The new Banner for the Blog has been chosen. It was close (and I almost pushed the result to my favorite, #1), but in the end Banner #2 had more votes than the others so that’s why it’s at the top of the page now. It’s a great new look! (To see the other contenders, scroll down to the entry entitled ‘Vote! Vote Early! Vote Often! But Vote!’)
Tapped Out!
A little quote from NAR’s Chief Economist, Lawrence Yun:
Housing equity – housing asset value minus mortgage liability – has greatly shrunk in the painful aftermath of the housing market crash. The aggregate homeowners’ real estate equity stood at $6.1 trillion today versus $13 trillion in 2006 according to Flow of Funds data from the Federal Reserve. According to Census, there are 74 million homeowners. So on average, the average equity per homeowner in 2011 is $82,000, which is down from $170,000 in 2006. A separate Federal Reserve data from Survey of Consumer Finances showed that the median homeowner net worth to be $190,000. This larger net worth figure is due to homeowners having other assets in addition to housing equity. The median renter’s net worth was $4,000. The only good news at the moment is that the further declines appear largely over. Price measurements from NAR, Case-Shiller, Core Logic, and Federal Housing Finance Agency have all noted a slight uptick in home price in recent months.
We just don’t have the clout of equity we did five years ago; and it was clout. I’ve seen it in franchise sales. Five years ago an eager prospective franchisee could easily pull a second mortgage to finance a start-up business. The equity was there and banks were falling all over themselves to lend the money. Today that door is pretty much shut. Most times, the equity is not there and when it is, the lenders are so difficult (and guidelines so strict) that the old equity cash-out bonanza is almost impossible.
The good news is (and there’s always good news): It’s not that expensive to get started today. Five years ago, retail space was very pricey and Marketing – which in Help-U-Sell was largely direct mail based – was huge. HUS offices routinely spent $7,000 -$10,000 a month on marketing and it was mostly postcards and mailbox delivered flyers (ETMs). Today, postcards are still an important part of the mix, but Marketing is mostly about the Internet. While it’s not free, it’s cheap compared to mailbox stuffing.
But the drop in equity has had big implications elsewhere, too. Small business expansion is not happening like it used to. In fact, most real estate companies are doing the opposite: scaling back, hunkering down, closing offices, merging, and consolidating. I talked with a Help-U-Sell broker the other day who was a little intimidated by the new mega-office in her town. Two medium-sized companies had combined to produce the largest house of agents on the block. I reminded her that offices consolidate in an effort to cut expenses, and it happens when neither office is making it on their own. She used to have two competitors, each with 50 agents doing less than half a closed side a month. Now she has one competitor with 100 agents each doing less than half a closed side a month. She called back to say she’d run into the new consolidated broker and he wanted to know how she was doing so well. He’d seen her listing and sales activity and was amazed that she was able to turn the numbers with her minimal staff and small location.
Now let’s get practical. Let’s assume we have a homeowner with equity (hallelujah!). Let’s assume this homeowner is in a $300,000 house (that used to be worth $425,000) and has a mortgage of $200,000. That’s $100,000 in equity. The homeowner is grieving for the $125,000 he’s lost, but still needs to sell. ABC Realty will take the listing and charge 6%: $18,000. But that $18,000 is 18% of the homeowner’s equity! Here’s a homeowner who already thinks he’s lost more than half his equity to the economic downturn and now some real estate broker is trying to extract 18% more!!
Thank goodness Help-U-Sell is in the equity preservation business! If this homeowner is smart he’ll keep interviewing until he finds a HUS broker charging a low set fee of, say, $4,950. That works out to a savings of $13,050 and the set fee is just 5% of equity, not 18%.
Yes, we’ve had a huge collective drop in equity. We all want to hang on to as much of what we still have as possible. Today, that means saying goodbye to high, percentage-based real estate commissions and hello to Help-U-Sell. In addition to ‘Save the Whales!’ and ‘Save the Rain-forest!’ let us add ‘Save the Equity!’ List with Help-U-Sell.
Vote! Vote Early! Vote Often! But Vote!
Master of Time, Space and Graphics, Theo (I don’t know Theo’s last name but it’s probably one of those twisty South African names) . . . Theo has created three possible new headers for the Set Fee Blog. I’m excited to finally be moving out of last decade’s design and into the new Help-U-Sell image. Trouble is: I like all three so much I don’t know which to pick! So, I’m asking for your help: Please vote for one of the following:
Candidate 1:
Candidate 2:
Candidate 3:
I will tabulate the vote and announce the winner on Monday, Sept. 19 by applying it to the page design.
Help Wanted
Wanted: Market Segment Specialist
We are expanding our business and are looking for
a few happy folks in specific ‘niche’ marketplaces
to help secure our position there. Are you in a
unique or specialized neighborhood? Belong to a
large local organization? Are you active in a local
club, religious or social group? This might be the
perfect way to earn an extra income working part-
time from home! A real estate license is necessary
but easily obtained with our help. Contact . . . . .
Once again, today’s Broker Roundtable call was a hit. The sharing has been so good lately, there is a move afoot to change the name from ‘Roundtable’ to ‘Mastermind.’ We started out talking about the difference between hiring an agent as a real estate salesperson (charged with the responsibility of expanding your business) or as an assistant (helping you manage the flow of business you have created and freeing you up to create more). It was an interesting discussion. But once again, near the end of the call, an exciting new idea bubbled up.
It started with Maurine Grisso describing a Seniors Only neighborhood in her marketplace. She said she’d love to have someone there to be her advocate. Ken Kopcho chimed in, saying, ‘a kind of Market Segment Specialist?’ So this idea of bringing someone on to help you gain access to a specific niche market began to take shape. It might be Seniors in a specific neighborhood or active in a specific club, or Veterans at the VFW, or even well liked and visible teachers.
The MSS job would be to tell the Help-U-Sell story whenever an opportunity arose so that we get the call when it comes time to buy or sell. Compensation would probably be a referral fee. You’d probably NOT be offering these people a full bore real estate career – and good candidates probably wouldn’t want one — just a chance to earn some extra money doing something easy and enjoyable.
Jack Bailey talked about a very well liked teacher who is active in his school and with the families of his students. He has five kids of his own and is always looking for a way to earn a few extra dollars. This might be perfect for that man.
While the initial vision of this job seemed to be most like a ‘bird-dog’ simply alerting the Broker when activity is imminent, Maurine enhanced it a bit, saying she’d want her Senior Specialist to work any of the buyers who might be appropriate for that specialized neighborhood.
I just cranked out the sample ad above that might be helpful in identifying candidates for this interesting new recruiting target. Perhaps it would go well in Craig’s List or the Penny Saver.
While I love this idea, it is a little bit of a twist on the Help-U-Sell way. Ordinary (Traditional) real estate Brokers recruit bodies with almost no selectivity hoping to hire the few who may expand their business. You see, the Ordinary Broker believes the only way to do more business is to hire more agents. At Help-U-Sell, we never hire unless we have more business than we can handle. When we hire, we’re hiring NOT to expand our business but to more efficiently and effectively handle the business we have already created. When we want to expand our business we do it with Marketing and skill development.
But here, you are hiring a Market Segment Specialist who will enable you to break into markets that are at present unavailable to you. You are hiring them to help you expand your business. It’s a new wrinkle for us . . . but I like it!
It’s Up! It’s Down! And the Problem with ‘Virtual’ Companies
Having finally gotten back from vacation, my thoughts are a little scattered . . . but I still have a few morsels to share.
The NAHB (Home Builder’s Association) is out with a list of marketplaces that have shown sustained improvement over the previous six months. These are places where three indicators (Housing Permits, Housing Prices and Employment) have improved steadily over the period:
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- Alexandria, LA
- Anchorage, AK
- Bangor, ME
- Bismarck, ND
- Casper, WY
- Fairbanks, AK
- Fayetteville, NC
- Houma, LA
- Midland, TX
- New Orleans, LA
- Pittsburgh, PA
- Waco, TX
Meanwhile, Zillow is out with a list of the ten metro areas experiencing the greatest drop in home values over the past five years, based on their own Z-Estimate guess at value. All of these markets have experienced at least a 50% drop in value, according to Zillow:
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- Merced, CA
- Modesto, CA
- Stockton, CA
- Las Vegas, NV
- Vallejo, CA
- Salinas, CA
- Daytona Beach, Fl
- Bakersfield, CA
- Ft. Meyers, FL
- Phoenix, AZ
Of course, I see a 50+% drop in values and immediately imagine a 50% drop in percentage based real estate commissions. The whole traditional approach to the business has taken a 50% pay cut and that’s before factoring in any decrease in the number of sales occurring. Clearly, we are in the midst of a huge change. I don’t believe we will ever do business again the way we did it in the past. In the future, consumers will demand a leaner, more efficient, less expensive, no-nonsense approach to buying and selling real estate. Oh! What was that I just heard?? Did someone whisper ‘Help-U-Sell?’
In the past, when we had a downturn, there was a purgative effect on the business. Bad agents – I hate to mince words, but anyone doing less than a deal a month is, well, a bad agent – usually left the business when the pickings got slim. While REALTOR ranks have shrunk during this long season, they’ve not dwindled they way I expected.
Concurrent with this downturn, we have the widespread advent of the ‘Virtual’ real estate company, an innovation I believe will be part of the future of real estate. Unfortunately, the current aberration of the ‘Virtual’ company presents a problem. Most have simply become a place were unproductive agents can hang their licenses cheaply. Some charge an agent only a few hundred dollars a year, while others charge a small per-transaction fee. So the three or four deal a year agent – the one who used to get out when things got tough – can now afford to stay in and scrape a few deals together each year while earning a regular paycheck somewhere else. Of course, that’s fewer transactions available to the real professionals in the business, but in the end, it is the consumer who suffers. They’re saddled with agents who do so little business they can’t possibly be as current or effective as others who live and die real estate every day.
I think it is very relevant and totally appropriate for any person thinking of selling today to ask their prospective agent, ‘How many transactions have you done this year? How many last year? How many were successful short sales?’ Today, you want an agent who is capable of turning numbers, who knows how to navigate a short sale and to solve the big problems that torpedo so many transactions. One of the biggest mistakes a potential seller could make would be to select an agent who is doing so little, they don’t have the depth of experience to do much at all.
By the way: Jackson Hole, The Tetons, and Yellowstone were all wonderful, but Utah . . . now that’s a State in which to spend some recreational time. Zion National Park and, especially, Capitol Reef were amazing. I learned many important lessons on the trip, especially that dogs and toads don’t mix. Homer bit one when I wasn’t looking and immediately turned to foaming at the mouth and shaking. Turned out this was not a lethal toad, just a typical one, and he got through it. But All toads can produce the same reaction in a dog, even from just licking the little rascals. There are a few that are lethal, but they are rare. Although frogs don’t seem to be a problem, my advice is: if it croaks and hops, give it a wide berth.