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.

.

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.

What Are You Doing?

Me:                  Good morning Reality Real Estate.

Caller:         This is your lucky day I want you to sell my fantastic home.

Me:         That is wonderful.  We love to sell homes.

Seller:         It will be a snap.  I expect it to sell this week.

Me:         It sounds as if you are very motivated.  I think it would be helpful if we spent time working together, setting your goals and developing a plan to achieve your goals.

Seller:         That is not necessary.  My house is perfect.  It is exactly as I bought it.  I have never done anything to make it worse.

Me:         Well that is great.  When did you buy it?

Seller:         Eighteen years ago.

Me:         What improvements and changes have you made in those eighteen years.

Seller:         I told you it is exactly as it was the day I bought it.

Me:         Are you saying you have done nothing to improve it, put in modern fixtures, colors, appliances, replace worn items etc.

Seller:         I told you it is perfect.  It was perfect then and it is perfect now.

Me:         But the world has changed a lot in the last 18 years.

Seller:         A house is a house. It gives you shelter, keeps you warm in winter and cool in summer. A place to watch TV or play in the yard, have a washer and dryer. Eighteen years old or 18 months old a house is a house.

Me:         A lot of things have changed in 18 years including houses and everything in a house and how we use houses.  As times change people change and people always want to have the latest and greatest.

Seller:         And I give it to them.

Me:         Listen Reality Real Estate is all about selling your home for you.  That is what we do.  In order to do that it is important to give people what they want in the way they want it.

Seller:         Exactly.  My house has a roof, a yard, kitchen 3 bedrooms and 2 baths, a basement and a one- car garage.

Me:         That is the point.  Today people want a full bath for each bedroom.  One- car garages are ok if you are in city center but not if you are in suburbia.  Four bedrooms or three bedrooms and an office are on everyone’s shopping list.

Seller:         Oh.

Me:         Eighteen years ago I had one of the first cell phones.  It came in an old army ammunition box, weighed about 15 pounds, had a range of about 3 miles, you had to shout to be heard and a 5 minute call would drop two or three times.  If I offered that eighteen-year-old cell hone for sale would you be interested in buying it?

Seller:         Of course not.

Me:         But it is a cell phone and still works.

Seller:         Stop being silly.  I have the new Apple 4s.  Why would I want your old phone?

Me:         Listen I will make you a special offer you cannot refuse.  I will give you a 5% discount from my original price that was only $1,100.

Seller:         Have you lost your marbles?  It does not sound like there is any reality at Reality Real Estate.

Me:         Help me out please.  How is my cell phone deal any different from your home?

Seller:         Look my Apple 4s is small, fast, does not drop calls, is 4G, has siri and answers my questions; it has front and rear facing cameras.  The cameras have better resolution than all but the most very expensive cameras and better resolution than any camera more than 4 years old.  I can go on forever about why my new phone is better.  Also it costs 1/3 of your cell phones cost and that is for the upgraded model.

Me:         Well what about your house and a new or newer house.  Does your house have granite, a bath for every bedroom, an office, wired for our electronic age, radiant heat in the floors?  Is it energy efficient? At age eighteen it probably needs a new hot water heater, furnace and roof.  The dishwasher and washer dryer are also probably failing.  Do you still believe your perfect home is still a perfect home and is equal to or better than a new or almost new home? Do you still believe it is more desirable than new or almost new home?  Do you still believe a buyer will pay the same for your old home as for a new home?

Seller:         You have opened my eyes.  I love my home so much.  For eighteen years I have looked at it through my eyes and never through the eyes of current buyers.

Me:         Owning a home is like being in love with your wife of many years.  As your love grows you see a beautiful soul and not the wrinkles, grey hair, age spots etc.  You realize that love is much more than beauty.  Your home is the same way.

Seller:         You really are realists at Reality Real Estate.  You have opened my eyes.  Can you come over tonight at 6 and we can set our goals and make our plans.  I am more excited than ever to be working with Reality Real Estate.

What Do You Think?

A month ago I went way out on a limb expressing the thought that real estate perhaps, maybe, possibly had turned the corner.  That blog was written weeks before Oct. 31and published just after the European bailout plan passed and the world’s stock markets enjoyed their best week in many years.

Now the question is what’s next?  I do not have a crystal ball.  Having been right a month ago is not a predictor of being right again.  Two months ago there were two 800- pound gorillas in the room, the European debt crisis and the Congressional Super Committee work.

Europe is “solved” for the moment.  Personally, I would be amazed if the crisis is over in Europe.  The issues facing Europe have not been solved they have been put off.  The can has been kicked down the road.  If you study the situations in Greece and Italy, their structural problems have been discussed for a generation and no action has been taken.  Why should anyone believe the appropriate, painful and difficult actions would be taken now?

Ireland has gone down this path before.  Ireland did what it had to do and it appears to be working.  It will probably work again.  Spain is not Ireland yet it is not Greece or Italy either.  I do expect Spain to eventually resolve its economy.

I believe the current European solution is a short- term win.  If Italy and Greece respond fully it will be a huge win.  If Italy and Greece do not respond the European leaders have bought time to permit their orderly transition from the Euro.  This too will be a win for the financial markets.  All financial market wins are real estate wins!

The super committee’s work reminds me of Winston Churchill’s 1939 radio speech “…a riddle wrapped in a mystery inside an enigma”.  Nobody believed a Congressional Committee, especially this one, could work for 2 months without a major “leak”.  Their silence helped to stabilize financial and real estate markets by ending the daily emotional roller coaster of deficit debt and taxation fears.

If the Committee maintains the mandated schedule it must give its report to the independent budget office by mid November and issue its report on November 23.  If the Committee plays politics nothing will be agreed upon, the financial markets will go into a tailspin the economy will stall and fall and the current real estate market will look great compared to a year from now.  Failure is a real possibility.  Failure will be a real estate disaster.

If the Committee does not take positive action real estate will be hit extremely hard.  The financial community wants a solid plan for short- term investment in America with long range sharply reduced spending.

If the Committee only achieves its mandate of $1.2 trillion there will be a small sigh of relief.  Most analysts will have a small smile with a $2 trillion package.  Real Estate and financial markets will have a party at the $3 trillion level.  If by some miracle the Committee achieves and Congress accepts a $4 trillion package fireworks will go up worldwide.

Any significant deviation from $3 dollars in spending cuts for each $1 dollar of tax increase will be interpreted as unacceptable by one side or the other.  Failure is a distinct possibility and it should not be an option!

America is at a crucial turning point.  It is time for the committee members to be Americans and only Americans.  Party and politics have no place in this process.

I believe these men and women are good people.  They believe their ideas are the best ideas for solving our problems. At the same time all of them must be willing to compromise and reach across the aisle to find a real solution.  Polls show that 72% of Americans want a grand solution.  Can 72% of Americans be wrong?  I do not think so.

Failure to make your voice heard has consequences.  Silence is not golden in a crisis.  The super committee’s decisions will influence real estate for many years.  Tell them what you think!

Movie Mogul Real Estate Maven

Was Samuel Goldwyn a movie – maker and a real estate maven?  You be the judge.  For those under 40 Samuel Goldwyn was the “G” in MGM studios.  He is also famous for saying “An oral contract isn’t worth the paper it is written on”.

As the real estate markets continue to decline or muddle along, we have witnessed an explosion in “oral offers” and requests for “oral contracts”.  These requests are not limited to less expensive properties, foreclosures, or bank owned properties. We recently received an oral offer for $1,000,000 on a $2,000,000 property.

It is in everyone’s best interest to have a written signed contract.  No one should ever risk the time, money and effort of buying and selling real estate to let the outcome be determine by a court over a “he said she said” oral conversation.

The problems and issues of oral contract enforcement are not limited to real estate agreements.  Many people are surprised to learn that courts throughout the world routinely enforce oral contracts for goods and services.

In 1985 Gordon Getty, heir of J.P. Getty, and owner of Getty Oil orally agreed to sell the company to Pennzoil.  Before the agreement was reduced to writing, Texaco made an offer that Getty also accepted.  Pennzoil sued Texaco for interfering with its oral contract.  Texaco defended in essence by adopting Sam Goldwyn’s “oral contracts are not worth the paper they are written on” defense.  The court awarded Pennzoil 11.3 billion dollars!

We decided to conduct a research poll.  We contacted 300 outstanding realtors throughout the world.  Their input and observations are very interesting and a message to all buyers and sellers.

• The overwhelming majority of countries and states absolutely prohibit oral contracts for real estate.
• The overwhelming majority of jurisdictions require all negotiations to be in writing.
• A handful of jurisdictions permit oral contracts for real estate but they are not enforceable in court.  In essence if the parties orally agree to a transaction and complete the transaction it is binding.  If it is not completed neither side can even ask the courts for assistance.
• A few jurisdictions permit the offer and negotiations to be conducted orally but the final agreement must be in writing and signed by the parties.
• In a few of the jurisdictions that permit some oral negotiations the local association of realtors requires all negotiations and the contract to be in writing.

The research is clear, most governments mandate all real estate contracts must be in writing.  Most require all negotiations to be in writing.

We also researched current trends and attitudes toward oral negotiations and offers and the results are important.

• Every realtor reported a sharp increase in oral offers.
• Every realtor reported that the oral offers were “lowball”.
• Several realtors reported the offers were “lower than lowball”.
• Every realtor reported the initial call began, “my client is busy and does not want to waste your time so here is the offer and the seller has 12 hours to accept”.
• Only three realtors reported the oral offers ever resulted in a signed agreement of purchase!
• Over 93% of the realtors reported that when the seller insisted on receiving a written signed offer the “buyer” disappeared.
• The realtors reported that new or inexperienced realtors almost always presented the oral offers.

We asked why the insistence on written negotiations and contracts.  There was a unanimous response “To protect the interests of the client”!

The research speaks clearly and loudly.  Do not make an oral offer if you are a buyer.  Do not accept an oral offer if you are a seller.  If your agent wants to conduct oral negotiations you should remember the research.  Never agree to an oral contract unless you like paying lawyers, going to court and having stress and strain in your life.

White Magic Black Magic No Magic
I know there are many people who believe in magic numbers such as 666 or 777.  I know there are many people who have personal magic numbers.  Years ago a co- worker had a magic number.  I could never figure him or his number out.  His number was 8 and whenever he had a few dollars he would bet horse 8 in the 8th at the local race- track.  His magic number must have been black magic because he lost far more than he made.  I do not think his lottery “8” system ever won.In real estate the new magic number appears to be two.  Several times in the past month two has appeared as a magic number.Me: I am glad you are reviewing the current comparables and the overall market condition.Seller: Yes I realize I have to consider doing something.Me: If you are still committed to selling and taking that new job offer out of state you must offer your home at the market value.Seller: Of course.  I know that.  I do have alternatives how ever.Me: Please elaborate for me.  Do you have a viable plan for selling above the market?  If you do I think we should patent it and we can make a fortune.Seller: I wish.  No we can wait 2 years and then I can get my price.Me: Wait two years for what?Seller: For me to get my price.  I know that if I wait for two years I will get my price.Me: How do you know that?  Prices have been falling since 2006.  In some parts of the world they are stabilizing, some prices are slightly up most are still falling.  How do you know that in two years your values will go up 10%?Seller: I have talked to many other sellers and we all feel that in two years values will be up 10-15%.Me: What do you and your other sellers know that the wisest economists and most successful investors and business people do not know?Seller: We know what we know.  It is a feeling that is so strong that it must be true.  If you believe it you will see it is our belief.Me: I read Wayne Dyer’s book by that name and I agree with what he wrote.  He was writing about something very different than you and your friends are thinking.Seller: Our thoughts control the world!Me: Our thoughts control OUR world not THE world.  Seller: You have it wrong.Me: Do I?  I am 5’10” and I am shrinking a little each year.  I always wanted to be 6 feet.  No matter how hard I think 6 feet I am 5”10 and shrinking.  My friends are always thinking diet rather than dieting.  They are gaining not losing weight.  You can think the market will go up 10-15% in two years but thinking will not make it happen.Seller: What will happen?Me: There is no magic in a number or in the market.  You can only deal with today and make some reasonable short turn projections.  In 2006 people who believed in 2- year magic lost 10-15% of the value of their property.  If they did not sell then and continued to believe in the magic of two years they have now lost 30-40% of value.  If their property is in a very hard hit area they have lost 50-60%!Seller: Maybe the magic number should be 3 or 4?Me: There is no magic number.  There is only today.  You have to make the best decision for today and not believe in some fanciful magic of tomorrow.  Since 2006 your property has lost 30-35%.  Your magic number system has cost you $175,000.  Everyday you fool yourself with your magic number system costs you cold hard dollars.  Your white magic if anything is black magic.  There is no magic.  Make the best decision you can for today based on cold hard facts.

Financial Advisor Friend or Foe?

Yes!  A great financial advisor is a great friend.  A bad or even average financial advisor can be a foe to your financial success.  Before I am inundated with emails from financial advisors let me be clear I love people who work with great advisors.

My definition of a great financial advisor is one who is dedicated to increasing and preserving client wealth.

Financial advisors come in all sizes and shapes.  Some people use their CPA or chartered accountant as their advisor, other use licensed financial advisors.  Some people use their banker, stock- broker or investment broker as a financial advisor.  Your advisor’s title is not important.  What is important is does your advisor protect and increase your wealth.

My father told me this story.  A farmer had a roadside stand next to his field.  He always asked a fair price and usually threw in some extra berries or fruit with each sale.  The farmer worked hard and was able to send his son to a great university.  The son studied finance and economics.

The son graduated and the Great Depression arrived simultaneously.  The farmer continued to offer a fair price and continued to offer a free extra.  His business continued to prosper.

So:                  Dad, haven’t you heard there is a depression?  You need to cut back.  Preserve your wealth.

Farmer:         But I continue to make money.  I do not want the food to rot in the field.  Rotten food is an expense not a profit.

Dad:                  I went to the university.  I know about these things.  You must conserve your money.  Cut back on spending.  Reduce your labor costs and overhead.

Farmer:         But I am busy and making money and need more help to grow the business.  But you are right you have an education and are a financial advisor and I am a farmer with a roadside stand.

So the farmer fired some people.  He also had to reduce the hours of operation because he could not work 100 hours a week to keep the stand open.  He also stopped giving away “extras” because his son told him to save.

Farmer:         Son you were so right.  My business has really fallen off.  People say they cannot afford the time and gas to drive out and find the stand is closed.  They do not like the lack of free extras or the higher prices I am charging.  Business is way down and you were right.

Son:                  Dad you must preserve what you have.  You must cut more and raise your prices even higher.  This is the wrong time to be investing.  This is the Great Depression.

The father listened to his financial advisor son.  Business got worse and worse as prices went up, hours of operation went down and profits disappeared.  Food rotted in the field.

Farmer:         Son we have to talk.  I am an uneducated farmer with my hands in the dirt.  You are a brilliant university educated financial advisor.  You have been right every step of the way and now I am facing bankruptcy.

Son:                  You can hide your assets, use bankruptcy to wipeout your creditors and start all over again.

Farmer:          No.  I am going to call up my old employees and ask them to come back.  I am going to call my old clients and tell them we are cutting our prices, extending our hours and giving away an extra with every purchase.

Son:                  But dad, I preserved your money.

Farmer:         You preserved it to the point of bankruptcy.  I am going to grow my wealth not lose it.  I love you but I do wish you remembered a financial advisor has to preserve and grow client wealth.

In most of the world real estate prices are at 10-15 year lows.  I am a very cautious investor.  I believe in buying low and selling high.  I do not see the wisdom in buying high in the hope of selling even higher.  I like profits not loses.   I love to make profits for my clients.

I encourage my clients to get input from all their financial advisors. Are you the farmer or the son in my story?  If your advisor always says no to your plans are you getting the best advice?

What is a Serious Offer?

Every week I get  calls from agents saying he or she has a buyer who wishes to make a serious offer to buy.  Most of the calls are straight- forward and follow the normal processes of negotiation and contract.  This one was extreme to say the list.

Buyer agent:         Hi, I have a very serious substantial buyer who wants to make a serious offer on one of your listings.

Me:         Great thank you for the offer.  When can I expect it?

BA (buyer’s agent):         Now.

Me:         Ok I have my computer on so send me the contract and electronic signature by email.

BA:         My client is very serious.  He does not want to waste your time or his time with paperwork going back and forth.

Me:         That is nice and thoughtful.  Experience has taught me that truly serious buyers want their offer to be in writing and the seller’s counter offer to be in writing.

BA:         I told my client that you would say that.  All the older experienced realtors say that.  It is just old-fashioned thinking.  Today everything is fast.  This is the age of technology and high- speed communication.

Me:         Say what you want I would be doing my client a great disservice if we were to just exchange emails rather than offers and counter offers.  There is a reason oral contracts are not worth the paper they are written on.  Besides in our state contracts for real estate must be in writing.

BA:         No problem once we have agreement we will write it up.

Me:         We will never get to agreement unless it is written up each step of the way.  Having a written record of each position every step of the way will be a help to all.

BA:         Look we are not going to do that.  Here is the offer.

Me:         Over the phone not even in email?

BA:         Of course that way my client has complete ability to walk away if there are any issues.

Me:         I thought you said this was a serious buyer.

BA:         He is serious.  He is a very successful businessman.

Me:         Who is your buyer?  It is my practice to Google all prospective buyers.  You would be amazed how many times it has benefited my client.

BA:         Oh, I cannot reveal the buyer’s name.  He is so important he does not like people to know whom they are dealing with.

Me:         So who is signing the contract if the buyer is not going to reveal his identity?

BA:         I am.

Me:         You!  So if some how I can work my way through this serious oral unsigned offer and there is a contract you are going to sign as agent for an unknown buyer.

BA:         Yes.

Me:         And if the buyer breaches the contract who is the seller going to sue, you?

BA:         Oh no.  I am only the agent but I cannot reveal the buyer’s name.  Besides I certainly do not have $895,000.  I don’t even own my condo.

Me:         Well there is a technique I have used to solve the confidentiality issue.  The sellers will agree to a confidentiality agreement once we receive your significant serious written offer.

BA:         Oh, once again you are ignoring the buyer’s wishes.

Me:         No I am trying to make this “serious offer” turn into a contract.

BA:         Look you are making it hard for me.  I promised my client that I could pull off this deal for him on his terms.  If you don’t let me do this I am going to lose him as a client and I cannot afford that.

Me:         Please do not blame me or the seller for your actions.

BA:         Help me please.

Me:         Here is what we can do.  Tell your client he can buy this property by making a truly serious offer in writing.  The seller will keep the buyer’s name confidential.  I agree not to reveal your name so as not to embarrass you.

Three weeks later the agent called and told me he had not heard from his serious buyer since asking him to put his offer in writing.  He had heard that the serious buyer was working with another agent in the same office and had made several serious oral offers.  None of the oral offers had been considered.

I was sorry for the buyer agents and I was proud of all the seller agents who acted in the best interests of their clients.

Have We Turned the Corner?

I do not know.  Anyone who says they do know really doesn’t or is a politician.  Being a politician today is proof positive that they really do not know anything.

There has been a lot of good news and less bad news in the past few weeks.  It is not at all clear if this pattern will continue.

Here is a list of some of the good and less than good things.  It is subject to immediate change.

• The most dramatic change is that there may be some adults in the room.  Looking at the headlines and the pronouncements of “leaders” world wide there is a real shift in tone.  Much of the bombast and rhetoric has been replaced by an admission that action must be taken.
• The “my way or the highway approach” we heard worldwide from last December to mid September has softened in tone.  There is a recognition that everyone must work together if the world is to avoid a major recession -depression.
• There is recognition that compromise may be good rather than evil.  There certainly is recognition that inaction will not produce solutions.
• There is recognition that it is safer to take many small safer actions that to bet the ranch on a large single action with a higher risk of failure.
• There is recognition that a chart measuring rhetoric volume versus economic realities would be revealing and disturbing. Last December the condemnation and rejection of the Simpson- Bowles report slowed, stopped and finally reversed the unquestioned recovery of the world’s economy.  The American debate over the debt ceiling destroyed 6 trillion dollars in the world economy just in July!
• The 18- month Euro and sovereign debt crisis beginning with Greece and spreading to Portugal, Ireland, Italy, and Spain took many trillions out of the world economy.
• It still is problematic that France and Germany will be able to find and put in place a real solution to this complex situation.
• It still is problematic that the American Congressional super committee will rise above politics and electioneering and present a workable solution to America’s debt issues.
• It is still problematic that the Congress and the President will come together to adopt the super committee plan.
• The Arab Spring simultaneously casts sunshine and shadows across the world.  Nobody has a crystal ball that will tell us the ultimate outcome of the Arab Spring.  It is possible that Democracy and Capitalism will not replace dictatorships. It is possible the price of oil will become more volatile not more stable.
• Financial markets are up and seem to have found a bottom.
• Inflation is down especially critical food and energy inflation.
• World energy resources are increasing rapidly.
• Military tensions are still very high and it is clear America is essentially if not completely leaving Iraq and Afghanistan.
• The American banking crisis is improving by very small amounts but it is going in the right direction.
• American corporate profits continue to exceed expectations.
• American job creation is an abysmal failure and there still is no clear plan to improve the situation.  This is the single largest drag on the American economy.  Creating jobs is the fastest way to American economic recovery.  Jobs are the missing link in the recovery process.

It is not clear that the world economy is on a clear wide path to improvement.  There are many dark clouds on the horizon.  At the same time there is some blue sky and sunshine.

The economic weather changes daily.  We seem to have entered a new sunnier season.  Everyday the economic sun shines is a day that the real estate world gets brighter and brighter.

Are You Buying/Selling The House or the Wallpaper?

I love to take busman holidays.  Whenever I am speaking in a new city I make it a point to team up with an agent and go on a listing appointment or with some buyers.  People constantly amaze me.

When the agent does not adequately counsel and advise the seller or buyer the sale is often lost before the process even begins.  Left to their own resources and experiences buyers and sellers are without direction because they do not understand the process or have a plan.

The sellers and buyers are not stupid they just lack experience and therefore knowledge and skill.  Sellers and buyers believe that buying or selling a home is like buying or selling a hammer or lipstick.  Buying or selling real estate is a complex financial transaction touches on our most important values of family security ego peace of mind and personal satisfaction.

My experience is that the old rule of keeping the seller and buyer apart until the closing is the best rule.  The trend is clearly otherwise.  Keeping them separated reduces the risk of spoiling the soup with too many chefs.

The Internet makes direct communication easy and it often kills sales.  Our culture also has changed and people feel they are as smart as the smartest most skilled realtor.  They may be very smart but that does not make them a great realtor.

Buying or selling a home is definitely not like buying or selling a hammer or lipstick.

Today there are no skills involved in selling or buying a hammer.  You go to your local building warehouse wander around looking for hammers and wander around looking for help.  When you find the hammers you wonder why there are so many different styles and looks.  Most of the time you buy on looks and price hoping you made a good decision.

If you buy lipstick you will be offered help and often the sales person is knowledgeable.  If you are buying your lipstick in the supermarket you are just like the person looking for a hammer.

Think of all the times you wanted and sought help from a salesperson and the results were less than you desired.   The salesperson was often as not focused on their opinions rather than learning your wants and needs.

Buyers, sellers and yes, all to often realtors, are busy talking rather than listening.  They push their agenda.  They talk about what they like or they think you might like rather than listening.  There is no plan.

As a result the information exchange is usually very superficial and meaningless.  The buyer makes a positive comment and the seller and the agent are ready to write up a full price offer.  The buyer makes a negative comment and the seller puts on a full court press to change the buyer’s mind.  At the same time the agent is ready to move on to the next property.  These behaviors do not help anybody buy or sell a house.

One of the hallmarks of a truly great realtor is he or she will sit down with the client and help them focus on what is truly important to them.   If having a chair rail in the dinning room the agent can help the buyer focus on that need.  The agent will also develop hard cost estimates to make a chair rail or change a chair rail!

The seller may love their country kitchen cabinets.  A good agent will explain that buyers will consider all the features of a home.  If the buyer focuses on the cabinets acknowledge their interest and do not try to “sell” to that interest.

Buyers are motivated by many factors.  If they focus on the most important ones they will by a great home.  If they get lost over the chair rail or wallpaper they will have a bad experience.

The sellers are the same way.  Their goal should be to sell the house not to hold on to great Aunt Tillie’s bookcase.  The bookcase may have many memories for you but are they equal to the price being offered by the buyer?  Do you really want to repurchase your home by losing this sale?  Are you really ready to put your life on hold till another buyer comes along?  What will you do if the next buyer also wants the bookcase?

Everyone must stay focused.  The seller is usually focused on the sales price and the time until closing.  The buyer is focused on neighborhood, the “bones” of the house, schools, commuting times, and improvements that will or will not have to be made.

One of my most successful negotiating techniques is to ask each party what are the three most important goals they have.  Most of the time their goals are not in conflict and it is very easy to bring the parties together.  Even if there is conflict it is usually over one point not all three.  When you start out agreeing on two out of three points it is much easier to resolve the only point of conflict.

If you remember you are not a skilled negotiator or salesperson and leave the heavy work to your realtor your life will be happier and your transaction easier.  You are not buying or selling a hammer.  You are buying and selling dreams.  A great realtor is great because he or she has become skilled at dream transactions.