Tuesday, January 30, 2007

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?


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!!

Thursday, January 25, 2007

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!

Wednesday, January 24, 2007

It IS for the Children!

Before we go on to serious stuff: aren't these the absolutely most adorable kids ever??

This is what I love about the real estate business. My own two girls, for whom I live, are too busy with their careers - Shannon's an executive assistant at Microsoft, Kelly's a third year med student at the University of Washington - to do the unselfish thing and present their father with grandchildren.

But in this business I meet wonderful people, customers become friends, and - voila! - I'm a grandfather on loan! I'm blessed...

The Home Buying Process

Whenever I first meet with a buyer or a seller, I put together a “What’s going to happen next” list and we spend an hour or so discussing it. It’s particularly helpful for first time buyers, but even those seasoned in real estate like to be reminded so there are no surprises. Knowing what’s coming is a good first way to ease anxiety in what can be a stressful process.

Someone suggested putting it all in writing, available for reference. (Who am I to argue?) While others have tackled the issue (see here, for instance), Oregon has its own set of rules and I have my own set of biases. So I’ll spend the next few days, first for buyers then the differences for sellers, elaborating on each of these:

1. Choosing a Realtor; Consultation.

2. Pre-qualification with Lender.

3. Selecting/Viewing Homes. Decision.

4. Writing the Earnest Money Agreement.

5. Satisfying Contract Conditions (Escrow).

6. Signing/Closing.

7. Possession!!

As always, comments welcome!

Wednesday, January 17, 2007

December Update: Good News!

When discussing market stats, this caveat:

The value of a home is exactly that price a seller will accept and a buyer will pay.

National stats aren’t Portland Metro stats, which aren’t neighborhood stats, which aren’t an absolute predictor of what a home you’re selling or buying is worth. Consult your realtor!

That said, hot off the press: Much better than I’d predicted. These are all for the Portland Metro area:

1. Closed sales (units) down 16.4%, new listings up 8.3%.

2. Inventory 4.5 months, down from 5.6 in November, a standard seasonal drop. Up from December a year ago, 2.2 months.

3. As noted, average price up for the year 14.1%, median price up 13.9%

4. But the best news: Pending sales, which compress the market closer to real-time, were UP, 0.2%. That’s a small number, yes, but it’s the first year over year increase since October, 2005.

It looks every bit that what we anticipated is in fact happening: Sellers’ prices are falling into line with buyers’ expectations. Homes continue healthy appreciation, but not at the insane rate of 2005. We have a relatively stable market.

Good time to sell, good time to buy!

Tuesday, January 16, 2007

Tiiiiiiiime, is on my side (Yes it is...)

I went to a time management seminar not long after I changed my career to real estate (now beginning my third year). Excellent speaker, good suggestions, except: “Successful agents spend 90% of their time prospecting for new clients.”

Waidaminute. If I’m spending 90% of my time selling myself to new clients, what, exactly, am I selling?? Granted the value of marketing, differentiation, and contacts, if I include the time I’m spending typing this and all other posts I still wouldn’t hit 50%. 90%????? Would I go to a surgeon who spends 10% of his time practicing his specialty?

[I’ve met a few who take this to heart. Enormous effort is spent on perfecting listing presentations, overcoming objections, learning to say what people want to hear. But they’re like the car-chasing dog: excellent at the chase, but no idea what to do with the catch. Listing in hand, they move on to the next presentation.]

My approach has always been simple: Take very, very, very good care of the customer. All else follows.

So how do I take good care of customers if I’m busy looking for new customers?

The answer is in the form of a Phil Knight quote:

“Yes, of course Nike is a marketing company, but our product is our number one marketing tool.”

A realtor’s product – and it’s a valuable product – is service. If it’s possible to put the time providing that service into the prospecting column, voila! 90% seems reasonable!

For the record, that’s exactly what good agents do.

I feel so much better…

Global cooling! Global cooling!

The best laid plans…

Tuesday is realtor tour day, usually preceded by an office meeting, ours this morning was – is? – on condo conversions. In any event, four wheel drive notwithstanding, I won’t be there since I live on a hill in West Linn, the access road to which tracks at roughly 90º and closes when it rains. Open houses will be tough with the kids home, Portland Public Schools this time wisely waiting to close until after the students were already in class.

And I’m thinking: there are agents out there so precise on their scheduling that they leave voicemail messages like “Your call is very important to me. Please leave a message. I’ll be returning calls between 4:00pm and 5:00pm on the Tuesday following the spring equinox.” Would not want to be them today.

I’ll just stay here and write about the value of time management.

After another cup of coffee…

Friday, January 12, 2007

Downtown Lake Oswego, OR, USA

Sigh. Another drab, grey winter day in the Pacific Northwest.

Just why would anyone want to live here?

Thursday, January 11, 2007

Stats dressed up as facts...

As noted earlier, the stats show, for the Lake Oswego/West Linn market, a December drop in both the average (down 5%) and median (down 4%) price of housing, the first time this has happened in at least two years. Quelle horreur!!

Ah, but chill. Last year condos represented 14% of the closed sales, this year 25%. A flood of condos hit the market – in fact the entire Portland area – and their lower price point brought the aggregate down. With the exception of three bedroom single family homes, which were essentially even, all categories, including condos, were up substantially over 2005…

Timing in life...

I read The Oregonian, though if the publisher keeps reducing newsprint it’s going to eventually fit on the bathroom roll.

But its bane – and the bane of all print media – is timeliness. In the twenty four hour cable/internet news cycle, by the time the paper hits the porch it’s already passé. It has to rely on features and habit to keep the readership up – something that’s not happening, for a number of reasons.

Real estate market news, though, is even less timely, so should be digested carefully and with an eye to the present.

Consider: sometime in the next week an item – on A1 or the front page of the Business Section – will highlight the December MLS report. (Listings up, sales down, but median and average prices up over December ’05 for the metro area, all expected.) Note, though, that those stats are for closed sales for the month, sales that actually entered escrow in late October and November, thus reflecting a market up to ninety days old!

Ninety days ago listing prices were dropping rapidly because sellers wanted to be out by the end of the year, and buyers were waiting because they were sure the prices were going to drop even more.

That’s not the case now: Sellers who’ve held on this long are holding price until the Spring rush – which usually begins the middle to the end of January – and investors are already coming back into the market. These facts won’t be reflected in The Oregonian until March or April, when buyers will likely be facing higher prices!

It’s the customer, ya’ hear, the CUSTOMER!

[OK. And the children. If politicians can use it, so can I.]

There are two fundamental models on which to build a business. The first stresses decisions based on income and profit, with the assumption that the natural extension will be doing what’s right for the customer. By far the most common.

The second stresses making decisions based on what’s right for the customer, with the assumption that the natural extension will be income and profit.

I got my formative business education at Nordstrom in the late sixties and seventies, when they were just beginning to explode on the national scene (in a recession). The employee handbook read “Use your own best judgment at all times.” in its entirety, and fledgling buyers were given million dollar budgets with the instruction “Buy what the customer wants.” Markups were capped at a maximum 52% to ensure value, and in the culture “Customer” was a noun only in the sense that “God” is a noun to the world’s faithful.

Can you guess in which model this blog believes?

In the rapidly changing business of real estate the industry spends a little too much time protecting the status quo, as opposed to embracing new technologies and adapting those that serve our customer. Rather than reacting negatively per se against anything that looks like it might jeopardize our business – whether it’s Redfin or Zillow or whatever – the pertinent questions are: Will it successfully serve our customers? If not, why not? And, if so, can we find some way to serve our customers even better?

So that will be this blog’s constant theme: The Customer.

And, of course, the children.

Tuesday, January 9, 2007


Real estate is changing. A lot. Buyers and sellers have more access to more information more quickly than most agents did ten years ago. Over seventy percent of buyers begin looking on the internet. Most major brokerages are setting up extensive internet search engines, and some internet search engines are getting into the brick and mortar brokerage business. Limited service discount brokerages are filling a need (much more on this in later posts), Zillow.com, though still basically a parlor game, is showing further potential by taking free listings from agents nationally, and GoogleEarth can get you an overhead snapshot of pretty much any property anywhere, in seconds.

And 2006 saw the explosion of blogs, now nearly 50 million. Leaving aside the forty nine million built on the MySpace narcissism model, a significant few are devoted to real estate, some excellent institutional, some excellent local, but most merely an extension of an agent’s web site, thus personal promotion with daily links to interest rates. Yawn.

That’s not this blog. The hope is not only to disseminate accurate, timely market information – a subsequent post will deal with the fact that the information you read in, say, The Oregonian is already sixty to ninety days old – but how to process that information. [Yes, the average price of closed sales in the Lake Oswego/West Linn area dropped in year over year comparison in December – the first time in at least two years – but…why? Anomaly or trend?]

We’ll also tackle the political: could the drop in Multnomah County population – compared to the substantial increase in the surrounding three counties – have anything to do with a nutty County Commission? How does that affect home prices?

The requisite disclaimer: We’re free with opinion, and are happy to argue a case if we’re right or admit a mistake if we’re wrong. (Comments, pro and con, welcome.)

But the opinions are ours, and ours alone.