After a discussion of market reports in a real estate discussion group geared at forwarding the industry, I am prompted to revisit what makes a market report good or bad in terms of consumer response. 

First, if what you produce gets no consumer response, you need to change what you write. If what you do works, keep it. 

Consumers basically want to know three things from a market report, and the more simply and elegant it is presented, the better. They want to know

• If the local market is up or down. 
• What prices are these days. 
• An example of what is available or recently sold. 

Market reports with too many graphics and charts-especially in the absence of thought out commentary- lose most people. One chart or graph might be useful, but only if you interpret it intelligently. Otherwise you have peacock plumage that makes most consumers eyes glaze over,  is useless to search engines and doesn’t even make you a better source of knowledge. I’ll explain. 

Those of you who know Paul Slaybaugh know what I am talking about. Those of you who don’t can thank me later. Paul is a writer of uncommon talent with a wit that I adore. He quasi graduated from Active Rain and now self hosts his own platform at Scottdale Property Shop, and his latest article is not only very funny, it is very true.

Over the past 4-5 years I have often wondered aloud what it would be like for a certain segment of REO agents when the gravy train of cheap, bank-owned foreclosure listings go away and things like collegial treatment of fellow agents and basic giving a crap would matter again for them. Not all REO guys; just the ones who haven’t returned a phone call since 2006 and whose assistants tell you-ASSURE YOU- that the 180 day old listing is “fully available” at 10 am, then say with a straight face at 3pm that contracts are out.

Yeah. Those guys.

Paul has penned (typed) an awesome piece you should read.

Go. There. Now.

Welcome Back, REO Agents!

Full disclosure: I was Redfin’s first partner agent when they opened business in New York. I remain good friends with Michael Daly, who is, in my view, a valuable asset to their enterprise and a top shelf man. 

In one of those transactions, a Redfin buyer client, after months of looking with me, ended up wanting to see one of my own listings. On the advice of Redfin’s Kevin Broveleit, I stepped back and designated an agent in my firm for both buyer and seller, as I am principal broker. This was an “in house sale” where I got MLS credit on both sides, but was not the type of dual agency Mr Kelman refers to. The devil in the details is that Redfin is assuming that MLS credit to one agent includes in house sales where buyer and seller had designated agents (which Redfin does engage in themselves) or simply a buyer customer who did not have the fiduciary service from the listing agent whose client remained the seller. Neither of those cases is the dual agency Redfin warns against.

Do overpriced listings, which end up stale, sell for a higher percentage than aggressively priced homes that garner vast attention from cooperating firms? I think we know the answer. So, yes, listing agents often end up selling their overpriced inventory, (if they sell at all) themselves. And some of the “lowballers” do deal directly with the listing agent as part of their strategy. Even in those cases, with the seller as client and the buyer as customer, it is invalid to conclude that dual agency occurred. 

There is a sinking feeling real estate agents get when we look up the history of a co-op or condo apartment we are listing for sale and see that our new client bought it as a 2 bedroom unit and prior transactions have it as a one bedroom. Obviously, two bedroom apartments are higher in value than those with one bedroom. However, using a den or alcove as a bedroom does not make the area a legal bedroom.

Generally speaking, a bedroom has to have its own door, a window, and a closet. That said, even if the owner hires a contractor to add a closet, you simply may end up with an illegal bedroom. All buildings have certificates of occupancy, and they specify the characteristics of the building. The reason for this isn’t simply municipal hegemony; the number of bedrooms indicate the probable number of inhabitants for matters like utility usage, parking spaces, and fire safety. If a large building with limited parking has ten or fifteen extra “bedrooms” added over time without  management’s knowledge, there can be a shortage of parking or quality of life issues the building was not designed to accommodate. That is why there is red tape or prohibition in legalizing a 2nd bedroom.

When owners and real estate agents list a 1 bedroom unit with a den or a junior 4 (one bedroom with a dining area) as a 2 bedroom, that information is out there forever. It remains in Multiple Listing Service  archives and real estate websites, and future owners of the unit who thought they bought a two bedroom and can only sell it as a 1 bedroom may be caught in the information undertow. This is a liability that is larger than any gain that the 2 bedroom listing might have yielded.

The pragmatic issue is that the current crop of buyers in this economy are very cautious, and do far more research than in years past. Moreover, a buyer needing a true second bedroom often turns on their heels when they see a 7′ by 9′ den or converted dining cubby being pawned as that second bedroom after viewing true 2 bedroom units. That does not foster trust.

Last year the Westchester Putnam Association of REALTORS (now the Hudson Gateway Association) began to actively stop member brokers from listing junior 4 and 1 bedroom units with a den as 2 bedrooms, and that did cause a backlash with some sellers who thought they owned two bedroom units. This was an unfortunate thing, but necessary to make sure that the integrity of the data going forward would be reliable.

The takeaway for consumers and agents alike is that a simple check with the management office can save future headaches and expensive mistakes.

Sometimes there is no pretty way to say it, so I’ll just say it: January 2012 was not a very good month in Westchester real estate. According to the Empire Access MLS, both the transaction total and median sale price of single family homes in the county were down from the same time in 2011. Since 2011 started out far slower than 2010, the ramifications could be far reaching. 

To sumarize: 

In January 2011, 237 single family homes closed at a median sale price of $540,000. 
In January 2012, 219 single family homes closed at a median sale price of $485,000.

The last month of January the median price was below $500,000 was 2002, when the median was $472,000. That  month, however, there were 415 closings, or almost double last month. 219 transactions is a shrinking pie to share amongst the over 6,000 licensed sales people in Westchester. 

Median price is not average price, so rather than being more emblematic of where values are, it speaks to the buying public’s trend to buy less expensive homes. Clearly, the consumers are more conservative, discerning, and cautious. 

There are other factors at work as well. Currently, there are 676 homes under contract in the pipeline. If only half of them closed in the next 30 days it would be a very productive month. However, getting that many deals closed is  unlikely for several reasons. First, many of those deals are short sales that are months away from being approved by the sellers’  lenders. Also, the mortgage money supply continues to be quite tight, and many transactions are still caught in red tape, underwriting obstacles, and other roadblocks related to a crimp in the monetary system. 

Last week I attended a dinner keynoted by Michael McHugh, president of Continental Home Loans. In his view, the tighter money supply is a result of Dodd-Frank, and this trend is expected to continue as the legislation continues to be implemented. Ironically, 4% interest rates and lower prices and  are not enough to push the market out of the malaise. It is a complex issue, because the “fix” for the financial crisis is having a suppressing effect instead of strengthening the market it was designed to turn around. 

This does, of course, spell a huge opportunity for buyers. The climate is very heavily tilted in buyers’ favor, but how many take advantage remains to be seen. While many conditions clearly make it a great time to buy, the overall mentality of caution  is keeping many would-be buyers on the sideline. What buyers sitting on the fence should know is that if they are planning for the long term, they can get themselves a very good situations with excellent terms. They just have to get out there and make an offer. 

For those of you not living in New York or who don’t follow NBA basketball, the toast of Gotham is Jeremy Lin, an unheralded, undrafted, and un-scholarshipped (is that a word?) point guard who just led the Knicks to their 4th straight win over the Lakers. He scored 38 points to pace the Knickerbockers, playing without their two stars, over LA 92-85. Lin is an amazing story: after leading his high school to the state championship, no college offered him a scholarship. I read last night that a coach at UCLA, Lin’s dream school, admitted that had they been wise enough to recruit him, he would have started for the Bruins. He played at Harvard and was undrafted by any NBA team. Two clubs cut him before the Knicks picked him up. He’s only been in town a couple of weeks and probably would still be on the bench if the squad weren’t plagued by injuries. And all he’s done is play out of his mind and lead the Knickerbockers to 4 straight wins. 

One of the announcers tonight mentioned that Jeremy is staying at his brother’s house on the lower east side on a couch. They went on to say that some real estate agents must be licking their chops, because Lin is not leaving New York anytime soon. I agree- Mr Lin is not going to be some journeyman who gets cut, waived, traded or sent back to D-League. He’s staying in Madison Square Garden and he’s going to have to do better than his brother’s couch. 

If Jeremy wanted to live in the suburbs, Westchester would be the best choice in my mind, and I think I know a good broker for him to call. However, I think he’ll stay in Manhattan, and that gets my wheels turning because I know an agent or two that, if I were in his shoes, I would use to find a home. 

I have done business with Eileen Hsu for years and she’d be a phenomenal choice. Eileen is a tremendous talent, a great advocate and negotiator, and possesses an incredibly committed work ethic. I have had a front row seat in some transactions of a highly difficult nature where Eileen gave virtuoso performances and got the job done elegantly. 

My friend Doug Heddings also comes to mind. Heddings Property Group is perhaps the most forward thinking and innovative real estate brokerage in Manhattan. The firm’s growth proves that Dog knows where this industry needs to go to truly serve the public. 

Of course, Knick hall of famer and announcer Walt Frazier’s son Walt Frazier Jr is an agent with Keller Williams in Manhattan, and he may already be on the job. I had the good fortune of meeting Walt at the New York RE Bar camp last month, and I remembered him from his own illustrious college basketball career at Penn when he played some great games against my alma mater, Villanova, and ruined our chances of winning the Big 5 in 1988-89. Walt, who has the heart of a champion, runs a great operation. 

But alas, in the post game tonight the commentators mentioned that Jeremy has been offered the apartment of ex-teammate David Lee in White Plains. 

What really gets me jazzed about Jeremy Lin is not the pipe dream of being his real estate agent. My 9-year old son Luke has coincidentally discovered a love of basketball in the last few months. Luke has ADD and last year, prior to his diagnosis, he had to endure some difficult times in school both academically and socially. It is not easy for a father to see that, and Ann and I have worked hard to help him. I had ADD too and sports made a huge difference for me. It is beginning to make a difference for Luke. He and I will be going to some games aside from the ones we play in the driveway, and a role model like Mr Lin makes a father’s job easier. His story of perseverance and faith is an inspiration. And that’s why Madison Square Garden is electric again. 

Update: Lin is out in front again- NY Post already reported he’s househunting! 

Every so often I get a call from a home seller asking me a variation of this question:

What will the commission be if I find my own buyer?

It could be a seller client or someone considering listing their home with my company. Typically, the discussion that follows reveals that the questioner

• either wants a complete exemption from commission because it is “their” buyer or:
•  a steep discount because they think most of the work is now done. 

This shows a fundamental lack of understanding of the role their broker plays in the sale of their home. 

To backtrack: In 2004, a person could make an offer on a home, get it accepted, and get a mortgage in 30-40 days without much effort or hand holding from their agent. I know this firsthand; I was a loan officer from 2001 until about 2005 when I started my company. It was so easy to get a mortgage back then that it was almost scary- there were no income loans, no documentation loans, and all sort of other programs that required a pulse and little else. If a person liked a home and wanted it, you sent them to the mortgage broker down at the corner, left them alone, and they moved in 60 days later. All that was needed for a house to sell was a person that liked the place. 

Since the housing downturn, the pendulum has swung the other way. Banks are so cautious and strict in their underwriting that even seemingly well qualified people have a hard time getting to the closing table. The scrutiny from bank underwriters not only borders on suspicion, sometimes it feels like they are looking for an excuse to avoid lending the money.

In this climate, finding the buyer is just the beginning of the work. Not only are the banks more cautious, buyers also proceed with far more trepidation and hesitation than they ever did in years past. Even when people simply love a house, I have seen deals implode over draconian underwriting or buyers who have gotten spooked over a seemingly easy to fix problem on the seller’s side, such as an open permit or high radon reading. 

Today, an accepted offer is anti climactic. Once a buyer makes an offer, we have to navigate an obstacle course of home inspections, attorney haggling over contract verbiage (which can drag on for weeks here is lawyer happy New York), appraisal issues, title concerns, commitment conditions, challenges to get a clear to close and a ton of other possible “gotchas” that we often doubt a closing will happen until all parties show up. 

No sane person dislikes saving money. I sure don’t. But if a seller has a cousin or a neighbor they run into at the store who expresses an interest in their home, they should immediately refer them to their agent and ensure that the deal has the best chance of closing. You never as a seller want to compete with your own agent. It is tempting for some to think that they can “save” by bargaining their agent to a lower (or no) commission by procuring their own buyer. But the skill set that it takes to carry that buyer over the finish line is far more than most regular folks possess. 

There are rare cases when a seller might have a solid buyer lined up where an exclusion could be negotiated for a reduced commission IF the buyer is a quick knockout punch. But the sort of prospect who can truly close quickly with no time on market or the associated expenses is rare. Often the the seller is seduced by mere interest, as if it were 2004 again and all they need do is send their prospect down the street. In this day and age, that doesn’t occur much. In a transaction the magnitude of selling a home, the best thing to do is have your professional do the job, and rest assured that you are getting what you paid for. 

If you want a do it yourself project, build a go-cart. For real estate, use your broker no matter where the buyer might come from. 

The thing is that we have jobs to do, and communication from the loan officer is essential at some times when the client tells us things that don’t add up. 

So when  we seek you out, we aren’t looking to enjoy your sparkling, collegial personality. We seek clarity on something the client cannot offer. Why don’t you call the <Uberbank> branch in Scarsdale for advice on how to address something like that, and they might be able to offer you some insight on what we seek. I have more use for their LO team than your supervisor. 

Have a great weekend.