Reading the tea leaves of real estate. What's up for 2007?

By your real estate dude.

You may not have noticed this, but our national culture has become one in which “talking heads” and “experts” rule the day. Just about every “news” program on television spends the better part of the broadcast segment asking experts to give their opinion about whatever they think is going on. Newspaper and magazine articles often do the same. The “experts” forecast and analyze everything from the weather to the war and we read or watch their opinions with great interest allowing our moods and thoughts to be shaped along the way. I do it, and I know you do too. Look at you. You’re reading this column!

This past Monday (December 18th) was a field day for talking heads. It was the “Seventh Annual Residential Real Estate Conference” put on by the Burnham- Moores Center for Real Estate at USD. The gathering of developers, investment gurus, real estate prognosticators, mortgage lenders and economists was quite large with many of the “movers and shakers” present and accounted for. During the presentation, a group of PhDs and industry experts gave their predictions for the coming year. As an official “talking head”, I was invited to attend. Here is how it went.

A well known investment guru and two PhDs in economics made lengthy, complex and impressive presentations, followed by a panel including an economist, a major developer and the president of a major San Diego real estate firm. The first presenter’s message was upbeat and optimistic. In his opinion, the market is experiencing a normal correction, there never was a real estate bubble and all will be well going forward. As I followed along with his presentation I was feeling pretty good about the market and wrote in the margins “Don’t worry, life is good”.

Just about the time I was feeling great about the coming year, the second presenter took the stage. This PhD spent his allotted time depressing the life out of everyone in the room with dire predictions of a sagging market. My note in the margin read “The sky is falling”.

Then, at the very pit of the room’s despair, the third presenter bounced upon the stage with a grin. His twenty minute message left my margin note proudly stating “It’s a normal market; no big deal; life is good”. Just as I wrote this the lady seated next to me leaned over and whispered, “I’m not sure if all this is good or bad”.

To put the icing on the cake of our confusion, the panel took the stage. Not surprisingly, they could not seem to agree on much. During the question and answer period I asked how so many experts can possible read the same data and come up with so many differing forecasts. They’re only response was, “Welcome to economics”. My margin note read, “They haven’t got a clue”.

So, where does that leave you and me as we try to sneak a peek at the future of the real estate market? It leaves us with the only valuable thing coming out of Monday’s conference. It was both the simplest piece of information to gather and the last presented.

Almost at the conclusion of the conference, the host decided to close with a parlor trick. Each table had an electronic keypad to allow the audience to answer three simple questions about the coming market. It was a gimmick meant to compare the audience opinion with that of the “experts”. But then, the audience was full of experts. It took only five minutes. Each table voted and the votes were tallied and presented on the big screen. My margin note… “The opinion of the audience was overwhelmingly positive; it’s going to be a good year”.

Representation vs. Sales

by your real estate dude

Some time ago I closed an escrow that had me wanting to dust off my soap box, grab my megaphone and shout opinions to every passer by at the nearest street corner. Fortunately, I write this column, so I don’t have to strain my voice or get pelted with tomatoes by those who may disagree with what I am about to say.

In every industry there are things that rise to the level of pet peeves for those who work in the business, and I am no different in that I have pet peeves when it comes to real estate. While some peevish things are just irritating, others can cause genuine and lasting harm. It is one of the latter that I am going to tell you about today.

The greatest pet peeve I have with regard to real estate can be found in the fact that many do not clearly understand the difference between representation and sales. While real estate agents are often looked upon as “sales people”, the truth is that a real estate agent has a fiduciary duty to his client under the law. The fiduciary duty is one that requires the agent to act with the utmost care, integrity, honesty and loyalty in dealing with the client. In plain and simple English, the agent is to act in the best interest of the person whom he or she represents. Unfortunately, agents sometimes lose track of whose interest they are representing. Take the escrow I mentioned earlier for instance.

I was representing a client in the sale of her home. We received an offer to purchase the house and I began negotiating with the buyer’s agent on behalf of my client. My goal, as the seller’s representative, was to get the best possible deal for the seller.

The buyer’s agent made some mistakes at the outset by drafting the offer in an incomplete manner. This gave me the opportunity to take advantage on behalf of my client and save her the cost of a few items. So, I drafted a counter offer which clearly shifted the cost of certain items totaling about $3,000 to the buyer. I told my client that the buyer’s agent would surely catch it and negotiate these items out of the agreement, but it was worth a try. After all, as my grandfather use to say, “If you don’t ask, you don’t get.” As it turned out, the buyer’s agent was so eager to get the “deal” that he just had his client sign the contract as written and never raised the issues.

Twenty some odd days later, the buyer received the estimated closing statement with an itemized list of the buyer’s costs. The buyer was blindsided and upset. Right there on the list of costs were items generally paid for by the seller. But, the buyer, without being forewarned by his agent, had agreed to pay for them.

As you might imagine, the buyer expressed his displeasure and I received a frantic call from the buyer’s agent. It seems that the agent was upset that I had negotiated effectively in favor of the seller. During the call, I explained my responsibility as my client’s representative and that my job is to look after my client’s best interest. With a sound of disappointment in his voice, the buyer’s agent said, “When we started this deal, I thought you were a nice guy”.

This agent did not understand where his loyalties should have been. While I viewed my job as one of “representation”, he viewed his as “sales”. During the transaction, he was a “nice guy” and was happy to give up whatever it took to make the deal. I was pleasant to work with but took every opportunity to get the best possible arrangement for my client. While the buyer’s agent’s loyalty was to the “deal”, mine was to my seller.

Make no mistake; there are hundreds and hundreds of good, honest and trustworthy real estate professionals working hard for their clients in San Diego County. While some forget where their loyalties lie, and become more concerned with making the sale than with their client’s best interest, it is by no means accurate to label every agent as self serving and mercenary. The important thing is to be able to tell one from the other.

The easiest way to find a good agent is by referral. As the old saying goes, “Word of mouth travels faster when it’s bad”, so get referrals from friends whom you know and like and trust. If their real estate agent took good care of them, you’ll probably have a similar experience. One way or the other, if the agent seems more like “sales” than “representation”, my advice is to kindly excuse yourself and find someone else.

‘Tis the season to be buying

By your real estate dude

I know I’m stating the obvious, but in case you’ve just returned from outer space, Christmas is right around the corner. Christmas, or at least the commercialized version of it, is everywhere. The retail onslaught is relentlessly pursuing each of us on television, radio commercials, print and every other form of advertising devised by man. ‘Tis the season when retail stores try with all their might to make their sales for the year and everyone, it seems, is focused on the holidays to come.

So much so in fact, that many of us become afflicted with a strange illness about a week before Christmas called “short timer’s disease.” You’ve seen it in your workplace; people just going through the motions waiting for Christmas vacation to start. Some desks are already empty and many companies are working with a skeleton crew. Nobody likes to admit it, but most folks are more interested in shopping and company Christmas parties than they are in working as the day draws nearer. Like I said, “’tis the season.”

Just about every business has a seasonal component to it. For retail, this is the time to rake in the bucks. But, for real estate this is down time. While people everywhere are swarming the malls, raiding internet retailers and marking time at work, thousands of homes are for sale without anyone paying them any attention. If you’re trying to sell, this time of year can be a bit discouraging, but if you’re buying this is the right time for you.

Come January, things traditionally start to pick up for real estate, but from now until the end of the year the real estate market slows to a crawl. The beautiful part for buyers is the almost total lack of competition. Sellers are more likely to bend over backwards to make you a deal during this season because you will probably be the only buyer they have.

So call me Santa and take my advice. If you’re ready to buy, take a break from the malls, grab your Realtor, go house hunting and make an offer. You might be surprised by the happy result. After all, ‘tis the season to be jolly!

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You don’t have to be smart!

By Your real estate dude

Just the other day, I found myself talking with a fellow who had asked me for advice some time back and not taken it. He probably doesn’t remember asking me or the advice I gave him at the time.

It was a strange scene, becoming almost surreal as he began to speak, like one of those movie flashbacks. There I was, standing next to him listening as he lamented his current circumstances. His face looked long and tired. Suddenly, it was as if I was transported back in time. In my mind’s eye, I could see him standing in almost the same exact spot a year or so ago excitedly asking me for my advice regarding his plan to take out some very risking loans in order to realize his dream of becoming a landlord. I was about to give him my answer, to share the advice he so quickly discounted, when I was thrust back into the present once again just in time to hear him tell me what a terrible financial mess he was in. As he finished his tale, his last words were, “but, you know more about this real estate stuff than I.”

As I walked out to my car, I couldn’t help remembering a rule my grandfather had taught me when I was growing up. It has echoed in my memory ever since, “You don’t have to be smart, just hang around smart people.” Sure, Grandpa was a do-it-yourselfer when it came to some things, but there were certain things, according to my grandfather, that you just didn’t take on by yourself. You didn’t do your own taxes, you didn’t represent yourself in legal matters and when it came to investing, you didn’t do much of anything without first consulting professionals who had been successful at what you were trying to do. And above all, when they gave you advice you listened!

Over the years, I have surrounded myself with smart people who have experience and knowledge in areas I don’t, and who are more interested in my welfare than a paycheck. When I have a tough investment decision to make, I start asking the right people and listening carefully to what they say. I’m not perfect at this you understand. On a couple of occasions, I have gotten too big for my britches and thought I knew better. I ignored the advice I received and believe me, I paid for it just like the fellow I told you about a few paragraphs ago.

The important thing is what I get to pass along to you. I have learned that my Grandpa Charlie was pretty smart after all. He knew what he didn’t know and he was smart enough to heed the advice of others who did. In doing so, he increased his chances of being successful and you can too.