Dear Lake Oswego Buyers: It’s Time.

I’ve never considered it part of my job description as a buyer’s agent to talk anyone in to anything. My job is to advise: to interpret needs and wants of every client, to find the homes that fit those needs, to negotiate an equitable and binding sales agreement, then to see the process through to closing. I don’t think I’ve ever had to manipulate someone into making a buying decision he or she was clearly not ready to make.

But in the last year or so indecision has evolved into an art form. There are certainly some legitimate reasons: Inventories have been rising, sellers have been reticent to price realistically, and every day brings a new round of “Housing Market DOOOOOOOOMMED!” headlines, understandably driving buyers to the sidelines until some sense can be made out of the mortgage sub-prime /liquidity /standards /foreclosure mess. That, of course, exacerbates another round of headlines, leading people like CNBC’s Jim Cramer – a buffoon who, as Greg Swann points out, screams for a living on cable TV – to declare on the Today show last week: “Don’t you dare buy a home now. You’ll lose money.” He did amend that the following day on CNBC, exempting Seattle as the one area where prices aren’t dropping, his fact checkers not digging quite enough to know the same is true of Portland and a high percentage of the Pacific Northwest. [I’m not sure that mattered much; more people read BHB on a given day than tune in to that particular network.] It's a barely meaningful statistic anyway: because LO showed last month a 6.3% appreciation does not mean an individual home will sell for 6.3% more than it did a year ago - it emphatically won't - nor does it mean that in a market where there's a 6.3% depreciation that a home will sell for 6.3% less. There are simply too many variables.

So in keeping with the all real estate is local axiom, there’s a temper shift emerging in Lake Oswego, the local market with which I’m most familiar. [Thus: it may be true of the broader Portland Metro market as well; I haven't run the numbers.] Here’s what I see:

1. Inventories are down from thirty days ago, after a steady and dramatic rise over the last nearly two years. I’d love to say that’s because of sales – it’s not; September sales were down over 30% compared to September 2006. It’s because fewer listings are coming on the market, listings are expiring and not being relisted, or listings are being canceled or withdrawn. Those are the sellers who don’t have to sell immediately or who have decided to enter the rental market, sellers who on average kept their prices artificially high.

2. Many of the remaining sellers are motivated, moreso than ever. Sellers in large part have listened to their agents and had their homes put in turnkey condition with necessary repairs and upgrades. Now they’re further motivated by wanting to sell before the winter doldrums; list prices are dropping rapidly. Buyers are finding very, very nice homes at very, very attractive prices.

3. There’s still a lot from which to choose: As of yesterday there were 100 single family homes listed for under $500k [Note to those reading from outside the area: median price in LO is nearly $500k]; 205 between $500k and $1m; and 126 over $1m. And note only a very small percentage are selling for full list price.

4. The mortgage liquidity crisis is about over, and rates remain at historic lows. This does not mean we’ll return to the days when to get hundred percent financing all you had to do is prove you could breathe, but if you have good credit and 20% down you can own the market. [Obviously there are still many loan products available for individual circumstances; consult a mortgage professional.]

Final thought: all these reasons triple if you’re looking to buy a home to live in for five years or more, to raise a family or retire, rather than simply looking at it as an investment.

A home is, after all, first and foremost a home.

Jim Cramer notwithstanding.

Rates DOWN. Confidence UP.

Jeff Brown wrote a brilliant piece on Bloodhoundblog yesterday. Read it all - and the comments as well. This kind of thinking is the reason I read blogs, especially BHB. Key graphs:

I can’t find a two week period in the last 40 years where the Fed has increased money supply by over $110Billion — can’t find it. That doesn’t mean it hasn’t happened, but you have to agree, that’s a monster increase in our money supply. (That’s M2 for the econo-nerds.)

This move will, (I theorize) spur the stock market — and please believe me, I don’t say this lightly — to heights we haven’t dreamed of. That kind of added liquidity in this set of circumstances relegates whatever Bernanke chooses to do with interest rates tomorrow — anticlimactic. The only argument that makes rate cuts more likely than not, is the absolute requirement of — confidence.

Confidence? No kidding: DOW up 336, 2.51%. Investors were tickled to death with the half point cut in the federal funds and discount rates. Sure, one day does not a rally make, but the drop in the DOW a few weeks ago when the sub-prime problems were fully felt foretold nothing but gloom, so I’m going to exercise prerogative and give tickled where tickled is due.

What’s this mean for the housing market, particularly the housing market in the Pacific Northwest? It should help ease the coming interest resets for adjustable rate mortgages. Whether or not it will affect mortgage interest rates is questionable; there’s no direct correlation. That said, the thirty year fixed dipped below 6% for a time last week, and jumbo mortgages (+$417k) are starting to settle.

As I’ve argued before the fundamentals remain strong.

So what’s the real effect? Perhaps, as for the stock market, this is a catalyst for the one thing this housing market has lacked:

Confidence.

'Green, Green' Redux

Back in March I wrote this about the then new ‘green’ search filter on the MLS. Dylan Rivera of The Oregonian had written an extensive – and breathless – piece about its rollout: “Environmentally friendly information for Realtors signals good news for some buyers and sellers and starts a trend.” was the subhead.

Since our MLS is one of the few in the country to have the filter, here, for the benefit of those around the country considering the add-on, are the six month numbers from one of the greenest cities in the US:

Total active listings, Portland Metro: 16,108.
Total listings labeled ‘green’: 451
Or 2.8% of the total, where it’s been for the last four months.

But what about buyers? Only new construction is available for a green cert, and builders may, in this market, be reluctant to add the cost if that cost can’t be recovered. If the incentive is meaningful certified properties should sell at a higher rate:

Total sales, last six months: 16,016.
Total green sales: 296, or 1.9% of the total.

Apparently not a trend quite yet…

Twenty Year Trend: Portland vis-a-vis the US

The NY Times has an interactive graph displaying a twenty year growth trend – both actual and inflation adjusted – in housing prices for nineteen US markets. See here. [Thanks to Dave Koch of RE/MAX for the link.]

For the moaners among us – and I catch myself in that category occasionally – it’s eye opening, and comforting. With the exception of Atlanta, which is missing five years of initial data, Portland is the only market that hasn’t experienced a quarterly downturn in actual growth. We haven’t experienced the wild peaks and valleys of, say, a Phoenix or Las Vegas, and Portland and Seattle remain among the most healthy real estate markets in the United States.

That’s not to say it can’t happen; in August inventories continue to climb and sales slide. But even with that both the average and median prices are up considerably across the broad metro area.

The fundamentals remain strong.

How to Write Imperfect Copy

One of the most difficult tasks in writing is that of writing copy for catalogues, newspaper ads or, well, MLS listings. It’s important to capture attention and tell a story, but character limitations make that difficult, which is why you often run across sentences like “Stng 4br clonl, chrm thruout w/trfc vu of Hd.” As much as I love to write, I admit to being not very good at the task; there are only so many ways to say “Pottery Barn cute!”, and there are only so many synonyms for “coveted”.

But there is – or should be – an inviolable rule: proofread. I came across this this morning:

"Brick front introduced gracious Georgian. Designer Upgrades! Wainscotion, bay windows, island kit, brfst nook, 2 wood burning fireplaces, picket fence backs to manicured greenway. Coverted Oak Creek School. A sence f style embraced by a Spirit of Tradition! No Sign on Proptety."

To me – and I’m priggish when it comes to spelling and grammar, but so are many others – that’s like fingernails on a blackboard. What’s being said disappears into how badly it’s being said. It reflects not only on the writer – who is either magnificently dull or, as I suspect here, careless and inattentive – but on the listing, a $760k home. The listing is five days old, which means the agent hasn’t checked it once posted, and the seller either hasn’t been given a copy – sellers, always get a copy of your listing and check it for errors – or hasn’t bothered to read it.

This is a market where in selling a home – especially in that price range – everything matters, little and big.

Nf sd.

Realtors' Dilemma

I’ve written a couple times on BloodhoundBlog about the need for the real estate industry to divorce the buyer agent commission from the listing agent commission. With the seller still in control of what both agents earn, but the buyer bringing the money to the table, we’re living under the vestige of sub-agency, where everyone in effect is working for the seller. It’s otherwise codified in both Oregon Statute and the Code of Ethics – we owe fiduciary duty to whomever we represent, buyer or seller – but I learned long ago that, with market forces in play, saying isn’t always doing.

Case in point: We had an office discussion yesterday that began with how best to market listings when inventories are fifty percent higher than a year ago. Even with all the right ingredients – right price, top condition, good staging, easy access – given all the choices buyers have it’s sometimes difficult to get showings. What to do?

One suggestion: Raise the Buyer Agent commission. From, say, the average 2.7% to 4%. Considerably cheaper for the seller than lowering the price another $20k.

But, wait. That runs counter to statute and code. As a buyer’s agent I’m bound in all cases to consider my buyer’s interests ahead of my own. A home that’s not right at 2.5% doesn’t suddenly become more attractive at 4%. Could anything like that actually work?

Yes. Sadly. It works. And we’re seeing it used as a tactic more and more often.

It’s comforting to know that everyone in the room was as passionate as I: Not only has the buyer commission never entered into a decision on what to show or not show a buyer, but the suggestion that we’d be thus encouraged is a rank insult. Most felt that any buyer agent bonus needs to be disclosed to the buyer, and if possible manipulated so that it becomes in his or her interest.

Then the conversation turned to the dilemma: As a listing agent my fiduciary duty is to the seller. If more traffic can be generated by bribing my fellow agents, is suggesting that to the seller the right thing to do? Does the duty to my seller trump the cynical feeding of the venal realtor stereotype?

I honestly don’t have an answer. I have a fabulous listing in Lake Oswego - where there’s about an eleven month inventory of homes in the $500k and up range - that would be a perfect candidate for a trial … but neither I nor the sellers are quite ready for that. Much better, I think, to hold the commission where it is and try to find incentives to put in the buyer’s pocket.

In the meantime, I’ll continue to write about divorcing commissions.

Perception is NOT Reality

Back when I was still in the shoe business a friend – and terrific retailer – leased a small space in Washington Square Mall. There weren’t more than ten chairs; he could have three people in the store and it would look mobbed. Business was fabulous, growing at double digit rates.

When a neighboring space came available, he took advantage and nearly tripled his footage, adding commensurately to the inventory. He hired more people and prepared for a windfall.

But: His sales immediately dropped. He found that even with ten people in the store after the addition it looked empty: the smaller space created a buying frenzy, the larger buyer skepticism, skepticism additionally fueled by too many choices. He was still offering the same quality product and service, but the perception had changed, and he had to close the door within a year.

That’s the best allegory I can think of for the current real estate market.

The economic fundamentals are still in place, and mostly good. More people are moving into than out of the Portland Metro area, unemployment is low, the economy is growing, and interest rates, though higher than a year ago, are still historically low. Home values are appreciating, though at a slower rate than the last three years. Skittishness has hit the mortgage markets – fallout of the sub-prime failures – nearly panicking the Oregon senate into a poorly thought out remedy, but what’s happening here is nothing when compared to most of the rest of the country. In reality this is a good market.

But perception has changed.

It’s the negative that gets all the press, and buyers have turned seriously skeptical. Two years ago was the frenzy: buyers thought if they didn’t buy now! they'd overpay. Today the fear is if they do buy now … they’ll overpay. Agents have watched this for several months: people walking away from $10,000 in earnest money the day of signing because it ‘just doesn’t feel right’, buyers faced with a confusing array of choices, so many any choice is permanently postponed. On the other side sellers are anxious to get their homes on the market for fear the market will begin to drop.

And in a self-fulfilling sort of way, they’re all right, and the stats are beginning to catch up. At the end of June the Portland metro area had 57% more active listings than a year ago. Year over year sales were down almost 20%. Median and average sales were up year over year – 5% and 6% respectively – but down slightly over May’s median. Both median and average prices of active listings are down and will be reflected in sales shortly. Etcetera.

Does that mean it’s a bad time to be buying or selling?

Absolutely, unequivocally: No. It requires patience, reasonable pricing and excellent presentation on the selling side; a knowledge of the market and market history on the buying side. Homes are still selling, and there are many, many good bargains for buyers if you don’t let emotions fog the decision.

To wit: I helped a buyer a few months ago find a home in Lake Oswego. It took five months of ‘Should I or shouldn’t I?’, but we finally found exactly what she wanted. It was an older listing, had started at $456k, was now listed at $430k. She loved it, offered $400k…and it was accepted, an exceptional, exceptional value. In the first week we made it through a very clean inspection. The seller was gracious enough to begin what few repairs there were to do even before the inspection addendum was written. But she began looking for things to be wrong, finally settling on – ‘It just doesn’t feel right…’ – and backed out.

Epilogue: the home sold the next day for $420k.

Point:

All the happy spin in the world isn’t going to change the current perception; that’s going to require a couple months of diminishing inventory.

But don’t allow that perception to keep you from buying or selling! If you know what you’re doing – or hire an agent who does – you’ll do juuuuust fine.

Taxes, Zillow and the Price of Homes

I have a listing in Marion County. New construction, but when I entered it into the MLS the address didn’t match the tax id. The seller had been receiving tax statements, so I couldn’t figure out the why.

Called the county. Pushed the required numbers in order to talk to the required three people, finally landed at the map room. “Oh! By golly, looks like I entered the lot number instead of the address!”

That was nearly four weeks ago. Tax id and address still don’t match.

Pause here to note that that is one of the organizations Zillow relies on for accurate market information.

But this isn’t about Zillow.

I received an email a couple days ago on a listing I have on Craigslist. He or she – it was anonymous except for the email address – was wondering why the list price was so much higher than: the market value according to the county.

Oh, dear.

This led to an exchange where I tried to explain that the Market Value as assessed by the county – and it doesn’t much matter what county – only exists to make Zillow look somewhat accurate. There’s exactly zero correlation between assessed market value and sales price. I even sent this person county value/sales price ratios from within a mile of this home over the last three months: 57%, 15%, 25%, 27%, and – 7%. I pointed out the home was listed with the county as a single story five bedroom; it’s actually three stories and four bedrooms. I explained that if he were to do a search of every home 3900 to 4100 sf (this is 3997) listed or sold in Lake Oswego in the last year, this would be the least expensive, and it’s not a fixer, it’s completely updated on a quarter acre. Perhaps he should see it?

No deal. The county was his number and he was sticking to it.

Oh, well. The real value of any home is the price a seller is willing to accept and a buyer is willing to pay. In any free market he’s absolutely sanctioned to make decisions on whatever criteria he thinks work, be it horoscopes, numerology, crystals, or county assessments.

My suggestion, of course, is: hire a good agent.

The Value of Us Pt 2: A Day in the Life

Good heavens, where have you been?

Earning a living! Busy time of year.

Give. Me. A. Break. Everyone knows realtors work two days a week – half days at that – and make in the high six figures. That’s why, frankly, I deserve some of your commission.

Oh, dear. You of all people are buying into that?

Are you denying it??

Of course! But only on the basis that it’s nonsense.

HAHAHAHA! I know work; try wearing this hat all day! Here’s your test: what did you do, say, yesterday?

Made a flyer for a new listing, just like Sixty Minutes said.

SEEE?? I was right!

Well, not quite. That was from about 7am to 8am, if you include the time it took to print one color copy for duplication. Note I’d already spent about a week and a half with the seller – a good friend – prepping the home, taking the pictures and getting it ready to list.

Then you took the rest of the day off?

Then I drove to the RE/MAX office, met up with another realtor who I’d asked to co-list with me. The home’s in an area I’m not familiar with and overlaps another MLS; she knows the area well, is a member of the other MLS, and it’s worth half the commission to give the home every chance to sell.

Heyyy, that’s my commission you’re giving away!

After we made copies of the flyer, we took the hour drive to the home, walked it for another hour making notes, putting up signs and lockboxes, and talking marketing strategy. Then we drove back to the office.

Just in time to get in eighteen holes!

Right. Just in time to spend a half hour on the phone with the county to try to get the tax id and address to match – the map room had entered the lot number instead of the address, throwing off every site that tried to link to it. Time to enter all the info and data into the MLS, time to write and post ads on Craigslist, Zillow and Trulia.

Time to follow up on an inspection report and a foot-dragging lender regarding a property in escrow, a property sold to wonderful buyers with whom I’ve worked for over a year to find just the right home. Now that they’ve found it, they’d like no glitches. Time to rewrite and repost copy for another listing. Time to parry silly requests from a listing agent on another home in escrow, requests that would only annoy the buyer I’m representing. Time …

OKOKOKOKOKOKOK! I get it! You had a busy day! So what’d you do Sunday?

Before or after the three hour open house?

I take it I don’t get any of your commission?

I – and every good agent I know – will do anything and everything possible to see that you get the very best representation you could possibly get. Everything, that is, but give you my commission.

I'm convinced!

Of course you are; you're my adorable adopted granddaughter!

The Bloodhound In Me? No. The Me in Bloodhound.

I've linked often here to Bloodhound Blog in Phoenix. Not only is Greg Swann, the site's author and moderator, one of the best writers in or out of Real Estate blogging, but he has some of the best insights I've found into the business of buying and selling homes. More, he's surrounded himself with other seriously bright people from all phases of the business: Mortgage brokers, investors, as well as other RE brokers, both new and hugely successful. I get more useful information in a week of reading BHB than in the entire 150 hour course taken to get a license.

So I was drop-dead astounded a couple days ago when I got an email from Greg – it sat in my spam filter for thirty six hours before I actually saw it – asking me to join the group. Humility isn't one of my great strengths, but what in the world can I offer to people who've taught me so much?

Well, we'll find out. I of course accepted, and will be posting there as regularly as time allows, hoping to add whatever I can. What I've found refreshing already is that Greg, true to his free market aesthetic, doesn't set any constraints on what's said or when it's said. This isn't the equivalent of an internet group hug. People are passionate about their thoughts but reasoned in their passion. Who knew real estate could be so incredibly interesting?

So, thanks, Greg. It's going to be great fun.

REDFIN, Sixty Minutes and the State of Real Estate

Translation: Please don't criticize our illegal, consumer hostile monopoly on real estate transactions, or Realtors will be forced to get real jobs.

Would like some cheese with that whine?

Gotta love the internet, where vacuous canker is assumed an adequate substitute to actual thinking, and cleverness is almost always inversely proportional to its writer's perception.

That was from John Cook's Venture Blog for the Seattle PI, a response to a reprint of NAR's letter to CBS rebutting the Sixty Minutes piece. It's a miniscule part of the polemic and traffic that's driven real estate blogs since last Sunday, some of it terrific, clearly some of it not. But it's generated some thoughtful introspection as to the state of the industry, and where it's likely headed.

First, that comment isn't completely out of the ordinary; real estate agents have a very real problem with reputation. Harris Interactive has done a couple polls in the last year, one on the prestige of various professions, one on the trustworthiness. RE agents were next to last in both, just above stock brokers. [I'd argue this is a little like polls re congress: 28% approval, but "MY congressman is excellent." That's why over 90% get reelected.]

That's the sentiment on which Sixty Minutes meant to capitalize, and it's indelibly etched in the marketing plan of Redfin. In its post transaction survey, to the question why the customer was attracted to the company, included in the multiple choice response is "Stick it to the Man. Just don't like traditional agents…" (for the record, 18%). That's one of the reasons Redfin will fail: a foundation built on what's wrong with everyone else rather than what's right with you isn't a foundation at all because it keeps moving.

More importantly, Redfin will fail because it doesn't pay nearly enough for what little it does; it won't attract any volume. But that said, the amount that it's paying is too much to ever realize a profit. Brokerages, even internet brokerages, are expensive to run, especially when it's staffed by too many salaried agents and support staff generating too few closings. By its own numbers it closed only 170 sales in the Seattle area from Feb 2006 to Feb 2007, a time frame in which (this is a guess based on our own Portland numbers) there were probably over 50,000 closings total. Since the beginning of 2007 it's closed 150, with 25 agents. Risk capital is very expensive, and VCs tend to get really grumpy when projections aren't met, especially since the recent dot.com collapse. I'll be a little surprised if Kelman is successful in his current fundraising trip, a lot surprised if Redfin is still around in eighteen months.

So I just don't see Redfin as a threat to the traditional model, and I still think normal people are perfectly capable of sniffing out Sixty Minutes deceit. As I've said, internet startups will come and go, the market deciding which are which.

The real threat to the industry comes from: The industry. In stereotype there's always an element of truth, as the stereotype exhibited in the Harris polls suggests: We spend entirely too much time worrying about and protecting ourselves, entirely too little focusing on our customers. We hoard information and regulate how it's dispensed, keeping it from those who need it most. We spend more time concerned about marketing ourselves than marketing our listings. Even the nomenclature betrays us: Consumers, clients, customers and friends are people; spheres and farms are commodities. Books and classes teach us how to SELL! SELL! SELL!, and give droll scripts to follow for every situation. Worst for this discussion, many are firmly anchored to the "I've done it this way for twenty years…" mentality, unwilling to change even as the internet passes them by. I've run into two in the last year who still don't have email.

None of which is to diminish the value a good agent brings to the buying and selling of real estate. Most of the people I work with are very, very good at what they do. Some are not and, unfortunately, they get most of the attention.

If we're going to limit opportunities for the Leslie Stahls and Glenn Kelmans of the world, we're going to have to change how we approach business. Change licensing procedures. Deregulate information.

My favorite because it will solve so much, and considerably closer to reality than most would think: Set up a new commission structure by separating completely the buyer's agent commission from the listing agent's. [Thanks, again, for the many ideas from Greg Swann.]

There's been a lot of comparative talk this week about Nordstrom vs Walmart, vis-a-vis full service agents and Redfin. But most miss the essence of what made – and makes – Nordstrom Nordstrom. It's not that they give good service; that's a result.

It's that they never take their eyes off their customer. What's best for that customer is the first consideration in every single decision that's made.

That's what we need to do.

REDFIN Hit Parade!

HOOOWHEEE! Busy day. Thanks, Greg; that worked. Lots of traffic. If you ever get your server back [update: it's back] I'll link to Kris Berg's superb post as well. And thanks to local agent Ron Ares for the link and excellent post.

Since there are many new visitors, including several agents from Redfin, here's a brief summary of the ideology behind this blog as it pertains to internet startups in general and Redfin in particular:

1. I'm a profound believer in the free market, which means I have faith in the ability of the customer – you – to make sound decisions. You're not stupid.
   
   
2. Given (1), I thrive on competition. I aspire to be as good as those who do things well, but still love those who don't because they make me look better.
   
   
3. Thus not only don't I have any inherent animus for startups like Zillow or Redfin, I applaud them their innovation. If consumers find value, they'll survive, and we'll all be better because of it.
   
   
4. Zillow will survive. Redfin, I suspect, will not.
   
   
5. The Sixty Minutes piece, as noted, was transparently dishonest. There's nothing customers hate more than dishonesty. [But I do admire the chutzpah of an agent claiming she quit her full service job because, doggone it, she was just making too much money too easily.]
   
   
6. As many have noted today, Redfin doesn't sell something for less, it sells considerably less for less.
   
   
7. Good agents sell not only what they do, but what they know, and are worth every penny they charge because of it.
   
   
8. Not every agent is a good agent.
   
   
9. The real estate industry is in flux, and it's internet related. But I think it has more to do with where effort is concentrated: The agents who spend most of their time prospecting for new clients, practicing listing presentations and learning how to overcome objections are going to dwindle in numbers; those who spend most of their time learning new techniques to market a home or touring homes to know the inventory – learning to be better agents – are going to go to the head of the class.
   
   
10. Finally, back to (1): As an industry we spend waaaaaaaayy too much time worrying about innovation, trying to protect ourselves from it, rather than capitalizing on it.
    
    It's simple: do whatever is best for the customer. That's what good agents do every day.
    
    Works a lot better than talking points.

REDFIN: Errata

Trevor Smith, Redfin agent, has pointed out that Redfin has never been through a downsizing. True (since corrected), and my apologies: my confusion was with HouseValues.com, another real estate internet startup. All else stands.

SIXTY MINUTES (3); REDFIN.COM

First, I owe Greg Swann of Bloodhoundblog.com once more for the brilliant device of using REDFIN.COM in a post, the more to attract search hits after the Sixty Minutes piece. I'm just venal enough to want some of that traffic as well.

So. Sixty Minutes. I feel like a Popular Mechanics editor who just sat through a Truther video. It was a parody of everything that's wrong with Sixty Minutes: preconceived story line, silly questions to silly people in order to puff that story line, demonstrably false proclamations by Glenn Kelman of Redfin, and absolutely no substantive rebuttal. It was so transparently bad I'm perfectly willing to let anyone make up his or her own mind: Here's the video. Redfin away. Let me know if you have any questions.

Use this as your guide: The same agent in the King 5 report that closed "as many as four sales a day", in this piece closes eight a week. Redfin released sales not long ago, and closed fewer than 300 as a company, in all of 2006. (Do the math!) They've never made a profit, and are living on venture capital, accumulated via Glenn Kelman's terrific salesmanship.

The marketplace will decide whether or not they survive.

So to the NAR and all other hand wringers: Much ado about nothing.

SIXTY MINUTES (2)

The segment hasn't run here on the west coast yet, but I saw the two and a half minute Q&A promo here. Three things struck me: 1) Leslie Stahl is looking really old; 2) I absolutely love the irony of someone from CBS News telling me that the internet is going to have an impact on my career (See: Dan Rather); and 3) Given that Sixty Minutes producers do all the background work, the correspondents only coming in at the last minute, Leslie Stahl, I suppose, has an excuse for being so thoroughly confused. [Leslie: Redfin's claim to ingenuity is that its agents represent buyers. Trust me, that has nothing to do with staging a house.]

I'll report; should be fun.

And Now: SIXTY MINUTES!

It's at least interesting when two dominant forces of the mainstream media launch real estate related stories within a week of each other.

In the email this morning was this press release from the National Association of Realtors. Apparently SIXTY MINUTES is running a piece this weekend on the internet's impact on the real estate industry.

Full disclosure: I have no use for Sixty Minutes. I haven't watched it for seven or eight years, ever since they ran a Kevorkian snuff film during sweeps week. Between that and the Alar hoax they spent pretty much all their residual credibility, and I have many better things to do during that particular hour.

I've also had experience with one of their producers and film crews. In the early nineties there was a measure put before the King County (Washington) Council by the local animal rights org that would have essentially outlawed the breeding of pets, particularly dogs. Couched in typically painful compassion prose, it looked like it might pass; that piqued Sixty Minutes' interest and they showed up to document before and after the council vote.

Oddly enough, there were a number of people who thought that was an absolutely nutty idea, largely because it was. We showed up at the council meeting at 5:30am – speakers were called on a first come, first to talk basis – and, while the cameras rolled, we spoke for the first eight hours of the meeting. The measure failed overwhelmingly, and Sixty Minutes was no longer interested.

Which is what's happened here. Apparently intended to be a major Good Little-Guy v Bad Big-Guy hit piece, it sounds like the nuances of a very complex industry backed them off considerably. Now – and, again, I'm only going by the press release – it's more of a puff piece on some internet startups, particularly Redfin out of Seattle. Zillow's probably in there as well. So, OK. Big deal.

About Redfin: One of the Seattle stations got a jump on Sixty Minutes, so here (via Inman Blog) is a sample of what you might see. [I love Glenn Kelman selling the fact that he isn't a salesman.] Redfin works primarily as an internet buyer's agent, promising to rebate 75% of the buyer agent commission to the buyer.

Reminder: it's illegal in the state of Oregon for an agent to share commission, avoiding in the process lots of conflict of interest problems. Redfin cannot operate here. Whether that's good or bad is for another day.

I'll break my boycott, DVR the Sixty Minutes segment and respond accordingly, but my gut is models like Redfin have a lot of tweaking to do before they're ever profitable. Their agents by design stay by their computers, fold on their fiduciary duty, and allow their buyer, the listing agent and others to do the heavy lifting. I suppose that's great for savvy buyers, but it puts the listing agent in a position of much higher liability with no prospect for return. Not a good way to begin a transaction.

So in keeping with the theme that people aren't inherently stupid, I think NAR's angst is juuuuuuuusst a bit overblown. We'll see.

And for the record: I really hate talking points.

Market Update…

Just to follow up on PARADE, from the Wall Street Journal (subscription required):

The housing news isn't all grim. Even as prices sag nationwide, there are several cities in the country where home values are climbing smartly. Portland, Ore., Boise, Idaho, Seattle, Salt Lake City, Houston, Austin, and Charlotte and Raleigh, N.C., are among the cities bucking the national trend.

And the trend continues. In the April year over year numbers for the Portland Metro area, though only 1%, unit sales were actually up. Median prices were up 5.8%, average prices 4.1%. All very good: buyer and seller expectations are reaching parity.

HOWEVER: there are 79.5% more active listings now than last year, 11,710 to 6523. That puts pressure on the selling side, and both average and median prices of active listings are down slightly. I think it's possible we'll see a couple months of flat prices – or even slightly down – as the inventory gets cleared.

All that said: Nothing much has changed. Sellers – at least most sellers – are bringing down their prices to reasonable levels. Buyers are realizing value when they see it. Prices are still local.

Ahem: Consult your agent!

I…ummmm...Love a PARADE…

Parade magazine really should stick to the meaningless celebrity gossip it does so well. When it attacks more substantive topics it tends to grind them up and spit them out as hyperbole mixed with non sequiturs masked as studied analysis. Thus they treat, say, the war in Iraq with the same seriousness as Anna Nicole's weight at the time of her death: 178. "Ah, but she may have been on a diet because a bottle of Slim-Fast was found by her bed." Thanks. I can rest easily now.

Today, then, came the breaking news that, nationally, the real estate market belongs to buyers. [No. REALLY???] It DID allow the Pacific Northwest as an exception, but painted mostly a dire picture, the same dire picture you've heard from other mainstream news outlets for the last year. Like ghost stories around a campfire, various versions of apocalypse apparently sell. As if AGW weren't enough.

Reminder: Don't listen to it. Not only is real estate local, it can be singular. What's happening in Phoenix is not what's happening in the Portland Metro area; is not what's happening in Lake Oswego; is not what's happening in Westlake; is not what's happening in Brighton; is not what's happening with, say, a 3300 sf Chafee in terrific shape and perfectly priced. National trends are interesting in the proper context; but trying to extrapolate them to specific situations can be dangerously misleading.

And speaking of misleading: I've defended Zillow in the past and I still defend the right of all people interested to access their site. But it remains a parlor game, and anyone who takes it as anything more is facing delusion and therapy.

PARADE and Zillow, though, have apparently reached an agreement: PARADE drives people to its own web site where, using Zillow's engine, offers this:

What's Your Home Worth?

Find out at Parade.com. Use our free real estate calculators from Zillow.com to determine the current value of your home – and your neighbor's.

See any caveat? No. "Determine the current value of your home". Period.

Look. It's not that I think most people are too dumb to get it, or that any marginally intelligent agent or appraiser can't answer "But Zillow says it's worth $500,000!" with "Well, Zillow assumes you have a roof."

What bothers me is this is likely to give additional impetus to the doofuses at the Arizona Board of Appraisal and those like them. [PARADE is what passes as deep source material for many politicians as they write laws.] If that happens, it's Zillow's own fault for either A) not demanding editorial rights; or B) having editorial rights and not exercising them. Parade doesn't care: they're just trying to get as many hits as possible so someday they can rely on the web to offset the perfectly awful color reproduction in their magazine.

And for the record: Zillow's claim to the wonder of algorithms is that a "majority" – that can be 51%, but I think they say 75% - of their estimates fall within 10% of the selling price. First, anything in this market 10% over priced isn't getting any showings, but more importantly that means, on a $500,000 home, the price could be either $450,000 or $550,000, a $100,000 swing. And those are the good ones!

Anyone want to buy or sell a home based on that information?

April Showers Bring May Showers!

Sure, it has little to do with real estate, but there are important moments in the life of a thirteen year old very furry dog: YETI has decided he hates the rain. Since he lives in Seattle, this presents a bit of a problem for, well, potty trips.

So, of course, Shannon bought him a raincoat, the perfect Seattle Slicker.

Now Yeti braves the elements and approaches potty trips with the same mettle as Galahad searching for the Grail. Stays out all day. Can’t get him back in.

What a thoroughly nutty dog...

Reminds me: make sure there’s enough visqueen in your crawlspace!

The Value of Us. Part 1.

Real life examples often illustrate truths better than any academic argument possibly can. This is such a case, but I'm going to couch specifics so it doesn't look like I'm trying to ridicule; I'm not. But I don't think anything has come this close to illustrating that good agents actually are worth everything they get in commission:

I've done a lot of business in a particular neighborhood. The homes are homogenous, built roughly the same time: Mid to late eighties, a few as late as 2000. The builders vary somewhat in quality, so some developments within the neighborhood demand a higher price than others; and most have been upgraded – new roofs, siding, kitchens, baths, etc. – at some point. Average sold price in the last year is around $720k, the average size 3000 sf, the average $/sf is around $234. It's safe to say I've been in most of those homes, plus those currently active and pending. There was a time during the frenzy a couple years ago that the average days on the market for this neighborhood was less than seven days and selling prices averaged a little over list; now the time is 47 days, and sellers are averaging a five percent reduction in their original list price.

There. That's the background.

A few days ago I was looking through Craigslist and came across an ad for a home I hadn't seen on the MLS. In a very nice area on a terrific lot, both backed and sided by greenways. The ad was nicely written, though included things like "Great investment!" that would never be written by a professional. In it the sellers argue that since the lot is so nice, the $/sf shouldn't count as much. True enough: greenbelts can account for as much as five to seven dollars a square foot, fifteen to twenty thousand dollars for a 3000 sf home.

Unfortunately, that's not what they have in mind. The price they're asking is $63/sf higher than any home that's sold in the last year – including, it should be noted, a number of homes on greenbelts. At the barest minimum the home is $150,000 over priced, likely closer to $180,000. Even if they found a buyer it would have to be a cash buyer; it would never appraise for a loan.

But more: The photos – Craigslist allows four – are of A) an exterior, which emphasized a tree, the garage, a dormer and a lot of hipped roof; B) children playing outside; C) either a den or the living room, emphasizing lots of furniture and knick-knacks (see: DECLUTTER!); and C) a darkened picture of a bath tub. Nothing that would actually help sell the house.

Then, yesterday, the home appeared on the MLS. The sellers had gone to a discount broker - $295 to list!! Why pay more??? – who had earned exactly whatever was charged: The same four pictures, plus four more, including one of a toilet; a half filled out listing; a price exactly $6000 less than the Craigslist price; a buyer's agent commission of 2% when, as noted elsewhere, the norm is 2.5% to 3%; and no provision for a lockbox, making showing much more difficult.

Anything's possible? Nope. No chance in the world this home will sell under these circumstances.

Here's my guess: Armed with the urban legend that brokers only care about themselves, they had several in to give comps, and the agents were at least honest enough to tell them the price the sellers had in mind was out of the question. It's even possible one or more turned down the listing: marketing costs are considerable, especially now; with no chance of a return they walked. And agents are fanatically cognizant of reputation: having their name attached to a listing $150k over market is bad business.

So at the very least, the sellers are out $295 plus their time and angst. If they really want to sell – rather than just play the market – and eventually have to hire and listen to a professional, the home will have the negative taint of its present listing. Chances are very, very good they'll net less than if they'd hired the right person in the beginning.

Please! Be represented. Hire the best, and listen. It's in your interest!

UPDATE: The buyer's agent commission has been raised to 2.5%. All else remains the same!

DON’T PANIC!

Any time I can invoke Arthur Dent, Zaphod Beeblebrox and Marvin the Seriously Depressed Android, I do.

Those words, of course, are on the cover of The Hitchhiker's Guide to the Galaxy, a book especially relevant to someone (Arthur) whose home had just been demolished – the entire Earth, actually – to make way for an intergalactic highway. Things are never as bad as they seem.

And they aren't! NAR has just released info to the effect that March existing home sales were down the highest level since 1989, 8.4%. Headlined on Drudge, I expect it will make The Oregonian tomorrow.

But: As I've noted before, home sales reflect contracts entered into 30-60 days prior, when most of the east coast was under a blanket of snow. So: Duh.

Which means it means exactly nothing to what's happening in the Portland Metro area. Total sales for the month here were down less than one percent; dollar volume was up. Inventory is at 3.8 months, as opposed to over 7 months nationally. As seller's expectations continue to align with those of buyers, inventory will decline even more.

Don't panic!

Free the Market! Free the Market!

I read Bloodhound Blog frequently. Mostly inside real estate for those connected to the profession, it's still fascinating reading for anyone interested in what may lie ahead in the buying and selling of homes.

It has many excellent contributors, but is run by Greg Swann, principal broker of Bloodhound Realty in Phoenix. Greg's a terrific writer, writes, I believe, a weekly column for the Arizona Republic, and knows the business thoroughly. But what keeps me coming back is his passion for the free market, which is almost always defined as what's best for you, the customer. That means he's more interested in making agents better agents as opposed to better salespeople, and that he occasionally has to go against the protectionist orthodoxy that can invade our industry and your rights as consumers of our services.

Thus yesterday this was posted. Briefly, from the Arizona Republic:

An Arizona regulatory board has ordered Zillow.com to stop offering its online estimates of home values.

The Arizona Board of Appraisal has issued two cease and desist letters to the popular real estate Web site, claiming Zillow needs an appraiser license to offer its "zestimates" in Arizona.

"It is the board's feeling that (Zillow) is providing an appraisal," said Deborah Pearson, Board of Appraisal executive director.

Granted it's Arizona, not Oregon; granted it's obtuse on so many levels it approaches parody; and granted it has almost no chance of getting anywhere: it's as if the American Library Association issued a cease and desist to Google.

But it's symptomatic of how industries in general, and ours in particular, react to innovation that's perceived as competition: Gather the lobby, circle the wagons, and regulate that competition out of existence. Greg says it well:

This is Rotarian Socialism in action. The so-called regulatory body serves at the beck and call of the putatively-regulated industry. They have no hope of doing anything but making themselves look ridiculous in public, but they have to answer to their allegedly regulated masters no matter what.

Zillow does what it does very, very well. It's decidedly not entirely accurate, but it admits that up front.

What it does do is make me better at my job. Almost every client – both buyers and sellers – with whom I've worked knows the site, and has used it. I have to be better at justifying any comp I do.

One last thing: Bloodhound believes – as do I – that good agents are worth every penny they charge, and then some. The business is changing, and rather than shrink from competition and new ideas, we can thrive on them.

We have to.

Home Buying Process (6) Escrow and: Possession!

1. Hey, it's been a month! I thought you said…
   
   I wrote a term paper once – Spring term – titled Spring Fever. In it I made the case that the phenomenon is real, that people really do slow down and procrastinate more as the weather turns from grey to not grey. Turned it in almost two weeks late. Got an A.
   
   That's my excuse and I'm sticking with it.
   
   


2. Still looks pretty grey to me but, whatever. Shouldn't you follow the Imus example and apologize?
   
   Sorry.
   
   


3. Thank you. Now: We have an agreement! I've bought a house!
   
   Almost. The escrow period – when the transaction is put into the hands of a neutral third party, usually a title company – can be as short as a couple weeks in the case of a cash transaction, to as long as sixty days or more if one or the other party need the accommodation and both parties agree. The point is it's a crucial period, can be enormously stressful for both buyers and sellers, and you need to know what to expect so there are no surprises.
   
   


4. Oh, dear. Should I be afraid?
   
   Good heavens, no! Just know what to expect, and lean on your agent: as noted, this is where they can earn their keep! [An aside: be very careful of outside suggestions. They can be well intentioned – or not – but can lead to confusion and more stress than necessary. Again: listen to your agent. He or she has the all the necessary information, and, if you hired well in the first place, has your best interest in mind.]
   
   Time is of the essence. Sounds perfunctory; it's not. It's a crucial part of the Sales Agreement. Each stage of escrow has a date attached, and both parties need to agree – in writing – if those dates are extended. Pay close attention to those dates!
   [Your agent will be there nagging you.] Otherwise you can find yourself in breach. Briefly:
   
   Loan application. If you're applying for a mortgage, you have three business days [Note: 'business days' excludes weekends and holidays] to make the actual application. This does not mean you can't change lenders later in the transaction, just that you're making a good faith effort to get the process rolling.
   
   Disclosures. Unless it's new construction or the seller is a bank or holding company, the sellers must fill out a four page disclosure form outlining any problems with the property that they're aware of. Because of past siding problems there's an additional Siding Disclosure, and if the home's older than 1978, a lead based paint disclosure. The listing agent will get them to your agent immediately. Go over them carefully: if there is anything you need explained, get the explanation! Unless you've waived it in the agreement, from the day you receive the disclosures you have a five business day revocation period in which to terminate the agreement if you see something that's unacceptable to you. You get your earnest money back, with no agreement necessary from the seller.
   
   Preliminary Title Report. Will be ordered as soon as escrow is opened. Gives information on any outstanding liens, any easements, whether the seller has clear title and is therefore able to sell. Look it over carefully with your agent!
   
   Inspection period. Can't say this too many times in too many ways: GET YOUR OWN INSPECTION. Even if it's new construction, even if a recent inspection done by someone else is available. It's the best $350-$500 you'll ever spend. Should it turn out everything's perfect, you've bought peace of mind! If you have friends with references for a good inspector, terrific; if not your agent will have a list of two or three.
   
   Unless it's modified in the agreement, the inspection period is ten business days from the date of the agreement. Note in those ten days it's necessary not only to get the inspection, but any follow up inspections (sewer scope, oil tank, pests, etc. ), any appraisals to quantify repairs of any problems that may exist, and a negotiated addendum for any remedial action necessary on the part of the seller. So it's best to schedule the inspection as early as possible.
   
   If, within the inspection period, you find the property unacceptable in its current condition, or can't reach an acceptable agreement to get repairs done, you may file an addendum stating your Unconditional Disapproval of the property, terminate the transaction and receive your earnest money back. Note: If by midnight of the tenth day of the inspection period no agreement has been reached, no notice of disapproval has been filed and no extension agreed to, the inspection period automatically sunsets and you've accepted the property as is. Watch those dates!
   
   And, do I need to say it? Listen to your agent!
   
   Appraisal. Most mortgage brokers will wait until the inspection period is over before ordering an appraisal; no sense spending the $500 or so unless you're sure the property is up to your expectations. Lenders, of course, need the appraisal to ensure the home they're lending on is worth what you're paying. Even if there are discrepancies – not often, but it happens – any differences can be negotiated with the seller.
   
   Financing. The final piece! This is where a good mortgage broker is invaluable: He or she will stay in contact with you and with your agent, keeping things moving so there's no delay in closing. You can still expect odd questions from the underwriter "Why, in 1906, did your great great grandmother not pay for that crab on the San Francisco waterfront? … Earthquake? What earthquake?" but good brokers (and agents) buffer that kind of thing.
   
   Signing. At least two or three days prior to the closing date, the lender should have packaged all the loan documents and sent them to the escrow officer. There the escrow officer will process them, ready them for signing and prepare you a preliminary closing cost estimate, the net amount you need to bring in to sign, in the form of a cashier's check. You'll also have the option of getting copies of the documents you'll be signing so you can read them in advance, and prepare any questions you may have. Then – and prepare the muscles in your hands and fingers in advance – signing! Have your agent make the appointment at least one day before closing. He or she will very likely be with you, possibly your mortgage broker, and a good escrow officer can explain in detail the three or four stacks of stuff you'll be signing. Clarify anything about which you're not sure! If all have done their homework, there should be no surprises, and it's actually a fun time; you're only hours away!
   
   Closing! Note closing is the day funds are released and the deed is recorded. The escrow officer will call your agent when each occurs; after recording, it's time to CELEBRATE!!!
   
   You own a home!
   
   Now: wasn't that fun?
   
   


5. 
   
   YES! But: Is this the last we'll talk?
   
   Not necessarily. Are you ready to sell?
   
   
   

Green, Green Update

Bless The Oregonian. When the editors get on a theme, they hammer it!

A few weeks ago it was a billion column inches devoted to the new green listings data point on our local MLS. Since then we've had green lumber and green building. This morning we have green cars on the front page and green clothing in the business section.

Again, this isn't a bad thing. Green products sell, all other factors being equal. The Prius is a popular car because it delivers great gas mileage without a great deal of sacrifice in performance, and a relatively small premium on the initial investment. Hua, the new clothing retailer, is at least saying the right thing: if the clothes aren't right – and competitive with other brands – nothing else matters. And it doesn't (though I note the article didn't contain any pictures of the actual product).

Back in the early '90s, when I was still in the shoe business, a local company came out with a line of completely recycled footwear. Special rubber for the soles, uppers of recycled something or other, even the packaging was all from recycled paper. There was enormous hype, and all the department stores bought into it. Might have worked, too, except they were manifestly unattractive, overpriced, didn't fit and fell apart.

I think the brand and the concept have been resurrected, but their website doesn't work and the only product I can find is at half price. Perhaps it's because … well, you be the judge.

All of which is the long way to update the MLS numbers: There are now 171 designated green listings. Out of 10,442.

Market Expectations...

"Wait. You're asking HOW much?????"

The Portland real estate market is in an interesting transition. Sellers’ expectations are still a little too high, Buyers’ expectations are a little too low. It’s neither the white-hot market of the last four years, nor is it anywhere close to a fire sale. We’re heading toward equilibrium; we’re not quite there yet.

Most fundamentals are good: Strong local economy, low unemployment, more people moving into the area than out, excellent interest rates. Both average and median prices continue their year over year increase, and sales are inching closer to those of a year ago: down only 7.5% in February when we’ve seen double digit decreases since last June.

On the other hand, inventories are high: a lot of new construction as a residual of the building frenzy (nearly a third of active listings), condo conversions (nearly three times more condos on the market than a year ago), sellers worried if they don’t sell now their value will go down.

And demand is down: buyers thinking that better values are coming, marginal buyers being forced out of the market because of the crack down on sub-prime lending.

Note the psychological components:

Two years ago buyers were afraid if they didn’t buy NOW!, they’d lose out, unleashing a buying frenzy; some sellers were reluctant to list, afraid that if they sold their home too soon they wouldn’t be able to find a replacement.

Now buyers are afraid that if they DO buy, they’ll…lose out; sellers are listing quickly, afraid they’ll get less if they wait.

OK. Everyone take a deeeeeeeeeeeeeep breath. The facts are these: homes properly prepared and reasonably priced are still selling, and selling well. Homes that are not, are not. Diligent buyers with attentive agents are finding what they want, at reasonable prices.

We’re heading into the active Spring season. Honest:

It’s a good time to buy. It’s a good time to sell.

Home Buying Process (5) ... Really! Sales Agreement

7. FINALLY! OK. I hired a Realtor, been pre-approved by a lender, and found a home I’d like to buy. We’re about there, right?

HAHAHAHAHAHAHAHAHAHA!!

8. Be serious!

Sorry.

There’s a good case to be made that from here on out is where the agent earns his or her commission. Now that you’ve found a home you’d like to purchase, the next step is to apply your interests to a clear, comprehensive – and ultimately acceptable – purchase and sale agreement. The standard Oregon form is seven pages, small print, and note it’s a binding contract. I assume you’ve read it through to at least get a basic understanding of what you’ll be signing?

9. Ummmmmmm…

If your agent doesn’t give you a sample copy when you first meet, ask for one! Read it through, again to get the basics. If you have any serious questions, consult an attorney; that’s something your agent usually is not.

Very basically, the main negotiating points in a sales agreement are these:

Price. You can offer whatever price you want and the offer must by law be presented to the seller. That said, though we’re in a buyer’s market, there is no fire sale. The object is to come to an agreed price – remember, the actual value of a property is the amount a seller is willing to accept and a buyer willing to pay – so offering twenty percent below list is likely to be rejected outright. (The seller has three options: accept, counter, or reject.) Though it’s ultimately your decision, listen to your Realtor! He or she will have done a market analysis and will know how to get to the price you’re comfortable paying.

Earnest Money. This is the amount deposited into escrow at the time the contract is agreed upon, later to be included as part of the down payment. It shows two things to a seller: your financial stability, and how serious you are regarding the purchase of the property. Since this is the sole remedy to the seller for a buyer having breached the terms of the contract, it’s highly unlikely, say, $1000 will be accepted on a $400,000 home. Given there are several buyer-protection clauses in the contract that protect it, usually the higher the amount the more seriously the offer will be considered.

Financial considerations. Again, you must have a pre-approval letter from a qualified mortgage broker. Beyond that, finances are what they are: 20% or more down is a sign of stability, 100% loans less so, especially with lenders tightening qualifications. That doesn’t mean they aren’t accepted – they are, all the time – but will receive more scrutiny, which may mean offering better terms in other areas. [Note you are not obligated to stick entirely to the terms written in the contract.]

Contingencies. If you have to sell your current home to qualify for buying the one on which you’re making an offer, it’s much more likely to be considered than it was a year ago, but if it’s accepted it’s usually put in a ‘bumpable’ status. That means the home stays on the market; if another suitable offer is received you’ll have a set amount of time to remove the contingency or terminate the offer (you get your earnest money back). Usually best to get at least an offer on your existing home first, or there are many loan products on the market that can help you carry both. The only caution: with the days on the market over a month longer than a year ago, there exists the possibility you’ll end up with two mortgages.

Closing and possession dates. You can make your offer much more attractive – often to the point of canceling objections to a low price – if you can accommodate the needs of the seller; your agent will have found those out before the offer is written. Sellers whose homes have been on the market for several months and are already vacant love quick closing dates; some sellers need time to pack and move, or are waiting for a home they’re building to complete.On the other hand if you have needs that have to be met, that can lead to accommodations elsewhere.

Ask your agent!

10. What about inspections? Disclosures? Right of revocation?

Next installment…

11. Oh, good. Can we have that in less than, say, a month?

Promise.

12. What's with the picture?

The door to your dream home.

13. ...

OK. I just like the colors.

Buyous Interruptus

5. So who was it?

Shannon. Love my girls! I’d sent her a check for some software she’d sent me – she works for Microsoft – and…her dog ate it. Yeti is the innocent looking dog you see to the left.

Not only that, she’d loaned a friend some money. The friend wrote a check to pay her back…Yeti ate that, too. Her friend wrote a second check.

Yep. That one, too.

Yeti is the same dog who learned to roll down my car’s back window, the better to lean out the window and bark at trucks. He’s also the only dog I know that, no matter who’s singing it and no matter what key, howls at “Me and Bobby McGee.”

I could write a book on Yeti…

6. How about writing instead about the Home Buying Process?

As soon as I stop laughing...

UPDATE: Shan emailed to remind me: The checks were in her wallet which was in her purse. He skipped over all the receipts, went straight for the checks. Reminds me of a post I need to write on predatory lenders...

Home Buying Process (5) ... Almost

1. Can we please get back to Home Buying? I’m about ready to write an offer.

Do you mind if I digress a little first?

2. …Unlike what you’ve been doing the last month?

I’ll take that as an “Of course I don’t mind.”

Kendra Hogue, editor of The Oregonian’s Sunday Homes and Rentals section, I’m sure is an exceedingly nice person. Realtors, Builders and Macy’s are The Oregonian’s last consistent revenue streams, and keeping each happy is a priority. So I’m sure it’s with that intent that she said this Sunday:

…For those of you who haven’t purchased a home before, “hiring” a Realtor to help locate a house costs you nothing.

That bothers me on several different levels:

First, it’s not entirely true. Yes, commissions are taken out of the seller’s net, and the amount of the commission is negotiated between the listing agent and the seller. But that commission comes from the funds provided by…the buyer. That’s who ultimately writes the check. The commission is factored into the home price.

Second, some of the best agents are now using an Exclusive Buyer Service Agreement, which not only protects the agent but assures the buyer of the very best representation. It states clearly the buyer is responsible for a set percentage or flat amount upon a successful sale, less any amount received from the seller. Using Kendra’s assumption, a buyer could legitimately ask “Wait…I thought you were free.”

Finally, ‘free’, practically and by definition, diminishes value. As noted elsewhere, a buyer’s agent is every bit as valuable to a buyer as a seller’s agent is to a seller. ‘Free’ implies the exchange of one warm body for another – as long as both are licensed – equals like representation. That’s emphatically not true.

Buyers: Please assume you’re paying an agent, then hire the best.

3. Weren’t you going to mention something about ‘green’ listings?

Can we please get back to Home Buying?

4. Soon. Please get the phone.

Green, Green?

Dylan Rivera wrote a piece in yesterday’s Oregonian that begs perspective. A third of the front page of the Business section, above the fold, overshadowing news that covered a 416 point drop in the DOW. The breathless headline: “Local homes database turns ‘green’” and the sub head, “Environmentally friendly information for Realtors signals good news for some buyers and sellers and starts a trend.”

Well.

Let’s start here. Yes, the RMLS did introduce a new search mechanism for ‘green’ properties, and did so without fanfare. As of today, of the 8125 active listings in the Portland Metro area, those that carry the ‘green’ label number: 17. These are split between four builders in four developments, all new construction. So far, at least, it appears ‘green’ buyers don’t have much choice.

Green marketing – please just assume the quotes – has a very spotty history. Back when the ozone layer was the crisis du jour, Advertising Age found that over 70% of those asked said they would definitely purchase more expensive dispensers over aerosol to save the environment; six months later AA went into the homes of the same people and found over 80% still using aerosol.

So if I were to speculate – and it’s just speculation because I’ve never had a buyer ask for green properties nor had a seller suggest green as a marketing strategy – is that green will have a marginal effect, making a difference only when all other things – including price, or at least savings offsets – are equal. Whatever the case, the only determining factor will be: buyers. If it’s important, they’ll let us know.

Realtors also are hoping the change will help push up prices – and commissions – for some abodes listed in their Regional Multiple Listing Service.

Even the most venal among us wouldn’t suggest a builder add cost just to jack the price to put an extra $100 in our pocket, certainly not without an underlying demand. That’s just silly.

But much more importantly (and Mr. Rivera or his sources should know this): A Realtor’s first obligation is to the fiduciary interest of his or her clients. I can’t speak for the entire Portland area, but those Realtors I work with every day take that very seriously. If the client is a seller, that means negotiating the best possible sales terms for the seller; any commission effect is ancillary. The same agent will turn around the next day and, representing a buyer, negotiate a lower price. Adding $4000 to the sale of a $400,000 home isn’t going to motivate any agent I know to vitiate his or her primary duty.

But RMLS members are allowed far more detailed searches and can input data. Realtors point to such access when arguing for their commission and services.

As I said in my initial post, Realtors spend too much time trying to hoard data, especially since so much of it can be found anyway. So as things now stand this is partly right.

But it’s also wrong. The value of a Realtor isn’t in the access to information, it’s in the ability to organize, interpret and apply that information to real world decisions. I can buy Grey’s Anatomy in any Border’s, but you’ll still find me in the doctor’s office when I have chest pain.

Finally, after his lobbying efforts failed to get the Gainesville, FL MLS to add Energy Star to its listing filters, Karl Sayles says this:

“I think they’d have trouble unloading the inventory that wasn’t Energy Star…I don’t mean to trash Realtors, but they’re just out for a buck.”

This from an Energy Star lobbyist. [He also famously said: “As consumers become more educated and familiar with all of these benefits that energy efficiency has to offer, in 5 years non-ENERGY STAR rated homes will become functionally obsolete.” Right.]

My question to Mr. Rivera is simple: if this roll-out is worth the expanded coverage, why did he have to go to Florida to get a significant – albeit gratuitously smarmy – quote?

Why was it included at all?

Sellers! It's not your market!

I’ve been touring a lot of homes the last several weeks, in all price points. Working mostly as a buyer’s agent allows me to see what impresses a buyer and, more importantly, what decidedly doesn’t. So I’m taking a break from Buying 101 to talk to sellers:

It takes three weeks longer to sell a home now than it did a year ago. Inventory, at 6.2 months, is higher than it’s been since 2002. With lots and lots from which to choose, a seller needs every advantage.

There are five factors that go into selling a home: Price; Location; Economic Environment; Condition; and Marketing. Note a listing agent has complete control only of the last: his or her greatest responsibility is to use knowledge to assess the others before any marketing takes place. If not, the old axiom applies: nothing kills a bad product faster than good advertising.

Location and Economic Environment – interest rates, local job market, etc. – are pretty much fixed, but both affect the most important consideration, the right Price. Listen to your agent, and be realistic! Twenty percent of the homes I’ve been in since the first of the year the prices are, frankly, delusional; thus selling prices 20% below the original listing price are not uncommon. In almost all those cases, the final price would have been higher if priced right from the beginning.

[I’ll cover this more in later posts, but when picking a listing agent do not pick one just because the comp was the highest, and by all means don’t pick the one that leaves the price entirely up to you.]

Condition. Unless you’re selling a fixer – and have priced it accordingly – make the obvious repairs before listing! Paint, inside and out if necessary. A few thousand dollars spent here can mean many more on the other end. Clean up the landscaping. Polish the appliances, get rid of clutter, clean carpets, get rid of clutter, clean windows in and out, get rid of clutter, deodorize pet and smoking smells, get rid of clutter: you’re selling your home, not your porcelain frog collection. If the home is already vacant – and sometimes even if it’s not – have it evaluated and staged by a professional stager. It can make all the difference, worth every penny.

Marketing. After everything else is in place and, in the real estate vernacular, your home ‘shows easily’, the agent’s responsibility becomes getting as many showings as possible. Make sure there are a full complement of photos – MLS allows eight, but individual sites allow as many as 99 – and make sure they’re good photos; pictures of empty bedrooms don't sell a lot of real estate. Virtual tours will show up not just on the MLS, but other web sites as well. Make it as easy as possible for agents to show: use a lockbox, be flexible, avoid serious restrictions. And, while buyer’s agents should not consider it a factor, make sure the buyer’s agent commission is in the norm, currently 2½ to 3 percent.

Do all this, and you’ll be a full step ahead of half the homes I’ve been in this week…

Home Buying Process (4) Selecting/Viewing Homes; Decision

1. Where’ve you been?

Sorry, busy. Love those buyers!

2. Right. May we start looking at homes now?

Soon. You’ve determined one of the two most important aspects in buying, a price you can comfortably afford. Stick to that price range. Looking at half-million dollar homes when you’re in the $300k range produces little but inflated expectations.

The second most important: location. Even if you’re not new to the area, focus on those things most important to you – schools, commute time, walking distance to shopping, crime rate, neighborhood turnover, etc – get recommendations from your agent and drive through those neighborhoods to see what feels best. Narrow it down to a few and prioritize, remembering that location also determines price. You may have to sacrifice some of one for more of the other.

3. …Now?

Not quite. Broadly prioritize needs: size, yard, bedrooms, baths. At this point don’t get too picky, otherwise you may miss something.

Your agent will have an internet search engine – either directly from the MLS or a more sophisticated map based system – that can give you current listings in the price and neighborhoods of your choice. Study them. Narrow it down to seven or eight; your agent will likely have suggestions based on conversation as well.

4. To the car??

Yep, armed with two things: patience and a notebook. If you have a camera even better, or ask your agent to shoot photos for you. Take your time, take notes, and by all means talk about what you like or don’t like about what you’re seeing. That’s part of the agent’s learning process.

Under no circumstances see more than ten homes in a day; they’ll all start looking the same. Process the notes over tea soon after you’re done.

In the meantime, a good agent will be watching you and listening to what you’re saying. After that first day a good agent can have a good enough idea that he or she can be previewing homes for you and making informed recommendations.

Then: continue as long as necessary and you’ve found the home you want, not one that will simply do.

5. How do I tell the difference?

Instinct.

6. Wow. Cryptic. Explain?

Home buying is equal parts right and left brain, intuitive and rational. I’ve seen a number of people rely too heavily on the latter, talking themselves into liking a home because it has check marks by all the requirements, but no real connection. They end up in a house, not a home, and move as soon as they get the chance.

On the other hand, too much “Oh, I just LOOOOOOOVE IT!” can lead to overlooking problems that may exist. Not good either.

Make the connection – believe me, your agent will know when you do – then rationally weigh all the contingencies. There’s nothing an agent likes to hear more than “We just love it.” at the end of a year or two.

Home Buying Process (3) Lenders; Pre-Approval

1. Why is this after finding a REALTOR®? Why can’t I find a lender first?

Of course you can find a lender first. If you’ve worked with someone you trust, or if you have a recommendation from someone you trust, by all means sit down for a consultation. The main point is you must consult with a broker and have a pre-approval letter before you look at your first house.

2. Why?

Several reasons: First, you need to know accurately how much you can afford. There are many loan products available that, depending on your credit history, might fit your situation better than a standard 30 yr fixed mortgage, thus raise your ceiling, and a good broker can give you the options.

Second, if there’s anything in your credit history that needs correcting or repair, the earlier to know the better.

And third, if you find something you like no offer will be accepted without a pre-approval letter.

3. And if I don’t know any Mortgage Brokers?

All good real estate agents have a list of people they trust to do the best for their clients, especially knowing a bad broker can be a nightmare to a transaction. Ask for two or three names.

Then go through the same process as in finding a REALTOR®. Interview, look for honesty, knowledge and dedication.

Incidentally, do not be drawn only by price. Just as with a REALTOR®, competence is critical.

4. OK. Good information. Not to change the subject, but I’ve been meaning to ask: what’s that circle R thingy?

By REALTOR? That’s a registered trademark. The term REALTOR® can only be used by members of the National Association of Realtors.

5. Is that good?

Yep.

Here Comes the Sun…It’s All Right!

In the fashion business it’s axiomatic: have the seasonal goods marked down and gone before the first shift or weather, or plan on holding them until the next year. That day, buying habits change.

It’s true in Northwest real estate as well. In late fall, with shortening days and grey, miserable skies – around mid-November – buyers begin a hibernation. Open houses by and large present a great time for realtors to do paperwork, and by mid-December many sellers have rested their listings in favor of spring and are hibernating as well.

Then…Sun! All it takes are a couple days strung together, and it’s not even necessary to be warm sun. This Sunday I hosted an open house. Scheduled from 1-3, I left just before 5:00. I stopped counting people at thirty-two – ten is a good day in winter. It was like the first day of a Nordstrom Anniversary Sale!

The phone is ringing, buyers are back actively looking and sellers are preparing their homes to list. Love the sun, love the spring!

Welcome back, Buyers; welcome back, Sellers; great to see you again!!

Home Buying Process (2): Finding a Realtor®

1. Why do I need an agent? I can find listings on the internet. And can’t I save money by dealing just with the listing agent?

With so many internet search engines yes, you could probably find a home, though a Realtor can help you find it faster and avoid finding the wrong one.

But finding a home is only the first part of a long process where the benefits of representation really pay off. (To follow.) Note Buyer Agency wasn’t codified into Oregon law until 1994, and was done so then because so much of a transaction leaned to the side of the seller. Get representation!

As to saving money: not likely. Yes, some listing agents will drop their commission if they represent both the buyer and seller, but there are three parties who want part of that savings: The buyer (you), the seller and the agent. The agent is usually the big winner, especially because any savings a buyer may glean could possibly have been negotiated by someone representing only the buyer’s interest.

Incidentally, most good agents I know will represent both buyer and seller (dual agency) only in perfect circumstances, say a mother selling to her son. There are just too many legal pitfalls in representing one party in whose interest it is to get the highest possible price and another whose interest is paying the lowest.

Can’t say it often enough: Get representation!

[Side bar: A number of internet based companies have introduced models which, in return for using their services, part of the buyer’s agent commission is rebated to the buyer. That’s illegal under Oregon law.]

2. OK, ok, ok! How?

Interview. Remember an agent is being paid for his or her services, and in a very real sense it’s the buyer that does the paying because it’s built into the price of the property. You deserve the best.

Now I suppose I should offer a litany of appropriate questions – here are some good ones (ht Rain City Guide) – but that misses what should the point of the interview: Connect.

I’m a big believer in intuition. If you trust it, you can tell more about a person in ten minutes face-to-face than you can from a hundred emailed well rehearsed answers to standard questions. If you have to be talked into liking someone, it’s probably the wrong person.

You’re looking for three things: Honesty, knowledge, and dedication.

Honesty: Agents are bound by law and ethics to customer loyalty, which broadly means your needs supersede any needs of the agent. Most agents are intensely faithful to that; some, though, will walk you through home with higher commissions and bonuses first. You must be able to trust!

Knowledge is more than just knowing the market and the idiosyncrasies of a transaction; it’s knowing people. Believe it or not, you may not know exactly what you want. Just by watching, a good agent can narrow the focus after no more than a dozen homes, and often can tell you’ve found the right home even before you do! So concentrate not just on the answers you’re getting to questions, but the questions being asked of you.

Dedication. A good buyer’s agent rarely works with more than four or five active (i.e. ready to buy) buyers at a time; more than that stretches the ability to properly serve each. Make sure the agent will be there throughout the process: a great deal of the work comes after the sale agreement is signed!

3. Anything else?

Yes. Loyalty works both ways. Find a good agent and stick with that agent. Many will ask you to sign a Buyer’s Agent Agreement, as much a guarantee to you that you’ll be given full attention as any agent benefit. Good agents will always ask “Are you already working with an agent?” in the first thirty seconds of a conversation, and the absolutely most certain way of diluting the quality of your representation is to work with several agents simultaneously. Loyalty pays!