Text Messaging Neophyte

"Oh! Now I Get It!"

As a text messaging neophyte -- I've only been using it for a few months -- I'm still discovering situations and contexts where it's superior to voice messaging.

Like, when you're standing in line at Tin Fish by Lake Calhoun on a sunny Memorial Day and don't want to be the obnoxious guy on his cell phone.

Missed the Tax Credit? Lucky You

Did the Late Bird Get the Worm??

Although I take issue with some of the math underlying the analysis, there's no denying that the drop in interest rates since April 30 -- thanks to the Eurozone crisis -- has at least partially offset the benefit(s) associated with now-expired home buyer tax credits.

Missing the tax credit deadline might have seemed like a big mistake to some home buyers, but waiting could have been the smartest thing to do. Interest rates have fallen so dramatically since April 30th that the typical purchaser of a $350,000 home, financed with a $280,000 mortgage, would have saved a bundle by waiting until May.

At April’s average rate of 5.34 percent, a home buyer would have locked in a 30-year fixed rate loan with a monthly payment of $1,561.82. The same borrower could have snagged a 30-year fixed rate loan at a rate of 4.625 percent in May and paid $1,439.59 per month. That’s a $1,467 annual savings. Over 30 years, it’s a $44,003 savings, dwarfing the tax credit.

--"Post-Tax Credit Buyers May Save Money"; Daily Real Estate News (5/27/2010)

So what's wrong/incomplete about the above analysis (at least if you live in the Twin Cities)?

Three things.

One. The average home sale in the Twin Cities currently is about half the $350,000 cited in the foregoing excerpt (no doubt written by a journalist in New York or LA).

So, cut the monthly mortgage savings from $95 to $47.50 -- making the tax credit that much more valuable.

Two. The average home buyer doesn't stay in their home for 30 years.

In fact, seven years is more typical.

Three. The calculations don't discount for the time value of money (why people prefer "a bird in the hand to two in the bush").

In plain English, most first-time home Buyers would rather have an immediate $8,000 (or $6,500, for move-up Buyers) than an extra $95 every month for 30 years.

However, the whole episode does serve to underscore that the decision to buy a home depends on many variables, including interest rates, prevailing home prices, financial incentives, etc.

Vicissitudes of Timing

The post-tax credit drop in interest rates also shows how (fickle) market conditions can trump . . . everything else.

Case in point: I worked with a client last year whose plan was to buy a newer, bigger home, then sell their existing home. That strategy made sense because their current home needed quite a bit of updating -- work that, realistically, could only happen once it was vacant.

Part one went off without a hitch: my client got a great deal on a very nice Plymouth home, and proceeded to move in.

However, part two suffered delay after delay.

So, instead of having their home ready for sale in February, at the beginning of the "Spring" selling season, my client's home wasn't on the market until May.

Did the delay hurt them?

On the contrary, several homes that were competing with my client's home all got snatched up in the interim.

As a result, my clients were able to raise their asking price -- and got it, in the first two weeks!

Listing Prices & "Leaving Room to Negotiate"

No Discount on This One

In a Buyer's market like today's, it's not unusual for gun-shy Sellers to want to "pad" their initial asking price.

Their rationale?

No matter where they set their initial asking price, aggressive Buyers are simply going to discount further from there.

So, why not pick a listing price that "leaves a little room to negotiate?"

There are three reasons that's not a good idea:

One. Self-selected peer group.

If you set your price too high, your home will be compared to more impressive homes asking the same price. And found wanting.

So, yes, you may have "left yourself room to negotiate."

But that hardly matters if there aren't any offers (or even showings).

Two. Even in a Buyer's market, well-priced homes can sell quickly, for above asking price.

Case in point: 5035 Glenwood Ave. (pictured above) in Golden Valley.

Listed in late March for $289,000, it sold -- in multiple offers -- the first week.

Ultimate selling price: $305,000.

Three. No Realtor can promise their client that they won't receive lowball offers (for all I know, the owner of 5035 Glenwood received lowball offers, too).

But lowball offers are a lot easier to repel when there is also a full-price offer -- or even better, multiple offers above list price -- on the table.

For Sellers, negotiating leverage is all about how many prospective Buyers are interested in your home.

If you price too high, the answer is usually few . . . or none.

P.S.: another fringe benefit of pricing well, and attracting broad interest: Buyers tend to pull their punches when it comes to negotiating any inspection issues.

"Location, Location, Condition"

"Not a Drive-By"

Quick, test your knowledge of Twin Cities real estate, and guess how much the single family home pictured above is listed for:

A. $149,000
B. $249,000
C. $419,900
D. $599,900

Give up?

Here are three more, very significant clues: 1) the home has been completely remodeled; 2) it's located in Minneapolis' tony Kenwood neighborhood (just east of Lake of the Isles, and close to downtown; 3) appearances to the contrary, it's over 3,000 FSF.

Correct answer: D

As they say, "the curb appeal is deceptive" (also commonly billed as "not a drive-by").

P.S.: and yes, curb appeal matters: the home has been on the market for over one year.

Staging: Make-up . . . for Homes

Making the Most of What's Available

A rose is a rose is a rose.

--Gertrude Stein

Question: When is a chair not a chair?
Answer: When it's a prop.

Home stagers view furniture, framed pictures, rugs and various other objets d'art not as things in themselves -- but in terms of what they do for the room they're in.

So, what counts isn't the pedigree or provenance of a particular painting or piece of furniture (nice alliteration, huh?).

Rather, it's whether the item accentuates the room's size, natural light, and focal points (like a fireplace) -- or softens the room's negatives (like being too small or dark).

In turn, that often depends on the object's size, shape and color more than its craftsmanship or aesthetic value.

In fact, good stagers excel at using what's already available to them in the home.

That avoids the home owner having to go out and rent expensive props to accomplish the same thing.

P.S.: a good parallel for staging decisions is picking a stylish pair of eyeglasses. The right frame isn't necessarily the most expensive one -- but the one that shows off the person's best features.

Lake Calhoun Tableaus

Good & Evil at the Same Spot, Days Apart

The Northwest corner of Lake Calhoun (pictured on this blog's masthead, and at right) was the scene of two very different incidents this week.

The first one occurred Monday night around 10 p.m., when a gang member was apparently ambushed and killed just off the lake's very popular walking and hiking paths.

Area residents (I live about a mile away) knew something was up because we heard the sound of very loud helicopters hovering nearby (we sometimes hear helicopters fly overhead, but they don't hover).

The next morning, a Realtor in my office reported broken windows and bullets holes in the nearby residential tower where she lives.

Good Samaritan

Lake Calhoun incident #2, which occurred early Thursday evening, was slightly less notorious and involved . . . me.

Around 5:30 p.m. I parked my car in the lot at the northwest corner of the lake, and proceeded to take my dog for a walk on a gorgeous late Spring evening.

At the beginning of the walk, my cell phone was on my belt clip; at the end, it wasn't.

When a search of the area around my car didn't turn anything up, I immediately went home and spent the next few hours scouring my PC for any sensitive data (I synch my cell phone and PC daily) and changing passwords as needed.

The next morning, when I was literally heading to the Sprint store to obtain a replacement, I checked my work voicemail.

There was a 9:01 a.m. message from Ackerberg Property Management, a tenant in the office building on the northwest corner of the lake.

Somebody in their office had found my phone; it was waiting for me at the valet parking station on the west side of the building.

And it was!

Early Start to Memorial Day Weekend?

"On Your Mark, Get Set, Go!"

Or, The Email Indicator

Judging by my email in-box, the long Memorial Day weekend officially started . . . . about 1 p.m today.

That's when my email box went strangely silent (on a typical business day, I get an email every three minutes or so).

Given the gorgeous weather locally, who could blame anyone for getting a jump start?

Doomed Deals & Silver Linings

"Recycling" Market Knowledge

It doesn't happen to me that often (fortunately), but it's always a bummer when a deal I'm involved with falls apart -- as happened the other week.

But there's often a silver lining.

In the course of handling what turned out to be a doomed condo purchase in Minnetonka a few weeks ago, I became an expert on virtually every nearby Minnetonka condo and townhouse that had changed hands in the last six months.

I also spent time driving up and down the now-complete Shady Oak Road (much wider and nicer!); pulled up plans for upcoming, nearby light rail routes and stations; and became familiar with all the nearby parks and shopping amenities.

All that fresh market knowledge came in handy barely a week later, when I interviewed to list a condo in the same area.

Impressed (in part) by my state-of-the art command of the market -- the clients hired me over two other Realtors!

Insult . . or Courtesy?

Realtor-to-Realtor Courtesy

Normally, you'd think pointing out that someone tracked dirt through your home, or that a window was covered with a certain bird "souvenir," would be an insult.

When isn't that the case?

When a Realtor doing a preview or showing encounters those things, and lets the listing agent know.

That's especially the case when a home is unoccupied, and the offending condition would otherwise go uncorrected -- until the next prospective Buyer came through.

The same courtesy applies -- only more so -- when a Realtor encounters a home with an unlocked (or open!) front door (not common, but it's been known to happen, especially with unoccupied homes).

Then, alerting the Listing Agent not only serves to protect an otherwise vulnerable home owner, but takes the agent reporting the problem off the hook for any security-related problems on the premises.

Needed: Glass-Steagall . . . for the Housing Market

Life after Life Support

There are no atheists in foxholes.

--Famous aphorism

There are no free market Republicans in today's housing industry.

--Real estate version

When it comes to the housing industry today, even the Republicans sound a lot like Democrats.

For now, at least, people of all philosophical stripes understand that the housing market is functioning in large part due to governmental support.

That includes providing the capital for mortgages; insuring mortgages once they're created; and providing the credit for investors to buy the resulting securities that the mortgages are bundled into.

No one is eager to see what happens if that support is scaled back precipitously.

The focus of the upcoming debate, then, is how much support to withdraw, how fast.

Reason(s) for Hope

One overlooked possibility, however, is that the housing market might actually need less help than is commonly believed.

Take, for example, the Federal Reserve's now-concluded purchase of $1.25 trillion in mortgage-backed securities -- undertaken to assure continued low interest rates, and thereby support the fragile housing market.

What happened to mortgage rates in the almost two months since the program was discontinued?

They've gone down.

Thanks, Eurozone (in point of fact, they were declining before that).

Producing "Financial Foie Gras"

Obscured by the "recent unpleasantness" is the fact that the U.S. housing market functioned successfully for more than half a century.

What changed?

Two things:

One. From 2003-2004, the Federal Reserve dropped nominal interest rates to near-zero (negative, in real terms), unleashing a tidal wave of demand for securities that paid a respectable return.

Two. Wall Street got a hold of the housing market.

If the demand was created by the Federal Reserve, the supply was provided -- on a truly breathtaking scale -- by Wall Street.

In effect, Wall Street stuffed the housing market "goose" with capital to be turned into financial foie gras.

Or at least what the ratings agencies promised was foie gras.

Glass-Steagall for the Housing Market

Which catches us up to today.

Used and abused by Wall Street, the housing market is temporarily a ward of the state.

Fortunately (unfortunately), something like this has already happened.

Before Wall Street got a hold of the housing market, it got a hold of the banking system

The direct result of that was something called The Great Depression.

But note society's response then.

Wisely, it wasn't to socialize the banking system in perpetuity.

Rather, it was to throw Wall Street out of the banking system for a long, long time, by separating "investment" from "bank."

In fact, the Glass-Steagall Act served the banking system -- and U.S. -- well for over 60 years, until its repeal in 1999.

What the housing industry needs now is a real estate version of the Glass-Steagall Act.

There's no reason the U.S. housing market of 2010-2070 cannot be as stable, functional, and largely independent as the housing market that prevailed from the 1930's to the 1990's.

What Emoticons Can't Convey

Uses -- and Limitations -- of Email

All the emoticons in the world are a poor substitute for conveying basic human emotions like empathy, amusement, disappointment, resolve -- and a million other subtle nuances.

Email also has a way of being misconstrued, or coming across harsher than intended.

So, for letting a client know (at midnight) which showings have been confirmed for the next day, email's a Godsend; for finishing off a tense negotiation . . . . most experienced Realtors instinctively reach for the phone.

Stale Listings -- Late Spring Edition

Is it Too Late to Get an Extension?

OK, so it's not quite as bad has having an exterior shot with snow on a day that the Twin Cities hit 95(!) sticky degrees.

However, given that April 30 was one of the most hyped deadlines in the housing market the past year or so, I was taken aback to see a listing today that blared, "Still time to get tax credit!! in both the agent and public remarks fields.

Too tired to do an MLS-wide search, but I'd guess it's got company . . . .

Wall Street's "Advise and Consent" Role

"Enjoying Virtually Front-Door Access"

Executives and political action committees from Wall Street banks, hedge funds, insurance companies and related financial sectors have showered Congressional candidates with more than $1.7 billion in the last decade, with much of it going to the financial committees that oversee the industry’s operations.

In return, the financial sector has enjoyed virtually front-door access and what critics say is often favorable treatment from many lawmakers.

--"Financial Overhaul Bill Poses Big Test for Lobbyists"; The New York Times (5/22/10)

Since when did we give Wall Street a say -- the say -- in regulations purporting to regulate it?

I know the U.S. Constitution gives the Senate an "advise and consent" role -- but where it does it say anything about Wall Street??

And yet.

And yet the financial reform legislation just passed by the Senate apparently must now run the gauntlet of industry lobbyists, who would weaken (if not gut) it.

Why is this, exactly?

Oh, yes: because these guys finance our politicians' election campaigns . . .

Getting the Jump on the (Wall Street) Journal

"Told 'Ya So" Department

You read it here first -- by four days, to be exact:

No, it's not good when already volatile markets lurch downward like they've done the last couple days. However, astute financial observers know that such turbulence is also accompanied by a "flight to safety" -- in this case, U.S. debt. The silver lining is that anyone who's on the cusp of refinancing can do so at rates that are temporarily "on sale."

--"Flight to Safety = Rate Drop: Market Melt-Down Creates Refinancing Opportunity"; City Lakes Real Estate blog (5/20/10)

Now compare that with what's in Monday's Wall Street Journal:

The financial turmoil in Europe is providing an unexpected windfall for American home buyers, as international money seeking a safe haven is flowing into the U.S., pushing domestic mortgage rates to the lowest levels of the year and back near 50-year lows.

--"Mortgage Rates Decline"; The Wall Street Journal (6/24/10)

Nice scoop, if I say so myself!

P.S.: No, I'm not clairvoyant -- it's typical for print articles to post online the night before publication.

Real Estate Myth #37: Sunday Open Houses

"Open House Available For a Terrific Listing That Always Gets Great Traffic"

One of the more durable myths out there is why Realtors do Sunday open houses: many clients (and prospective clients) seem to believe that the primary motivation isn't to sell the client's home, but for the hosting Realtor to troll for future business and ultimately sell other homes, down the road.

The reality is a bit different.

If Sunday open houses were such a great way to pick up clients, you'd see more listing agents doing them.

In fact, the majority of listing agents avoid doing them.

Instead, they try to line up replacements -- typically, newbie Realtors -- by dangling carrots like this: 'Open house available this Sunday for a terrific listing that always gets great traffic.'

Just once I'd like to see a listing agent level with would-be pinch hitters with a hook like this: 'open house available this Sunday for a not-so-appealing home in an out-of-the way location that's already been for sale for 8 months, is (still) priced above market, and may get 3-4 people through -- if you're lucky.'

Notoriously Low Yield

What the (experienced) listing agents know that the newbie's don't is the following:

--Most people coming through open houses aren't interested in buying a home at all.

They're just curious about what the home looks like inside; are interested in interior decorating ideas; want to see what prevailing home prices are so they know how much their home is worth. Etc., etc.

--The distinct minority of prospective Buyers who are serious are invariably already working with a Realtor. Which means they're strictly off-limits.

--The remainder of Sunday open house prospects -- people who maybe, kind-of are looking -- usually are characterized by one (or more) of the following: a) they can't afford the house (or any house); their timetable is next year (or century); they have no idea what they're looking for, at what price range, or where.

So, yes, a new Realtor who has time on their hands and plenty of patience is welcome to follow up with such prospects -- assuming they leave valid contact info -- in the hopes they'll eventually buy something.

Or not.

The Case for Open Houses

All of which begs the obvious question: if open houses have such a poor track record, why do them at all?

For two reasons:

One. As a convenience to serious, already-represented Buyers, who are typically off work on Sunday afternoon and can cover more ground going through open's (vs. having their agents set up private showings during the week).

Two. Because, while the odds may be low . . . you never know. (See, "The (Mythical?) Serendipitous Buyer").

In truth, the vast majority of things Realtors do to market homes -- at least individually -- have a low probability of success.

So, the odds of a private showing leading to a consummated transaction are less than 10%; the odds of exposure at a Broker Open (Tuesdays) leading to a sale perhaps only a little better.

Ditto for blast emails to neighborhood Realtors; direct mailings; high-end photography and literature; "plugging" listings at various Realtor meetings, etc.

But therein lies the rub.

Precisely because you don't know which marketing effort will ultimately sell your client's home . . . a good Realtor does all of them.

P.S.: the foregoing recalls the marketing director of a Fortune 500 company who laments that she knows she's she's wasting half her marketing budget -- she just doesn't know which half.

Gas Prices & Memorial Day

Dropping Prices: Two Theories

I put it in the same category as a 50 degree day in January (at least in Minnesota), or the movie theatre with the popular new movie -- and no lines: a welcome development, to be sure, but one that's still slightly unnerving.

What am I referring to?

The rather steep drop in gas prices the last few days in the Twin Cities.

That, just ahead of Memorial Day weekend -- typically a time of peak demand and correspondingly high prices.

Less Pain at the Pump

What's going on?

The rational explanation is that the economy just got bumpier, hurting demand and causing prices to fall.

The political explanation (and what isn't lately)?

The oil producers, led by BP, are in lots of hot water these days, and don't want to raise the temperature further by inflicting more pain at the pump.

"Number of Graphs Drawn Since 1945"

Lie, Damn Lies -- & Graphs

The graph at right captures my attitude towards the myriad graphs, charts and other "pictorial data" available to show real estate trends . . .

(And no, it's not my idea; I saw this in a cartoon on the wall in the Stanford economics department in 1981).

Competing for Listings, or, "The Brother-in-Law Factor"

Blood is Thicker Than Water (in Real Estate, Too)

I don't imagine that, in medicine, a neurosurgeon who was being considered for a life-saving operation finds out that the patient chose another surgeon because . . . the patient's wife and the other surgeon's wife are best friends.

But that kind of thing happens to Realtors all the time.

People understandably want to do business with people they already know and trust.

It's also the case that not going with the Realtor cum son-in-law/best friend/cousin would risk jeopardizing important relationships.*

However, it's hard not to conclude that at least some of the foregoing preferences reflect ignorance about how the real estate business works -- and specifically, an assumption that "all Realtors (and Brokers) are created equal."

Interview a few, and you'll likely find out otherwise . . .

*Of course, it's also the case that some people assiduously avoid working with friends and relatives, because of the threat(s) it can pose to the relationship.

Steve Jobs' Next Invention

Great Minds Think Alike

I think I've got Steve Jobs' next invention.

It's portable.

It's disposable.

You can write on it.

It never crashes or has a weak signal.

And it's very, very cheap.

Give up?

A piece of paper.

Steve, call me . . .

P.S.: the foregoing prompted by a week of virus-fighting headaches, "smart phone" crashes, etc.

Flight to Safety = Rate Drop

Market Melt-Down Creates Refinancing Opportunity

No, it's not good when already volatile markets lurch downward like they've done the last couple days.

However, astute financial observers know that such turbulence is also accompanied by a "flight to safety" -- in this case, U.S. debt.

Doesn't the U.S. have a $13 trillion (and counting) deficit, and many more trillions in unfunded obligations?

Doesn't really matter, at least for the moment; in the land of the financial blind -- that would be the Eurozone at the moment -- the one-eyed man is King.

What does that mean for the the housing market?

A weaker economy -- if that's indeed what's ahead -- isn't great news.

However, the silver lining is that anyone who's on the cusp of refinancing can do so at rates that are temporarily "on sale."

In Praise of . . . The Midtown Greenway

Green Development -- Literally

Once there were parking lots
Now it's a peaceful oasis
you got it, you got it
This was a Pizza Hut
Now it's all covered with daisies
you got it, you got it
I miss the honky tonks, Dairy Queens, and 7-Elevens
you got it, you got it

--The Talking Heads; lyrics, "(Nothing But) Flowers"

I don't know whether the folks responsible for the Midtown Greenway were Talking Heads fans.

But they could have been.

What was once an abandoned railroad track cutting east-west through the middle of Minneapolis is now . . . a vibrant, bicycle and pedestrian-friendly artery.

Due to leadership and foresight like that, Minneapolis was recently named "America's Best Bike City" by Bicycling Magazine.

Maybe the owners of the now-closed Brookdale Mall will catch the fever next:

There was a shopping mall
Now it's all covered with flowers
you've got it, you've got it

One can certainly hope . . .

Gold(en) Ambivalence

The Gold Debate

Want to know what to think about gold?

So do I.

As best I can tell, here are the opposing camps' two best arguments:

I hate gold. It does not pay a dividend, it has no value, and you can’t work out what it should or shouldn’t be worth. It is the last refuge of the desperate.

--Investor Jeremy Grantham

Just because the lifeboats leaving the Titanic are crowded doesn't mean you shouldn't be on one of them.

--Commodities trader on CNBC, who was asked whether it was worrisome that gold was becoming "an increasingly crowded trade."

My thoughts on gold are already on record ("The Gold Tax").

As they say, "you pay your money and you take your chances."

Minneapolis' Great Lawn

No Celebrities -- or Crowds

OK, so the buildings ringing it are only 5 to 10 stories tall, not 50 to 60 stories -- and none of them are famous (unless you count the Calhoun Beach Club).

And you won't see any celebrities throwing Frisbees or otherwise kicking back.

But Minneapolis' equivalent of Central Park's Great Lawn is a lot less crowded, and actually abuts a real lake -- Calhoun (Central Park's Great Lawn is a couple blocks south of a reservoir).

Where exactly is this lawn?

Just off the northwest corner of Lake Calhoun.

While perhaps one-third the size of its (infinitely) more famous New York counterpart, Minneapolis' "no name" lawn is every bit as inviting on a spectacular Spring day!

(And no, I only spent my lunch hour there today -- not the whole day, tempting as it was).

BIG Edina Discount

Great Value Overlooking Lake Edina

Where: 4904 Poppy Lane in Edina

What: 4 BR/3BA walkout rambler with 4,200 FSF and pool overlooking Lake Edina

How (much): $699k

Who: listed by Steve Stewart; broker is Edina Realty

Historically, homes in Edina enjoyed some of the best appreciation in the Twin Cities -- and weathered economic downturns much better.

Not this recession -- especially for upper bracket Edina homes (and true of upper bracket homes throughout the area).

Exhibit A would be this sprawling rambler overlooking Lake Edina.

Originally listed at $1.1 million a year ago, the price was just reduced Monday from $825k to $699k -- now a whopping $180k below the tax assessed value ($880k).

I saw the home earlier this Spring, and thought it was a value $100k higher!

15 vs. 30 yr. Mortgages

Deciding Rationally -- or Realistically

I don't usually advise clients which mortgage is best for them; that depends on their financial circumstances, time horizon, credit scores, etc.

However, if clients ask, I will serve as a backstop for advice they're getting elsewhere (like from their financial advisors). And I always encourage clients to get a couple, apples-to-apples quotes for whatever mortgage they're contemplating.

So, a client called yesterday to say that he was mulling refinancing options, and that his financial advisor recommended a 30 year mortgage over the 15 year.

His chief arguments?

First, you can always make extra and/or bigger payments on a 30 year mortgage -- making it more like a 15 year.

Second, statistics suggest that if you invest the difference between the (smaller) payment on a 30 year mortgage and a (bigger) 15 year mortgage payment, you'll come out ahead.

Practical Considerations

Both valid points, to be sure.

But just like economists always used to assume -- evidence to the contrary -- that people are rational actors, how many financial advisers consider what their clients are actually likely to do?

I know my client, who doesn't like routine or regimen -- and abhors following the Wall Street roller coaster (who does, outside of Wall Street?).

Given that, the odds that he would: a) make extra payments as circumstances allowed; and b) faithfully invest the extra cash flow freed up by a 30 year mortgage, are somewhere between next-to-none and none.

The clincher was his current age: 50.

The idea of being mortgage-free by 65 was a psychologically important goal for him.

And who could argue?

Once he told me that cash flow was no issue . . . I counseled him to go for the 15 year.

P.S.: the Solomonic solution? Go for a 20 year mortgage.

Buyer's Agents & Networking

Peeking Under the Curtain

Last Sunday I showed my clients five homes in the west suburbs that all met the profile of what they were looking for: within 20 minutes or so of downtown Minneapolis; around 3,500 FSF; at least 4 Bedrooms; a nice master Bath; price between $600k and $750k.

So what?

Only one of the five homes I showed was already on the market.

The other four were either pre-lists or one-time showings.

Missing Out

One of the things prospective Buyers not represented by agents don't know is that homes are often quietly for sale well before "the curtain goes up," i.e., they formally debut on MLS.

Behind the scenes, Buyer's agents are busy broadcasting their clients' criteria, while listing agents are busy promoting their upcoming listings through a variety of pre-list marketing.

Not surprisingly, technology and social networks make this kind of pre-list activity easier and cheaper than ever.

And therefore more important . . .

Home Sellers and Buyers' Intentions

Hiding the Wrecking Ball

Does it matter to the Seller if they know that their Buyer intends to do a "gut rehab?" (pretty much what it sounds like).

Sometimes.

There are certainly some home owners who are so psychologically identified with their home -- and think that its condition and appearance are so perfect, just the way they are -- that any suggestion otherwise is construed as a personal affront.

However . . .

Usually it's pretty apparent -- to prospective Buyers if not the Seller -- when a home is need of a total renovation.

Sellers who hear the same feedback, over and over, eventually become inured to the idea that the next owner of their home "may be making some changes."

Lots of Showings

Too, Buyers planning on doing extensive renovation will usually show their hand in the course of doing showings.

A lot of them.

Of course, the purpose of multiple showings -- typically with contractors in tow -- is to determine the feasibility and cost of the project(s) being contemplated (as a listing agent, I encourage this process -- to a point; much better to have no deal than one that blows up after lots of time wasted on negotiation).

Eyes on the Prize

At the end of the day, though, most home Sellers (properly) are more focused on whether the Buyer is able to perform financially, and what price they're getting for their home.

There can even be offsetting advantages when the Seller knows that the Buyer intends to do a major renovation (or more).

So, a home that might otherwise get picked apart on inspection instead can get a "pass."

There can be exceptions to that, though.

I handled one deal, the sale of a 19th century Victorian, that almost fell apart when it became apparent that the Buyer planned to do a tear-down.

The issue?

Both the owner and the Buyer wanted the home's gorgeous (and quite valuable) leaded glass windows.

The "Due Diligence" Showing

I Guess That Qualifies as Feedback

I was wondering what was up with an agent who showed a couple of my listings near Cedar Lake in Minneapolis in the span of a few days last week.

The feedback was quick and generic, and there was no follow-up interest.

The "mystery" was cleared up this morning when I saw the agent's new listing on MLS, in the same area and general price range as mine.

Rules of the Game

Before Sellers get up in arms over the foregoing, two caveats: 1) an agent who is "just" previewing today may have a real, live Buyer tomorrow -- or work with a colleague who does.

That's especially the case if they're about to list a competing property and pull in a ton of prospective Buyers looking for a home in the same general area and price range -- Buyers who, for whatever reason, may not be candidates for the agent's new listing, but might be for yours.

If your home is for sale and on the market, there really is no such thing as bad exposure.

Caveat #2: your agent likely did the same thing before your home came on the market.

By way of clarification, most agents who want to see a home, but aren't actively working with a suitable Buyer, will set up the showing as a "preview."

That way, the home owner can hang around, and doesn't need to go through the fire drill of getting everything shipshape for an actual showing.

That's an especially nice courtesy in Minnesota around, oh, January.

P.S.: I am careful to coach my selling clients not to volunteer anything to the previewing agent if they happen to be around -- like, how many recent showings there have been, feedback from same, etc.

Selling Hurdles -- Financial & Psychological

The Psychology of a Spurned Offer

Sometimes, financial considerations prevent home owners from selling.

If they owe more than their home is worth, they must either be able to write a check for the shortfall at closing, or, persuade their lender(s) to reduce the mortgage balance.

However, such "underwater" home owners only account for a slice of the Twin Cities housing market today.

What accounts for all the "above water" homes that seemingly linger on the market month after month (and in some cases, year after year)?

By definition, such Sellers don't need to sell; otherwise, they would have.

In Realtor-speak, such Sellers are said to "lack motivation."

Psychological Hurdles

Take away economics, and that leaves . . . psychology.

Sometimes the rub is what a neighbor sold their home for.

That's especially the case if the home didn't measure up to theirs.

The catch, of course, is that market conditions can and do trump home features; I can think of dozens of Twin Cities homes that sold for more -- a lot more -- three years ago than their more impressive neighbors are listed for today.

Even closer to home (sorry, bad pun) is the would-be Seller who turned down an offer above their current asking price earlier in the listing.

In fact, I just heard about an Edina home, now under contract for $900k, that had been on the market for over 2 years, starting at over $1.2 million.

Along the way, the owner apparently rejected two such offers -- one for $1.1 million, and another, later one for $1 million.

You'd guess that they have plenty of company (albeit at less lofty prices).

Bye, Bye, MLS Areas!

Searching By Neighborhood Names

No, the map (at right) isn't some sort of alternate zip code for Hennepin County.

Actually, come to think of it . . . it is.

For Realtors.

Unbeknownst to (most of) the public, the Twin Cities Multiple Listing Service ("MLS") database splits the metro and outlying areas into 139 districts.

So, on MLS, Realtors looking for something by Lake of the Isles would search under MLS area 300.

That's in addition to searching by custom map, zip code, price range, and home attributes.

"Name that Neighborhood!"

Which is kind of the problem for MLS areas: they've been superseded by more powerful (and customizable) search criteria.

So, by the end of year, they're going to be gone.

In their place will be neighborhood names (Linden Hills, Country Club, Fern Hill, etc.)

Which makes intuitive sense.

The only catch I see is that not every neighborhood is easily defined -- and not every home is in a defined neighborhood.

Just to take two examples:

--in Golden Valley, the area east of Lions Park and west of North Tyrol Hills is really part of neither. What will it be called under the new system?

--Ditto for the area west of Cedar Pass and east of Bent Tree in Minnetonka.

People old enough recall a game show called "Name that Tune."

Get ready for the real estate equivalent: 'Name that Neighborhood!'

"I survived the 2:45 p.m. Crash"

"The Flash Crash"

Imagine a beef processor that was linked to an e.coli-tainted shipment that ultimately killed 100 people.

A week after the outbreak, the authorities were still trying to determine how e.coli got into the beef processor's facility.

In the meantime, the facility was operating "normally," and continuing to process and sell beef to all its usual customers.

Wall Street Dysfunction

Of course, in the real world, none of the above would have been tolerated.

Now compare that with what has happened on Wall Street after the major stock averages did a 10% bungee jump in the span of 5 minutes on May 6.

Nothing.

While the SEC and various stock exchanges look for a culprit, the exchanges continue to trade, "normally," with no change in their structure or business practices.

Just one more thing that's disturbing about modern day Wall Street . . .

P.S.: would it be bad form to point out that the "crash survivor" is missing something? Like his head??

"It's not Dark -- It's Safe!"

The Limits of Spin

I addressed overcoming home shortcomings in a post earlier this week, "Fielding Buyer Objections."

Sometimes, depending on what they are, you're better off simply conceding the drawback(s) and emphasizing the home's strengths.

Case in point: a home I showed this week that has a particularly dark basement.

The listing agent's response?

The owner, who'd built the home, declined to put in any windows (lookout, egress, etc.) because "it was safer that way."

Right.

The home is in an upper bracket neighborhood in the west suburbs, and sits on a huge, private lot.

Big Weekend for Country Club Open Houses

Country Club Extravaganza

Country Club is one of the premiere neighborhoods in Edina -- indeed, in the entire Twin Cities.

Mostly built in the '20's and '30's, Country Club homes are historically registered, and include some of the most impressive Tudors and Colonials around.

There are currently 44 Country Club homes on the market ranging in price from around $600k (smaller homes needing lots of work) to more than $4 million; more than half will be open this Sunday (that's quite unusual for upper bracket homes).

One example: 4620 Drexel Avenue South (pictured above).

Built in 1928, this Tudor has been completely renovated, and has five Bedrooms and Baths, and 5,600 FSF. List price is $1.75M.

If you are looking for a great home in a fabulous neighborhood, but didn't think you could afford Country Club, come take a look.

You might just be surprised!

Open Houses at Odd Hours

"Open Thursday From 5 p.m to 7 p.m"

Most Realtors hold open houses on weekend afternoons.

In fact, I'd guess that more than half of all open houses are from 1 p.m. to 3 p.m. on Sundays (Vikings games in Fall excepted).

There's certainly logic to that: that's when most people are off work, and free to go house shopping.

And once there's a default time, it becomes self-reinforcing, because everyone wants to "piggyback" off the traffic being generated by the other open houses.

However, there's a case to be made for changing that up, at least occasionally.

I heard a story just this week about a Realtor who held an open house on a Thursday evening -- and got a Buyer!

The back story is, the Buyer has a lake cabin they go to every weekend -- no Sunday open houses -- and just happened to see the open house sign.

What is "Evangelistic Foods"?

. . . and What is it Doing in a Minneapolis "Walk Score?"

If you are looking for a home in the Twin Cities, and use Edina Realty's market-leading Web site, you'll notice a new feature: each home now has a "Walk Score."

Calculated from 1-100, the Walk Score is supposed to show how pedestrian-friendly the immediate neighborhood is, and map nearby landmarks and commercial establishments (groceries, restaurants, various services).

So, does it work as advertised?

Kind of.

However, when I ran a search on my own neighborhood, under "grocery stores" the first name to pop up was something called "Evangelistic Foods," at 2729 France Ave. South.

That is very much a single family residence -- not a grocery store; I drive by it every day! (if I'm wrong about that, Minneapolis zoning would sure like to know).

Mystery #2: how on earth did they end up so prominently displayed on Walk Score? (I've got a guess).

Just a hunch, but as Walk Score works the kinks out, you'd guess "Evangelistic Foods" goes away.

"Crying Wolf" on Interest Rates?

Still Low (For Now)

For months (years?), Realtors have been warning prospective home Buyers that today's low rates (still around 5% for those with excellent credit) won't last much longer.

That's based on a number of potent economic factors:

--Trillions in economic stimulus pumped into the economy by the Fed and its potentially inflationary impact;

--The dire status of Fannie Mae and Freddie Mac -- the sources of liquidity to the housing market at the moment;

--The withdrawal of both direct (tax incentives) and indirect government support to the housing market (like the Fed's purchase of $1.25 trillion in mortgage-backed securities, which stopped in March).

And yet, mortgage rates have stayed low -- and now, jumbo rates are coming down, too.

You'd certainly guess that by now, many (most?) consumers take perpetually low interest rates for granted.

I'm not forecasting an imminent spike.

But we all know what happens in other markets (like stocks) when investors get complacent . . .

Appealing to Buyers' Emotions (vs. Pocketbooks)

Playing Down the Price

Patriotism is the last refuge of a scoundrel.

--Samuel Johnson

The real estate equivalent of Johnson's line is, "when you've got nothing else (left?) to sell, sell price."

That's not to say value is irrelevant.

In today's Buyer's market, it's more important than ever.

However, financial considerations -- price -- come after a prospective Buyer already likes (or loves) the home.

Then, the price becomes more of an after thought, assuming that it's within their budget.

Price speaks to the Buyer's rational side.

But they decide to buy based on emotion.

Do You Really Want That $2M Listing??

Homes That Don't Measure Up
to Their Asking Price

The quick Realtor answer to the question posed above?

"No, not if the home's worth closer to $1.3M."

That's especially true if the owner with the unrealistic price expectations also expects a drumbeat of expensive marketing over the course of a year (or longer) -- the average market time now for a Twin Cities home carrying that price tag.

To bridge those expectations, more Realtors who specialize in upper bracket homes are presenting such clients with a proposition: 'I'll run as much advertising as you want, but you pay for it.

When (and if) the home sells, the Realtor then credits back the client's marketing outlay at closing.

Spiral Staircases

Spiral Pegs in Square Holes?

I'm sure there's a context where a spiral staircase works beautifully.

I just haven't seen one lately.

Instead, in the course of showing homes this Spring, I've now encountered at least three spiral staircases that all have the same attributes: they're shoehorned into additions where there wasn't space for a conventional staircase, and a spiral staircase was the least bad alternative to provide access.

Unfortunately, in each case the spiral staircase was inconsistent architecturally (they don't exactly go with Colonials, for example), and the diameter was so tight you'd practically have to be a child to comfortably navigate it (I'm 6'3, 220 lbs -- bigger than most of my clients -- but not all of them).

Whenever I see such a stopgap, I think the owner should have saved even more space -- and just put in a fire pole instead (definitely more fun for the kids!).

The Part-Time Realtor, or "Caveat Home Seller"

Are You Working with a Semi-Pro?

You wouldn't want to fly on a plane flown by a part-time pilot.

Or have your back operated on by a part-time surgeon.

But if you're not careful, you could end up represented by a part-time Realtor.

That's the upshot of "Swanepoel Trends Report 2010," which notes that fewer than half of all Realtors reported that real estate sales was their primary source of household income (44%).

Caveat Home Seller

What does that mean for home sellers?

Just because you hire (and pay for) a Realtor doesn't necessarily mean that your home is going to be well-represented and marketed.

Ask your would-be Realtor what services they provide; what their track record is; and to demonstrate that they actually know the in's-and-out's of handling a transaction.

Otherwise, you may be paying for full service and receiving . . . less.

Does Everybody Manage Gazillions?

The Billion Dollar Money Manager Club

Oh lord won't you buy me a Mercedes Benz
My friends all drive Porsche's, I must make amends.

--Janis Joplin

I must have just finished reading the 10th -- or 100th -- financial piece peppered with platitudes from investment managers who, very matter-of-factly, cumulatively seem to run more money than exists on the planet.

Who are these people?

How did they get such big chunks of capital to manage . . . and where are they from again??

The following quotes are straight out of a recent Bloomberg.com article discussing oil stocks; the only information that I've altered are the individuals' names and the amount their funds oversee (I've embellished slightly):

“You have the uncertainty about where oil prices are headed,” said John Smith, chief investment officer at Fort Washington Investment Advisors in Cincinnati, which oversees more than $450 million trillion. “It’s a very uneven recovery."

"As the global economy improves, demand for oil should increase,” said Bob Johnson, who helps oversee $500 gazillion as research director of Dallas-based Hodges Capital Management Inc.

“Obviously we’ve had some setbacks in the past couple of weeks with the sovereign debt crisis in Europe and oil spills,” said Steve Anderson, Boston-based money-manager at Pioneer Investment Management, which oversees about $350 quadrillion zillion.

See what I mean??

The Blogging Impulse

Blogging & Solipsism

Substitute "real estate" for "Wall Street," and the following fits me pretty well:

[My blog posts are] simply what someone who works on Wall Street is thinking about or looking at. “Helping to quiet down the voices in my head” would be a more suitable tag line.

I find myself in agreement with Daniel Boorstin, Librarian of Congress, who said “I write to find out what I think.” Setting down ideas each day is a helpful process. It creates a searchable archive of commentary. Best of all, it generates immediate feedback, tremendous ideas and additional suggestions from readers.

Of course, it also gives me a platform to push back against the tyranny of stupidity in the world, the foolishness of our most esteemed institutions, and to counter the mainstream silliness that passes for American public discourse. Now that I reread this, I think I may have to change the tagline to “Helping to quiet down the voices in my head . . . "

--Barry Ritholtz, The Big Picture blog

The only thing I'd add to the foregoing is, sometimes the best way to clear your head is to . . . empty it.

Nothing accomplishes that better than a good post!

$6,000 Condo Assessment

Are Twin Cities Condo's Suddenly Pet-Friendly?

At my broker open in Golden Valley yesterday, a "civilian" (vs. Realtor) came through who was grumbling about a $6,000 special assessment just levied on the condo association where he lives.

Apparently, even though the condo association's Bylaws expressly prohibit animals, a resident who was evicted because he had a dog successfully sued the association.

While I was duly sympathetic, I tried to put things in perspective: in an age when attorneys charge -- I don't know -- $200-plus an hour, a $6,000 hit isn't exactly the end of the world.

At which point the individual clarified: the assessment was $6,000 per condo, and the complex has more than 150!

He further spied a link between aforesaid lawsuit, and Twin Cities condo's suddenly all becoming pet-friendly.

Any Twin Cities blog readers who can corroborate any of the above?? Area Realtors?

At least up until now, my legal background tells me that condo associations can proscribe anything they want, provided it doesn't violate any laws or other public policy (i.e., no discrimination etc.)

Fielding Buyer Objections: Hits & Misses

Wants, Needs -- & Deal Breakers

I'm currently representing Buyers who prefer at least 3 Bedrooms on one level, because they have little kids.

So, an otherwise suitable home that I previewed for them was a pass, because the kids' bedrooms were on the lower level (I was hoping the home's other strengths would offset that -- they didn't).

When I relayed the Bedroom problem to the listing agent, she suggested putting in video cameras on the lower level.

No, it didn't convince my clients -- but I give her an "A" for effort (and creativity!).

P.S.: In contrast to parents with young kids, parents of teenagers seem to prefer homes with separate wings.

Fannie, Freddie's Original Sin

The Fannie/Freddie Dilemma, Cont.

No Government-Sponsored Entity ("GSE") can serve two masters.

--New Testament

OK, so that's not exactly how the Biblical quote goes.

But it's an apt description of the conundrum facing would-be reformers of Fannie Mae and Freddie Mac, the two now-state wards that buy or guarantee a stunning 96% of all U.S. mortgages.

The philosophically pure solution -- dissolve them -- risks throwing the housing market into disarray (or worse) by creating a financial vacuum.

Meanwhile, the clean, business solution -- spin them out as for-profit's and sever their government guaranties -- likewise means no more government "sugar daddy" for the housing market.

The result has been a muddle: keep them alive, quarter-to-quarter, until the political will to tackle the problem head-on reaches critical mass.

Here's another take on the two, mutually exclusive missions assigned to Fannie and Freddie:

America may want a private mortgage market, or it might want the security of a subsidized market. What every administration since L.B.J.’s has coveted and what has always been a lie is that we can get a subsidized market free.

--Roger Lowenstein, "Cracked Foundation"; The NY Times Magazine (4/25/10)

Read the rest of Lowenstein's article for the complete (conflicted) history of Fannie and Freddie.

(More) Hemorrhaging at Fannie Mae, Freddie Mac

Legacy Losses -- or Fresh Red Ink?

If a sweater was 96.5% navy, do you think it would look navy-colored?

And if a chocolate bar was 96.5% dark chocolate, could the manufacturer bill it as dark chocolate?

And if the chance of precipitation was 96.5% . . . would you carry an umbrella?

What's with the inane questions? And the 96.5%?

According to Inside Mortgage Finance, that's the percentage of mortgage loans the government directly or indirectly provided financing for in the first quarter (The New York Times; 5/10/2010).

If housing finance isn't a nationalized industry -- at least temporarily -- I don't know what is.

"Near Collapse"

Based on Fannie Mae and Freddie Mac's recent results, the two companies need another $20 billion or so -- to survive another quarter.

As horrific as that number is, it's actually an improvement from their losses a year before.

What to do?

Some of the answer depends on whether that tidal wave of red ink consists of "legacy" losses -- incurred as real estate fell about 30% nationally the last four years -- or instead reflects ongoing, current losses.

Given Fannie Mae and Freddie Mac's famously bad accounting, no one really knows for sure.

"We Need the Eggs"

For now, the government is clearly consigned to writing that check quarterly.

But how long it can afford to -- or is willing to -- is a big question mark.

The dilemma recalls a scene from an early Woody Allen movie.

One of the characters complains to her friend that she has a crazy uncle who thinks he's a chicken.

"Why don't you send him to a psychiatrist?," the friend asks.

"We need the eggs," she replies.

P.S.: I know where to go to get at least a little of the capital needed to fill the Fannie/Freddie black hole: their former managements. As I recall, Franklin Raines et al walked away with hundreds of millions in pay during the period that these entities' losses were gestating (notwithstanding their Pollyanna financials).

That should make them poster boys for so-called exec pay "clawbacks."

Euro Euphoria

Would euphoria for the Euro -- of the kind witnessed in yesterday's markets -- properly be called "Europhia?"

Just asking . . .

Negotiating vs. Arguing

Real Estate Negotiation 101

Real estate agent and trainer Rich Levin is the author of "Top Ten Negotiating Rules for Realtors."

I can personally attest to the validity of the first two:

One. Don't go back and forth between a buyer and seller more than twice.

Two. Don't let the buyer and seller come to dislike each other.

In fact, rules #1 and #2 are very much inter-related.

In my experience, a real estate deal with one or two rounds of back-and-forth is a negotiation; three or four (or more!) usually becomes . . . an argument.

European Bailout

One Helluva Round-Trip

Want to know what stocks are going to do?

Forget financial analysis.

It's all about political analysis: on the strength of a European bailout (announced over the weekend), worldwide stocks are going crazy -- this time on the upside.

Personally, as a long-term, buy-and-hold investor (vs. Wall Street trader), it all has me reaching for the Pepto Bismol.

The large size.

Just call it the "Pepto Bismol" stock market, I suppose . . .

Fern Hill Extreme Makeover

Playing Housing "Leapfrog" on Huntington

Where: 28xx Huntington Ave. South, in St. Louis Park's Fern Hill neighborhood

What: whole house renovation

Who: Mike Sward, agent; Edina Realty, broker

When: due back on market late Summer

How much: projected selling price = low $800's

No, you won't recognize this home driving by -- it won't look like this for a few more months, when the new dormers are added.

For now, it's a hive of dumpsters and contractors, who are busy remaking this 1949 Fern Hill Cape Cod.

When it's complete, the home will go from the runt of the block (1,949 FSF; sold price $390k this March) to the "Charles Atlas," complete with all the bells & whistles.

Wall Street "Bungee Jump" Culprit? Mrs. O'Leary's Cow

Lots of Dry (Financial) Tinder

Want to know who -- or what -- caused Wall Street's melt-down last Thursday?

It was Mrs. O'Leary's cow. Or at least the 21st century, financial equivalent.

Huh?

It was Mrs. O'Leary's cow, of course, that got the blame for causing the Great Chicago Fire of 1871 (it turns out the story was made up by a journalist).

But while a cow kicking over a lantern might plausibly have started the fire, it quickly developed into a conflagration for other reasons.

Like a city full of highly flammable wooden structures all built too close together, protected by an antiquated, overstretched fire department

So, too, the spark for last Thursday's stock market bungee jump might well turn out to be a clerical error on an especially large trade.

But it's hard to believe the resulting fire would have been so big if there wasn't plenty of dry tinder nearby.

Capping a Polluting Gusher

Looking for a "Containment Dome" . . . . for Wall Street

See if this sounds familiar:

First came the explosion and melt-down.

Next came the after-effects: millions of innocent victims, sickened and poisoned by the fast-spreading pollution.

Finally, tardy and tepid, came the containment and clean-up efforts -- entrusted, incredibly, to the same despoilers whose negligence and greed caused the spill.

BP's oil spill in the Gulf of Mexico?

Try, Wall Street's 2008 Melt-Down and after-effects, still causing shock waves in financial markets and the global economy two years later.

The only real difference I see is that, at the moment, the authorities are making a serious effort to staunch the pollution . . . in the Gulf.

The Unsung, Unassuming, Underappreciated Split-Level

Learning to Love (OK, Like) Split-Level's

What's so great about opening the front door of a home and finding yourself standing in the middle of the Living Room?

Or maybe Kitchen?

That's been my experience in any number of newer, upper bracket homes -- homes that supposedly boast the latest and greatest of everything, and reflect the latest trends.

By contrast, no one seems to want a Split-Level.

The floor plan strikes some as awkward.

The curb appeal can be underwhelming.

Plus, there's no grand entry.

On the contrary, if the Split-Level is also a Split-Entry . . . . you have to decide whether to go up . . . or down!

Advice to Home Buyers

So what?

What Split-Level's lack in sex appeal, they often make up in functionality.

And price (as in value).

And construction quality.

The majority of the Split-Levels in the Twin Cities -- at least closer in -- were built in the 5o's and '60's: a golden era for home construction quality if there ever was one.

Which is another reason to love (OK, like) them: great location.

Finally, that floor plan many turn their noses up at has some redeeming virtues.

Like, the lower level in many split-levels is a walkout, or at least has lookout windows.

Which means no dark, basement-y feel.

So, here's my advice to prospective Home Buyers:

Get over yourselves.

Curb appeal, which is over-rated anyways, is for the neighbors.

And if you want a grand entrance, with a two-story foyer . . . you can have your pick of dozens of McMansion's in the 'burbs -- about as trendy as Hum-Vee's right now.