[Published Nov. 19, 2009, in the Denver Post - Jeffco editions]
Those of us who traveled to San Diego last week for the National Association of Realtors annual convention and trade show really lucked out on the weather, leaving before the snow storm began and returning after it ended..
I did attend one of the educational sessions, and I did enjoy several non-real estate activities such as visiting the Wild Animal Park and cruising San Diego Bay. But, for me, the major value of such conventions is the “expo” — the opportunity to get current on technology and products being introduced. In that regard, the NAR convention is the “daddy of them all.”
Being an iPhone owner, I was particularly struck by how many vendors offered apps for this device which has already transformed the practice of real estate.
It was only a year or so ago that I had an ordinary cell phone — no email, no web capability, nothing at all, compared to today’s smart phones. Nowadays, it’s hard to imagine being a successful Realtor® without a smart phone. My wife, Rita, who is not in real estate, now realizes that she, too, must discard her cell phone and get an iPhone. I heard this weekend that there are 50 million iPhones in use today.
In a previous column I mentioned zillow’s great iPhone app which, curiously, zillow was not promoting at their booth.
Other vendors, however, offered something zillow doesn’t offer — a branded MLS IDX search engine, something I look forward to offering as soon as I can install it. Look for more about this feature after I get it up and running.
What will make such an app unbeatable will be a GPS component which allows you to search the MLS listings closest to where you are standing with your phone.
There were other technologies being promoted, of course, but the iPhone has definitely captured everyone’s attention and imagination — and with good reason.
Taking it all in at one trade show is like drinking from the proverbial fire hose — it’s simply impossible to do justice to what I learned this weekend. It’s only appropriate that the same kinds of technology allowed me to be completely in touch with my clients and business throughout the convention and expo. Indeed, I sold one of my listings while I was in San Diego.
I have never been more convinced that a real estate agent must be “with it” technologically to be competitive in today’s industry. If you’re unhappy with that fact, you can blame the iPhone.
Friday, November 20, 2009
Thursday, November 5, 2009
18 (or more) Questions to Ask When Interviewing Your Next Listing Agent
.
Published Nov. 5, 2009, in the YourHub.com section of the Denver Post:
I completely sympathize with sellers’ frustration and sense of powerlessness when it comes to putting their home on the market. Should you try to sell it yourself and save on commission? How do you know which agent to hire — and what will it cost? Should you hire your brother-in-law or risk alienating him (and your spouse) by hiring someone more qualified or more familiar with your area?
Perhaps making the process more scientific will help (especially with the brother-in-law issue), so I have prepared a set of 18 questions to ask the agents you interview, including your brother-in-law, which will give you a little more confidence that the choice you end up making is fairest and makes the most sense.
.
Published Nov. 5, 2009, in the YourHub.com section of the Denver Post:
I completely sympathize with sellers’ frustration and sense of powerlessness when it comes to putting their home on the market. Should you try to sell it yourself and save on commission? How do you know which agent to hire — and what will it cost? Should you hire your brother-in-law or risk alienating him (and your spouse) by hiring someone more qualified or more familiar with your area?
Perhaps making the process more scientific will help (especially with the brother-in-law issue), so I have prepared a set of 18 questions to ask the agents you interview, including your brother-in-law, which will give you a little more confidence that the choice you end up making is fairest and makes the most sense.
I’m sorry that space limitations don’t allow a full explanation of all the questions, so feel free to contact me if you don’t understand any of them — such as the first one:
- Do you subscribe to Showcase service on realtor.com, and will you make full use of it for my home? (Browse realtor.com’s listings in your ZIP code to see how this service can help to promote a listing.)
- Do you promise to complete every possible MLS field describing my house, and not just the mandatory fields?
- Will your MLS listing of my house be syndicated to 20 or more consumer websites? (The MLS has a free service called “ListHub” which does this, but each broker must opt into it for his listings.)
- Will you also post my home for sale on craigslist.org — and how often will you refresh it?
- Will you produce a virtual tour (what realtor.com calls a “Featured Tour”) of my home? If so, which vendor will you use? (If this agent has any current listings, they should be on realtor.com, where you can compare his “Featured Tour” with those created by other vendors for other agents. You’ll see that their effectiveness varies greatly. I favor visualtour.com’s.)
- Will you produce a video tour of my home, and can you show me a video tour you have produced for another listing? (If he does videos, they will be on his realtor.com listings if he has “Showcase” service, which leads me to question #7…)
- May I have the address of one of your current listings so that I can see how it is marketed on realtor. com and elsewhere? (Google the address for “elsewhere.”)
- How many of your listings sold in the last year, and how many of them expired or were withdrawn without selling? (You may want to have another agent verify this data, since it requires MLS access to do so. This can also help you to verify whether the agent you are interviewing is being truthful with you.)
- Will you provide a staging consultation to help make my home show its best?
- Will you do email blasts or distribute printed flyers telling other agents about this new listing?
- Will you promote my listing at the various weekly Realtor marketing sessions and/or hold a broker open house?
- (Optional) Will you hold regular open houses for as long as I want you to do so?
- What is your commission, and will you reduce it if you sell my house yourself (no co-op commission owed to a buyer’s agent)?
- Will you reduce your commission further if I hire you to represent me in the purchase of my next home?
- Will I get feedback from you on every showing by you, and will you actively solicit feedback from other agents who show my home and tell me what they say?
- Will you mail out “Just Listed” postcards so that neighbors and others will know that my home is on the market?
- Does your company, or you, have a website on which your listings are promoted?
- How else will you advertise or market my home?
.
Wednesday, October 28, 2009
Fraudulent Claims of the $8,000 tax credit
.
I heard on NPR a few days ago that there is an enormous number of fraudulent claims for this tax credit and that the IRS is unable to challenge fraudulent claims for the $8,000 tax credit without doing a full-blown audit! No proof is required, it appears, that the taxpayer is a first time home buyer or that they have actually bought a house!
Any legislation extending the tax credit should include a provision putting some controls on this raid on the Treasury!
I heard on NPR a few days ago that there is an enormous number of fraudulent claims for this tax credit and that the IRS is unable to challenge fraudulent claims for the $8,000 tax credit without doing a full-blown audit! No proof is required, it appears, that the taxpayer is a first time home buyer or that they have actually bought a house!
Any legislation extending the tax credit should include a provision putting some controls on this raid on the Treasury!
Wednesday, October 21, 2009
Technological Convergence Has Greatly Improved the Practice of Real Estate
Published in the Denver Post, Oct. 22, 2009:
It’s awe inspiring how cellular and other technologies have converged to revolutionize the practice of real estate in recent years. The primary platform for this convergence is the “smart phone” — a generic term for the BlackBerry, Apple’s iPhone, Palm’s Pre and similar products.
Let me paint a few scenarios, and you’ll see what I mean.
Scenario #1: I’m in my car and my iPhone rings. I push a button on my steering wheel and the caller’s voice comes across my car radio, which is silenced automatically. (This is Bluetooth technology.) The caller is a client wanting to reserve my free moving truck for later in the week. Stopping at a red light, I consult my Outlook calendar on the phone and confirm a date and time. At the next red light, I enter the reservation on my calendar, confident that it will be on my laptop next time I look at it.
Scenario #2: I have a buyer in my car and we pass a home that sparks his interest. I open the Zillow application on my phone, and it displays a satellite view of that location with a red icon for active listings and green icons for every other home. I can touch the red icon and instantly get the essential MLS information about the house. Touching the other icons gets me a similar amount of information about them, including when they sold and for how much.
Scenario #3: Another client is a flight attendant who flies internationally, so calling her on her cell phone is not practical or affordable when she’s in Rio or Paris or Hong Kong, but I can text her and get a text response the next time she’s on the ground, without worrying about what time zone she’s in. (If she had a smart phone, we could exchange email on our phones.)
Scenario #4: I come across a property that a client in New York would really like. I pull out my phone, shoot a video with my own narration, and email it to him on the spot.
There are countless other scenarios I could share. Another favorite device is my car’s navigation system. When showing homes, I can enter several addresses at a time, view them on the map, re-order them as I wish, and then let the voice guide me from one listing to the next without taking my eyes off the road to look at maps or directions.
Technology continues to make me more effective and productive — and, fortunately for my clients, I readily adopt it!
It’s awe inspiring how cellular and other technologies have converged to revolutionize the practice of real estate in recent years. The primary platform for this convergence is the “smart phone” — a generic term for the BlackBerry, Apple’s iPhone, Palm’s Pre and similar products.
Let me paint a few scenarios, and you’ll see what I mean.
Scenario #1: I’m in my car and my iPhone rings. I push a button on my steering wheel and the caller’s voice comes across my car radio, which is silenced automatically. (This is Bluetooth technology.) The caller is a client wanting to reserve my free moving truck for later in the week. Stopping at a red light, I consult my Outlook calendar on the phone and confirm a date and time. At the next red light, I enter the reservation on my calendar, confident that it will be on my laptop next time I look at it.
Scenario #2: I have a buyer in my car and we pass a home that sparks his interest. I open the Zillow application on my phone, and it displays a satellite view of that location with a red icon for active listings and green icons for every other home. I can touch the red icon and instantly get the essential MLS information about the house. Touching the other icons gets me a similar amount of information about them, including when they sold and for how much.
Scenario #3: Another client is a flight attendant who flies internationally, so calling her on her cell phone is not practical or affordable when she’s in Rio or Paris or Hong Kong, but I can text her and get a text response the next time she’s on the ground, without worrying about what time zone she’s in. (If she had a smart phone, we could exchange email on our phones.)
Scenario #4: I come across a property that a client in New York would really like. I pull out my phone, shoot a video with my own narration, and email it to him on the spot.
There are countless other scenarios I could share. Another favorite device is my car’s navigation system. When showing homes, I can enter several addresses at a time, view them on the map, re-order them as I wish, and then let the voice guide me from one listing to the next without taking my eyes off the road to look at maps or directions.
Technology continues to make me more effective and productive — and, fortunately for my clients, I readily adopt it!
Tuesday, October 13, 2009
The Job of a Listing Agent Is Not to Sell Your Home, But to Get It Sold
Published Oct. 15, 2009, in The Denver Post
There’s a popular misconception that the job of a listing agent is to sell your home. I beg to differ.
The real job of a listing agent — prior to negotiating a contract and representing you through the transaction — is to maximize exposure of your home to buyers and to the agents who represent buyers. Understand this, and you will find it much easier to select the right listing agent, because it’s far easier to compare the marketing skills and practices of different listing agents than it is to compare their selling abilities.
First, recognize that fewer than 10% of listings are sold by the agents who listed them. That’s why we have an MLS. Next, don’t mistake simply putting the home on the MLS (which is all many agents do) with true marketing.
True marketing to other agents as well as direct buyers begins, but must not end, with full data entry on the MLS, beyond those few fields that the MLS requires. It means, for example, putting in room dimensions and locations and using the full public remarks field to describe the home’s selling points. It means uploading ten high-quality pictures, not just one exterior picture. And it means producing a “virtual tour” using a good vendor (I prefer VisualTour.com).
MLS data entry is just the start. True marketing must include non-MLS efforts that are still targeted to agents as well as buyers, such as flyers to the agents’ offices and email addresses. The agent’s listings must be syndicated to 20 consumer sites like zillow.com and trulia.com, and must be man-ually entered on craigslist.org. The virtual tour vendor will do its own syndication, so it’s important for the description on the virtual tour to be more extensive than just captions for each photo.
Then there’s realtor.com, which will carry every MLS listing for free, but only in stripped down format with just four pictures and none of the public remarks from the MLS. The only way to get good exposure on realtor.com is to purchase “showcase” service and then utilize it. Some companies (like mine) buy that service for all their agents, but it’s up to the agent to actually go into realtor.com’s control panel and enter those enhancements.
Don’t make the mistake of thinking that because most listings are sold by other agents that getting on the MLS is all it takes. It takes so much more, and that should guide you in your agent selection.
How to Evaluate a Listing Agent:
Performance Criteria
Of course, you’ll want to know how many listings the agent has (and where), and this you can easily verify online. The real question, however, is how many of his listings have sold in the last 12 months and how many expired without selling. How many homes did he sell himself, including his own listings? But beware: agents know that you cannot verify this data, so you should be skeptical. If in doubt, get a different agent to obtain this data for you.
NOTE: If the agent says he or she has a buyer for your home, make him or her prove it by signing a two-day listing agreement (not on MLS).
Marketing Criteria
Do NOT ask how he will market your home. Instead, ask for the address of one or more current listings. How he markets other listings is an absolute predictor of how he’ll market yours. Google the addresses. Look for them on realtor.com and REcolorado.com and see how they are promoted compared to similarly priced homes.
On realtor.com, make sure that the agent has Showcase service which allows for headlines, 25 pictures, virtual tours, video tours, extensive sales pitch, etc. If he doesn’t have those on his current listings, he won’t have them on yours.
There’s a popular misconception that the job of a listing agent is to sell your home. I beg to differ.
The real job of a listing agent — prior to negotiating a contract and representing you through the transaction — is to maximize exposure of your home to buyers and to the agents who represent buyers. Understand this, and you will find it much easier to select the right listing agent, because it’s far easier to compare the marketing skills and practices of different listing agents than it is to compare their selling abilities.
First, recognize that fewer than 10% of listings are sold by the agents who listed them. That’s why we have an MLS. Next, don’t mistake simply putting the home on the MLS (which is all many agents do) with true marketing.
True marketing to other agents as well as direct buyers begins, but must not end, with full data entry on the MLS, beyond those few fields that the MLS requires. It means, for example, putting in room dimensions and locations and using the full public remarks field to describe the home’s selling points. It means uploading ten high-quality pictures, not just one exterior picture. And it means producing a “virtual tour” using a good vendor (I prefer VisualTour.com).
MLS data entry is just the start. True marketing must include non-MLS efforts that are still targeted to agents as well as buyers, such as flyers to the agents’ offices and email addresses. The agent’s listings must be syndicated to 20 consumer sites like zillow.com and trulia.com, and must be man-ually entered on craigslist.org. The virtual tour vendor will do its own syndication, so it’s important for the description on the virtual tour to be more extensive than just captions for each photo.
Then there’s realtor.com, which will carry every MLS listing for free, but only in stripped down format with just four pictures and none of the public remarks from the MLS. The only way to get good exposure on realtor.com is to purchase “showcase” service and then utilize it. Some companies (like mine) buy that service for all their agents, but it’s up to the agent to actually go into realtor.com’s control panel and enter those enhancements.
Don’t make the mistake of thinking that because most listings are sold by other agents that getting on the MLS is all it takes. It takes so much more, and that should guide you in your agent selection.
How to Evaluate a Listing Agent:
Performance Criteria
Of course, you’ll want to know how many listings the agent has (and where), and this you can easily verify online. The real question, however, is how many of his listings have sold in the last 12 months and how many expired without selling. How many homes did he sell himself, including his own listings? But beware: agents know that you cannot verify this data, so you should be skeptical. If in doubt, get a different agent to obtain this data for you.
NOTE: If the agent says he or she has a buyer for your home, make him or her prove it by signing a two-day listing agreement (not on MLS).
Marketing Criteria
Do NOT ask how he will market your home. Instead, ask for the address of one or more current listings. How he markets other listings is an absolute predictor of how he’ll market yours. Google the addresses. Look for them on realtor.com and REcolorado.com and see how they are promoted compared to similarly priced homes.
On realtor.com, make sure that the agent has Showcase service which allows for headlines, 25 pictures, virtual tours, video tours, extensive sales pitch, etc. If he doesn’t have those on his current listings, he won’t have them on yours.
Thursday, October 8, 2009
Sewage Back-Up Not Covered WIthout Separate Endorsement
Mike Bailey of State Farm tells me, in answer to a question, that sewage back-up is not covered in the standard homeowner's policy. If you have a finished basement, you'd be well advised to pay the extra $25 or so for an endorsement adding that coverage to your homeowner's policy. Good advice!
Saturday, October 3, 2009
Friday, October 2, 2009
Don't Miss "The Diary of Anne Frank" this weekend at Golden High School
I was blown away by how good this production was. I happen to sit next to the aunt of the 16-year-old student, Jamie Nagode, who played Anne Frank so amazingly, and I got some inside info -- like the fact that her prom date is the boy who plays Peter in the production. In one scene Anne and Pete share the first kiss for each of them... Their roles appear to have drawn them closer to each other.
The cast was uniformly great in their acting, and were great at staying in character while the action was elsewhere on stage. Especially nice was the fact that they all stayed in character and on stage throughout the 15-minute intermission. As Jamie's aunt explained, "They couldn't leave their hiding place, after all."
The audience gave Jamie in particular a standing and prolonged ovation at the end, and she certainly deserved it.
Don't miss this production. The last two performances are Saturday, Oct. 3 at 2pm and 7pm. And if you do miss it, ask to borrow the DVD of tonight's performance which I ordered during intermission!
The cast was uniformly great in their acting, and were great at staying in character while the action was elsewhere on stage. Especially nice was the fact that they all stayed in character and on stage throughout the 15-minute intermission. As Jamie's aunt explained, "They couldn't leave their hiding place, after all."
The audience gave Jamie in particular a standing and prolonged ovation at the end, and she certainly deserved it.
Don't miss this production. The last two performances are Saturday, Oct. 3 at 2pm and 7pm. And if you do miss it, ask to borrow the DVD of tonight's performance which I ordered during intermission!
Appraisers Don't Give Value to Solar Installations -- Here's Why
I spoke today with Beth Hanlon, an appraiser active in Jeffco and the Foothills, and she said that she cannot assign more than token value (under $5,000) to a photovoltaic installation on a home, because the underwriters would disallow it. This, she said, would apply regardless of how recent and how productive the PV (or solar thermal) array is. For instance, I installed a $60,000 PV and $10,000 solar thermal system on my own house a couple years ago, and these two systems save me hundreds of dollars on my electric and gas bills every month. (My energy bill for this 3,600-sq.ft. ranch is about $50 per month.) No matter, she said. She couldn't get even a reasonable percentage of that investment approved by any underwriter. Moreover, if the installation detracts from the curb appeal of the house, Beth will actually deduct for it. (Since my house faces north, you can't see either of my solar installations from the front.)
If the Obama administration wants to promote clean energy such as PV and solar thermal (not to mention geothermal, which is never visible from the street and an even greater investment), it should consider regulating the valuation of these systems by underwriters. For example, assign a reasonable life (15 years at least) to these systems, and require a minimum valuation based on its bona fide installation cost, depreciated over that lifetime.
A homeowner who installs an energy-saving, greenhouse gas-reducing system should be able to recoup at least as much on that investment, percentage wise, as they do by updating a kitchen or bathroom! The kind of regulation I'm proposing has the additional advantage of not costing any federal tax dollars.
Moreover, why spend tax dollars incentivizing people to install such systems when the return on investment only applies if you keep the house forever and not if you sell it! Under the current situation outlined by my appraiser friend, I would NOT advise anyone who isn't going to live in their house for at least 10 years to invest in a PV or solar-thermal or geo-thermal system other than just to feel good about doing so.
If the Obama administration wants to promote clean energy such as PV and solar thermal (not to mention geothermal, which is never visible from the street and an even greater investment), it should consider regulating the valuation of these systems by underwriters. For example, assign a reasonable life (15 years at least) to these systems, and require a minimum valuation based on its bona fide installation cost, depreciated over that lifetime.
A homeowner who installs an energy-saving, greenhouse gas-reducing system should be able to recoup at least as much on that investment, percentage wise, as they do by updating a kitchen or bathroom! The kind of regulation I'm proposing has the additional advantage of not costing any federal tax dollars.
Moreover, why spend tax dollars incentivizing people to install such systems when the return on investment only applies if you keep the house forever and not if you sell it! Under the current situation outlined by my appraiser friend, I would NOT advise anyone who isn't going to live in their house for at least 10 years to invest in a PV or solar-thermal or geo-thermal system other than just to feel good about doing so.
Tuesday, September 29, 2009
Keeping Listing Agents Honest - A Modest Proposal
Recently I was competing for a listing with another agent. We were both asked how much real estate we had sold in the last 30 days. For myself I guessed (correctly) about $1 million, but the other agent said $1.7 million. When I got home I looked him up on the MLS. He had sold one small property in January and another in February -- nothing since! Agents can indeed lie to prospective sellers and the seller has to take their word, because there is no way to verify past sales, only current listings!
Back in April 2008, I competed with an agent for a $685,000 listing (which I got). The seller showed me the listing presentation which the other agent had left behind. That agent claimed to be the city's top selling agent for over 10 years straight selling over 100 listings per year. Since I'd never heard of him, I looked him up on the MLS and found that he had averaged under 20 sold listings per year in the last three years and had not sold any of his own listings or any other agent's listings in the previous 2 years! (He claimed he had a database of buyers waiting to buy a "home like yours.") It was outrageous, and I wrote about it without naming him in my newspaper column. (www.ecentral.com/members/jimsmith/Columns/Apr24YH.pdf) A couple colleagues guessed who I was talking about, which surprised me! My only regret is that I didn't file an ethics complaint against this agent, because he is a Realtor and bound by the Code of Ethics which says you should not lie about your statistics.
I'm thinking of creating a website on which sellers could get accurate performance statistics on any agent usng the MLS. It would involve the seller giving the agent's name and someone with MLS access would look the agent up on the MLS and send a report. Do you think this is a good idea?
PS: I don't want to do the analysis myself -- and don't have the time, either. But it requires access to the MLS to do the analysis. One solution would be for the local Realtor association to farm out the assignments to volunteer members whose reports would be anonymous. This should not be a way for one agent to win clients away other agents, just to keep agents honest and give sellers some way to verify perfomance claims. I think we owe this integrity check to consumers. Don't you?
Back in April 2008, I competed with an agent for a $685,000 listing (which I got). The seller showed me the listing presentation which the other agent had left behind. That agent claimed to be the city's top selling agent for over 10 years straight selling over 100 listings per year. Since I'd never heard of him, I looked him up on the MLS and found that he had averaged under 20 sold listings per year in the last three years and had not sold any of his own listings or any other agent's listings in the previous 2 years! (He claimed he had a database of buyers waiting to buy a "home like yours.") It was outrageous, and I wrote about it without naming him in my newspaper column. (www.ecentral.com/members/jimsmith/Columns/Apr24YH.pdf) A couple colleagues guessed who I was talking about, which surprised me! My only regret is that I didn't file an ethics complaint against this agent, because he is a Realtor and bound by the Code of Ethics which says you should not lie about your statistics.
I'm thinking of creating a website on which sellers could get accurate performance statistics on any agent usng the MLS. It would involve the seller giving the agent's name and someone with MLS access would look the agent up on the MLS and send a report. Do you think this is a good idea?
PS: I don't want to do the analysis myself -- and don't have the time, either. But it requires access to the MLS to do the analysis. One solution would be for the local Realtor association to farm out the assignments to volunteer members whose reports would be anonymous. This should not be a way for one agent to win clients away other agents, just to keep agents honest and give sellers some way to verify perfomance claims. I think we owe this integrity check to consumers. Don't you?
Wednesday, September 23, 2009
Regulators Prove the Road to Real Estate Hell Is Paved With Good Intentions
When I was a journalist in New York City, I was drawn to interview the highly successful police commander of The Bronx, Tony Bouza. I’ve never forgotten the secret of his success which he shared with me. He said — paraphrased here — that if you want to find out what’s not really working in any organization, don’t talk to the chiefs, talk to the indians.
I am reminded of Chief Bouza every time I read about the regulatory “fixes” being handed down from on high. It’s as if those in power are grasping tor dramatic fixes without any input from those involved in the day-to-day business of real estate..
Twice, for example, I have written about the new appraisal nightmare called the Home Valuation Code of Conduct (HVCC) forced upon our industry by New York Attorney-General Andrew Cuomo. Under threat of litigation, Fannie Mae and Freddie Mac agreed to institute rules to keep loan officers and real estate agents from selecting or communicating with appraisers, as the “cure” for appraisal fraud.
The result has been disastrous. Everything we in the business had predicted (and more) has come true, such that 37% of Realtors surveyed by NAR this June — just one month after implementation of the HVCC — said they had had at least one transaction fail to close because of this stupid regulation. Space doesn’t permit me to go into all the details, but you can read them in my Jan. 22nd and May 14th columns at www.JimSmithColumns.com.
Now here comes yet another ill-conceived regulatory change threatened for Nov. 1 implementation, this time from the FHA, pertaining to condo approvals.
For years, it has been the rule that in order to qualify for FHA financing, a condo must be in a complex with at least 50% owner occupancy. This was easy to calculate because the condo management office could readily provide this information.
Well, starting Nov. 1, 2009, it will also be required that no more than 30% of the units in that complex be financed by FHA loans. The management company won’t have this information. The only way to verify this would be to pull from public records ALL the deeds of trust for all the units in the complex — an inconceivable hurdle.
Applying Chief Bouza’s lesson, I’d ask regulators to talk to Realtors and loan officers, not just themselves, before issuing such regulations.
[Published Sept. 24, 2009, in the Denver Post's YourHub.com section. Previous columns can be found online at www.JimSmithColumns.com.]
I am reminded of Chief Bouza every time I read about the regulatory “fixes” being handed down from on high. It’s as if those in power are grasping tor dramatic fixes without any input from those involved in the day-to-day business of real estate..
Twice, for example, I have written about the new appraisal nightmare called the Home Valuation Code of Conduct (HVCC) forced upon our industry by New York Attorney-General Andrew Cuomo. Under threat of litigation, Fannie Mae and Freddie Mac agreed to institute rules to keep loan officers and real estate agents from selecting or communicating with appraisers, as the “cure” for appraisal fraud.
The result has been disastrous. Everything we in the business had predicted (and more) has come true, such that 37% of Realtors surveyed by NAR this June — just one month after implementation of the HVCC — said they had had at least one transaction fail to close because of this stupid regulation. Space doesn’t permit me to go into all the details, but you can read them in my Jan. 22nd and May 14th columns at www.JimSmithColumns.com.
Now here comes yet another ill-conceived regulatory change threatened for Nov. 1 implementation, this time from the FHA, pertaining to condo approvals.
For years, it has been the rule that in order to qualify for FHA financing, a condo must be in a complex with at least 50% owner occupancy. This was easy to calculate because the condo management office could readily provide this information.
Well, starting Nov. 1, 2009, it will also be required that no more than 30% of the units in that complex be financed by FHA loans. The management company won’t have this information. The only way to verify this would be to pull from public records ALL the deeds of trust for all the units in the complex — an inconceivable hurdle.
Applying Chief Bouza’s lesson, I’d ask regulators to talk to Realtors and loan officers, not just themselves, before issuing such regulations.
[Published Sept. 24, 2009, in the Denver Post's YourHub.com section. Previous columns can be found online at www.JimSmithColumns.com.]
Sunday, September 20, 2009
Mortgage Issues Exacerbate the Already Difficult High-End Real Estate Market
(Published 9/17/09 in the Denver Post)
By Jim Smith, Realtor
My August 27th column detailed the seller’s market for lower-priced homes and the buyer’s market for higher-priced homes. In that column, I attributed this dichotomy primarily to the $8,000 first-time home buyer’s tax credit, which naturally favors low-priced homes (and which expires on Nov. 30th).
One could reasonably argue that the real estate recovery we’re witnessing now is artificial due to that tax credit, especially when you look at the slowness in the market for homes over $400,000. For example, I have a wonderful solar-powered home in Golden’s Mesa Meadows subdivision listed at $500,000 that hasn’t had a single showing in the last three weeks, even though it is well priced — without factoring in the free electricity from the sun!
Yet, homes under $250,000 are getting multiple offers and even selling above their listing prices.
So what’s going on?
Yes, the tax credit is disproportionately stimulating the lower-priced market, but financing has become disproportionately more difficult for the higher-end market.
When you have to borrow over $417,000, you are in the “jumbo” not “conventional” mortgage market, and what was possible just two years ago is no longer possible, according to the mortgage brokers I deal with most.
Previously, a common strategy was to get a $417,000 first mortgage plus a second mortgage covering the balance up to 90% of the purchase price. Putting 10% down in that market was much more doable for buyers than today’s requirement of getting a single jumbo mortgage for only 80% of the purchase price. Second mortgages are simply not available anymore. FICO score and debt-to-income requirements are also far more stringent now.
At the low end, buyers can put down as little as $1,000 (see my previous columns), but 20% of a high-end home is $100,000 or more, and those buyers are often unwilling to liquidate depressed stocks or other assets to come up with a 20% down payment.
Such buyers could take out a home equity loan against another property to provide additional cash, but nowadays, unlike before, you can only borrow up to 80% of that other property’s current value, vs. 90% or 100% in the past.
Until these financing constraints are addressed, a recovery in the high-end market seems unlikely to me.
By Jim Smith, Realtor
My August 27th column detailed the seller’s market for lower-priced homes and the buyer’s market for higher-priced homes. In that column, I attributed this dichotomy primarily to the $8,000 first-time home buyer’s tax credit, which naturally favors low-priced homes (and which expires on Nov. 30th).
One could reasonably argue that the real estate recovery we’re witnessing now is artificial due to that tax credit, especially when you look at the slowness in the market for homes over $400,000. For example, I have a wonderful solar-powered home in Golden’s Mesa Meadows subdivision listed at $500,000 that hasn’t had a single showing in the last three weeks, even though it is well priced — without factoring in the free electricity from the sun!
Yet, homes under $250,000 are getting multiple offers and even selling above their listing prices.
So what’s going on?
Yes, the tax credit is disproportionately stimulating the lower-priced market, but financing has become disproportionately more difficult for the higher-end market.
When you have to borrow over $417,000, you are in the “jumbo” not “conventional” mortgage market, and what was possible just two years ago is no longer possible, according to the mortgage brokers I deal with most.
Previously, a common strategy was to get a $417,000 first mortgage plus a second mortgage covering the balance up to 90% of the purchase price. Putting 10% down in that market was much more doable for buyers than today’s requirement of getting a single jumbo mortgage for only 80% of the purchase price. Second mortgages are simply not available anymore. FICO score and debt-to-income requirements are also far more stringent now.
At the low end, buyers can put down as little as $1,000 (see my previous columns), but 20% of a high-end home is $100,000 or more, and those buyers are often unwilling to liquidate depressed stocks or other assets to come up with a 20% down payment.
Such buyers could take out a home equity loan against another property to provide additional cash, but nowadays, unlike before, you can only borrow up to 80% of that other property’s current value, vs. 90% or 100% in the past.
Until these financing constraints are addressed, a recovery in the high-end market seems unlikely to me.
Friday, August 21, 2009
My first blog - taking social networking workshop
Today I begin a five-week social networking workshop with Susan Stewart. I'm looking forward to expressing myself in new and different ways. I already write a weekly real estate column which appears every Thursday in the Jefferson County editions of the Denver Post's YourHub section. You can read the past 2 years' worth of columns at www.JimSmithColumns.com. I'll start posting them each week in my blog.
Subscribe to:
Posts (Atom)