Monday, August 27, 2007

Do you really want your agent to tell you the truth?

By Joel Persinger
YourRealEstateDude.com

Like most families, we have our little traditional games we play with our kids. One of my son’s favorite games when he was small has now become one of my daughter’s favorites. We call it, “this way or that way”. We drive along the neighborhood, pausing at every intersection so that our kids can decided whether we go “this way or that way.” The kids enjoy being in charge and exploring the neighborhoods at the same time. All of us were piled into the car playing that game earlier today with my daughter joyfully acting as navigator, when my wife observed, “There’s at least one house for sale on every street.” “Yes”, I said, “And the vast majority of them are overpriced!” The moment I said it, it got me thinking.

I have had several meetings this past week with prospective home sellers. In each case they asked to meet with me to discuss the market and the possible sale of their homes. In each case, I left the meeting without having listed their homes for sale. This is because, in every case the clients were expecting to sell their homes for much more than the current market will bear and knowing this, I gently but firmly told each one of them the truth.

They were disappointed to be sure, but each now has the information they need to make a well thought out and informed decision. In one case, the clients have decided to continue renting out the property. In another, the decision to stay put until the market changes was the best idea. But regardless of the direction each client chose to take, each situation has two things in common. First, I told the truth even though it wasn’t what they wanted to hear. Second, I didn’t make any money doing it. Which brings me back to my wife’s observation about the number of homes for sale and my comment about them being overpriced.

Real estate people make money when they sell a property, pure and simple. They may give advice to anyone who asks, but they don’t make any money doing it unless they get to sell a property somewhere along the way. Even if the client is left much better off after having received the advice, the real estate agent is still left without a dime of compensation and looking for the next client.

This explains why many agents are simply afraid to tell their clients the truth. It also explains why there are so many homes on the market that are hopelessly overpriced. After all, if the agent tells the client that her expectations are unrealistic, the client may simply hire an agent who will tell her what she wants to hear. The end result is that many agents list homes for sale, knowing full well that the price is too high because they are afraid to tell the client otherwise. Then they either wait for the seller to become frustrated and desperate enough to lower the price on their own or simply hound the seller to reduce the price until the property sells. Either way, the selling experience is an exercise in sleepless nights and excess stomach acid for both seller and agent. This, among other reasons, is why I decided years ago to just tell people the truth from the start.

So, if by chance our paths should cross and you ask me for advice about selling your home, don’t be surprised if I start out by asking, “Do you want me to butter you up like a Sunday biscuit, or would you like me to tell you the truth?”

Saturday, August 25, 2007

“The only thing we have to fear, is fear itself”

By Joel Persinger
YourRealEstateDude.com

I have heard from many clients this past week who have expressed their concern and downright fear for the future of our country and their individual prosperity. The news surrounding the financial market, the real estate slump and the almost daily diet of “Chicken Little” news stories screaming, “The sky is falling” have left many of us in a kind of zombie-like funk.

It is at times like these that I am most grateful for being old enough to remember a few presidents and to have parents and grandparents who told me stories about the difficulties and the leaders of their time. While I remember the, “Ask not what your country can do for you…” speech of President Kennedy, my parents and grandparents were moved by the first inaugural address of President Franklin D. Roosevelt. An address which was given during one of the most challenging times our country has ever faced.

Over the years, as they told me stories of the “Great Depression”, I sat wide eyed with amazement at the challenges they endured and the hope they were given by the words of the president they affectionately called “FDR.” It was a sad and difficult time to be sure. Those of us who are not old enough to remember or have family who could tell us the stories can only imagine, with an almost clinical detachment, the hardships faced by our nation at that time. Yet, even so, there is some truth in the notion that history repeats itself to one degree or another. It is with that thought in mind that I sat down this morning and read FDR’s speech once again.

As I read the speech, I became more and more grateful for the blessings of today and the simple fact that the present American economy bears little or no resemblance to the crippled and devastated marketplace of that era. In fact, I became convinced that the hardships we face today are minor by comparison, and on a comparative basis, cannot justifiably be called hardships at all. The overwhelming majority of our citizens are employed, interest rates are still amazingly low, the supermarkets are brimming with food, the lights still go on when I flip the switch, water still comes out of the tap, gas is still plentiful and I can still fill up my car for about half the price paid by my counterparts in other countries. “But,” you reply, “My house has been on the market for months, nobody is buying and I’m afraid that my 401K is going in the tank!” I understand these things. My properties aren’t worth as much as they used to be and my retirement funds are in jeopardy too. The difference is that I refuse to be guided by fear.

Fear is what is holding things back. Fear is what has caused buyers to hold off from buying your house. Fear is what caused the financial markets to fly wildly in every direction last week. And so I ask myself, “Fear of what?” Buyers certainly cannot be afraid of current real estate market conditions. After all, this is a buyers’ market. Interest rates are great and buyers have all the clout. The leaders of the financial markets could not have been driven to panic by the fact that they were losing money, because they weren’t losing money until they became afraid of their own shadows and began to panic.

Just as in any time of trial, the first thing we must do in order to survive is to get hold of ourselves and decide here and now that we will not panic. In the 1930s our country wasn’t going into the tank, it had already gone. Yet, in the face of those heart-wrenching circumstances, FDR offered the best encouragement anyone could have given. He said, “This great Nation will endure as it has endured, will revive and will prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself…” If you are sitting on the fence, paralyzed by a fear that is keeping you from buying a home, don’t let fear win out. Look at the reality of the market. This is a buyers’ market. You have all the advantages. But it won’t last forever, so grab the opportunity while you can and don’t look back.

Monday, August 06, 2007

Is the lending market drying up?

By Joel Persinger
YourRealEstateDude.com

This past week I received a couple of emails and a phone call or two from lenders addressing some changes in company policies. It would be fair to say that some had to do with loan approval requirement and programs and others represented changes in response to an increasing number of fraudulent loans that the lending companies have gotten stuck with.

A few of the lenders in question have tightened their requirement for borrowers. As a result of these changes, it appears that borrowers are going to have to produce more information, have better credit, have a history of solid employment and jump through other such hoops in order to get a loan. Basically, the lenders want the borrower to be able to prove that he or she can actually repay the debt. This may not sound like a novel approach, but it stands in stark contrast to the recent real estate boom, during which time just about anybody could get a home loan as long as they could fog a mirror and maybe sign their name with something other than an “X”.

In the case of another lender, I received a copy of an internal memo which addressed the fact that the lender had experienced a problem with fraud. According to the memo, some loan officers had generated a significant number of fraudulent loans. This resulted in loans that could not be resold on the secondary money market. Many lending companies generate loans and then sell them, thereby earning money for generating the loan and recovering their investment once the loan is sold so that they can lend that same money over again. When lenders cannot sell a loan on the secondary market, they must hold the loan and service it themselves. This means they cannot recover their investment quickly and, therefore, potentially have less money to lend when you and I bop by asking for a loan.

At just about the time I received these emails and became concerned about the availability of money for home loans, I received a telephone call from one of San Diego County’s larger credit unions informing me of a program they are offering in which there are first time home buyer loan packages with 30 year fixed rate loans as low as 6.5%. Given these apparently mixed messages, what is the average guy on the street to think?

The bottom line is that some lenders have been hurt by their own foolish lending practices. During the real estate buying frenzy that occurred a couple of years ago they lent money to people who should never have been able to get a loan. Then they dreamed up crazy loan packages that amounted to nothing more than ticking time bombs which are now blowing up all over the place leaving a wake of short sales and foreclosures in their path. Unscrupulous loan brokers and loan officers started popping up all over the place as a result. Fraud became a serious problem. This was a hard and costly lesson, and it is only natural that they should tighten their requirements after having learned it. But does that mean that there is no money to be had? If the credit union I heard from is any indication, the answer is “NO”.

The credit union representative who called me was excited about the home lending business. She has loan programs that are very competitive and money that is available to lend, but the borrower has to be able to pay it back in order to borrow it. What a concept! So, don’t let the “bad news” get you down. If you have good credit, a good job and have been responsible with your money, you may find that the home loan you’re looking for is waiting for you just around the corner.