Waiting for the Bottom and Other Stupid Ideas...A True Story

I hear over and over again from agents, clients and customers that they are "waiting for the bottom" of the real estate market before they decide on one of their largest long term financial decisions, the purchase of a home. Here is a true story of "waiting for the bottom"...

I have been working with clients for many years now trying to find the "right" property. They know exactly what they want and that is a very good thing (Clients Who Know What They Want and Why I Love Them is a blog for another day...I digress). This spring we started honing in on a couple properties that met every criteria we have been searching for. They had been saving money at a feverish pace and had built a large nest egg close to $200k. However, a little birdy told them that the real estate market had not hit bottom yet and it was not a good time to buy. "Wait till the market hits rock bottom and you can get a real deal". They heard this mantra over and over again at church, work, in print, on line, and on TV. All of these "experts" must be right, they thought to themselves.

So they put their $200k of hard earned money into a "sure thing"...the stock market. The "experts" at church, work, in print, on line, and on TV said nothing negative about the stock market because their field of expertise only extended to real estate. It was settled, "Hold off on purchasing a home that we would live in for 10-15 years to "wait for the bottom" and put all of our hard earned cash in the stock market to gain value."

I got a call last night. The $200k is now $110k. The first words out of his mouth was, "if I had put that money in a house, I would have AT LEAST had SOMETHING to show for it." They have outgrown their 3 bedroom house, they no longer care about "the bottom", but they can no longer qualify for their next home.

They thought of their long term asset (real estate) like a short term asset. Waiting for the bottom is a great strategy when you are trying to buy something to sell tomorrow. With a long term investment, purchasing at the bottom isn't as critical as picking the time to sell at the top.
So all the experts who cautioned my clients on "waiting for the bottom" but did not give such counseling when it came to the stock market...Shame on you.

A Real Estate Analogy...

So I'm watching the mountain bike finals for the Olympics a couple weekends ago. The TV commentator says, "When dealing with a technical course, one where passing is almost impossible because of the narrowness of the trail, you must ride with the fast riders. If you get caught with a slower pack of riders you will never be able to catch up. The fast riders keep pushing each other while the slower groups keep getting in each others way."

It is along the same lines as, "you play better golf with better golfers.", but most agents don't realize that the opposite is also true, "you play worse golf with bad golfers". I talk to a lot of agents everyday about the companies they work for and the agents around them. Most successful agents succeed in spite of their companies and the agents around them. However, are they reaching their true potential? In a market place where the margin of error is so very slim, you need all the support you can get. Who are the pace setters in your business?

Lessons We Can Learn from Michael Phelps

There are 3 (and only 3) keys to success and they all start with the letter A. Aptitude, amplitude, and (most important) attitude. Sports creates so many great analogies because the results can be so clear and concise.

Aptitude- Michael Phelps had the god given ability to swim fast...No question about that. However, there are many other good swimmers who have better physical traits, but they are not great. Why?

Amplitude-No matter how much god given talent Phelps has, he had to jump in the pool every day and train. Showing up seems like the easiest part of the success, but consistency is vital to greatness. But even showing up doesn't guarantee greatness. Why?

Attitude-Above all this is the most significant key to success. Phelps had to dream that he would be able to set the record. Without that goal, getting out of bed at 5am to swim in the same boring pool, every morning, would have been near impossible. Consider this, Phelps had the worlds largest bull's eye on him. Phelps could have caved in mentally with all the pressure the media and competition placed on his shoulders, but he didn't. Why? Because he dreamed that he would win.

Big Real Estate Company v. Small Real Estate Company...Why not both?

Whether you are looking to list your home, buy a home, or even start a career with a real estate company...you have choices. Recently I heard a debate about the merits of a small company over a large one. Here is how it went (the names have been changed to protect the innocent):

Agent Napoleon: We have hands on training and management. That means our clients get PROFESSIONAL service.

Agent Rasputin: But we have more tools and resources. That means our clients get MORE services.

They both were right...So why not get both? If you search hard enough you can find real estate companies that provide the high touch service of a small company PLUS the resources of a large international one. Here are a few factors to identify:

1. Find out how much high level training is done on site. Not just prelicensing and contract review, but hard core business development and skill sharpening. The higher level training is what separates the good from great. Keep in mind, even Tiger Woods has a coach.

2. Where are the broker/owners? Are they available? Active? Ask to speak with them. It can be easy for a leader to make decisions when they are isolated from the results. Many onsite owner companies are held to a higher standard of accountability because they are more accessible.

3. Last but not least, what is the power of their brand. Some of the franchise companies offer international exposure as well as aggressive local marketing. Many clients are coming from outside of the local area and may not be familiar with the local brands.

Do You Spend Money Advertising Your Listing? Attraction Vs Satisfaction

Why are you doing it? Sounds like an obvious question, but if you don't understand your true purpose you are likely to spend money foolishly. Spending money to cause a property to sell has a very small chance of success. As a rule, you should never spend money to cause a property to sell! You can't compel a market response. There are however value reasons to advertise a property. The two most effective are attraction and satisfaction. Are you advertising to attract potential buyers and new listings to your business? Are you advertising to satisfy your seller's expectations? If the purpose is lead generation, it should be pre-planned, tracked and the response measured over time. Know your return on investment on every 'attraction' dollar you spend. Satisfying your seller's expectations should also produce leads for your business, if it doesn't it is money poorly spent. Your advertising budget should be set in advance.When a seller calls to ask "what are you doing to get my property sold?" running another ad is not a proper response because it will not compel a market response. Always stick to your marketing plan, it worked for all your other clients right? A seller's motivation may change and their patience with the process will often become short, explore the changes in motivation and take the appropriate professional response to create a successful result for your client and your business. Take charge of the situation! Take charge of your career.

I have solved the National Foreclosure Issue-Pres. Bush please call me.

Currently we have many folks who are facing short sale/foreclosure who want to keep their homes but can no longer afford the new payments, so they come on the market as short sales/foreclosures. With each one of these cases coming onto the market, the overall situation only gets worse for the person selling after them and in the big picture, the national economy which will have to "clean up" the mess. So what do we do...

First, do the homeowners want to stay in their homes? If yes, then we need to find out what can they afford monthly payment wise under an FHA program. That will be the new loan amount. (Let me stop and explain a little more) They owe $400k, we refinance them to a new FHA loan amount which they can afford, $300k. (The new loan amount would have to be a minimum of 70% of the previous balance.)

So now what do we do with the $100k short fall? Instead of having a foreclosure to sell or a large short, the bank will be able to write the "bad debt" off their books and hold a $100k note. When the people go to sell the home a later date they will still owe that $100k back to the bank. Time will help the process. Currently, it is a race to foreclosure.

So the banks get to clear non-performing loans out of their portfolio, the real estate market will be much more stable with 1/3 to 1/2 less homes on the market that are foreclosures or priced for foreclosures, and the tax payers do not have to pick up a huge tab on a loan bailout.

Don't Read This Blog If You are Buying a Home Right Now!!

Why?

Because you are one of the many people who are taking advantage of one of the best real estate markets in recent times and you don't need any of the advice I have.

WHAT!!

That's right. Interest rates are at historic lows, home prices have dropped, and the number of homes to chose from is at a historic high. Econ 101, when is a good time to buy? When everyone is selling.

TRUE.

This is not a market for everyone. However if you are a first time buyer, move up buyer or an investor, take a look at the marketplace objectively.

First time homebuyers have "nothing to lose". Rents are increasing, while home values have come down considerably. Many loan programs have become restrictive, however the once in a lifetime interest rates are an awesome incentive.

Move UP buyers are those who are selling in a lower price range and buying into a higher price range. First you must understand that your current home value has probably dropped about 10% in the last 12 months. However, the home you want to purchase has probably gone through the same depreciation. For example, your $400k home dropped $40k in value. Your dream home at $900k dropped $90k. So the move up buyer just added $50k in equity.

Investors...Remember, Its a Wonderful Life. Mr. Potter bought while everyone was panicking. Sure we don't strive to be Potter-esque, but he was a smart enough to understand when there were great market opportunities.