Are You Silly or Successful?

I have a good friend, Sandy, who is very well known in the world of real estate.  She has a unique ability to mix the cold hard truth with a smile and a laugh.  A client of hers once told me “Sandy can shoot you right between the eyes with a double barreled shot gun and make you feel you want her to do it again”.

Sandy recently told me this story.  I am sure it is true because it is exactly the way Sandy talks.  Sandy of course is a member of the Reality Real Estate organization.

Steve Seller:         Hi Sandy this is Steve seller.  How are you?

Sandy:         Steve I am great and so glad you called.  Have you been thinking over the price reduction we talked about?

Seller:         I have and I have good news for you.

Sandy:         Wonderful.  We agreed at the time of listing the market value was $625,000.  You agreed that after 30 days of listing at your above market price of $725,000 you would lower the price to $625,000 and sell.

Seller:         Yes I did Sandy.  My wife and I always keep our word.

Sandy:         Good I will change the price in the computer right now and roll out my market price promotion program.

Seller:         Sandy, not so fast.

Sandy:         But you said you agreed to sell at $625,000.  Our listing agreement says you will lower the price from “your” price of $725,000 to $625,000 after 30 days.

Seller:         Yes I did say that.  Yes we will sell at $625,000.  We just cannot tell everyone that is the plan.

Sandy:         Oh you want to be a secret seller!

Seller:         I am not sure what a secret seller is.  I do know I told everyone at the office and our neighbors we would not take a penny less than $700,000.  I got a little carried away with myself and I am afraid I painted my self into a corner.

Sandy:         No problem at all.  If you are serious about selling, you are still going to have to follow the listing contract and change the price to $625,000 because that is where the market is.

Seller:         I am afraid it gets worse.  The wife was talking with her PTA friends and told them we have already rejected $675,000.

Sandy:         Wow.  You do not even want to be a secret seller you want to be a silly seller.  How silly of you and how silly of me!

Seller:         (Chuckling lightly) Yes.  I guess we made it hard on you.

Sandy:         (Laughing aloud) No you did not make it hard on me.  You have given me a big laugh and a great story to share with other sellers who are thinking of being secret sellers or silly sellers or who want to go over the top and be secret silly sellers and never ever sell.

Seller:         We did?

Sandy:         Steve for a moment you really had me believing you were going to be a secret silly seller who would never sell their house.

Seller:         We did?

Sandy:         Of course you did.  You have given me a great laugh and brightened my day.  You almost had me.  For a moment I thought you were serious about being a secret silly seller.  Then I remembered how serious smart and funny you are and I realized you were too smart and too serious and too successful to be so secretive so silly and so stupid.

Steve:         Yes of course.  Of course we are serious smart and successful. We are great believers in being serious smart and successful.  It is the foundation of our family and our business. We are always serious smart and successful.  We would never have it any other way.

Sandy:         Great.  For a moment you fooled me.  You are such a great actor.  You really sounded like you decided to make vanity and ego more important than selling.  You had me believing you wanted to keep your true intentions a secret from the buyers.  Then I remembered you are serious smart and successful and I knew you were playing a trick on me.

Seller:         Of course we were joshing you.  We just wanted to brighten your day with a big laugh.  You know us and how we love to make you laugh.  We are smart enough to recognize the realities of the market.  We are serious about our decision to sell and move on with our lives.  We are dedicated to our family success that means a new home and a new job in a new community.

Sandy:         I knew that.  You sure are a great actor.

Seller:         When will you roll out your market price promotion plan at $625,000 for our house?

Sandy:         Right now.  Thank you for being so smart serious and successful rather than so secretive silly and stupid.  Thanks for the great laugh.  I really enjoyed it.

Seller:         My pleasure.

Sandy:         My pleasure.

Dark Side Marketing

Are you engaged in dark side marketing?   The following is a true story.  In fact the agent that told me the story said he actually had to delete many of the Dark Side activities because while true they would seem unbelievable.

Agent:         It is a great day at Reality Real Estate.  How can I help you?

Caller:         I want to file a complaint with your boss.

Ron Reality:         This is Ron Reality and I own Reality Real Estate.  What seems to be the problem?

Caller:         It is your agent Renee.  She is just terrible and is running our chances of selling our listing.

Reality:         I am very shocked to hear that.  Renee is one of our top agents and has never had a complaint like yours.  Where is your property?

Seller:         468 Maple St.

Reality:         But we do not list that property.  We are not your agents.  Renee does not work for you.

Seller:         That’s right.  Why should I pay you for bad service?  I am keeping the commission.

Reality:         But if we do not represent you why are you mad at Renee and saying such terrible things?

Seller:         Look Renee is an old friend and while we would never pay her we did allow her to show our property.  We told her that if there were an acceptable offer we would discuss paying her for her time but not a commission.

Reality:         We are doing you a favor and you are angry with us?

Seller:         You bet.  Renee showed our house and the people slipped and fell and may sue us.

Reality:         How can we be responsible because we did you a favor and the buyer slipped and fell in your house?

Seller:         Renee did not bring a flashlight or broom with her.  It is all her fault.

Reality:         You are not making sense.

Seller:         We shut off the electricity to save money because no one was looking at the house.  Renee showed these people and they did not see some stuff that was on the steps and the lady slipped and fell.  If Renee had a flashlight the potential buyer would have avoided slipping.  If Renee had swept the stairs there would not have been any dirt and debris on which to slip.  If we get sued you and Renee are getting sued.

Reality:         What kind of marketing are you doing?  The lights are off.  The house is obviously not clean.  You have not hired a realtor.  You are not offering a commission if someone does sell your house.  Is there anything else you are “not doing” to market and sell your home?

Seller:         Yes.  We are not going to make all the expensive repairs Renee and the old agents suggested.

Reality:         Of course I should have known that.  Why?

Seller:         You realtors are all so smart.  You want us to spend our money and make it easy for you to get your money.  Well I will not fall into that trap.  You are going to have to work to get my home sold and get money out of me!

Reality:         Not really.

Seller:         What?

Reality:         We do not have to work to get money out of you.  We are not going to work for you ever.  It is not easy to sell a house and you do not want to protect your own interests and investment. You only want to blame others for your own problems.  You are a Dark Side marketer, figuratively and literally.

Seller:         What?

Reality:         You are a Dark Side marketer.  The lights are off so a buyer cannot see your house.  You will not list your house with a professional agent.  You are not marketing your house.  You will not clean your house.  You will not fix up and maintain your house.  Your house is dark and your energy and ethics are dark.  Even if a buyer wanted to “see” your house it is dark and not “seeable”.  Your marketing plan is so dark nobody can “see” it.

Seller:         But if I fix, clean and polish my house it will cost money.  If I hire a professional realtor it will cost me money.  If I turn the electricity on and clean the smelly refrigerator it will cost money.  If I clean out the vermin it will cost money.  If I paint it will cost me money.  If I throw out the broken furniture and stage the house it will cost me money.  Why should I spend all that money?

Reality:         So you can sell the house and get money.

This story is extreme but not unusual.  Everyday we see houses with Dark Side marketing issues.  Are there Dark Side issues in your marketing program?

Do you Know The Rules for Real Estate Success?

There are a few really big rules you must know and follow for real estate success.  Did you know you learned these rules in kindergarten?

Every few years some psychologist conducts a study and tells us something we already knew.  What always amazes me is that many of the rules are rules we learned in kindergarten.  The rules worked in kindergarten, real estate and in life.

Rule Number One

Sit in the front of the room.  If you hide in the back of the room you are not engaged.  Hiding in the back lets you observe but not participate.  You do not have to be a psychologist to know that you learn more (quantitative) and better (qualitative) when you participate.  Experience is a great teacher.

Rule Number Two

Pay Attention.  Sit up straight with your feet on the floor.   Proximity to wisdom is very important.  Engaging with wisdom is critical.  Doing things half- heartedly will give you half hearted results.  In computer speak it is called GIGO, garbage in garbage out.

Rule Number Three

Listen.  If you are talking all the time there is no time to listen.  If you are not listening you deny yourself the opportunity to learn from others.  Talking is telling others what you know or do not know.  Listening gives you the opportunity to learn what you do not know.

Rule Number Four

Teams have more success than individuals.  A person may be a catalyst but it takes a team to get the job done.  You may think you can do it all on your own but you are wrong.  Teams can celebrate.  Individuals have nobody to celebrate with.  Throwing yourself a celebration party and being the only guest is not a lot of fun

Rule Number Five

Surround yourself with great people.  Everyone has strengths and weaknesses.  Surround yourself with people who have strengths you do not have.  Remember united we stand divided we fall.

Rule Number Six

Be nice.  Learn to play well with others.  People who play well with others do better over time.   Great leaders motivate while pushing people.  Bad leaders punish people while trying to motivate them.

Rule Number Seven

Take time to recharge.  All work and no play make you boring and tired.  Things in motion tend to stay in motion but they also go slower over time.  Everyone needs down time to recharge.  There is a time to work and a time to play.  You need to do both.

Every real estate transaction has many participants.  Each of the players is an important player in the game.  Sellers and buyers often think they are the only important players.  These egocentric people believe all the others must bend to their will.  This is not true.

Many a deal has crashed on the “rocks” of an appraiser, inspector, mortgage officer, debt negotiator or any of the many other players.  Real estate is unique because there are no “bit” players.  All players are important and all players have the power to win or lose the game.

Success in real estate is about getting to yes.  Some use a big stick to get to yes.  Life experience however is to the contrary.  A big stick or very big stick or even a super big stick may get you to yes.  There is always a situation when you find your stick is not big enough.  Kindergarten and life experience tell us that cooperation is a better path to success.

The Best Time For Repairs

Fix it now or fix it later what really is the best time to make repairs.  My father always answered now or later questions with  “yes”.  As a kid it was confusing.  As an adult it was enlightening.

In real estate I always ask sellers what are the advantages in either situation.

Me:         What are the advantages to fixing repairs now and what are the advantages in postponing repairs?

Seller:         If I put off the repairs I am holding on to my money for a longer time.

Me:         Really.  Have you considered you are also holding on to your house for a longer time?

Seller:         What?

Me:         Have you considered that your failure to make your house the highest value in the market has prevented it from selling?

Seller:         I have reduced the price several times and I have offered a buyer’s credit for fixing the hot water roof and for carpeting.

Me:         Those are steps in the right direction.  Why haven’t you just made the repairs?

Seller:         I don’t have the money is a real problem.  My daughter’s college tuition is more important than new carpet.

Me:         Is that it?  How much more money would you free up for yourself and her tuition if you sold the house?

Seller:         Oops I see what you are getting at.

Me:         Have you thought that perhaps the buyer will not have any extra money for repairs and fixing things.  The buyer is going to be able to borrow 75-90% of the total cost of the house.  The buyer will sink everything into buying the best and most expensive house possible.  Rarely does a buyer reserve substantial money for repairs.  The buyer is indirectly asking the bank to “fund” the value of the repairs.

Seller:         Are you saying I am cutting off my nose to spite my face?

Me:         What do you think?

Seller:         What if I put down a brown carpet or paint the walls yellow and the buyer wants a white carpet and beige walls.  If I make the wrong decision I have shot myself in the foot.

Me:         Buyers may not love you choices.  Every buyer I have ever met is willing to live with something new and nice even if it is not their perfect choice just so long as they do not have to put out extra money at closing.

Seller:         I am afraid that if I start repairs I will be opening a can of worms that will cost me more time and money than I have.  I think it is smarter to let the buyer take that risk.

Me:         Do you really believe that the buyer is not concerned about the same issues that concern you?

Seller:         I had not thought about it that way.  I just do not have the money or time.

Me:         I see you realize that you and the buyer are in exactly the same boat.

Seller:         I realize that I have to lower the price so the buyer feels comfortable making the repairs.

Me:         If there is any way you can get the money for the repairs it will be greatly to your advantage.  Crème de la crème homes sell for more money and sell faster than homes that need repair.  It is to your benefit to beg, borrow or find the money for the repairs.  If the items are small many stores and repair people will agree to a partial payment and the rest at closing.  This is especially true if you instruct the title company or closing attorney to make the payment directly from the closing proceeds to the contractor.

Seller:         What if I put the costs on my credit card?

Me:         I would do a very careful cost analysis.  An alternative that achieves the same goal at lower cost is to use a credit card issued by the home repair stores.  Many of these cards offer a grace period and have lower interest rates than regular cards.  You can also anticipate some of the repairs and schedule the repairs or purchases around special sales.  For example replacing an air conditioner is much cheaper in the fall than the summer.  Furnaces and hot water heaters are cheaper in the spring than in the middle of January.

Seller:         I am going to talk with my wife tonight.  We are going to figure this out tonight and begin the repairs as soon as possible.

How to Avoid The Square Foot Trap
The square foot trap ensnares countless buyers and sellers every day.  Buyers and sellers caught in the square foot trap rarely escape.  When they do escape they are always severely injured.  The injuries are financial and emotional and often mean the property remains unsold.What is the square foot trap?  The answer is itself a question.  When is a square foot not a square foot?  A square foot is a function of the person doing the measuring and calculations, the community where the property is located, the rules of any of several oversight authorities, and the desired outcome of the calculations.How is something as simple as measuring and calculating length times width be so difficult?  Measuring and calculating square footage is a take off on the accountant’s joke.  The first accountant asks his associate “how much is one plus one”.  The associate says, “What would you like the answer to be”.Before you can calculate a measurement you have to decide what you are going to measure.  This sounds very simple but it is not.  In cold climate communities a general rule is to measure “heated” space.  If Sam Seller has a heated 2- car garage does it make sense to measure the garage as part of the square footage of the house?  Suppose Steve Seller has engine block plug in heaters in his 2-car garage but does not heat the air space of the garage.  Does it make sense to include or exclude the garage in calculating the square footage of the house? Sylvia Seller has a super insulated garage.  It is warmer than the garages of Sam and Steve but it does not have space heaters or engine block heaters.  Is it fair, wise or make any sense to exclude the size of Sylvia’s garage from the square footage calculations?  Do you place the same value on the “heated” garage as on the main dwelling area?The problem flips when applied to hot weather climates.  The general rule is to measure air- conditioned space.  Hot or cold the problem remains the same.  What should be measured and does it make sense to measure or not measure?When is a patio not a patio?  In many places it depends if the patio is “enclosed”.  If the patio is enclosed it is a patio and may be included in a square foot measurement.  Is a screened patio an enclosed patio?  Does the patio get measured if it is roofed but not enclosed?  It depends on local custom in many areas.In many places a ground floor patio is never included as square footage but the very same patio on an upper level is included.  The most common explanation for this duality is that the ground floor is part of the outside yard while the upper level patio is part of the house.  There are many more patio measurement issues.Mother in law apartments raise many questions.  Does the apartment have direct access to the main house?  Is the connection via a corridor that can be closed at one or both ends.  Is access only available through an exterior entrance?  Does the apartment have some physical connection to the main house? Does a converted attached- or unattached- garage qualify?  Can an apartment above a garage ever qualify?  The correct answers depend on what sate or even what town you are in.Basements are another example of the trap.  How high must the ceiling be?  What constitutes finished floors and ceiling?  Does it have to have windows of a certain size and or a minimum number of windows?  Must there be a walk out door?Dueling governmental regulations regularly produce different square foot calculations.  A friend built a house in an unincorporated area.   The county rules and regulations were crafted to encourage certain designs and to prohibit others.  After many years the areas was incorporated into an adjacent town.  The town had its own building code with goals and prohibitions markedly different from the county.  The official square footage of the home grew by almost 225 square feet.  This was good news in terms of future sales but terrible news in terms of taxes.In many densely populated areas space is super expensive and apartments are sold on cubic foot measurements.  Calculating cubic feet geometrically compounds the measurement problems.A friend had a tiny condominium on New York City.  To enlarge the space the sheet rocked “dead” space above some large closets was knocked out and opened up to become enclosed storage.  The tax office increased the condominium’s official size.  The increase in taxes was small compared to the increase in value because of the additional “space”.  The total space did not change but the usable space increased and the value increase significantly.Appraisal professional organizations and many realtor associations have their own suggestions and guidelines as to what should or may be measured and how.  They also allow for the appraiser or realtor to use discretion.In contested divorces each side hires its own appraiser.  Often the square foot calculation is 10-15% apart!  When coupled with widely different comparables the value differences may be huge.The trap of square footage is easy to avoid.  Pay no attention to it.  Leave behind all you know about square footage.  Look at the overall market to determine how the house you like compares to others you have looked at.   If you get lost in the minutia of “finished” basements, “enclosed” patios, “heated” garages, and mother in law apartments, you will not see the forest because of the trees.  You are buying or selling a home, an emotional expression of materials not a mathematical calculation of the materials. The materials constitute a house.  The way the materials are put together and the emotion you bring to the house make a home.

Real Estate Lessons From Your Mom

For many years I believed that I was the only person whose mom imparted life and real estate lessons.  As I got older I learned that every mom has life and real lessons she imparts to her children.  I decided to ask several of the most outstanding realtors in the world what life and real estate lessons their mom imparted.  These are the most popular mom lessons.

Rule Number One:         Where is it written?  This was one of my mom’s favorites and it turns out this was a favorite of several moms.  When I or my realtor friends went running (crying) to mom about a real or imagined injustice or unfairness we all were met with ”Where is it written?” response.

This is a much more thoughtful response than simply noting that life (and real estate) are not fair.  The ”where is it written” response urged us to seek, explore and learn for truth, justice and fairness.

Over time we learned that life is fair when we choose to surround ourselves with people for whom fairness is an important value.  Soon we learned that if we always surround ourselves with people who share the same values, life becomes exactly as we wish it to be.

I am always amazed when sellers and buyers rant and rave over the unfairness of the market or other sellers or buyers.  There is no point in a buyer getting angry or upset that sellers are asking too much or not lowering prices.  If you are a buyer you have choices.  You can “pay up” or you cannot buy.  If you are a seller there is no point in being upset with buyers trying to “steal” your property.  You too have a choice you can sell and get money or continue to own your property.

Because nobody knows what the future will bring the wisdom of your decision is always determined by hindsight.  Hindsight is about time.  If you choose the right timeline hindsight will assure you have made the right decision. Choosing the right timeline is solely within your control.  You cannot make a mistake!

The lesson is you are in control of your life and real estate.  A long- range perspective will correct all short- term errors.  You can make the world exactly as you want it to be.  “Where is it written” is written in your head and heart.

Rule Number Two:         Achieving your goal IS the goal.   People love to beat the other side.  What often happens is that they win a battle and lose a war.  Many realtors reported mom let them learn this turtle and hare lesson the hard way.  They had many short- term battle successes only to find out that they failed to achieve their goal.

Buyers and sellers often both demand winning every battle.  The battles are fought over price, terms, conditions and the extras.  Each side invests huge amounts of emotion, energy and intellect into winning.

If one side “wins” too many battles, the loser fears total defeat.    The only option for the “loser” is to withdraw from the battle in order to live and fight another day.  The result is neither side reaches their goal of selling/buying the property.

Rule Number Three:         Win win is the only way to “win”.  Somewhere deep within our psyche is buried a message that we always have to win.  Perhaps it is a hard wire of our brains from cave man days.

Experience teaches that buyers and sellers usually have much more common ground than disputed ground.  Recognize what is very important to the other side and do everything you can to give them a win.  The law of reciprocity will work to help you achieve what is important to you.

A rule in poker is to “know when to hold them and know when to fold them.”  It is the same in real estate.  Almost every realtor reported that mom imparted a win- win philosophy as a key to life and real estate success.

If you follow mom’s real estate rules you will find your real estate transactions are positive successful experiences.

Is Your Real Estate Brain Frozen?

Cryogenics is a booming business.  In real estate having a cryogenic approach to buying and selling will lead to disaster.

People have always wanted to extend their mortality to cheat or postpone eternal death.  Scientific break throughs have resulted in many small steps that may lead to a truly successful process.  Simply put cryogenics freezes tissue to temperatures near absolute zero.  The hope is that in the future the tissue will be brought back to “life”.

Many sellers and buyers take a cryogenic approach to their real estate dreams and aspirations.  It is understandable human nature to always believe that your personal economics will get better.  We all like to think that we are smarter than the next person and that our insights are better, clearer and are true and correct.

By definition most of us are average rather than being smarter, sharper, clearer, true and correct. If we are all special none of us can be more special.  Applying “special” thinking to your real estate wishes is usually disastrous.

Buyers rush into the market when it is very high.  Everyone one of those buyers believes the markets will continue their meteoric advances.  Many are convinced the rate of appreciation will actually accelerate.

In hot markets sellers often think like the buyers.  The sellers put outrageously high prices on their properties.  The sellers believe that even if the price is outrageously above the market it will only be a matter of a few weeks or perhaps a month or two when the market “catches up” to the price.

The reality is that when greed reigns supreme the greedy become even greedier.  Sellers keep raising prices and buyer keep chasing the market up.  One day the bubble bursts.  There is always a day when the bubble bursts.  It does not make a difference if the market is real estate, stock or bonds or tulip bulbs.  One day the market is up, up and away and the next day there is no market.

Cryogenic sellers and buyers who bought near the top of the market are certain the burst bubble is simply a minor market correction.  They are sure the next day headlines will announce the return of greed and sky rocketing prices.  It does not happen that way.

When the bubble bursts it cannot be put back together again.  It always takes a very long time for a new bubble to form enlarge burst and restart the cycle.  The cycle in real estate is usually between 15-20 years!

Waiting decades for something to happen is a very expensive proposition.  Waiting for decades without any assurances that history will repeat itself in the exact manner you wish it to repeat is a form of insanity.

Cryogenic brain freeze in real estate happens in down markets just as often as it happens in up markets.   In down markets brain freeze infects sellers and buyers.  The most obvious form of brain freeze in buyers is the notion that the market will continue to fall.  Infected buyers are sure that if they wait another 6-12 months they will be able to buy their dream home for 10% less than the current price.

For buyers the issue is compounded when they refuse to recognize when the market bottoms or moves up.  No matter how solid the market correction is the cryogenic brain frozen buyer is sure that recession if not depression is just around the corner.

The cryogenically frozen brain of a seller in a down market is certain the market is turning up tomorrow.  No matter how long the recession or depression, no matter how deep the economic malaise, the brain frozen seller “knows” the market will turn tomorrow and skyrocket up even faster than it fell.  This is a nice hope but has no basis in reality.

Markets are about what is here today and possibly might be here tomorrow.  Nobody knows what today will bring.  No body knows what tomorrow may bring.  Thoughts of the future are guesses.  They may be good guess even great guesses but they are still guesses.

Choosing to risk your family harmony and well being on a guess is not wise.  The symptoms of a cryogenic brain are obvious and numerous.  They manifest as an absolute assurance the future can be foretold.  If you feel a real estate brain freeze coming on quickly call your friends at Reality Real Estate. Large doses of reality can melt even the worst brain freezes.

Real Estate Pugilists

Great realtors know that bringing the buyer and seller together will often produce fighting words.  This is a true story that provides many valuable lessons if you are willing to learn.

Steve Seller:         I am Steve Seller.  Thank you for coming to my house.  I hope that you will buy it.

Barry Buyer:         Well it is a nice house and I am looking for a nice house.

Seller:         Great it is yours for $759,000.

Buyer:         Wow Steve that is a lot of money.

Seller:         Are you kidding me?  It is a great buy.  I paid almost that much three years ago.

Buyer:         So what.  What have you done to fix the house up in the past three years?

Seller:         Barry, I painted the baby’s room, put in energy efficient light bulbs, seeded the bare spots in the lawn, and put up a new mail box and house numbers.

Buyer:         Steve that does not sound like a major investment.  Just how much did you pay three years ago?

Seller:         It really is none of your business.  The value of the house today is what is important.

Buyer:         You are right.  Give me a moment and I will access the county records on my phone app and get the price.  Wow Steve according to the county you only paid $675,000 in 2009.

Seller:         Maybe that is right.  But I did make those improvements and we also replaced a window air conditioner.  That was a couple of hundred.

Buyer:         I do not want to be ungrateful but you did not add anywhere close to $$84,000 in improvements and the values in this area have dropped 10-15% the last few years.

Seller:         Well the values may have dropped a little.  Whatever happened here is better than in most areas.  That is proof that this is a very desirable location.  In real estate location is everything.

Buyer:         You are right about location.  I am right that values have gone down and not up.  Down by 15% is not up by 12%.  Even without walking through the entire house you are over priced by 20-25% maybe more.

Seller:         Who do you think you are Mr. smarter pants buyer?

Buyer:         I may be a smarty-pants buyer Mr. Stupid seller.  I also have been in 20-30 homes in this neighborhood all of which offer far more value for the money than you are offering.

Seller:         Well I have lived here for three years and my neighbors have told me it is my duty to hold up their values.

Buyer:         I believe you and I have gone into their houses and those same neighbors are offering more than you are.  They are undercutting your value.  How did you come up with the asking price?

Seller:         I did what all sellers do I figured out how much money I needed.  That is what sellers do.

Buyer:         That is what sellers who never sell their homes do.  Sellers who are serious about selling calculate the price that means they are offering the highest and best value in the market.  Those sellers sell the rest never sell.

Seller:         That is ridiculous.  If I focused on value I probably will not get the money I need to pay my bills, send the kids to college, start my new business and buy my next home.

Buyer:         Well that is your wish list.  To be honest buyers never care about the needs and wants of the sellers.  Buyers care about their own needs and wants.  In that regard buyers and sellers are exactly alike.

Seller:         Well that may be true but I cannot be concerned about you.  I have to focus on my family.

Buyer:         Focus all you want.  I understand your position.  I am focusing on my family as well.  I would be happy to buy your house today for  $595,000.

Seller:         You are crazy.  You are cheating me.  That is outrageous.  Get out of my house immediately.

Buyer:         I am not crazy, not a cheat and I will leave and go buy your neighbor’s house.  The market puts a value on your house.  Your neighbors, other sellers, other buyers, lenders, appraisers, inspectors, all the players in real estate contribute to determining value.  $595,000 is the fair market value of your house today.

Seller:         That is what the people at Reality Real Estate told me also.  I told them to fly a kite.  I had an appraisal done and it appraised for $597,500.  I told the appraiser to fly a kite.

Buyer:         Did you get a pre inspection?

Seller:         I did and there were only small repairs and stuff.

Buyer:         How small?

Seller:         Just under $9,000.  It was all small stuff.

Buyer:         Great.  I will take off for the repairs and revise my offer down to $585,000.  Take it or leave it.  It is not about me it is about the market value of your home today.

How many lessons did you learn?

Which is More Important Time or Money?

Every realtor worth his or her salt has had this conversation many times.  The issue applies equally to buyers and sellers.

Me:         Hello this is Reality Real Estate.  How may we help you?

Caller:         I want to sell my house and I will hire you as my agent if you give me what I want.

Me:         I will do my best.  I have help thousands of people and I am not a miracle worker.  No matter how much I would like to help you must recognize the realities of the market place.

Seller:         Well time is not important to me.  I want to make sure I net $650,000.  Can you do that for me?

Me:         Yes no and maybe.

Seller:         What type of answer is that and what kind of realtor are you?  I am beginning to have doubts about you.

Me:         It is a very honest answer and I am a very honest realtor who never loses site of the realities of the market place.

Seller:         Well time is not important just get me $650,000 net and the listing is yours.  Can you do it?

Me:         If your house is worth $650,000 net I can definitely do it.  If maybe it is worth $650,000 net I will do everything I can to get it for you and probably will succeed.  If the house is not worth $650,000 net it is impossible for it to sell for $650,000 net.

Seller:         Look I realize you are different than other realtors.  You seem to be a real thinker not a fast talker.  Since money is much more important to me than time, take all the time in the world and sell it for me $650,000 net to me.  To make things easy on you do not call me each week and tell me about the market.  Just call when you have a contract that gives me $650,000 net.

Me:         Well how much time do you really have?

Seller:         Take all the time you want.

Me:         Is five years acceptable to you?

Seller:         Five years!  Are you crazy?  Five years can be a lifetime.  I have time but not five years.  What a stupid question.  I am having doubts about you again.

Me:         Well the market in our area is the best in the country and the best since six years ago.  If your house was worth a net $650,000 in 2006 unless you have done major improvements it is probably worth $500,000-$550,000 net today.  I have to make my usual detailed in depth analysis of your home and your market before I can give you any price.

Seller:         I think my house was worth more in 2006.  It was probably about $700,000 maybe $725,000.

Me:         Great.  However if you are right about the 2006 value, the current net value is below, perhaps well below, $600,000.  If it is $550,000 you need a $100,000 increase to achieve your goal.  In real world terms you would need growth of 4-5% a year for 5 years to reach your goal after accounting for inflation.  That is not the market now or in the foreseeable future.

Seller:         Well maybe my house was worth $800,000 in 2006 then it might be worth $650,000 right now.

Me:         Now you are thinking.  I will do an in depth analysis and tell you what the market value of your house is today.  You can then decide if  “a bird in the hand is worth more than two in the bush.”  There is one last thing for you to consider about time versus money.

Seller:         Ugh, I do not like the sound of that.

Me:         All of your thinking is based on the idea that the market has bottomed and will only go up for the next several years.  What do you know that the rest of the world does not know?

Seller:         Real estate always goes up.  It is slow and steady and up.

Me:         If you pick the right time line that is true.  If you pick the wrong time line it is not true.  Just look at the last 6 years.  Nobody who bought in 2006 thought there would be any decrease in real estate values.

Seller:         I can see why you call your company Reality Real Estate.  You really are smart and knowledgeable about the market.  Please come over at six tonight and tell me what my house is worth today.  Then I would like you to give me a risk reward assessment of the next six months in the market.  I now realize that six months is as far into the future as one can reasonably look.  Cash in hand is better than birds in the bush.  No matter how many birds there may be they are in the bush and will not pay my bills.  I can use money I cannot use time.

The Case of the Disappearing Genie

Thank you for the many emails about our recent real estate genie story.  Many asked if the real estate genie ever works with buyers.  The real estate genie works with sellers, buyers, realtors, lenders and inspectors.  The real estate genie helps everyone who is willing to be wise listen and act.

Broker:         Reality Real Estate how may I help you?

Caller:         Art it is me Barry Buyer.  I have to talk to you immediately.  The wife and I just had the most amazing experience,

Art:         What happened?

Barry Buyer:         The little lady and I were looking at Sam and Sally Sellers house and

Art:         Barry excuse me but I have had two calls from the police this week about you and Bonnie staking out Sam’s house.  You and Bonnie are house stalking.  You are going to get in serious trouble one day.

Barry:         We were not stalking the house we just like to look at it and watch it.  We are waiting for the right moment to buy it.

Art:         Sitting in the car and watching the house every evening is upsetting the sellers and the neighbors.  Sitting and watching will never get you the house.  I keep telling you to make an offer that the sellers cannot refuse.

Barry:         I know.  Today was different very different.

Art:         What happened?

Barry:         Sam put out the trash.  On top of the trash was an old urn and it had a note attached.

Art:         What did the note say?

Barry:         It was so weird.  It was addressed to Bonnie and me.  It said, “Dear Barry and Bonnie Buyer.  There is a real estate genie in this urn.  The genie gave us our three real estate wishes.  If you rub the urn it will give you three real estate wishes.  Hoping to sell to you very soon.  Sam and Sally Seller.”

Art:         I know all about Sam and Sally’s genie.  I have been working with that genie for many years.  The genie and I whisper in the ear of everyone in real estate who is serious about real estate.  I know that Sam and Sally listened to the genie and they have the number one valued property in the entire neighborhood.  It will sell very soon.  The genie always works for people who listen and act.

Barry:         Listen stop your speeches this is my story.  Bonnie and I rubbed the urn, pulled out the stopper and sure enough a genie popped out.  She promised to grant us three real estate wishes.

Art:         So what did you wish for?

Barry:         Bonnie and I talked about it first.  We decided we wanted to buy Sam and Sally Seller’s house for 15% below its true value.

Art:         Well that was a wish but not realistic.  What else did you wish for?

Barry:         You know we are still saving money to buy a house so we wished for the closing to be delayed for a year while we save.  We also love the furniture and artwork and we thought it would be nice if it was included in the sale at no extra cost.  We also want them to fix up the gazebo area and plant some trees while we are saving our money.

Art:         That is four wishes not three.  What did the genie do?

Barry:         That is what is so strange.  The genie said, “I am a genie not a miracle worker.  I only work with people who are realistic, fair and who take action.  I am going back into my urn”.  Then the genie disappeared and so did the urn!

Art:         Did your mom ever say, “If wishes came true beggars would be kings”?

Barry:         Sure.  What does that have to do with our disappearing genie and buying Sam’s house?

Art:         Every buyer wants to buy at the best possible price in the shortest time and without hassles.  Every seller wants the same.  When you offer a price, a timeline and a hassle free offer to Sam and Sally you will own their home.  If you sow nothing you will reap nothing.  If you do 99% of what has to be done you will still reap nothing.  Just as the seller has to do everything necessary you have to do the same.

Barry:         I get it.  Can we make our mortgage application now and make a realistic and fair offer to Sam and Sally today?

Art:         Yes.

Barry:         What happened to our genie?

Art:         She granted you three wishes.  Her work was done so she went on to help other buyers and sellers

Barry:         But how did she grant us our wishes?

Art:         She knew that you would not be realistic.  She intentionally disappeared so you would panic and come to me.  The genie knew that in your panic you would finally be open to reason and reality.

Hubris the Achilles Heel of Real Estate

Hubris is defined as an excess of pride and conceit.  In mythology it describes man’s believe to be a god.  Hubris is a very common disease in real estate.  It is always financially, emotionally and psychologically expensive.

Talk with any good realtor and they will tell you this story is not an isolated event.  Quite the contrary it is an everyday occurrence that happens over and over.  Sadly, there has been a very sharp increase in hubris attacks since the real estate bubble burst in 2006.

Hubris disease is universal.  It is not limited to sellers or buyers.  It happens in sellers’ markets and buyers’ markets.  Hubris disease is not constricted by place or boundaries.  Hubris attacks all genders though my personal experience is men are afflicted more often and more seriously than women.

This is a true story. The fact that this story played out over 8 years is not unusual.  I knew a very successful businessman who suffered a terrible case of buyer hubris.  His attack lasted 17 years from 1983 to 2000.  When he finally bought he paid almost 325% more than what he could have paid in 1983.

In 2004 Steve Seller was looking to invest in a vacation home property.  I referred Steve to one of the best realtors in the business.

Steve bought an under construction condo in a rising market.  Steve was very excited because he was the second buyer in the complex.  Steve rightfully anticipated that the actual construction time would increase and that prices would increase.  With the help of his broker he was able to negotiate a good discount for buying before completion.

By the time the condo was ready for closing Steve was feeling very good.  In fact he was feeling and thinking he was invincible.  Steve had a very bad case of hubris.

In 2004 Steve’s builder was asking $180,00 for his unit.  Steve and his broker negotiated a 10% discount reducing Steve’s cost to $162,000.  At the time of closing in 2006 the asking price for condos like Steve’s was $210,000.

Steve was really feeling good.  He had a gross paper profit of $48,000 in just two years.  Because Steve had a very favorable mortgage his cash on cash return on paper of 150%.

In mid 2006 when the real estate bubble started to burst Steve’s agent suggested he might consider selling.  Her thinking was simple.  She felt that vacation properties would suffer more than primary residences.  People will always give up luxuries before they give up essentials.

Steve ignored the suggestion.  He did agree to put his property into a rental pool. For a while Steve did have some rentals.  Steve continued to feel infallible.  In fact he was sure the laws of the market place did not apply to him.  Steve’s case of hubris was very serious.

Steve’s agent again suggested Steve get ahead of the market and sell while he still had a profit.  Steve even called me and I gave him the same advise, sell, sell, and sell.

Steve agreed to sell.  Steve’s hubris disease was so bad he needed acute care.  He ignored my advice and that of his local realtor and asked 22% more than the current market value of his home.  He wanted $265,000 for a property worth $210,000.

Two years later Steve received an offer of $186,000.  This was an excellent offer in the declining market of 2009.  The buyer presented it as a take it or leave it offer.  Steve made it very clear that he would not “give away” his property or allow any buyer to “steal” it.

2009 morphed into 2010.  The resort economy of Steve’s community collapsed faster than the tail spinning world economy.  Steve’s agent called every month and gave Steve detailed data showing the sharp downward turn of the market.  As the economy failed the rental demand decreased.

In 2011 Steve’s mortgage that seemed so favorable a few years earlier now became a heavy weight dragging him down.  Steve finally did start to lower his asking price but he was always chasing the market down.  He refused to get out in front of the market by pricing to the market and becoming the number one value in the market.

Steve’s hubris disease had overwhelmed him.  The bank began foreclosure on his mortgage.  The foreclosure created immense financial, emotional and psychological strains within the family.  The family could no longer afford to send their daughter to a first class university.  Steve drained his retirement fund trying to “save” his investment.  After suffering so much Steve deeded his property over to the bank in exchange for the foreclosure being stopped.

Nobody knows the future.  There are no guarantees in life.  Salmon can swim upstream.  Remember that at the end of the swim the salmon die.

Wise people accept the universe as it is and act accordingly.  Wise people do not suffer from hubris.  Wise people know it is better to accept today in order to live and enjoy tomorrow.

Seller Finds Real Estate Genie

My good friend Art at Reality Real Estate shared this story with me.  I know the moral of the story is true while I am not so sure about the actual events.  It reminds us that there are certain self- evident truths in life and that we are the masters of our destiny.

Art:         Good morning it is a great day at Reality Real Estate.  It will be my pleasure to help you.

Caller:         Well it really is a great day.  I am calling to say that I found an ancient magic urn.  I am Sam Seller and I am going to change the world of real estate.

Art:         Sam that sounds very exciting.  We have not done much with ancient urns.  Have you considered a museum or magic store?

Sam Seller:         No.  This is a real estate magic urn.  I rubbed it and a genie appeared and offered me three real estate wishes of my choice.

Art:         Well this is a new story to me.  I must admit I am intrigued.  Where did you find this genie?

Sam Seller:         My wife has been hounding me for weeks to clean the junk out of our basement.  She says nobody will pay top dollar for a house with boxes of junk all over the recreation room.

Art:         Sam it sounds to me like your wife is the genie.  She is very smart.  It today’s markets only the very best looking houses are selling.  You have to give top value in order to get any offers.

Sam Seller:         I know my wife is right.  But my stuff in the recreation room is not junk.  It is years of my stuff.  Anyhow that is not the important news.  The genie is the important thing.

Art:         So tell me about the genie.  Did he or she appear in smoke and offer you three wishes?

Sam Seller:         Yes, how did you know that?  She offered me three real estate wishes of my choice and promised they would all come true.

Art:         Was your genie also very beautiful?

Sam Seller:         She is drop dead beautiful.  Next to my wife she is the most beautiful woman I have ever set eyes on.

Art:         Did you make your three wishes and did the genie make them come true?

Sam Seller:         Yes and no.

Art:         Sam in all beautiful genie stories the genie makes the wishes come true.  Are you telling me your beautiful genie did not make your wishes come true?

Sam Seller:         Let me explain.

Art:         It is your nickel.

Sam Seller:         I had to negotiate with my genie.  My first wish was to sell my house for the highest price in the shortest time and without any hassles.

Art:         Well that is a great wish.  Every seller I have ever met makes that wish.  What were your next two wishes?

Sam Seller:         That was what we negotiated about.  My genie said my first wish was actually three wishes not one.  We went back and forth a few times and I am afraid I raised my voice.  My genie told me that I was not in a position to bargain.  I could take her offer or leave it.

Art:         Well that sounds like every buyer and every seller I have ever met.  All offers are always on a take it or leave it basis.  I have never figured out why sellers and buyers want their offer to be take it or leave it while insisting that the other person is obligated to keep on making offers even after being rejected.

Sam Seller:         I took the offer and said I wanted her to sell my house for the highest price in the shortest time and without any hassles.  You remember I told you the same thing three months ago?

Art:         Yes Sam I do remember.  Do you remember my answer?

Sam Seller:         No but listen to what the genie told me.  She said to get the highest price in any market I had to offer the highest value.  I had to give the buyer more value for the money than any of my competitor neighbors.

Art:         Hmmm.  Sounds like what I said 3 months ago.

Sam Seller:         Yeah I know.  It also is what my wife has been saying.  I told the genie to hop on it and get it done.  She said she already had done her job.  She told me how to get the highest price by giving the highest value.

Art:         What about your wish to have the fastest sale?

Sam Seller:         She said she had already fulfilled that wish also by telling me to offer the highest value.  She said it was like The Godfather movie.  I had to make an offer no buyer could refuse.

Art:         Smart genie.  Sam do you remember I told you the same thing?

Sam Seller:         You and my wife have been breaking my back with that value stuff.  But you are not a genie and neither is my wife.

Art:         I bet for your wish of a hassle free closing the genie said she had already given you the secret.

Sam Seller:         She did.  She said I have to offer so much value the buyer would never want to mess up the deal over a chandelier or an inspection item.  My genie is so smart.

Art:         Sam are you sure it was a genie and not your wife or me whispering in your memory?

Sam Seller:         Well maybe you and my wife are my genie.  The important thing is that I have learned my lesson.  I will get the highest price in the fastest time and a hassle free closing by offering more value than all the other sellers.

10 Keys to Real Estate Success in 2012

2012 is going to be a year of hope possibility and risk in the world of real estate.

Everyone is hoping it will be the turn around year in real estate and mark the end of a six- year worldwide slide in prices.  The possibility of an improving world economy is based on signs particularly in America that the economy and real estate are improving.  There is more risk in the world today than any time since 1939 and the beginning of World War II.

I interviewed some of the top realtors in the world and asked them what they were watching as directional signs for real estate in 2012.  What are the keys to real estate success in 2012?

Key 10         Watch your local real estate market.  Real estate is always local.  A great local economy can overcome regional, national and even international issues.

Key 9         Watch the ratio of supply to demand, actual price movement up and down, time on market and market volatility.  Be focused on the real numbers not newspaper or TV headlines, what your neighbor told you or what you hear in the beauty salon or barbershop.   Verify all market data.

Key 8         Watch for the “F” word!  Foreclosures are a huge black cloud hanging over the western industrial world.  Many experts believe America may suffer more than a million additional foreclosures in 2012 and 2013.  Foreclosures may be 20-25% of the American market an absolute barrier to increasing prices.  In some markets they will be 35-45% of all sales.  The situation in Europe may be much worse and last much longer!

Key 7         Watch for the market “overhang”.  Market overhang is the number of sellers who want to sell and have not put their homes on the market.  They say they are waiting for the market to turn.  If the markets do turn up and there is a flood of overhanging properties coming to market the supply will outweigh demand and prices will fall.

Key 6         Watch for the unexpected.  In 2011 we had unexpected tsunamis, earthquakes, floods, oil spills, political revolution, dictators fell, major oil disruptions and more.  Each event had a major ongoing impact on the world economy and real estate values.  Cumulatively the events initially caused fears of worldwide food inflation and then of worldwide recession.

Key 5         Watch for the second “F” word! Flexibility.  Nothing says buy me and reflects the market faster than seller flexibility.  Are sellers in your market offering financing?  Are they fixing up their homes to A+++ condition before they go on the market?  Are sellers making concessions for closing costs, repairs, and extras?  Seller willingness to be flexible is a clear market direction signal.

Key 4         Watch the American presidential and Congressional elections.  Markets want certainty.  If the early polling is clear, consistent and unchanging the economy will believe there will be certainty in the markets and the economy will respond.  If the election results are not clear there will be uncertainty until November.  If the candidate’s policies are not clear uncertainty will rule.  Markets may not like or endorse certain policies but they will always deal with them.  In markets knowing the rules is more important than not knowing.  Markets will deal with what they know.  Markets cannot deal with the unknown.

Key 3         Watch Europe, the EU and the Euro.  All economic and political eyes are on Europe, the EU and the Euro.  The three are very closely intertwined but they are not the same.  What is very clear is that the situations are precarious.   Economists and politicians engage in daily crisis management meetings.  For the world economy and world real estate markets there is no opportunity for failure.  The leaders must win each and every battle.

Key 2         Watch your powder and keep it dry.  With so much known uncertainty this is not the time to risk everything at one time.

Key 1         Be!  Be careful.  Be prudent.  Be wise. Be alert.  Be patient.  Remember tomorrow is another day, another opportunity, and another chance for success in real estate.

Goodbye 2011 Hello 2012

Finally we can say goodbye to 2011.  We began 2011 with very high hopes.  I cannot recall another year that began so hopefully and was so filled with negative surprises.  Some surprises could not be anticipated.

The first biggest and most unexpected surprise was the earthquake, tsunami and radioactive disaster to hit Japan.  Japan was and still is the world’s third largest economy.

The world quickly learned that an almost four per cent decline in industrial production in Japan leads immediately to economic hardship worldwide.  The world also learned that catastrophic problems do not go away immediately no matter how many billions of dollars and tens of thousands of people are thrown at the problem.

The next natural calamity to overwhelm the world economy was the record flooding in Thailand.  Before the floods, which are still debilitating the Thai economy and will continue to do so for another 2-6 months, the world industrial supply chain was viewed in an intellectual sense if thought about at all.

Suddenly people could not buy their favorite cars because a switch or piece of fabric only came from Thailand.  Because of high labor costs the same Japanese carmakers had outsourced manufacturing from Japan.

The Japanese earthquake severely disrupted the supply chain but did not cause total collapse because many parts were produced in multiple locations.  Thailand was different because in some cases it was the largest manufacturer of some parts.

2011 also saw unbelievable unexpected political change that will continue in 2011 and beyond.  The Arab Spring surprised everyone.  It disrupted the flow and raised the price of oil worldwide.  High oil prices and shaky supply lines always produce economic turmoil and slowing economies.

The Arab Spring will take years and years to play out.  Anyone who says they know what the final results will be is a fool!  The secular versus sacred, democratic versus anti democratic, tribal versus national and regional alliances, Shia versus Sunni, al Qaeda versus everyone, male dominance versus woman’s rights, rich versus poor, Muslim (Arab nations) versus Israel issues will keep the Middle East destabilized for the foreseeable future.

The war in Iraq ended and at the same time is growing worse threatening to tear the country into multi level war.  Osama Bin Laden was killed and the fighting continues.

The war in Afghanistan may be ending and it may be getting worse.  The unofficial war in Pakistan also seems to be getting better and worse at the same time.

The world of finance in 2011 proved how self-centered and ostrich like leaders in Europe and Washington were.  With remarkable consistency “leaders” chose to represent their own and or narrow interests rather than their country.

After years of complaints about waste in Washington Congress was incapable of finding even 600 billion dollars in cuts in a multi trillion-dollar budget.  If anything the situation in Europe was worse.  The year began with promises to save the Euro and has ended with promises to save the Euro.

The European situation has grown so desperate that the save the Euro discussion has grown to save the European Union.  The Euro has gone from $1.54 to below $1.29.  Political leaders openly and seriously discuss Greece, Spain, Portugal, and possibly Italy leaving the EU!

America seems to be an improving economy while the EU is facing years of recession.  Inflation fears in Asia have been replaced with deflation fears.

What does 2012 hold for the world?  The things we know about will continue to muddle along.  We live in an age of muddlers and muddling and not leaders who lead.  There will be natural disaster surprises.  We can only hope they are less severe than in 2011.

The Arab Spring may move left, right and stay stuck in the center.  It probably will do all three at the same time.  The world will continue to grow smaller and more interconnected.  Good news will cause worldwide improvement faster than in the past.  Bad news will cause recession and depression faster than ever.

Politicians will continue to disappoint throughout the world.  In America it is a Presidential election year.  2012 will bring a flood of commercials that twist the truth, a tsunami of robo calls, and too many broken promises; truth will be sacrificed on the altar of election and re election.  If you have zero expectations you will not be disappointed.

In America real estate will probably get a little better while it will get worse in the rest of the world.  The key to making money in real estate is to find areas of economic and political certainty. Greater economic and political certainty means a clearer future for real estate.  Real estate success will continue to focus on local economies rather than regional or national economies.

My wish for you in 2012 is abundant peace prosperity health and happiness.  The next post will be Wed. 4 January.  Happy 2012.

Real Estate Boxing Day

Though not a holiday in America Boxing Day is widely celebrated throughout the world especially in the British Commonwealth countries and central Europe.  Today being the day after Christmas is Boxing Day.

There are many competing theories as to the origins of Boxing Day.  The great English diarist Samuel Pepys mentions it in his diaries almost 400 years ago.  One theory is that tradesmen came on the day after Christmas soliciting tips for their “savings box”.  Another theory is that it was the day the wealthy boxed the left over food from Christmas and gave it to the staff and needy.  Whatever the true origin of Boxing Day it originated in charity and giving.

There is a very important boxing day in real estate. Real estate Boxing Day is the day after you decide you are going to sell your house.

It does not matter if you have not listed your house with your realtor.  Boxing day in real estate does not even require that you have set your asking price, or have your plan and strategy in place.  The moment you decide to sell your home is also the moment you should be boxing up your house.

The moment you decide to sell your home you should immediately look at your home as a house.  Your decision to sell means you have decided to end your emotional ties to your home.  Your house has now become a business endeavor.

When you “own” your home it is yours and you should do with it, as you like.  The moment you decide to sell you should look at your home as a house.  You need to see your house through the eyes of your prospective buyer.  You must present your house to the buyer in the manner that will maximize its emotional appeal to your buyer.

The most common mistake sellers make in presenting their house is to present it as their home.  Think about it.  You are trying to sell your property.  You have something that you want the buyer to see as something they must own.  If you “own” the home how is it possible for the buyer to own it?

The signals of ownership are obvious and subtle.  Most sellers’ recognize the obvious signals of ownership and box them up and put them away.    If you have a sign, painting, or placard saying “Hilda’s and Harry’s Home Sweet Home”, box it up.  No buyer wants to take someone’s home away.  The message is subtle but it is powerful.

Many people have a casual life style in their home.  They believe in “living” in a house rather than keeping it neat as a pin.  Box up your stuff and make your house neat as a pin.  Buyers are turned off by messy and turned on by neat.  The buyer may not be a neat freak.  They may be messy themselves.  Nobody wants to buy your mess.

A messy or dirty house sends another signal to the buyer.  The message is that you may not care about the maintenance of your home.  Most buyers are not handy.  They certainly do not want to buy repair issues.  If they do like your house and are worried about repairs any offer will be significantly below the cost of repairs.  Box up your mess and put it away.

Your house may be super clean and organized and still needs “Boxing”.  Many people are collectors.  The things are usually artfully arranged on every shelf and flat space in the house.  No matter how beautiful your collections may be they are a distraction to the buyer and a message that the house is your home and you are not a serious seller.  Box up your collections and let the buyer envision their own collections on the shelves.

Many sellers cover the walls with family photos, certificates of child and grandchild successes, graduation pictures, newspapers pictures and articles.  These walls of fame are a strong message to the buyer about your emotional attachment to the house.  The message is you are not ready to sell.  The buyer senses you will be a tough negotiator because you are not ready to leave the house.  As emotionally difficult it may be for you to box these items up you must do so if you want to sell your house.

Do not pile the boxes into your attic or garage and certainly not inside the house.  Rent a storage space.  It may be difficult to have to go back and forth for some items.  It may take time and money.

A storage space for a few months is much better than not selling your house.  It is also much cheaper than not selling your house.  It also allows you to achieve your goal of selling.  Celebrate Real Estate Boxing Day and know you have taken the first step to sell your house.

Tis the Season of Joy

It would be easy to write about the troubles of 2011.  One could write pages and pages enumerating the housing problems we faced individually and as a nation in 2011.  It is all too depressing.

What is important is not to enumerate our problems but to celebrate having over come them.  Woody Allen said, “showing up is 80% of life.”  Over the years the quote has been changed to raise the percent to 90% of life.  By any standard anyone who showed up and survived the 2011 housing market has reason to celebrate.

Remember when the real estate bubble began to burst in 2006?  Pundits said it will be all over and a distant memory in two years.  Two years later in 2008 the housing market was in shambles and we were hearing terms like Lehman Bros., Bear Sterns, credit default, and liquidity crisis.

Suddenly the housing crisis was dwarfed by the Wall St. financial crisis.  The problems of Main Street were no longer on the radar as Wall Street issues were front and center.  As in 2006 people were predicting that in two or three years all these issues would be distant memories.

2010 came and went and changed into 2011.  Wall Street issues were dwarfed by headlines about American debt and deficits.  Suddenly there was an understanding that the fastest easiest way to resolve the housing crisis was to solve the lack of jobs crisis.

The plan and thinking was sound.  If there are more wage earners there are more people who can pay their mortgage rather than default on their mortgage.  More wage earners also meant more people who could buy homes.  More wage earners also means more taxes paid in to the government and fewer benefits paid out.  Job creation became the cure to America’s economic ills.

In the second quarter this plan and approach was derailed by events at home and abroad.  At home Congress drew lines in the sand as politicians became more obsessed with their own reelection than with the overall well being of the America people.  In Europe profligate government spending suddenly exploded.

Europe experienced an economic and political crisis that threatened the very existence of the European Community and the Euro.  For six months nothing happened in America as all financial eyes were focused on Europe.  Would Europe survive or not?  If Europe failed would it cause America to fail?  Would the entire world fall into depression?

2011 was the most difficult financial year since 1929 and the Great Depression.

The financial news in America has been slowly getting better.  Considering the world issues it amazes me it has gotten better at all.  It seems that Europe is finally taking its problems seriously and is making progress in restoring financial sanity.

The future of American housing markets is much brighter today than at any time in the past six years.  There are many ways the recovery can be derailed.  There are many more ways the recovery can be faster, larger and more stabile.

We have made it through the housing firestorm of 2011.  Just as when iron is exposed to heat it becomes steel, the survivors of the 2011 housing crisis are stronger.

We have to celebrate our success and continue to work for greater real estate successes in 2012.

Shoot Your Way to Real Estate Success

I am not suggesting you go out and buy a .345 Magnum or any other firearm.  I am strongly suggesting you go out and spend $200 on a good camera if you do not have one already.  Why?

The two most important success factors in selling your home are:

First hire the best realtor and do everything he or she says especially concerning pricing.

Second you should get a no brainer camera and shoot lots and lots of picture.  Today’s cameras are idiot proof.  They do everything for you.  If you line the picture up correctly you cannot take a bad picture.

You should start taking pictures the day you move into the house even if you have no intention of selling for many years.  It takes a long time to build a portfolio of great pictures.  Take pictures every season of the year.

Today’s market has changed dramatically in the last twenty years.  The Internet has changed the entire game.  More than 90% of all real estate sales begin on the Internet.  The Internet is about pictures.  We all know that a picture is worth a thousand words.  A good picture in real estate is worth many tens of thousands of words.

Our experience is very consistent.  Buyers are attracted to a property by the combination of words and pictures.  No matter how glowing and positive the words may be if pictures that “prove” the words do not support them buyers will hit the next button on their computers and you have lost before you even started.

Good pictures can overcome average words.  If you or your realtor is not a Shakespeare the situation can be remedied by shooting good photos.  Nothing can overcome pictures poor in quality, dull, boring, or showing the property to be less than advertised.

What should you take pictures of?  There are two aspects to selling and buying a home.  Both parties are interested in the features of the home and of the benefits of the home.  A feature is a “thing” about the home.  A benefit is what the feature means to you emotionally.

A large deck is a feature.  The benefit is that you can have wonderful parties, entertain friends and families, and have a place for relaxing and family play.  Your realtor will take pictures of the deck.  They will be “feature” pictures.  The photos will show how big the deck is.  The realtor is handicapped by time and circumstances.

As the homeowner time and circumstances are not limiting you.  Whenever you have a party or activity on the deck that shows the benefit of the deck take some great pictures.  Make sure there are lots of people in the pictures and that everyone is having a great time.  These are benefit pictures.  They establish emotional connections between the prospective buyer and your home.

Pictures in the living room with the Christmas tree, presents and smiling faces are another great opportunity to shoot your way to success.  Friends and family gathered around the table for Thanksgiving, Christmas, Easter and other festive events are another great opportunity for shooting your way to success.

Be smart about shooting your pictures.  If your dining room table holds 8 comfortably and you are having 14 for dinner do not shoot yourself in the foot.  Take a picture of the table set for 8 with all the dishes, glassware flowers, etc. shinny and clean before the feast begins.  Do not show an overcrowded dirty table that reminds people of the hard work of cleaning up after entertaining.

Many people love to gather in the kitchen.  Many homeowners prefer to entertain in the kitchen as well as in the rest of the house.  If you have a large kitchen take pictures showing fun and food in your kitchen. Do not take pictures of a sink filled with dirty dishes.  Do not take pictures of a small crowded kitchen.  If you kitchen is small take pictures which show how well the kitchen works for you.

Many realtors and owners take pictures of every room in the house.  Our experience is that this is often a mistake.  If you have a fantastic bathroom that looks like a spa in a 5 star hotel by all means take many pictures.  People dream about owning spa like bathrooms.  On the other hand do you really believe anyone wants to look at your plain old white toilet or your 30 year-old sink and wallpaper?

Garages are like bathrooms.  Never take photos of your cluttered, piled high with boxes garage.  Do not even take pictures of your clean empty garage.  If you have a garage that a mechanic or carpenter would die for, please take pictures.  Most men dream about owning an organized garage with each tool hanging in its assigned place.  I am always amazed by the astounding number of men who never what to touch a hammer or saw who want a decked out garage.

Planning ahead and shooting great pictures of the benefits of your home will put thousands of dollars into your pocket.

Cut Rate Commissions Good Idea Bad Idea

Me:         This is Reality Real Estate it is my pleasure to serve you.

Caller:         I want to sell my house.  I warn you I am a very well informed seller.

Me:         That is great.  We love well- informed sellers at Reality Real Estate.  What is your name please?

Bill:         I am Bill smith and my house is as 456 Oak St.

Me:         Bill that is great.  According to the county records your home is 3 bedrooms 3 bath, 1985 square feet, 1 car garage and 9 years old.  You are the original owner and paid $325,000 and have a mortgage originally for $290,000.

Bill:         Gosh that is impressive.

Me:  You really know the market.  Thank you but my computer is the secret.  All housing information of that sort is public record and on line.

Bill:         Before we go too far I want to be fair with you.  I have learned that commissions are negotiable.  So we are going to negotiate.

Me:         You are right commissions are negotiable.  Why do you want to negotiate?

Bill:         Maybe I was wrong about you be smart and sharp.  I want to save money of course.  A penny saved is a penny earned or in your case thousands of dollars saved.

Me:         Well I cannot argue with that logic.  There is one fallacy however.

Bill:         No there isn’t!  Prove it!

Me:         Did you ever buy a “knockoff” or an imitation product?

Bill:         Sure.  I once even bought my wife a knockoff of a $2,000 purse.  It looked great to me.  I could not tell it from the real thing.

Me:         Did it fool your wife?

Bill:         Yes and no.  When I gave it to her she was all lovey dovey.  When we had an argument a few weeks later she threw it at me and called me “ phony and cheap just like the purse”.

Me:         Did you ever hear that you get what you pay for?

Bill:         Of course I am beginning to see your approach.

Me:         Here is another thought for you to consider.  What is the purpose of your agent?

Bill:         Market my home, find a buyer, negotiate a contract are the big ones to me.

Me:         Do you want your agent to be a smart tough sophisticated negotiator for you?

Bill:         Of course I do.

Me:         If your agent caves in when asked to negotiate his or her commission what would you think?

Bill:         I would think I was a great negotiator and the agent saw that immediately and caved.

Me:         Really?

Bill:         Not.  I understand where you are going with this.  You are telling me that quality counts and that my home and family are too important to mess around with.

Me:         Go to the head of the class.  I want to thank you for raising the issue.  Everyone initially thinks saving money is great.  There are times it is very important to save and the risk of damage or harm is small.  There are times when you definitely do not want to cut corners and go on the cheap.  Imagine hiring the cheapest doctor to perform heart surgery just because he or she was cheap.  Would you hire the best lawyer or the cheapest lawyer to represent you in a big case?

Bill:         I hear you loud and strong.  You are sharp and smart.  In a very nice way you made me realize that quality comes with a price.  Can you come over at 6 tonight to see the house set a price and move us forward?

Me:         Yes and thank you very much.

Seven Steps To Your Own Black Friday/Black Monday

Black Friday is the day after Thanksgiving.  It is the biggest retail store- shopping day of the year.  It theoretically is the day on which retail stores go from 10 months and several weeks of net operating losses operating in the red to having a profit operating in the black.

Black Friday is also the harbinger for Christmas retail sales.  Black Friday is a bell weather for the entire economy.  Everyone from the retail store owners, to manufacturers of retail products to Wall Street investors to government economists watch the Black Friday numbers.   Black Friday is about billions of dollars.  It is extremely important.  This year’s Black Friday surpassed all estimates.

Black Monday is a phenomenon of the technology age and a spin off from Black Friday. Black Monday is to on line sales what Black Friday is to in store retail sales.  Instead of thousands of shoppers lining up outside thousands of malls envision millions of people sitting at their computers waiting for on line bargains to be posted.

Together Black Friday and Black Monday represent billions of dollars in sales.  Together they are a very clear indicator of consumer confidence.  This year both “holidays” set significantly higher sales records with double digit increases in sales transactions, total dollars spent and average expenditure per customer.

Have you thought about having your own Black Friday/Monday for selling your house?  What do retail stores and on line stores know that real estate sellers don’t know?  Absolutely nothing!

Stores have inventory on their shelves for 10 plus months.  They loose money everyday of those months.  On line retailers store their inventory in shipping centers.  Your home for sale is your inventory.  It is also your store.  If you think of your home in retail terms you will immediately see the analogy.  Everyday you do not sell your home you are losing money just like the stores and on line retailers.

Do the stores and on line retailers hope to make sales before their Black Day?  Yes.  Do they make money on those sales?  Yes.  Do they make money on their entire operation?  No.

Home sellers act exactly the same way.  All sellers are hoping and trying to sell their home all year long.  The difference between the homeowner and the retailers is the homeowner does not have a fixed Black Day.  There is no fixed day when the owner will take all necessary actions to produce a profit for the year.  Every homeowner has the power and ability to create their own Black Friday/Monday.

Once the homeowner decides to sell their approach should be strictly business.  In business time is money. In selling a house time is money.  Everyday you own the house you are paying on a mortgage, taxes, interest, insurance, maintenance, homeowner dues, mortgage insurance premiums and many other expenses.

You do have a roof over your head but you have already decided it is not the roof that you want over your head.  Whatever your reasons you want a new roof over your head.  Every day you fail to sell your home you expensively fail to achieve your goal and dream.

Step One in creating your own black Friday is to establish a realistic selling plan.

Step Two is to do everything necessary to make your home the highest and best value for the neighborhood and price range.  Leave nothing undone.  The smallest leak can sink a ship given enough time.

Step Three is to set a very realistic asking price for your home.  If you set the right price you will immediately have your own Black Friday/Monday.

Step Four is to set a realistic timetable for selling your house.  What is the average time on market for houses in your market?  If the average time is nine months it means many houses are sold in less than nine months and many take longer.  It also means that many houses do not sell.  Look very carefully at the houses that are selling quickly.  Make sure you value your house to emulate those sales.

Step Five include in your timetable hard and fast dates for reducing your price.  If your house is not getting showings and serious interest how long will you wait before waking up to the fact the market is rejecting your valuation?  How long will you go on losing money and denying your goal?

Step Six preset a plan for the amount of your price reduction.  You should work closely with your broker on this.  If you are not getting any showings, you may need a 15-20% reduction.  On the other hand if you are getting showings but no offers perhaps you only need a 10% reduction.  If you are getting offers that are not acceptable perhaps you only need a 5% reduction.  Experience has taught me that when you make these decisions at the beginning of the process you will make better and easier decisions along the way.

Step Seven is to set a firm Black Friday/Monday date for you and the market.  Let the market know you will sell on a day certain.  Making it clear to buyers that someone is going to own your home on a certain day brings out buyers who do not want to loose a deal.  You have to be prepared to sell at the real market price but sell you will.

You Have Signed The Contract Now What?

The first thing that happens is that the buyer will get an attack of buyer’s remorse.  Simultaneously the seller will get an attack of seller’s remorse.

Each party will begins to torment and second- guess themselves.  Each party is certain they have made a terrible mistake.  The buyer is sure they have paid too much while the seller is just as sure they have left money on the table.  Remorse is very powerful.  It is also curable.

If you suffer remorse call your agent and review your situation.  Look at the comps again.  Consider how long the property has been on the market.  Think about how anxious you were to find a house or find a buyer.  Review your finances once again.  Ask yourself if you really want to kill your dream and want to start the process all over again.

Buyers typically have multiple future contingencies.  There will be title, inspection and appraisal contingencies.  Each of these will be an opportunity to commit to a transaction or kill the deal.

Title objections are relatively few and far between.  Most States have title search processes that have effectively eliminated problems over the years.  When there is a title problem it may be a very big issue.

Title issues must always be resolved.  Depending on the nature of the title objection even if the parties are not concerned the future lender is usually very concerned.  Lenders want nothing to do with serious title issues.  Lenders want nothing to do with boundary issues, long lost people who did not sign off on the title, and especially with suspicious looking signatures.

Title issues are not issues the buyer or seller can turn a blind eye to.  Title issues almost always mean a call to a real estate attorney and hard work.  Title issues are like pregnancy.  There is no half way. Just as you either are or are not pregnant your title is a good title or a bad title.  The good news is that usually given some time and money bad titles can be turned into good titles.

Appraisal contingencies are also very serious.  Today everyone looks to the appraiser for validation of the price.  The buyer and seller may be more attuned to the market than the appraiser.  The bank does not care that the buyer is happy with the price.  The bank does not care that the buyer looked at 40 homes and believes this is the highest and best value.

The bank and the appraiser are looking over the shoulder and remembering the excesses of 2002-2006.  The bank and the appraiser do not want to make valuation errors.  They are very conservative.

The solution is painful.  The seller may have to come down in price or the buyer may have to come up with additional money.  Overall market conditions and the private financial situation of each party determine the outcome.  Talking with the appraiser and asking for a review is always a possibility.  Experience has shown that rarely will an appraiser modify the appraisal.

Inspection is the third major contingency and in many ways the most troublesome.  In many places anyone can be an inspector.  There are inspector franchises.  Some inspectors were former contractors, carpenters, plumber’s assistants, etc.  Often these people are very good at seeing their specialty issues but not other issues.  Former carpenters may see only carpenter issues and not electrical problems.

Inspectors come in every stripe and color and take individual approaches to the work.  Some are “buyers” inspectors who see every popped nail head as a sign the house is falling down.  Others inspect without regard to the age of the house and the price.  They want every house to have a new furnace, hot water heater, roof, windows and appliances.  Their inspections are more about protecting themselves from litigation than in making a fair assessment of the condition of the property.

There are also inspectors who seemingly, hear no evil, see no evil, and speak no evil.  Their reports are filled with exculpatory phrases, such as the roof could not be inspected because there was no ladder access to the roof.  I have also seen an electrical inspection report which said the panel box seemed ok and the wires were behind the wall so could not be examined!

The parties should always resolve inspection issues.  Either the price should be adjusted or the seller resolves the issues.  The seller will always want to adjust the price and the buyer will always want the seller to do the work.  Each side wants certainty rather than surprises.  Buyers and sellers just have to be reasonable under the circumstances.

The last hurdle to closing is the chandelier.  The chandelier is the symbol for one side wanting a last minute “win”.  My experience is that chandeliers often poison the process and ruin it for everyone.  The best way to avoid the chandelier issue is to make sure the wives do not let their husbands experience a testosterone surge.

Always keep your eye on the goal of buying or selling and do not let any obstacle get in your way.

Are You Looking At The Big Picture?

Me:         Hello.  It is a great day at Reality Real Estate.

Caller:         I am glad to hear that because I have a house to sell and everyone is telling me depressing news.

Me:         We will tell you the truth about our real estate market.  At Reality Real Estate that is what we do.

Seller:         Great come right over and we can sign the paperwork.

Me:         At Reality Real Estate we educate our clients before we jump into the fire.

Seller:         What ever you say.  I just want to sell my house.  I have the biggest best house in the neighborhood. I believe I should get a record price.

Me:         The price you will get depends on the market in your location and the demand for your type of house.  Part of the pricing procedure will include looking in detail at the condition of the house, improvements, terms you are offering and more.  This is what we call the microanalysis.  Every detail of your house, neighborhood and community are examined in great detail.

Seller:         Boy I am glad I called you.  I am impressed by your attention to detail.  You sound very professional.  I am a very detail oriented person.  When you see my home you will see how detailed I am and how we take care of every detail in the house.

Me:         Wonderful.  It sounds like you will get great marks on the detail part of the process.

Seller:         What else is there to consider?  This is about selling my house not sending a rocket to Mars.

Me:         Great realtors will also help you look at the big picture.  The big picture in the market is just as important and often even more important that the particulars of your house and neighborhood.  In extreme markets the big picture is usually more important than the details of the home.  We are in a very extreme market right now.

Seller:         I have the feeling this is not sounding very good for me.

Me:         It is not about sounding good or bad.  It is about making a very careful analysis of both the details and the big picture.  We have to consider the micro and the macro market events.

Seller:         It sounds complicated.

Me:         It is not complicated at all.  It is very important.  At Reality Real Estate we have learned that our clients only want to consider the part of the market that is most favorable to them. It is important to see the entire picture not just a piece of it.

Seller:  Well what are these big picture things we need to look at?

Me:         We need to consider the national, state and particularly the local economy.  We will consider market activity, days on market, foreclosure competition, interest rates and more.

Seller:         There is more?  Your list already sounds very long.

Me:         We have to look at the even larger picture and also dig deeper into the information we discover.

Seller:         I just want to sell my house for a lot of money.

Me:         At Reality Real Estate we want to sell your house for the most money in the shortest time and without stress.  Let me give you some examples of looking at the big picture and digging deeper into what we learn.

The big picture is that nationally sales are very slow, inventory is building, prices in general are falling and it is hard to borrow money.

Seller:         Yes even I know that.  I hear it on the news almost every night.

Me:         Did you know that in Miami Beach prices are up sharply in the last year?  Did you know that most of the buyers are cash buyers from Brazil?  Did you know that high- rise condos on the beach are in great demand?

Seller:         No I did not know any of that.

Me:         At the same time in Miami proper the market is completely different and down?  Can you see why we look at the big picture and the details?  We also look at changing demographics.  Seniors like different homes than newlyweds or people with families.

Seller:         Does that apply to us?

Me:         Yes it does.  Most of the people in your community came to it to raise a family.  Now the community has aged.  The homes are designed for young families yet the community is now almost all retired people.  This is an important to our pricing and our marketing.

Seller:         I am really glad we are looking at the big picture.  I thought I was selling my paint, colors, design and décor.  There is a lot more to consider.

Me:         We also have to consider that the largest employer in the area is closing and there is no prospect for a new employer offering as many jobs and a very high payroll.

Seller:         Did I tell you we have the only swimming pool in the neighborhood?

Me:         Do you see that with a big loss of high paying jobs your pool is a liability not an asset?  In parts of the rust belt so many jobs have been lost that towns are knocking down blocks and blocks of abandoned homes because there are no buyers and the houses are becoming slums.

Seller:         Please come over so we can look at the micro and macro pictures, set a price that will sell my home for the highest price possible as fast as possible and without stress.  I am so glad I called Reality Real Estate.  You really know what you are doing.

Snatching Defeat From The Jaws of Victory

The Congressional Super Committee announced failure.  There has been and will continue to be huge amounts of finger pointing and blame.  Republicans have already begun to blame Democrats and Democrats are doing the same to the Republicans.  The Republicans and even a few Democrats are blaming the President.

The balanced budget proponents are raising a hew and cry to have a balanced budget.  What good would a constitutional balanced budget amendment do except buy years of time to process the amendment?

If Congressmen and women cannot balance the budget now why would these same people be able to do it when there is an amendment?  On the other hand if Congress can balance the budget in the future with a balanced budget amendment why can’t they do it now?

Everyday throughout our lives we have analyzed our finances and made the appropriate decision.  Some decisions were easy and some were painfully hard.

Usually our financial review was casual.  We knew what we had what we were spending and we did not spend what we did not have.  No matter how much we wanted or even needed a thing we did not buy anything unless we could pay for it now!

A few times the process was extremely difficult.  We had a very great need, a need greater than our finances.  We talked, researched, planned, adjusted and rethought every penny.  We always made a decision that kept us out of debt.  The only time we elected for debt was with our home mortgage.  Even then we borrowed a very manageable amount and paid it down 12 years early.

We are not unusual.  Almost every family I know pays their bills and lives within their means.  While bankruptcies have increased dramatically very few people go bankrupt.  When the experts look at the bankruptcy statistics the old patterns continue true.  Loss of job, divorce and health issues are the major causes for bankruptcy.  Divorce and health issues are constant.  Job loss is the major variable.  People live within their means.

It is time for Congress to stop its nonsense and adopt as a minimum $4 trillion in cuts and revenue over the next ten years.   It should begin 2012 by finding at least $1 trillion in revenue and cuts for 2012!

Spending what we do not have does not work.  The trickle down theory of taxes and job does not work!  The Bush tax cuts have proven that.  Giving money we do not have to improve “society” does not work!

Congress is snatching defeat from the jaws of victory.  On the day of its announced failure:

• Unemployment had been dropping for two months
• Housing sales have increased for 3 months
• Nationally housing inventory has drop to 8 months a major move
• Job creation has exceeded expectations for 2 months
• Inflation was lower than anticipated
• Oil prices are down and production up
• Gasoline is down at the pump
• Natural gas production is way up
• Europe may resolve its issues
• Food inflation is down worldwide for 4 months
• Recession fears are passing in America
• The majority of leading indicators are up sharply

The list can be three times as long.  It is clear that the America is moving forward.

Congress is snatching defeat from the jaws of victory.  The stock market dropped 300+ on the announcement.  Credit agencies are considering downgrading America’s credit!  The recession index surged.  It is clear this is the start of a very difficult time.

Business leaders from both parties want clarity and consistency.  The public wants clarity and consistency.  The markets want clarity and consistency.  Real estate wants clarity and consistency.

Congress gives us blame.  Congress gives us opaqueness.  Congress gives us confusion.  Congress draws lines in the sand and insists on my way or the highway.

The Super committee legislation mandated $1.2 trillion in automatic cuts.  Congress is already talking about eliminating these mandated cuts.

Some Congressmen are talking about eliminating cuts in defense even though our defense budget is greater than combined budgets of the next 16 nations.  Of those nations 14 are our allies.  The only “enemies” are Russia and China; both are favored nation trading partners.  We out spend combined China and Russia by 4 to 1 in defense.   China’s overall economy and budget are the strongest in the world.  Russia has a balanced budget and is getting stronger every year.  They grow richer while we grow poorer.

The vast majority of people and businesses recognize we need tax reform, spending cuts and revenue increases.  America has to do everything it can to improve our jobs, markets, and credit and balance sheet.

The Super Committee was an extraordinary opportunity to do the right thing.  They have failed miserably.  The leaders of each party that selected the members failed miserably.  Do you employ people who consistently fail miserably?

Congress should try everything and if something does not work as well as expected improve it or drop it. If something works do a lot more of it.  This is not rocket science.  It is snatching victory from the jaws of defeat.

A final thought.  Congress is always complaining about waste in the budget.  If there is so much waste how come they cannot find it when they have to?

Negotiation Lessons From Isaac Newton

Newton’s third law of motion is “to every action there is always an equal and opposite reaction.”

My good friend Art at Reality Real Estate called and gave me an “Art” law of negotiation.  Art’s law is “To every action there is always an equal and opposite reaction.”

Me:         Art that is Newton’s 3^rd Law of physics.

Art:         Yes it is and it is my 1st law of negotiations.  Just as you cannot ignore Newton’s law buyers and sellers should not ignore my 1^st Law of negotiations.  Let me share a story with you and your readers.

Me:         Our pleasure.

Art:         Hello!  It is our pleasure to help you at Reality Real Estate.

Seller:         I need you to beat some sense into my buyer.

Art:         Are you a client of reality real estate.

Seller:         No I wish I were your client.  I made a mistake and listened to my wife who insisted I use her brother who has never sold a house in his life.  Now my wife is made at me, her brother is mad at me and I am mad at everyone.  In fact while you beat some sense into my buyer beat my brother in law up as well and give my wife a few hints of what is in store for her.

Art:         Stop!  We do not beat people up.  We do not believe in violence and anger.  We do not even beat the table.  Also because you have an agent and broker we do not and cannot interfere with your contract with them.

Seller:         No problem I fired them this morning!  They said some nasty things about me and I told them a thing or two and they emailed me all of our paper work stamped cancelled.

Art:         I still am not happy with the situation.  What I will do is help you get back with them and your buyer and you will pay them on closing.  If you or they decide to compensate us that is fine, if not that will be fine also.

Seller:         Wow, I really made a mistake not listing with Reality Real Estate.  Here is what happened.  My agent wanted to list at 20% below my price.  We did get an offer however.

Art:         What was the offer?

Seller:         It was 30% below what I wanted.  I told the agent to tell the buyer to “stick it”.  That mealy mouth agent told me I was being “rigid, stubborn, foolish and blind to the market”.

Art:         How long have you been listed and how many offers have you had?

Seller:         We have only been listed for 13 or 14 months and this is our first offer.

Art:         Would it be fair to say you blame the lack of a sale on your brother in law agent and do not consider you may have some responsibility with your pricing?

Seller:         Of course I blame that jerk of a brother in law.  Perhaps I have some responsibility with the pricing.

Art:         Do you know Newton’s 3^rd Law of Physics and Art’s 1^st Law of Negotiation?

Seller:         Of course I know Newton’s law but I have not heard your law.

Art:         Well they are the same.  I do not think you are rigid or blind to the market.  Would you consider reviewing the realities of the market and adjusting to those realities?

Seller:         Well when you put it that way instead of insulting me as by brother in law did of course I would review the realities of the real estate market.

Art:         Your agent and broker were right. Your price point is 20%-25% above the current fair market value point. The buyer is actually signaling he or she want to buy your property.

Seller:         Really?

Art:         Yes, it is a clear buying signal.  Statistically, the buyer is willing to meet you at fair market value.

Seller:         How could you see that when I could not see it?

Art:         I used Art’s 1^st Law of Negotiation.  Being opposite does not mean being against.  Being opposite means it is just on the other side of the negotiation.  Being equal means just that.  Great negotiation means meeting trust with trust.  It means countering a good offer with a good counter offer.

Seller:         Brilliant.  Now what?

Art:         Are you willing to call your brother in law and apologize and offer to counter at 20% off your asking price?  Are you willing to then split the difference of 10% in the next round of negotiation.

Seller:         Yes I am.  I heard my minister talking about Art’s 1^st Law of Negotiation in church last Sunday.

Art:         Really?

Seller:         Really.  He called it the Golden Rule!

14 Secrets to Real Estate Success

Great realtors are masters of psychology.  They have learned by experience and formal study to watch for certain behaviors. Successful real estate negotiation is about actions not words.  As a buyer or seller you should be looking at your own actions and words not just the action and words of the other players.

Be on the alert for these behaviors.  You can turn failure into victory by using your new knowledge and skills.

1. Lack of motivation.  Do you really want to sell? Do you really want to buy?  Then why haven’t you stepped up to the plate?  Is the other side really motivated?  There is nothing wrong with asking for commitment.  At the same time do not confuse your hopes for the market with the realities of the market.
2. Impulse control.  Is someone constantly changing direction?  Are emotions overriding intellect?  Focus, focus, focus is the only way to get to the goal.
3. Perseverance or couch potato.  Nobody reaches a goal by giving up.  Perseverance is the hallmark of goal achievement!  Stop the talk and start the action and demand the same from all the participants.
4. Right skills wrong skill.  Everyone has multiple skills. Some are stronger than others. Use your strengths and insist everyone uses his or her strengths.  Use the strength most appropriate for the circumstances.  Only permit positive strengths in the process.  Someone may be a great bully, but bullies are not long- term winners.  Give and demand respect.
5. Process vs. Goal.  Process and the goal are both important.  Never sacrifice the goal for the process.  Achieving the goal is always, well, the goal.  How you get there is not as important as getting there so long as the process is honest, fair, etc.
6. Knowledge not BS.  Knowledge and truth always will win out over BS.  Do not waste your time in the Land of Know “Nothingism”.
7. Fear of Failure.  Use this to drive you to achieve success.
8. Fear of Success.  Remember God does not make junk!  Millions of ordinary people do extraordinary things every day.  It is always more fun to march in the parade than to sit on the curb watching the parade go past.
9. The turtle and the hare.  Big goals take time to achieve.  Bring your turtle skills to the situation.  Remember the turtle won the race!
10. “Woulda, coulda, shoulda”.  There is always stuff and it always can be twisted into “woulda, coulda, shoulda” so what?  Nobody cares about your “woulda, shoulda, and coulda” why should you?  Follow your star and never give up!
11. Run the entire race!  So often people stop just short of the goal.  The scoreboard does not go off and the fireworks do not go up unless and until you cross the goal line.  There is a reason it is called the goal line and not the almost goal line.
12. Trees or Forest.  To follow your path through the forest you will see the forest and the trees.  Never take your eyes off the path.
13. Critical /Creative Thinking.  Learn to be flexible.  You must be both a critical and a creative thinker.  Know when to use each skill and when to switch from one to the other.
14. Celebrate your victory.  The best way to celebrate is to share the credit.  Recognize everyone’s contribution. Teams of people not individuals achieve big goals.  There is no “I” in the word team.

These behaviors appear regularly in real estate.  When you see one of the negative behaviors you can save the day by recognizing it and taking appropriate action.  One of the most effective tools in any negotiation is to call a time out.

Giving an unruly child a time out and a period of quiet is a common way to change the energy and dynamics of the situation.  A time out is always a good tool when a real estate situation begins to go awry.  Letting emotions cool and lowering both the temperature and intensity of the negotiations helps everyone.

Always use the appropriate positive behavior that will move you to your goal.

Six Easy Steps to Prepare Your Home for Showing

As a seller there are several critical points to getting your home sold.  First you must hire the best realtor in your community for your type of home.  Second you must listen to your realtor about the price point the market will accept.  Third, you must prepare the home for sale.  Fourth, you must prepare for each and every showing.

You can hire the perfect realtor to sell you home.  You can put the perfect price on your home.  You can paint, clean, scrub, decorate and design to sell your home.  You will fail to sell your home if you do not prepare it for each and every showing.

Imagine being a potential buyer walking into the perfect home and realizing it looks and smells like a college dorm room.  What would you do?  You would turn around and head for the next home on your list.  I have watched buyers experience this hundreds of times.  With only inches to the goal line the seller lost the sale!

It takes ten minutes to prepare your home for a showing.  How can this be?  You have children, pets, and a spouse who never picks up and so on.

1. Insist that you receive 24 hours notice of a showing.  It is your house, your show, and your show time.  Don’t blow it by being unprepared.  Most sellers love to control the process.  This is the most important time to exercise your control.  Make your spouse the children, extended family etc. help get the house ready!  Perfect is the only acceptable standard.  Buyers who want to drop in are never real buyers!
2. The kitchen must sparkle.  Dirty dishes in the dishwasher are smelly and a turnoff.  Clean dishes in a counter rack are clean and unacceptable.  Create good smells, such as coffee, vanilla, cinnamon.  Do not use heavy sprays.  Heavy sprays tell buyers you are hiding something that smells badly.  Kitchens sell houses.  There is no excuse for failure.
3. Make the beds.  Ordinary is not acceptable.  If you do not have beautiful quilts, spreads, covers, pillows, towels and the like go to your favorite linen store before you sign the listing.  Even though you may not like the luxury hotel look in your bedroom that is what buyers want to see.  Women make up their minds to buy in two rooms the kitchen and the master bedroom.
4. Clean, clean and clean!  Wash the dirty clothes and put them away.  Do not leave them in the washer or the dryer.  Dirty clothes are like dirty dishes, dirty.  Dust, vacuum, take out the garbage, and put everything away.  Make sure the liter box is clean and out of sight.  Many people are allergic to animals especially cats.  Liter boxes are offensive even to the non allergic.  Are you willing to lose a sale because of your cat or dog?  Make sure the yard, garage, and bar b cue are clean.  Toys must be put away.  Valuables belong in the safe.
5. Show off the best features of your home.  Open the drapes to the magnificent view.  Close the drapes that show the neighbor’s window looks directly into your bedroom and is only 30 feet away!  Create a peaceful relaxed mood with music and lights.
6. Leave the house before the buyers arrived.  Do not return until you have called and confirmed the buyers have left.  The best buying “signal” is a buyer who does not want to leave the house.  Why would you want to limit or impinge upon the buyer’s time in the house?

The world is shrinking dramatically.  Communities are multi-cultural and that means home sales are multi cultural.  Staying or leaving a house during a showing can be a cultural issue.  In many countries the owner “sells” the house to the buyer.  The belief is nobody knows the house as well as the owner.

If you believe this have a pre showing meeting with the buyer’s agent and “sell” the house to them.  Buyers absolutely hate being sold by the owner.  This practice always fails.  I have seen many buyers walk away from the perfect house because the seller insisted on “selling” them.

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Ten Tips For Making Great Real Estate Decisions

It is very rare for sellers or buyers to ask the secrets of making great real estate decisions.  This has always amazed me.  Making great decisions in any endeavor is always a process.  A process can always be learned.

What are the important steps in making great real estate decisions?

First:         Know who you are.  Everyone is different with different needs and desires.  What is perfect for one family may be a disaster for another.

Many families get caught up in an emotional rush to have a certain type of house or live in a certain neighborhood.  They want a house that will satisfy an emotional need.  It may also be a financial calamity.  Regardless of our income level we always want more.  We have to ask ourselves can we be truly happy living in a house we cannot afford?

Second:         Know how long you expect to live in the house.  If you are a young couple without children a two- bedroom condo may be perfect for your needs.  If you already have a family and are thinking of a large family do not think about a two-bedroom condo. As your family grows, you will have limited opportunity to save for a larger home.  It may make more sense to buy a larger house now and live in it for a long time.

Third:         Know your limits.  If you are not handy do not even think about buying a fixer upper.  If you are handy and already working 40-55 hours a week do not buy a fixer upper.

Having a small herb garden is not the same as taking care of an acre of grass.  An herb garden is not the same as growing your own food.  Painting your two story house at age thirty is very different than painting it when you are 60!  Hiring people to take care of your house may be a very acceptable solution during your income producing years.  Hiring workers in your retirement years may create impossible choices between health care and home maintenance.

Fourth:         Plan for problems.  Stuff happens!  Stuff always happens.  If you are prepared with a realistic plan you will prosper.  If you are not prepared the consequences may be terrible.

Fifth:         Choose to work with only the very best professionals.  Work with the best realtor in your area and price point.  There is a big difference in the skills necessary to help sell or buy an FHA foreclosure home to a first time buyer than to sell or buy a multimillion- dollar property.  Each requires unique and different skill sets.  Work with the best lender, inspector, designer, or landscaper.  Investing in the best people is a good investment.  It may cost a little more in the beginning but it will save much more in the end.

Sixth:         Ask questions.  If you do not know, ask.  The only bad question is the one you do not ask.  Guessing and assuming are not viable alternatives.  Buying and selling your home is about protecting your family.  Pride should not go before your family.

Seventh:         Study, research, explore and learn.  In a few hours on the Internet you can often learn more than people working in an industry have learned in years.  The Internet has old and new information.  Most people are not life long learners.  Often their “current” knowledge is many years old.

Eight:         Do not fear being wrong!  Years ago a client brought me his home plans and his concern that the plans were not being followed.  He was embarrassed to talk with his architect or contractor. After reviewing the plans and walking the site and it was clear the client was right.  A major mistake had been made.  Fortunately, the client spoke up, albeit indirectly, and the error was corrected.  By speaking up the client saved thousands of dollars!

Nine:         Remember the “F” word!  Be flexible!  Do not even try to bend the world to your will.  It is much wiser to be flexible and adjust your plans to the realities of life.

Ten:                  Celebrate your successes.  My dad always said, “If success was easy everyone would be successful”.  Being successful is an accomplishment enjoy it!

Building: Ten Points to Consider

I am frequently asked, “Should I build”?  My response always is there are two ways to build.

The first way is to quit your job and go to the jobsite everyday and take lots and lots of tranquilizers.  The second way is to quit your job and travel for two years until the house is finished.  You will have a great time, you will see the world and you will never need tranquilizers.

There is no easy way to build a house.  There is no easy way to even have a house built for you.  Building a house is hard work. It requires special skills and expertise.  Knowing what you like or want does not make it happen.  Making something happen can be expensive beyond belief.

A client once changed her mind about the size of the living room windows.  The change was made after the windows were in, the sheet rock up and the walls painted!  The cost of materials and labor to get six more square feet of windows was $53,000.00!

Having built two homes of my own and as consultant to about a dozen builders and dozens of clients I assure you that when done right building your own home is a fantastic experience.  It may be very rewarding financially and emotionally.  The key is in doing it right.

Point One:                  What is the condition of your market?  I have built it hot and super hot markets and it is hard work.  Every time you go to the store the cost of material goes up.  Every time you call the tradesman the cost of labor goes up.  Material does not arrive on schedule and labor does not arrive at all.

When the market is slow the situation reverses itself.  You pinch yourself because the prices are stable, material is always available and the crews show up and work all day and even on Saturday!  You can even stay on budget!

Point Two:         You must have a budget covering every item right down to the cabinet knobs and toilet paper holders.  I learned this lesson from a mentor who built more than 20,000 houses, condos and apartments all over America.  He told me once he budgeted for every cost he began to make “real money”.

Point Three:         Have a team of experts.  Do not start unless your team includes people you trust who understand architecture, engineering, design, construction, and every component of building.  I always want my experts to have dirty hands.  I want my architect to have real world experience building.  I have looked at hundreds of “pretty” plans that cannot be built.  My engineer has to have experience in the trenches not just in supervision.

Point Four:         Your experts need to be practical.  The best plans will be changed in the field.  Change can be very expensive and if done by people with practical experience it can also save you money.

Point Five:         Budget 10% extra for the unexpected.  If it is a big house, you should budget 20% for the unexpected.  If you or your spouse is going to change the plans budget 40% for the changes.

Point Six:                  If you are not knowledgeable about construction hire someone who is.  Your architect will watch the overall design and some key construction points.  Your architect will not be on site 8 hours a day.  Many deviations in construction will be covered up long before the architect makes a weekly inspection.

Point Seven:         Hire a general contractor who is the best in the business for your type of construction.  Your home is not a place to cut corners, or a practice time for the inexperienced.  Building small homes is not like building big homes.  Doing quality construction is different from slap dash construction.

Point Eight:         Hire a very knowledgeable overseer who must be on site 4 hours a day and on call all day.  This is a great investment.  A great overseer will save you much more than his or her salary.

Point Nine:         Go to the site everyday preferable 30 minutes in the morning and 30 in the evening.  Insist that your supervisor and general contractor call you everyday with a 5- minute update.  This is mandatory.

Point Ten:                  Be prepared for the unexpected and celebrate your successes.

Why Are Some Houses Selling and Other Not Selling?

Did you know there is a direct connection between you, Steve jobs and selling your house?  I have been a fan of the late Steve Jobs for 30 years.  My admiration for Steve began when I heard him tell the story of his father and the fence in their backyard.

When Steve was a young kid and still had to listen to his parents his dad told him to fix and paint the backyard fence.  Like most kids his age Steve began looking at how to do less work.

His dad anticipating the situation sat him down and explained that both sides of the fence had to be perfect.  He explained there are two ways to do things the right way and the convenient way.  He explained that there really are no short cuts in life.  If you are going to do something do it the right way even if no one will ever know it except you.  When I was ten or so my father told me to paint the fence and taught me the same life lesson.

Obviously this was a lesson Steve took to heart.  The stories are legion about his insistence on perfection.  Steve Jobs always made sure his customers got great value, the very highest value possible.  Steve Jobs was always successful whether at Apple, Next or Pixar.  He was successful because he always gave more value than his competition.

By giving the greatest value possible Steve Jobs took Apple from near bankruptcy to the world’s largest company in 10 years!  He built better and better “mouse traps” and the world beat a path to his door.

Did you know there is a direct important connection between Steve Jobs and selling your home?

Everyone focuses on the millions of homes that are not selling worldwide.  Everyone is focused on the downticks in home prices.  Everyone is focused on the low mortgage rates and the high lending standards of the lenders.  Everyone is focused on rising inventory and foreclosures and time on market.  Everyone is filled with and focused on the gloom and doom.

We all know that houses are still selling.  The deals may be hard and take a long time but the houses are selling.  The question is why are some houses selling and so many not selling?

The answer is in Steve Jobs’ fence story.  As a seller you will sell your house the instant you give more value than your asking price.  Your house has to be perfect in terms of value.  It does not have to be perfect in terms of condition, though the more perfect the condition the more value given and the higher price you can demand.

House sit unsold for one simple reason, the seller refuses to give value in excess of the quality of he house.  So long as a seller refuses to believe the market the house will not sell.

Holding on to the house and waiting for the market to turn even waiting two or three years does not guarantee a sale.  In fact without improving the value it does guarantee a lower sale price if a sale does occur.  The scientific studies on that point are clear.  Stale properties sell for a lot less than the original asking price and take a lot longer to sell.

Just today I received a call from a seller.  His house was appraised in 2006 for $4,500,000.00.  It has been on the market at that price since 2007.  The pictures he emailed were of a truly magnificent house.  The market has changed.

A few months ago he ordered a new appraisal from the original appraiser.  Now the house appraised at $3,000,000 a loss of $1,500,000.  The worst news was that there had not been a single showing since the price had been lowered.

I asked him to email the appraisal and if I could talk with the appraiser.  After reviewing the appraisal it was clear comparable sales had not been reviewed by the appraiser and two of the comparables were not even in the same community!

I called the appraiser and asked what was going on.  His explanation was the seller in 2006 now wanted the highest appraisal possible as he was going to ask for a mortgage.

I asked the appraiser what value would he place on the property if the lender hired him rather than the borrower.  “If the lender was my client I would feel very uncomfortable above $2.500,000.00.  I think $2,250,000 is o.k.”

I told the seller almost any buyer would be getting a mortgage and therefore the very high end of the market and any appraisal was $2,500,000.  The seller had to consider a lot of great homes were priced at the high end of the market and they were not selling.

Considering all aspects of the market a 60- day sale price would be in the $2,200,000.00 range.  I would start there and after 30 days without a contract would lower the price another $200,000.00.  The seller was upset very upset that his $4,500,000.00 home was being “given away”.

I said you cannot argue with the markets.  The home was probably worth $4,000,000.00 in 2006.  That was in the past.  In 2006 he could have sold for that or close to it.  He chose to not give full value to the buyer.  He did not want to paint both sides of his fence.  As a result he did not sell.  He has chased the market down and down.  He had an unpleasant choice, sell now or chase the market lower.

The moment he gave great value exceeding the asking price he would get offers.  It may not be fun.  It may not be fair.  It certainly was painful though less painful than if he continued not to sell and the market continued to fall.

In life and selling a house we always have to give great value.  We must always paint the fence on both sides even if we are the only ones who know it is painted on both sides.