LA real estate

No Love for Brokers

I had an opportunity to read a Future of Real Estate Marketing blog post from 2006 today.  The post was titled, Brokerate broken? and it talked about the fact that Brokerate.com, an online feedback system for real estate brokers in New York, had to disable the Comments feature on their site because of the amount of negative feedback being written about brokers.  Since that time, the web site has ceased to exist.  Unfortunately, the animosity aimed at real estate brokers by the general public has only grown stronger.

Think of how much has changed in the real estate market since 2006.  Yet the almost singular constant is that the public held real estate brokers in contempt (or worse) then...and they hold us in contempt (or wore) now.  Just a quick overview of comments posted to most any real estate blog indicates that this is the case.  And that's in spite of those spiffy NAR TV spots.

So what is a real estate broker to do?  It's a question I ask a lot lately, as I am about to join those ranks.  I've answered the question this way:

• Accept that parts of our industry are broken and in need of replacement. 
• Be willing to see things from our customers' point of view...and give them credit for somehow arriving at their conclusions in an appropriate manner (in other words, they aren't all on drugs!)
• Make change your friend.
• It's okay not to have all of the answers if you're at least asking the right questions.
• Recognize that today's market gives you the perfect opportunity to try almost anything to effect a new customer experience.
• Make technology important as an enabling agent and not as a solution.
• Get comfortable with transparency.
• Don't be afraid to fail, re-tool and try again.
• Learn to communicate clearly.
• Tell the truth.  No matter what.

I don't perceive a single complex concept here.  Hardly an original thought.  But something is standing in the way of so many brokers who aren't considering some of these ideas.  It can't be the safety of the status quo.  There is none.  In fact, the status quo is almost guaranteed to put you out of business.  So what is it?  I don't have the answer to that question...but I'd be lying if I said I wasn't grateful for it.  It's setting the stage for me and countless others to step up and get our own at-bat.

Numbers Don't Lie. But Some People Do.

L.A. Times blog LA Land carries a post about think-tank Center for Economic and Policy Reserach projecting the nationwide loss of $6 trillion in home equity, equating to a loss of $85,000 in wealth per homeowner over the coming year.

Getting past the sticker-shock of the amount of money we're talking about here, this projection, based upon the numbers released in yesterday's Case-Shiller home price index, strikes me as particularly ironic in light of the NAR's current TV spot.  You know the one, where the friendly announcer reminds us that home ownership still represents the biggest & bestest way to build wealth?

If you check the fine-print at the bottom of your TV screen the next time you catch the NAR spot, you will see that this sunny statement of pretty wonderful future events is based upon a survey conducted in 1995.  That's right.  As in 13 years ago. 

Almost every day, I come across a blog written by a well-meaning Realtor that reminds us how today's "market" is somehow the manifestation of our own mindset.  And those of us who are more cautious and less sure of its upside are just mucking things up for everyone else.  Well, here is where my frustration just runs a bit on the wild side.

On the one hand, we have the NAR speaking for our industry when it goes on television and quotes from a 13-year old survey as if things haven't changed since the days when that survey was relevant!  On the other hand, we have a Washington think-tank using statistical trends from (literally) yesterday.  And their conclusion is far different from the one being espoused by the NAR.

Now, this is the part of the post where I repeat what's becoming my constant plea.  At a time when the credibility of our industry is being called into question,  real estate professionals just have to respect themselves and their prospective clients enough to tell them the truth!  Even if it means said clients may wait a bit before jumping into the home-buying waters.  As an industry, we can gain so much in the long run by dealing honestly with the circumstances that create our market, rather than scurrying back to another decade to find facts that support our wishful thinking.   We can be better than this...and we must be better than this.  And if the leadership isn't going to come from the top, then it can come from how each of us chooses to deal with our clients.  Starting today.

And Now, Some Bad News from the Real Estate Sector

Sorry for that short-term disappearance...as I've hinted at before, I'm in the final hours of launching a new residential real estate brokerage in Los Angeles and the last mile to be plowed turns out to be toughest.  But you will be hearing quite a bit about our new business model when we finally get ourselves launched during the latter part of May.  The company is called homsho.  And that's today's hint.

On to more serious matters...Peter Viles at LA Land has posted a sobering report from investment bank Credit Suisse.  The report is titled Foreclosure trends: A sobering reality.  And they mean it.  Likening the foreclosure mess to a baseball game, the report indicates that, "We are at best in the third inning ... global real estate investors are in the early stages of meltdown."

The report goes on to project 5.3 million foreclosures on the horizon in the United States (to go along with the 1.2 foreclosures already on the books) with housing prices falling 10% this year and another 5% in 2009.  (And to reiterate, into this ongoing disaster I will be launching a new real estate company.  Needless to say, it's gonna be different!)

Of course, we can pile the coming Option ARM debacle onto the other known "situations" out there, and we have a real estate market that will have re-defined the term "disaster" when all is said and done.

And yet I consider myself an optimist.  I believe that out of chaos comes opportunity.  And we in the industry who survive this disaster of historic proportions will be faced with the opportunity of re-inventing a real estate marketplace that's, to quote the opening of the Six Million Dollar Man,"better...faster...stronger.  We have the technology..."  All we need is the business creativity, vision and passion to execute.  How many of you are ready?

What if the Bailout Lowered the Value of Your Home?

It seems as though once the Fed bailed out Bear Stearns, it became easy for our elected representatives on both sides of the aisle to say, "If the government bailed out Bear Stearns, how can we ignore all of those homeowners desperately hanging on...?"  And so, within a matter of days, a homeowner mortgage bailout went from being  hotly-debated to being acclaimed by all.

Since Congress is spending today considering the details of a bailout, I thought that we should take a closer look at just one of those details.  The plan being offered by Congressman Barney Frank, as well as a near-identical plan being backed by the White House, provides for $300 billion in home loan guarantees by the FHA for loans on homes purchased in 2006 and 2007 provided the monthly mortgage payment currently exceeds 40% of the homeowner's income (virtually every home on the Westside of Los Angeles purchased with a No Doc or Easy Doc loan). 

In order to qualify for the government guarantee, lenders would have to take large write-downs on these loans because the FHA is only guaranteeing up to 85% of the home's current appraised value and then charging the homeowner 90% of the value.  Here's an example:

New home buyer purchases a $400,000 home with a 100% mortgage in 2006.  The home has lost 10% of its value, so its current appraised value is $360,000.  The FHA guarantees the loan to the bank at 85% of its current value, or $306,000 and the current homeowners receive a new 30-year fixed loan for 90% of the home's current value, or $324,000.

Now, let's walk across the street.  To an identical home.  Same floor plan.  Same square footage.  Same lot size.  Same value.  The neighbors across the street?  The ones who are current with their mortgage payments and aren't considering moving or selling?  Their home now has an updated "comp" of $324,000.  Just like foreclosure sales become the new "comp" in a neighborhood, so will the estimated millions of these "bailut re-fi's".  Ouch.

Back to the Future?

Did someone in the real estate industry declare this past Saturday as "Throwback Saturday"?  That would at least explain a few things.  I started my Saturday morning by casually browsing through the L.A. Times real estate insert.  All 112 pages of it, 90% of the insert made up of agent-paid advertising.  Looking at page after page of the kind of ads that NAR statistics tell us haven't performed for years, you'd think it was 2004/2005 all over again and agents just had money to burn. 

And then I came across the 5 full pages congratulating Coldwell Banker's top producers, complete with a tiny mug shot of each agent.  I understand that agent recognition is an important part of agent retention, but I'm confident that if we devoted just a moment's thought to this, we could find a better way to recognize our successful agents without this type of accolade.  Didn't Coldwell Banker get the memo that when everyone claims to be "Top This or That" it all just loses its meaning?  And 5 full pages of Top Producers certainly proves that hypothesis.

Then I came to a full-page ad for Keller Williams Westside properties...and the folks at Keller Williams Westside felt compelled to feature their mission statement in their ad.  Here you go:

"To inspire individuals to lead and achieve world class results in business and life"

I'm guessing that the "individuals" referenced in their mission statement are their agents.  And, someone please remind me, they included this in their ad because why?  Are they so drunk on their own Kool-Aid that they think people outside of their company care about their mission statement?  And, by the way, if you're going to feature a mission statement in advertising to the public, wouldn't it be great if your customers were somehow included in it?

Directly after finishing the Times real estate insert, I went to check my email and saw that I had received my weekly REALTOR Magainze Online.  The featured article is entitled, "10 Giveaways Your Prospects Will Remember."  So for the majority of real estate agents in this country who have not closed a deal throughout 2007, and may not have closed one so far in 2008, the NAR wants you to know that giving away an emory board or perhaps a pie may turn your world around.

Are any of these things truly bad things?  I don't really think so.  What is bad is the wrong-minded timing and emphasis on these kinds of things.   I don't mean to sound like a broke record, but I don't understand how the smart folks at the NAR and the smart broker-owners throughout Los Angeles seem to think that the best way to work through today's real estate market is by total denial.  I don't understand how we can be in the midst of the most serious financial hiccup this country has faced in most people's lives -- a hiccup that is tied directly to real estate -- and the real estate industry still refuses to share in its burden.  Most of all, I don't understand how smart sales professionals, who know that the first step to a sale is creating rapport, seem to be doing everything possible to destroy both rapport and credibility with our customers.  Until that changes, most of us in the industry may actually deserve what we've been getting.

No Bail-Out For You!

It's been a tough week for homeowners looking to the Federal government for a bail-out of their out-of-reach mortgages or searching for good news anywhere on the housing front.  The week started with Hillary Clinton recommending a foreclosure freeze coupled with the creation of a  $30 billion bailout fund to be made available to cities so that they could purchase foreclosure properties and re-sell them.  Which is exactly the business that city government ought to be in.  Keep in mind we're talking about an entity that can't seem to get pot-holes filled in a timely manner.  Now you want them to start closing escrows?  Then, things got worse.

John McCain came out the very next day exclaiming "Some Americans bought homes they couldn't afford, betting that rising prices would make it easier to refinance later at more affordable rates. There are 80 million family homes in America and those homeowners are now facing the reality that the bubble has burst and prices go down as well as up."  And then the punchline..."I have always been committed to the principle that it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers."

Sen. McCain was followed just a day later by Treasury Secretary Paulson, who graced us with, "Housing prices need to fall further to permit shell-shocked housing markets to stabilize and policy-makers should not interfere with that process."

Punctuating the race between McCain and Paulson to be named Housing  Nazi, the California Association of Realtors reported that statewide, median sales prices fell by 26% from year-ago levels in February, with home prices dropping at a rate of nearly $3,000 a week.  To put it all in perspective, the California housing price meltdown is more than three times as severe as the national decline of 8.2% in median prices reported this week by the National Association of Realtors.

And how is your week going?

Prices still dropping...credit keeps crunching...must be time for a Fair!

The California Association of Realtors has teamed up with the L.A. Times to present the Southern California Home Buyer's Fair on April 12 - 13 at the L.A. Convention Center. 

This reminds me of an annual trip I used to make to Las Vegas to attend a now-defunct technology trade show called COMDEX.  True to my geek origins, I had attended COMDEX  for years.  Walking through the enormous trade show (it couldn't be contained within the mammoth Las Vegas Convention Center and required additional exhibitor space, using ballrooms and meeting rooms in virtually every major Las Vegas hotel), I could almost grasp my own professional agenda for the coming year.  Bill Gates once, literally, bumped into me -- and I felt like a million bucks.  And then the air started seeping out of the dot com bubble.  And then the bubble burst.  And right before it burst, I attended my last COMDEX trade show.

Walking down the shortened aisles of the greatly reduced exhibition space...taking in  the quiet desperation etched into the faces in the trade show booths...getting a real sense that life was not going to be the same after this...

I wonder how much of that feeling will be evident at the "Fair"?   The Exhibitor Hall looks to be chock full of real estate brokerages anxious to help.  The attendees?  I'm not quite sure what their disposition will be.  I may have to attend just to find out for myself.

There's quite an ongoing debate taking place in the real estate industry right now.  On one side, you have folks proclaiming that the real estate market is down dramatically, home loans are difficult even under very positive circumstances and the future is questionable at best.  On the other side of the aisle, you have folks proclaiming that this is mostly media-inspired hysteria, and if we all just suck it up and act as if things were going well, they will begin to go well.  It seems that this Home Buyers Fair represents an ideal battleground to test the latter theory.  I can't wait to see those smiling faces.

On the other hand, if they run out of Kool-Aid at the concession stands, it could be COMDEX all over again.

Have We Hit Bottom?

Good news today.  Existing home sales were up for the month of February, breaking a 6-month downward trend.  And the median price of a home took a record fall, dropping 8.2% compared to last year -- which is the largest drop in prices since the NAR began tracking such things in 1968.

Peter Viles, at L.A. Land wonders if this is the bottom of the national real estate market.  Whether it is or not, it's certainly good news for an industry that's starved for something positive to report.

Can I Hang the Plaque In My Cell?

This just in from REALTOR magazine:

A Las Vegas couple is accused of orchestrating more than 400 sham real estate deals and cashing in on millions of dollars through a mortgage fraud scheme that involved inflated house values and straw buyers.

Eve Mazzarella, ABR®, GRI, broker and owner of Distinctive Real Estate & Investments in Las Vegas, and her husband, Steven Grimm, were indicted last Wednesday and charged with bank fraud, money laundering, and aiding and abetting, according to the U.S. Attorney for the District of Nevada.

If convicted, they could face up to 30 years in prison and a $1 million fine on each of the six bank fraud charges. They could also face up to 10 years in prison and a $250,000 fine on the money laundering charge, according to the U.S. Attorney.

The couple operated numerous limited-liability companies and allegedly used them to engage in 432 straw buyer transactions and obtain control over about 227 properties at inflated values. The total purchase price of the properties was more than $100 million.

The couple defaulted on mortgage payments on many of the loans, which caused at least half of the properties to go into foreclosure, according to officials. The foreclosed properties have caused losses to the banks of more than $15 million.

Mazzarella was recognized last year as one of REALTOR® magazine’s “30 under 30,” a program that recognizes 30 rising young stars in the real estate industry.

In defense of the magazine, you never know that someone is a crook until they're caught.  But this is just one more brick that's being thrown at our industry.  And we have to be better than this.  We have to look at things more closely.  We have to accept less at face value.  And we have to acknowledge that, until there are real barriers to entry, anyone can become an award-winning, nationally-recognized Realtor -- even a big-time crook.

Avoiding the Meatball Sundae or Why Web 2.0 Could Be A Failure For Realtors

Seth Godin's new book, Meatball Sundae, should be required reading throughout the real estate industry.  But first, some definitions.  Meatballs are the average products and services that have been created to appeal to the largest number of people.  Meatballs are not exceptional.  Meatballs are not extraordinary.  Meatballs will never offend.  They can't because they are trying to offer some value to the greatest number of people. 

Companies end up with a meatball sundae when they take their meatballs and try to top them with really tasty whipped cream, nuts and a cherry -- or Web 2.0 tools like a blog, Facebook page and an interactive map mashup showing available properties.  As you can imagine, a meatball sundae isn't going to taste very good, even though everyone (vegetarians excepted) likes meatballs and everyone likes whipped cream, etc.  The problem is the two don't work well together.  And that's the mistake that too many companies make when they try to "pump up" their marketing efforts with "some of those cool new internet things."

So why should Seth's book be required reading in the real estate industry?  Because as an industry, we've been in the meatball business forever.  And why won't many blogs be effective marketing tools for realtors?  Because beyond the blog, nothing has fundamentally changed.  Beyond the blog, we're still trying to put people in our cars to drive them to see homes.  Beyond the Facebook or My Space page, we're still pushing drip e-mail campaigns on anyone who trusts us with their e-mail address.  Keep in mind, I'm willing to assume that a significant number of realtors write blogs and participate in Facebook...and I know that's a faulty assumption to begin with!  The raw truth is that instead of that drip e-mail campaign, the majority of agents are still shotgunning un-invited direct mail and knocking on the front doors of innocent homeowners without invitation!

As an industry, it's premature for real estate to consider tools and methods like social media unless we're prepared to alter the DNA of our companies.  It will mean that broker-owners become uncomfortable as they trust the future direction of their business to methods and strategies that they never used as agents themselves.  It will mean that we embrace permission-driven marketing initiatives and re-build the notion of respect for our clients.  It will mean change at a fundamental level.

And if today isn't the very best time to consider this fundamental change in our industry, I'd ask every agent and broker-owner to consider your current level of business and then ask yourselves, "How much worse could a north-south change of direction be?"  Then, just take a moment to consider the upside.  What are you waiting for?