Real Estate Games

photo credit: josip2

Steve’s cell phone is on life support. First let me say that this comes as no surprise to the Berg nuclear family. He has a history of killing electronics.

In the early days, the cause of death could be easily established. When one falls into the spa with ones cell phone in his pocket, one will no longer be able to utilize the device for anything but a paperweight. There’s not enough white rice at a wedding to save a waterlogged Droid. Trust me.

Over time, however, his stuff just started checking for no obvious reason – so often, in fact, that you will find his picture at the counter of your nearest Verizon store. I believe he also enjoys the Customer of the Month parking space at Best Buy.

This is why I recently found myself killing time in Columbia, Missouri playing Fruit Ninja. Steve’s current phone, one that used to allow him to do all sorts of whiz-bang things — like receive emails and texts – has been relegated to no more than a simple talking device with a seven minute battery life. So while he purchased a stopgap car charger, I idled at the iPhone display killing fruit.

For the unfamiliar, it’s a goofy little game, this Fruit Ninja. As pomegranates and kiwi fly across the screen, you have to slice them without detonating bombs. More fruit means more points. Like any respectable game, it gets harder as you progress –to the point where passers-by, noticing your glazed eyes and spastic swiping movements, routinely assume that you are enjoying a day pass from the Happy Acres sanitarium.

Ultimately it’s just a time sucking exercise in futility, because you can never “win.” You may be momentarily entertained and even find yourself occasionally puffed with pride over your fruit salad-making awesomeness. Eventually, though, you will explode; it’s all about personal bests.

Ninja fruit is not a zero sum game. When I lose, someone else isn’t winning. Put another way, my success is not measured in the context of another’s failure. So goes real estate.

There remains this pervasive notion that one side of the transaction – the buyer or the seller – is going to become the victor. Buyers refer to these transactions as “smoking deals;” sellers tend to see it as getting “top dollar.” The reality is this: You will buy a home, or sell a home, for market value.

I have written about this before, the concept of market value. Market value is actually a range of value, because different people are, dare I say, different. For every person who wants a pool I can show you one that won’t even consider a home with a pool. One man’s wall paper is another man’s Sienna Sand paint palate; granite versus tile or Pergo instead of Berber – I can tell you on which side of these debates you will find your largest buyer pools, but the buyer who ultimately makes the offer is the “market,” at least at that moment.

As a seller, you may find that the market value of your home isn’t aligned with your expectations. That is not to say, however, that the buyer is winning and you are losing. It just is what it is, and I swear I am going to put that on a T-shirt someday.

If your home is on the market and you are not being shown, or if you have not received what you consider to be an acceptable offer, one of two things is going on. Your property is not being widely exposed and compellingly presented, or your pricing is out of whack. That’s all, folks. Sure, selling a home is a process, not an event, but consider the average market times in your area.

In Scripps Ranch, the average market time of detached home sold in December was 66 days. It was 61 days in November. Active detached listings, however, have been on the market for an average of 81 days. Give it time, of course, but at some point the market may be telling you something.

Now let’s take our places at the buyer side of the game board. We all want a smoking deal. If you don’t believe me, you weren’t looking for a parking space on Black Friday. But think about the holiday buying season. There were the occasional too-good-to-be-true sales – the sales involving “one in stock.” As a home buyer, you might encounter one of these offerings too, but be prepared for the pepper spray, because you won’t be the only one waving your checkbook in the air, and you will probably leave battered and empty handed.

What mostly happened on Black Friday was that retailers priced the products to position themselves favorably relative to their competition. They were focused on attracting the most buyers from the finite buyer pool, and while their events were promoted as “sales,” they weren’t really sales at all. That’s because when everything is price reduced, you’ve simply established a market. Pricing is inextricably linked to supply and demand; it is a response to current economic conditions.  This holds true whether we are talking about cashmere sweaters or homes.

Still don’t believe me that Black Friday was not brimming with “bargains?” Look at prices for those same retailers and for those same products today. The “sales” are still in effect. In many cases, in fact, prices are lower yet. If I can buy the same purse at a dozen different stores for the same discounted price, it is not discounted at all — unless my basis of comparison is 2004.

As a buyer, then, prices are what they are – today. That’s not to say that there isn’t room to negotiate. Of course there is. Depending on the seller’s needs and motivation, certain terms (like timing, financing and all those little contingency sticking points) may have value to the seller and may translate to a lower price. But it’s still not a zero sum game. There is give and take and, hopefully, a lot of what we call “dealing in good faith.” In most successful transactions, both parties ultimately benefit.

I see too many buyers playing to beat the seller instead of playing for a personal best. They take the asking price and offer 10 or 20% less, not because this seems like a fair price, but because it seems like a victory. Much like the sellers whose homes have languished on the market for too long, these buyers languish in the market for too long, firing too many blanks and missing too many opportunities.

 The moral, I suppose, is this: Know the market. And I don’t mean the Case-Shiller macro-portrayal, but your market in your ‘hood. Your agent can help you with this. Know what your goals are and try to reach – even exceed — them. Your agent can help with this also. You aren’t buying a pair of shoes; don’t rush things.  But at the same time, remember against whom you are playing. It’s not the other party to the transaction. And if you keep missing your targets, you might just be playing against yourself.

The Buyer Pool Revisited

At our recent year-end office meeting, we again gave our little State of the Real Estate Market address to our agents. We basically copied and pasted last year's summary — and the summary from the year before. As much as I am a fan of manufacturing drama, I feel a little like Sean Kingston with my iPod stuck on replay-ay-ay.

It's a question we get every single time we meet with a prospective seller. "If we wait — maybe we rent for awhile — how long will it be before prices are better?" they ask anxiously. The only difference is the homeowner's definition of "better." Sometimes, they want to hold out for only slightly better, while other times they are ready to hunker down until we return to the 2005 pricing glory days.

The latter is the easy one. If you are waiting for a return to peak values, go ahead and rent but with the expectation that your children will inherit a nice investment property. "Slightly better" is a little more complicated. If you believe the smart economists in dark suits (and I generally do), we are seeing signs of pricing stability, at least in San Diego. We are seeing the more affordable homes enjoy a bit of price creep, yet we are continuing to see some downward pressure in the higher priced segments. Until we clear out the troubled inventory, we will be bouncing around the valley floor. Think three to five years.

We have been noticing signs of more realistic expectations by both buyers and sellers; the value perception disconnect is slowly closing. But we aren't there yet.

I originally posted this insanely helpful infographic in late 2008 illustrating the buyer pool for any given listing using Dabbleboard. It is eerily as relevant today as it was over three years ago, except that the bubble on the right is relatively larger. And there will be a few more folks in the middle now — folks interested in your home but who still can't get financing. So, in the spirit of regifting, let's revisit what buyers are looking for.

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Without further ado, I bring you my Venn Diagram illustrating why homes are taking a wee bit longer to sell. It's a little complicated, as evidenced by the 5 minutes it took me to design it, so do hang in there.

Dislcaimer: Your results may vary. Margin of error = 100%. Patent pending. Use only as directed.

What’s wrong with people? Beware rental scams.

In my latest installment of “What’s wrong with people?” I shall revisit the popular rental scam.

Rental scams are nothing new. We began seeing them on Craigslist years ago. This is how it goes. Some despicable person, one who presumably finds that holding down a real job or otherwise being a productive member of society is just too much trouble, decides to instead steal. They find a home for sale online, and they pirate the photos and text. Next they find the name of the owner in public records and set up a bogus email account that might suggest they are the owner, something like gregjones77@yahoo.com. (My apologies to Mr. Jones if this is, in fact, his real email address. Just in case, let’s refrain from sending him messages this morning like “Kris wrote about you on her blog, you scum bucket!”)

Then, and this is the really good part, they take this home for sale and post it as a too-good-to-be-true rental. The monthly rent is always something exceptionally enticing like, say, five dollars — including utilities. When contacted, the “owner” will usually say that they live out of the country but will arrange for a friend to show it when they get a deposit. They will always ask for payment by cashier’s check or wire transfer.

Alert would-be renter Christina forwarded this email she received from one such pond scummy person on one of our listings:

Hello,

My home is still available for rent, We are renting this home to a responsible and neat individual or family who will treat the house as his or her own. Well,Our house has been put up for sale until my wife advised me to put it out for rent. My home has 4 Bedrooms 3 full, 1 partial Bathrooms , while the size is 2,425 sqft. I am asking $1,300 while the refundable security deposit is $1,300. Pets are also allowed. How soon are you willing to move in if we finalize arrangements with you now?

At least he blamed his wife and didn’t kill me off. Unfortunately, Josh Taylor, a Tennessee agent, met a untimely virtual death.

Last week, two of our own listings were scraped for fun and profit. In one case, our client found himself arguing with the showing agent, an agent who had seen both our online listing and the bogus rental listing on the same site (Trulia) and insisted that her client could lease the place if he wanted. The Internets don’t lie!

In the second instance, my client found a highway patrolman at his door. An upstanding citizen who neither speeds nor knocks off banks in his spare time, he was a little taken aback, until he realized that the police officer was just looking for a place to rent – for five dollars a month.

The thing about the rental scammers is that they are evolving. Where we used to only have to worry about Craigslist, now they use listing syndication services to victimize across multiple sites. In the case of our recent evil-doers, Postlets (powered by Zillow) was their syndication service of choice. In Zillow’s defense (Did I just say that?), they swiftly pulled the listings once I reported them as fraudulent. But I simply don’t have the time to police all of our listings every day, and these rental listings will likely reemerge tomorrow under new phoney accounts.

Phoenix guy, Jay Thompson, had a fabulously funny exchange with a rental scammer. I filed that one under “Things I wish I had thought of,” but the reality is I am too lazy to set up a non-traceable email account. I’m glad Jay is around to do my dirty work.

The reach afforded by our online world is a double-edged sword. It is both glorious and an opportunity for abuse, which I suppose describes most wonderful things in life – like those little white chocolate sugar cookies they sell at Trader Joe’s. So, please, use a little common sense when doing your online rental shopping. Only deal with folks you meet in person, people who will show you the big ticket item before demanding you commit. Never send cash or the equivalent. And always do a little cross-checking to confirm that the listing agent is really dead before pulling your own trigger.

Automatic showing feedback requests and self-cleaning ovens

Automation can be a beautiful thing. It can streamline your business and make you more efficient, freeing up valuable time for less mundane tasks — like automating other stuff.

Automation can also be the devil incarnate (incarnate, if you consider a computer to be a human being, which I do).  The problem is that once we automate a task, we tend to write that task off as having been accomplished. No need to worry about that “thing” anymore! It happens all by itself.

The problem is that, even when you delegate, some continued involvement is still required. Transaction coordinators and self-cleaning ovens come to mind.

Let’s start with the self-cleaning oven. There is no such thing. I demonstrated as much this past Sunday. It started innocently enough, with a certain husband who we shall call “Steve” (maybe not his real name).  “Steve,” the one who wouldn’t know dirt if he was riding shotgun in a backhoe, suddenly recognized that our oven didn’t look like other ovens in the ‘hood.

Eleven years of culinary disasters had done a number on the old guy. (I’m talking about the oven here, but I could just as easily be talking about Steve.) Sunday, apparently, the charred remains of a decade’s worth of pizzas and briskets, not to mention one unfortunate exploding potato mishap, reached Defcon 1 status in his mind. It was then that he eyed the magic “self-cleaning” display. “Let’s do that!” he squealed.

Now, we all know that “Let’s do that” is marriage code for “You do that while I watch the Charger game.” So I dutifully pushed the magic button. Then I waited while the internal temperature equaled that of the surface of Mercury, the oven cooled, and the oven unlocked, a process that took me well into the third quarter. And after I spent the next two hours, four sponges and one can of Bar Keeper’s Friend scrubbing the bowels of the Staphylococcus chamber, voila! The oven had self-cleaned.

The truth is that nothing in life can be entirely automated, except perhaps Ryan Seacrest, which brings me to my current beef. It has become all the rage for real estate listing agents to rely on automation for showing feedback. Adding to the popularity is the fact that our real estate association now offers an automated feedback service as a free member benefit, with the “free” part being the operative. If our Association of Realtors offered free spinal taps, I guarantee you there would be a shirtless line out the door.

The problem with automating the feedback process is three-fold.

1. It is spam
2. It still requires some human intervention
3. It is spam

I shall offer as Exhibit A the feedback request I received yesterday. The email included the standard language. “Please provide feedback by clicking here or by going to the link below to answer a few quick questions. It will take less than a minute and my seller and I appreciate the courtesy and I will gladly return the favor for your listings.”  Now, I can forgive the run-on sentence. Hey, who’s perfect? What I can’t forgive is this. While I had indeed shown this home on multiple occasions, and while my clients did in fact like the home very much, they liked it so much that they are closing escrow on it today.

This is where the spam part comes in. I get these nonsensical queries all of the time, three days after I have already spoken to the agent about my client’s interest level or, as in this case, three months after my client’s offer was accepted. It happens so often that I now simply hit the delete key without processing.

If an agent isn’t paying enough attention to monitor their automated systems (and to turn the darn things off when it makes sense to do so), I wonder how much time they are spending monitoring the responses and exercising a little agency on the client’s behalf. I suspect that as I write this, some agent somewhere is sitting in a listing appointment using this very hip and now duty delegator as a valuable selling tool. For the love of leftovers, don’t buy it! You are hiring an agent to use their noggin and to work for you. One personal, conversational email or, dare I say, phone call is going to be infinitely more effective than a thoughtless, often unmanned robo-message.

Go fish. Scripps Ranch listing inventory is oh-so-low.

This is the trend for inventory of Scripps Ranch homes for sale (Altos Research, 92131 Zip code). It’s ugly.

It’s ugly, that is, if you are a buyer.

I was reminded that it might be time to touch on the little empty shelf syndrome we are currently experiencing when I found myself, yesterday, at the weekly Scripps Ranch broker pitch session. The pitch session is a long-standing tradition in many communities, Scripps included, where agents from all offices gather to network and promote their new listings.

Now, I’ve been a bit of a negative Nellie about the pitch session in recent years, having long argued that this relic of the good ol’ days has essentially been relegated obsolete by things like, oh, the Internet. It seems rather goofy to stand in front of a rather insignificant subset of the Realtor population (insignificant in terms of numbers) and as many vendors – Title reps, loan officers, home stagers and others who will never bring a buyer to one of my transactions but would very much like to earn my business – and read from the MLS. Yet we do this, week in and out, because old habits die hard.

As this week’s meeting wrapped and we were swapping idle banter before hitting our Realtor mobiles to visit the newest offerings, it struck me that our current market may be serving to validate, at least temporarily, this industry throwback to the simpler days of water cooler back slapping. I watched as several informal discussions were taking place around the room between agents. Some had buyer needs, others had upcoming listings, and all were dealing from their respective decks in a real estate game of “Go Fish,” attempting to make that all-important match.

Here’s why. In Scripps Ranch this morning, there are 62 active detached listings. That’s it. 62. Consider that in the context of approximately 8,000 detached homes standing and in the context of a “normal” inventory of listings being approximately double what we have today. It’s slim pickings.

By the numbers:

Traditional sales = 44
Short sales = 11
Bank-owned homes = 7
Average days on market = 75 days*
Median price = Approximately $725,000**

* This is fakey days on market, because so many of these have changed agents or otherwise relisted and, therefore, enjoyed an opportunity to reset the old odometer. The real average is actually longer.

** “Approximately,” because of a stupid value range price that, in this market, no one understands and makes little sense.

So, these days, the more tenacious agents are left to their own devices to try to make choices materialize for their buyer clients. And, sometimes, it works. Twice in the past two months, agents from our own little shop found a matched pair, pre-MLS, to the delight of both parties to the transaction.

And, yesterday, I found myself engaged in one of those little card games with two other agents. One had an unmet buyer need, another had a client who was preparing to sell a home that met their criteria but needed to find a replacement home, and I had a home currently being staged to debut next week that sounded like a fit for the middle man. The first agent called it a possible trifecta. Or maybe it is a hat trick – depends on your sport.

As a result, two showings have been scheduled. It may work; it probably won’t. But, crazier things have been known to happen, and desperate times call for desperate measures. The moral to the story is that there are buyers out there. Listings? Not so much.  And to all those folks who ask if they would be better off to wait until after the holidays to list, just remember that the new year will bring with it new buyers but, also, more competition. If you do hold off, at least make sure your agent is stumping for you in the meantime.