Question #1 (Multiple Choice)

You are showing a home. You are a licensed real estate agent who, at this moment in time, is only concerned with one thing: Opening the door to let your clients in, and locking up when you leave. (OK, that’s two things.) When you are finished showing the property, after having unlocked the door and turned on all of the lights, you:

a) Turn off all of the lights that you, just moments ago, turned on, lock the door behind you, and return the key to the lockbox; or,

b) Run for the car in an attempt to break the land speed record, hoping to hit the road again before Ryan Seacrest finishes his top 40 countdown, leaving the front door to the now fully illuminated (and professionally staged) home unlocked, the lockbox wide open, and the key in your pocket.

Bonus Question: What is the number one song in the nation this morning?

Question #2 (Story Problem)

Kris will be commencing her last chance at 40-something on Monday, and on Wednesday Steve will be celebrating something starting with a “5.” In what will be the perfect storm of “you are so old, we can’t carbon date you” reminders, they will also be commemorating their twenty-second year of having been married without killing each other. Will Kris be able to take three days off, out of town, with her husband and keep her promise to forward her phones and leave her laptop behind?

Bonus question: They are going to Las Vegas. If Kris does forward her phones and leave her laptop in San Diego, will she be able to avoid the temptation to check messages and visit the business center at least once to check her e-mail and the MLS hotsheet, and maybe blog a little?

________________________________

Answers:

1. (b) (Bonus Answer: I don’t know. Ask the agent who showed our listing this morning. He will.)
2. No. (Bonus Answer: No)

I’ll see you on Friday. Or perhaps sooner.

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From Zillow’s press release today:

The Zillow Professional Directory helps consumers interested in buying, selling or conducting home renovations, to find and connect with a local professional to fit their needs.

This is a great concept. What’s not to like? In order to encourage agents and other industry professionals to participate in the site, and to reward those who help feed the data base, they have created the Directory. It is a hierarchical listing of agents by region. Sure, you can search by name, but the default sort is by number of active listings on Zillow and by level of “contributions.” For instance, Steve and I are shown as having five listings on Zillow. This number appears embarrassingly moderate at first blush, at first blush that is until you realize that one is temporarily withdrawn and two others are pending. Oh, well. I am no longer hair-on-fire motivated to keep my postings current. Going from a five to a two would absolutely kill my rankings.

As for the contributions, a quite impressive 476 in our case, these don’t represent past listings, but instead every entry we have ever made for every listing we have ever posted. Each photo, for instance, counts as one contribution. These can add up quickly if you post a lot of photos, as we do.  (If you are shopping for professional at this moment, I probably shouldn’t have told you this. Never mind. I am a BIG contributor! Let’s just leave it at that.)

So, I ran over to Zillow to bask in my glory as a Scripps Ranch Neighborhood Specialist, an “All-Star” as Zillow likes to call me. But I immediately encountered a little problem. It seems that a certain lazy, lazy agent never had gotten around to completing her profile. I suppose I was just too busy worrying about promoting my client’s homes. Realizing that this kind of thinking gets me nowhere in the eyes of the new directory, I edited my profile to promote my areas of expertise to all those in need of my professional services at this moment.

Now (drum roll), I will use the illustrative method in demonstrating that Zillow’s new brainchild is Ztupid.

A search for a Scripps Ranch, San Diego agent gave me this:

Number one is an agent team who works in Temecula which, if you are new to these parts, is in another county. Coming in at the number two spot we have a versatile agent team from, you guessed it, Temecula. Granted, Temecula is only a 45 minute drive (and a different MLS system), but they must be putting some miles on the ol’ Lexus! Here, from their profile, are the areas they serve:

Riverside County, Los Angeles County, and San Mateo! OK, you make it to San Mateo in a day, but you would definitely want to stop for lunch.

Keep in mind, this isn’t sour grapes. After all, they have more listings, more years in the business and far more contributions. I still managed to eke out fifth place. But this got me thinking. While it’s hard to break into the San Diego field, there are some areas ripe for the pickin’. And, apparently, we aren’t restricted to cities we have actually visited. So, with a simple series of key strokes, I was able to OWN Kodiak, Alaska. (Allow me to apologize in advance to Art. Your top spot will soon be restored, even though you don’t live anywhere near Kodiak.)

Then I remembered the time I replaced our kitchen faucet. Plumbing’s not so hard, so search for a plumber in all of San Diego, and I am there to help!

Silly as this sounds, lots of agents are doing it — because they can. So, to my Boise Blog friend Phil Hoover, who’s number five in Boise now? And to the Phoenix Real Estate Guy, Jay Thompson, I may be on Gilbert’s Page Two, but I didn’t see you when I looked up. Besides, when you need a Gilbert plumber, who are you going to call?

(Note to my friends at Zillow: I will correct my profile soon, but so many others won’t, I suspect. Oh, and you might want to delete the user “I.M. Burr” who currently holds the number two agent spot for Kodiak, Alaska. He’s not real.)

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Mismanagement, corruption, greed, irresponsibility, stupidity and ignorance. Pick one, or pick them all. It tends to make us feel better when we have someone to blame. It’s even fun to point fingers when you see suffering, as long as you aren’t the victim, because I suppose this reminds us that we were better and smarter.

“Bailout?” you might be thinking. “Hah! Why would I want to spend my tax dollars bailing out Wall Street millionaires, large banking institutions run be rich executives, or even all of those foolish home buyers who lied on their stated income loan applications or bit off more than they could chew? I was better and smarter. I saved and invested responsibly. I didn’t refinance my home to take lavish vacations or buy other homes I couldn’t afford. This isn’t my problem.”

Except it is.

When I was a child, my brother and I would fight. Mostly, he would fight, and being seven years older, I would get punished. Boys will be boys. He’s just a kid. He doesn’t know any better.

I’m feeling a little like that today, as I am sure many of you are. Whether you misbehaved or you were the model citizen, we are all in trouble. Whether you have (had) your child’s college tuition invested in stock accounts or you need to make your weekly run on the grocery store, whether you need to sell your home or you were hoping to buy your first home with the 10% down payment you have been struggling to save and which is no longer enough, this has not been a very good week. And next week may not
be much better.

It may not be your fault, but the economic crisis has definitely become your problem, and your neighbor’s and mine. How we got here is not our biggest fish to fry this morning, and doing nothing will change nothing. There will be a time to stand on principle, but now is not the time. We can go back to blaming people tomorrow.

photo credit: jonasj

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I have an idea. I know it’s a little out there, but difficult times call for innovation.

A lot has been written lately about how the current real estate brokerage model is broken. What went wrong? The answer may lie on Wall Street. And the solution may lie in our ability to start thinking a little more like Pizza Hut.

The traditional real estate brokerage is big. The broker provides large, shiny offices — many of them scattered throughout Your City. Where the office used to be necessary to do business, back in the days when the customer came to the service provider, now real estate is in the home delivery business. Computer wielding home buyers and sellers search the thousands of on-line menus from the thousands of on-line storefronts, rarely knowing or caring from which street the drivers are dispatched.

Yet we continue to have the shiny office buildings. The big brokerage model operates off of small margins. A three to five percent profit is generally considered a success. To increase profit, you must increase volume or reduce expenses, or a combination of the two. Duh. But in a business where virtually anyone can be a pizza, all of the pizzas tend to be treated the same. The thin-crust, unseasoned new agents and the stuffed-crust experienced ones all appear on the same menu and at roughly the same price to the consumer.

The problem is that the cost of goods to the brokerage are not the same. The experienced, stuffed-crust variety involves more dough. These agents command higher commission splits, because they bring in more orders and they are in limited supply. Every pizza joint wants them on the menu, which further drives up the their cost and reduces the broker’s margin. And here is the paradox. The newer agents are traditionally on a much higher split with establishment, which means they are really the product being pushed. A thin-crust offering may only attract one hungry customer a year, but with the margin being so great, the temptation is to carry the greatest possible inventory of these products at all times, even though they may not sell as often — or at all.

There is a cost to carrying a large inventory. You need to manage it and account for it. You need someplace to put it. You need a bigger staff to oversee the operation. You need big, shiny office buildings.

And here is where Wall Street comes in. The brokerage model has been bundling their pizzas. This paper has become high risk. The newer stated-income agents who may never reach maturity are packaged with the full-doc, lower risk, lower reward experienced agents. And now the market has shifted. The riskier investments in the portfolio are defaulting. The solid investments continue to perform but their numbers are not as great, so the company is on the verge of needing a bailout. But, a bailout only makes sense if the fundamentals that got us here are reconsidered. A bailout only makes sense if the business model is retooled.

It may be too late for the industry giants, but there may be room for their smaller competition. What if you were only to carry A paper? What if you focused on the more secure, less labor and capital intensive stuffed-crust product? You will make less profit per unit, but you will sell more. It is less risky, and you will reduce costs. The experienced agents don’t need big shiny offices, company-provided computer banks, office voice mail, canned web sites, and an expensive, over-sized oven full of weekly training and mentoring meetings. They come with their own toppings.

Where does that leave the sub-primers? Maybe, the industries giants could rethink their roles. Before an agent gets his license, he must pay for his required courses and he must pay his license application fees. Why, then, can’t the new agents be expected to continue the process of investing in their training and their success outside of the broker model? I can’t walk into Qualcomm with a formal education in art history (or no formal education at all) and get a job on the condition that they teach me all about electrical engineering; I have to come armed with the knowledge and tools. I am expected to pay for my education, and they in turn will pay me to produce.

I am willing to bet that there are countless entrepreneurial real estate experts out there who would gladly provide real estate job training for a fee. And I know first hand that Best Buy would be delighted to sell each of them their own computers, Staples their own office supplies, and a boat load of independent vendors their own tech and non-tech coaching and support. Then, instead of the brokerage having to continue to operate as a bloated, full-service, fully stocked training camp, they could focus on a cost-effective home delivery approach. After all, this is really what the customers want.
photo credit: Mr Wabu

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A couple of encounters Steve and I had yesterday reminded me of a story I recounted here long ago. It was so long ago, in fact, that I can’t find where I made mention, so I will stare danger of repetition in the face and barrel ahead.

Years ago, one of my daughter’s then second grade classmates was giving a riveting oral presentation on some obscure endangered animal. As room mom, I had the privilege of sitting in on the lecture. I do not remember the specifics of this particular mammal at risk, but I do remember the part about predators and prey. “They prey on jackals,” her classmate informed. “What is a jackal?” one small but inquiring mind asked. Without missing a beat, the presenter responded in an unquestionable voice of authority.

“A jackal is a rabbit.”

Good enough. The three of the thirty young members of the studio audience who were still awake at this point were by all accounts quite satisfied with this answer.

Fast-forward to yesterday, Tuesday, or as we call it in Scripps Ranch, Broker Caravan Day. Steve and I were walking through a newer, lovely, over-priced home (this breed is not on the endangered list), when I remarked about the stove to the out-of-area agent-host. “An electric range,” I said. “That’s odd.” “Well,” he replied, “all of the homes in this neighborhood came with them.”

A jackal is still a rabbit.

If I hadn’t been from these parts, I would have now misfiled this entire development away as the Land O’ Electric Cook Tops. It’s OK for a second-grader to make stuff up, I suppose, but when you are all grown up and charged with promoting a product, know your subject. Or, at least, when you get stumped as we all do from time to time, don’t try to fake it.

Next, we proceeded to visit an older, lovely, over-priced home. It had a sun room. In what we now call the Case of the Missing Square Footage, Steve asked the out-of-area agent how big the home was. She could have said she didn’t know with certainty but, instead, the agent proceeded to rattle off random numbers. “The tax records show (x) but the seller says (y) but I think it is more like (z) unless you consider the position of Venus relative to Aquarius rising.” We left confused, and our agent was left standing in the spacious sun room of unknown dimensions quite pleased that she had dodged a bullet with authority. But as an aside, we weren’t able to make it back to the car without having to give this chosen real estate consultant what amounted to a full-blown comparative market analysis in the driveway. “What do you think of the price?” she asked. “A little high,” Steve said. “Is it (x) high, (y) high, (z) high?” I suppose that would depend to some extent on how big it is.

Then again, you can argue there is a time and place for faking it.

Our final stop was a lovely, over-priced home with a view. The out-of-area agent host was delightful but had no idea what a jackal is and was not afraid to admit it. “Do you live around here?’ she asked. When she overheard me telling Steve how this might be worth showing to one of his buyer clients because of the upstairs layout (we hadn’t been upstairs yet), our perky host blurted, “So you are familiar with this neighborhood!” And finally, on our way out the door, she yelled after us, “Do you have any clients?”

Yes, we have clients, but it is a mystery to me why we don’t have more. Good grief.

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This is where irresponsibility breeds chaos. The “Paper” we are referring to is NOT WORTHLESS! Can you, the so-called experts, get this one basic thing right? Or would you prefer to set off more global panic in the financial markets? What are we really talking about here?

The basic concept is that the U.S Government is stepping in because the lenders (banks, mortgage companies, exotic overseas investors, etc.) did not have enough reserves to cover a downside market. As they allowed the borrowers to over-leverage, the lenders over-leveraged themselves, too. Why not do that? The market is always going up? Then these same idiots that effectively created the market for this “paper” panicked. (”Oh crap, did we really buy/finance a gazillion loans where there was no down payment and no income verification?”) We can all bitch about the abuses of the past and we can lament the downward spiral in home values, but I can tell you confidently that the paper is not worthless.

Take a typical culprit in San Diego, for example.  Someone bought a $500,000 home at the peak of 2005-2006. Even if they put $0 down (meaning for those not thinking quickly here, a $500,000 mortgage, or “paper”), that home today is, say, worth 20%, 30% or even 40% less (you pick the number). For our example, let’s use the BIGGEST decline in value of 40%. So today, the home is worth $300,000. That is far from worthless. The plan is for the U.S. to buy this “paper” and hold it until it may be sold to an investor for an amount equal to or greater than its value today. The U.S. government is not an investor, constantly worried about returns on their investment. Maybe they should be, but they have staying power. They can just sit back and wait. If the value goes down further, so what? Some day it will come back, and that’s when they will sell the paper and get their (our) investment back. We (the citizens) may even get a profit, eventually.

I pity the poor politicians who have to sort this mess out now (although their lack of proper oversight made this an accident waiting to happen), but it makes me crazy when the so-called pundits in the media call the “paper” worthless because it’s disingenuous to say so, and they should know that. If someone truly thinks that home that was purchased for $500,000 and is now worth $300,000 is really worthless, please sell it to me for $100,000. I will buy all the homes you can sell to me, and I will be happily retired in less than a year… if I can just get a loan.

Now I am reminded why I don’t write anymore.

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You might regret saying that… unless you really don’t want to be going anywhere any time soon. Sure, you can always adjust price later, but it is hard playing catch-up these days. (Note: Detached inventory in Scripps Ranch stands at 96 homes as of this writing.)

And, if your home is on the bigger side, beware of median statistics.

Information courtesty of the Sandicor Multiple Listing Service and for detached homes sold in the 92131 Zip Code. Information deemed reliable but not guaranteed, and so on and so forth.

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You may have noticed how we haven’t really talked about the melt-down of our financial systems here. It has been the Big News, particularly this week as we saw Lehman Brothers exit stage left and Merrill Lynch find a foster home at Bank of America, and as we continued to hear the reports that banking giants Washington Mutual and Wachovia are operating with detonation devices strapped to their chests. Most recently, attention has shifted to news that insurance powerhouse AIG is doing the dog paddle in a fierce undertow.

We haven’t really talked about it for a couple of reasons. First, what is currently taking place is quite complex. I am a real estate agent and, having opted to forego the elective classes on micro- and macro-economics during my college years in favor of physical anthropology and sailing, I readily admit I am not qualified to provide an in-depth analysis of the global or even national banking systems. I know what I don’t know, and what I know comes from the same places every other “outsider” gets their information — the media. Second, a full month ago I spoke with a favorite mortgage broker who promised me an insanely inspired guest article. The problem here is that he is a maniac, a perfectionist, a loan officer who embraces and studies economics with the same enthusiasm I show my Altos Charts. And with the scenery changing by the minute, I am told he is about eight redrafts into the assignment, which means I am no closer to my guest post.

Thankfully, Jeff Corbett has unknowingly come to my rescue. Better known as the X Broker, Jeff wrote this succinct piece on what the Wall Street goings-on of the past week really mean to the real estate market. Even I understood it, so I encourage you to give it a read.

If you live in San Diego, you might want to skip over the last part, where the X-Man says, “Unless you live in California, Las Vegas, South Florida, or the Rust Belt…which either experienced high levels of mortgage fraud(or) illogical appreciation…  your local housing market is no worse off than it was before Wall Street’s most recent ‘Black Monday’.”

Unless.

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Given the choice of watching the Charger’s game this weekend or sitting in a dark room wringing my hands about the impending collapse of our financial markets, I instead chose to direct my attention to the matter of cookies — not the computer kind, but the kind you ship to your daughter’s college dorm room. (Alas, I think I overlooked the baking soda.) And whenever a real estate agent attempts to grasp the brass ring of leisure, something has to give. So it’s time to play some blogging catch-up.

I have let myself get backed up on email questions from our readers. The Ask the Brokers button here has always been a crowd favorite, and this week was no exception. Here are the latest three questions I received (and as a point of clarification, these are all verbatim, presumably from those little spam-bot demons who like to visit me on a regular basis):

Q. Ma284zda asks, “c752t?” Or, maybe it was just a comment. I’m not entirely sure.

A. Yes, it is true. No agent in San Diego County was able to show a home most of yesterday, much less get into their own listings. You can blame it on Ike.

Due to Hurricane Ike and a strong Canadian cold front coming into the Ohio Valley, there are wide spread power outages affecting SentriLock. They have limited phone services and their ISP service provider is offline. Normal web site access is blocked…

Sentrilock is the lockbox key provider for our MLS, and what this means is that our access keys which need to be updated daily were rendered useless. For listing agents, this meant that showing information could not be downloaded, so our Monday morning feedback reports were scuttled as well.

Q. Ma909zda (and I believe he may be related, at least by marriage, to the Ma284zda) wrote, “c33t.”

A. I couldn’t agree more. In fact, based on their 2008 Survey of Home Buyers, the California Association of Realtors (CARs) wrote:

Due to the high inventory of homes on the market, and uncertainty about the direction of home prices, buyers are more cautious and are moving at a slower pace during the home buying process than in previous years.

In San Diego, particularly in the North County communities we serve, it is worth noting however that inventory is not all that high. In Scripps Ranch, we continue to hover around the 100 mark for active single-family detached listings. This number is moderate by historical standards, and any agent who is actively searching on behalf of a buyer client will readily admit that there is not an abundance of good (well priced, staged and located) homes for sale. True, buyer jitters are a huge factor in our market, serving to drive market times up and even prices down, but we shouldn’t forget the huge roll that the current financial crisis is playing in stalling our market. Loans are difficult to come by, even for the most credit-worthy applicants, and no loan means no home purchase. Sometimes, we know early in the process that financing is going to be an issue; too often, however, we are only learning this mid-escrow as underwriting policies change.

Q. Google offered, “http://search.live.com.”

A. Google (if that really is his name) raises a very timely issue. Just why is it that so many buyers agents, agents faced with a more challenging real estate environment, continue to relegate their traditional property showing duties to the listing agents? More importantly, why do their clients allow them to do this?

In the same 2008 report, CAR says, “The Internet… continues to play a vital role in this process and has solidified the relationship between REALTORS® and home buyers.”

I’m not seeing that, at least not this week. Just yesterday, we received two calls from buyers asking us to show one of our listings, each of whom admitted to having an agent. “Why don’t you have your agent show you the home?” we asked. In one case, the buyer said her agent is out of town. I must confess that in this case, we ultimately conceded. It turns out her agent was in fact in Europe, but I have to wonder how he is going to write the offer if she does decide that this is her dream home. According to the agent (who ultimately phoned us from Europe to cop a plea), he has assistants, but they are just too busy with other work. If she wants to write an offer, however, he assured us that they would get “un-busy” really quickly.

The second call came from a buyer who told us that he has an arrangement with his agent. He does all of the legwork and, once he finds the right home, the agent will write the offer. “I don’t want to bother him while I am just looking,” he said. Cool. Bother me, then. I certainly don’t want to be the one inconveniencing the man who will be taking half of the sales commission. Besides, what else do I have to do? It’s not like I am baking cookies or anything. At least, I won’t be at 4:00 today.

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We closed escrow this week on one of our listings. Several things were unusual about this particular escrow. First, we had the pleasure of working with sellers seemingly delivered to us from heaven. They were thorough, they were cooperative, they were respectful, and mostly they asked for and considered our advice on preparing the home for sale every step of the way, acting as true partners.

The result was an accepted offer in 12 days when average market times in the neighborhood are approximately 60 days for sold homes and 120 days for active listings. The result was an escrow that actually stuck, one that was never in danger of cratering at all. In this market, it is rare to complete the process without finding yourself breathing out of a paper bag at least once during transaction.

It is so tempting for me to sit here and tell you that it was our superior representation that made the difference. The truth is, I have to give most of the credit to the sellers.

The Sellers Rocked

Looking back, I can point to many things that the sellers did right, all of which contributed to their success. They priced their home on the money. Pre-list, they agreed to make improvements, some not inconsequential from a cost standpoint, which we told them would add value and make the property more salable. In short, they listened, they trusted our advice, and they were willing to invest some time and money to ultimately save both. But arguably the most important thing they did right was treat the buyer with respect, and by this I mean they were completely honest and fair in their dealings throughout the transaction. The most glowing example of their voracity, from the buyer’s perspective, came in the form of the Real Estate Transfer Disclosure Statement.

If You Have to Ask, Disclose!

The Transfer Disclosure Statement, or TDS, is the big-kahuna of statutory disclosures. There are many others of course, but this bit of legalize is the cornerstone of the disclosure package. It is on this form that the seller has the opportunity to share historical information on the property — what fixtures exist or don’t, what works or doesn’t, and what skeleton’s may be found in the walk-in closet. It is a three-page check-box, fill in the blank kind of document with a few lines thrown in to allow elaboration. Few sellers ever elaborate.

We are often asked, “Do I have to disclose this or that?” And our reply is always, “If you have to ask, then yes, you do.” In my experience, no buyer has ever canceled contract because a seller was too thorough. And I can all but guarantee you that if you don’t disclose that time that the toilet decided to become a drip watering system for the living room, your buyer’s future neighbor will. In fact, a TDS for an 18-year-old home that suggests everything is and has worked perfectly since the builder delivered the first set of keys is often eyed with suspicion.

The Moment of Truth

So our sellers possessing, an awe-inspiring attention to detail, delivered a TDS to the buyers in which they had taken full advantage of every inch of white space. If this wasn’t enough, they included self-penned Addendums A, B, C, and D totalling, I believe, ten pages (double-sided). If a light switch had been replaced during the Clinton administration, they noted it. Busted faucets and dirty air filters of yore, leaning fence posts, and a closet door that hasn’t always stayed dutifully in the track? Guilty as charged. The buyers response, while predictable to me, served as a good refresher course for fair dealings. The buyers were appreciative, dazzled in fact, and as a consequence, they were convinced that there would be no surprises after the mail had been forwarded.

In this case, the result was that we did not receive a Request for Repairs. No home is perfect, but the buyers asked for nothing, nada, zip, which is practically unheard of in this environment where every buyer seems to be out for revenge, out to right the wrongs of the early 2000s. The buyers’ agent attributed this to the trust that had been won when the seller threw the book at them, so to speak.

My takeaway from this latest transaction is that honesty wields great power. No one wants to believe they are being taken advantage of or being played the fool. People respect those who treat them fairly, and openly disclosing all you know about your home is one way in which you can demonstrate this respect for the other party in the transaction.

Of course, it also helps when your price doesn’t include an extra zero.

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