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A Sorry Mess

You're going to have to forgive me.

I usually avoid a lot of inside the real estate industry talk. This blog is meant to be educational to people interested in buying or selling homes or even just owning them. It's not focused on talking to the real estate industry.

Today is different.

NAR (National Association of REALTORS) has decided to raise it's dues in order to spend more money on its lobbying efforts.

Every citizen ought to be upset about this and the underlying causes.

As a member I am outraged and frustrated.

I completely understand why they've decided to do this. The Citizens United decision by the Supreme Court last year means there is now a no-holds-barred arms race in terms of political contributions. (There ought to be a sign outside the Capitol reading "For Sale Here: Legislators") NAR is concerned that banks, long wanting to get into the real estate business themselves (and not just as owners of foreclosures) could use this opportunity to get laws changed in their favor. They're worried about possible assaults on the Mortgage Interest Deduction and with what will take the place of Fannie Mae and Freddie Mac. Their solution is to have a pile of money with which to influence the outcomes.

I believe that the influence of money is destroying our democracy. Giving to the PAC (Political Action Committee) that REALTOR associations use to influence politics has always been voluntary and I have always declined, believing that it would be hypocritical to decry the influence of PAC money but become part of the problem when it seemed in my best interest.

Now it seems that my only options are likely to be let NAR use my money for purposes that I am ethically opposed to, or leave the National Association of REALTORs. The way the system works, that would make it much harder for me to work as a real estate broker.

This decision is not yet final and I'd urge anyone in the industry to plan on attending the NAR mid-year meeting in DC to protest this decision. The meeting on this is May 11th at 3:30.

For those of you not a part of the industry, I'd urge you to get involved in working to limit the influence of $$$s in politics. (Changing the Supreme Court make up would be a good start!)

I'm curious to know, if you're a real estate agent or broker what do you think? If you're a member of the public, are you concerned about the influence of money in politics?

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Painfully Funny

This YouTube video has enough truth to be painful whether you're a buyer, seller, real estate agent, lender or even a taxpayer. And if you're waiting on a loan modification, you may want to self-medicate before watching!

 

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Kickbacks Are Illegal

There has been some funny business going on around home warranties in the real estate industry. OK, maybe it's not just home warranties. Sometimes stopping kickbacks seems a lot like a Whack-A-Mole game. Eliminate it here, it pops up over there. Some people just don't get this whole "spirit of the law" thing.

So, here's how I've seen it work. A certain home warranty company makes an arrangement with a certain real estate broker. For every warranty that is sold the agent gets a fee, let's say $35.

Is $35 enough to change the behavior of a real estate agent? I'd surely hope not. But these are desperate economic times for some and who knows. More importantly, in my eyes, this is definitely providing the appearance of impropriety. For that reason alone it's a bad idea.

Last week HUD agreed and said:

A payment by an HWC for marketing services performed by real estate brokers or agents on behalf of the HWC that are directed to particular homebuyers or sellers is an illegal kickback for a referral under section 8

This is great news for the industry. No one was making a fortune off these kickbacks. It certainly wasn't worth it in terms of the damage to our reputation.

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Where to Retire

Baby boomers are starting to think about retiring. (They don't have enough money to actually retire!)

And early evidence shows that how and where they will retire is different than the preceding generation.

Baby boomers are apparently not dreaming of golf communities in Florida or Arizona.

By and large, baby boomers are hoping to retire right where they are. They may downsize. They may move closer to the city and mass transit so they can get rid of their cars. It seems the suburbs were OK for raising kids but not where they see themselves going forward.

This raises lots of interesting real estate questions. What does this do for FL and AZ? Surely it will make their recovery from the real estate slump much harder.

Access to train service into DC will be increasingly important to towns in the area hoping to keep their retirees. What else could places like Warrenton do to attract and keep retirees? (Who require fewer public services but contribute plenty of tax revenue)

Are the inner suburbs and DC ready for the influx of retirees?

What do you think? Where will you retire?

 

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The Certification Racket

The real estate business and market is constantly changing and it's almost a full time job just to keep up! Fortunately, I love learning so that part of my job is fun.

But part of the real estate education business is a racket, to say the least. I stumbled across Elizabeth Newlin's take on designations this week and thoroughly enjoyed it.

Most NAR (National Association of REALTORS) designations require you to pay to take a course. That seems perfectly reasonable. Then they charge you an annual fee to keep that designation. No additional coursework is required. It's not about making sure you have up to date information. It's just a way to gather $$$s from the real estate community as far as I can tell.

I'm not sure if all that learning is going to leak out of my brain if I don't pay.

Does this mean a real estate agent with additional certifications adds no benefit? Not at all. It's at least some evidence that you have that they care about continually learning and getting better at what they do.

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Rough Times in Real Estate

Most of the pain of real estate practitioners in this market is hidden away. Most of us don't talk much about the realities of doing this for a living in the worst economy in my lifetime. It's not just your average consumer losing their home to foreclosure.

But sometimes there's an amazing, honest, articulate agent with a story to tell. Matt Stigliano has a story worth listening to.

(How am I doing? Better than 2008! Not as good as a few years ago!)

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The Appraisal Mess

If you're involved in the real estate business or are a buyer or seller right now you probably are well aware of the appraisal mess. If you haven't gotten a taste of this yet, here's what all the fuss is about.

In an effort to make appraisals more objective and keep lenders from twisting the arms of appraisers to get higher values, new rules were rolled out this year from Fannie Mae and Freddie Mac. Instead of a local lender calling a local appraiser, they must now call a clearinghouse who will then subcontract to an appraiser.

While the idea of keeping arms length relationship sounds good, there have been some big hiccups with this new process. Appraisers are coming from far, far away to appraise in neighborhoods they know nothing about. Just today I met an appraiser at a listing I have in Culpeper. The appraiser drove several hours from Maryland to do the appraisal.

This has resulted in wildly inaccurate appraisals. And it's slowed the process down, because there's now an extra layer there.

The other thing an extra layer does is add extra cost. The new clearinghouses want to make money off of the appraisal too. So they raise the fees they charge, increasing the cost of the appraisal to the buyer. But at the same time they've lowered what they pay the actual appraiser. Guess how many of the best appraisers want to work for these clearinghouses?

There's a movement in Congress right now to suspend these rules temporarily until some kind of fix can be found for the more egregious problems. Meanwhile, if you're waiting on an appraisal, whether you're a seller or a buyer, be prepared for bad news! And, remember that if there are issues with the appraisal, there are also potential remedies.

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The Fees Must Go!

The Seattle Times has an article about a recent court decision declaring brokerage admin fees illegal.

It's about time! These are impossible to justify to clients, particularly sellers who are already paying thousands of dollars in commissions.

It is "nickel and diming" our clients and it's shameful.

If you wonder why the real estate industry has such a poor reputation, here's another reason why.

And, to the argument from brokerages that they can't be profitable without these fees...then clearly there's something wrong with the business model.

But I've been saying that for some time now!

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Industry Shake Up

Date: Apr. 3, 2009
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Matthew Ferrara is a real estate industry sage, often ahead of the rest of us in where things are going. His latest blog post is terrific!

If you want to know how the industry is going to change, how it must change, read this piece!

Clearly this is an industry that, overall, right now, is reacting rather than charting its own course. The consumer is dragging the real estate industry kicking and screaming where it needs to go.

We'll all be better for the change!

I've seen signs that there are some agents, brokers and even brokerages that get it. But it's a small number. There's a lot of pain and growth still ahead. I like to think it'll be an exciting time!

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Signs a Seller Will Love!

Date: Mar. 23, 2009
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I'm in love with these new signs being used by my friend, Jim Duncan with Nest Realty in Charlottesville.

He wonders in his blog post about how long it will be until they're copied. I don't know the answer in Charlottesville, but I hope it won't be long before I'll be copying him here!

If you were selling, how appealing would this be to you?

If you are a potential buyer, how helpful would such signs be to you?

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Paying Buyers Agents

The compensation system in real estate is, in my opinion, broken. There are many reasons the way the system has worked for so long doesn't seem feasible any more. But I want to talk about just one aspect today.

Buyer's agents in Virginia (and every other state) get paid based on what is listed in the MLS as the "coop fee" or the fee to the cooperating broker. In most cases, that fee is half of what the listing agent has negotiated as the fee for listing the house.

There is endless debate in the online real estate community over whether or not the seller is, then, in effect, paying the buyer's agent. After all, the listing agent is asking the seller for the X percent and then splitting it. Nowhere does the buyer's agent get asked to come up with this money to pay their own agent. The other side of this debate is that the buyer is paying for the house and that out of those proceeds come the fee for the buyer's agent and so, in the end, they are paying for their agent. I won't come down on one side or the other of this argument. Suffice it to say I think the fact that it's unclear who's paying the buyer's agent is a bad thing!

I think it's a horrendous thing, however, that the buyers agent's compensation is based on the sales price. That means that by negotiating the best deal possible for my buyers, I essentially hurt my own earnings. This is a very basic conflict of interest. It makes no sense that in a huge financial transaction, most buyers are represented by someone who has a conflict of interest!

The origin of this system dates back to when all agents represented the interests of the seller. Back then, even if I never met the seller and if I spent all my time working with you the buyer to help you purchase this home, I was still legally representing the seller's interests. So, it made perfect sense to compensate me based on how much the seller got for his house.

They did finally create buyer agency, but compensation has never caught up with that change.

The argument from agents is often that the amount of compensation difference between getting my buyer that house for $300,000 or $295,000 is so small, typically less than a couple hundred dollars, that it in no way influences my behavior.

And, I agree that in many cases, perhaps even in most cases, that's true.

The problem is the appearance of impropriety. The problem is that the buyer shouldn't have to wonder whether or not you're influenced by that difference. The problem is that it tarnishes the reputation of good agents. And, finally, the problem is that it makes the whole industry look shady.

It's time to fix this. I've got some ideas on how compensation could change. And, there are plenty floating around on the internet. But I'd rather hear your input. How should compensation work for a buyer's agent? What model would allow for a sustainable business on the part of the agent and no conflict of interest?

I look forward to hearing your solutions!

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Seth Godin Challenges Real Estate Agents

I'm a big Seth Godin fan. I think he's one of the smartest marketing minds around.

His latest blog talks about agents in general and real estate agents in particular.

He says anonymous agents are "interchangable and virtually worthless."

He also says that agents need to say "No, I won't sell this house, it's overpriced. List it yourself."

I think I'm a bit more diplomatic, but I've said no to an awful lot of listings this year. Hopefully I'm on my way to being the "great real estate broker" that Seth talks about.

It's a changing industry. I believe the business models continue to evolve and I look forward to figuring out what's next and how my clients need me to work with them in this new environment.

The status quo was boring anyway!

The question is, what will replace the models we see today?

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Bits & Bytes on Friday

I thought this story was worth telling. Many small builders are paying a big penalty in this market.

The first six weeks of the year, contracts in my office were up approximately 100% above those same six weeks in 2008. A sign? Too soon to tell, but it's nice to see some good news!

Finally, some input from consumers backing up what I've come to believe about virtual tours. I'll grant you it's not a scientific sample. But I'm taking it as reinforcement!

I'm highly competitive by nature, although I hide it well! There's a listing contest in our office. Whoever gets the most new listings by the end of March wins. Here's the thing, I talk most sellers out of selling because in this market if you don't HAVE to sell in the next 12-24 months, you should probably not even try. But if you no someone who really does need to sell...I'd love to win!

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Ridiculous!

It seems incredible that at a time when this profession gets more complex each day, the Virginia Senate thinks once you've been a broker for 15 years you no longer need to learn anything new.

But I've ranted about the lack of educational expectations in the industry before. I'll let my friend and colleague, Jim Duncan, in Charlottesville state the case this time around.

For the record, though, this is an idiotic idea. The only thing more idiotic is that it passed unanimously. Is there something in the water in Richmond?

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I Can't Keep Up

...with the stupidity of NAR (National Association of REALTORS).

Read the blog and weep.

Seriously, if there is not a single REALTOR out there who believes home prices will either not appreciate or (gasp!) decline this year the public should definitely not believe a word we say!

Some days I beat my head against the wall. Credibility is hard to gain and can be lost in a second. I'm not saying NAR ever had any credibility. But I'd appreciate it if they wouldn't try and ruin any I've managed to build!

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The Lockbox Mess

There's a change coming.

The local REALTOR associations have negotiated new lockbox agreements with various suppliers.

If you're not familiar with what lockboxes are, it's what a real estate agent puts on your front door to allow other agents access for showing your home when it's for sale. There are a variety of these devices out there and, of course, they're completely incompatible.

For the last few years, all associations have used the same equipment. So, if I was based in Warrenton and had clients who wanted to see a home in Leesburg, there was no problem showing them that house.

All that changes in the next few months. The association I belong to GPAAR (Greater Piedmont Area Association of REALTORS) has chosen one system. The Prince William Area association and the Northern Virginia area will be on the same system. The Dulles Area and Blue Ridge Area associations have gone in a different direction.

It's not that agents won't be able to show homes in both areas. They can buy both sets of equipment and still be able to show anything, anywhere. But in a tough market where every cost is scrutinized, not every agent can or will foot that bill.

And, so, on behalf of my fellow REALTORS, I apologize to you our clients. This is clearly a disservice to all of you. I believe we need to keep out clients in mind as we make decisions and clearly you all were not our primary focus here. In a market where it's already hard enough for the average seller to get a buyer to come and look at their home, we've just added another obstacle.

I'm not pointing fingers at anyone association or at any group of individuals. We all share the blame here and should have found a way to get this right.

So, a big "I'm Sorry" and a promise to my clients that I'll do everything I can do to protect you from this mess!

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The Culpeper View

Allison Brophy has another great article  in the Culpeper Star Exponent taking a closer look at the real estate market and the state of foreclosures in Culpeper county. Culpeper's been one of the hardest hit counties in this part of Virginia.

And a timely article in Slate on why the argument that the sub prime mess is because lenders were forced to do sub prime mortgages by the government is hogwash.

There are some signs that lenders are anticipating President-Elect Obama's 90 day moratorium on foreclosures and voluntarily beginning to comply in advance. If your a seller this will be good news, at least in the short term! Prices may stabilize sooner than anyone anticipated. And, if these properties stay off the market, that stabilization may last.

While it would seem that at the end of that time you'd get a bunch of foreclosures hitting the market and driving prices down once again, I'm not sure that will be true. I suspect that during the 90 days plans will be made to permanently reduce the foreclosures to a trickle.

If you're a buyer, it means the number of great deals may be shrinking quickly. If you've been waiting for the bottom of this market, waiting any longer could get expensive.

 

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Good Sign

Date: Nov. 14, 2008
Tags: , ,

CNBC had an analyst today reveal that there's been a sudden jump this week in insider purchases in homebuilders stock. Apparently, in a typical week there are 17 purchases by top executives at these firms of their own stock. This past week there were 47. That's a pretty big jump.

I don't know what they know that we don't. But it seems possible they're finally seeing something in the traffic in their new home communities over the last week or two that convinces them things are improving.

There's no way to know if their hunch is right, but they were confident enough to put money on it.

Interesting!

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A New Chapter

I kicked this off in the real estate community last week. And, today I'm announcing it publicly here.

Piedmont Property Management is now open for business! The business initially serves Fauquier, Culpeper and Rappahannock Counties.

I started my own property management firm for the same reason many entrepreneurs start a business. There was clearly a need. I heard so many complaints about the existing options that I became convinced there was an opportunity to do it better.

And, you, my client will be the ones who decide whether I manage to pull that off!

So for those of you who have decided it might be smarter to rent the house out and wait for a better market to sell, let me know! I'll be happy to tell you all about what I do and how I do it!

Don't look for a lot of posts here regarding property management. This will still be devoted to the buying and selling of real estate. And, in case you're wondering, yes, I still do that! In fact, it's time to go write an offer!

 

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Just Doin' My Job!

It's been a strange week.

I keep getting extreme gratitude from people for doing my job!

A woman thanked me for showing her a rental. The other agents she'd talked to hadn't wanted to show her what she wanted to see! And, she was unsure about renting vs. buying and they didn't want to have that conversation either, except to tell her it's a great time to buy.

I've gotten thanked repeatedly for returning phone calls and e-mails promptly.

I got thanked by a seller for letting him know I thought we should lower the price on his listing.

I got thanked by someone in our office for turning in paperwork properly filled out, in a timely fashion and in the right format.

In short, I'm being thanked repeatedly for just doing my job!

To which, I can only reply... thank you to all of my competition. Apparently you're all making me look good!

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