Monthly Archives: March 2010

Solid Ted?

I’ve been churning out this stream of consciousness called Real Estate of Mind for a long time now.  This past week,  I received the highest form of praise  I could ever aspire to… a local Realtor wrote:  “Your article on that over-the-hill agent was so funny, I blew coffee through my nose.”

A response that visceral and an image that graphic, exceeds all the right-on’s,  atta-boy’s, knowing smiles and mini-revelations my missives have coaxed out of you readers these last 13 years, by a factor of 10.  Thank you. I mean it. Blowing coffee through the nose.  It simply doesn’t get any better than that.

And while pausing for further commercial interruption in the middle of my own “advertorial” let me remind those who have gently complained about the small type –  log onto my blog with your morning coffee. You can OD on my real estate rants with whatever font size your aging eyes require.  Barring that, I have a new Promo Product to offer up. It’s a refrigerator magnet that doubles as a handy magnifying glass.  Helps you see and read the big picture of real estate.  It’s free to the first seven e mailers. After that, you have to list your house with me in order to get one.

But back to Tales of the Trenches….

There I was this week.  I got a call on a listing I just put into escrow.  It was on for $825,000 and after three weeks of the market’s coy flirtations and tiresome testing from  inveterate tire-kickers,  I listened to my own advice.  I encouraged my client to lower the price. Funny what even a small reduction can do sometimes.  Here was a discouraged Seller who had already concluded his property would remain unappreciated by buyers for all eternity. And then? Voila!

Four offers in three days. Full price. Qualified borrowers. Short contingencies. What more could one ask?  As usual, once the listing went into escrow,  the calls started. Agents representing Johnny-come-lately Buyers, who didn’t quite want it badly enough before. Those buyers content to keep circling around, doing their drive-bys, until the exact moment that mysteriously occurs when some other buyer steps up to ‘carpe diem’ the deal.  Translation: Homes are more desirable when you can’t have them.

So here’s the operative real estate phrase for the week:  Whenever an Agent calls another Agent about a house that has just gone into escrow, they ask:  “How’s the offer? Is it solid?”

Solid.  Hmm.  I have to admit, that there was a time when I would have answered that question unthinkingly. Without hesitation. Sure. Of course. Multiple offers. Full price. Qualified buyers.  Yatta Yatta.

But this time, that question stopped me in my tracks. I was momentarily stunned. Speechless. A flood of conflicting thoughts inside my head came cascading like a tsunami carrying all the dashed hopes and detritus and collective residue of all the DFTs (Deal Fell Throughs) accumulated over these last few years, while the real estate process has been turned upside-down and inside-out.

Does anybody really know what solid means anymore in this new day and new age when  every nuance of escrow is harder and almost every single thing takes longer than you thought it would?  “New and unimproved” as a one colleague says.  Is there anything close to unity and community of purpose or a sense of  ‘solidarity’ in real estate today?

Right now, realty looks like the rest of reality does when you get the big electron microscope out and peer closer. All those ‘real’ things that look so solid on the surface prove to be just a bunch of crazy mixed-up atoms, wandering in space, a slam-dance of chaos crowded onto the moshpit floor. Connections are tenuous. Always changing. Hard to tell how “it” all fits together. Or if “it” can stay together long enough.

No one is skating though escrow these days.  The ice is thin and far from solid. Hans Brinker’s golden skates got pawned. All us little Dutch boys are busy plugging holes in the dykes.

Are qualified buyers really qualified when it comes to the full doc, give-us-your-first born credit crunch?  Will that cut-rate appraiser hired by the AMC come down from Fremont and ding the value of the house even after it has been negotiated down $75k? If he doesn’t, is there a review appraiser at a desk somewhere in Des Moines ready to trip the trap door in this huge game of Chutes and Ladders? Will buyers be able to contain their own remorse and resist the temptation to renegotiate the price based on some red-flagged, red herring of an inspection non-issue? Will the other Agent’s brain implode trying contain his own buyer’s behavior?

Solid Ted? Naw. Nuff said.

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THE DISTRESS TEST…

An Over the Hill Agent happened to catch me on the cell the other day as I was running between a home inspection and a sign-off …

Now, when I say ‘Over the Hill’, I  want to issue a disclaimer and reassure any sensitive souls out there that I’m not using the phrase in a pejorative sense. It’s not meant to be ageist or politically-incorrect. God knows, if I didn’t photoshop my own Dorian Gray picture at the bottom of this column each week, I’d probably look as old in print as I do in my real estate life (pact with the Devil and all!)

No, I mean ‘Over the Hill,’ as in an Agent that works in the asphalt jungle of real estate beyond the great barrier reef of mountains lying North of Scotts Valley. One of those parts of the Bay Area where they seem to believe that most of  us Agents in sleepy little Santa Cruz, are just rubes farming our fallow fields, stuck in an outlying gulag of value, light years away from real estate central – so busy falling off our turnip trucks, we can’t focus on the true art of the deal.

Anyway, the mostly one-sided conversation went something like this:  ” Hello Thomas.” (That’s always the first tip they ain’t from here.)  “This is Jane Dough from Real Real Estate  and I’m calling on the property you have listed in Soqwell.  (She has that edgy, Agent-on-steroids tone in her voice. Sounds like she’s just finished a two-day Duncan Hines success seminar and she’s ready to Shake and Bake!)

Of course I say Hello and then politely wait for her follow up.  “This listing has been on the market for a while hasn’t it? (Yes. It has.)  Why do you think it hasn’t sold? (Well, to date, no one has bought it.)  “Are the Sellers really motivated to sell?” (Yes, they want to sell their house.) “Why are they selling?” (They want to live somewhere else.)  “But there must be a reason why they want to sell?” (They would like to have a different roof over their heads.)  “Who priced this house?”  (I’d say it was a collaborative effort.) “Here, in our market, things sell quickly.” (Some properties sell quicker than others.)  “Here, if something is priced right it sells with multiple offers.”  (We see multiple offers on occasion.) “But not on this property?”  (No, not on this one, yet.) “Do you think there is any flexibility in the Sellers’ price Thomas?” (I think if someone is interested in the property they should write an offer.) “Do the Sellers understand that the market has changed?” (They are sophisticated people.) “Don’t you think they should reduce the price Thomas? (I think it is their home. Their decision to make.)  And so on…

Admittedly, I’m a bit dense, if not rube-like on occasion.  It finally dawned on me to turn the table and  ask my own simple question: ” Excuse me, but have your buyers even seen this property?” Her answer: “No, they are going to be closing escrow on their home in Los Altos soon. They want to move to your area but they don’t want to waste their time looking at overpriced properties.”

I was speechless. For a moment. An Agent, pre-negotiating the negotiation before even showing the property?  Wow. Buyers wanting the price reduced before they’ll even take the time to look? Double wow. Buyers who haven’t even finished selling their own house yet? Triple wow.

It’s a sign of the times for sure.  The kinds of calls and conversations all of us are experiencing more and more in a market where half of the properties are clear distress sales (bank owned or short sales) and the other half  are suspicious listings that buyers are scrutinizing and trying figure out through a series of coded questions, just how much unseen distress there might actually associated with them.

Just to save us all a lot of time and Verizon brain cell minutes in the future, I have a suggestion. Let’s create a new category of information for the MLS.  Let’s try to make all this distress stuff more transparent so we can cut to the chase easier.  Let’s publish a  STRESS TEST for each nominally, un-distressed property – with the Sellers permission, of course.  We can rate the underlying distress level of each new listing and put a number in a  big red box right next to the photo. Maybe a 1-10 scale with 1 being a  Seller with lots of  equity just hoping to escape to Utah with as much of his remaining nest egg intact as possible, 3 being a recent pink slip and an unknown period of joblessness ahead,  7 being a pending ugly and messy divorce and 10 being a situation where the four horsemen of the apocalypse have ridden in to take up residence in a three bedroom home.

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THE DICKENS YOU SAY?

“It was the best of times. It was the worst of times.” Or, if I was the Great Decider-er, maybe I would say it is the better-er of times and it is the worser-er of times. Either way, it’s still the Tale of Two Markets here, in the decidedly surreal world of real estate.

Dickens has the story right. The words ring true: “…it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way…”

Two things happened this past week, that brought my angst-inducing astigmatism into sharper focus.

The first: On Wednesday, I wrote an offer for a client on a new listing in Soquel. Bank-owned. Seven quick offers. Two short days on market. Competition. Overbids. Client’s adrenalin pumping. Racing to write the offer. Racing to get the pre-approval letter. A familiar flashback. Shades of 2005!

The fears and doubts of the multiple offer game. What can we do to please the Seller? Make our offer look more attractive? Did we offer enough? Now, we wait for the mysterious ‘asset manager’ to render a decision from on high. Might take 3 or 4 days. Or a week. That helpless feeling. Something you have absolutely no control over welling up and washing over. And so we wait. Doesn’t feel much like a buyer’s market, like it’s supposed to be.

The second thing: On Thursday I met with the Seller of a listing I put on a month ago. It hasn’t sold. A few tire-kickers. No offers. He’s worried about the growing no-shows. Should we have put it on the market earlier? Are we going to have to lower the price? He is freaking out a little more each day as another drip of Chinese water torture hits him in the head and kicks him in the ass.

We thought we had it right. We looked at the comps and knocked the list price down another $25k to make it even more desirable. And yet.. Nada. No hint of adrenalin in the air. Just a few Agents calling to ask why the seller is selling. Or wondering what his “motivation” is. Or whether there is “flexibility” in the price. Doesn’t feel much like a market on the way up, like it’s supposed to be.

Small moments in the larger scheme of things. But representative of the mixed messages the meta-market is sending. Are we really gaining traction on what still feels like mighty thin ice? Are we (pick one): At the bottom? Near the bottom? Past the bottom. On the way up? Or just getting set up for the next big dip?

I finally figured out why this is all so hard to figure out. We don’t have one real, real estate market anymore. We have two. And both happen to share the same MLS circulatory system just like Jekyll and Hyde co-existed in the same brain. Our two markets are like parallel dimensions occupying the same space and time. They look similar at first glance. They overlap in some ways. But they are wormholes apart in other ways. And the spit confuses the hell out of us, because we keep getting them mixed up. Mistaking them for each other. Or wanting one to become the other. Or fearing one is becoming the other whether we want it to or not.

There is the Distressed Real Estate Market. And there is the “Regular” Real Estate Market that keeps saying it isn’t distressed.

Bank-owned Properties, Short Sales and any number of other situations lumped under the umbrella of pre-foreclosures made up more than 40% of the sales last year. Almost half.

Spring has arrived (a little early) for all those Real People who own those non-distressed properties and see themselves as being the Real, Real Estate Market.
Time for the real buying to begin. Any day now. Those real sellers are waiting for you real buyers.

For those basketball afficionados out there, old enough to remember when there was both an NBA and a separate ABA, this feels like then. There were two different leagues playing the same game but also playing slightly different games. What was clear to all who could read the writing on the wall, was, sooner or later they were going to have to merge. There wasn’t room for both.

Well sports fans, these real estate markets are going to have to merge too. I’ve already accepted the three point shot. I just hope we don’t get stuck playing with a red, white and blue ball.

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The Trouble with Bubbles…

I was taking a long, slow walk down memory lane the other day, rooting around in some old Real Estate of Mind columns, when I re-read this one from May of 2005. Hindsight can be a sobering, 20-20 experience… I thought I’d share a little bit of it…

I’m much b-b-b-better, thanks. My rehabilitation has come a long way. I can actually utter the word b-b-bub-bub-bubble now with only a bit of a stutter and without feeling completely overwhelmed by guilt and remorse for bringing up such a taboo real estate subject in public.

Bub-bub-bub-bubble. It has a rhythmic ring to it doesn’t it? An inherent onomatopoeia – specially when I take my finger and flick the front of my lower lip up and down while mumbling my real estate of mind missive.

Since I began blowing up the bubble question last week, there’s already been a front page story in the Chronicle sounding the alarm about the huge number of interest-only loans being issued in the Bay Area – 60% of the total this year- at a time when our housing mania seems to be seriously  surging over the top.

Such bastions of wisdom as Fortune 500 and Money Magazine have devoted considerable space in their May editions to examining the speculative nature of further real estate investment. Warren Buffet, the Oracle of Omaha, has stepped up to the podium and waded into the vast smorgasbord of opinion feeding our heads on the subject.  Many of you out there have also been kind enough to email me your favorite mystifying quotes from Alan Greenspan and a bevy of other well-known economists posing their own particular slants on the bubble question.

Greenspan is wandering around the economic landscape like a drunken sailor alternately denying a bubble exists:  “housing conditions are scarcely tinder for a speculative conflagration,”  acknowledging concerns about “froth in the housing market,” and ominously using those obfuscating double negatives:  “We don’t perceive there is a national bubble, but it’s hard not to see that there are a lot of local bubbles.”

I don’t know about you but images of froth and a lots of local bubbles brings to mind belches coming out of bloated beer bellies and the telltale signs of over-indulgent flatulence rising to the surface of the frat house hotubs and bathtubs. (By the way folks, this is just a lowly advertorial column. I appreciate all the thoughtful feedback, and high-minded discourse but how do you know that I’m not setting you up for my latest “make millions on real estate foreclosures scheme?” Just kidding, I think : – )

At any rate, it is clear that the “bubble” and other things suspiciously “bubble-like” are bubbling up in a steady stream from the collective consciousness. Google currently has 2,270,000 entries logged under ‘real estate bubble’.

If it looks like a bubble, walks like a bubble and bubbles like a bubble then it probably isn’t a duck.

But here’s the trouble with bubbles. They are tricky things. Even if we skip over the question of whether or not there is one, we are still stuck with the difficulty of defining
exactly what “it” is or exactly what “it” looks like.  By nature, bubbles are malleable. They float. They bend light and reflect rainbows. They appear and they disappear into thin air. They take many shapes and forms. You can see through them but you can’t quite touch them.

Bubble-sayers and Bubble-nayers. There’s a whole cast of characters out there stepping up to the mound to pitch us their best spin, couched behind a phalanx of logic and arguments and experiences and wishes and dreams and hopes and fears and expectations. If our heads aren’t quite doing Linda Blair 360’s yet, they are sure bobbing and weaving to the leitmotifs of the mosh pit.

Since so many people believe that reality inevitably follows perceptions created in the media – there are a lot of players competing for our hearts and our minds in the psychological battle
of the bulging bubble.

Next week we’ll round up the usual bubblehead suspects ranging from, those hardy souls that do believe in the bubble but also believe that they can time it just right – to those closet Howard Ruffs out there, already packing their survival gear and digging up their krugerrands from coffee cans in the back yard – to those still polishing their jewels of denial and singing the la-la-la song loudly to themselves – to all those others still enjoying the bubbly of the champagne bottle they just uncorked after their last big bazillion dollar sale.

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