Relationships should define the company, internally and externally

In the real estate industry, it’s both perfectly true and perfectly cliche to say this is a relationships business. It’s true in every sense of the word, since real estate is uniquely personal and professional at the same time – even while contracts and documents are being signed in quantities that give even the best writer cramps in their hands and strained eyes from reading “legalese,” in many cases a person or family’s dream of owning a home is materializing, making it an intensely emotion and personal experience amidst the stacks of paperwork and confusing industry jargon.

On the buyer’s side, an agent is charged with finding the buyer a fair deal, negotiating on their behalf on offers, closing costs, etc. and ultimately helping them follow through past the finish line, putting the person or family in the perfect home for their needs and budget. On the seller’s side, an agent is charged with pricing the home properly, marketing it aggressively, fielding offers, making counteroffers and negotiating with the buyer’s agent to make sure the buyer and seller meet somewhere in the middle and complete a successful transaction in a reasonable time frame. Needless to say these are huge, often grueling tasks that require patience, a sensational attention to detail and the right personality to work closely and professionally with everyone involved in the transaction.

With such a small group of people involved in each transaction, the amount of money changing hands and the length of time some transactions can take, most real estate transactions are destined to become personal in several ways.  Buyers and sellers each have relationships with their respective agents, then throw in loan officers and inspectors and spread out the transaction over 2-6 (or many, many more) months and just selling a home can start to feel like the people involved more closely resemble family members than professionals hammering out a business deal. If you feel like you know the buyers and sellers you represent better than your own friends and family, you might be on the right track.

But one type of relationship often goes overlooked in real estate because the public is blind to it: the relationship between the agent and their brokerage. This is arguably as important as any other relationship in the equation because without a healthy relationship between the agent and their brokerage, the agent is basically on their own in the transaction and in the industry as a whole, and that will often be painfully felt by the buyers and sellers they represent.

Does the agent have access to the latest industry information and marketing techniques?

Is the agent able to maximize their leverage in any transaction with brand strength and recognition and a broker to stand behind them?

Does the agent have access to the best tools and training to use those tools so they can either price and market a home properly for sellers or find the perfect “just hit the market” listing for buyers?

A poorly priced home can mean the difference between a home selling in a week or six months without a price change. Other times a home can be priced perfectly (or even be a great bargain), and the perfect buyers could even be on the market for that exact home, but without the right tools in the buyer’s agent’s hands, those buyers might not ever find that property, or they might find it too late to get in an offer before someone else with a more tech-savvy agent jumps on it.  If the agent doesn’t have or doesn’t have access to the latest and greatest technology and buying/selling techniques, they can be left in the dust…and their buyers and sellers are in the dust with them.

However, with a healthy broker relationship, an good agent can become a phenomenal agent, a “regular” agent can become a top producer and a struggling or new agent can quickly convert themselves into a solid performer with just a bit of inspiration, guidance and training on the latest techniques and technology.  It all depends on the level of motivation, inspiration, training and technology made available to that agent on behalf of the brokerage. Sure, some agents will have the hard-nosed, entrepreneurial spirit that will leap over all boundaries with or without the help of their company, but the fact is that those people quickly rise to the top and often start their own companies, and the vast majority of agents will either be working for them or working for one of their direct competitors.  For the bulk of real estate professionals in any given locale, they’re just regular people, leading regular lives and trying to keep their career healthy and stable, and this is where their company comes in.  Because even agents, who are technically self employed, need a healthy and productive relationship with their brokerage to go from bad to good and good to great.  Does your brokerage provide you with that relationship?

Owners and sellers…did you survive 2004-2005? (Hint, if you’re reading this, you did)

If you’re a home owner or home seller and you’re concerned about your property value – ask yourself just one simple question…

Did you survive 2004-2005?  If the answer to that question is yes, then you should have no trouble surviving 2010.

Why? Because the average sale price in the Treasure Valley for residential listings in the first third of the year – Jan. 1 through April 30 – fluctuated from $145,000 (2004) to $165,000 (2005).  And the ten million dollar question…what is the average sale price for the same type of property in the same time frame in 2010?

$155,000.

So, if you own a home and are still making the payments (of course that’s an entirely separate issue!), then you can relax a bit and just pretend we’re somewhere between 2004 and 2005 – both good economic years for the most part.

And for a real dose of objectivity, check this out…

For the first third of 2002 – mind you this was within 6-8 months of 9/11 and the pursuant economic slide and recession – the average home sale price in Boise was $135,000, a full $20,000 lower than today’s sales prices.  So while the media outlets have portrayed this housing crisis as the worst in decades (and it certainly is worse in some other areas across the country), Boise homeowners can rest easy and know that in the past eight years, their homes have still appreciated by almost 15 percent – not a bad number considering we seem to be on the tail end of the crisis that has plagued the industry for nearly three years now.

Just some food for thought!

The tax credits are gone…but does that have to mean sales are, too?

Yes it’s true, the first-time homebuyer tax credit and the “move-up” tax credit both expired on April 30, for all intents and purposes.  Anyone who signed a sales contract before the end of last month still have two months to close, but if you’re a buyer, seller or agent who is sans contract, the next two months may have you twiddling your fingers nervously, waiting to see what the housing market does, and more importantly, what it does to your home search, your attempt to sell your home or your paycheck (respectively).

But to really understand what the tax credit did, and what it will do, you have to break down the numbers a bit, and of course, understand a bit of basic economics – supply and demand.  Oh, and it also doesn’t hurt if some companies (cough Coldwell Banker Buyer Bonus cough) launch some novel programs with the intention of softening the landing after coming down from the rocketship ride that was the first-time homebuyer tax credit.

So first, lets look at the numbers and combine that with some high school knowledge of economics.  Without the tax credits, many have speculated that every home has now dropped in value by $8,000, since that’s the amount many buyers were getting as a credit for buying a home.  But this is not an accurate or realistic assumption to make for a variety of reasons:

1. First and most importantly, the tax credits came in the form of a giant lump sum of cash, not in the form of an $8,000 discount spread out over a 30-year mortgage. So conversely, it cannot be accurately said that reversing the tax credit is equal to an $8,000 boost in the price of the house, spread out over the life of a 30-year mortgage. We’re comparing apples to oranges.  $8,000 cash right now is a HUGE incentive compared to knocking $8,000 off the total value of a house, which spread out over 30 years would only be about $25/month in terms of a mortgage payment.  So when someone says making $8,000 in a lump sum cash payment is the exact opposite of spending $25/month over 30 years, that’s a logical fallacy.  The fact is, even with the tax credit now vamoose, most homebuyers aren’t going to immediately assess the value of a home at $8,000 less than its current asking price. In reality, the tax credit and the value of the home are really almost entirely separate issues and should be addressed as such.  A home’s value is still determined by what people will pay for it, not by some illusive government program that is more closely related to tax law than to the housing market.

2. Home values are constantly fluctuating, and within only a few weeks, an entire neighborhood could see its average sale price rise by much more than that $8,000 difference. If a new grade school is built or an existing school is remodeled just down the street from your home, odds are the price of your home could increase overnight by as much as $20,000, realistically.  If a new shopping center is built within a mile of your home, the value will increase.  If CNN Money writes an article about how your city is one of the best places to live in the country for any number of reasons, your home value will increase.  Or you can simply spend a few hundred bucks and repaint the house or have the lawn professionally landscaped and you’ll probably add more than $8,000 to your home with only a modest financial investment.  And most importantly, once the economic recovery returns us to a state of normalcy, home values will steadily appreciate in most cities no matter what happens, since the population is always growing and therefore demand is always growing.

3. Not everyone shopping for a home was shopping only because of the tax credits. Many people didn’t qualify anyway, and those people aren’t any more or less inclined to buy a house than they were a month ago.  In fact they might be more interested to buy a home now, since the competition from first-time homebuyers is now going to decline.  If this happens, demand will go up, which will again boost prices a bit and absorb some of the price impact suffered by losing the tax credits.  And even if that doesn’t end up being the case, I return to point #1 and #2 … within even a month, any number of things could happen to completely erase any loss of value a home suffered upon the tax credits expiration.

4.  And now for the best lesson of all…economics 101, supply and demand. Basically, economics tells us that supply and demand always result in a balance, even if it takes a little while to achieve that balance.  When the tax credits expired, it was kind of like a person jumping off the side of a small boat, with the kid being the tax credit and the boat being the housing market.  Sure, the boat is going to rock back and forth a few times, but within a very short time, it will be stable again and back to a balanced level in the water.  The housing market will behave no differently now that the tax credits have jumped overboard.  At first, home values will drop slightly because demand dropped.  But, once prices drop a bit, that will raise demand and slow the drop in prices, which combined with the recovering economy, should all but eliminate any damage done to your home value by the expiration of the tax credits.

So, if you’re an agent or home seller, fear not! The worst case scenario might mean a small ding in the selling price of a home, which you can mediate yourself with a small home improvement, or you can just wait it out and let the economy self-correct.  But the most important thing to remember here is that most buyers recognize the tax credit was a proactive action of the government and not a reflection of the home’s value, and therefore sellers should not expect offers to all of the sudden drop by $8,000 just because the tax credits are gone. In fact, I’d be surprised if home values dropped much at all, and by the time May is finished – should the economy continue to grow slowly as it did in March and April – the economic factors driving a home’s value upward will more than balance out any drop in value suffered by the departure of the free tax money.