Lying Realtors

Reason Not to Lie #37

Lying is hard, telling the truth is easy. By definition, every good Realtor juggles: multiple clients, dozens of showings, lots of parallel deals at varying stages. It's hard enough keeping all the details straight and presenting them coherently to your client(s); not tripping yourself up in a web of lies would seem to increase the "difficulty factor" exponentially.

--Ross Kaplan, "Freakonomics Rebuttal"; City Lakes Real Estate blog (3/23/08)

Faithful readers of this blog might be surprised to hear me say that, as far as I can tell, Realtors seldom lie -- and good Realtors never do.

There are multiple, reinforcing reasons for that: it's unethical, it's bad business, it's hard to do (see above), it's easily found out, etc., etc.

On that last score -- it's easily found out -- I heard a good anecdote recently about a Realtor who felt the need to "embellish" the turnout at a Tuesday broker open. If you didn't know, at least in the Twin Cities, the custom is for Realtors to tour the new inventory each Tuesday from 11 a.m. to 1 p.m.

Instead of simply reporting to his clients that, for whatever reason, the turnout was poor, the Realtor "borrowed" a slug of colleagues' business cards to leave out on the client's dining room table.

What happened next?

The client wanted to hear the broker open feedback directly from "the horses' mouths," and decided to call the agents directly.

When not one of them turned out to have actually attended the broker open . . . the client did what any client would -- and should -- do: fired the Realtor.

Down Time/Catch-Up

Hot Search Term(s): "Realogy Bankruptcy";
"Firing Your Realtor"

Note to Readers: no, it's not your imagination -- I've been off-line for a few days. Family trip to Chicago; taxing foreclosure deal (that came to naught); and ramping up a new blog design (details to come).

Question: What do parents (combined age: 95) of 3 kids (combined age: 19) say after driving to and from Chicago for four days?

Answer: TGIM ("Thank God it's Monday).

Enough catch-up . . .

One of the fringe benefits of a being a frequent blogger -- the last few days notwithstanding -- is that, in conjunction with my site meter, I can tell what key terms people are surfing for.

(Just in case you're concerned about your privacy: I can't tell the visitor's identity, but only such things as the name of the visitor's service provider, the time and length of their visit . . and the search words that brought them to the blog.

So, just like radio stations can tell which songs are popular and which aren't, blogs can tell which posts are attracting attention, and which aren't.

Out of some almost 300(!) posts the last six months or so, the far-and-away most popular is Coldwell Banker Burnet Troubles.

Clearly, there are lots of people out there speculating about the company's future -- so much so that my post has become one of the half dozen or so most frequently read on the subject. (Full disclosure: in the blogosphere equivalent of "being famous for being famous," blog posts that attract attention then draw attention for drawing attention -- very circular.)

To recap, Realogy is the parent company company of Coldwell Banker Burnet, an Edina Realty competitor, and is loaded with debt even as the recession whacks revenue. Not quite as bad as the problems facing the now-bankrupt Chicago Tribune or Minneapolis Star Tribune . . . but close.

Tough Market . . Rocky Relationships?

Winning the title of most popular "up-and-coming" blog post? Something I wrote last month titled, "Firing Your Realtor."

In a challenging market -- and this certainly is one -- more Sellers are taking multiple price cuts; more listed homes are expiring, unsold; and more Buyers are looking at more property, and taking longer to make offers. All those things can stress relations between Buyers and their Realtors, and Sellers and their Realtors.

So, clearly, unhappy clients are seeking online advice about when -- and how -- to find the exit.

Last item: I didn't even know that the Star Tribune had something called a "Netlet" -- an online-only guest column -- until they ran one of mine.

And I didn't even see it until a week after it ran (and two weeks after I submitted it).

Both of which just underscore the paper's declining business fortunes.

The piece was called "Who are Obama's Air Traffic Controllers?" In it, I made (I think) the rather obvious and unassailable point that, sometimes it's important for top government leaders (President, Federal Reserve Chairman, etc.) to tell key constituencies "no" -- and be willing to take the political heat for it.

Ironically, I was the one who got the "heat" -- in the form of multiple "flames" (critical, if not abusive, email criticism).

For the record, I am not a Reagan apologist, a defiler of the environment, anti-labor or anti-union, against air traffic controllers, in favor of gargantuan deficits, etc., etc.

Firing Your Realtor - Part 2

[Note: Please go to Firing Your Realtor - Part 1 to see the beginning of this post]

Three. Poor or no feedback from prospective Buyers.

As I like to tell clients, the best feedback any home seller can receive is a full-price, non-contingent offer from a financially qualified Buyer (even better: several of them!).
However, in the meantime, a proactive Realtor will elicit and make the most of feedback from non-Buyers.

If prospects are balking because the mechanicals are old, savvy sellers may want to consider buying a home warranty (or, if the asking price warrants it, replacing an ancient furnace, water heater, etc.)

If Buyers are turned off by old paint or carpeting, cosmetic updated may be in order. If the curb appeal is a turn-off, flattering interior shots — and lots of them — can help compensate.

If you don’t know what Buyers’ objections are, however, you can’t counter them.

Even if the problems cannot be easily remedied, it is important for Sellers to know so that their asking price can be discounted appropriately.

Four. Inattention.

It is never a good sign when your Realtor takes days to respond to you (or doesn’t respond at all). Even a Realtor in the middle of multiple deals will find a way to fire off a quick email or leave a voice mail.

What if your Realtor is guilty of none of these sins?

On the contrary, what if they continue to aggressively market your home to fellow Realtors and the public, hold open houses, refresh the marketing materials, track nearby activity for trends and developments, etc.

In the words of that famous real estate observation: “the fault, dear Brutus, is not in our stars, but in ourselves.”

Firing Your Realtor -- Part 1

How to Know When: Four Signs

Just because a home hasn't sold doesn't mean that the Realtor is doing a bad job.

But, if your home is lingering on the market, it's imperative to know why. Here are four signs that the problem may not be your home, but your Realtor.

One. Mediocrity (or worse).

Fortunately, egregious Realtor ineptitude is usually easy to spot.

Examples include omitting or misstating key information about your home on the Multiple Listing Service ("MLS") database or marketing materials; lack of familiarity with the contracts you've been asked to sign; and thinking a "virtual tour" is something that museums offer (in residential real estate, it refers to streaming video that lets prospective Buyers see your home from multiple angles on the Internet).

Not as obvious, but just as harmful, is when your Realtor fails to showcase your home's best selling points -- in which case, other Realtors and the public are likely to miss them, too.

In today's Buyer's Market, if your home isn't shown off to maximum effect --online, inside, and from the curb -- it's likely to stay on the market longer, fetch a lower sales price . . . or both.

Two. Under performing the competition.

With more than 30,000 homes currently for sale in the Twin Cities, the market time for practically all homes is higher than 2-3 years ago.

However, that doesn't explain why the 3 Bedroom, 3 Bath Colonial down the block sold in six weeks, while yours has been on the market for four months (and counting).

If seemingly inferior homes are selling while yours sits, your Realtor should have a ready explanation.

Sometimes, a nearby home that appears less impressive on paper in fact has a remodeled kitchen, a superior floor plan, etc. Or, your home may have one or more warts that, after years living in it, you either take for granted or can't see anymore.

Next: Firing Your Realtor -- Part 2

Buffett's Negotiating Secrets

Berkshire '09 Annual Letter -- Part Two

For investors, perhaps the most tantalizing -- and useful -- part of Warren Buffett's 2009 letter to shareholders is a little tidbit that's appended to the end.

Actually, it's a solicitation, addressed to perhaps a few hundred people in the world.

Who? People who run or have large minority stakes in a specific kind of company. One that Buffett might want to buy next.

Specifically, the desired company should have: a market value of $5 billion to $20 billion, ballpark; top-flight management in place; and be able to earn more than $75 million annually pre-tax, through "thick and thicker," as Buffett might put it.

Buffett also stipulates two negotiating prerequisites: 1) the Seller must have a firm selling price -- and be able to deliver it (thus, no consultants or other go-between's; only principals need respond); and 2) there must be no other suitors -- no auctions.

Buffett's Negotiating Secrets

What can Buyers learn from Buffett? Three things:

One. Never negotiate against yourself.

That's what you do when you open negotiations by announcing what you're willing to pay -- as opposed to insisting that the Seller announce its selling price (and indeed, commit to being sold).

Two. Never negotiate against other would-be suitors. That's what an auction is.

Buffett doesn't do auctions because he knows that a skillfully run auction will raise the price (savvy home sellers and their Realtors know that, too!).

One of two things happens in an auction (at least when the prize is gold, not dross).

Either you prevail, in which case you'll likely have overpaid.

Or you lose, in which case, you'll just have helped drive up the price the winning bidder paid.

No thanks.

So why would a choice, up-and-coming company -- and Buffett doesn't covet any other kind -- pass up the opportunity to "play the field?"

Several reasons, actually.

Berkshire Hathaway is like a beneficent -- and distant -- ruler. A very rich and patient ruler, with an unusual commitment to building long-term value and actually investing and creating capital, not sucking it out.

For an ambitious and capable manager, there are worse places to be than part of Berkshire Hathaway's corporate fold.

Oh . . . and negotiations will be simple, quick, and painless (Buffett doesn't do hostile deals). And cheap! (remember, no go-between's). That's actually Lesson #3 -- "keep it simple and friendly" -- for anyone who is counting.

"We can promise complete confidentiality and a very fast answer — customarily within five minutes — as to whether we’re interested," Buffett promises.

I'll bet Buffett gets two corporate takers by this July 1 -- three if the market's down significantly before then (Berkshire's pretty good shelter in a storm).

"Pride of Renter-ship"??

Renting vs. Buying: How Interchangeable?

Carla Zeineh, 22, and her husband recently began shopping for a home in Irvine, Calif., and discovered that with a 5% mortgage rate, her monthly payment on a $350,000 two-bedroom home with 20% down could be less than the $1,800 month that they pay in rent on their two-bedroom condo.

Nick Timiraos, "Renters Lose Edge on Homeowners"; The Wall Street Journal (2/25/09)

Besides figuring out how to save the financial system, the other Holy Grail at the moment seems to be calling the bottom in the housing market.

In turn, that has unleashed a search for various "metric's" -- or valuation yardsticks -- that will accurately identify when housing is truly cheap, and therefore likely to stop falling.

So once again the cost of owning vs. renting is back in the limelight -- this time, with commentators noting that the pendulum has swung back towards owning. (In fact, owning has traditionally been more expensive than renting, but in a growing number of markets, the premium is now much smaller.)

It's certainly good news -- to prospective Buyers, if not prospective Sellers -- that housing is more affordable. However, underlying the owning-renting comparison is the flawed assumption that renting is a close, if not perfect substitute, for owning.

In economic-speak, rice and potatoes are close substitutes; apples and oranges are, well . . . apples and oranges.

I'd argue that renting a two bedroom apartment vs. owning a two bedroom home -- the example cited in the Journal article quoted above -- is more like comparing apples and oranges, for two reasons. (Note: for purposes of this post, "condo" means "owned, "apartment" means "rented" -- both are multi-family housing.)

Pride of Renter-ship??

One. Different housing stock.

I work with clients looking for small, single family homes, as well as clients looking for condo's. However, I seldom work with clients looking for both at the same time.

Single family homes have more privacy, no shared walls, and -- if they're located in the Midwest -- a yard and a garage. Because of zoning laws (everywhere except Houston), the single family house is located in a lower density neighborhood surrounded by other single family homes.

By contrast, the condo is likely on a busier street, clustered with other higher-density housing.

Cutting the other way are such factors as convenience and upkeep; condo's offer more of the former, and require less of the latter. It's also true that higher density locations offer better proximity to public transportation, stores, and restaurants.

Two. Different profiles.

Of course, the difference between owning and renting extends to more than just choice of housing stock.

Renters tend to be more short-term oriented, financially less well-established, and, especially today, more risk-averse.

It can also be the case, particularly in the Midwest, that owners -- at least until recently -- enjoy subtly higher social status than renters (they're certainly treated better by the tax code!). Just as it's said that no one ever washed a rental car, few renters invest the kind of TLC in their rental space that owners lavish on their homes.

For all these reasons, the decision to own vs. rent is a more qualitative one that goes beyond simple economics.

Which is not to say that economics are irrelevant.

In my (Realtor's) experience, whether renters decide to become Buyers likely depends much more on their individual economic prospects -- and their expectations of future housing prices -- than housing's cost relative to renting.

Playing Realtor Roulette

Will the 4th Time Be the Charm?

Where: 29xx Quentin, St. Louis Park
What: 4BR/3BA; 3,900 FSF; 1931 two-story home
How much: $264,900
Originally listed: $374,900 (11/2/2007)
Number of Realtors (so far): six
Number of Brokers (so far): four

Scanning today's newly listed -- and re-listed -- homes, I couldn't help but notice 29xx Quentin.

I recalled it being an especially active listing and, sure enough, when I did a little digging, I pulled up a very long listing history. (If this house were a felon, it would have a rap sheet a mile long).

Since coming on the market 16(!) months ago, the owner has dropped the price four times, changed the size of the house once (from 4,505 FSF to 3,902), and switched Realtors four times (they've actually had six Realtors working for them because two of the listings were handled by two-person teams).

Even George Steinbrenner -- famous for hiring and firing managers -- didn't make this many changes this fast.

The Ex-Files

So what's going on?

You don't really know for sure unless you personally know the principals and the home involved -- and I don't.

However, it wouldn't be the first time that the combination of a declining housing market and an unrealistic seller proved combustible.

One pattern I've increasingly seen is that the homeowner insists on an unrealistic price, then finds a Realtor who'll take the listing at that price (one always will). The owner is then positively shocked -- shocked -- when the house fails to sell.

Goodbye, Realtor #1, Hello Realtor #2.

It recalls the Seinfeld episode where Elaine thinks she sees her doctor write that she's "difficult" on her chart, and then tries to get Kramer to track down the chart and delete the note so she won't be ostracized by other doctors.

Real estate's equivalent of a medical chart is the listing archive.

When Realtors see a troubled archival history, they naturally think twice about taking the listing (or should).

Unless they can determine why the listing failed to sell -- and have a plan for correcting it that the Seller will go along with -- the likelihood is that they, too, will be eventually be added to the "ex-files."

P.S.: For Realtors, it's decidedly not better to "have listed and lost then never to have listed at all" (sorry, I couldn't resist)

Next: When to Fire Your Realtor