Geno Petro has passed away. He was one of the best writers to work with us here over the years – and I have the proof.
Cura ut valeas, frater. Requiescat in pacem.
You know how it is. The NAR had to get itself sued to death first. Inasmuch as nothing is actually changing – adamantly, nothing – that works out to be a decent deal. Rotting giants fall hard, but sic semper tyrannosauris, as we have said all along.
Here’s what’s what: Starting in 2006 or so, BloodhoundBlog started debating ways to make the contradictions of our convoluted commission scheme more transparent and fairer to both buyers and sellers.
I ended up arguing for an idea I called The Divorced Real Estate Commission. If you click the link, you can read an eBook I wrote on the subject. Or you could just read the news from FannieMae and FreddieMac, who are this week implementing the idea I came up with seventeen years ago.
Seventeen years… And how many billions will the NAR have pissed away fighting a rear-guard action to get to where BloodhoundBlog was seventeen years ago…?
This amounts to a brag on BloodhoundBlog’s part. Out of seventy-ish contributors, only Brian Brady and I have written here lately – not very much and not very lately. Our whole server gets hammered when I blog here too frequently. But the blog of the dawgs endures, as witness. Because there is ALWAYS something to howl about.
How bad is your listing agent?
I’ve spent much of this month documenting how ineptly Redfin.com lists homes for sale. It wasn’t something I set out to do. I’ve been dour about them since I discovered CEO Glenn Kelman’s racist staffing policies, but I had never paid any attention to them with regard to real estate. They have mattered nothing to my business: I’ve never had a Redfin showing, never shown a Redfin listing.
But I was simply amazed by what I found. Just as with iBuying and the carrying costs of owning non-producing housing, every experienced broker knew that salaried agents would not produce. But even so, I was unprepared for what I found: Multiple bone-headed deal-killing errors in each listing, with those errors repeated in listing after listing. Since the MLS listing is the gatekeeper to showing and every succeeding step in the purchase process, if the listing repels the buyer, the home cannot sell.
And they don’t. Many listings Close over 90 days, some over 180. They have a lot of Cancelled and Expired listings, as well, with many of those at huge DOMs. Strangely, a significant number of these sellers relist. Having already lost six months and 20% of the property’s value, why not truly go for broke?
Oh. Nevermind.
And that would be the real problem. Redfin makes a point of not understanding real estate, so their plan is to recruit an agent who no longer exists – the top producer. The team leaders and rainmakers who actually sell homes are working at 95% to 100% splits – but the Read more
by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
It’s no secret that I am a Tom Brady fan. I admire him because of his commitment to excellence and because he competes hard. His off-field conditioning is maniacal but, at 45 years old, he has taught the next generation of NFL greats that self-care is what leads to longevity in the highly physical game of professional football. Brady prepares the way he does to win, and Brady wins.
As much as Brady wins, like it or not, not winning is a part of competing. He said as much yesterday, on his podcast:
“It’s interesting because you would think, ‘Oh, well, why is he still playing?’ Because all you want to do is win, and that’s all sports should be about is winning. And I agree it should be about winning, but it’s also, I’m looking at it like, no, what am I learning? What am I learning from putting a similar amount of energy in over the last couple years and not winning? What is that teaching me?” Brady said Monday on his SiriusXM podcast, “Let’s Go!”
This was the money line:
“You know, why should we feel like we’re just entitled to win all the time? We’re not. That’s not what life’s about.”
I know you have heard this Nelson Mandela quote, “I never lose; I either win or learn”. It may be trite but it’s true. Don’t use the word “lose”, ever again, when talking about business opportunities.
I have been self-employed or selling on commission since 1992. I am not kidding when I say that, in the past 30 years, I have never received a biweekly or monthly paycheck. I have been issued 1099 forms, each January, since 1997. It hasn’t always been easy but I have paid health insurance, paid car insurance, sent my daughter to private schools from Kindergarten through her senior year in college, and maintained two houses: one in San Diego and one in my present state of residence, Florida. I am bragging a bit but I am bragging to illustrate this point;
I don’t always win.
In fact, I win less engagements than I don’t win but, whether I win or Read more
by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
If you are following my journey, we moved to Tampa/St Pete FL last year. We still have a home in San Diego but spend most of the year in Florida. The reasons are plentiful but, when COVID lockdowns hit, it gave me a chance to start a new “product line” (commercial real estate loans) in a new location. The move isn’t without challenges. Although I can lend nationwide, most folks want to work with a local lender unless they have a prior personal relationship.
How did I parachute into Florida and build up a profitable mortgage brokerage business in 15 months?
1- I worked my inactive client database.
2- I added Florida agents, whom I met at industry happy hours, to my weekly email list
3- I try call 5 inactive clients and 5 agents daily. Few people answer their phones now so I usually end up leaving messages.
Last year started off really well. Our Florida purchase volume was about half of our California purchase volume. My goal for 2022 was to have our Florida volume to exceed of our California volume. 2022 was shaping up well until St Patrick’s Day-volume got weaker through Memorial Day, then even weaker by Labor Day, then it damned near dried up through now (Thanksgiving).
A month ago, I decided to try something different. Calling agents and inactive clients is still a daily discipline but it gets depressing when few calls are answered. I decided to do some “in-person canvassing”, one day each week, to meet business owners in and around St Petersburg. Pinellas County is a hodgepodge of independent businesses so I decided to make a goal of having 25 conversations each day, each time I went out.
First, I went to the charming seaside village of Dunedin. The local Chamber of Commerce gave me a map of 145 businesses within one square mile. I met:
-8 real estate agents,
-6 bar/pub/restaurant owners, and
-13 shop owners.
16 of those people owned a home and 2 owned investment properties. 12 people gave me permission to email them a bi-weekly newsletter. 4 of them said they would like to own investment properties.
Last week, I visited Read more
“If a slacker employee was mysteriously transformed into a house for sale…”
“What happens when the market turns?”
It would be charitable to argue that the iBuyers actually thought this mishegoss would work. Perhaps that’s so: They’re flippers, except they are very bad at every part of the flipping process. And they’re pawnbrokers – buyers of last resort – except they buy first, not last, paying top-dollar for the honor, then cling to their assets like precious prodigal sons.
Brokering real estate works for almost nobody, but it only works because the broker does not own the asset. Owning non-producing assets as “investments” is insane. It can only work if you buy at deep, deep discounts – like flippers and pawnbrokers do, and like OpenDoor apparently cannot do.
So: Closed Sale Price compared to Original List Price, on average: April -$9,537, May -$16,935, June -$31,698.
Those are from Phoenix. Perhaps they’re doing better in other cities, but this is their primal market and ground zero for all things iBuyer. I think we’re seeing how they work.
The trend on Days-on-Market is not great, and I would expect it to get a lot worse: April 41, May 40, June 48. By June the market had well and truly turned, but in April they should have been moving everything in single-digit DOMs. That they were not – and that they score so few winners in pricing, amidst so many huge losers – tells you how they will do, going forward.
The problem, as I have been saying for years, is that even if they bought right, which they don’t, and even if they rehabbed and marketed right, which they don’t, they would still own the “investments” far too long, resulting in killer carrying costs.
The delusion in iBuying emerged from two ploys from the Federal government, suppressing interest rates for home-buyers and also for Wall Street. Yippee! Practically-free money to buy assets that seem only to go up in price…
Ahem.
Imputed losses per “investment” will get uglier by the day – Read more
Sticks and stones might make a home, but money makes all the difference…
This is all Trump, so you know. Four or five years ago, investors decided that not only would right about now be a good time for new housing, the times would still be good for cashing in on opportunities planned for five years out.
You may think them unwise, but risk is what makes horse races. Moreover, had Trump retained the presidency, the bets would have paid off handsomely.
Things may be different where you are. It’s very easy to build in Arizona, compared to other places. Even so, you have your Trump-promise investments – in sticks, in stone, in steel – and you will have the opportunity to see how things work out locally.
I am beyond dour, for what that’s worth. We are on the cusp of global famine, and how tight belts will get in America remains to be seen. From borrower activity, we know the market has well and truly turned, and yet I suspect people still in the market are underestimating how bad things will get.
Will prices go down? Perhaps, but not necessarily. Since Reagan gifted us with Volker, we’ve treated housing prices as a bellwether to market trends – in real estate and everywhere. That will be a lot less useful as the market tries to find dry land, when it is awash in funds that are 80% newly-counterfeited. The tale going forward will be told by Days-on-Market – from single- to double- to triple-digits.
And yet: Isn’t there a housing shortage? There is here. How about Seattle? No one there will tell us, but the Great George Floyd Migration created housing shortages mostly where bus lines don’t run, leaving locales well-served by rioter-movers hugely vacant. We can expect rent-seekers to fill the most-vacant of that housing with Fiasco Joe’s illegal immigrants – Read more
by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
The housing market is “stuck”. Higher mortgage rates and the fear of higher property taxes cause Boomers and Millennials to “hunker down” rather than move to new homes. Reverse mortgages might offer a solution to this problem. Today, 2 out of 3 Baby Boomers are rejecting retirement communities and “aging in place”:
Today, 66% of this population report that they plan to age in place. Little changed from 2016, when 63% said the same. Given their reported financial gains in the past five years, however, they may be more equipped to do so.
When asked when they expect to move next, 27% feel confident they would move again, while 36% believe they will not move and 37% simply don’t know. These data suggest this population is in no rush to leave their current homes.
Regardless of their plans to move or age in place, 66% of survey respondents say they expect their home to need some degree of renovations to make the space livable for the long term if they were to age in place. Between personal savings and longer-term retirement and investment accounts, those who think they would need renovations to age in place say they are confident they could afford them.
This is both a problem and opportunity for real estate agents and brokers. Boomers own many of the “move-up” homes their children covet but can’t afford. Millennials might love to sell their $500,000 homes, and trade up to a $700,000 home but are locked in to sub 3% mortgage rates in a 5.5% mortgage rate environment. Let me break down the sticker shock the millennials are facing:
Millennial family buys a home for $350K, in 2016, with a 4.75% FHA mortgage rate and a monthly PITI of $2400. In 2021, they refinanced that mortgage to a 2.75% conventional loan with a monthly PITI of $1700, retaining over $200K in equity (which could be used for a down payment on a $700,000 home. There are two problems today: that $700,000 home is now $800,000 and mortgage rates are at 5.5%. If they sold their smaller homes, used their home equity as a down Read more
by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
Zillow “creates” digital home valuations and The Fed “creates” digital currency so it’s not like we are dealing with credible institutions BUT:
The Dallas Fed is worried that housing is overvalued.
Our evidence points to abnormal U.S. housing market behavior for the first time since the boom of the early 2000s. Reasons for concern are clear in certain economic indicators—the price-to-rent ratio, in particular, and the price-to-income ratio—which show signs that 2021 house prices appear increasingly out of step with fundamentals.
Zillow predicts continued housing price appreciation
No, and in fact, the expectation of another crash could contribute to keeping homes so unaffordable. Builders have been firing on all cylinders, and with more homes under construction than any time since 1973, they understandably feel exposed in the event of a housing downturn. If they trim their construction plans out of caution, we will miss out on one of the best hopes we have for net new inventory on the market, and the inventory crunch that’s helped push prices up will persist for longer than expected.
Pick your poison but keep these two things in mind: The Fed created this housing “boom” and Zillow executives aren’t practicing what its economists are preaching
by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
Southern California, agents are telling me that homebuyer enthusiasm has dropped quickly. More homes are on caravan and some are starting to reduce listing prices to get the home sold. Tampa Bay area agents are whispering the same. And while the US Home Price Index rose 2%, year over year, we see price reductions in over 30% of the cities across the country.
This is no surprise to me. Mortgage rates doubled in the past 6 months with a big move upwards in the past 60 days. That, combined with the rapid increase in home prices since the pandemic started has severely impacted housing affordability. With less buyers buying, and sellers looking for unrealistic prices, agents are pleading with sellers to drop their listing price. You can offer your seller a couple of options BEFORE you drop that price:
1- If the home is secured with a low-interest VA or FHA mortgage, you can highlight that those loans are assumable in the marketing remarks. This Safety Harbor listing offers an assumable loan, at 2.25%–half of what most lenders are offer today.
2- Offering a seller-buydown of the mortgage rate could save the seller some money. I run through the numbers of a seller-buydown in this video. This is a great response to a low offer.
I will be hosting a Realtor Happy Hour, in St Pete Beach, FL, on Thursday May 12, 2022.
I am hosting an Agents Helping Agents event, in Tampa, FL, on Wednesday, May 18, 2022.
Stay tuned if you are in San Diego. I will be hosting an Agents Helping Agents event in mid June.
by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
If you know me, you know that I am a fan of the Millionaire Real Estate Agent book by Gary Keller. His high touch marketing, to people you know, is a proven way to generate seller leads. Why aren’t more people deploying the 36-touch strategy then?
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Three reasons why Realtors aren’t doing this are:
1- it’s hard
2- it’s onerous
3- call reluctance
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Let’s face it– you probably don’t have a formal “database” which you nourish and grow and it’s probably because of one or two of those three reasons. This is what I did:
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I set up a Homebot account for my past clients and encouraged my Realtor partners to set up one for their database (Realtors need to be sponsored by a lender so ask me how you can do this). Mega San Diego/Phoenix real estate agent John Gluch shows you how he uses Homebot in this 6-minute video.
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Then…do two things:
1- call 5 homeowners daily who aren’t in your Homebot database and get them entered
2- call everyone who opens the sticky Homebot monthly emails and ask them for a referral.
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If you do this, you will have close to 1000 homeowners in your database and will have asked for some 500 referrals in the next year.
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It’s simple but not easy. If you want to make the “simple” easier, send me a message and I will get you a demonstration of Homebot, scripts for the calls, and sponsor you.
by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
Most buyers find themselves in a multiple offer situation in today’s market. While the highest price often wins the home, other factors come into play–some buyers are waiving appraisal, loan, and even inspection contingencies. Selling agents who want to protect their buyers, while affording them an “edge” against competing offers, are encouraging listing agents to contact the lender directly.
We think you can be more proactive than that. Here are five tips for Realtors about how to use a great lender to get your offer accepted:
1- Use a reputable mortgage broker, not a lender. (see why here) Both the originator and the mortgage company should have review pages, whether they are on Yelp, LinkedIn, or Lending Tree.
2- Use a loan officer with exceptional communication skills. If you want to test those skills, call him/her. If he or she doesn’t answer the phone, leave a voicemail and send a brief text. If you don’t get a text back or return call within an hour, you have the wrong guy or gal. That includes weekends. YOU work on weekends; so should loan officers. You should expect the originator to be responsive, Monday through Friday, 830AM to 7PM and 12PM to 5PM on Saturdays and Sundays
3- Make sure your buyer is pre-approved rather than pre-qualified. This means that the credit has been pulled, income and assets were analyzed and verified, and the file has DU approval findings in it. The pre-approval letter should address all of those issues in the body of the letter.
4- Have the originator call the listing agent and offer to do the following: speak with an originator the listing agent trusts, to review the loan approval or, if desired, speak directly to the seller. The originator should speak frankly and honestly about the contingency removals iin the contract and explain which ones might be difficult to meet. Be wary of the originator who makes promises which he/she knows can’t be kept. Underwriting approval time is easily determined but the originator has little to no control over the appraiser.
5- Have a plan to deal with a low appraisal and have the originator Read more
by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
I don’t need to tell you that housing inventory is tight. Buyer agents are having a hard time earning a living today while listing agents are finding more and more competition.
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One thing you can do is to prospect out-of-state investors and offer one free service for them– comparable rent analysis. Rents are rapidly rising and most investors aren’t keeping up with the market.
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Many out-of-state investors are former residents; they lived here, moved to another state, and hold the property as an investment. While some Realtors are focused on telling homeowners and investors what their property is worth, hardly any are speaking with investors about what they could be earning from their home.
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I subscribe to two services to help me offer my expertise to investors:
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Rentometer offers a quick, easy, report, which you can generate with your branding, showing the comparable rents for the property. It costs less than $100 annually.
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A more proactive approach is to subscribe to Homebot. Homebot keeps you in touch with past clients and prospects by sending them a monthly homeowners digest, showing them data on property valuation, rent estimates, AirBnB analysis, potential homeowners equity, possible move-up potential, and a whole bunch more. It’s VERY sticky– My Homebot email open rate is north of 70%. Homebot offers real estate agents a free version and the full service costs about $25/month. You must be sponsored by a lender to subscribe to the free or upgraded version so, if you want to see how it works, just hit reply and ask me to sponsor you.
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Out-of-state investors have made money on their property and may want to sell for two reasons: they want out real estate as an investment OR they want to invest in another area with a higher capitalization rate. You can grab their attention by offering something other agents won’t offer– a comparable rental analysis. After you perform the analysis, you can keep that data, and your name in front of them, every single month. That is going to earn YOU more listings
by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
Are you representing buyers right now? It’s hard…REALLY hard right now. You show 8-10 homes on the weekend, your buyers get excited about one of those homes, you make an offer on Sunday night, a seller multiple counter-offer comes out Monday night, your buyer offers a price which is above their comfort zone on Tuesday, and they find out Wednesday that they didn’t get the home.
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Rinse and repeat. For weeks.
Rinse and repeat. For weeks.
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Maybe the buyers get more aggressive and ultimately get an offer accepted but often, they just give up and say “it’s too hard right now”. Even worse, YOU give up.
Maybe the buyers get more aggressive and ultimately get an offer accepted but often, they just give up and say “it’s too hard right now”. Even worse, YOU give up.
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Realtor Cameron Hodge is one of my favorite new agents. He is licensed in both CA And FL and he hustles hard. I often finance his buyers and we were working with a zero-down VA buyer. He showed the buyers homes for three weeks, made 3-4 offers, and lost out.
Realtor Cameron Hodge is one of my favorite new agents. He is licensed in both CA And FL and he hustles hard. I often finance his buyers and we were working with a zero-down VA buyer. He showed the buyers homes for three weeks, made 3-4 offers, and lost out.
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The buyer gave up but Cameron didn’t give up on him.
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Cameron drove the neighborhoods looking for FSBO signs…and he found one.. right around the corner from a home they just lost to a higher bidder. Cameron banged on the door, spoke with the seller, scheduled a buyer tour…and tied the home up, with an accepted offer, a day BEFORE the buyer toured the home.
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Right before the offer was accepted, another offer came in but Cameron asked the seller how his buyer could win the deal. He discovered that the seller didn’t want to perform what amounted to a couple thousand dollar repair. The buyer assumed that responsibility and entered escrow.
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Debra and I funded the loan for this buyer. The house appraised HIGHER than the contract price, the repair wasn’t required by the appraiser (but still needs to be done), and the transaction closed about two weeks ago.
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Don’t believe me. Let Cameron tell you all about it in this video (starts at 2:55 and ends at 10:00)
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If you subscribe to my weekly emails, you have heard how worried I am about the future of real estate brokerage, I implored you to shift your efforts to listings. To do that, you are going to have to talk Read more
My apologies for not writing here lately. I need the server for business, but when I write here I get hammered from without and then lose days proving that I am not implausibly engaged in digital self-harm.
In any case: You can see me defending the headline here.