Trulia.com reports that last month, sellers lowered asking prices on 22 percent of homes, totaling $26.7 billion. There may be many reasons why, but clearly the role of the real estate professional in pricing a home is growing evermore vital in a changing market.  This will only increase in the years to come as the Mortgage Bankers Association this week gave buyers and sellers another reason to move with a sense of urgency, saying they believe thirty-year fixed-rate mortgages will creep up to the high six percent range over the next two years.

In good news/bad news reports, the “State of the Nation’s Housing” study from Harvard University’s Joint Center for Housing Studies predicts household growth could approach 15 million from 2010 to 2020, thanks to the emergence of the echo-boom and baby-bust generations, if employment picks up.  However, the US Labor Department reported only 41,000 private sector jobs last month, this is only one-fifth of the April number.

In other news from Washington, in what has been dubbed the “the mother of all bailouts,” Fannie and Freddie have been de-listed from the NYSE.  These government sponsored enterprises, which own or guarantee almost 31 million home loans, will need at least $160 billion to be fixed and can spiral up to $1 trillion.  Even the “low end” of this estimate surpasses the amount spent on bailouts of American International Group, General Motors or Citigroup.

Lastly, if you have homebuyers considering a fixer-upper with limited funds to remodel it, look into the FHA 203(k) Loan. A variety of home repairs, from painting to room additions to kitchen remodeling, can all be financed with the loan.

To all dads, Happy Father’s Day!

They identified 5 key attributes.

1. Strong Leadership

Leadership was determined to be the single greatest predictor of success.

2. Ability to attract and retain talent

Research conducted by Real Trends concludes there is a direct correlation between an increase in closed sides and an increase in the number of sales associates.

3. Focus on your model

There is no evidence that one business model is any better than another. What is key is choosing your business model, committing to it and building value around it. Companies that try to be all things to all people ultimately disappoint themselves and others. Five types of business models were identified:

• Graduated commission plans
• High commission concept
• Capped company dollar
• “Freedom shops”
• Online and/or discount models

An interesting observation made was that the more commission plans a company has seems to directly relate to less company dollar. In other words, more plans equals fewer company dollars. The advice given was to keep commission plans simple with limited options that stay true to your operating model and value proposition.

4. Customer Service Focus

We have been focusing the last 10 years on creating favorable online impressions with our clients. However, when human contact is disappointing, that favorable impression is lost. Truly successful tools and services recognize that customers demand responsiveness. We have to do a better job at customer service if we want to be a great real estate firm.

5. Ancillary services are part of the core offering, not add ons

Firms can no longer view mortgage, title, escrow and insurance as add ons. They are necessary core competencies to the successful real estate firm.

I think these 5 attributes make a great score card for any real estate broker to do a self-evaluation on their business. How would you rate your firm in these areas? How would your agents rate you?

Thanks to the REAL Trends team for a great conference.

In other news, even those looking to get out of their homes by defaulting on their home loans are having difficulty due to a backlog in the system. Others, who once thought they could count on equity in their homes as a financial safety net, are finding their home may no longer be worth enough. It’s no wonder, then, that some are “strategically defaulting” on their homes because it can be difficult to see the value in times like these. We’ve got our work cut out for us.

With all the turmoil in the mortgage financing world, there has been an increase in people buying homes with cash. Many believe the transactions highlight the sentiment among investors that real estate prices have nowhere to go but up. For those looking for a foreclosure, with cash or without, there are new quick-and-easy auction Web sites. Might be worth checking out?

Moving on… it’s not surprising, given the falling February construction of new homes and apartments, that sales on new homes fell to the lowest level on record in February. The good news is, though, the rate of decline has slowed since February 2009 and sales of existing homes, although down, are 7 percent higher than a year ago. Many are blaming the ferocious weather that swept many parts of the county. If this is true, we can all celebrate the sun finally coming out. Hopefully home buyers will find it as inspiring as agents do!

Mortgage rates near record lows and the government tax credit have not made a big difference in the housing market, some argue. It raises the question: how do we convince nervous home buyers that things will get better? One way is to share the news that, according to bond firms, the market is now stable enough to prevent a big jump in mortgage rates. Any other advice out there?

Still, as we’ve said before, we should expect to see a surge of home sales in April as the home buyer tax credit comes to a close. Some states and other organizations are doing what they can to help the market, before and after this deadline. California is chief among them, with the Golden State launching a $200 million tax credit on May 1^st to further incentivize home buyers in the state to stay active when the federal tax credit ends. We look forward to seeing how it works!

Like so many things, the housing market is all about how you look at the situation. A city’s recent downfall could be for the better, as two recent rankings found. Memphis, for instance, ranks eighth in underwater housing markets, but also ranks first in a list of cities for real estate steals. Similarly, some may look at an “as-is” property and see only run-down, but others could see a beautiful fixer-upper. For those interested in investing in “as-is” properties, there are programs, including the Federal Housing Administration’s 203k loan program, which are designed to help you make the most of it.

Due to the recession, 10 percent of 25-to-34-year-olds have moved back home with their parents. In a few years, this group has the potential to make a big splash in the real estate market as they look to move out and buy their own homes. When you are ready to make the move, we are here for you! But let’s hope you get out there soon and take advantage of the market, as new numbers out this week suggest that by mid-2012 the market will once again become a sellers’ market. Do you think it will be sooner?

One sight that spring has sprung: homeowners are starting to invest in their yards by planting gardens and installing decorative elements, getting ready for outdoor entertaining. Another group making the most of the times are 55+ communities, many of which recently relaxed age constrictions and opened the floodgates to “young blood” (that is, 45 and older). Well, party on!

On to other news, Facebook is playing a growing role in how people get news, according to a Web measurement firm. I say, there is no reason why we in the real estate industry can’t share in this dissemination of news. Start sharing interesting local and real estate articles on your pages. And, while we are talking about communication, these days more people are texting rather than calling on mobile phones. We need to make sure we’re communicating how our clients communicate and, now, that means texting. What communication tools are you finding most important?

In marketing news this week, once again there is evidence that the right strategy targeted at the right audience is the best marketing plan. Whether it’s a marketing campaign like Skittles’ high-tech and high-impact social media campaign or as simple as a man in a chicken suit clucking around at a St. Patty’s Day parade, the first step is knowing your audience. The same philosophy goes for email versus social media marketing. Turns out both are effective and complementary.

If you’re planning your trip to NAR Midyear and haven’t yet booked your hotel, Google is testing a new feature within Google Maps that displays specific hotel prices. What an easy way to shop around! Or, if you recently had an unpleasant hotel stay, the hotel industry is now reportedly listening and reading customer reviews and complaints. We can learn from this strategy too. As I’ve said before, listening to feedback – bad or good – from clients is paramount to success.

In perhaps surprising news, it was reported this week that Honolulu and Green Bay, Wisc., are the leading cities for green appliance households. Way to go! Please share your secrets for widespread adoption!

And finally, starting this week you can now gift iPhone applications. I know what is on my birthday wish list…

The good news is the U.S. economy grew at an accelerated pace in the last quarter of 2009 and, in January, consumer confidence rose for the third consecutive month. These national indications of an economic improvement possibly played a part in the 21 percent surge of mortgage applications in January, returning to pre-holiday levels. Additionally, the number of people preparing to buy a home in December rose one percent from the month before. The flurry of activity is certain to help one of the largest homebuilders in the United States, D. R. Horton—which reported its first quarterly profit in almost three years—continue to be “in the black.”

In Trulia’s latest American Dream survey, three in four Americans consider owning a home a part of achieving their personal American dream. Thirty-seven percent surveyed, however, believe President Obama is not helping to restore homeownership. The proposal from the Obama administration to offset a slash on upfront premiums on FHA mortgage insurance will increase annual premiums by 70 percent. How do you think this will alter next year’s American Dream survey of the president? It will also be interesting to see what the future holds for Fannie Mae and Freddie Mac as the Obama administration continues to “monitor the situation” closely. Stay tuned…

In what may become a new American dream of sorts, some are about to start fast-flipping houses as the FHA is revising its long-standing “anti-flipping” rules. The revised rules will allow flippers to sell their flipped properties as soon as they are ready—which is often before the former 90-day limit. Let the flipping begin!

Not only are first-time home buyers the largest share of home sales in many markets, but they also represent the fastest-growing segment. At the same time, second homes and move-up homes are the most rapidly shrinking segment. With this segment staying in their homes and first-time home buyers looking to buy, it will be interesting to see where these two will meet… likely at a stalemate in the middle. The much anticipated Realtors Property Resources, which will give realtors access to data, from tax assessment to demographic information, on every property in the country will begin beta testing in March. How do you think this will change our jobs and reach these two segments?

For those communicating with current and potential clients through mass emails, it is safe to assume that one in five people never receive your communication, according to new research. It is essential to follow up with other forms of communication and, according to new research from Nielsen, two channels that may be worth focusing on are online advertisements and traditional public relations efforts. That’s because newspaper Web site traffic increased 5.5 percent in the fourth quarter of 2009, over a year prior. Turns out traditional media isn’t dead!

On to social media, while most of us would kill for 6.2 million new customers a month, for Twitter that number represents a 20 percent decrease in new users from its July 2009 peak. The average user, however, is more engaged today than they were six months ago, so Twitter must be doing something right! Part of the reason consumers may be more engaged could be because brands are engaging them. Skittle’s, for example, re-launched its Web site allowing consumers to share all its content automatically through Facebook and Twitter. What a great way to give consumers an opportunity to spread the word! Certainly we can all learn from this.

In marketing news… Big brands like Microsoft, Kraft Foods and Nestle recently began reinventing the 1950’s Tupperware party by enlisting consumers to throw parties in their homes and sell products directly to their friends and families. Looks like they understand the home-centric mentality of today’s consumer – something our industry has been saying for months. Glad we’re all on the same page!

Ever since the news of the expanded and extended home buyer tax credit had been confirmed I had been encouraging any agent that would listen about the importance of getting information on this program out to their communities. The initiative Joe was explaining would do just that. I only wish I thought of this myself!

In early January, Better Homes and Gardens Rand Realty launched www.HomeBuyerTaxCredit.com. A site dedicated to answering consumers’ questions about the tax credit, whether they qualify and what they need to do next.

The site features some great content including video and free downloads. But the center piece is the Eligibility Test. After answering 10 questions (which you can do is less than 2 minutes), you are then moved onto the next section which determines if you qualify for the first time home buyer tax credit or the move up tax credit. With just a couple minutes of time invested you know whether you qualify or not. For a consumer this tool is very valuable.

Many buyers will procrastinate to the last minute to take advantage of the home buyer tax credit. When they are ready they will need information quickly and will turn to the Internet to find that information. HomeBuyerTaxCredit.com is just the tool to assist buyers and real estate professionals along the way. The site is unbranded and is a valuable resource regardless of which company or brand you are associated with.

Congrats to Better Homes and Gardens Real Estate Rand Realty for a great idea and powerful execution.

With all that in mind, people are getting creative with mortgages and refinancing for 15-year loans, as opposed to the traditional 30-year. Also, as we discussed last week, there is a growing demand for rentals, evidenced again this week by Zillow’s new rental search, which offers visitors the ability to use a monthly payment tracker to search for homes and rentals they can afford side by side on a map.

The environment has taken center stage this week while world leaders gather in Copenhagen at the climate summit. It should be no surprise, then, that eco-friendly housing programs came to light. A new report by Vice President Joe Biden projects that the Recovery Act will help fund the installation of smart meters, which track energy usage by month, week and even hour in 18 million homes. Additionally, a proposed “cash for caulkers” program will aim to encourage homeowners to invest in things like caulking air leaks and installing insulation and more efficient heating and cooling equipment. Although in its infancy with significant details yet to be worked out, the plan is estimated to save homeowners up to 20 percent on heating and cooling costs. In my opinion, anything that saves homeowners money and stress is great for our industry!

In marketing news, according to RISMedia, “Ninety percent of agents and brokers fail in their Internet marketing efforts. In most industries, failure rates of 90 percent results in a complete change in the way things get done. In real estate, however, the same old things that don’t work continue to be treated as ‘must haves’ for every agent.” So this brings me to the question: What are we doing wrong? If 90 percent are failing, that does mean 10 percent of us are not. We need to collaborate and share our best practices so we’re not making each other’s mistakes. Leave a comment below and tell us all what has worked for you.

On the social media front or, in this case, the almost anti-social media front, research from ShareThis and Nielsen Company confirm that email is still the channel preferred for sharing content. In fact, email beat Facebook by 13 percent and Twitter by 40 percent as the preferred method. This is especially interesting as we consider how to communicate with potential or existing consumers. Although social networking can be beneficial, it is important to remember that email is still far more important – at least for now.

Also this week, HomeFinder.com launched an “Open Houses” iPhone application dedicated to helping homebuyers find open houses and connect with a local Realtor. An iPhone truly is a homebuyer’s best friend these days and we hope you’ll all consider downloading these helpful applications, including our own, to help make your and your homebuyers’ and sellers’ lives easier.

And lastly, although it may be unrelated to real estate, in last week’s blog I dreamed of a day when an application would do my shopping for me. Well, in less than one week, that day arrived. Sears this week launched a “personal shopper” iPhone application. Do you think they read my blog??

• Inventory levels begin to fall, implying an initial increase in consumer demand
• Prices still have downward pressure as foreclosed and other lower-priced inventory sell first
• Sides flatten and even increase, as consumer confidence returns and more homes sell

With this information in view, please note the table below showing closed sales and average price in September and August 2009 vs. one year ago. You will observe that closed sales mostly flattened in August and increased in September year-over-year in all regions except the Midwest, while home prices showed some stabilization. It is important to note, however, that three of four regions in the U.S. actually experienced a year-over-year increase in closed sides during September.

Experts expect continued improvement through 2010

Based on a survey released by the National Association for Business Economics, home prices are expected to rise by 2 percent next year and 80+ percent of the economists surveyed by the NABE think the recession is over and recovery has begun. However, economists do warn that expansion will be gradual due to persistent unemployment. Additionally, sales of existing homes will rise by 11 percent in 2010, [Source: Associated Press, Alex Veiga (10/13/2009)] and Jay Brinkmann, Chief Economist of the Mortgage Bankers Association, recently predicted that sales of new homes will climb by a strong 21 percent in the new year. Finally, mortgage rates are expected to rise to 5.6 percent (low by historic measures) by the end of 2010, yet mortgage applications are still expected to increase by 12 percent [Source: Associated Press, Mae Anderson (10/12/2009)].

What can real estate professionals do to prepare?

All in all, the picture is clear. Recovery is upon us and the time to prepare ourselves for a stronger real estate market has arrived.  So what exactly can real estate professionals do in order to put themselves in the best position for success? Below are just a few suggestions to get the thought process going.

• Your confidence level is a self fulfilling prophecy – Keep in mind that market confidence is brought about largely by professionals bringing timely and accurate information to consumers. Your clients need your good guidance in order to navigate these positively changing waters.
• Consumer confidence doesn’t change overnight – Remember to be patient with one another. After all, we have truly been ‘through the mill’ over the last few years and changing consumer attitudes takes time. It is also true, however, that consumer awareness of trends often lags behind market realities, so some guidance now can help them make timelier and more cost effective decisions.
• Get more than one “no” from a mortgage company – Underwriting rules have tightened causing some mortgage applications to be denied. But nothing is preventing a determined buyer from seeking another opinion on their credit-worthiness. So don’t give up!
• If a property doesn’t appraise, look to get a second appraisal – In markets like the present one, banks and appraisers sometimes over react to the downside. Real estate professionals and consumers alike should therefore not hesitate to ask “why didn’t this appraise?” Open communication is the key here.
• Don’t hesitate to write offers – Resist getting tied up by traditional thinking and just make the offer! It’s kind of like baseball… once the ball is in play, anything can happen.
  
• “Do something today (that you did not do yesterday) to enhance your tomorrow” [Dominic Sacci, GM Better Homes and Gardens Real Estate Wilkins and Associates] – This statement sums things up beautifully. Positive change is the key and we should all expect business techniques to keep evolving. So get comfortable with change, embrace the new and watch the magic happen.

Here’s to your success!

Real estate auctions provide a good example of this. Many auctions protect Realtor involvement and are therefore an additional revenue opportunity for Realtors. However, a large number of properties being auctioned  require special financing that allows for properties being purchased to be rehabbed in some fashion. Auction companies have only one interest: to get the property sold.  So often the clauses “financing not available” and “proof of funds required” will be noted on specific properties. This means that the buyer needs to demonstrate that cash is readily available for purchase and that no allowance is being made for conventional mortgage processing. For this reason, many people who purchase property at auction have investor financing that allows not only for the purchase of the property but also provides funding for needed home improvements. Often times, there is even a moratorium on payments permitted for several months, to allow for completion of repairs before payments begin.

So many examples of special financing exist that it almost staggers the mind. Below is just a quick and very limited sampling of the many choices that homeowners and investors have in selecting financing type for their properties. Each has it’s own unique purpose and audience, but rest assured there are tools available for all type of buyers and sellers.

For Homeowners

• Fannie Mae 97 – 3% down (or less), up to 38% qualifying ratio
• Fannie Mae 2-4 unit program – Owner occupied up to 4 units, portion of rent used to qualify the buyer, dedicated to rural areas (under 50K residents)
• 203K – No PMI, moratorium on payments for 6 months to allow for repairs to be completed
• Seller financing – Points, pre-payment penalty, term and interest rate are all negotiable

For Investors

• Hope 3 Program – For purchase and refurbishing
• Title One – For home improvement, no appraisal required, no equity needed, takes second or third position, no pre-payment penalty, flat rate for up to 20 years
• Portable mortgages – Variable term, reusable loan
• Wrap-around mortgage – Can facilitate a purchase while leaving existing loans in place
• Seller financing – Allows sellers to take payments over time, creating residual-type earnings

The possibilities and interplay between the types of financing available are too numerous to discuss in the context of a blog.  Some investors that I have spoken with and read about have identified as many as 200 different ways to finance a real estate transaction, yet many real estate salespeople can name only three!

It is time to act! Some steps that can be taken include:

1. Pursue training in the area of creative finance
2. Take a course in real estate investing
3. Take a situational approach to financing. Look for creative ways to faciliate each sale and present them
4. Ask every seller if they are in a position to consider owner financing and explain how it works
5. Think of yourself as a “transaction coordinator”
6. Use your imagination…there is gold there!

]]> http://bhgrealestateblog.com/2009/10/01/future-selling-will-require-increased-knowledge-of-financial-tools/feed/ 4