John's Real Estate Blog

Jack of All Trades

2010-01-22T16:40:00.000-08:00

As a real estate professional in today's market, every agent must possess a multitude of skills in order to succeed. Thus, we become a Jack of All Trades to Master One - Real Estate Sales!

The Market Specialist - We must consistently be an expert in our markets. We must understand current pricing trends as well as neighborhood demographics. This is an ongoing study for us as markets continue to change ever so rapidly.

The Economist - While we do not have a crystal ball to see the rise or fall in the market (though many people seem to feel we do), we must be focused on not only our local economy, but our national and global economy as well. The last 5 years definitely proved how important global economic stability is to our business.

The Accountant - Of course we must obtain the skill to add and subtract, as well as calculate a client's amount received or needed to close a transaction. Now throw in the short-sale, bankruptcy, and other debts owed and we have a complete balance sheet to juggle (all the while trying to meet our client's desired bottom line).

The Marketer - Yes, marketing! Isn't that the main aspect of what we do? We market ourselves, market our listings and even market our buyers to prospective listings! If you are poor at this, you are in for a long and unprofitable ride.

The Psychologist - This is a new one for me. Yes, I have become somewhat of a psychologist for my clients. The pain and suffering of not getting that great deal, moving under stressful conditions, disagreements with spouses over price, and having to accept much less than anticipated on a sale are only a few of the reasons we console and listen to our clients.

The IT Specialist - Where would we be without computers. We need to be up to speed with the latest gadgets, marketing software and web sites, programs, etc... As the majority of our business moves to the web, a background in this area is definitely beneficial (or a necessity).

There you have it. I am sure I left out a number of skill sets, but you get the point. To be successful in this business one must exceed at many trades to master real estate sales. I wouldn't have it any other way!

Mortgage Lending Getting More Stringent?

2010-01-18T05:18:00.000-08:00

Over the past 2 weeks I have come across one article after another regarding the difficulty to obtain a mortgage. While this is nothing new in the real estate lending world of today, we are now faced with another huge obstacle to climb - a depleted FHA fund.
According to the National Association of Realtors, FHA financing was obtained by 40% of home buyers. That is a huge number for one lending program, yet a positive one to maintain the proper balance of housing inventory levels.
The FHA capital reserve fund has gone below statutory minimums. What does this mean? A change in the FHA guidelines is inevitable. The change may consist of one (or all) of the following: more money down required from the borrower, less seller contributions, a higher MIP, and possibly not allowing the up front MIP to be financed. Of course, NAR strongly opposes any drastic and sudden change, as this could eliminate a large percentage of home buyers.
Now, couple this with Fannie Mae and Freddie Mac guidelines that continue to get more conservative, and a flow of bank-owned foreclosures to hit the market, and values could fall even more.
As a home buyer, it is still an excellent time to buy. Work closely and early with your real estate professionals to ensure you are up to date in program guidelines, and form a tight budget to enable more savings for your home purchase.
As a real estate professional, keep in touch with the latest industry changes by going to your member access site for the National Association of Realtors. While change is coming, we can be prepared and ultimately the lending market will self-adjust.

The Mobile Agent

2009-09-11T05:59:00.000-07:00

Many agents in the industry today acknowledge they are mobile. The majority of agents I know have some form of PDA device (Blackberry, IPhone, Palm, etc..) and a laptop. While having one of these devices does establish a mobile presence, many of these agents may not be utilizing their devices to ensure they are not only productive and efficient while away from the office, but cutting edge as well.

Know Your Device and Equipment

Whether it's an IPhone or a Blackberry, today's agent must understand the full capacity of their device to maximize their productivity. This means constantly being in tune with the latest apps and updates their devices offer. If not already, soon there will be an application for practically everything imaginable.

I chose an IPhone. The IPhone has mortgage calculators, loan apps with client management, property searching apps, and recently an app that is perfect for the real estate professional - AgentWorx (not yet available for Blackberry). AgentWorx organizes your listings and details along with your buyers from a dashboard. Let's say you get a call from a sign. Simply go to that listing on your IPhone and the specs and details are right there! There is also a leads tab and features a way to forecast future income. Another featured app the IPhone has is MobileMe. This instantly updates all of my outlook contacts and appointments with my IPhone wirelessly. I then have a Groups App that automatically imports specific groups I create, and color coordinates each group. Being a Broker, this allows me to e-mail our office as a whole or any other group by tapping the screen. It's that simple. Recently, one of my agents was selected for our MLS company's beta-testing for a mobile MLS app. From what he showed me, it looked great! So whether you are using a PDA, Laptop or Netbook with Wireless plan, or all of them, your business is now everywhere you go whenever you need it.

How Far Will Technology Go?

My philosophy as both a broker and an agent is technology will only get more advanced and more complex. While it's initial use will be fairly easy, complete utilization will take some craft. The real estate office will become smaller and more remote (this is already happening). The water cooler chatter will be replaced by texting and blogs, and offices will become more barren as work becomes more mobile. I particularly am in favor of this. I am accessible 24/7 via my mobile device to my agents and clients. I have web-based servers that maintain our files, and I can handle 75% (or more) of the issues away from the office (as can most of our agents). Technology is advancing quickly and is here to stay. Embrace it now and make it an integral part of how you run your business.

To Buy, Or Not To Buy?

2009-05-14T18:25:00.000-07:00

To buy, or not to buy, that is the question!
I have been getting this question quite often recently from many buyers. Most buyers appear to be "on the fence" about buying in today's economy. While I do agree that much thought, preparation and consideration has to be made about a buyer's particular income and economic situation when purchasing a home, I also encourage buyers who are able to purchase to take advantage of the incredible opportunities that exist for buyers in today's market.
Why should I buy now?
Yes, banks are restricting credit and financing has become increasingly more difficult to get, yet interest rates are extremely low and FHA loan limits are high. Couple that with a declined average home price and buyers are in perfect financial position to buy that home. Now, add to the mix the $8,000 tax credit (yes, it is basically FREE money but ends at the end of November) and the buying decision is an easy decision to make.
What about renting? If you qualify for a mortgage, and plan on living in a specific area for more than 4 years, it really does not make sense to rent when you can buy. As financing gets harder for some people, rentals will be in more demand, and those prices will actually increase. With rates so low, more principal is being paid rather than interest, which makes a great situation to buy.
Besides the financial advantages, owning a home is still the single most important investment people will make. In fact, the home purchase in my opinion will now become as important a decision and investment as it was to the baby boomer generation. The world we now live in (post-credit craze) will create a value in the few possessions we as a society have. The home will once again be at the forefront of those possessions. People will not be spending as carelessly as in previous years, and I believe homeowner's will be staying in their homes for a longer average than in the past 2 decades. At last, we once again have a traditional and healthy real estate market, where the majority of purchases will be made by homeowner's rather than speculators and amateur investors looking for the next "get rich quick scheme". This will eventually lead to sustained values that will begin to appreciate in a more consistent manner.

Credit Card Crunch?

2009-03-11T13:29:00.000-07:00

In the midst of the housing crisis and credit crunch (mainly mortgage loans, business loans and lines of credit) lurks the possible end-all of the American financial system - the credit card crunch!
The magnitude of the potential damage that will occur in our global economy can be prevented if both politicians and bankers actually use the brains they claim to have and stop what is already occurring. Let me explain.
The credit crisis has already affected millions of Americans and may affect millions more in the upcoming years as the major banks that make up the allocated credit available to consumers plan to cut half of the available credit on the market. This is not just those cardholders with high limits and late payments; this is an approach that will alter every aspect of our current financial system and every person who has a card in their wallet.
Recently, many good-standing consumers have seen their interest rates skyrocket and credit limits plummet with little explanation from the credit card companies. With fed rates so low, how can they now justify, in a more difficult economy, this hike in rates?
If a $10,000 card balance on a $20,000 limit was at 12%, the minimum payment would be around $180/mo. That person's credit report would still show a favorable score since 50% of the limit was still available.
Now the credit card company retracts the line to $10,500 and increases the rate to 28%, thus the payment is increased almost double. The applicant can try to balance transfer, but wait, the retraction of the original limit most likely lowered the applicant's score thus making the applicant a higher risk.
The truth is the credit card is a prime economical tool for consumer spending. Roughly 45% of card holders have a monthly revolving balance. What will happen when that is taken away?

Are Homes Becoming Over-improved?

2009-01-18T06:22:00.001-08:00

As I analyze current market trends and sales data, I can not help but notice the number of over-improved homes on the market. First, the term "over-improved" is any property that has been updated in such a dramatic way that the current sales price is beyond what the market can bear. So, one can easily remove the "over-improved" label by properly pricing the property in relation to the current market, regardless of improvements.

Unfortunately, many real estate agents encourage "over-improving" and do not educate homeowners the reality of improving a home. That granite counter top or slate tile floor may be beautiful and the difference maker to sell a home compared to the competition, but it does not necessarily mean the home is worth more.

If a given area has home prices in a 200k-250k range, then a home really should not sell above 250k, especially in this market. What sellers should know is to improve their property wisely, and determine if it is to sell or for the seller to enjoy. I was watching a program on HGTV where the agent came back after improvements and gave an adjusted market price 5% higher than the improvement costs. This does not make sense, since improvements in real estate (structure) typically depreciate (like cars) while the land typically appreciates. So beware when you are making improvements. Choose them wisely and hopefully make them for your enjoyment and don't worry so much about the possible future gains the improvements may make.

Mortgage Mess Meltdown 2009

2008-12-28T06:49:00.000-08:00

As we enter 2009, many Americans are wondering whether the depreciating real estate industry and mortgage crisis will come to an end. Depending on where you live and what geographic market you are selling/buying in depends on how the question is answered. Forbes.com (CNN Money) cites the top ten worst real estate markets are basically in California, with Miami and Washington D.C. included in the mix. I wonder why these desirable areas are in such disarray? And will this affect the marketplace I live in? I then look at the dynamic that increased values in those areas.

Most of those areas resulted in an excess of building coupled with easy no doc loans to buyers, many of whom were buying investment or second properties. In other words, buyers purchased speculating a continuously appreciating market. In contrast, Philadelphia (my marketplace) did not have much room for growth of new housing. And most buyers purchased homes with the intent to reside in these homes. Our growth went up (literally, in center city) and those projects are possibly the most failing in the city. In my opinion, Philadelphia is not a city of residents desiring condo-style homes. There was a reason why Fannie requirements in the past were much more strict on condo buildings (particularly high-rises). They are simply more difficult to re-sell. I do think, however, there is a market in condo-cnversions to rentals. Let's think about condo-purhcases. Will the average purhcaser hold on to the property for more than 7 years? Again, since the lifestyle is not well-suited for families, logic demonstrates buyers would sell and move up to a larger property.

Current and future conditions resulted from many bad practices and bad decisions. Buyers, real estate agents, mortgage brokers, underwriters and sellers are all to blame, to name a few. In my industry, real estate agents spoke highly of new condo-developments and how wise of an investment purchasing one is, with little knowledge or factual statistics to back those claims up. Buyers (many educated as well) would "drink the kool-aid" and purchase with plans of turning around a quick profit.

One way to avoid many of these issues in the future is to resort to logic. As a real estate professional, my opinion is based on experience and data I compile. I never followed the condo boom for a reason: I thought it was destined to fail. There was insufficient data to support its growth. Philadelphian's, as I knew them, have always enjoyed there homes. Since property taxes are already low in Philadelphia, condo fees and the limitations condos have compared to single-family dwellings made them an inferior product, in my opinion. Yes, people will buy. Many, though, will be speculators. More may consider to buy now and in the future if the condo was significantly less than its single-family competitor. But builders purchased land too costly and building costs and materials at the time were expensive. In a nutshell, there were a lot of bad decisions all round to create this mess.

How can it be fixed? My previous blog proposed a similar question. I would like to hear every one's opinion, resolution or debate to any of my points. I encourage your thoughts! Thank You!

Mortgage Mess!

2008-12-16T05:36:00.000-08:00

Most of us know by now how severely damaged the mortgage and real estate financial industries are; but what is still to come? And what measures can be taken to avoid a collapse that would be classified as a depression-like economic society? These are broad questions, and I am looking to both real estate professionals and consumers for their thoughts and ideas.

For example, will simply lowering interest rates stimulate the housing industry to rise above the current crisis? And what future ramifications would such a move create? What else should government do? What should government not do? Is too much government good or bad for our economy and our industries? Jay Leno joked that in Cuba, when Castro rose to power, he instantly demanded all private business and commerce was now public-owned, which we define as communism. In the U.S., however, we call that a bailout. As extreme and funny as that statement sounds, is there any truth to it? Recently, 60 minutes reported we are only in the 1st wave of the financial meltdown, and this crisis could snowball for the next 2-5 years.

There are also some scary similarities of the conditions of today compared to those during the great depression (ex. Obama policies compared to F.D.R policies). In fact, the depression did not end when F.D.R. took office. The economy (national and global economy) continued to worsen for years to come until after world war II (actually, the horrible global economy enabled one opportunistic dictator to rise to power - Adolf Hitler).

This blog is not intended to evoke political party affiliations or opinions towards either party. The goal is only to hear the every day American's opinion on how this can be corrected, if it can be at all. We also want to hear how future waves of credit demise could effect your presonal life and well-being. Think auto-loans, student loans, credit cards, etc... Thank you for your posts and thoughts. - JB