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Category Archives: business of real estate

Leading indicators v. Trailing indicators

Friday, 15 February 2008 23:52
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There are things that tip us off to the coming conditions, and then there are things that we look at to confirm what our gut has already told us.

Leading indicators are things like the stock market. Stocks tend to rise before the associated industries post their gains. Rumor, innuendo and press releases drive stock prices up or down before confirmation.

Wait for the confirmation and you will be watching the boat sail while you are sitting on the pier.

Trailing indicators are the things that confirm what we already thought. The stocks went through the roof, and then the company announces their profits. We see that homes sales picked up two months ago. The government announces a recession or a recovery or an uptick in consumer inflation.

Yesterday, in Forbes, Colin Barr noted that Homebuilders are the hot stock so far this year.

Shares of the S&P Homebuilders Sector Spider (XHB), the exchange-traded fund that tracks the biggest publicly traded companies in the residential construction business, have risen 7% this year. That gain is noteworthy on its own, given the 7% decline in the S&P 500.

But what’s even more dramatic is the huge rally that erupted in these stocks in the middle of last month, right before the Federal Reserve started cutting interest rates in a bid to stave off a possible recession. The homebuilders ETF is up 29% off its early January lows, while components Toll Brothers (TOL, Fortune 500), Lennar (LEN, Fortune 500) and Hovnanian (HOV, Fortune 500) are up 40%, 52% and 96%.

So, is this a leading indicator, or is it an anomaly. Maybe it’s just trolling for bargains.

If it is a leading indicator, the property bargains will start drying up. There is a lot of pent up demand from the recent slowing of sales. If not, the biggest questions are when will the recovery take place, and how much downside is there for the local market?

I don’t see much more than a couple of points for Atlanta and Gwinnett County… and I really don’t see that happening.

“Agents” buying buyers… Good idea?

Wednesday, 13 February 2008 17:31
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Ok, let me just kind of wade into this one.  I’ll start by saying that Clark Howard and I will probably be on different sides of this issue…

There is a company that hasn’t operated in the Atlanta market yet, but they base a large portion of their business on buying buyers.  It goes like this…

If you are buying a home, they promise to refund a portion of the commission from the sale of the property to you upon completion of the sale.  In effect, it is free to the buyer money that came out of the pocket of the seller (because that is who paid the commissions).

While I am certainly a free-marketer, and have no issues with this company’s business model, there are a couple of flaws:

  • It only works in a full-commission environment… and they spend a lot of time trying to defeat that same full commission environment.
  • It doesn’t draw the highest quality agents.
  • The company flatly states that they can’t afford to spend the time to actually take the “client” to show properties, or even be involved in the search.  The “client” is left to seek out their own properties to view, and find a way to view them.

Let’s look a little deeper at these issues.

Beginning with the first, while telling their sellers that they just have to spend too much money, they give the money to buyers.  If sellers didn’t spend the money, this company couldn’t attract buyers.  So, if their wish to reduce commissions came true… their business model would fold.

On the seller side, I spend a lot of money marketing the property for my clients.  I also spend a great deal of time.  We can’t just enter it into the MLS, and then wait for the flood of offers…  On the buyer side, I spend a great deal of time.  Not just time with the client, but time spent locating properties, previewing properties to save them the time of looking at ill-suited homes, and time learning the contracts and changes… as well as time to learn how to deal with issues and other things that allow me to provide better service to clients.  Finally, with buyers I spend a fair amount of time researching properties prior to offers to make sure that the offered price is fair to the buyer… just offering a percentage of the listed price is NOT assessing a fair valuation.  If I reduce the money from these activities, I would have to reduce the time and activities in order to make it up in volume… Do you get good service at Wal-Mart compared to specialty stores?

Finally, to add a little more to the previous paragraph, and more deeply talk about the third issue…  There are plenty of places for consumers to search properties.  I have a search of all of the MLS listings on my search page.  There are plenty of other options as well… with some level of efficiency.  But, if I were to just send my clients out to see all of the properties on their own, how would they do it?  Drive by?  Open House?  Knock on the door and ask the owner?  How much time would be wasted in their search?

Or better yet, should they call up the listing agent and have them do all of the work… just so that this company can swoop in at the last minute and claim a portion of the sales fee?  That is what they recommend to their clients.

So, if you are looking for a lawyer to represent you in court… do you get the low bidder?  What about when you get your taxes done?  Is the firm that says they’ll do your whole tax return for $29 really the one that is going to make sure you are protected and that everything is accurate… and that you are getting all of your deductions?

Of course not.

So, while it looks great on the surface, real estate is a big investment.  It might be a little better to have someone that actually cares to consult.

You’re fired…

Monday, 11 February 2008 14:30
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I’m not Donald Trump… and you probably aren’t either, but you might share something in common.

Back way before I started in real estate I was in the commercial photography business.   I was a photographer as well as a professional photo assistant.  I loved the work.  I had a pretty good client base for the assistant business, and was reasonably busy.  I also learned a LOT of things.

One of the things I learned that carried me well through that business, as well as during my time with Wolf Camera (I went from clerk to store manager to big mall store manager in about three years).   The little tidbit I learned was this:

I didn’t have to be fired.  They could just not call me back in.

I was a contractor.  I wasn’t an employee as a photographer or assistant.  To get rid of me, there were no forms that needed to be filled out.  There were no burdens of proof.  I didn’t need three warnings.  All my clients had to do was not hire me to work the next day.  They didn’t even need a reason.  At the end of the day, or the end of the shoot… I was not working for them any more, so they could just not hire me for the next job.

I would love to say that I always got the call back… but I didn’t.  Sometimes I was glad…  But, I did have some great people that I worked with, and they called me back time after time.  I added value to their business, and represented them well.

So, what does this have to do with the here and now?

It isn’t quite as easy as it was… but if you hire me to represent you in either the sale or purchase of a house, you can fire me.  I am confident in my abilities, and I don’t have a problem having an “out” in the contract that lets you fire me if I am not doing the job to your satisfaction.  Many agents believe that a six month listing contract or a six month buyer’s agency agreement means that they own the client for that time period.  While I don’t think any go into the deal thinking that they will just blow off their client later, it happens.

It won’t happen with me.  Or, you can fire me.

I don’t think you will…

(Just a note.  This was to be published on 2/11/08, but didn’t post.  I had to repost it and change the date.  Sorry for any confusiuon)

How cool is this?

Friday, 08 February 2008 22:46
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If you are a buyer, how would you like to be able to hit a virtual tour for a house you are interested in, and then pull up the floor plan and load your furniture into the house to see how it fits?

You could pull your cars into the garage. Check to see how the speakers can be arranged in the media room. Make sure that there is a good workflow pattern to the kitchen. Make sure that your furniture fits and can be arranged with good groupings and traffic patterns.

As a buyer, would that make you more interested in the house?

But wait, there’s more…

How about if there were pictures of the rooms and outside of the house… and you could go in and redecorate. Change the floors to hardwoods. Paint the walls. Paint the house.

Would that help to make you more interested in the house?

As a seller, wouldn’t you want to have THAT kind of experience for the people interested in your home? Wouldn’t that rate better than a couple of fuzzy shots from someone’s low resolution phone camera? Want to see it? Call me…  My next listing will be getting this for free.

Isn’t technology cool?

Sellers only need 1 buyer!

Tuesday, 05 February 2008 16:37
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Advertising and marketing are generally done for the purpose of finding as many people as possible. We see it on TV and magazines, or hear it on the radio. Spam emails, and pop-up ads. They are all focused on one thing, getting as many people as possible to get the message.

But, in real estate, that is all wrong. We don’t have a million pairs of shoes or billions of hamburgers or even 287 cars on the lot. We are trying to sell one house. Just one. Ok, if I have 10 listings, I’ might be trying to sell 10 houses, ditto for 100 or 1ooo… but when I write an ad for one house, I only need that ad to sell one house. The pictures of the house only need to sell that one house. The flyer is all about that one house.

How many buyers does it take to buy one house?

If you just said one, move to the front of the class…

Why, then, do we write ads that try appeal to scores, if not hundreds of potential buyers? Simple, it is to cast a wide net… at least that is what the marketing types call it. Put it in front of as many people as possible and hopefully someone will want it.

Does that sound like a good strategy?

Does McDonald’s support the opera? Do the Atlanta Thrashers advertise their games on billboards in Detroit? Is Barak Obama running his commercials on Nickelodeon? Are we going to see Mitt Romney hosting a special on the Disney Channel?

Of course not. It wouldn’t make any sense. That isn’t the target market. Should we do media buys on national TV networks to sell houses in the suburbs of Atlanta, GA? Still no.

So, what is the point of all of this?

Simple. Niche marketing. As real estate agents, we do it. A real estate agent can’t be all things to all people. I can’t be an expert in everything. I wrote a while ago about specializing in everything… And that it doesn’t work. One can’t be a specialist in everything.

Other agents specialize in a small geographic area, or in golf properties or equestrian properties. They spend their time with those people, or in those areas.

Still other agents (actually, the majority) don’t specialize in anything. They will list anything or deal with any buyer. They don’t aspire to be the experts in their field. They just aspire to get another deal done.Garage in the Addison at The Legends at Parkview development

I specialize in properties for auto enthusiasts. I market to auto enthusiasts. I understand auto enthusiasts. I AM an auto enthusiast. I understand the needs of people that are like me.

Wrap it up, Lane.

Here is what it comes down to… I write my blog, and my website for auto enthusiasts that are or will be interested in buying properties with big garages. I study the market for properties with big garages. I work with buyers interested in those types of properties. I do this so that I can target market for homes with big garages. I know that there is only one buyer needed to sell a property. And, I know that the buyer of a property with a 4 car garage will probably like cars. And, I know that I have a better chance of finding that buyer on a car website than cruising Disney’s website. I know that when I start buying TV ads in Atlanta, Speed TV will be a better ad buy than the Game Show Network. I also know that an ad for th at house is getting a higher number of appropriate hits in Hemming’s Motor News than in the AJC.

So, if you are really trying to sell your house, let me know. We can work out a marketing plan that will search for the buyer in the right place, rather than just standing at the mall and yelling out hoping that the right person passes by.

Just as a funny aside, one of the agents in my network wrote about a seller in FL that wanted him to hire a person to stand in the front yard and shake a for sale sign on the weekends. Granted, it will get attention, but will a passerby be so thrilled to see the person standing in the yard that they will have to buy the house?

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