Fixtheleak.blogspot.com

Is Real Estate a Relationship Business? Depends.

2010-08-02T13:34:00.002-05:00

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

2010-07-27T17:23:00.002-05:00

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

2010-07-01T16:55:00.001-05:00

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

2010-06-07T17:10:00.000-05:00

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

2010-06-07T17:02:00.001-05:00

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

2010-05-24T18:43:00.000-05:00

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

2010-05-17T18:14:00.000-05:00

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.

When the Stimulus Ends, Another Door Opens

2010-04-22T12:42:00.000-05:00

A rush is on and the first attribute to be discarded in the pressure paced flurry is logic. The focus is on "get the credit", common sense aside, the credit must be gotten. "Time is Running Out...Time is Short" shout the warnings by Realtors and mortgage bankers. We are fueling the fire---fear is a motivator.

From my position on the field I see the people least prepared for a backlash making the greatest rush---the first time buyer. Not seeing a significant rise in motivation of persons who would qualify for the $6,500 credit, but the first time buyer who might have been calm and calculated is now pressed and highly motivated. The competition for the remaining good homes severe. Tension is up, heads are down, the determination is great. It's Christmas time at Toys R Us.

Consequences of the actions we facilitate are unknown but if this last year is a small version of 2002-2006, the results could be the same; a new generation of upside down home owners, but this time they will be in the entry level price points in our market. Three percent down is a safe mortgage when appreciation is 2-5% per year for the first three years. It's not sufficient when the economy is struggling, appreciation is spelled with a "d", and jobs are not secure. Add to that concoction a requirement to pay back any part of the $8,000 tax credit for selling before three years and the dangers of buying to get a credit are worth slowing to consider.

When the stimulus end, another door will open. Fear may be a motivator, but patience is a virtue. Rewards for virtuous behavior are well documented, and patience is a virtue apparent in the survivors of the last great depression. There are lessons of caution to be taken to heart from people over 80 and I'm seeing those lessons put to practice by people who have learned from the most recent experience. Slow and Steady wins the race it's said. I'm encouraging slow and steady.

Here's an idea---Searching and researching gives you knowledge. Asking questions and partnering with people who know adds insight. Knowledge with insight removes fear. An attitude of abundance is what you will have when fear is out. Confidence is an attribute of a person with an attitude of abundance--Confidence, not ego. Confidence in knowing preparation is in place and information is logical.

May 1 is a new day. I look forward to the end of the stimulus and the beginning of real recovery.

Stimulus Stimulant

2010-04-15T17:14:00.000-05:00

Unless Uncle Sam's teasing the American public, the stimulant for the real estate sector of the economy is coming to an end in two weeks from today. The upshot will be felt, by those who participated and those who did not, for much longer. Hope wishes for no negative repercussions. Hope may be blind.

Increasing numbers of foreclosure properties in any state effects the way lenders to do business in Wisconsin. The statistics gathered by RealtyTrac.com are reported on FoxNews and if rising numbers in foreclosures are symptoms of ill health, there had better be a doctor in the house.

Realty Trac is my teacher. When they came on-line a few years ago Madison, Wisconsin barely had a pulse on the site. We were immune. Foreclosure was isolated and we were immune. Then the cough started. In April 2010 we can say for certain, foreclosure is contagious and Realty Trac people were way ahead of the curve when they launched. They saw a shift, read the indicators correctly and were well in place by the time the convulsions hit.

For the last year Realtors and mortgage lenders sustained on the stimulant which energized the newest home owners. These are folks who may soon be participants of the newest fad--upside down home ownership, because we didn't learn our lesson and 3% or less down payment loans were the rage. In addition, a shift in value for the least expensive homes has not happened yet. The stimulus looks like a sure win instant lottery--buy a house, get $6,500.00 cash. Got a down payment? Don't need one. The credit is credit. Come and get it. What percentage of buyers wanted the cash and got a house? Zero? Hope so.

I wonder if the stimulus' legend will be less about how it impacted the economy and more about how it stimulated a change in the nature of Realtor's. Seeing what's coming I'm going to sharpen my patience and compassion attributes.

Somethings Missing. Where Have the People Gone?

2010-03-24T13:27:00.000-05:00

A popular suspense scene has a street smart, rumpled detective type walking around a crime site. Skilled professionals with high-tech gear, are hustling about. Anxious superiors are demanding quick closure. Conclusions are being reached. But the old-school character is seeing what's missing and wondering...wondering why, wondering how could it be, wondering what does it mean.

On the streets of Madison neighborhoods there are many old-school detective types walking in and out of houses wondering about what's missing. They're Realtors. What's missing is the home owner. Anxious superiors are waving off the questions as if shoeing pesky flies, but the questions persist. If the real estate economy is going to re-boom, it will have to happen without people because we're not seeing them where they should be, and that's in the houses which are selling.

If the activity in the $200,000 homes being bought by first time buyers is going to trickle upward to the more expensive price points, there will need to be sellers who become buyers and they don't seem to be living in the homes being sold. There are no statistics to tell us if the home is vacant or occupied by an owner, and the short-sale and foreclosure data is not being reported consistently in the South Central WI MLS. Without this data, forecasting the activity in upper price ranges is reduced to wishful thinking.

A walk around the plant will give you a good idea of the vitality of your business and in our case the plant is the market. I, like other Realtors, am seeing an inordinate number of empty houses. The people are gone and I don't know for sure, but the economy suggests they didn't buy a bigger house on a bridge loan, so I might be accurate to assume a high percentage are renting elsewhere and elsewhere is not in Madison.

Unless the people who are selling 3 bedroom homes start buying 4 bedroom homes before June 30th, the notation that the next rush to buy will happen in the upper price points is unsupported by facts. Somethings don't add up. Somethings missing. I'm wondering what this means.

Commitments Made on Facts

2010-03-14T15:32:00.000-05:00

We make decisions every day based on fact, fiction, and/or hope. The choices which culminate in follow through are commitments. I can make a decision without facts but rarely if ever am I committed.

A change I am seeing in the first quarter is "letting go of hope" and embracing commitments made with attention to facts. The real estate market movement last year was powered by hope and the hopefuls were those least well equipped to process facts. People buying their first home were enticed by a credit carrot--one which was dangled, removed, and then re-dangled. All participants in the enticement pocketed a share of the profits at a cost to the hopeful.

Those who are letting go of hope and making wise choices are the people who must sell at less than peak prices. When they held out for a return to Glory Days the market peaked at price points dangerously low. Hope kept those owners on the sidelines last year and the interconnected real estate industries suffered.

Facts and commitments go hand in hand. Hope with disregard for facts is a sail boat without wind.

Grateful for not having participated in the last great enticement.

Stage Right

2010-02-04T15:06:00.000-06:00

When the going gets tough, the tough get a stager. The first time I heard the term "stager" was in the late 90's at a real estate conference. I was standing near an elevator next to a group of real estate women who were talking about this concept they called "staging". Apparently someone felt there was a need to make homes look nice inside and out before offering them for sale. Staging required the right colors, the right furniture, the right ambiance. I wasn't buying what those ladies were selling. Seemed like a gender thing and given the choice or staging or burying St. Joseph I would choose the shovel.

Today I'm convinced it is better to paint than dig and staging is a phenomenon with traction. A new business is booming and it's making a difference in a tough economy. With a professional attitude and sharp skills, the talented people of this new industry are earning the confidence of Realtors and home sellers. The business is not interior decorating, it is interior and exterior enhancing. The best people in the business are savvy about increasing the return on an investment and getting things done on a tight time schedule. I've seen houses sit on the market with no interest before staging and fly off the market with multiple offers after staging.

Staging as a business isn't for the meek and working with a stager isn't for the control freak. The effective stagers learn your objective, they balance what your expectations are with reality of the market, and they give you sound advice on how to get the biggest bang for your buck. Tough love is what you might be getting up front so you can get what you want in the end. If you need to be in control as a home owner, you might need to sharpen your letting go skills. The stager will give you a recipe for success and if you want to reduce by half-measures you're likely going to be disappointed.

In this economy, self medication is not the answer. Hire a professional stager, pay the cost of admission, and stick with the plan. I like what one stager said about her service: You don't have to hire a stager, but the staging service can be done first and it will cost you less than the amount of your first price reduction.

A High Ethical Principle

2010-01-18T10:50:00.000-06:00

If it feels good do it, or so the saying went. What if it doesn't feel right? What if something in you flashes yellow and yet the world in which you live is lit by flashing lights of green and fireworks of joy? Do you brush away your apprehension and get on board, after all a million of your peers couldn't all be wrong...could they?

Some things just don't add up and when common sense asks to be recognized we would be wise to listen to our conscience and turn the floor over to voices of reason. It is "hope" and "eternal optimism" which keep our attention off of reality and justify our self interest decisions to sacrifice the greater good for personal gains.

Daniel Ellsberg wrote about the attitude of his fellow employees in his book Secrets A Memoir of Vietnam and the Pentagon Papers. There was unmistakable evidence of the futility of continuing and expanding the war for his fellow military analysts at Rand Corporation in 1969. Maintaining and expanding was good for employment and horrific for the combatants and resident innocent people. Ellsberg wrote about his company in 1969, the words I could not find to describe my sentiment toward my industry forty years later.

"...But the proposition that what is good for my personal income is automatically good for (my industry) and for my country is hardly a high ethical principle."

Whether the strategy is failing in military terms or economic terms, lies and deception only hide the truth allowing more suffering by innocents long enough for the principals to dig their deeper hole. Be careful and cautious. Go with common sense. Some things just don't feel right.

Caution Ahead

2010-01-08T15:31:00.000-06:00

Driving to my office on University Ave there are two large orange road signs that warn: "Rough Road". Sure enough, my journey is rough and bumpy, and that's just the part of the going that's covered in buckled asphalt. Once I get to the office the rough road continues and I am just as careful guiding clients as I am driving my car.

Even the best economic interpreters can not be sure that their analysis of indicators means more than an educated guess of what's ahead. All educated opinions use some understanding of probability to reach a conclusion. Since the economic calamity is unprecedented, it's reasonable to believe the probability of measurable recovery is, well...iffy.

Caution has always been a prudent attribute. In the days of rapid appreciation caution was snickered at and those who threw caution to the wind were the mavericks who captured attention. As we idolized we emulated, and speaking as one person who threw too much to the wind, I'm practicing what was preached to me---Proceed with caution. "Think ahead" was my Dad's favorite phrase. As I think ahead, I'm going to error on the side of caution and assume there are more rough roads ahead.

What that means in my business is---let the other guy have the steal of the year. Let the other guy pay a little more than he should. If it's too good to be true--it is.

January is Our Spring

2010-01-01T12:10:00.000-06:00

I grew up in north-central Wisconsin where winter lingers longer and spring lasts until the week after the 4th of July. In Dane County the real estate market springs into action on the first business day after New Years. People who want to sell in the spring will set their plans in motion starting Monday January 4th. Home buyers will get to the bank for loan pre-approval as soon as the Christmas gift boxes are broken down and put out to be recycled.

My advice for home owners who want to move in the first or second quarter is to get your home in tip top shape in January--put in the new floor, remove wall paper, select paint with a professional stager, and get the house pre-inspected. Defects you discover can be repaired for 1/3 or better of the cost a buyer will extract from you to stay in the contract.

House shoppers, my opinion has not changed. Find the neighborhood you want and look for the best location in that neighborhood, and a house that fits your budget and life. You won't necessarily get the "best deal" but in the long run you will likely be more happy with a home that works for all of your lifestyle. Eventually you'll be selling and the return from a premier location in any neighborhood is more money and an easier time selling.

Even though the temperature outside says winter, the interest in buying and selling homes is heating up. Expect interest rates to remain low with some upward movement through May, and home prices to remain unchanged. Sales in upper price ranges lagged over the last 3 months and those limited sales will be the price setters for the first quarter. As long as appraisals are part of the financing equation, we will not see upward spikes in values.

It's All The Same Year

2009-12-17T13:09:00.000-06:00

In two weeks we will close the calendar on 2009, and on the first decade of the 21st century. But does this mean we are cutting the ties that bind us to the economy or the actions that took us into the economic crash? Certainly not.

I do believe we ended 2005 and 2006 shouting "Happy NEW Year!!" in expectation of better things to come. The expectation did not include any ceasation of activities which seemed to be working. We wanted to continue doing what we were doing, we just wished for more of the same result.

Now we want the pain to go away and return to the good old days. Do you ever wish for just one more year like 2004 when making money in real estate was easier than toasting bread? And yet on 12/31/04 were you grateful or hopeful? In '04 and '05 we could not stop the reckless course of lend and spend. We turned the page of the calendar and expected the money tree to produce more fruit sooner and longer. And then the tree gave us less and less until the fruit was much smaller and less plentiful than we demanded.

Change can only begin when we stop an action. Once the action ends we change can begin. Change only requires different choices. If we choose to manipulate and misguide we will get more of the same because a new year or a new decade isn't new anything. Time is nothing. People are everything. Mothers and fathers. Sons and daughters, brothers sisters. Grandparents. People remain people. What we called 2008 became 2009 but what we think of time did not change. People, not days, will respond favorably to what we do and what we be.

We are making progress in coming to terms with reality. By continuing to look at our part in the situation we grow in being part of the solution. Expecting ourselves to take right actions and then doing right, and not relying on an imaginary magic of time, makes a difference we can be please with.

I let go of dependence on new years and will use what I learned on this road that knows no end.

Buy Your First or Next Home With Common Sense---You'll make your grandparents proud

2009-11-30T15:00:00.001-06:00

Ronald Reagan said "Recession is when your neighbor loses his job. Depression is when you lose your job. Recover is when the President loses his job."

Maybe this is and maybe this isn't the 1930's all over again but lessons learned in a depression are lessons worth adopting in a recession or post recession economy. Ingenuity, saving, recycling, stretching a buck, are all common-sense attributes of Americans who lived the hard and bitter times of the 20th century. Not much more than a generation removed, we find ourselves right back in the midst of time when the only fear we should have is fear itself. I'm suggesting we use the principals of our father's fathers to walk through the fire of challenging times.

The following points are suggested as a way to take control and build some equity in your first or next home ownership. The plan allows for you to be interdependent. You will use your earning power, your self control, your wisdom and the government's cash incentive to grow your real estate equity.

Qualify with a local mortgage lender for a purchase based on a minimum of 5% down on a 15 year mortgage---this is critical. You will buy only what you can afford on a 15 year amortization.
In case I haven't made the point clear enough--Borrow only a 15 year mortgage. Do not use 30 year fincing. We are working on building our own equity.
Look only at homes priced within and up to 5% above your qualified price point.
Focus your search on the best location within the neighborhoods you prefer--all locations are not the same. Stay off of main roads, busy streets, and avoid houses with no back yard.
Judge the home by its location and layout. If the outside is tacky that's OK. Others will discount the house and you can improve it. Location can't be improved but appearance can.
You will make offers only at prices you can support with two comparable sales in the neighborhood in from the last 90 days. You aren't looking to get a property below fair market value, you just want to get the best location you can afford at no more than fair market value.
To determine fair market value you will depend on the value established by the Appraiser, not the assessor, or the owner, or the owner's Realtor.
If the kitchen and baths are not up to your expectations, plan to improve them--money spent here has a better than even chance of coming back to you when your location is superb.
In your offer, exclude the appliances.
Think Energy Tax Breaks You are going to improve the home with energy efficient appliances and mechanicals.
Your Tax Credit of : $6,500.00; $8,000.00 combined with your energy tax break credits will be SAVED. You will open a tax break bank account.
Appreciation will not be expected, anticipated, or wished for---but if there is appreciation you will never spend it. Not for fun or emergency---it's not earned therefore never spent.

In seven years you will have saved and earned a favorable chunk of equity and established some life changing values. It won't be the equity but the values which deliver you from being a victim of the next great depression or recession. It's sure to arrive as soon as we forget the lessons of the past once again.

A Wise Use of the $8,000 Tax Credit

2009-11-23T17:34:00.000-06:00

A typical first time home buyer will keep that first house for 7 years. The 30 year loan is a relatively new invention and for all the impact it has had on increasing home ownership, it may be one of the culprits in the market free fall. The extended tax credit may be the perfect tool for changing our dependence on long-term loans.

The next generation of American home owners will probably make money the old fashioned way in real estate--they'll earn it and they'll appreciate it. Unlike real estate appreciation, for which we proved to hold little appreciation, earned money is precious. Wise young Americans will take a lesson from their grandparents and avoid the 30 year fixed mortgage and benefit.

Consider this:

A 30 year FHA loan has an interest rate of about 5.0% today. The monthly payment over 7 years will apply about than $1700.00 to principal and almost $6,000. to interest. Yikes. Before we get too excited about the mortgage interest deduction, consider what that the $6000.00 is gone money. It's value to you is a one time thing on your tax return for one year.

On the other hand, a 15 year FHA mortgage at 4.5% interest will put $5,500.00 to principal and a still hefty interest deduction of $5100.00. Granted the monthly payment is a little higher--about $400 per month, but the savings is significant. Sure you will have less for spending but that may be OK. Learning to be conservative after growing up in a culture of buy now, pay later takes some work.

Now, as a friend of mine told me on Saturday--"Washing machines work hard." I want to help you work smart. Here's an idea. Take the $8,000 tax credit and bank it. Only use money from the tax credit to pay toward your mortgage on the months when it is absolutely necessary to cover the $400 +/- difference in your 15 year mortgage v. a 30 year.

Tough it out and you will probably find when you sell your first house to buy your second, you'll have a comfortable downpayment made up of Earned Equity, Appreciation Equity, and Government Cash.

This is what I mean by being part of the solution. Repeating the same mistakes by using the same failed formulas is wasting the opportunity we have been given in this new economy. There are no new ideas. The same tried and true principals of the past will work today.

Curious and Cautious

2009-11-18T15:38:00.002-06:00

My son works at a grocery store and he confirmed the current shop and drop phenomenon. You're probably a participant as a shopper or you've seen it as a seller of product or services. On-line and in-stores, people are shopping but then dropping items from their cart at the check-out counter.

Maybe it's the 21st century version of window shopping and we see it every Sunday with people coming through open houses...In the words of Jack Johnson: sitting, waiting, wishing. Look but don't leap. Touch but don't take.

There is plenty of curiosity amidst the caution. This is going to be a test of patience on behalf of would-be real estate buyers and sellers. Buyers are well informed by now. The loan underwriting rules have been in place long enough now and the inventory of sold properties for appraisals is big enough that we know within reason the value points around Dane County.

Because patience eventually runs out and the desire to buy will overcome the contentment of shopping, I suspect we soon will see people choosing to write offers. When that happens, owners of homes in good condition will receiving multiple offers. But they won't be impressed by the prices offered. The last great hope will be with the sellers who expect the flood of buyers to drive prices up. I believe the consumer who has been curious and cautious will come into the market wearing conservative clothes. They are stopping short of checking out after they look, but soon they will hold on to what they are now putting down. Their motto may be: "We won't be burned again". But they will be making decisions. It will be up to the owners to decide to let them check out.

When the buyer's come back to the price points they ignored for the last year we will see the housing market begin to trudge for real.

Central Station - The Hub for Real Estate News: Foreclosures: An Overview of the Wisconsin Process

2009-11-12T11:26:00.000-06:00

Central Station - The Hub for Real Estate News: Foreclosures: An Overview of the Wisconsin Process

Obama's Loan Modification Plan: 7 Things You Need to Know - US News and World Report

2009-11-10T13:06:00.000-06:00

Obama's Loan Modification Plan: 7 Things You Need to Know - US News and World Report

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Loan modification makes financial sense to the lenders when the borrower of a modified loan meets these two tests:

Can not bring the loan current without the modification
Has the financial ability to keep the loan current with the modification

If the modification only delays the inevitable or the person can bring the loan current without the modification, the lenders are not likely to assist the borrower today. Apparently the government's criteria of 2 months behind will make you eligible to be considered. But the lenders have added the criteria that you wipe out your savings and liquidate assets to receive the modification.

This is interesting. The tax incentive to purchase implies that the real estate economy will get better in time. The incentive is sold as a bridge to keep housing selling in a down economy with the hope that the market will be strong again in the near future. The Loan Modification is suggested as a bridge to help people ride out the sluggish economy in their home until things get better again. The banks are participating in making the new loans fueled by the tax incentive, but they are not gung ho on the loan modifications. Do the bankers see, or do they not see, a better economy on the horizon?

Stimulating Bubbles...again

2009-11-04T15:09:00.000-06:00

If I understand the logic---As the housing market goes so goes the economy. Thus, paying people to buy a house they would not buy without a government subsidy is going to help heal the economy because the lack of demand causes house prices to tumble. Artificially stimulating the market by creating buyer's who would not otherwise buy was part of the problem which created the real estate value crisis. Zero down financing, 80/20 loans to avoid PMI, No documentation loans, low interest short term loans... these were the culprits endorsed by the Federal Government to turn maniquins into home buyers in the first half of this decade. Why do we believe turning non-buyers into buyers will work this time?

OK, I'm not an economist but some things just don't make sense. What is happening today with the extension and expansion of the home buyer tax credit is neither good or bad. Some people will be helped in the short term and some people will eventually be hurt--it may be the same person who gets whipsawed by the help and then the hurt when the market has to get along without government intervention. My role in this upside down world is to help people make a smart decision and begin with a plan to protect from the inevitable painful drop.

Be conservative---buy only what you need, not what you want. When the next bubble bursts you may be holding more mortgage than you want. We can live within our means, not our wants.
Acquire the 20% downpayment--but if you have to own plan to stay in your house for at least 7 years. Real estate is a long term investment--even if you life in your house, you have to expect you will be upside down in the first few years in a mortgage with 3% down
Save 10% of your mortgage payment each month for repairs and updates. A brand new home today is out of date in 7 years--Only in red hot seller's markets will buyer's accept less than stunning
Buy the best location in the neighborhood of your choice today--Even your favorite neighborhood has bad locations---get the best location you can find and fix up the house
Let the other person over-pay. If you make an offer on a house and another person comes in with an offer, stay with your initial opinion of value. In an artificially stimulated market buyers exist who would not be there in a non-stimulated market. Don't pay more because someone else is interested--let it go unless you don't mind over paying.
A home is NOT an investment. It's a home first and foremost. The home you live in has nothing in common with stocks, bonds, income property, etc.
Money spent on Home inspections and radon tests may be better spent on down payments---you decide. Every house has some issues. Inspection walk around check lists might be sufficient to draw your attention to items to address in an offer or after you take ownership. Silly amounts of money are spent discovering reverse polarity, and un-bolted decks.
Better to do an energy audit and find the leaks where money goes out the windows and doors every day.

That's enough for today. I can't change the stimulus--it is what it is. I can help people be smart about owning. This sure looks familiar to me though.

Balance

2009-10-27T11:21:00.000-05:00

Staying with the theme--Markets are neither good or bad, here's a thought: Good and bad are just terms we attach to a condition based on our perception and our perception depends on where we stand.

Balanced markets favor more of the population than Good or Bad market conditions. A balanced market provides some appreciation, a fair number of homes to consider and compete against, and prices that are attainable by a great segment of the population.

Therefore, there are not good or bad markets---there are only markets which are void of balance.

Neither Good or Bad...It is what it is

2009-10-23T14:23:00.002-05:00

MSN Money Blog

I didn't write the headline for MSN Money Blog---and I think "doomed" is a little harsh, but the business of hope seems less productive than sorting out the facts and finding truth so I'm sharing the information.

Economic indicators are at best sign posts which tell part of the story. When put together indicators offer some ideas on the direction we are heading. They probably are not equal to mileage/distance posts in that an economic indicator can't accurately tell us how far we are from where we came or how close we are to a destination. Unlike a highway, the road of recovery can change--- with no notice we can end up in the ditch or set back.

Presented individually some indicators are props for false expectations. Before concluding that I am speaking doom and gloom, consider this--- I am in favor of recovery or rebuilding for my personal stake too. If people can't sell and can't or won't buy houses, I'm out of work. I like to work. I intend to be effective by being reasonable and working with facts not spreading illusions.

This is my opinion, based on what I am sorting out from the data: The housing market we experienced from 1999 through 2006 was an anomaly--a deviation from the norm. And, that deviation was fueled by failure to adhere to sound business principles. This new market is not a deviation from what normally happens when growth reaches its pinnacle. Drop off had to happen. How far we drop or how fast the fall is unpleasant but not unprecedented.

What we do in this economy is our choice. I choose to accept the reality and look for solutions which work for individuals. There is no one size fits all answer. To sell or not sell is determined by personal situations. I don't know if a person should sell today or wait for a better economy in the spring. I don't think we will see significant change when the snow melts, but I do know what to expect today---demand by buyers for top condition and relatively low prices. Because sentiment lags behind economic indicators I would not expect more enthusiasm until we have steady employment growth over many months. Conservative, careful will be the mindset of people burned once. And that's good.

2009-10-23T11:23:00.001-05:00

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'Is It the '30's Again?' Wall Street Journal Sunday

2009-10-19T14:47:00.000-05:00

Happy days are here again...or maybe not. The Journal Sentinel carried a forum from The Wall Street Journal on Sunday and it caught my interest. What I was most curious about was the basis used by the Yeas and Neas to make their points. A month ago I put out a message that was well received by people who are looking at facts and lambasted by people who want happy thoughts and positive spins. It looks like the same goes for the WSJs forum contributors.

Brett Arends says this is a great depression and he suggests we need to fix the leak before taking up pom poms--"Despite the cheerleading...we have barely begun to address the fundamental problems that lead to the crisis in the first place." Brett goes on to site factual evidence of the depth of the seriousness of the situation: US household debt is equal to 59 weeks of income. (there are 52 weeks in a year). Middle class incomes have barely kept up with inflation for 3 decades. Real unemployment is at historic levels. The jobless figures don't tell the entire story because many workers are taking part-time jobs when they can't find full time work---one in six workers are unemployed. The unemployed and underemployed result in a deepening housing crisis. Mortgage defaults, bankruptcy, are on the rise and huge waves of mortgage resets are coming due in the next 24 months. All quality facts to make a point.

What do the happy meal people have to say? Nothing surprising. Dave Kansas writes "...doomsayers..." "...mutterers of darkeness..." Name calling and comparing hollow numbers is the best the cheerleaders can do.
Deciding it's not so bad by comparing the unemployment rate of 2009 at 9.8% to the unemployment rate of 20% in the 1930's is arriving at a conclusion on weak information. In the 1930's a small percentage of Americans owned real estate. An unemployed person in the '30's more likely had an ability to sustain themselves by going home to a family farm. Farms were the major employers in the '30's. Today the unemployed have lost jobs in small businesses. Those small business owners are out of work too and they may not show up in the unemployment numbers.

I like the double edge sword Mr. Kansas uses as a glint of silver lining--"Corporate restraint seems to be reducing excesses and laying the foundation for sustainable economic growth." Corporate restraint and reducing excesses are measurable are tangible in job cuts, salary reductions, and less spending.

Both Mr. Arends adn Kansas agree that the jobs picture is the contributing factor to depression and recovery. Related articles appear on other pages of the same section. Filings for Chapter 7 bankruptcy are up a third from last year. The typical filer is 50 something, has credit card debt, a mortgage, kids in college, and had a well paying job. Chapter 11 bankruptcy, for business reorganization, is running 7 times higher in U.S. Eastern district court this year---70 compared with 11 in the first nine months of '08.

The McClatchy News Service has a report out of Washington that tells how Moody's punished workers who warned of trouble on the horizon. Kill the messenger is always the prefered method of swindlers and false profiteers.

It's OK to see things as they are and ask why or why not. An effort by everyone to fix the leak will do more for refilling societies glass than name calling and denial. Is it a depression or recession? Who cares what it's called but I do recall what Ronald Reagan said when running against incumbent President Jimmy Carter--"A recession is when your neighbor loses his job. A depression is when you lose your job. And recovery begins when the President loses his job." Sounds like a pretty fair description.

Dane County by the Numbers to Date

2009-10-14T14:33:00.000-05:00

A quick search of the Realtors Association of South Central WI Multiple Listing Service produced the following numbers about the sales of homes in Dane County from January 1, 2009:

3339 Single Family (non-condominium) Homes Sold
     75 Were entered into the system as Short Sales
   115 Were entered into the system as REO

964 Condominium Style Ownership Properties Sold
    7 Were entered as Short Sales
41 Were entered as REO

The MLS is not reporting the non-equity sales as part of the monthly report and that could be because they may not feel confident that the data collected is an accurate representation. Short Sale and REO have to be checked at the time the property is entered into the system or at least by the time the data is pulled for end of the month compilation. While accurate reporting of data is required for participation in the MLS, it is possible that members may be overlooking the relevance of this information and not taking precautions to make the necessary change to the info already in the system.

What's In a Number? Ask the WRA to provide meaning to the numbers

2009-10-13T17:41:00.001-05:00

One is not always One in home sales. Sacramento gets it. They're breaking out the distressed sales from the rest. In Madison, WI we're used to a typical sale being a home owner or a builder selling to a home buyer and the home owner is not a corporation i.e. a bank or financial institution.

An Equity Sale is the typical owner to buyer transaction we all grew up with. The Short Sale is the sale where the home owner-seller walks away with no money (maybe still owing some money to someone), and the mortgage company and lien holders are collecting less than 100% of what's owed against the property. REO Sales are the foreclosures. Short Sales and REO Sales are Distressed Sales.

This pie chart shows that Sacramento's Equity Sales are outnumbered in a big way by the Distressed Sales. Compare the total number of sales in this pie to total number of sales in a previous year and you might conclude that the total numbers look pretty good. Breaking the numbers out by Short Sale, REO and Equity Sales we can see more clearly that the current numbers indicate a market made of aluminum and not steel...the numbers have too little substance. A foreclosure vacated house is probably not adding another buyer to the economy. The short sale is likely the same---one sale with no additional money going into the economy.

OK Realtors remember--I don't care if you think I am not "optimistic". I care that I am realistic and focusing on accurate information to help people make informed, not hopeful, decisions. I know a short sale and REO sale probably does pay a broker fee, so a sale is a sale when counting money paid to the realtors, title company, and lender. But the health of the market is what we are trying to get a handle on. If someone asks if the market will be "better" in the spring, we need to have some facts to base our opinion and "I hope so" is not an acceptable response. Numbers that show equity sales rising and distressed sales decreasing is a sign that the market is moving forward, not grinding.

wra@wra.org is the email to send a request to the Wisconsin Realtors Association to request this information be compiled and made available by county.

Move-on. Lessons for the Real Estate Owner from the Brett Favre Saga

2009-10-05T16:37:00.001-05:00

January 1997 New Orleans Super Dome.

The kid who grew up to be every Mother's son was a child star in his first Super Bowl. Perfectly fit, strong, filled with exhuberance, Brett Favre ran off the field after throwing a touchdown pass with helmet and the hearts of every Packer Backer in his right hand and arm. In a few hours from now, the unthinkable will unfold. Brett's been painted purple and yellow.

The guy is more than a player because players came and went from 1968 through 91 and no player came along who could pull the Packer Nation back to the top of the football world until Brett did it. Some homes are more than houses because of the memories and the place they hold in our hearts. Letting go of what was is not without pain.

Just like the young man with floppy hair is grizzled and gray, so might be our homes. The arm is fine--good bones and a dependable central heating and cooling system. Character grows with age. Tried and true if not a little tired and stubbly in some areas.

Many of us purchased our current homes about the time the Packers landed Brett Favre from the Atlanta Falcons. They were a bargain back then. We intended to keep those properties until we were ready to move-on to something more suitable to our new life style. We aren't 20-30 something any more and the old home might be too much for us to keep for ourselves. If nothing else, the old home is more than we need and letting it go to someone who will love it like we did, seems to be appropriate. Something a little smaller, and more efficient is appealing. But, the cost of letting go is getting in the way of making the commitment to move-on.

In 2005 a home value of $300,000 was verifiable for large number of homes that were built in 1988-90. Four years ago might have been the ideal time to move if selling high and buying high were palatable. I held on a little longer and in retrospect--- I dropped the ball. Interception in the red-zone. What a bummer.

Well, game over I guess. Time to regroup and move-on. Best I can do is acknowledge that the loss has occured--if we can call decline in equity a loss, and I think we can. Then when I accept that the old house isn't worth what it once was to me, I have to let it go to someone else. Fortunately there are good homes out there at surprising prices. Let me remind you, Aaron Rogers was expected to be the first pick in the draft and he was still available at 24 that April day in 2005. Wow, were the Packers the lucky shoppers or what? Lesson learned--you can always buy if the right property is out there, but you have to shop to know what's available.

The Brett Favre Green Bay Packer era is over and so might be the era of high home value appreciation for those of us who raised our families on Brett Favre and 2400 + sq ft houses with bedrooms and family rooms enough for everyone. We can calculate the opportunity loss and move-on to the new property... or we can sit and grumble about what could have been.

Rebuilding our home equity will likely include less borrowing against the paper value of our homes. The next house for many of us will be a fresh start with more memories to be made. To get to the next house we can let go of the present one. The new owner will appreciate it, even...with all of its flaws and scars.

Mid to Upper Price Points...Time to Make Offers?

2009-10-02T15:02:00.000-05:00

A quick scan of the multiple listing service shows of homes entered for sale since January 1: 38 homes, no older than 25 years, for sale from $599,000 to $800,000. The average price is $678,573 and the average days on the market is 99 days.

For those that sold this year, the numbers look like this: Five Sales. Average days on the market: 57. Average asking price $654,960 and average sales price $649,660. Add to that the four that are pending and will close soon, Four with an average days on the market of 119 and asking price of $661,950.

The homes available include Madison, Fitchburg, Middleton (town and city) Springfield, and Oregon.

It is my belief that people who stay on the market in October and November are the most cooperative in negotiating. The competition is minimal. When determining a price to offer, look at the recent sales and make an offer in line with what it appears other sales will support for the subject property. It may be less than the asking price, and the owners will have the opportunity to consider the evidence.

October, November, and December are the "Tween" months---past the most active time of the year and before the Spring market, which starts in February, if not mid-January here. This is a smart time to shop.

Real Estate Isn't the Only Thing...

2009-10-01T11:34:00.000-05:00

Last night I looked out from the stage at Madison Memorial High School making a presentation to parents and students on a topic not related to real estate but entirely related to home-life. The evening was title True Life and included speakers such as Dane County Executive Kathleen Falk, Tom Farley, and experts in the field of drug and alcohol use in the culture of our state and our schools. A life, health, and death issue to be sure. Real estate seems not so serious in comparison.

What I thought about while listening to the other speakers is that what we rarely know is what is happening in the lives of people we see in our business. Buying and selling homes is part of living, but only a small part of a person's life. Day to day, hour by hour, our customers cope with real life challenges which affect their ability to give attention to the business of buying and selling.

In my life time we purchased our two homes in the final months before our sons were born. Maybe that was out of the ordinary and most people might not undertake real estate moves at times of monumental change when given the choice. Health issues choose their time to get involved in the matters of the day and when they perk up they may be moving to the front of the line for the attention of our clients.

My sons once read a book about walking a mile in another's moccasins. A worthy thought. I will remember that real estate isn't the only thing on the minds of my customers and clients.

Has the Housing Market Bottomed Out?

2009-09-30T13:23:00.000-05:00

The subject is contentious to say the least. Networks trip over each other to be the first to call an election and the race is on to call the end of the recession. CalculatedRisk.com was suggested to me by real estate attorney, Robert Caflisch as viable source of insight.

Numbers are being crunched by real estate interested economists and differing opinions are coming out. Not unusual because the hollowness of the numbers. A home sale today is not equal to a home sale 4 years ago as the sales today include a substantial percentage of foreclosure properties. A foreclosure sale does not have a seller who is reinvesting in the housing market by moving up, down, or sideways. Strength of the housing economy may be what aluminum is to steel---a little flimsy.

Regardless of what the economy is today a decision to buy or sell today can be made with information that can be verified. Waiting until spring may or may not be advantageous. We will not know then what we know now until then. I am in favor of making decisions based on what you know and can be reasonably sure of. Who can be reasonably sure of anything six months from now?

H.E.L.P.

2009-09-29T16:28:00.000-05:00

HELP is on the way for would be home buyers. Fear of loss is a great motivator unless that fear is the loss of a job. If I'm going to lose my job I will be in a tough spot to pay bills. No one wants to walk away from obligations but if push comes to shove, I'm guessing walking away from a lease is less damaging to a person's credit than walking away from a mortgage.

Renters who would be home buyers today if they were less concerned about their ability to make mortgage payments should meet with Realtors participating in HELP, an acronym for Homeowner Education and Loss Protection. Buying a home with a HELP certification the new owner will have six months of job loss mortgage payment protection up to $1800 per month.

I just completed the certification process. Seems to me that a current home owner who is uncertain about their long term employment security may want to sell and buy now to be HELP eligible for the next two years.

Home sellers who want to differentiate their home can provide the HELP product to the buyer of their home for $500.00 when working with a Restaino & Associates agent.

A good idea at the right time.

5418 Old Middleton Road - Tom Meyer

2009-09-29T11:35:00.001-05:00

5418 Old Middleton Road - Tom Meyer

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Absorption Rate or a Misnomer?

2009-09-24T13:50:00.002-05:00

Absorbtion Rate
Hmmm. Maybe. Let's think about this. Do we use "Absorbtion Rate" calculation in determining when our warehouse supply of Rice Krispies will be depleted? I think we do--but I'm not an MBA. Someone chime in here---

If I have 10,000 boxes of cereal in my warehouse and I sell 5,000 a month every month the supply of ceral boxes will be absorbed by the consumer in sixty days/two months. I know this is accurate and reliable because the Rice Krispie today is the same as it was decades ago (I assume) and for decades, in all economies, kids have been eating Rice Krispies with milk and sugar, and butter, and gooey marshmellow at a consistent rate. Drought years, cold year, bull markets, and bears...Rice Krispies are consistent and good food loved by everyone.

Where I am not trusting absorbtion rates is when we try to use the formula in the discussion of pricing homes and estimating the health of the market. People don't buy homes by the time on the market so to say I should expect 10 months to sell because there is a 10 month supply of homes is silly. That idea assumes my house would sit in the back of the real estate warehouse to age until the less fresh houses are moved out.
You're reading this and thinking "is anyone saying absorbtion rate affects my time on the market?" You bet they are.

The number of homes on the market in any category, price, style, age, size, area, matters because of the relationship the inventory has to capturing the attention of buyers. The higher the ratio of homes available to any category the less likely those homes will sell at any speed considered "quick". Homes are acquired by people who want to live where other people want to live and scarcity drives decisions. Go into any neighborhood today with a double digit number of homes for sale and you might expect to see the average time on the market relatively high.

What's my point? Here it is---before thinking your house won't sell or it will take multiple years, we should meet. Homes priced right, in good condition, and attractive locations will sell.

Time always gets too much attention--it's not time but what we do in the time we have that matters.

Logical Offer Negotiations

2009-09-21T15:29:00.001-05:00

Real estate Offer negotiations are not complex. For every problem ever imagined someone has created a contingency to include in the terms of an offer. Offers, which become contracts when agreed to by buyer and seller, are fat with contingencies (or conditions). When the terms are well written, such as "I will do _____ by (date) and if I have a concern I will tell you by (date) and you can do (such and such) or we can agree to disagree and go our seperate ways", buyers and sellers work very well together. The process moves smoothly to closing. What keeps buyers and sellers from getting down to the work of moving toward closing is often the ill will cultured when intentions are questioned. Illogical methods lead to the illness which kills cooperation.

After deciding the home is fine and dandy, a buyer with more information than common sense may grow Donald Trump hair on the brain. Of all the fat in an offer, the only muscle is Price and Closing Date. Money and Time, Time and Money---they are all that really matters. Every other term in an offer affects time or money. Keep that in mind and you will negotiate with logic and your intent will be clear.

This is my favorite:
Illogical price negotiating :
Seller is asking $300,000. Buyer wants to pay less--and does want to own the house. Buyer offers $250,000. Seller counters with $295,000. Buyer counters with $280,000 and expects buyer to accept because "I came up $30,000--Seller only has to come down $20,000. I made the biggest concession."

Where one starts and moves to is not relevant in Home sales. A Seller is equally capable, "Well I started at $325,000--so I already came down $25,000." People--if this strategy made logical sense, Sellers should start $100,000 above their reasonable fair market value and Buyers should start equally low.

Consider that home sales involve some emotions that are rooted in intangibles. If you like a house and you want to own it, perform a thorough analysis of the market as it pertains to that home and your finances. If you can not afford to pay what the market indicates to be the value your options are limited--posturing and implying you think the owner is goofy with the price, let the owner know your limitations. Chances are the owner could care less about your situation but you never know. Better to part ways on good terms in case the owner later wishes to take less than to have the owner say not just NO, but Hell NO! Not EVER will I sell to that knuckle head.

If a lower price is your desire, give on the closing date--most home owners will accept a little less than they planned in exchange for their best closing date.

Go into your next home purchase with this in mind: How much you moved doesn't make sense in the end, but it does make adversaries from the get-go.

Saving the World at Work--by Tim Sanders

2009-09-17T14:49:00.001-05:00

Customers and talent are drawn to businesses that share knowledge. This blog was created with that awareness. Price is not king when creativity and compassion are in the picture.

We all have an opportunity to look in the mirror and answer the challenge, "Now that this has happened, what am I going to do about me?" Fix The Leak is all about sharing expertise and addressing the challenges as they truly exist and not waiting in vain for time to do what time will do.

Tim Sanders honed his skills as a writer and speaker with Yahoo and through life situations. His message is not new, after all Zig Ziglar has said for decades, If your thinkin' is stinkin' your business is too.

Share your knowledge on this blog--what do you know that someone else should know about navigating this real estate economy? Everything will change when enough of us change how we understand the sign posts along the route and share what we know with compassion for the customer.

Staging the Home First---A Good Move!

2009-09-16T13:49:00.000-05:00

Good Move boosts real estate sales by staging homes. Every home can benefit from Staging. It will cost you less than your first price reduction.

How is this? Buying decisions are made with a blink of an eye and driven by emotion. These quick moments are screen views through the computer, on-site curb appeal, and the initial smell in the home.

University of Rochester School of Medicine published a study based on brain activity revealing that emotion is inextricably a part of the decision making process. It continues by stating, that if in fact, “you eliminate the emotional guiding factors, it is impossible for people to make decisions in daily life”.

University of Florida also conducted a study on emotions and their effects on the buying process, headlined that “Americans are more likely to let their Emotions Do the Buying,” contending that “emotions were nearly twice as important as knowledge in buying decisions.” The study pointed out that “marketers should focus more on understanding how to connect with their audiences on emotional as well as intellectual level.

Staged homes photographed for the Internet increase your odds of being chosen to view with 84% of buyers on the Internet previewing homes before looking. The properties with amazing photographs will be looked at first; with statistics showing us that more buyers view homes that are staged vs. un-staged.

Staged property prior to going on the market benefits everyone involved with the sale and purchase of the property. Show buyers the properties true potential.

Cost of staging is always less than the first price reduction.

Cathie Quandt Broker, Owner, Professional Stager, Member of: Real Estate Staging Association (RESA), National Association of Realtors (NAR), Wisconsin Realtor Association (WRA

Whole Number Pricing--A Smart Way to Reach the Right Buyers

2009-09-15T12:38:00.000-05:00

$199,900. $299,900. $399,900. $499,900. Why do we do it? Why do we place prices on houses the way we price a pair of pants? Well, because we always have. The most likely explanation, other than "I don't know" is that the price sounds like less money and looks like less money than $200,000, $300,000, $400,0000, etc... That's old school marketing and the result is we are missing large numbers of consumers because we aren't pricing the way the consumer searches.

Almost every consumer of real estate uses the internet to search for homes they want to see. Even if the realtor is searching, the consumer is doing their own search day and night. While I would drop the customer's bottom number several thousand dollars lower and raise it several thousand dollars higher to make sure we don't miss underpriced or overpriced matches, the typical buyer searches in whole numbers such as $100,000 to $150,000; $250,000 to $300,000. $400,000 to $500,000. They do this because of one or two reasons: By choice or by restriction. Some web site search sytems don't allow the user to enter their own numbers. The numbers are chosen from a drop down box. (See www.Firstweber.com and www.Starkhomes.com) Other search sytems allow a person to enter any whole number (www.Restainohomes.com and www.Realtor.com).

Homes I had priced at $299,900 were definitely being missed by the person who searched $300,000 and up. Yikes!! I was missing my most likely buyer by a hundred bucks!

This seems like such a simple concept yet it eluded me until I heard it explained by a sharp Realtor, Randy Tews. See www.TewsTeam.com Randy has a long track record of working with home owners who had tried to sell on their own or with other realtors. Knowing how the consumer searches the internet, Randy has been helping people reach the consumer by this simple pricing idea for years. In mant cases Randy actually has the owner INCREASE their price---granted it's only a $100.00 but that little increase brings more buyers which equals more competition and the result is usually an offer the owner can work with.

No assurance the pricing will mean more money to the owner, but it should result in reaching more viewers. The home still has to be worth the price. Retail pricing has its place in a retail environment. Be smart---price the way the consumer searches. Whole numbers.

Let's call the $99,900 pricing Old School, and the whole number pricing $100,000 New School.

Downtown Madison Condo Market

2009-09-14T17:20:00.000-05:00

When you're green you're growing, when ripe you rot.

Years of experience is trumped by insight and attitude. Heidi Tiefenthaler is one of Madison's up and coming Realtors. She's an entertaining writer with a savvy business mind and exhuberance of youth. I invited Heidi to write about her niche to share on this site. Follow Heidi at www.renewshub.blogspot.com

Here you go! My take on the current downtown condo market and why it isn't as bad as people say it is - as long as you are in the "right" building.

I was out with a buyer who is considering moving to downtown Madison. We toured condos at Union Transfer, 4th Ward Lofts, 100 Wisconsin Avenue and The Marina, all the while being treated to views of tree-lined streets and both lakes. Our hunting complete for the day, we headed over to Fromagination on the Capitol Square to enjoy wine and cheese. My buyer looked at me and said dreamily, “Who could say no to this?” Having lived downtown my entire life, I could only heartily agree with her.

Yet there are many out there who believe that the downtown condo market is in trouble. Is this true? Well….yes. But before you get ready to pack up and head for the ‘burbs, let me tell you not only why the market is in trouble, but also why that should not stop you from buying in the heart of Madison.

A few years ago during the housing boom, local real estate developers decided to capitalize on the competitive downtown condo market by putting up high rises. In what used to be a market filled mainly with luxury condos in exclusive buildings, downtown soon found itself host to “affordable” (to be kind) units. Unfortunately, the developers did not anticipate the downturn in the real estate market as a whole, and now the downtown condo market is flooded with brand new construction with not nearly as many buyers as needed.

So yes, the downtown condo market is in trouble….but not all condos should be included in that dire statement. Condos listed in smaller developments and those that are in excellently constructed buildings are consistently being sold with fewer days on the market and with a better sales to list price ratio (upwards of 97%). So why are they selling, but not the high rises? Simple: people want to buy homes, not apartments being dressed up as condos.

With new, cheaply built units flooding the market, those who bought early and are trying to sell now find their resales in competition with brand new construction, not to mention all of the other cookie cutter resales on the market. So does that mean you should avoid downtown? Absolutely not! There will always be people interested in downtown condos. However, to keep your investment safe, stick with buildings that have a history of appreciation and unique units, and avoid anything that makes you feel like you’re living in an ant farm.

Heidi Tiefenthaler is a Realtor with Restaino & Associates who specializes in the downtown condo market. You can generally find her at her downtown office on Wilson St., The Union, or The Old Fashioned for lunch. E-mail: heidit@restainohomes.com.

Fix it. Paint it. Replace it. Refresh it.

2009-09-14T13:00:00.002-05:00

Old thinking should be set aside just like old fixtures in your house when you're selling in today. Five, ten, and 15 years ago, a house in the right location was all that was necessary to capture the interest of home shoppers. The competition was relatively fierce and with high demand we had lower expectations. Today's home shopper is cautious and demanding.

Maybe the new mantra is Location, Location, CONDITION. There was a commercial back in the day that went "You can pay me now, or you can pay me later..." and that slogan rings true with house selling. The smallest things that appear worn and tired will translate into loss of enthusiasm by the shoppers and more time on the market for you. More time will generally equal less money. Now here's the challenge to acceptance---Repairs, updates, refreshments will not necessarily return dollar for dollar. There does not seem to be a positive corelation between dollars spent and increase in expected value of a property. It is possible to invest $10,000 and not see your comparative market value increase by one dollar. What does seem to increase is consumer acceptance of the property which translates into offers which have a chance of closing.

You will be able to find research that still supports the notion that improvements increase estimated value. I know one such study published by the National Association of Realtors, but the results are more a product of survey of opinion than scientific evidence. In the end you may be most pleased with your decision if you scrutinize your property with the help of sincere people, realtors you trust, home inspectors, appraisers, home stagers, and make the changes to conditions that sing the blues and expect pleasure in the fact that you are presenting a better condition property with a better chance of getting an offer. Success is not always measured in money. Fix it. Paint it. Replace it. Refresh it.

Glass Half Empty Kind of Guy

2009-09-11T11:58:00.000-05:00

"Many of you probably know Tom Meyer. He’s been in the business a long time. Suffice it to say that he is certainly a “glass half empty” kind of guy."

Those are the words written by a person who has grown up in the Madison real estate world, and who's opinion I respect. It's an invigorating experience to read opinions about yourself. The author of that quote is a smart guy. He's well known as an owner of a relevant real estate company. I decided it would be smart to take a close look at what he had to say. I did that, I'm still doing that, and the man's critique inspired me.

What caused the author to author to critique me was his feelings about real estate economy observations I shared. My comments may be contrary to the conclusions promoted by the National Association of Realtors and the Wisconsin Realtors Association. It seems some feel my opinion is "negative" at a time when "positive" spins are preferred. I think we have the same intention, we just have a different idea on what means we will employ to help the consumer navigate the real estate landscape. A cheer leading approach s certainly an option, but I'm not participating.

What has happened to Americans in the last 24 months is painful. When emotional pain is involved I believe the solutions are found in accepting the realities and going through the pain---not running from it, not hiding from it. But turn and face it and walk right through. When we can accept what is, and acknowledge that actions, not TIME, will heal the wounds we start looking at solutions. A glass Half Full (positive attitude) or Half Empty (negative attitude) is not full for a reason and because nothing stays static finding the reason is part of the solution. I'll accept the label of "Glass Half Empty Kind of Guy" instead of defending my ego. No matter what you call it, something happened and repair or change is in order. The glass is half empty and I believe it is because there is a leak in the glass. This blog is about finding the leak and fixing it.

To change the direction from paralysis or fear to empowerment, this blog will be a venue for people who provide services that matter in this real estate economy. Challenges we will address include: Real good solutions to show your home in a way that meets the expectations of today's cynical buyer. Insight into how to buy a condominium when you need to borrow money. Ways to sell a condo when money for condos is hard to find. Where to go for residential mortgage financing and where pitfalls exist. How to evaluate an income property to make sure you don't get a money pit when you wanted a cash cow. Ways to use your home to keep it.

You can use this blog as link to the realists in the real estate economy. These people will have positive attitudes in that they are positive in their knowledge and committed to actions which make a difference. These will be the professionals who see a problem and take action to fix it.

If you want to be part of the solution please share your ideas. It's OK to object. Differing opinions generate ideas. Neil Armstrong said, and I am not exact on this, so I won't use quotes: Some people talk about people. Other people talk about issues, and a few people talk about ideas. Doesn't it seem to make sense that the solutions are in the issues and the ideas, not the talk about people?