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Month: February 2007 (page 5 of 7)

February 9, 2007

Sellers: Ready for cherry-picking time?

by

Suburban Phoenix Real Estate Broker

Author website

This is me in today’s Arizona Republic (permanent link).

 
Sellers: Ready for cherry-picking time?

We can’t grow cherry trees in the desert, but it’s cherry-picking time in the Phoenix real estate market.

Why? Because even though the buyers seem to be coming out in normal numbers, there is still a large surplus of inventory for sale.

The implication? Buyers are going to shop for the best overall value — price, preparation, presentation. In other words, they’re going to pick the cherries and leave the rest.

From the buyer’s agent’s side of the transaction, we’re going to look at a lot of houses. If buyers have a very tight set of criteria for their home search, normally they might have four or six or eight choices on their short list of candidates. In this market, the short list of possibly acceptable homes might run to 10 or 20 houses.

One would think that would make it easier to choose, but, in fact, no one house will have everything buyers might want. They can end up with a short-short list of homes that might work, each one of which falls slightly short of abstract perfection.

The consequence can be analysis paralysis, the inability to make a decisive choice among two or three cherry-picked homes.

But what happens to all the others?

From the seller’s point of view, the frustration can be huge: “My home is showing — finally. Why isn’t it selling?”

If the home isn’t a cherry waiting to be picked, or if the price is not very aggressive, the marketing effort might be hopeless. If buyers are dithering over two nearly perfect choices, then the other 18 houses they looked at are already out of the running.

But even that perfect cherry of a home — priced right, staged beautifully and in perfect repair, broadly marketed — can languish on the market. Your home can be the second choice again and again before some buyer falls deeply in love.

In the long run, things will settle down. In the nearer term, if you want your home sold, make sure it is the cherry buyers will want most to pick.

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February 9, 2007

What if Redfin gave a PR offensive and nobody came?

by

Suburban Phoenix Real Estate Broker

Author website

We pulled out all the stops for Redfin.com’s announcement yesterday because we thought it was important news. Such insiders we are, like Obscure Sports Quarterly subscribers glued to ESPN-8 for the Women’s Curling Semi-Finals. On and off all morning, I combed Google and Technorati for news, linking to what I found. Bottom line: Big yawn.

Redfin employee Matt Goyer provides a similar rundown, catching a few that I missed. Goyer also does the kind of stupid Realty.bot math trick that we have learned to expect from fawning news coverage of stupid Realty.bots: In adding three agents, Redfin.com grew by 340%. No, the number of MLS listings on its stupid Realty.bot grew by 340%. Redfin grew its head-count and its burn rate.

The only truly amazingly stupid math I saw, though, was at The Real Estate Economy, which cannot tell an apple from an orange, but which knows they must be equal if there are a million of them:

When Redfin gets up to six cities, it should carry a total of about a million listings on any given day, roughly the same that rival Trulia currently stocks.

It would take an hour to sort out every idiocy in that one sentence, and that may be the actual problem: The Realty.bot revolution is being fomented by geeks who can’t do the math and is being heralded by dinks who can’t think at all.

Marlow Harris, by pointed contrast, shows us what can be done with a fully-functioning mind and an insider’s insight:

One of the problems I have with Redfin is their continual commoditization of the bad-boy stance, their claim of being the outsider, the renegade ready to fight against The Man, ready to defend their clients against the Real Estate Industrial Complex, when in reality the business is made up of hundreds of thousands of individuals. There’s no cartel. There are thousands of little real estate offices all across the U.S., with 100’s of MLS’s, each with their own rules. Redfin has co-opted the power of dissent by appropriating the language and symbolism of non-conformist youth and tech/geek culture. By inserting themselves into the real estate equation, Read more

February 8, 2007

Is Your Broker Profitable?- Traditional Brokerage

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Have you ever analyzed the business model your broker has? Try to run the numbers sometime and see just how much profit the owners(s) of your real estate brokerage really earn. I learned a lot about running a mortgage brokerage and real estate brokerage from 1999-2002. I’ve owned both and was successful with the former and a walking disaster with the latter.

Here is the deep, dark truth about traditional real estate brokerage as a business; it’s just not that profitable in its purest sense of practice unless (a) the broker produces (which brings up a whole host of issues) or (b) the brokerage is really HUGE. Let’s analyze the typical medium-sized brokerage (25 producers) in a typical American city ($250,000 median value).

There are A, B, and C agents. There will be five “A” agents who close 20 transactions per year or $5,000,000. Assume they average a fee of $7,500 per transaction. Each producer closes $150,000 in gross commission income (GCI). These producers generally command a commission split of 90%. This means that their gross contribution to the brokerage is $750 per transaction or $15,000 per agent annually. This translates to an aggregate GCI for “A” agents of $75,000.

There will be five “B” agents who close 10 transactions per year or $2,500,000. The average GCI per producer is $75,000. Now, they might command as little as a 80% commission split so the aggregate GCI translates to $75,500. We’re up to $150,000.

The rest are “C” agents who close an average of just 3 transactions per year. They will receive a commission split of 50%. So the aggregate GCI to the company is $168,750. Now we have total revenues to the brokerage of $318,750.

Let’s analyze the annual expenses. Receptionist, operations assistant, and sales manager salaries will total $130,000. We gross that number up 115% to include payroll taxes and benefits for a total of $149,500. This is a traditional model so you should figure on $12,000 for advertising. Throw in the rent and facilities charges of $75,000 for a 2000 sq. ft. office, $12,000 for supplies and $12,000 for Read more

February 8, 2007

Lucky or Consistent(ly Bad)?

by

Realtor, Associate Broker

Author website

And if Redfin’s trip to SoCal wasn’t enough of a distraction today, Zillow issued their Quarterly Home Value reports for 2006. Alas, so much “material” and so little time.

You can see their “Zindex’s” for 75 metro area both on their website and at their blog. I begin by stating the obvious; their median “home values” are based on their own Zestimates, which agents largely agree are (sometimes significantly) flawed. Like a bad wreck, I had to look however.

Surprisingly, Zillow’s quarter-over-quarter and year-over-year numbers for San Diego and its various neighborhoods are not far off compared to recorded sale price changes. I guess when you are talking averages, you can be consistently bad or consistently good, so long as you are consistent.

Edited to add a thank you to Amanda Hoffman at Zillow for sending me the links to the info this morning. They have put together a staggering amount of statistical data which I admittedly haven’t had time to give more than a cursory glance yet.

February 8, 2007

Helpless In San Diego — Or Any Place Like It — Get Outa Dodge Now

by

Real Estate Investments Broker

Author website

This is somewhat of a ‘simulcast’ with my own blog, as I just published a longer piece on the same subject for the second day in a row. I think it’s important.

This is for those investors living in areas like San Diego.

You know, median home price around half a million, and rents for the ‘average’ 2 bedroom rental $1,000-1,300 a month. I’d say if your median home price is over $400K your area probably qualifies.

In San Diego a boring but safely located duplex sells for $480-700K, and a fourplex goes for $750K-1Mil. In the next 10 years those ranges will have climbed, probably significantly. If over the next decade San Diego appreciates at just 3.5% yearly, the top of the range for duplexes will have reached just under $1Mil! And there’s not been a decade in the last four with an average of only 3.5% appreciation in San Diego. Tell me seriously — who is going to consider that a good investment? Unless they flew in from San Francisco they’re going to think the owner is over medicating.

So I see a paradox.

dodge city

Investors owning rental property in areas like San Diego will see them appreciate, only to find it very difficult locating that last fool who thinks it’s still a solid investment. They’ll get the growth they gambled on, but won’t be able to cash in. Impotent growth. (The name of my new band.):)

The solution?

Get outa Dodge now.

You’ll be happy to know there are a few regions in the country where you can buy property for way less, while also using low down payments. You’ll be back on the growth track, only now you’ll be in control of 2-4 times the property (in terms of value). This will turbo charge your capital growth rate magnificently.

Make use of a tax deferred exchange (1031) to move your equity to one of these lower priced growth areas. Do it now. You’re losing money staying in San Diego or any place like it. And your capital’s future isn’t bright.

Unless of course you think there will be a bull market for million dollar duplexes.

February 8, 2007

Podcast with Redfin.com CEO Glenn Kelman: “We’re looking for nerds living in nice houses”

by

Realtor, Associate Broker

Author website

Last week I had the pleasure of meeting with Redfin CEO Glenn Kelman and his Senior Communications Director, Cynthia Pang. Let me begin by saying that I waltzed into my local Starbucks anticipating a date with the devil. While I exited no more enamored with their business model, I have to admit that both Glenn and Cynthia were a delight. No horns, no forked tails and no speaking in tongues (well, not exactly).

My impression of Glenn was one of a passionate entrepreneur who genuinely believes in his work. He struck me as honest and sincere, and I thoroughly enjoyed our brief time together. Having said that, I don’t get the impression that he entirely understands the depth of our business or of our duties as agents and fiduciaries. Some of his core premises strike me as fundamentally flawed from the standpoint of end game success or, worse, as ingredients in a recipe for future liability claims and outright failure.

I could be wrong. Divergent opinions and perspectives are what make our world go round. So, I would like to thank Glenn and Cynthia for their time. It may surprise some to know that I honestly wish them much success, as I believe their success will only be found (if it is truly realized at all) in a niche market sense.

So, Redfin, welcome to San Diego!

More: Kris Berg’s husband, Steve, has a very thorough Redfin post at The San Diego Home Blog. Los Angeles Times. Redfin.com’s weblog. (Ahem. Gertrude Stein’s ungrateful whine about Oakland was “There is no there there.”) Kevin Boer at The San Francisco Bay Area Real Estate Blog illustrates the demographics of Redfin’s move. The Future of Real Estate Marketing. More from Kevin Boer.

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February 8, 2007

Glenn Kelman on Redfin.com’s move into Southern California: “I’ve never had to think so hard in an interview in my life”

by

Suburban Phoenix Real Estate Broker

Author website

Here’s the newspaper news, and we’ll come back to it in due course: Redfin.com today opens three new offices in Southern California: Los Angeles, Orange County and San Diego. The company has expanded its web site to include listings from nine Southern California MLS systems.

Here’s the real news, which emerges from a forty-five-minute podcast interview made by BloodhoundBlog contributor and San Diego-based Realtor Kris Berg with Redfin.com CEO Glenn Kelman: Redfin.com is not profitable at present and may never achieve a reliable state of profitability. Most notably, Kelman’s willingness to reverse himself on unpopular but cost-saving policies may ultimately doom the company, at least in its present configuration as a discount brokerage.

The immediate problem is simply the payroll. As Kelman says in the interview:

What investors worry about with Redfin is the margin in the model. So today we generate about a 50% margin out of real estate operations. So for every dollar we make, we have to pay fifty cents to one of our agents. And we have to pay our agents more than we initially thought, just because we wanted to to get good people.

Redfin’s agents are salaried employees, not the more typical independent contractor paid on some sort of commission sales plan.

A new Realtor in a traditional brokerage offering training would expect to earn from 50% to 90% of the total available commission offered for the sale of a the home — which might be 3% of the purchase price.

A more experienced Realtor working in a brokerage with no training could expect to keep 95% or more of earned commissions.

Redfin concedes two-thirds of the buyer’s agent’s commission to the buyer, with half of the remainder going to compensate its agents. By this we can see that Redfin agents are being paid substantially less than successful Realtors in other types of brokerages. Even so, Kelman concedes, “We’ve got it around fifty cents, and that’s not enough to pay our developers.”

Since launching as a brokerage, Redfin.com has met with considerable criticism for some of its more unorthodox business practices. At first, the company advised buyers to appeal directly to the listing Read more

February 8, 2007

What Is Intelligence, Anyway?

by

Mega-Producing Realtor

Author website

I just received this in an email from a friend. I liked it so much I wanted to pass it along here on the blog.

__

What Is Intelligence, Anyway?
Isaac Asimov

What is intelligence, anyway? When I was in the army, I received the kind of aptitude test that all soldiers took and, against a normal of 100, scored 160. No one at the base had ever seen a figure like that, and for two hours they made a big fuss over me. (It didn’t mean anything. The next day I was still a buck private with KP – kitchen police – as my highest duty.)

All my life I’ve been registering scores like that, so that I have the complacent feeling that I’m highly intelligent, and I expect other people to think so too. Actually, though, don’t such scores simply mean that I am very good at answering the type of academic questions that are considered worthy of answers by people who make up the intelligence tests – people with intellectual bents similar to mine?

For instance, I had an auto-repair man once, who, on these intelligence tests, could not possibly have scored more than 80, by my estimate. I always took it for granted that I was far more intelligent than he was. Yet, when anything went wrong with my car I hastened to him with it, watched him anxiously as he explored its vitals, and listened to his pronouncements as though they were divine oracles – and he always fixed my car.

Well, then, suppose my auto-repair man devised questions for an intelligence test. Or suppose a carpenter did, or a farmer, or, indeed, almost anyone but an academician. By every one of those tests, I’d prove myself a moron, and I’d be a moron, too. In a world where I could not use my academic training and my verbal talents but had to do something intricate or hard, working with my hands, I would do poorly. My intelligence, then, is not absolute but is a function of the society I live in and of the fact that a small subsection of that society Read more

February 7, 2007

Ask The Broker – What Do We Do If We Can’t Find The Listing Agent?

by

Associate Broker

Author website

We (my fiance and I) put in an offer on a condo priced way below market, and the seller would like to take us up on the offer. However his agent is absent, disappeared w/o a trace.

The seller is bound by contract to his listing agent. Since our agent and the seller have been unable to get in touch with the sellers agent, the seller is only hesitant because he has to pay the commission to an absentee agent.

Is there anything that we can do to move forward?

Yes. Write an offer, and ask your agent to submit it – to the listing agent’s broker.

The fact that the listing agent can’t be found is really not an issue. It’s a nuisance… and we deal with nuisances all the time… but it’s not an issue.

The listing is actually an agreement between the seller and the listing broker – not the listing agent. The broker will either handle it personally… or s/he will delegate the duty to an agent in the brokerage.

The issue of whether or not the seller must pay a commission is really of little concern to you. You want to buy a house – the sellers want to sell a house – and that’s all that really matters.

February 7, 2007

Fortune on Zillow.com: They can gape, but they can’t Google . . .

by

Suburban Phoenix Real Estate Broker

Author website

It’s possible that I’ve written more about Zillow.com than any other real estate weblogger. More on why Automated Valuation Methods necessarily stink. More on why the National Community Reinvestment Coalition’s shake-down of Zillow.com stinks even worse. More on Zillow.com’s new features.

If I haven’t written more than anyone else, I’ve certainly written plenty. Want proof?

If you Google on Zillow.com, you have to drill all the way down to the third and fourth entries to find my posts. Most days, I beat their own frolickin’ weblog.

But let’s be conservative and simply say that, as a weblogging Realtor based in Phoenix, AZ, I’ve written quite a bit about Zillow.com. So when Fortune magazine writes a cover story about Zillow.com, who don’t they talk to?

They quoted a real estate weblogger — one I’ve never seen before — whose site has been dormant since last October.

And they talked to a Phoenix-based Realtor, Brett Barry, A Realty Executives agent working out of Scottsdale. (Brett emailed me about this article when he was interviewed a while ago.)

But apparently Fortune Senior Editor Jeffrey M. O’Brien didn’t run a simple Google search.

What he did do — almost but not quite — is talk a sweet pregnant lady into turning on her buyer’s agent and disintermediating the bee-hotch. I told David Gibbons last week that the Make Me Move feature puts Zillow.com in the business of brokerage, even thought they’re not taking commissions for it. I wrote about this in December, but, even so, he was taken aback. But in the article, O’Brien is actively marketing his home as a Make Me Move FSBO transaction.

It’s a fun article, but there’s really nothing new in it. It’s impressive, I suppose, that Zillow.com can make the cover of Fortune without even a hint of profitability on its horizons. And it’s certainly a matter of interest to me that I could wrestle my way to third and fourth position on the search for Zillow.com — a search for which BloodhoundBlog gets over a hundred unique hits a day — but not attract the attention of Fortune magazine. Who says real estate is going hi-tech…?

Technorati Read more

February 7, 2007

So, you wanna be a real estate blogger?

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Dustin Luther’s seminar was an excellent primer for the real estate professional who is contemplating web logging as a business tool. Mary McKnight from RSS Pieces, wrote that you should have already established your web log by January, 2007. However, if you’re the type that puts off the book report until the night before it was due, here are the Cliff Notes to Dustin’s Seminar.

The full podcast of the seminar is hosted by Rudy over at Sellsius. I believe he has broken it up into three parts.

The “4C’s” of the RE.net evolution:
1- Change: The “techies” decided that there was inefficiency in the pricing of real estate brokerage and attempted to disinter mediate; they found that more than “raw data” access was needed bu the consumer.
2- Communication: Real estate 1.0 was all about publishing, 2.0 is about communication with the consumer. RSS feeds, weblogs, and sticky websites are the solution.
3- Community: social networking sites and web logs are creating communities where you, as a real estate professional, want to be known as an “expert”.
4- Consumers: This movement is about the consumer and inviting them to a conversation online.

The way to invite the consumer to a conversation and create your online expert reputation is to:
1- Create a weblog
2- Post interesting content
3- Link to other sites
4- Leave lots of comments

He further outlined the steps to creating a web log, the steps to writing a blog post (along with an excellent analogy to composing an e-mail message), how to comment on other’s web logs, and how to create a link.

The second half was dedicated to more advanced ideas for creating communities. It was agreed (as it was in Phoenix at the Webloggers Roundtable) that Active Rain is an excellent place to learn how to create and write a blog post. If you are in the profession, and haven’t joined The Active Rain Real Estate network, do so right now. It’s free and you can click this link to join.

Dustin also showed us how to effectively use a feed reader. He demonstrated Google Feed Read more

February 7, 2007

Getting the “L” Out – A Stump Speech

by

Realtor, Associate Broker

Author website

Why is it that so many agents seem to see a “Sell” in “Selfless”? Don’t people see through the facade, or does this really have a positive marketing impact? I suppose it depends on your particular shtick, and perhaps the “love me” approach will play to some audiences. Call it naivete or an ignorant, misguided notion, but I somehow believe that the tone and quality of our personal marketing is a reflection of the type of people and professionals we are and the way we view and conduct our business. I could be wrong.

Love me! This is a common mantra among the dozens of agent ads I see in our little monthly community newsletter, circulation approximately 14,000. Dozens of “reprinted” testimonial letters, happy client gushings of adoration, and “We’re #1!” screams. The latter has gotten so ridiculous that we see statements like “#1 agent team for (name of company) in (name of community) in past (number of) years combined”. Now, I know that this means this team was out-produced by individual agents and agents for other companies and most everyone in other communities and during any single year. My question is, are consumers so gullible that they don’t get it?

Personally, I have always taken a high-road approach to my ad content, and this newsletter is no exception. No “sweetheart deals” in the February issue, no “new home in your stocking” in December. Bah-humbug. “Here are our listings, we sell bunches of them, call us if we can help you” has been our consistent message. My clients are not hiring me to run an ad filled with shamrocks and maypoles. They want their property exposed and sold. Of course, through marketing our inventory, we are de facto marketing ourselves, but in-your-face self-promotion has never struck me as the best method of gaining respect and trust for ones competence. As they say in Steve’s home state, “Show Me”. I am ever hopeful that our actions and our success speak for themselves.

I’m selfless! Let me tell you just how much so you will bring me business because of it! Another recurring theme I see Read more

February 7, 2007

Value Investing 101

by

Real Estate Investor

Author website

Value may be easier to find than you think. A few days ago I read this article about Florida Mobile home buyers and thought, man; I need to get into mobile homes. To be fair, I am probably not going to get into mobile homes (certainly not because of this article), but it is clear there is value everywhere. This off the wall scenario happens all the time, heck; it’s what makes real estate an exciting business to be in. So if value is easier to find than you think, where do you start looking?
First, start in your own backyard. I have shared my views on out of state investing in a previous post, so it should not come as a surprise when I say that value can be found close to home. I say this because the small investor knows this environment best. Investing at home is a lot more feel, than numbers because an investor has developed a great sense of the market. As investors move further and further away, information gathering and financial modeling become the chief tool. Of course, this is not to say that you should not use these tools in local investing, however; it is to say you have other tools that may be more valuable (intuition and market knowledge).
Second, find the crowd and look to the peripherals. If you see an area that has grown rapidly, go another half a mile or mile out. If this area is still lying fallow, it might be a good place to invest. This takes a small bit of market timing because you don’t want to be on the very back end of a trend. However, this kind of investing can net significant gains for those of you who buy and hold. There will always be buyers who want to live in the mix, but can only afford to live close to it.
Third, buy the worst of the best. If you can afford the worst house in the best neighborhood, you can usually find great value there. In good markets, great neighborhoods tend to get hot fast. Read more

February 7, 2007

Yes, Consumers Do Need To Understand You

by

Real Estate Marketing Executive

Author website

Cathy Jager wrote this in a comment, and I responded briefly, but I really think the response needs some expansion.

“I tend to disagree consumers should be expected to understand agents. Would anyone suggest that it’s important for patients and clients to “understand” doctors and lawyers?”

Cathy is correct. They don’t need to understand real estate agents in the same way real estate agents need to understand them. But they do need to fully understand why they need to use a real estate agent and it’s clear to many that they don’t.

Why don’t I have to “understand” doctors? Because I already do.

If I’m going to go to a doctor, I first have to understand what a doctor does and why going to a doctor is going to help me. It’s easy to say “I don’t have to understand doctors” in this example, because on the whole, we trust doctors. We’re taught to trust them very early on in life, by our parents. Our parents hold our hands and lead us to the family doctor and explain what the doctor does and why we need to be there. So, we understand not only what they can do for us, but that we can trust them to do it for us, and this development of trust starts very young. So, when we get sick, we go to a doctor. We don’t really have to think about it. We only have to think about which one we choose.

The same can’t be said for real estate agents.

Our parents don’t drag us to a real estate office when we’re a child to meet the family real estate agent. They don’t lead us by the hand and walk us through an understanding of what they do, and why we need them. Value has to be explained and trust must be earned. The consumer isn’t just thinking about which real estate agent to choose, they’re wondering if they should choose one at all.

Consumers are obviously confused. For whatever reason, consumers don’t trust real estate agents. Cathy covered this topic very well herself. In the Harris Interactive Poll Read more

February 6, 2007

An Example of “Expert Knowledge”

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Dustin Luther, Director of Interactive Marketing for Move.com gave an outstanding seminar today in Long Beach, CA entitled “Finding Relevance on the Internet“. Dustin offered something for both the upstart and the more advanced real estate blogger. In typical “LA fashion”, it was a star-studded event with real estate webloggers from all over the country in attendance.

Dustin’s presentation used examples of live weblogs. This picture is from the presentation as an example of “expert knowledge”.

We just love Dustin for that example.

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Inventing Real Estate 2.0

Welcome to BloodhoundBlog, the national real estate industry marketing and technology weblog written by, for and about real estate professionals. Better yet, welcome to the wired world of real estate. We are busily inventing Real Estate 2.0 – technology, marketing, service and salesmanship. Like all Bloodhounds, we are smart, frisky and fiercely independent. We've built a spot on the earth – beloved over all – where each one of us can be who we are, no matter who that might be. We are committed to an idea of excellence that will flush the bums, the con-men and the crybabies out of the real estate industry. If you yearn to have your failures excused, your moral lapses absolved or your boo-boos kissed, seek elsewhere. But if you are sick to death of mediocrity – welcome home. Read all about us, subscribe to our feed and steel yourself for the hunt. We work hard, we play hard, we learn everything we can – and we bow to no one.

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