Is Real Estate a Relationship Business? Depends.

http://realtytimes.com/rtpages/20100526_business.htm

Jennfier Allan, www.sellwithsoul.com , is a better writer than me and she says what I'm thinking. I have a good relationship with my dentist, I forgot his name, but he's a good guy and I'm sure an equally fine dentist. My cardiologist is a life saver. He exceeded my expectations. We have a great relationship---He tells me what to do, I question his direction, then eventuall follow his orders. We are invested in my heart's success. If it doesn't go as planned, he will be sad for a moment or two. I probably won't express any emotion being as it is with hearts.

Not speaking for everyone, but for me, my job is to go with what I know. If I'm focused on the result---achieving the goal of the person who hires me, not being a friend or making a buck, the rest falls into place.

Interest Rates, Property Values, and Lessons From a Market Collapse

 I'm no economist and my calculator only does basic math and some functions that looks like M- and M+ and MRC. Maybe pie, I don't know how to make these buttons do anything. As the joke goes, you can lay all the economists in the world end to end and you wouldn't reach a conclusion, so what difference does it make if I chime in? Probably no difference, but I've got a minute so I'm chiming.

The climate is favorable for selling and buying. Caution should always be at the top of our minds when making decisions regarding use of our money. That has not always been the case for me. In the late '90's I threw caution and wise advice to the wind and invested in tech stocks and I was brilliant. My picks always went up. Picking winners was so easy. I dismissed the "old timers" who said the tech stocks had no fundamental evidence to support their values. Then when my stocks went south, I bought into the idea of buy more at bargain prices. I continued this strategy of throwing good money after bad until all the money was bad. Informed people with wise advisors didn't get killed, or at least survived with minor abrasions. There is something worth considernig in that expensive lesson and I am interested in learning more. What did those who lived to surivive another stock decline do that makes sense to apply to real estate?
It's now the end of July and owners are seeing real buyer traffic at their homes. Offers are being written. I sense a fair percentage of buyers who make offers are doing so with a foot in one door and an eye on another house. As owners we send counter offers at our own risk. A buyer's motivation to pursue first choice or second choice is not always significant. Commitments are weaker than the days of old. That tells me there are new fundamentals to consider when negotiating offer terms. Do not count on getting a response to a counter-offer. Make concessions on items of minor significance.

The number of sales is not enough to ripple the real estate pool. In fact, maybe "settled" is accurate compared to the high sell off of low priced homes in the first quarter of the year. Now I'm hearing the buzz around interest rates. My weak economics background suggests I should just listen to the experts and mind my own business, but I have to ask, "Which experts do I listen to?" The ones who say "Good time to buy. Interest rates are low." Or, do I listen to the one in my conscience saying "Careful here. Something isn't adding up." I think I am going to go with common sense and read behind the lines. Who is saying "Buy" and who is saying "Hold"? Everybody has something to gain or lose by the decisions consumers make. Before applying any one recommendation to my decision, I should know if the advisor and I have a similar stake.

When interest rates are at an all time low, what is the most likely direction for interest rates in the next 12 months? If you said "up"  give yourself a PI R Squared. When interest rates go up, what happens to house prices? Well, without any help from Uncle Sam the price of housing goes down in an escalating interest rate climate. If my home value delcines 2% per year as interest rates go up 1% per year for three years will I be in a negative position if I have to sell in 3 years? Maybe. Maybe not. Am I buying for shelter and a lifestyle, or for an investment. If my investment eggs are in my home I have no investment. The money in the home is not able to be moved to safe havens and it's definitely not diversified. A fundamental of investing is diversification. Some money must be liquid for ease of movement in and out of danger.

Should I buy real estate? Maybe the question is "Why do I want to own real estate?", and probably "How long will I keep this piece of real estate?"  Owning a home is a good idea when we own for the fundamentally right reasons. If we own a home and think of it as an investment which will return a healthy next egg, we may be setting ourselves up for dissapointment...again.

Interest rates are one part of the equation.Repair costs, home prices, location, and personal plans are all factors to consider before buying or selling. The allure of  interest rates may not be moving the needle on the real estate activity index. Do interest rates move people to buy in times when people don't want to buy or sell? Maybe.



Think before you leap; still waters run deep.

Soulful Thinkers and Doers

The smartest people we know think like us. Mark Twain might have said that. Regardless, it's true and Jennifer Allan is one of the smart people in my mind.

 Jennifer gets it.  Here's a person who saw the dorkeyness creeping deep into the real estate practice and she did something to make a difference.  Many of us can spot a cliche. Some of us can talk about what's wrong. Few people can show the way to change.  Jennifer is relevant and she's got the platform for teaching a better way to be a real estate person. A solution to Fixing the Leak always includes changing the fixtures. That's more work than the quick fix plug. But let's look at it another way: Say I want to be a better person.  What's more long lasting--a new attitude or a new haircut? A new haircut lasts for a few days, but an attitude of abundance will carry me through life's experiences.

I like Jennifer's approach to treating people we know as Very Important People. Business people spend a lot of time trying to attract new customers---(maybe because new customers are new folks to fool). If my business is worthy, new customers will be directed to me by people who know my character, provided I let them know I am still in business.  Jennifer's web site http://www.sellwithsoul.com/ is loaded with ideas and enthusiasm for building confidence to "be you" and be yourself with you VIP's or Sphere of Influence. For years I have tried to make that point with certain results. I know I am a better story teller than teacher, so I'm going to tell you to see Jennifer. She has the enthusiasm, credentials, and tools to show you a better way.

I'm also inspired by her way of writing. I called Jennifer and found that she talks exactly the way she writes. That's a talent but it is a talent that can be learned. Maybe the first step to acquiring that talent is shedding the dorkey wrting styles we learned in our days at Executive U.

Rather than keep you here reading me, go to http://www.sellwithsoul.com/ and see if you think Jennifer is one of the smartest people you ever read. If she is, join her. What she's teaching can be the difference between being a statistic of the economy and being the change you wish to see in the world.

Peace.

Real Estate Solutions by A Glass Half Empty Kind of Guy--Fixtheleak.blogspot.com: Infill is an Opportunity Building for Generations X, Y, and Boomers

Real Estate Solutions by A Glass Half Empty Kind of Guy--Fixtheleak.blogspot.com: Infill is an Opportunity Building for Generations X, Y, and Boomers

Infill is an Opportunity Building for Generations X, Y, and Boomers

Build your house and start this year.

Reducing cost of construction of homes begins with eliminating and to begin eliminating, everything is up for review. Everything adds cost. Where to begin this process of elimination? Roof? Walls? Windows? Basement? No. Begin where construction begins--from the restrictive covenants.

No part of the home construction process is more appropriately named than Restrictive Covenants. The compact created by parties to ensure the minimal size, style, colors, appearance of homes in a neighborhood might be more effective in restricting access to new construction and in driving up costs than whatever is their stated intention. Restrictive covenants restrict creativity, diversity, and free trade. But much of that's another topic. This is about building in the new economy and to get building moving we could be looking at infill lots.

Infill is a simple concept--consider a block in a neighborhood where you've often walked past a wide open space between two homes which have stood for decades. That space may be a buildable lot. If a house were built on the lot we would be "filling in" the space...infill. Other streets may contain a house in total disrepair. For whatever reason the property is an eyesore and if not abandoned, the value may be next to zero for habitation, but the lot is fully improved with driveway, utilities, and except for the run down building, the lot would be an ideal location for a home. The tear down operation quick, and less costly than you might imagine.

Restrictive covenants typically lose their teeth over years by neglect or intent. Some older neighborhoods never had minimum size restrictions. Own where you can build smaller, not be restricted by style, and use materials where you are free to obtain competitive bids, you have freedom to trade in an open market. Competition favors the consumer and that's good. When we require the property owner to build more space than he/she needs we are forcing waste waste and expense.
Next is an idea where I may be more wrong than right.  If you can avoid getting caught in the"consider resale" idea, you have more opportunity to keep cost down. In 20 plus years I have yet to find a person who successfully built a house just right for the person he has not yet met and who may not be in the market when he goes to sell that house which he built "for himself". Is it possible that we build rooms we rarely use and pay for them everyday? Yes. Then why build them?

I found a dozen or more good infill lot opportunities around Dane County. Middleton builder, Design Shelters is perfectly set up to explore this idea. To prove its worth I'm building a house in the Town of Verona on an infill lot. Follow along. I'll let you know what I learn.

Condominium Sales in Dane County

Should we be surprised that condo sales rose in the first quarter of 2010? Maybe. Money was tight as lenders drew firm lines on what they required before getting involved with a loan on a condominium and for good reason. With owners falling behind on mortgage payments these same people certainly were not making payments on their association dues and the budgets of the associations with rising mortgage distress were getting weaker by the month. Lenders were wisely reluctant to risk becoming potential owners in condominium projects with no money for upkeep in their coffers.

A review of the sales across Dane County shows there is more to the number than will meet the eyes.  Owners paid dearly for the attention of the buyers. Getting an offer meant reducing prices and getting an acceptance on an offer required end of the day concessions of 10, 20, 30, and even 40 percent off of original asking prices.  Agreed there were worse results elsewhere in the world, if you were the one who sold for less than you paid or choked down a $21,000 loss of equity which you had other plans for, the pain was as real here as it was in the Southwest USA.

Not all owners were hit equally hard. Developers, in some cases may have benefited from  the assistance of lenders who created financing incentives to bring buyers to undersold projects. The result is the risk gets spread, but prices paid in 2006 were not supported. Units which were first offered for $279,900 in one project sold for under $230,000 in the spring of 2010.

Should you buy condos? Maybe. A glass half empty idea is to look close at the financial records of a condo project you'd like to live in. Then look further to see if the condo fees are reasonable or artificially low. Before deciding on  a price to offer, make sure you have done your homework on the recent sales. You may be able to find out more details on the financing and purchase packages negotiated by buyers in the spring. If extraordinary incentives caused sales to happen at $250,000 for example, the $250,000 price is probably not the true market value without the incentive.

Or, consider this suggestion mere self righteousness and rush in with a glass half full of confidence...

Absorption Rates---Good for Hot Dog Sales and Septic Drain Fields

Cliches always catch my attention---the same way too much of an explanation makes me think I'm being lied to. Three years ago a term commonly associated with product sales was borrowed into real estate: Absorption Rate. We first heard it being used as a visual tool to show property owners why their expectations were not being met.

Realtors actually bought into this nonsense--"See Mr. and Mrs. Seller, there are 30,000 homes on the market and in the last month 4000 homes sold. With my Texas Instrument XR-7 here, I can punch in some numbers and see that 923.08 homes sell each week. Looks like you should expect to sit tight 32.5 weeks. The buyer for your home is out there, they just haven't gotten to you yet."


If absorption rates make sense for determining hot dog sales it can't be a useful tool in home sales, unless the homes we are selling are identical. Absorption rate, also known as a  percolation test or "perc test" for determining suitable ground conditions for building a septic systems drain field, is a failed tool for communicating anything logical about real estate. The picture above fails to include the fact that there is no control on houses entering the market as  houses are  "absorbed".  If the number is flawed, it becomes meaningless and if the number is meaningless, then why talk about?

We talk about it because it looks like something. The calculation looks as if there is something logical going on. And that's just it--looks.  If we were processing hot dogs we would have a good use for this calculation.  Based on sales and inventory data we can know when the weiners we made today will be sold or spoiled. 

Unless people are selecting homes by number of days on the market, absorption rate should tell a home owner nothing about how long their home may be on the market.

To see how "absorption rate" is being used by real estate brokers Google or Bing: Absorption rates madison wi real estate. I'd like to hear what you think about this.