Unbelievable!

Some days I hear something that just sends me running to my blog! This has been one of those days and it's not even noon yet!

I listed a house, probably about a year and a half ago now. I was the second agent. There was a third after me. The house never did sell and eventually went into foreclosure. I've kept my eye on it and I recently noticed the bank had gotten a contract on it. The list price at that time was almost $200K less than the original sales price. It hasn't closed yet so I don't know what the final sales price will end up being.

The truly amazing piece of this story is that the people who are buying the house still have a house to sell! Their agent had warned them repeatedly against buying a house when they hadn't sold theirs. But they drove by got very excited, called the listing agent and wrote an offer on the house. Since this is a foreclosure the offer COULD NOT be contingent on the sale of their home. And there are no other contingencies that would let them out since, typically, banks won't accept them. The listing agent assured them that he could sell their house "just like that", no problem!

There are so many bad things happening here you hardly know where to start!

First of all, let me reiterate again that the listing agent represents the seller, will do what he can to get the property sold and does not give two figs how that impacts the buyer! "Buyer beware" doesn't begin to cover it. If you call a listing agent and use them to buy the property without your own representation you are asking to be taken advantage of!

And, if you fall for an agent telling you they can get your house sold "just like that" you need to have your head examined! Anyone who tells you that is either delusional or lying! There's just no way to sugar coat that!

Here's the really amazing part! The reason the house is in foreclosure is because the previous owner, against the advice of their agent, bought another house without selling the one they already owned. History appears about to repeat itself!

Some days I'm not sure this downturn can last long enough for people to wise up!

Just my rather agitated two cents for the day!

Teams

Nationally and on a local level we've seen an increase in real estate teams. Usually a team starts when one agent has more business than they can handle. And, generally, the first person hired is an administrative support person. If business continues to grow, the agent moves into handling more listings and fewer buyers and hires a buyer's specialist for that piece of the business. Some teams eventually grow to have quite a few buyer specialists. And, in some cases, the original agent assumes a "rainmaker" role and functions more in a business development/management role while others handle the actual real estate transactions.

From a real estate agent's perspective, perhaps the most attractive thing about the team concept is the ability to have someone there to cover your business when you want time off. After all, as a one person company in a 7 day a week business it can be tough to manage those times you need a vacation.

But let's take a minute and talk about what the advantages and disadvantages are for you as the buyer or seller. Typically, when someone who is part of a team is asking for your business they argument is that they can better serve you because they're not spread as thin. There's certainly some truth in that.

But it also depends on the caliber of the individuals on a given team. While the agent at the top of the team is almost certainly a seasoned professional, that's often not true of everyone on the team. In many of the teams operating locally there seems to be a fair amount of turnover. And while the top agent may be the person who initially makes contact with you, after that initial appointment you're unlikely to deal directly with them most of the time.

The other potential down side of a team is that shared responsibilities always has the potential for creating gaps. Hand offs can mean things fall through the cracks.

I'd argue that one great agent may actually serve your interests better than a team if that team is inexperienced and doesn't have good systems in place.

If you're talking to someone about their team, make sure you find out more than just about the the team leader. Who will be working with you on a day to day basis? How much experience do they have? How much access will you have to the team leader?

The truth is either a team or an individual agent can give you spectacular service. It's up to you to ask the right questions and make sure you understand what you're getting when you hire anyone, agent or team.

As always, you need to do your homework!

Impact Fees

In Commonwealth Magazine, the publication of the Virginia Association of REALTORS, there is an article this month that discusses the effect of impact fees on home affordability.

It quotes a study from the NAHB of saying that each $1,000 increase in the costs of home ownership reduces the number of prospective buyers by 217,000.

The implication of the article is that fees such as higher construction permit fees, tap fees, proffers required frombuilders and such things as the new taxes contemplated by some northern VA counties to pay for infrastructure are a bad thing.

Here's the problem with that implication. All of these fees, taxes, etc. are, in their own way, a way to offset the increased infrastructure required as new homes are built and new residents are added to an area. Increased population requires additional roads, schools, hospitals, sewers, etc.

Since all of these things have costs associated with them, the money has to come from somewhere. If you're not going to get that money from the builders making money off selling those homes, or from the new homeowners who, after all, will be the people utilizing those new services, who should pay?

The only people left, it would seem, are the existing homeowners. They would see an increase in their own taxes to help fund new infrastructure for the benefit of other people. It's hard to see anyone jumping on that bandwagon!

No one likes fees or taxes, regardless of their political persuasion, regardless of whether they use the services that those fees fund. But you can not simply continue to add population without infrastructure. And you can't expect existing home owners to absorb the entire burden. You're asking for an anti-growth backlash!

"Even modest impact fees can have a dramatic effect on housing affordability," says Jerry Howard, the CEO of NAHB.

I'm still waiting for his suggestion on who, then, should pay for the infrastructure!

I think we've all seen what happens when no one pays and construction continues and the services aren't there for the newcomers. Is everyone enjoying their commute from this area into northern VA and DC?

So, what do you think? How do we pay for infrastructure?

Discount It and They Will Come

K Hovnanian, one of the largest homebuilders in the country recently did a nationwide sale event called "The Deal of the Century". It included steep discounts of up to 25% or $100,000 in an effort to clear out inventory. In places like New Jersey and New York those discounts amounted to almost $150K.

And, it worked! They got contracts for 1700 homes and have deposits on 400 more. They've almost met their quarterly sales goals, all in one weekend.

There are a lot of analysts talking about how this proves there is pent up demand out there. Duh! Who didn't know that?! Buyers will buy at the right price! Of course they will!

Here's the problem. How many home sellers are in a position to reduce the sales price by 25%? And, if they are in a position to do so, will they? So far, the answer has clearly been "no". Most of the people I meet with about selling their homes these days don't have the kind of equity that would allow them to do that. They don't deal in volume and can't make it up by selling 100 houses!

There's an old saying in the real estate industry that "price cures everything." meaning that if I get the price of your house low enough it doesn't matter what's wrong with it. And the saying is true. Which is not to say that it should be your mantra in getting homes sold. In my opinion it usually makes much more sense to correct anything objectionable in a home, improve the look of the place and try that first. And, in this market, maybe you lower the price some AND do that work.

I can lower the price of your home to $1000 and I guarantee I will sell it and sell it quickly! That doesn't mean it's the best strategy.

But, heck, if you can discount your home 25% I absolutely believe it will get your home sold. I'm not holding my breath, though. I suspect the typical homeowner isn't going that low until the rush of foreclosures forces his or her hand!

Why Are Real Estate Agents so Upbeat?

Industry associations such as the National Association of REALTORS (NAR) or the National Association of Home Builders (NAHB) frequently put out public statements that appear to be nothing more than self-serving statements full of positive spin about what a great time this is to buy a house. And, let's be honest, that's exactly what a lot of them are. They have every reason to try and persuade people, especially now, that it's a great time to buy.

And, many real estate agents have been heard making similarly upbeat statements. I know that many of you think it's the same sort of self-serving claptrap!

Anybody who has been reading this blog for any length of time knows that I'm certainly no industry apologist. But I do believe that my fellow agents and I are often falsely maligned by such accusations.

Yes, there are agents who would say anything to get someone to buy a home. But I still maintain that they're in a minority.

Real estate agents, like other self-employed individuals, are by nature, optimists. Trust me, no one would go into this type of career, and take the kind of financial risks we take unless they were optimistic by nature. Real estate agents are, by nature, people who will automatically see the glass as half full. I personally, veer towards a three-quarters full view on a regular basis. Extreme optimism helps a lot in markets like this! It keeps people in this business who, if they had any sense at all, would go get a job that pays better, has actual benefits and more regular hours!

And, any savvy business person learns early on it never does your business any good to say things are anything but "great". Announcing to the world that your business is suffering is unlikely to attract more business! And, besides, any decent optimist knows things are turning around tomorrow!

So, give that absurdly optimistic real estate agent a little slack. If you're a seller, isn't it a little reassuring to hear a little optimism when there's so much gloom about the market everywhere you turn?

I've got to go take my happy pills now!

Half a Percentage Point

I do know that the correct phrasing for yesterday's rate cuts is "50 basis points" but let's face it, all us lay people are thinking about it as half a percentage point!

Whatever you want to call it, it's good news for buyers and sellers!

Let me explain that this is NOT a half percentage point cut in mortgage interest rates. While the Fed rate does impact mortgage interest rates it's not a direct one to one correlation. And, some of the Fed rate cut has been gradually factored in already.

That said, this will put downwards pressure on mortgage interest rates. Today's release of CPI numbers showing almost no inflationary pressure will help that as well.

So...now what do you do? If you're a potential buyer it's a great time to think about buying a house. You probably qualify for a little more than you did a week or two ago. There are unlikely to be much in the way of additional rate cuts in my opinion. If you're even semi serious it's time to talk to a mortgage lender and find out what you can afford to buy. Then go looking! But read my advice to sellers as well!

Sellers, good news at last! But...don't blow this! This is not the time to raise your price. In fact, I'd argue just the opposite is true. You're likely to get a brief uptick in buyers. Lower the price now and get the place sold. This new, small surge of buyers isn't likely to last long and the spring market is a very long time away! I believe pricing pressure will continue to push home prices down. The bulk of foreclosures haven't begun to hit the market here locally yet. And, as always, make sure your home is in tip top showing condition and is easy to show! Always!

Time to Step Up

Let's face it, things are not looking rosy in the real estate industry at the moment. If you're selling I'm not telling you anything you didn't already know! The August numbers showing another jump in inventory only reinforce the story.

There is no one place to point the finger of blame on how we got here. And, in the end, does it matter right now? It's time to figure out how to fix this mess!

While there have been lots of ideas floating around in the political realm and in the economic world of the Fed, I'd like to talk a little about what real estate agents can do to help.

I see plenty of seminars for first time home buyers, working on educating them and helping them buy their first house. There's nothing wrong with that, but I think a bigger area of need right now is education for the homeowner in trouble.

I'd like to see us offering classes, in partnership with mortgage companies and settlement companies, walking homeowners who have already missed payments or those with mortgages about to adjust, through their options. The vast majority of homeowners don't understand all the options available to them and the pluses and minuses associated with each one. We need to talk about short sales, deed in lieu of foreclosure and foreclosure.  People need to know what to expect with each step of the process.

We are in a unique position to help here. I realize that this is a for profit business. And I know this sounds like a seminar that's unlikely to produce much in the way of income. But I think we'd do our profession a service. I also think you'd build long-term income potential by helping people in a tight spot. Most of those people will eventually buy another house. If you're there when they need you, many of them will remember that.

When times are tough we can show our character and step up and do the right thing. It's good for everyone! And it can't hurt the reputation of real estate agents either!

Rappahannock and Prince William August Numbers

For those of you who wanted to see August numbers for Rappahannock and Prince William Counties:

Rappahannock

Prince William