Some time back I mentioned that many countries do not have the same level of regulation for real estate agents that we have here in the United States. Did you know that many states model their rules for real estate salespeople and brokers in part on the National Association of Realtors’ Code of Ethics? Well, in Britain, there is a movement to institute basic minimum qualifications and standards for “estate agents”, including a regulatory body and what appears to be disclosure requirements.

Maybe you remember when I wrote about Barbara Ehrenreich getting it wrong? Now Brad DeLong says she “has gone totally off the rails” when she insists that only the rich can afford to live in beautiful places. I suppose a lot depends on what a beautiful place means to you.

Objective data — actual real figures — show that the Las Vegas real estate market is getting better, thank you very much, with 3000 pending sales and an additional 4000 contingent.

As for the much hyped RealtyTrac figures that 1 out of every 118 Nevada homes got a foreclosure notice in May, that figure seems a bit odd. The last time I found a foreclosure figure “odd” it turned out to be totally bogus. Their figures also indicate that “Nearly 74,000 properties were repossessed by lenders nationwide in May, while more than 58,000 received default notices,” while Foreclosures.com said that nationally, “Lenders took possession of 74,570 homes in April, down more than 5 percent from March….” They also found that “Clark County had 4,426 preforeclosures in April, more than double the 2,029 preforeclosures in the same month a year ago. The number is down from a record 6,152 preforeclosures in March. REOs, or real estate owned by the lender through foreclosure, declined to 1,911 in April, compared with 1,937 in March.” In fact, you can see their stats right here: Nevada had 4,985 new foreclosure filings in May, compared to 5,177 in April and a high of 6,876 in May. And they saved me the trouble of adding up the number of homes total in each county: 742,752 total homes in the state. One out of 149 homes is still alarming, but improved. You can click on Nevada to get a county-by-county list: Clark County as a whole had 24,585 foreclosure filings year-to-date, including 4,222 in May as part of a 2 month decline, for a total of 4.80% out of our total 512,253 households. Keep in mind that many of the foreclosures from earlier in the year are already in the hands of the bank — and in some cases sold already. So the real news turns out to be both better and worse than originally reported.

And I promised a bonus: You know you’re a real estate investor when….

That’s all for today. Make it a good day.

No Crown for Vegas: Back in December, Clark County approved the Crown project, which would have been the second tallest structure on the Strip. This week, “Company officials said the recent upheaval in the world financial market caused the plans to be scrapped.” Furthermore, they will stop making payments towards purchasing the land for the project.

The truth about foreclosures: Just because the bank owns it and wants to not own it anymore doesn’t make it a bargain automatically. Buyers still need to do their research, Realtors still need to be aware of market conditions and advise buyers accordingly, and everyone needs to be aware that it takes patience to deal both with the bank and the problems that may arise.

Didn’t I already say this? Tony’s tips for curb appeal on foreclosure sales may be intended for REO agents (who are experienced listing agents or the bank would never call them) and investors who have purchased property from banks (see above). But they still hold true for Joe and Jane Average as they try to sell their home.

Your Friendly Neighborhood Licensee: I bet there’s at least one Realtor that lives in your neighborhood. Heck, there’s at least 3 on my block! Odds are very good that there’s a Realtor or two that takes a vested interest in your neighborhood, even if she lives miles away. She sends newsletters, she knows every house that’s been available for the last year, she goes door to door, maybe she goes to HOA meetings and organizes neighborhood garage sales. Well, she probably does genuinely like the neighborhood — particularly if she chooses to live there! — but the truth is she would like your business too. It’s a win-win situation, because chances are she knows and can highlight the great things about the neighborhood and the homes in it better than any agent in the area.

Lies, Foreclosures, and Gratuitous References to Adult Parties: The Hopps of Florida weren’t the only people making money off the real estate bubble — in fact, I think you could argue that if their actions involved securities, the SEC would be investigating them for “pump and dump“. In fact, many areas had somebody involved in the same sorts of schemes, where homes were bought for no-money-down, taking mortgages for more than the purchase price, and hoping to get out quickly. The Hopps might have been nothing more than a footnote if it weren’t for that one party making the news. The moral? I don’t know, defraud people and corporations as much as you like, as long as everybody keeps their clothes on?

I normally talk general econ over there, but….: Tim Iocono has some things to point out regarding the relationship of real estate holdings to overall net worth of American households.

I won’t bore you with the various conflicting stories I have seen this week regarding the state of the real estate markets. They range from “things will deteriorate for at least another year or three” to “we should see a bottom in the next 6 months” to “we are bottoming now” to “what are you talking about prices have already started to rise again in some places.” But you know how Tip O’Neill said “all politics is local”? Well all real estate is too. And locally, supply is declining. Sometimes when I do “floor duty” (answering real estate inquiries at the office for people who do not have Realtors), the phone rings regularly with people who want to buy. Econ 101 says that when supply declines and demand remains steady — or rises — prices go up.

I hope everyone has a great weekend.

I’ve updated the links, and added a section for Realtor Resources. Some of the other new additions include Frugal Vegas and the personal blog of former Secretary of Labor Robert Reich. One of his recent posts is on the housing bill currently in Congress.

It turns out I am not the only person who is taking a hard look at the various fees that mortgage companies are trying to squeeze out of people. “Slowly but surely, a handful of public-minded bankruptcy court judges are drawing back the curtain on the mortgage servicing business, exposing, among other questionable practices, the sundry and onerous fees that big banks and financial companies levy on troubled borrowers.” Over and above the miscalculated interest, the sloppy record keeping, and the fees upon fees that can keep people from ever being able to put their loans in good standing, some lenders are adding fees back on after judges have tossed them out and discharged a bankruptcy!

The Christian Science Monitor reports that some potential home sellers are deciding not to play the game at all and pulling their property off the market. Eventually these homes will come back, as the owners find themselves needing to sell rather than wanting to. Others will someday decide that the market has improved enough to chance a new listing. Some will sadly end up in foreclosure and become REO properties. Short version, this trend helps shore up supply now but bodes ill for some future date.

And now for a completely different kind of real estate, French lighthouses. Interested in a tough historical preservation project?

Speaking of foreign real estate, you probably don’t know how lucky we have it here in the states in some ways. Let Robert Brady spell it out for you: “Believe me when I tell you that, when it comes to business (that is, the purchase of real estate), the agent you’re working with is not working for you. Buyers’ agents don’t exist outside of North America. In many of the markets I recommend, real estate agents aren’t regulated or even licensed.”

A message to all those Realtors out there: I know about “Realtor Standard Time” and I know that things happen, but you still have to make an effort to be on time. Got that? Would it have killed you to call and let somebody know you were going to be late?

In a move that surprises nobody who has thought about things for a few minutes, economists have found that housing prices have declined most in places where the commute is longest. I suppose if you can work remotely, you can get some screaming housing deals in the far-flung ‘burbs right now. In the meantime, remember that the Las Vegas Valley is relatively small; I can be on the opposite side of town in a half hour…. traffic permitting of course.

And last but not least, two fun if kitschy tours of Vegas: the mob history tour (hey, they’re all legitimate businessmen!); and the haunted Vegas tour.

That’s all for tonight!

One fascinating aspect of our current market is that some houses blow off the market in days, while others languish for many months. While price is certainly an aspect of this phenomenon, it is not the sole factor. Nor is it all in the condition of the home. I am blown away by the fact that people will buy houses with no toilets, or with missing windows, or with huge holes in the wall, and gladly pay up for the privilege.

At the beginning of this week, there were over 17,700 single family homes available and another 4700 condominiums and townhomes. Half of them are vacant; almost one in 5 is a “short sale” where the mortgage balance is greater than the purchase price. These people need to sell their homes, and they need to do it quickly. Just short of 1 in every 10 listings is bank-owned (REO), and they account for over half our sales! That isn’t because banks are underpricing, and it isn’t because repos are necessarily nice places to live. People are getting into bidding wars on these properties, and eventually paying more than asking price in many cases! And then other bank-owned properties have sat, gathering dust, for months upon months.

So what is the difference between the houses that sell quickly, and the houses that simply don’t sell at all? And who is to blame for the ones that don’t sell? Remember, if the market is really declining, a fairly priced house can become a wildly overpriced house over the course of a 3 or 6 month listing agreement. There are many reasons that a quick sale is a good thing, so it is worth our time to consider how to make a home sell quickly. So here is a short list of things:

1. Of course, price still matters. If you walked into the grocery store and told them you had to buy a pound of ground meat for fifty cents, odds are very good you would not get it. If they told you they had to have $15 for a loaf of bread, you wouldn’t buy it. In fact, you would leave the store and go somewhere else — and so do home buyers when the list price is too high! Sadly, your monetary needs do not change the market value of your home. Remember that every for-sale sign in your neighborhood is competition for buyers. Clinging to a need you can’t and won’t get may cost you even more in the long run. After all, you still have to pay the bills. Listen to your Realtor about current market conditions. If she says your price is too high, listen to her.

2. Of course, the condition of your home still matters, too. Volumes have been written about “staging”, the process of preparing your home for sale. I bet there’s one in your local library, or that your Realtor can give you specific tips relevant to your home. The sad fact is that most people have a hard time looking past your clutter, your dirt, your un-done list of little maintenance chores. The last is of particular importance, because prospective buyers will wonder what other maintenance hasn’t been done! A clean house just seems nicer than the same house with dirty carpet and a scratched up front door. Really good REO agents know this, and at the very least send a cleaning crew to spruce things up.

3. Be reasonable about showing your home. Buyers can’t decide whether to buy if they can’t get in the front door. What they can and will decide is that your place is too much trouble. Go ahead and let the Realtor install an electronic lockbox so people can see the place while you aren’t around. The electronic ones available in most areas are very good — I have yet to see one broken into — and can only be accessed by Realtors via an electronic key system. Most are programmed to allow showings only during certain hours. If you are in a situation where you cannot allow people to be in the home unattended, seriously consider waiting to list until that situation is resolved.

4. Don’t put in unreasonable requirements. You know that if you say you will sell your home to “only Good Christians” or “No Blacks”, the Federal government will kick your butt? Well, there are other requirements that are legal but still not reasonable: “must prequalify with XYZ Mortgage, no exceptions” comes to mind. Some requirements are understandable but still not fun to deal with, such as unfortunate cases where sale is subject to court approval.

5. Make it a good listing from the start. If Jane Average does a search on REMAX.com and finds 82 houses that fit her needs, what is the first thing she’s going to do? She’s going to eliminate everything that doesn’t have pictures! And if she still has 50? She’s going to cut everything that only has one picture! Then and only then, she will read the description in the comments while looking at the pictures and online tours. Which would she rather tour: “Bank Owned-Addendums required-Property sold AS-IS. Information is not guaranteed-Buyer to verify all. Spacious two story home with upgrades and pool. Vacant now, show anytime!” or “REMARKABLE, CLEAN, HIGHLY UPGRADED HOME. Energy efficient windows w/custom treatments. Wood laminate floors in entry & kitchen. EnergyStar rated appliances. Big cement patio. Master bdrm separate from other rooms. Antique custom cabinet/sink combo in bath.You will be impressed.” She probably won’t even call Joe Average over to the computer until she’s narrowed things down to 10 or so. House-hunting isn’t what it was even 10 years ago. More people are using the internet — not the newspaper — to pick a short list of homes before they ever get in a Realtor’s car.

6. Be aware that things change. A wise man once said that the only thing that doesn’t change is that everything changes. Both Realtors and their clients need to be aware that market conditions change all the time, and that their strategies must therefore adapt to the way things are, rather than the way they used to be, should be, or the way we want them to be. Prices change, desirable neighborhoods change, the “best” schools change, the kinds of property people want to buy changes, interior design changes (thank goodness). Don’t fight change; adapt to it.

Don’t make things harder than they need to be.

According to the NAR, a REALTOR can help you get more money out of selling your property — even after commissions.  Doubters will of course point out that these numbers were put together by an organization with a vested interest in the outcome.   Even so critics and economists who doubt these figures concede that REALTORS provide valuable services to their clients and will never be completely replaced by such things as websites that allow sellers to list their FSBO (”For Sale By Owner”) homes for a flat fee.  A new study from Stanford spells it out:

Sellers potentially benefit from [real estate] brokers’ services in a variety of ways. First, brokers provide promotional services. They help prepare a house for sales, circulate flyers, place advertisements, hold open houses, and recommend the house to individual buyers. Second, they often assist with negotiations. Third, they screen prospective buyers, facilitating and potentially accelerating the process of matching buyers and sellers. Fourth, they provide access to the Multiple Listing Service (MLS), which lists all homes available for sale. Fifth, they provide market information and recommendations pertaining to the appropriate asking price. Sixth, they often assist with paperwork and legal documentation.

It’s a short version of the list, but it gets the point across.

Of course, the same report comes to a couple of interesting conclusions:  They did not find the same improved pricing that NAR and other research has reported, but they did find that  “[sellers] who use brokers sell their houses more quickly.”

That’s an important finding!   We are currently in a national real estate market where sales are at the lowest level since 1999, prices are declining over time, and we have an average of 10.3 months supply of housing on the market right now.  Locally, inventory has declined to a mere 21.22 months. Add to that the fact that foreclosures are up 57% since last year and 8% since December — including over 45,000 actual bank repossessions! — and it is clear that a lot more homes are coming on the market, either as short-sales or as REO (bank owned) property.  Even if Congress manages to pass Senator Dodd’s HOLC proposal, a lot of people will need to get out of homes they simply can’t afford.

Do you have 21 months to sell your home?  No!  Of course you don’t!

And are you prepared for the fact that if your home sells 6 or 10 months from now, you may very well get less for it than if you were to get a buyer 30 to 60 days from now?

Yes, selling a home more quickly is a big deal, even if you don’t have to relocate quickly.  In a declining market, time on market is money lost on market.

To get my free publication on how a REALTOR can help you titled “50 Things a Licensed Real Estate Agent Does”, or to get help finding or listing property, be sure to call me or click the “Contact Me!” link to the side.

Looking forward to seeing some of you at the Desert Shores Dojo this Friday night!

I will be at the United Studios of Self Defense Desert Shores Dojo on Friday, February 29, from 6:00 PM to 8:00 PM to meet you and answer any questions you may have about buying or selling property, local market conditions, the economy, and real estate in general.  I will also gladly set up appointments to list your property for sale, or help you find a great property to buy.  They are located at 8410 W. Cheyenne, Suite #104 (in front of Albertsons and CVS, for a map click here).  You will also be able to meet with representatives from other local businesses.

Yesterday, Sensei Brian told me there are a number of RSVPs, so to get your business represented or get a list of businesses that will be there, call him or Miss Teri today.  Their phone number is (702) 396-9944.

I’m looking forward to seeing you there!

An idea we toss around in meetings is that we, as real estate agents, have to stand out. And that means doing something memorable. However, it has to stand out in a good way — potential clients should not be thinking “Now that was dumb!” And it doesn’t matter how much the thing you did stands out if nobody can remember who you are. I wrote this article (reprinted below) 3 years ago, and it’s still true. We talk about giving away “items of value” to our potential clients. Items have no value in the trash. Revisions in italics.

This week [in Mid-December 2004] I received marketing materials from two competitors. Realtors, in fact.

One was a plastic bag, left by my front door while I was away. As paranoid as people are about terrorism, he should consider it a victory that I brought this bag inside at all as opposed to calling the local bomb squad. It contained a “complimentary luminary kit” (that’s a candle and a paper bag), a phone list for local ski lodges, and contact information. I do not know this Realtor. I have never heard of him, and will likely never hear from him again. He has spent quite a bit of time and money putting these little bags out around the neighborhood. There is nothing in this bag that will remain in my home next week — except maybe the candle [which does not have his name on it].

In short, I will not be calling this man, and I certainly won’t be generating a commission for him.

The other item was mailed to me by the Realtor who helped me purchase the very house I sit in [I have since moved]. It is a desk calendar. It is neutral in decor, nice and heavy, and has a little pocket in the front cover with 2 of his business cards. Not only is this item likely to sit on my desk all year — incidentally keeping his contact information handy — I am likely to give one of the business cards away to someone who needs a Realtor. This might have cost more than a paper bag and a candle, but I think it’s better marketing.

Odds are very good that even if I don’t buy or sell a house in 2005, I will generate future revenue for this Realtor. [He helped me sell that house too. It was only on the market 8 days!]

It is almost impossible to run a successful business without some kind of marketing. When considering your marketing options, be sure to pay attention to the return on your investment.

Recently I watched this item on a family that thinks they saved $26,000 by selling their home themselves. First, I feel a little gypped that 60 minutes bothered posting this one minute and eight second long clip, and then made me sit through a 30 second commercial to see it. But I digress.

This couple seems to think that all a licensed real estate agent would have done for them is print some brochures for the sign in front of their place and held an open house. The fact is that a licensed real estate agent does a lot more.

First, the agent can get your house into the Multiple Listing Service. According to the NAR, 75% of home buyers in 2006 used a buyers agent and the MLS — this family limited themselves to one in four potential buyers at the outset. They got a small online listing, sure, but you only saw that listing through the Owner/Seller site they used. This site is used by a tiny minority of the people in any given time and place who are interested in buying a house.

Second, an agent has a rolodex full of trustworthy contractors he or she has done business with many times before. People like carpenters, painters, cleaning crews, electricians, plumbers, title companies, and even loan officers. These people want to do a good, fast, and reasonably priced job so they will be called back again. If you think your house is in perfect shape and you need no contractors, fine. But I bet you are wrong.

Third, because an agent is not you, they can get feedback you can’t about your house. People might be too polite to tell you your house is cluttered, or smells bad, or that the paint in your kid’s room is awful. But you want to know why people aren’t buying your house, don’t you?

Fourth, an agent knows how to do an accurate market comparison in an impartial fashion. It’s a lot more complicated than punching an address into Zillow. You might say “But the house on the next block sold for $30,000 more than that!” But the agent can say “Yes, and they have a pool, new carpet throughout, and 500 more square feet,” or “Yes, but that was 6 months ago and right now there’s a house in your floorplan 3 blocks away selling for even less.” The agent wants you to list for a fair selling price, because even though her pay is a percentage of the sales price, she doesn’t get paid until after it closes. In short, she wants it to be the highest price that it will sell for in a reasonable period of time. She doesn’t want your house to sit on the market for ten to twenty months any more than you do.

Fifth and most importantly, a licensed real estate agent will help you follow the law. Do you know whether you are required to give a statement about the dangers of lead paint? At what point you must give a disclosure about anything that might be wrong with the house? If there is a particular form you need to use for that? What the legal description of your house is? How to get a payoff amount from your mortgage company? How to fill out a sale agreement? What items must be notarized? The difference between owning property as “Joint Tenancy” or “Tenancy in Common”? What things you can and can’t put in your advertising from a Fair Housing Law standpoint? In short, she is paid to make sure things are done right.

And that’s just 5 of the biggest things. Sure, this couple thinks they’ve saved $26,000. But they haven’t figured out what their time is worth, nor do they know how much the home would have sold for marketed by a professional. You wouldn’t sell a hundred shares of stock without professional, unless of course you were a professional yourself; why would you sell your biggest investment that way?

Today, Forbes.com asked “Where Were the Realtors?” Moreover, “How is it… that millions of borrowers took on toxic subprime mortgages that could cost them their homes? Why did their agents not warn them off?” Well, it’s pretty simple: real estate agents are not mortgage brokers. More to the point, real estate agents are not lawyers or accountants.

Sure, smart agents begin by having potential buyers sit down with a trustworthy mortgage broker. This serves several purposes: it separates those who want to buy a house from those who just want to look at them; it determines exactly how much the client can afford to spend; it enlists another person who has a vested interest in getting a deal done. On one hand, that means the mortgage broker will make sure all his paperwork is done correctly and shepherd it through the system in a timely fashion — nobody wants closing to be delayed or even canceled because the mortgage didn’t come through. On the other hand, an unscrupulous broker might be inspired to push a bad deal through the system just because it is a deal. How do you know you have a “trustworthy” mortgage broker? You have a little faith, you ask around the office, and you get a second opinion. I am not above calling my current mortgage company and asking what they can do for me on a new place.

Forbes goes on:

At the heart of the matter is the way agents are paid–traditionally through a commission, paid by the seller, of 5% or 6% of the home’s sales price. Nudging buyers toward subprime loans, or keeping mum about the risks, means more sales go through. Also, the low teaser rate on a subprime loan allows the buyer to borrow more, helping to boost sales prices and commissions. “You can’t lie,” [Wharton real estate professor Georgette Chapman] Phillips said of the agents. “You cannot intentionally mislead somebody. But you work for the seller.”

I’m sorry, that paragraph is flatly misleading. Sure, the commissions come out of the seller’s proceeds. But nobody gets paid anything until there is both a willing seller and a willing buyer. The buyer’s agent works for the buyer and has certain fiduciary duties towards the buyer he or she represents. Nevada, like many states, has a specific form outlining these “duties owed” which must be provided to and signed by the client. Sure, if the buyer has no agent, the buyer is at the mercy of the seller and his/her agent. But in an environment where there are thousands of houses available in any given metropolitan area at any given time? The buyer is free to walk away if he doesn’t like the terms of the deal. There is no deal — and no commission — without a willing buyer and seller.

And they go on:

“It is my experience that real estate agents have been pushing people to buy more expensive homes than they were initially qualified to buy under 30-year, fixed-rate [loan]s,” said [Shanna] Smith [President] of the National Fair Housing Alliance.

She recalled a young Washington, D.C., couple that had pre-qualified for a fixed-rate loan no larger than $310,000. “Their agent kept pressing them to look at $400,000-plus properties because he could get the same payment, or even lower payment, for them for a more expensive home,” she said. How? By encouraging them to get a “2/28″ subprime, 30-year loan that started with a low rate, which would reset two years later, and then again in each of the 28 subsequent years. The borrowers qualify for such a loan based on their ability to make the initial, low payments, even if they cannot afford the higher payments likely to come later. By selling the more expensive home, the agent earns a larger commission, she noted.

This behavior is outrageous, and I refuse to believe it is common. Forgive me, I am one of those radicals who thinks if you take care of the clients, the commissions take care of themselves. If an agent is pressuring you to purchase a home that does not fit your needs — and “price range” is part of your needs — you tell them what you need, you tell them not to show you anything that doesn’t fit your needs, and if they persist you tell them to get lost. You walk away. You consider reporting them to the state agency that regulates real estate agents.

I am forced to wonder if that agent is even still an agent. He’s certainly not getting repeat business or referrals from families like that.

On the second page, they make an attempt to be even-handed. “But experts are divided over the agent’s legal and ethical responsibilities”? I must not be an expert then; I know that an agent’s legal and ethical responsibility is to encourage clients to seek experts when there are issues. Oh, and the National Association of Realtors agrees. From the Forbes article, page 2:

“It’s pretty complicated,” said NAR policy expert Jeff Lischer. “A good agent, in order to get the job done and help the person buy or sell … is going to do whatever has to be done to [accomplish that].” In his view, an agent working for the seller might be free to suggest that the buyer get professional help with lending issues, but a seller’s agent should not give advice on the pros and cons of different types of loans.

The NAR has a consumers’ brochure describing the pros and cons of various loans, and another one warning home buyers about predatory lending. But Lischer said he did not know how many agents hand the brochures out. The NAR also has a lengthy code of ethics which calls for agents to “treat all parties honestly” and to “protect and promote the interests of their client,” whether the client be buyer or seller. Since it is usually the seller, a realtor could run afoul of the code by warning a buyer off a particular loan and killing a deal. Moreover, the code bars realtors from professing to be experts in areas in which they are not.

Funny, the law says the same thing. Oh, and REALTOR® is a term specifically referring to members of NAR; not all real estate agents are REALTORS®.

I guess I’m not impressed with Wharton’s and Forbes’s real estate experts.