"Did They Really Get $1,500 a Month for That?"

Rentals on MLS

One of the quirks of following rentals on MLS -- available since Sept. 1 -- is that there's no way to track the difference between what landlords are asking, and what they're actually accepting.

Over on the "for sale" side of MLS, Realtors and appraisers alike know to skip homes that are "Active," and instead only scrutinize actual, closed sales (called "Comp's," or "Comparable Sold Properties").

At least so far with rentals, there's no analogous way to do that.

P.S.: after six weeks, the local MLS now has over 300 rentals listed -- a big jump, but still a fraction of what Craig's List has, and a drop in the bucket compared to the 28,000-plus active "for sale" properties on MLS.

(The Problem with) Blind Solicitations

"Would You Consider Renting?"

Through the years, I have in rare instances sent a blind mailing on behalf of a client who had seemed to exhaust all other possibilities.

Typically, they were interested in either a very specific style of home, a very specific neigborhood -- or both.

And were under a time deadline.

Junk Mail

While such letters invariably do elicit some bites, the problem is motivation: if you ask someone who wasn't contemplating selling or renting whether they'd consider selling or renting, they have a funny way of coming up with a price that's WAY above market.

Or -- after prolonged, time-consuming negotiations -- back out.

Bottom line?

The best way to be sure someone's home is really on the market -- either for sale or rental -- is that . . . it's already on the market (on MLS, Craig's List, "For Sale" and/or "For Rent" signs in front, etc.).

Get Ready for Thursday Tour (Thursday??)

You Read it Here First

In the course of helping clients find a rental property the last 2 weeks, it's become abundantly clear that the rental market is much more fragmented and chaotic than the For Sale market.

And pricing is much sloppier (what you get for, say, $2,500/mth runs the gamut from properties worth high $300k's to low $600k's).

While Craig's List seems to dominate, there are another 6-8 sites that have rental properties that aren't listed elsewhere.

And coming this week, rental properties will now be on MLS.

Step 2

Once you've defined the appropriate universe of rental candidates for your client, step #2 is to go look at them.

Some owners and rental brokers are quite responsive, and showings are easy to set up.

However, others take repeated efforts to reach, and have very little time available for showings ("How about after work next Monday?").

For Realtors generally accustomed to getting access during business hours, with a few hours notice, that doesn't cut it.

Proposal: Rental Tour

Once upon at time, For Sale properties suffered from a similar lack of exposure.

At least in the Twin Cities, the solution was to hold open houses every Tuesday, between 11 a.m. and 1 p.m., when Realtors can see all the new inventory.

Here's betting $100 that there'll be something similar for rental properties within the next year (at least ones whose rent justifies the marketing effort).

P.S.: my proposed time is 1 to 3 p.m Thursdays.

Craig's List Job Posting (Seriously)

"Dear New York Times Op-Ed Department . . ."

Just in case any readers of this blog know anyone, I just posted the following on Craig's List:

I write a highly-regarded (but relatively lightly read) real estate blog, and am looking for someone who can help get my pieces/posts published on high traffic, national sites (The NYT, Wall Street Journal, Huffington Post, etc).

Location: Twin Cities
Compensation: commission
Principals only. Recruiters, please don't contact this job poster.
Please, no phone calls about this job!
Please do not contact job poster about other services, products or commercial interests.

As far as commission goes, what I had in mind was a "bounty" ($250 - $500) for each successful appearance on one of the aforementioned sites (Hey! I'm a Realtor -- I believe in paying for results!).

And yes, I know about search engine optimization, but I'm not convinced that anyone offering to do that (for a big fee) really knows what they're talking about, or can deliver the promised results.

And, just so I don't sound too forlorn, my pieces are published nationally on a surprisingly regular basis, including more than a dozen times now on RealClearMarkets.com.

Amazingly, another 50(!) or so posts from this blog currently show up in Google's "top 10" hits by subject matter (try typing in "Freakonomics rebuttal").

Hijacked Listings, Cont.

Note to Readers: in my post Aug. 20, Hijacked Listings, I discussed the practice of scammers using homes listed for sale to snare unsuspecting, would-be renters. The information below is from the home page of the Multiple Listing Service ("MLS"). While it's addressed to Realtors, the follow-up steps are relevant for anyone who may be affected by this scam.

from NorthstarMLS.com:

Craigslist Rental Scam Targets the Area

There is a rental scam using craigslist that has targeted some properties listed for sale on NorthstarMLS. Property information and photos are taken by criminals from public broker/agent Web sites and then listed as a rental home through a Craigslist classified ad at an unbelievably low rate. The landlord-who had to leave the country and travel to Nigeria-asks that you wire him two months' worth of rent. You arrive at the home on the agreed-upon date, but there's just one small problem-the house is not actually for rent and its owners know nothing about your agreement. This latest scam being perpetrated by Nigerian criminals located halfway around the world has been seen in a number of U.S. states, perhaps in response to the current housing market-with fewer people buying, more people are renting.

What to do if your listing is a victim of this scam

Email the details to abuse@craigslist.org. Be sure to include the URL (or 10-digit post ID number) in your message. For further recommendations, check out the craigslist page on who to notify about fraud attempts. You may also report it to the FBI's Internet Crime Complaint Center to help them determine the extent of the problem.

"Hijacked" Listings

"Craig's List" Rental Scam

[Note to readers: the Twin Cities MLS now has a message to Realtors on its home page regarding hijacked listings. Click here for the post discussing it]

No, not many people trying to sell the Brooklyn Bridge these days.

However, there appear to be at least a few people trying to rent out homes they don't own.

The practice, called "hijacking a listing," consists of posting a "For Rent" ad on Craig's List, with much of the house info lifted straight from the local Multiple Listing Service ("MLS"), where the home is listed for sale.

The home isn't available to view -- after all, the scammer doesn't have a key.

However, they have a good cover story for that: typically, they're overseas on a business assignment (personally, I wasn't aware that Cargill, 3M, etc. had so many executives temporarily stationed in places like Zimbabwe and Nigeria).

To get renters to bite, sight unseen, the scammer dangles a way below market rental rate.

The would-be renter is asked to complete a background questionnaire, then mail in a "refundable security deposit payment."

As the natives would say, "Yah, sure!"

The proper response if you encounter such a situation?

Contact the police, Craig's List, and the Realtor listing the home, in that order.

Renting vs. Buying & Selling

Realtors & the Rental Market

If you are a prospective home seller who is convinced that prices are temporarily depressed, what do you do? Contemplate renting.

If you are a prospective home buyer who is convinced that prices have further to fall, what do you do? Contemplate renting.

For the above-mentioned reasons, Realtors -- myself included -- are overlapping with the rental market much more often these days.

Buying vs. Renting -- or Selling vs. Renting -- is a case-by-case decision that depends on personal circumstances, time horizon, risk tolerance, and any number of other factors. So, I don't presume to tell clients what to do.

However, I'd encourage anyone weighing the decision to at least consider the following questions:

Prospective Sellers

--If you are convinced that home prices will be higher next year -- or in two years, or whenever -- what is that belief based on?*

--As a prospective landlord, are you prepared to deal with property maintenance, tenant screening, insurance and liability issues, etc.?

--What is the condition of your home? If your home is in mint condition now, how much time and effort will it take to un-do the wear & tear associated with renting?

--What are your investment alternatives? Specifically, is collecting monthly rent a better or worse return on your money than selling and investing the proceeds elsewhere?

Prospective Buyers

--If you are convinced that home prices will be lower next year -- or in two years, or whenever -- what is that belief based on?*

--Where do you think interest rates will be when you're ready to buy? Even if home prices are lower, higher interest rates may negate any savings (unless you're paying cash).

--For the same budget, how do your rental choices compare to your purchase choices, net of any tax benefits associated with buying?

--If you have kids, how will renting (vs. buying) affect your choice of schools? Choice of neighborhood(s)?

Just because I'm a Realtor does not mean I automatically think everyone should own.

In general, the more short-term your horizon is, the more sense it makes to rent rather than buy. That's also the case if you're not prepared to maintain your property, or simply don't have the money for the necessary upkeep (not to mention the downpayment). Of course, if you are new to a community, it can also make sense to rent until you know the area better.

Lending a Hand

As a Realtor, how do I handle prospective Buyers who decide to rent?

I try to be as helpful as I can, with the caveat that I'm not an expert on the rental market -- it's hard enough to keep track of home prices metro-wide.

That said, as a courtesy to my clients (and former clients), I'm happy to do an email to fellow Edina agents to see if they know of something; check Edina Realty's (internal) classified ads for leads; and suggest such resources as rental agencies, Craig's List, and even local university bulletin boards (online and off).

I'm also happy to keep my eyes and ears open.

While I was showing a home two years ago, I struck up a conversation with the tenant, who mentioned that their lease was expiring soon. Although my clients passed on the house, I had other clients who were looking for a rental in the area.

I put them in touch with the owner, who ultimately decided to take his home off the market and rent to my clients. (Based on my first client's feedback from their showing, as well as my own market knowledge, I was pretty confident that the home wasn't going to sell -- at least not anywhere close to the asking price.)

*P.S.: If you know where housing prices are going to be in the future . . . by all means tell me!

"New" vs. "Re-List"

Q: When is a "new list" not new?
A: When it's a re-list

"'Insanity' is doing the same thing over and over again and expecting different results."
--Albert Einstein

January in Minnesota is about snow, subtly lengthening days (finally!), and -- to Realtors -- re-lists. Lots and lots of re-lists, especially this year.

If you're not familiar with the phenomenon, cancelling and re-listing a property is the preferred way for Sellers (and their Realtors) to raise the profile, however briefly, of a home that's been for sale for awhile and starting to get "tired."

Like Craig's List, the Multiple Listing Service ("MLS") database is a dynamic river of new information. The main difference is that the flow is vertical -- specifically, top to bottom -- not horizontal.

The vast majority of prospective Buyers (as well as Realtors) focus on the newest properties to hit the market. If you're seriously shopping for a home, and your criteria are reasonably crystallized, you'll quickly become familiar with all the existing inventory that meets your criteria (or doesn't, as the case may be). So you keep your eyes on what's new to market every day.

For Sellers, the catch is that so much comes on every day that any single listing is quickly buried. After 60-90 days in a market the size of the Twin Cities, it's likely that thousands of listings have come on the market since yours.

So how do you get your home put back on top of the pile? By canceling and re-listing.

Three types of Re-Lists

In truth, there are really three kinds of re-lists.

One. The Serial Re-Lister.

If once is good, several times is better, right? Definitely, positively, not.

Re-listing doesn't really fool anyone, at least not for very long. That's because the MLS has two links, "CDOM" and "History," which show what's really going on. "CDOM" stands for "cumulative days on market," and is exactly that. No matter how many times you cancel and re-list, you can't re-set CDOM (the only way is to take your home off the market and wait one year).

"History" shows, line by line, every change in a home's sales status. The categories include "Active" (same as new); "Pending" (there is a consummated contract, but the deal hasn't closed); "Closed" (equals "sold"); and "Expired."

When an experienced Realtor sees a property history with row after row of status changes, they know that: a) the property was seriously overpriced initially; b) the Seller isn't serious about selling; or c) both a) and b).

Invariably, the answer is (c). When that's the case, the inevitable, final row is usually . . ."Expired."

"Line in the Sand?"

Two. "The Line in the Sand" Re-list.

One of the features of the current, Buyer's market is frustrated, increasingly inflexible Sellers. When their home first doesn't sell, such Sellers may respond by reducing the price in conjunction with making some cosmetic improvements, investing in better staging, etc.

Eventually, however, their willingness (or ability, depending on what they owe) to accept further price reductions evaporates. So, they instruct their realtor to cancel and re-list . . . but at the same price.

This time of year, the MLS database is clogged with homes that either were cancelled around Thanksgiving, and are now being brought back on as new, or, are simply being cancelled and re-listed on consecutive days, with no change in price.

Unfortunately for such Sellers, along with the economy generally, the housing market in most areas has continued to weaken the last few months. So an asking price that was too high in November is even more unrealistic now.

Such a mindset evokes Einstein's definition of insanity: doing the same thing over and over again and expecting different results.

It also recalls an anecdote about Ben & Jerry, of ice cream fame. The two had the same sixth grade Phy Ed teacher, who told the students that if they couldn't do that day's required exercise --running a mile in less than 12 minutes -- they'd have to do it over again until they did.

Ben and Jerry supposedly looked at one another (one can presume neither one would have been mistaken for Carl Lewis), shrugged, and asked the obvious question: 'if we couldn't run a mile in 12 minutes the first time, what makes him think we can do it the second (or third, or fourth)?"

Three. Which leaves the legitimate cancel-and-relist.

Whatever the initial asking price, the re-list price is now at -- or even slightly below -- current market value. Along with the new price, the Realtor freshens the listing's marketing language, and updates any photos that may have become seasonally stale. The owner addresses any cosmetic, easily corrected objections from previous showings.

And perhaps most crucially, the listing agent couples the cancel-relist-price reduction with an aggressive marketing push. That includes networking the price reduction, putting the home back on broker tour (Tuesday's), and holding the house open the next Sunday.

In my experience, such an orchestrated "surge" (oops, bad term) often results in a deal in relatively quick order.