This is definitely a conversation that should happen up front. You don't want to ask the question for the first time when you're unhappy.

Any one running a small business is very dependent on personal referrals for their business. One very unhappy individual can do a huge amount of harm to your business. I simply don't understand why every agent wouldn't make it their policy to release a client when they ask. But I know from experience that not everyone has this policy!

So make sure it's one of the questions you ask when you interview an agent!

It's a Competition

Some of my clients were telling me this week about teasing their neighbors that it was a competition in the neighborhood to see who could sell first! It was just good natured ribbing and I thought it was funny.

But I've been thinking about it since and that's actually exactly right!

If only 20% of the houses currently on the market are going to sell, at all....

And, if there are a very limited number of buyers out there....

Every seller is absolutely in a competition to get their house sold as quickly as possible! If there is one buyer looking in the neighborhood, that might be the only one around for quite awhile! You are absolutely competing against your neighbors for the attention of that buyer. And this is definitely a beauty contest!

And, you're competing to sell yours first because the Days on Market number matters to buyers. In this market I know it doesn't seem fair. But every day your house is on the market gets you closer to when buyers start to wonder what's wrong with your house.

So you'd better be playing to win!