Exploring alternatives to the Status Quo in real estate
The Set Fee Blog has been sorta silent the last several days. It’s not that we don’t have anything to say: it’s that the Tech Summit is less than a week away and there is so much to do! I only have time today to pass on a couple of tidbits.
First, there’s a news item that hit last Thursday:
Then, there are some words of wisdom (let us all be knowledgeable, skillful and virtuous!):
Wisdom is knowing what to do next,
Skill is knowing how to do it,
And virtue is doing it.
— David Starr
Here’s a little background you may not know:
Our new Help-U-Sell website and the new Broker websites that are being unveiled a the upcoming Tech Summit, are being developed by a crackerjack team in South Africa. The are led by our own Robert Stevens, an Afrikaner himself. After working with Help-U-Sell for several years, Robbie took the franchise to his homeland and established it there. If you look at what he accomplished in South Africa in two years, you cannot help but be more than impressed; you’ll be amazed. He grew from nothing to 34 offices, terrifying the traditional business that was already there while delighting consumers as only Help-U-Sell can.
Robbie came back in 2008, and when Ron Westman and Infinium took over, one of their first official acts was to empower Robbie to do what he’d been advocating for a long time: rebuild the Help-U-Sell web presence from the ground up. You see, our website had been outrageously effective in the 2002-2005 time-frame. It absolutely flooded leads into the system. The reason was simple: while the rest of the industry fought tooth and nail not to give consumers free access to information, we embraced the idea. After all, Information Without Obligation was one of our core values. So we employed IDX at a time when most of the other players in the industry kicked it aside and hoped it would go away. Of course, the consumer was delighted and flocked to our website. We quickly started to outrank Re/Max and Century 21 in the Alexa traffic stats and even topped Realtor.com a few times.
Unfortunately in 2005, things began to shift. One of our large competitors saw what we were doing, declared they wanted that and wooed our vendor away, leaving us out in the cold. We scrambled. But truth is, the next few well-intentioned attempts to restore the Help-U-Sell website failed. Robbie realized the biggest problem was that we were at the mercy of the vendors who created, hosted and maintained our site. Not only were they in control, they also took many of the great ideas we used in our website and distributed them to their entire client base. We needed our own site, we needed to build it, we needed to be responsible for it.
So in January, 2009 he began working with a team he’d met while bringing Help-U-Sell to South Africa. No strangers to real estate, these guys had already established the South African version of Zillow/Trulia and were the cream of the crop of that nation’s real estate oriented web developers. In six months they had the new corporate site up and running and nearly doubled traffic. Helpusell.com is carefully constructed to be the Marilyn Monroe of real estate websites capturing the eye and the attention of search engines on a near constant basis. What can I say? Helpusell.com is flirty and captivating!
Now, the focus is on our broker websites, designed to synergize perfectly with the corporate site and to bring a level of easy customization to our brokers that’s never been seen on this kind of site before. When they are introduced at the Tech Summit, the first week of March, the new sites will make it possible for a broker to quickly localize, customize and optimize his or her website, to maximize hits and page views, and minimize bounce rate.
Today, the first contingent of the South African team arrived at Help-U-Sell HQ in Sarasota. They will be with us for the next several weeks to ensure that the introduction of the new broker sites goes without a hitch. It is an important and exciting moment in our history. You’ll be meeting them at the Tech Summit but for now, let us all say, ‘Welkom!’
Although the initial press releases from FHA about 2010 changes made no mention of limits to seller contribution, yesterday’s release made that part clear. In a nutshell, here are the changes:
The changes are in response to pressure from Congress to bolster the soundness the FHA reserve fund and to reduce risk by ensuring that borrowers have ‘more skin in the game’.
I’ve heard from, well . . . nearly everybody how numbing these changes will be to the housing recovery that is taking place today. The economy has created a great market for first time buyers to own their own homes . . . and suddenly we’re making it very difficult for them to take advantage of the opportunity.
Think about it. Today, a young family with less than perfect credit can get into a $150,000 home on an FHA loan with something like $6,000 in cash. That would be enough to cover the downpayment, and some miscellaneous costs. Much of their closing expense can be paid by the seller — up to 6% of the mortgage amount. With the changes, the same family would probably face a 10% downpayment plus have to pick up half of what the seller used to be able to pay for them. That same $150,000 home would probably take $20,000 in cash to acquire. You can imagine how many homebuyers will be taken out of the market when these changes take effect.
We’ve wrestled and wrestled with how to fix the economy and we’ve created new programs to get America moving again, some with positive results, others . . . no so much. I can’t help but wonder what would have happened if we’d have taken a nice chunk of the Stimulus money and put it into housing. What if we’d have made it possible for homeowners to have more — to reduce their debt or their payments — or for buyers to find it easier to get into the market, instead of helping some of the biggest corporations in the world weather the storm.
I know these things tend to work themselves out over time and if there’s good news in the FHA changes it is that their implementation is months away. Here is a timeline:
Is there an action step for us here? Probably. Write your Congressmen and Women. Contribute to RPAC, the REALTOR Political Action Committee (they fight not just for the industry, but also for homeowners). Work with your best lenders to find ways to help these newly disenfranchised borrowers get back into the market.
Thanks to Lana Erwin, Help-U-Sell Edmond/OKC, for helping me track down this information.
The FHA changes that were rumored late last year have begun to trickle out and the initial announcement is not quite as bad as we heard it might be. Downpayment requirements for borrowers with a FICO score less than 580 will increase to 10%. Those with scores above 580 will continue to qualify for the 3.5% downpayment currently available to all. In addition, the upfront Mortgage Premium will increase from 1.75% to 2.25%.
The Brookings Institute is out with some interesting data regarding foreclosures in the market through September 2009. First, they ranked metro areas by the number of REOs per one thousand mortgages. You can see on the following map what we already knew to be true: the highest levels are in the Southwest and Southeast — where all the red and orange dots are — and the lowest rates are in the Northeast — blue dots. You can see that Syracuse, NY had the lowest level of REOs where Las Vegas had the highest.
A full listing of the top 100 metro areas is located here.
They also published a similar map showing where the largest changes — positive and negative — occurred in the levels of REOs. Here is the map for that:
The locations with the highest decreases in the levels of REOs were in California. In fact, nine of the top ten decreases were in California. The largest increases were in the Southeast with six out of the top seven metro areas being in Florida. The full list is located here.
There’s a ton of information here but what leaps off the page at me is that the market seems to have turned in California. Buyers — many of whom are investors — have poured into the market and are snatching up foreclosures as quickly as they can. I’ve heard this from our California brokers, usually in the context of how difficult it is to get a first time FHA buyer into a well priced foreclosure where an all cash investor is the competition. In a downturn, it is usually the investor who establishes the bottom. When they begin to buy, prices and rates of sale begin to improve. It’s also true that real estate trends often start in the West and sweep Eastward. In other words I see this as very positive for all of us.
I also see how important it is to know your market before you make your plan. If you are in the Northeast and are reading about the prevalence of REOs, it would be wise to do a careful analysis of your specific market before you devote time, energy and money to tackling this business. You may discover that REOs are not much of a factor in your town. If you’re in the Carolinas — which are pretty blue in the first map and pretty red in the second — I think you might consider gearing up for and increase in REO business.