Hiya Steve ~
Must be tuff being married to Kris
I write an annual business plan at the beginning of each year.
It has the requisite mission statement (not to make a certain amount of money, but rather about the kind of service I provide), strategies, tactics, and also a list of things to change and random thoughts.
That used to work well, but real estate is changing so rapidly now that I find I must rewrite it every quarter because what worked at the beginning of the year may not be effective 90 days later.
We are in very fluid times now with lenders going out of business, liquidity challenges, too many agents, confused clients, etc.
I am now in the process of writing my 2007 Year-End Plan, which will be how to survive and thrive in the remaining four months of this year.
I have some ideas on how to increase my market share by taking advantage of the current chaos, as well as ensuring that I work with clients who have lately come to realize it is to their advantage to work with an experienced agent vs. a discounter or new agent.
There IS opportunity in the current situation and I AM finding good clients who want to buy a home to live in vs. using it as their get-rich quick vehicle.
That in itself is encouraging!

Phil – Great points! Particularly the shift-on-the-fly nature which is another business plan imperative today. Kris and I typically review and tweak our BP one a year. This year, we are into our third iteration. Not reacting quickly enough to changing conditions will adversly impact your clients and therefore can be fatal to your business.

>Must be tuff being married to Kris.

??!! I is a veritable picnic, Phil!

Sincerely, The Much-Maligned Wife

The coming bailout may cause agents to work out a new business plan for the increase in foreclosures on the market. Bailout or not, the economy will still be in a prolonged and severe recession. Even if Federal aid prevents millions of foreclosures from happening, all of the home equity accumulated during the bubble years will be gone. Debt reduction and restructuring will not stop home prices from falling, and will not make homes easier to sell. After all, those looking to buy homes will no longer have access to the easy credit that made bubble prices possible in the first place. Home prices are a function of what future buyers can afford – not what past buyers paid. If new buyers are required to make 20% down payments, fully document their income, and fully amortize a fixed rate mortgage, they will not be able to pay nearly as much as what current owners paid during the bubble.

Joey from LA – Well, that was quite the doom and gloom comment. You covered a lot of ground though, so I’ll try to take your comments one at a time:

– True. Just not for us. We know agents who are focusing there entire business plan on short sales and REO’s, but it’s at the expense of their core business. We have made the business decision not to do this. Thankfully, our client base and network is strong enough to give us this flexibility. The current flushing out of the market is a relatively short term condition (12-18 months). While we prepare a business plan for each year, Kris and I gear our business goals based upon a much longer term time horizon.

– I actually am of the belief that the government should keep out of this mess, except in a couple of areas such as lending reform. The free market, while obviously not perfect, does a better job of straightening things out more quickly, even if more painfully. Sadly, many more people will be financially damaged over the next year. But it serves as a reminder that there is risk in all investments, including the investment in a primary residence. Too many people believed that they were “entitled” to make an overleveraged purchase with risky financing and expect huge and fast returns.

– At this point, I think it’s too early to suggest that there will be a “prolonged and severe recession”. Yes, the economy has been weakened by the cyclical downturn and recent excesses in the housing market. How severe and prolonged it will be and, indeed, whether it will even trigger a recession (by definition 6 consecutive months of contraction in the economy) remains to be seen.

– If you’re referring to those who purchased in the last 2 years and overleveraged their purchase than I would tend to agree with you. Beyond that prices would have to drop 50% or more to evaporate the equity gains from the beginning of the appreciation cycle in 1997. Not happening. Not even close.

– Wrong. Debt reduction and restructing is for the sole purpose of creating the opportunity for a financially troubled homeowner to KEEP their property and not be forced to dump it through a short sale or foreclosure. Fewer forced sales means less inventory/supply.

– This is true for those less qualified individuals with little or no down payment, as it should be. But a prospective buyer with decent credit still has access and numerous choices in the credit markets.

– Also true. But you oversimplify. Home prices are a function of supply and demand, with the numerous and complex variables inherent in this basic principle.

– Theoretically true, again. As it should be. I would only add that there remain numerous financing alternatives to your scenario, subject to decent credit and documentable income. One of the most significant causes of the current market condition was the fact that lenders financed too many buyers with poor credit, did not document income and, worse, did these loans with little or no down payment. If one has no money in the deal there is little incentive to hang in there when things go south.

Whew, this was too way much brain damage for a Saturday morning. I think I’ll go clean my garage.