J Mac Says- Montgomery County and DC Metro Real Estate Info

My finest gift to Rylee

2007-12-24T10:24:00.000-08:00

My grand daughter, Rylee, has an aversion to Santa. Elmo and the Grinch are o.k. Santa was this terrifying man at the mall.

Through a set of circumstances that are to boorish to share, I was asked if I knew anyone that could appear as Santa at my nephews third birthday party. My niece is very conniving and I was pegged for the role.

Adorned in the finest of Santa suits, white beard and hair clad, I appeared. Much to my surprise, I was met with looks of wonder. It is impossible to describe the joy in childrens eyes when they look upon SANTA. They stand 5 feet away and stare, giggling in unison to Santa's laughter.

I settled in to the chair and greeted them, one at a time, with gifts. Ten minutes into the visit, this little bundle of joy ran up to me and crawled into my lap.

She looked up in awe as I whispered.

"Santa Claus loves you Rylee"

Joy in a grandchild's heart. There is no greater gift.

There is more behind the door of that "Open House"

2007-12-17T13:40:00.000-08:00

On a recent post, one of my esteemed friends from Florida discussed his views on open houses. He offered some statistical data and suggested that any agent that included them in a marketing plan during a listing presentation should be thrown out the door.

I won't disagree with the statistical analysis that was presented. I am wondering why it is even an issue. He and many others feel that open houses are a waste of time. I accept that. He and others are quick to point out that one of the side benefits of holding an open house is that the agent may come in contact with buyers or others that are considering selling their home. Somehow, this is presented as a bad thing for the owner of the home.

He is quick to point out all of the possible dangers. He mentions theft, injury to visitors, injury to the agent as things that may occur. He fails to acknowledge that theft can occur when visitors view the home with their agent, injury may occur when visitors visit the home with their agent, injury may occur to the agent when they are showing the home. Somehow, he and others perceive that bad things only happen during the open house. There is always risk. A meteor may strike the house during an open house as well. The same meteor would strike the house if no one was there when it arrived. Just because one event occurs during another does not create a causational relationship of one with the other.

A broker's open is a good opportunity to showcase the home for other agents. This showcase often increases the awareness of the home with other agents in the market. Increased awareness may land the home on a short list in the future.

People do visit open houses. In some cases, people buy the house. In other cases, neighbors recommend the home to a friend that is seeking to move into the neighborhood. There are times that viewing a home will enable the buyer to focus on exactly what they are seeking. In these cases, one open house helps sell another. I personally believe that open houses are a long continuem of product on the market. Making the product available for viewing does help increase the overall sales figure for the market.

It is one thing, to adamantly believe there is no value to your personally holding an open house. If you feel that way, I would suggest your chance for success in holding open houses will be limited by your attitude regarding them. I do not feel that they should be the "deal breaker" regarding hiring an agent. Throwing an agent out because an open house may or may not be part of their marketing plan is short sighted at best.

The beauty of our profession is found in the wide array of opportunities available to us to use in our day to day operations. Postcards work for some, farming works for others. Phone calls work for some and personal "pop-bys" work for others. Shown by appointment only works for some and open houses work for others.

If we are to stop marketing in every fashion that is not singular in purpose, our costs would increase significantly. If we are to be honest about all the reasons we market, our listing appointments would go on for hours. Should we toss every agent that suggests the use of craig's list because in addition to marketing the home, it may bring potential buyers and sellers? Should we toss every agent that suggests placement of the home on their personal website because in addition to marketing the home, it may bring potential buyers and sellers? I, for one, think not.

I think that our job is to expose the home to as many potential buyers as possible. The greater the pool of potential buyers, the more likely we may receive an offer on the property. The ad for the open house brings exposure. The neighborhood notification about the open house brings exposure. The signage on the street regarding the open house brings exposure. The open house brings exposure. Exposure brings the potential for opportunity.

I will accept that he sees no value in them. I accept that others may see no value in them. Neither of those facts is sufficient to denigrate those that hold them nor is it evidence that they have no worth.

If you would like to discuss the sale of your home or if you have any other questions about the process, feel free to contact me.

An open letter to you.....

2007-12-10T09:40:00.000-08:00

We are facing difficult times.

It seems we are hearing bad news at every turn. New Orleans remains in shambles a little over two years after the levees failed. The number of illegal immigrants now living in this country is estimated to be around 12,000,000. The war in Iraq continues with no apparent end in site. The value of the dollar continues to fall. Foreclosures reach new levels each month.
We are facing difficult times.

Each challenge is presented in a neat package. Each challenge is presented with numbers and graphs. Each challenge is presented in turn on the nightly news. Numbers and graphs may present one view of the facts. Numbers and graphs accompanied by sound bites present a slanted view of the challenges that face us. Conservative and liberal biased media outlets present opposing views of the challenges and equally opposing views of what should be done to address these challenges. Every thing is not black or white.

The challenges seem so overwhelming, that many of us don't know where to begin to address them. I am just one of many that believe that we do have the power to change the course of these events and in doing so, change the course of history.

Let me back up a bit. Hurricane Katrina was forecast and most people knew ,that if it did hit close to New Orleans, the subsequent damage would be significant. No one expected the levees to fail. Spending time attempting to place blame on anyone detracts from where our focus should be.

The people in the 9th ward did not plan to be in the path of flooding waters. They were working people. They were living their lives as best they could. Each of them has a story that can not be told by lumping their plight into one big problem. They had dreams when they moved into the 9th ward. Those dreams did not wash away in the flood waters.

The illegal immigrants did not march across our borders 12,000,000 strong. They came alone or in small groups. They came to realize the dream of living in our wonderful country. Their desire does not remove their guilt for crossing illegally nor does their status diminish their dream. Each of them has a story that can not be told when you lump them all into a number. They had dreams when they came here. Those dreams will not be erased by deportation nor will they be squashed by the construction of a large wall.

Our involvement in Iraq is a fact. A resolution will never be found if both sides continue to discuss how we got there. Every day, soldiers that represent us go out on missions or patrols and put their lives on the line. They do not decide when or where, they just follow orders. They are all volunteers. They each believe that they are serving their country and doing their part so that we may continue to live free. Each one of them has a story, a family and a dream. The dirt, dust and constant threat to their lives has not ended their dreams.

The value of the dollar is impacted by our purchasing and our saving. It is impacted by our investments. It is impacted by the way we live our lives. The dollar is one measure of our economy. We can not allow that which measures us to continue to falter.

We are all quite aware of the foreclosure problems. Investors that were attempting to make profits within the system have been caught short. There is no sin in attempting to better your financial position. Home owners were buying a place for their family to live. They may have stretched what they could accomplish. Most of them did not do so maliciously. Realtors were showing homes and selling homes to willing buyers. That is what we were asked to do. Lenders made loans. Appraisers appraised homes. The majority of all of the people in trouble never dreamed that they would find themselves in this position. No one plans to have their furniture piled on the side of the road. Everyone in this situation was attempting to realize dreams. Those dreams did not die with the downturn of the market.

So I wonder, what if we each take responsibility to do our best to make our little corner of the world better. Not one of us has the power to fix all of this. Each of us has the power to do our job with the focus on making it better.

Can we just look at each situation on its own merits? Can we stop lumping everyone and everything into a neat package? None of these problems are insurmountable.

If we deal with one family at a time, eventually the entire southeastern coast will be rebuilt. It will not happen in a day or a week or probably a year, but one day we will achieve success and those dreams will remain alive.

If we understand the motivation of illegal's and endeavor to deal with each situation, we will correct the current problem. It will take years to sort out, but in the interim, could we possibly stop painting the tarnished cloud of "you must be illegal" that hangs over every Latino's head. One day, we will facilitate the dream of citizenship that they cherish.

None of us is in a position to change the course of events in the Middle East. We can study the problem, listen to solutions and vote for candidates that we believe offer a way out. I would never pretend to know whether the solution is a continued presence or a 100% draw down of the troops. I am willing to let better minds than mine make that call. I do believe that we need to speak our piece at the ballot box. Once the election is over, we all need to come together and support whoever wins. We are one country. We must keep our dreams alive as well.

The same can be said regarding the value of the dollar and our worldwide economic situation and our current exorbitant national debt. We must listen, study and vote. Once we have done so, support those that we have charged with the responsibility of guiding our ship of state.

The last issues are the ones that we as Realtors, lenders, neighbors, etc. can directly impact. We can look at situations as they exist today and do our best to resolve them. Each person has a story and we must listen and do what we can to help them. There is no solution found in judgment nor is there any resolution is blame. We have the wonderful opportunity of assisting those in trouble. We may not be able to fix what is wrong, but we do have the skills to assist them in finding the best solution possible, one family at a time.

We are facing difficult times.

I believe that we have the talent and ability to make a difference.

I invite you to join me in re-dedicating our efforts......one family at a time.

I have asked before...why rent when you can own ?

2007-12-09T16:51:00.001-08:00

I was reviewing property for sale in Montgomery County. It seems that prices have begun to bottom out. I am always surprised when potential buyers tell me they are waiting until prices absolutely bottom out. You see, when they hit bottom, they won't stay there long. They will begin to rise again and it is possible that the rise will be quicker than the fall.
The other thing that a lot of folks overlook are short sales. Once they are sold, they are gone. Many of these homes present better value than if everyone waits until the foreclosure happens. In Montgomery County, I found several homes priced under $300,000. That did not happen very often in the last year or so.

This home is in Germantown. It features 4 bedrooms and 2 and 1/2 baths. They are even offering a home warranty. All this for $249,900. Payments on that could be as low as $1500 per month.

This home is in Germantown. It features 3 bedrooms and 2 and 2 half baths. They are even offering a free appraisal if you use a specified lender. All this for $289,900. Payments on that could be as low as $1800 per month.

This home is in Germantown. It features 4 bedrooms and 2 and 1/2 baths. They are even offering a home warranty. All this for $299,000. Payments on that could be as low as $1800 per month.

Imagine, while everyone else is sitting back waiting, you could be moving into your own home. If these homes have caused you to pause and rethink sitting on the fence.....GOOD.

My name is John MacArthur and I am a Realtor in this area. If you would like to discuss this information with me, I can be reached at 301-537-4377 or you can send me an e-mail me at macarthurgroup@gmail.com . I would be glad to discuss any one of them with you. A phone call may be the first step to your next home.

I am available at 301-537-4377.

Let's talk. I never promise the moon, but I always give down to earth information.

Single Family Homes in Montgomery County for $400,000 and lower???

2007-12-09T16:36:00.000-08:00

I have lived in and around this county all my life. Suffice it to say that I have reached that long in the tooth status. I have watched the county grow (Georgia Avenue was a two lane road and Wheaton Plaza was woods).

I have lived through the ups and downs of housing markets. This one has been a doozy. One thing that really caught my eye was that a family could actually buy a single family home for around $400,000 or less again. How sweet it is to see that prices have come down to the level that homes have become affordable. Take a look at these. They represent a portion of what is out there right now.

This home is located in Silver Spring, north of Dennis Ave. It has 5 bedrooms and 2 baths. It is close to Metro, shopping and has easy access to 495. It is selling for $309,999. I can hardly believe it. That is a single family home at a townhome price.

This home is located in Takoma Park. That's right, Takoma Park that has been priced so high for so long, many have given up hope. It has 5 bedrooms and one bath. There is rough in for another. Takoma Park for only $320,000. Payments could run as low as $1900 per month.

The next bargin I came across is located in Conneticutt Avenue estates. I know the neighborhood well, I live here. Solid homes built by Kay or Greenberg in the late 50's. This one offers 3 bedrooms and 2 baths. It is selling for only $329,990. This could be home for less than you imagine.

The last home I will share now is this gem. It is a little farther out. It is located in Germantown but take a look. It is a 4 bedroom, 3 and one half bath, colonial. It is more than a bargin at the low price of $400,000. Think long and hard about it. If this matches your dreams....act now. If not, someone else will be living in your dream home.

Imagine, while everyone else is sitting back waiting, you could be moving into your own home. If these homes have caused you to pause and rethink sitting on the fence.....GOOD.

A phone call may be the first step to your next home. I am available at 301-537-4377. Let's talk. I never promise the moon, but I always give down to earth information.

Balancing My World and Yours

2007-11-16T08:59:00.000-08:00

The fact that I am a real estate agent does not ban me from pausing every November to be thankful. You see, I hear about agents that jumped up from a holiday meal to go show a house. I have heard the old wives tales about the biggest deals being done on a holiday.
I don't believe it!

I think that I have the right to sit down with my family and enjoy a feast celebrating all that has happened in the last year. I think those that are buying and selling have that same right. "Black Friday" will come soon enough. My feelings on setting aside time to share special days are not a secret. My friends and clients know that I am a more rounded person because I balance the personal and professional aspects of my life. I encourage them to do the same.

Halloween is now the start of the great American holiday festival. We start in mid-October, preparing for the night of children's delight. We decorate our walks and doorways with ghosts and goblins. Every knock is answered and we are treated to costumes, store bought and hand made, trumpeting the success of t.v., movie and books.

We begin our season giving treats to those that come and entertain us. Our journey into the fall and winter is a celebration of fantasy.

The decorations are no sooner packed away for another year, when we begin to prepare for Thanksgiving. It is a time for giving thanks. It is a time to see every glass half full and remember that there are so many less fortunate in this world.
Friends and family gather to enjoy the finest feast. Early in the day, the streets are filled with Thanksgiving parades that end much too soon to the jingling music that accompanies Santa, high on his float, arriving to hear first hand the desires of every little girl and boy.

By afternoon, football is found on every major channel. The meal is followed by a plethora of desserts that lead to many early afternoon naps. As night falls, hot coffee and one more piece of pie are shared while eager consumers go over the ads for the "Black Friday" sales. Then the countdown begins.

We are a nation of many faiths. This is a special time for all of them. The most ancient of religions celebrate the birth of Zoraster around this time. The pagans have always celebrated the beginning of winter. Christians have chosen this time to celebrate the birth of Christ.

Children of all ages and many faiths just wait for Santa Claus. I find joy in the season of giving. I don't mind waiting in the lines to make a purchase. The large crowd in front of me represent so many happy faces on Christmas morn. Even Scrooge found joy on Christmas morning.

So, how does one find balance between the demands of a profession and the desires of the heart? As a real estate agent, my job is dealing with people. They are celebrating as well. They have the added burden of either a home on the market or the need to find another house. I always have my home to return to at the end of a day. I find balance by pausing and .....

I put myself in their shoes!

I have been fortunate enough to be homeless. I have been fortunate enough to have been confined in a place that did not allow holidays. I have been fortunate enough to have gone long periods of time away from friends and family. I have been fortunate enough to not have enough money to pay for food for my family. I have been fortunate to have suffered along the road of life. I have been rich and I have been poor. I have learned the value of comfortable which resides somewhere between the two.

I put myself in their shoes, because I have worn them before and I know with a little support and encouragement, they too can rise above their situation.

It doesn't matter if they are trying to rent a one bedroom apartment or purchase a $700,000 home. The basic needs remain the same. When I try to juggle their demands with the life I have chosen to live, I set the stress aside, put myself in their position and seek a resolution.

When it is time to share the holidays with friends and family, I let them know what I will be doing and encourage them to do the same. The problems we all face, will still be there tomorrow. Today is a day for enjoying what we have, whom we love and the guiding hand that leads us.

Then I slip out into my studio..................

and I paint.

Sitting on the fence...don't get caught by interest rate increases!

2007-11-15T15:36:00.000-08:00

So, you are sitting back waiting on those prices to fall even further. I understand. After all, it is rather safe on the fence.

The problem you have while sitting there, watching prices, is that the cold wind of interest rate increases is on the horizon. Just like "the hawk" that brings the chill to the frozen tundra of Lambeau field; the chill of rate increases will freeze you out of potential homes faster than you can say "jimmy crack corn and I don't care."

We have ridden the roller coaster of low rates to the bottom and watched them creep up and then take a moderate dip again. The rates remain, at what we in the business like to call "historically low". Of course, you don't pay your bills with historically adjusted money. You pay your bills with money earned today. I have to tell you, rising costs and inflation are reducing your buying power while you sit up there on that fence.

You're waiting.

I can't find many that would disagree that prices remain high on homes for sale. Not all of the homes, but many of them remain a bit out of reach. Of course, the prices on some homes will always be out of reach. While you are sitting atop that fence waiting for the really nice 4 bedroom colonial with a finished basement to drop another $25,000, the cost of that $25,000 may be growing before it exists. It may be more prudent to sit back and take another look at what you can afford today. You might have to pass on the finished basement, but you will be able to afford your house. You might be better off if you decided what you can afford rather than waiting on that fence until the market dictates what you can afford to you. It is always better to be the driver rather than the driven.

What danger is lurking in the ocean of uncertainty? What will the next wave of financial news bring to bear? The best possible scenario would be that interest rates remain stable. A quick look at the overall financial condition of the country as it relates to the rest of the world gives us a clue. Interest rates will have to rise. Everytime you hear that the value of the dollar overseas has gone down, understand, that will impact you, while you sit perched above the fray. Instead of bemoaning that a trip to Rome or London will be more difficult, you better realize that a trip to the local grocery store or gas station will soon be more unpleasant.

Let me put it in basic terms. If you can afford a $450,000 loan today, a one percent rise in the interest rate will reduce the power of that money to $400,000. Just a half point will drop the power to $425,000. Now, before you go grab a calculator, these figures aren't based on some fancy program. It is just principle and interest at 6% for today and then 7% or 6.5% in the future.

Sitting on the fence, you may find that if and when prices drop, interest rate increases have wiped out your buying power. I don't have a crystal ball, but I can guarantee that the first rate increase will be followed by others quickly. If you wait to act, you may find that you are "chasing the market".

Maybe it's time you stopped sitting on the fence and became proactive about the purchase of your next home. It is rather easy enough to get in touch with a real estate agent. (God knows there are about 20,000 in this area). Find one, get comfortable and at least find out what you may be able to do today. The facts regarding your situation may not be as pleasant as you would wish. Knowing the facts will allow you to act. Acting now will prevent you from losing the power of your dollar while you were waiting for prices to fall.

It will never only be about price. It will always be about what you can comfortably afford. I just thought you should know, the house you are watching and waiting for the price to drop may be out of your reach by the time the price falls. Don't let the media keep you perched on that fence. Get the facts. Knowledge is power.

If you would like to discuss this information with me, I can be reached at 301-537-4377. If I can't help you in your area, I have a personal relationship with agents in most areas and I will put you in touch with one that will help you.

There is no room for anarchy in this business....

2007-11-06T06:47:00.000-08:00

Shakespeare offered "Much Ado About Nothing". I was perusing this morning's Washington Post and came across an article regarding an email sent by the owner of Long and Foster exhorting his agents to use the in-house lender. I was surprised to see that his note caused enough of a stir to reach the level of prominence that the Post gave it. Then, I stopped and realized this is the same instrument that has been extolling the death of the real estate market for months.

Later today, doing my usual reading of blog entries, I came across one from an Active Rain member. I had read some his other blogs and realized that even on Active Rain
outlandish self promotion through "McCarthyism" techniques occurs. It is no mean feat to point at supposed enemies in our midst and create a stir with what, on the surface, appears to be sound, rational and probably factual statements. The problem occurs when the facts are checked and they don't quite measure up to the "sky is falling" impression left with the original post.

Today's entry actually reminded me of the accuracy shared in most political advertisements. You have seen them. Statements taken out of context used to paint an opponent in a corner. The advertising camp can sit back and rejoice how we put a spin on that one. Voters are left to ferret out the truth.

There was an anonymous quote in the article.

An agent offered, "I'm thinking that some agents will feel psychic pressure to use only Prosperity Mortgage," the agent said. "I'm supposed to give my clients the best service, and that means helping them find the best loan."

I had to read the sentence a few times. I was not sure if it bothered me that there was an agent that thought helping a client find the best loan was part of her service or if I was concerned that the agent actually believed that statement.

In either case it is a rather sticky web of self importance she is weaving.

Claiming to be responsible for finding your client the best loan certainly opens a larger can of worms than referring a client to an in-house lender for pre-approval for a loan. What authority gives any agent the right to determine what is the best loan for any client? Does that agent truly want to accept the liability for every loan that she recommends? The only person that can determine if the loan is the right loan is the client. You do need to make sure that they understand the terms and conditions of the loan. They decide.

The law is pretty clear. You can not advise a client about anything except real estate. You can not step in and give financial advice. You can not step in and give legal advice. You can not.

You may have wonderful intentions. You may feel you are doing the right thing protecting your client. You are only stepping outside the boundaries of your fiduciary responsibilities and leaving yourself exposed to unwarranted liabilities. Our profession is based on the law. Everything we do is deeply entrenched within the law. Using your personal opinion to direct a client anywhere is outside the law.

If a client says, "I don't have a lender". You can not reply "Here is a lender's number, call them."

You can share with them, "There are several good lenders in this area. I would recommend that you contact a local lender, so that we will not run into problems getting the necessary documents to the settlement office in a timely fashion. I have worked with XXXXXX in the past and they have always funded closing within the contractual time. If you would like their number, I will provide it." "As soon as you decide who you wish to use, I will be glad to contact them and set up an appointment. I will go to the first meeting with you. It is important that I have a relationship with whomever you choose to fund the transaction. Also, you do not have to use the first lender that you speak with. They will provide you with a Good Faith Estimate, which you can use as a bench mark in speaking with other lenders."

It is up to them to decide whom they wish to contact. It is up to them to decide whom they choose. If any agent thinks that they are going above and beyond the call duty by choosing the lender, they are not. They are stepping outside the law. This practice could lead to anarchy.

There is no room for anarchy in this profession.

As always, I welcome your questions and/or comments. Feel free to write me an email if you have specific issues that you would like me to address.

Education or Experience...pick your poison

2007-10-31T12:15:00.000-07:00

I have been reading different blogs and articles regarding the importance of education. I have also read various opinions on the value of experience. When you are evaluating the capabilities of an individual, both can be used as a yardstick. If you come across someone that has both, you may discover the best of both worlds.

Education is fundamental in learning the basic framework of a profession. Experience is the result of actually performing the tasks of a profession and learning how the knowledge gained through education is practically applied.

You can usually decide your educational pursuits; experience is often garnered by chance. In a perfect world, you acquire the education and then step into the professional role. In that professional role, you apply your knowledge while experiencing the events that occur in the course of you performing your job.

There are times, when life throws you experiences before you have had the time to acquire the education necessary to deal with them. In those times, you have to call on prior experience and the cumulative knowledge you have garnered in life. There will be times when you make the correct decision and there will be times when you make the incorrect decision. The event will become another learning experience.

Is there a difference? When I was a younger man, I believed that you could study and read and acquire the knowledge necessary to do just about anything. I have learned that belief was flawed. Reading a textbook, taking part in a classroom exercise, watching film or listening to a lecture never replicates real life experience.

Soldiers tested in the field of battle have a much greater understanding of the perils of war than those that have read “The Red Badge of Courage”. There is something distinctly deeper about knowledge gained through practice.

Lessons learned in classroom settings usually occur in controlled environments. An individual may learn how to perform all aspects of their profession. Lessons learned in real life situations are filled with ancillary activity that is going on at the same time. You may read how to perform each function. Experience will teach you how to perform many functions simultaneously. Lessons are learned in a sequential order. Experience occurs in a multifaceted fashion which requires you to handle several functions at one time. Classroom experience is generally one sided whereas experience occurs with the interaction of others.

When weighing education and experience during the evaluation of potential real estate agents, it would behoove the public to consider what may be needed to accomplish the task at hand. If your need can be met by one that has more knowledge than experience, that is the route you should take. If your need requires the skills acquired through years of experience, that is the individual you should hire.
How do you know which type of agent you need? The question is not easily answered. If you were to ask the agent that is educated but lacking in transaction experience, they will surely attempt to sway you with the value of education. If you ask the agent that has been working for several years, they will surely point out the advantage of “real life” experience garnered through many transactions. The truth is probably somewhere in between the two and it will depend on the market at that point in time.

If housing is active, there are advantages to both sets of individuals. If the market is slow, you may be better advised to seek out an agent that has dealt with a slow market. You see you can read about the slow markets of years past. Agents can study how others dealt with those markets. Agents that have been through those markets will be in a better position to guide you through a transaction without needing to check a guidebook.

Glib statements like “interest rates remain at an all time low” carry a great deal more impact coming from an agent that was involved in transactions in the 80’s when rates were 14%.

The final thought on the difference of the two types…..education or experience involves the one thing that separates those that are successful. Focus. I truly believe that the ability to focus is the strongest asset in any professional’s bag of tricks. Focus can only be fine tuned through the understanding that comes from day to day experiences. Although, it is in a different venue, I look at the difference between Tiger Woods and the hundreds of golfers that come through the PGA schools. He is a champion, because of his ability to focus on the task at hand. His focus is fine tuned from the experiences he has experienced. There are several components to a fine round of golf. It is necessary to understand which component has the highest priority at various stages of the round. (It does not good to focus on the though process needed to make a long putt when you are getting ready to hit a shot from the fairway.)

So there you have it. Education or experience? I am an old guy now, so I will have to fall on the experience side of the equation. As a side note, to you young folks coming out of the universities, I can remember walking 10 miles, up hill, both ways in snow that was knee deep …………

Hold that line ......

2007-10-25T10:28:00.000-07:00

I suppose this will irritate some agents in this area. The market has slowed to a crawl. We do have more houses, townhomes and condos for sale that at anytime most of us can remember. Prices have to come down.

I know those of you that bought in 2003, 2004 and 2005 faced a rediculous market. Many of you are living in a home that was actually your second, third, fourth or maybe more choice. Homes went on the market and if you placed an offer, many times it would be one of many offers on that property. You sat nervously by the phone hoping you would get the call "you've got the house." Only one person could receive the call, the rest of you returned to the market, hoping to get lucky. Prices were going up. If you got caught up in the groundswell, your target price began to creep up as well.

In those days, financing began to change. You could finance 100% percent of the purchase (in some cases, you could finance more than 100% and cover your closing costs too!). Interest rates bottomed out at around 4.5%. It was possible to get a lower rate on the enticing loan products being offered.

How could you lose? Prices were going up, but that meant you would move in and your home would be more valuble than when you placed the offer on it. It had to be true, your lender had the home appraised before you settled and amazingly enough...........it appraised for just a bit more than your loan amount. Fancy that.

Everyone heard rumors of bubbles and froth from the then Chairman Greenspan, but things kept moving at the same frantic pace. Dozens of people at every open house and contracts being written on the hood of cars seemed to be the norm.

Then it stopped.

In the fall of 2005 pace of consumption ran smack dab into actual affordability. Prices had reached a point that put homes out of reach. All of the sudden, it did not matter what sort of fancy loan product was being offered. It cost too much to buy a home and the market came screeching to a halt.

The NAR used whatever manipulation of statistics was necessary to deny there had been any change. Major real estate firms across the country began preaching "everything is ok, it is a wonderful market". They too denied that there was a fundamental shift in consumer behavior. After several years of riding the runaway train of unwarranted price increases, everyone got off at the same stop. It was easy to miss the mass exodus. It occured about the same time that we as a nation watched the victims of Katrina and their suffering on t.v.. We were becoming more entrenched in the war in Iraq and the media was focused on Valerie Plame and Jack Abramoff.

Very quietly, a nation of buyers stopped reading the classifieds. A nation of buyers stopped visiting open houses. A nation of buyers stopped seeking the counsel of a real estate agent. A nation of buyers sent in their ballots by staying home and refusing to pay the higher prices. Our industry looked in every corner to find the culprit behind lagging sales.

The NAR pointed to the fact that things may be slow, but the average sale price was going up. They failed to elaborate and reveal that the average price going up in a market that is slowing down only indicates that the homes that are selling are higher priced and the lower priced homes are sitting on the market. If the lower priced homes are not selling, that should have been the first big clue that there was a problem. First time homebuyers buy the lower priced homes and they are necessary for the entire system to work.

Then came the sub-prime loan fiasco. When the industry was bustling, many people took advantage of the opportunity to make money. Money was a commodity and it was cheap and with the frenzy of buyers, people could start up mortgage companies and make a lot of money quickly. The system was overwhelmed. Loans were made, sold, bundled, sold and so on. Some of the sub-prime loans went bad. Sub-prime lenders began to go belly up and many people in the industry began to point at these failures as a reason that the market was slower. No one mentioned that sub-prime loans were nothing new. They failed to point out that anyone with a average credit score could still qualify for a conforming loan and buy a property in the mid to lower price range.

Prices were still too high and homes continued to sit on the market.

We have now seen prices in this area drop as much as 10% and the activity is still non-existent. Prices are still too high. Interest rates are around 6% and they will not go much lower regardless of any action by the Fed. The buyers are doing the math. Home prices remain above what they can afford to pay.

It is not about sub-prime loans. It is not about bad media. It is not about interest rates.

There are buyers out there. There are people that have to move. There are people that have to sell. The components of a normal market are in place. The prices are too high. If someone asks me "Is this a good time to buy?", how can I tell them yes? If you have to buy, you have to buy. If you are asking "should I buy now or wait?", I would have to say - wait. Prices have not bottomed out yet. All of the indications I see are that home prices will continue to fall.....maybe as much as 5% more.

Now there are those that will say - If you plan on living in the home for more than 5 years, you will be able to absorb the "on paper loss" and over that period of time the value of the home should increase. There may or may not be truth in that statement. Historically it seems to hold up, but, if you wait until spring, you can ease the "on paper loss" by quite possibly paying less for the home. The danger? If you find a home you love and decide to wait.........someone else may buy your dream house. Right now, dreams are more expensive than they will be next spring.

If you are in the process of selling or you think you have to sell, knock 10-20% off what you think your home is worth before you put the first sign in the yard. If you ask for an opinion of your homes worth, make sure that you are given two years of data to analyze. Look at the trends and understand that the last sale is probably more than you can expect right now.

There is a key word to paste on the refrigerator door - PATIENCE.

Do not be swayed by stories placing the blame on lenders or types of borrowers or the Fed. Prices went up faster than incomes could accomodate. They will have to return to substainable levels before the "for sale" signs begin disappearing from every third or fourth house in your neighborhood.

As always, I welcome your questions and/or comments. Feel free to write me an email if you have specific issues that you would like me to address.

Artificial sweetener? Sugar cane please!

2007-10-16T14:57:00.000-07:00

It would be nice, if lenders realized that they have been a large player in our current housing market. Sounds rather simple, one would imagine that they are aware of their position. Maybe I should phrase that; it would be nice if lenders accepted responsibility for their role in our current housing situation and actually offered some solutions. If you merely circle the wagons until the dust settles, you will have made no progress. You will be going in circles and never reaching a destination.

There are several factors at work today.

There are some bad loans that will have to be dealt with. Lenders can either reconstruct loans for credit worthy consumers or they can foreclose on property. At some point, someone in power will have to admit - those holding bad mortgages are not going to get all the money back. It is not going to happen. You are going to lose money. In the interest of everyone involved, will someone please understand the magnitude of your losses and act to minimize them.

Reconstructing loans for credit worthy consumers seems on the surface to make practical sense. If the loans are in danger of going into default, debt reconstruction should take place. It does no one, not the borrower, not the lender, not the community and surely not the economy any good to wait until someone is three or four months past due before addressing the problem. Lenders waiting for the final shoe to fall in hopes of garnering a few extra dollars are risking losing thousands. Does the phrase "pennywise and pound foolish" ring any bells? Some lenders are actively seeking to re-finance some loans. Some is not enough. A comprehensive review of all new loans made in the past five years should take place. If lenders are pro-active it may put to rest the mud slinging that is occurring regarding predatory lending. Most people understand that there were some cases of bad loan officers but their number is dwarfed by the large number of honest professional lenders all across America.

It is high time that our elected officials addressed each problem facing the housing industry separately. There is a crisis created by the implosion of sub-prime loans. There is also a crisis created by the 100% financing. There is also the issue of competition within the real estate industry.

The sub-prime loan crisis is the result of many people involved in transactions seeking to garner their personal piece of the transaction pie. This chain of folks begins with those that sought the loans, travels through real estate agents, those taking loan applications, those appraising houses, those underwriting loans, those packaging loans for sale and those purchasing investments that included the loans. Everyone had a hand out. The majority of them were following the rules that existed at that time. Yes, there were cases of loan fraud. There have always been cases of loan fraud. The issue here is greed, not fraud.

In my humble opinion, it is not the responsibility of the government to bale out those that made bad investments. The chance for great reward in investments usually includes the risk of great loss. We have seen the losses. We have seen companies fold. None of it (beyond the investigation of any loan fraud) requires the intervention of our government.

People, whether at the beginning of the chain or at the end of the chain, should be allowed to live with the results of their decisions. Those that have chosen more prudent behavior should not be indirectly compelled to pay the price to offset others losses. The role of the government should be focused on controlling inflation and reducing the risk of a deeper recession.

It has been shared in many places that the National Association of Realtors has lost their way. In the course of growing into the large lobbying organization it has become, it has lost the support of the rank and file members. Realtors across the country are members only because it is required to be a member to have access to the multiple listing service and it is also required if one is to refer to themselves as a Realtor. Access to listings (which could be blown up if anyone comes up with a national plan that includes all listings) and the use of a trademark are the main reasons they can claim 1,000,000 and growing. Their inaccurate remarks and press releases have created a situation where agents everywhere are left trying to explain what they have shared. The bottom line, each member has the responsibility to become more active and attempt to correct the course this ship has taken before it joins the Titanic at the bottom of the sea.

The news industry has changed. There will be no in depth analysis of any industry because in depth analysis is boring. Sensationalism draws listeners, viewers and readers. If a full explanation of the housing market is going to be shared, it will have to be printed on the backside of O.J.'s next confession. The best source of information about the market continues to be the agents that work in it every day. If you have a conversation with an agent and everything they share is in direct conflict with what you perceive around you, find another agent to speak with on the subject.

In a nutshell ......

It is not a time for despair. The market will adjust. Those selling will have to accept the new market value of their home. As housing costs recede, their will be a positive impact on the cost of living in any area. As housing becomes more affordable, the path to the "American Dream" will re-open. There is a better tomorrow....we have just to wait and accept tomorrow will not happen today. That is not an artificially sweet statement.

Tomorrow will be better and that is as sweet as the purest sugar cane growing in Cuba.

Reality is like a beignet without the powdered sugar

2007-10-16T11:25:00.000-07:00

The current housing market is being described in extreme measures. The media seizes every word shared in a press conference and attempts to put the most dramatic spin on what was spoken. The lenders are scrambling to cover current losses and mitigate future losses. They advise us that the situation is returning to normal. Of course, they do not point out that over 100 lenders have ceased operating. Interest rates are historically very low and lending guidelines have been shored up to prevent future abuses.
(note: The fox is advising the hen’s that it is safe to return to the henhouse.)

The House and Senate are wringing their collective hands over the situation. They are having the members of their staff develop legislation language that will read well and offer dramatic sound bites in the upcoming elections. Any potential bills are being vetted to assure that the special interests groups will be protected by any new laws. Statements are being shared indicating that the housing crisis is serious and it will be dealt with quickly.
(note: The pied piper is playing his song and the lemmings are headed for the cliff.)

The National Association of Realtors is convinced that this is a wonderful time to buy. They have spent a great deal of money advertising the importance of using a Realtor in a real estate transaction. Their spokesperson has managed to skew every report regarding the housing market and blindly step before cameras proclaiming that the “market is fine”. When challenged by the stock market entertainer, Jim Cramer, that if you buy a home today, you will lose money – the President elect of the NAR retorted that the housing market in Indiana was just fine.
(note: Alice through the looking glass had a more accurate picture of the world around her.)

It is no wonder that the housing market has stalled. The media proclaims that housing prices are going down. The local Realtors offer statistics that sold prices are actually going up in some markets. You have a better chance at finding the pea in the thimble game on the streets of New York than you do of making sense of the statistics used to convince you the market is up or the market is down.

The Federal Government offers that we are in danger of a recession but we also have to guard against inflation. The existence of one does not preclude the existence of the other. We do face both and housing is a large factor in both.

In a nutshell ……

Housing prices have risen to levels that are out of proportion to the salaries in any given area. This occurred, mainly, because the instruments used to finance homes were expanded to reduce the out of pocket money necessary to purchase a home. The easy availability of mortgage money allowed all borrowers the opportunity to buy. This easy access also supported the “eBay” mentality that led to multiple offers on homes and increased demand for a limited supply at that time.

As homes sold, others saw opportunity for large gains and they also placed their home on the market. The money sources were hit by losses on loans that went into default. These defaults did not begin occurring in large numbers until recently. The mortgage products used to “give away” the easy money were unique in that the payments would not go up for a few years. Those years have passed the payments are beginning to increase.

Qualifying for a loan has become a bit more difficult. The bigger change is that the programs that allowed borrowers to make purchases with no money out of pocket have been significantly modified. It is much harder today to get the creative financing of yesterday.

Therein lays the root of the problem.

It does not matter what the media says. It does not matter what bills are passed. It does not matter which dream world the NAR is operating. If first time buyers can not enter the system in sufficient numbers, the rest of the market will remain stagnant.

It appears that we have shot ourselves in the foot. There was a time when people saved money so they would have at least 5% cash to put down on a home. We wiped out that entire population with the no money down needed loans. They spent the money. Those that followed, stopped saving….you did not have to save anymore! Programs were created and homes were sold and prices kept going up.

The 100%+ financing changed the landscape. There is no money in savings accounts. If we are to understand the impact, we must understand that the market can not recover until those that want to buy a home have the opportunity to save the 3-5% cash needed. That will take time. That may take longer than the pundits are sharing. That most likely will not occur in the spring of 2008. It may not occur until the spring of 2009 or later.

The government is right. Inflation is a problem. A recession does appear to be in its early stages. Neither of those events makes it easy to save money.

Prices are coming down. Prices will continue to come down until they reach a level which is more closely related to the income of the area in which homes are located. It would not surprise me if homes that went from $200,000 to $400,000 over the last few years to find their value return to much closer to the $200,000 level. We will not see a 20% decline; we may see a 50% decline before the market becomes relatively active again.

Those that purchased in the last 3-5 years will find that they will have to stay in the home 10-15 years before they realize equity gains that were thought to be commonplace just a few years ago. The days of purchasing and moving up and making money in a few years are gone!

The only people that should be selling their home are people that need to sell their home. Just as investors have sought the greener pastures of the stock market roller coaster, those that purchased real estate hoping to cash in on the frenzy need to re-evaluate their business plan. The glut of homes on the market only indicates that all prices are too high and breaking even on recent investments may be impossible.

We all see the “for sale” signs in our neighborhoods. Many streets have three, four or more within a few blocks. The signs may have gone up last spring. The houses may be vacant. They remain for sale and no one is looking. The signs and homes are sitting there gathering dust.

No one is making offers on homes for sale. Nothing can happen until an offer is made. It doesn’t matter the price point, there can be no negotiation until someone says something. If the price is too high, a buyer can make an offer. That used to happen. It is not happening now. It is not happening on inexpensive condos, it is not happening on mid-priced town homes, it is not happening on single family homes. It is not happening.

It does not seem to matter what the price is for homes now. There is no activity among first time buyers and without that upward pressure, no one else is in a position to move.

The dust you see being blown off the for sale signs is really just the sugar on a powdered beignet. All that is left is a rather bland dough ball and that is just not happening.

A note to my competitors (?)

2007-10-15T16:29:00.001-07:00

I know and you know that you drop in here every now and again. This is to you in hopes that you will...........Give the public a BREAK!!!!!

I just got my mail. Just like every few days there were postcards from real estate agents telling me of home values in my area, telling me they were number one, telling me this is the ideal time to put my house on the market(?), telling me of the homes they have sold recently (? - a quick check of the mls indicates none of the homes has sold in the last 6 months), and advising me that they are the "neighborhood expert". I have been getting these cards for years. The names and faces change, but the mailbox overload continues.

At some point, somebody has to spread the word. This sort of marketing has a minimal return on investment. Do the real estate guru's really believe that if you inundate a market with these sort of cards, you will land that listing? Of course, they will tell stories of agents that have had success. The majority of the agents that have invested money in these programs are not agents anymore. They went broke marketing. They took their toll on the tree population, they kept printers in business and they are now selling cars at CarMax.

New agents need to take a long look at how they have treated "junk" mail in their personal lives. Most people will respond to coupons that offer buy one and get one free meals. Real estate agents don't offer to sell your home for half price if you get the neighbor to list at full price. Brokers across the nation extoll the virtue of farming with postcards. Some firms will even offset your expense with credit for the postage. You still pay the bulk of the bill.

You can show your family and friends the wonderful card. You can sit back and know that 500 people saw your picture. You can enjoy your 15 seconds of fame as your card is glanced at and dropped into the trash.

Of course, if the mail arrives just as a homeowner has decided to sell and the homeowner does not know an agent and the homeowner doesn't have any friends he can get a referral from and the homeowner has no co-workers he can get a referral from...........he may call the number on the next card he receives. You just have to hope that yours is the one that hits at that moment under those conditions.

Last night, my wife and I were eating dinner when we were interupted by the phone. I am not on the do no call list. It was an agent with a local firm that very politely told me that his company had a listing in the neighborhood and they had a great deal of interest at the open house and was wondering if I was thinking of selling or if I knew of any of my neighbors that might be interested in selling. Sounded good, but the agent works in my office and the home they were referring to was my listing and I sat in the open house they were referring to and there were no visitors. Bad luck for the agent.

The lie bothered me, but I knew they were reading from a script, so I let that go. I was more annoyed that they had chosen to "cold call" a neighborhood at the dinner hour. Of course calling at that time will catch more people at home. Common sense would indicate that interupting a meal will not endear you to anyone. The fact that some of us have not chosen to be on the "do not call" list does not automatically indicate that we are hoping to hear from telemarketers. The list came into existence to stop annoying calls.

Rather than take the hint that this method of marketing is neanderthalish, brokers and trainers alike have encouraged "boiler room calling" mentality. They all promise that it is a numbers game and if you call enough folks you will get an appointment and if you go on enough appointments you will get a listing. The public at large is hoping that you stop making the vast majority that just say no your stepping stone to possible success. The general public, whether they are on a list or not, really does have the feeling "don't call me, I will call you."

This brings up the last but not the least annoying marketing that I and others have to suffer. Walking the neighborhood may bring your face some prominance. You may get to know a few people. You will also be intruding on a very precious commodity - the free time at home your neighbors cherish. The demands on our lifestyle as we move through the 2000's are tenuous. Americans cherish the free time they have. Many of them truly don't want their weekend interrupted by a stranger at the door with a printout of recent market activity or packet of flower seeds. They want peace and quiet and privacy.

There are ways to market yourself effectively. You won't need to invade homes via the mail, phone or personal appearance. You won't have to spend yourself out of a career. You won't have to attend seminars and leave with an annual coaching contract. You won't have to buy every gimmick thrust on you at weekly sales meetings.

You can do it being yourself, working with your sphere of influence and focusing on being a real estate agent. If you don't believe it can happen, take the time to read posts on Active Rain by folks like Jennifer Allan. You can be yourself and allow the public a long deserved break. You can do it now. You can do it if you are a new agent. You can do it if you have been an agent for years.
A strong dose of common sense will carry you farther than all the cheerleading and direction of those that earn a sizeable chunk of the revenue you create. It is your decision how to practice your craft. I only ask...give the public a break.

Move over Willie Sutton...you've got company

2007-10-09T07:53:00.001-07:00

Many years ago, there was a chap that robbed banks. He would commit the crime, get caught, and do the time. Upon release, he would wait a bit and then plan and rob another bank. He would be caught again and the cycle would continue. The gentleman was Willie Sutton. He was interviewed at one point and the reporter asked, "Why do you keep robbing banks?"

His answer was short and sweet and quite revealing. "That's where the money was."

Philosophically, Willie Sutton has lots of company today.

If you live anywhere in or close to Montgomery County, you must have noticed that there are homes for sale. There are homes for sale on the main roads, side roads, back roads and dirt roads. There are homes for sale in condo buildings (pick a floor and you will find a unit for sale in one of the buildings). There are homes for sale by every type of agent ( big names, little names and boutique companies). There are homes for sale by owner and homes for sale by banks.

You get the picture...........there are homes for sale.

There are more homes for sale now, than at anytime most people can remember. Did I mention there is pre-construction, new construction and re-sale homes in this mix. The amount of new homes for sale dwarfs the number of potential buyers that are looking for a new home.

Just like every industry that discovers a long running slowdown is occuring, the real estate industry has started using a new term - "the absorbtion rate". It sure sounds pretty impressive but it really only means - how long will it take to sell all these houses? Any agent worth his or her salt has been aware of this figure for a long time. We used to just say "how many months inventory is on the market". I guess that was too simple and as others have done, agents have determined that if we change the spin, maybe no one will notice how bad it has become.

"If you buy a house today, you will lose money!" was Jim Cramers most recent pontification. It was heard on the Today Show and has been heatedly debated in many quarters. (For the record, he was right and he was wrong. It depends on the total picture. For investment purposes, he is dead on...for awhile. For those that need a home ... he has missed the boat.)

Everyone has an opinion on what in the world happened. Fingers are being pointed at lenders and real estate agents. People are convinced that there is a relationship with illegal immigrants. Others think it must be "those" people that used sub-prime loans.

There were some bad lenders that failed to make sure that their customers understood the loan they were accepting. There were some really bad apples that did not care how accurate the application was as long as they could get the loan made. There were cases of loan fraud.

There were some real estate agents that were not concerned with their clients ability to pay for the home that they were seeking. There were agents that affiliated with lenders that would "get the loan done" and home inspectors "that would not pooch the deal." There were cases of failed fiduciary.

The immigration status of anyone that bought a home has no relationship to any default. You do not have to be a legal resident of the United States to purchase property in the United States.

Sub-prime loans were available and remain available for some borrowers. The product is not at fault. The problems created by sub-prime loans did not occur with the majority of people that borrowed money using that product.

All these fingers being pointed, and there is a "gorilla in our midst" that few will acknowledge, that is probably statistically the biggest offender. There is a group being overlooked in the equation and few fingers are pointed their way.

Homebuyers and home owners, this finger is for you. You were the consumer and most of you had every opportunity to make a better decision. You signed disclosure after disclosure. You knew what you could consistently afford to pay. You allowed the possibility of financial gain or the desire for things you really could not afford to cloud your vision. Yes, in most cases, you created the quagmire that you are attempting to escape.

The consumers, that purchased homes that they could not afford, will ultimately have to accept responsibility for their actions. The consumer that used one or more cash out refi's to increase their buying power will ultimately have to accept responsibility for their actions.

Not only accept responsibility but they will have to live with the consequences of their actions.

Before you get angry and stop reading.... play along with me here. Let's do a short version
of.......IF THE SHOE FITS......

Did you ask your lender for a loan that would give you the smallest monthly payment?
Did you ignore the fact that the payment might increase because you were sure that prices were going up and you could refinance before the rate went up?
Did you succumb to the desire to own a home you could not afford because creative financing allowed you to get in the door?
Did you tell your real estate agent the total amount of money you wanted to spend on a home?
Did you think, in the back of your mind, well if I can't afford it, I can sell it for more than I am paying today?
Did you think that the multiple disclosures that you signed, agreeing that you understood every aspect of the purchase, were just meaningless window dressing?

For a short period, people were buying and selling homes like cheap jewelry on E-Bay. The market was very hot. People got caught up in the rush. There was money to be made in the kitchen, the extra bathroom, the finished basement, etc.

People began viewing their home as a liquid asset. They dipped into their equity and bought cars, vacations, paid off credit cards and many things like that. They did not change their lifestyle. Now the car is old, they need a vacation and the credit cards are maxed out again.

The milk cow has run dry.

People can not afford to stay and they can not afford to go. Homes are on the market and no one is willing to pay the asking price. Buyers are not willing to subsidize the largess of the homeowners. The once perceived value does not exist anymore. Sellers will either reduce their price to an acceptable level or they will have to remain in the home. If they cannot afford to repay the money they have knowingly borrowed, they will have to accept foreclosure. In this area, short sales remain terribly overpriced. The stalemate has continued.

Sellers have been asked, "why would you mortgage yourself to the hilt?"

They all have the same type of reply...."That's where the money was."

Cramer vs. Cramer........in a war of words NAR sent an unarmed man

2007-10-06T07:44:00.000-07:00

I would hope by now you have had the opportunity to either hear or read Jim Cramer's statements about the condition of the real estate market. He was on the Today show the other morning. (NBC is pimping Cramer and his Mad Money, so get used to his visage during morning coffee.)

In his appearance earlier in the week, Cramer told Meridith Viera - and I paraphrase - "Do NOT buy a house now, you will lose money!" I have to admit, I listen to Cramer sometimes and he speaks from experience. His experience is in a world that I don't have much expertise. He deals in money matters. There are a lot of people that listen to him. His statement went unchallenged by Meridith "what in the world are you thinking" Viera.

Apparently, someone at the NAR was flipping channels that same morning. Their search for the cartoon network was interrrupted by Cramer's Crash Cramming Course in the housing market. I can only imagine that they sent Lawerence Yun (sic) a memo and asked him to research what Cramer said and craft a response. They sent NBC a note saying that it was not fair that no one was there to rebut what Cramer shared.

If you think Cramer was piling on.....you will hate what happened next.

The Today Show, (really pimping their new program pick up - Mad Money) invited Jimbo back and offered a point-counter point spot to the NAR. In their typical wisdom, the NAR had the president elect for 2008, Charles McMillan get out of bed and appear opposite Cramer.

What the hell were they thinking?

I was available. There must have been other agents available. I accept that maybe some verbose, quick thinking people must not have been available......but Charles "do I have to get up that early after key noting the Indianapolis state convention" McMillan. (And you wonder why the effectiveness of the NAR is in a faster free fall than housing prices?)

Cramer made his statement again. Your turn McMillan "that's not true, real estate is local. It is different everywhere." Cramer " Only three zip codes in the country are a value, Seattle, mumbled numbers and maybe Montgomery County, MD. That's it" Over to you McMillan - I must have misheard, I think he stammered something about the mid-west and included Indiana. It was hard to tell because although his image was stationary, our president elect (duck out of water already) was back pedalling quickly.

Cramer 'Indiana???? Indiana is one of the worst!!!!" Our man on the spot McMillan "That isn't true. I was just the key note speaker at their convention and they are positive about their market"

Memo to Charlie......you just got through blowing hurricane force smoke up their rear end. you are the president elect of their national group. you only chatted with groupies that were hoping for a photo op and other leaders that over time have learned to say when asked "hows the market"..........respond "incredible".

To McMillan's credit....I have to say something nice (I don't want my supra key cut off). He did try to mention that people live in houses. It may just be me. I actually expect the head of my association to be able to speak about the market we work and live in. I do not expect a "deer in head light" vacouous stare and nothing of substance offered to refute Cramer.

It would have been nice to hear -

People that buy homes as a residence and plan to live in them for 3-5 years have rarely lost money.
The only investment that people can purchase and use for housing is a co-op.
There is not one stock that receives the favorable capital gains treatment that home ownership is afforded.
You can not directly finance the purchase of stock and write off the interest related to that financing.
Shelter is one of the basic needs (according to Maslov), no investment is on the scale.

I didn't hear it. I just watched McMillan fumble through his side. There was nothing offered that would refute Cramer's statement - If you buy a house today, you will lose money. Well, I can promise you that if you watch a replay of the point-counter point late this afternoon.....you will lose your lunch.

Why are Realtors paying dues to the NAR?????

Required disclosure and disclaimer: I am only parapharsing this event after but one cup of coffee. Even though I only have Cafe Dumond coffee in the house, The chickory does not provide me with photographic memory. The view expressed here are mine and I reserve the right to change my mind if questioned by anyone from Homeland Security that asks to speak with me privately.

Ask the question.....you might get an answer

2007-09-24T11:44:00.000-07:00

It wasn't so long ago that I was having a conversation with my wife over dinner. We were talking about how quickly things had changed in the real estate market. I shared a few ideas and told her, "I think I will write a blog entry about it."

She looked at me and said, "You have been writing about it. You sit down at the computer and decide what you want to focus on and thirty minutes later you hit the enter key and voila....another epistle from Dippy."

"Instead of telling them what you think they need to hear, why don't you ask them what they want to know?"

That night, I formulated a little questionaire and sent it out to about 500 people. I waited a day or so and questions began to trickle in. This will be the first of series of sharing the questions and offering an answer.

I keep hearing that real estate is in the tank, yet, it seems there are more agents than ever in my area. I would have thought with the market collapsing, a lot of them would try something else. Why are there so many still in your business?"

That is an excellent question. At first, I thought the same thing would occur. After receiving your quetion, I did a little digging and asking around.

A lot of the agents in this area got into real estate in the last few years. Prices were going up and inventory could not keep pace with the buyers. If you were an agent and listed a house, it sold quickly and usually for more than the asking price. Listing agents were making a tidy income. Buyer's agents were spending about a day or so with clients, writing offers and usually finding success quickly. They too were making a tidy income.

When sales were so fast and frenzied, new agents saw no need in learning the profession. They were making more money than they ever dreamed of because they were there.

Those days are behind us. The memory of the reward for making just one sale lingers on. Agents that are without business today hang around the office hoping that lightning in a bottle will strike one more time. They have researched other jobs. There is not one job like real estate. In this market, one deal will carry a lot of agents for two or three months. In this market, faced with no income and the prospects of a long cold winter, one deal is all you need to get to spring.

So they stay and wait. It is survival of the patient and long suffering. It is not survival of the fittest. The quality of an agent can not be measured by the fact that they have remained in the business. It is still very important to interview two or three agents and make sure you have aligned yourself with one that is here because it is their career and not because they have no other choice.

"I keep seeing offers to get a CMA. Just what is that?"

A CMA (short for comparitive market analysis) is generally regarded as a document that shows homes that have sold similar to yours and uses that information to give you a general estimate regarding your home's value. It is not to be confused with an appraisal. It is not factual, it is a "best guess" about market value based on current market data.

Agents routinely offer these as a way to get into your living room in hopes of being the one that will list your home. If you are thinking about selling, you really should speak to more than one agent and I would recommend you spend the money on an appraisal before you put the home up for sale.

"If prices are falling, but the average sale is going up and total sales are going down....just what is market value?"

There are many opinions about market value. Some will tell you it can be determined by recent sales of similar homes. Some will tell you that it is the ultimate price someone will pay for your home. I fall somewhere between the two. I think you have to determine a reasonable starting point for pricing your home. The actual market value should be your final price. Your choice of an agent and how extensive their marketing plan it will either increase or decrease your market value.

Prices are falling and there are less sales, so determining a starting point is becoming much more difficult. The average sale is going up because there are fewer sales and the average price of what is selling is higher. Entry level homes (condo's etc.) are remaining on the market longer. Statistics you see must be analyzed seperately. Each figure is only an indicator of that segment of the market.

"Is this a buyers market?"

No. It is not a sellers market either. This is the most unusual market we have ever experienced. It is the mirror image of the frenzied market of three and four years ago. If you remember, there were more buyers than there were homes for sale. Sellers were receiving multiple offers for much more than they were asking. Now we have more homes than buyers. Sellers are receiving no offers or they are receiving offers for much less than they are asking. The market did a flip. In days gone by, it was like a pendulum swinging back and forth. We now are seeing it flip. It changes quickly, but right now.............we have no market.

That being said, everyone understands it is a great time to buy. Interest rates remain historically low. (If you thought the Fed cutting the rate would get you down to 5.5% again....you were wrong. Right now the Fed rate is close to 5%. When mortgage rates were down around 5%, the Fed rate was 1%. Don't expect those days to return for a long time.) There is a lot of inventory and there are many sellers that have to sell. Talk to your agent about the market. It may be time to buy for you.

Well, I think that is enough for now. Please continue to send me questions and I will answer them privately right away. I will put together another batch to share here as well.

The truth about tomorrow!

2007-08-20T17:38:00.000-07:00

The only people that get hurt on a roller coaster ride jump off in the middle. Most folks are watching the perils of Wall Street, listening to Jim Kramer rail against the attitude of the Federal Reserve and being bombarded with newscasts that predict the end of the world as we know it.

It just isn't true.

The truth is - many lenders chose to go the expedient route of desktop underwriting on mortgage loans. The underwriting process factored in data such as income, employment and your FICO score. The internet became the "deadbeats" best friend. There were some people that did not have a good job history. There were some people that did not have verifiable income. There were some people that had low FICO scores.

No problem.

You could go on line and pay a company to verify whatever job you chose to claim. You could just tell the loan officer how much money you made and if it made sense with the job you created, you could just state your income. That would work as long as your FICO score was high enough. But you don't have a good FICO score...?

No problem.

There was this nifty loop hole in the FICO system that allowed you to be added as an authorized user to someone with good credit. That's right, you could just pay a fee and have your name added and BINGO ...up goes your credit rating.

All of the sudden, anyone with a pulse (and access to nefarious firms on line) could get a mortgage. The smiling loan officer would just ask...how much do you want to say you can pay each month. Lies were told, paperwork was signed and loans were quickly resold. The valuble loan officer was the one that could close loans that would last 3 or 4 months before defaulting. (If the loan was sold and payments were made for a few months, the purchasor could not demand that the loan be sold back).

BIG PROBLEM.

First it was the sub-prime loans that began to go bad. The larger lenders sat back and smugly shared sound bites "We don't make those kinds of loans." The lenders that did make them are now pretty much history. Any reputable lender that did have some on their books, stopped underwriting them. The fall out was the demise of the sub prime business. Eye brows were raised and investors were stunned to see they were not going to get that big return. The question was raised...how could this happen?

Very old axiom....if you lend money to people that do not have the ability or inclination to repay it...you will lose your money!

The dust had barely cleared when larger lenders began to run into what they called "liquidity problems". If everyday terms, the investors began to feel the pinch and they reduced how much they were willing to pay. American Home Mortgage was the largest recent victim(?).

Now, rumors run rampant that Countrywide will fall. They did run into a problem. It is significant to note that the other big banks lent them the money to continue operations. They have announced some changes. Those changes portend tomorrow.

The TRUTH ABOUT TOMMOROW!

The situation has no relationship to chicken little or a fallng sky. Lenders have tightened their requirements. Jumbo loans (those over $417,000) are more expensive to get. There is still money for mortgages. The lenders are just beginning to focus on those loans that are guaranteed by Freddie Mac, Ginnie Mae and Fannie Mae. They need to make sure that the loans they make will be purchased.

It would seem to me that if the money pool remains the same, and companies are focusing on conforming loans, the housing market is in better shape than most understand. If the pool of money used to fund Jumbo loans is not being used, that money will have to be lent to someone. The amount of money that will be available to the conforming folks will increase. Remember, the lenders only have a chance at making money when the actually lend money.

In case you haven't noticed, buyers at the lower end of the scale have not been knocking down doors to get loans lately. There are several things that have spooked them. The media with it's continuing gloom and doom soundbites has tempered enthusiasm. The month after month increase of the interest rates when the Feds meet has created the illusion that interest rates are high. The increase in the cost of living on day to day things like gasoline, dairy products and basic entertainment (like a family nite at the ball park) has them worried about the future.

Lenders will have to take a long look at the potential pool of borrowers and come up with a way to entice them back into the housing market. The federal government will have to come up with a way to stave off the recessionary possibilities that now exist. One answer will solve both problems. Interest rates will come down a bit. It won't take much. A quarter point drop on Sept 18th or before will resonate across the market place with the power of the started at the Indy 500 intoning "gentlemen, start your engines".

Real estate has always been a bottom up industry. The people that buy the $200,000 home enable the seller of that home to become the buyer of the $300,000 home and so on. It is sort of a trickle up effect. We will have more money available to the first time buyer or the buyer purchasing property at the lower end of pricing. Those sales will trickle up and we will see a return to housing sales.

This is not to say that we will return to the days of escalating prices and homes sellng for 10% or more over the asking price. Those days were fueled by lies and those lies have seen the light of day. Prices will probably go up in accordance with other costs in the economy...no more and no less.

Realtors will once again pre-qualify buyers and listing agents will take a longer look at the ability of buyers to purchase their listings. It used to be that way.

You see, real estate agents got lazy too. They opted for the "talk to your lender and bring me a pre-approval letter and then we can go look for homes". They passed the buck and responsibility onto the lender. The lender passed the buck to the desk top underwriting system and various documents that were not verified. Folks selling homes were willing to accept offers as long as the money got to the settlement table. Everyone turned a blind eye to reality.

As I have shared...those chickens have come home to roost. The absolute truth about tomorrow is that everyone will be more careful. Loan applicants will actually have to be credit worthy. The housing market will improve.

Tomorrow.

County Fair Diary ...Day Six

2007-08-17T08:57:00.000-07:00

So in the Bible, on the seventh day, God rested. Those shoes are too big to fill for me. I had to take a break on day six. I planned to visit a BNI group for a breakfast meeting (I was subbing for a fellow agent and that meant the breakfast was free!) and then drive over to Needwood Golf Course and play a round of golf.

It was overcast and reasonably cool and I was able to join a threesome on the first tee. My drive was perfect, splitting the fairway and coming to rest about 90 yards out. I used a wedge to hit my approach shot to within 15 feet of the flag. My birdie putt was just a few inches from the mark and I settled for a solid par to start my day.

Then........the rains came. The thunderstorm scheduled for late afternoon erupted six hours early. I returned to my car and put my rain soaked clubs in the back and drove to the office. I spent the rest of my day off dealing with various transactions. All was not lost. In the evening, my wife and I enjoyed the ballgame at RFK. A good friend had tickets that they could not use and dropped them off at the office for me. Great seats!

So even a day off that gets turned upside down can end swell. County fairs and baseball....great American pastimes it is a priviledge to share.

County Fair Diary ...Day Five

2007-08-17T08:34:00.000-07:00

Well, it is wednesday night and I have to share....my feet hurt. I had the afternoon shift today. I got there a little early figuring that the person working the morning shift might want to scoot sooner than later (I seem to be the only one in the fair crew that loves the opportunity). Well, much to my surprise, I replaced no one. The early person left around lunch time and the booth had been empty for awhile.

Within minutes of my arrival, a very nice young woman stopped by and wanted to discuss the sale of her home. She has been going back and forth between her house and the home her mom left her two years ago. She had stopped by a bit earlier but no one was in the booth and she was taking one more chance on her way home.

I shared what appeared to be her options and she asked the I come by next week and tell her what has to be done to sell. She also asked that I bring the paperwork necessary to list the house.

It wasn't an hour later that another homeowner came by and asked about selling their home. We talked about pricing and the market. After a conversation and answering questions, we made an appointment to have me come by and list the home this weekend.

The rest of my tour was spent blowing up balloons, chatting with folks that came by for general information and taking a break to partake in the most wonderful funnel cake.

My shift ended at around six and I was able to go across the way and enjoy the finest fried chicken dinner on the lot. After eating, I figured..why sit in rush hour traffic and went over and watched the monster truck show. Just another day in paradise.

County Fair Diary ...Day Four

2007-08-17T07:51:00.000-07:00

All is fair in love and war. The same holds true for working the booth at the fair. I had to actually do work related activities during the day. My shift began at six. Once again I enjoyed the private delight of driving through the special vendor entrance, guiding my jeep past horses, the cow barns, stopping at the pedestrian cross walk and continuing to the on-site parking for vendors. It really is nice when such small priviledges bring such joy to my heart. It was extra special tonight...my lovely wife was with me and she got to enjoy the treat as well.

On to the evening. There was a lot more traffic in the vendor area. Apparently, local fair goers suffer from "fair fatigue" early in the week of our fair. It follows on the heels of a nearby counties events and those that enjoy visiting the fair circuit need a little time between visits to recharge their batteries.

I was in the middle of explaining the highly technical job of blowing up balloons when a young couple stopped and exclaimed, "Hey, we know you, you helped us buy our house!" I looked up to see Rob and Melissa (apparently on her way to being great with child). They were very happy to see us and began to relate the story of how they got their first home.

It was a couple years ago, about mid-January, when they first began their search. Rob laughed as we talked about the superbowl sunday when I met them to tour an open house. We got there around noon for a one o'clock open house and found a crowd of about 50 other people waiting to get in. Parking was at a premium. I was walking from my car to theirs and took an awkward step on ice. Apparently, they were in tears as they watched me, my briefcase and their paperwork go flying through the air.

The house was not quite for them and they decided not to join the other six offers that were being submitted that afternoon. The following weekend, one of the homes chosen for viewing had been on the market 2 days and was available for viewing during an open house. The listing agent was one of those folks that put a sign in the yard and tell the seller to hold the open house. Rob and Melissa walked through and loved it. The owner was hosting the open house. We went outside and "we want to submit and offer on this house." I pointed out the large numbers of buyers that were coming and going and told them, "OK, let's write the offer right here on the hood of my car. You will then walk back into that house with me and tell the owner that youi will pay him full price for the house if he accepts the offer right now." I wrote it up and Rob and Melissa went back in and cornered the owner in the kitchen. Rob made his pitch and the owner stammered "I think I need to talk to my wife, she won't be home for thirty minutes." I could have kissed Rob when he smiled and said "We'll wait." The owner turned to me and asked, "Can I accept an offer now?" I told him that I was not his agent but it was my understanding of Maryland law that he had the right to accept or reject any offer.

Cut to the chase. His wife came home. They accepted. Later in the evening, his agent called to say that it was underhanded and he had three more offers to present. I told him to hold onto them, my clients might not like the ocndo docs but as it stood, they had a ratified contract. Rob and Melissa are going to need a bigger place once the baby arrives. They asked if I had time to sell their home and help them find a new one. It is nice being at the fair. Would I have been involved if I had not seen them at the fair...maybe. They did mention that they do receive my monthly market reports, but I didn't know she was expecting and I believe that I may have missed the boat if I had not been here at the fair.

The rest of the evening was spent chatting with folks. Most were concerned about the mortgage industry implosion. I shared that the dust will settle. The feds will cut rates and the market will improve as it always does ...from the bottom up.

County Fair Diary....Day Three (Bus man's holiday)

2007-08-14T11:32:00.000-07:00

Well Monday is children's day at the Fair. I did not sign up to work in the booth on this day. I have to share that one of the great fair attendance joy's is to see the wonder in children's eyes as they wander from one livestock area to another. Grownups usually have forgotten the thrill of standing right NEXT to a real cow! The biggest thing wandering the suburbs in today's world is the neighbors dog (that is unless you live in the western suburbs that occasionally receive a visit from a wayward black bear).

I spent my day off from the fair at the fair. I went from booth to booth rediscovering the longing for a hot tub that I thought was quite removed from my psychie. I sampled assorted flavored pretzels from Pennsylvania. I tried my luck hurling darts and unbreakable balloons. I test my free throw skills with basketballs that had more bounce than the original super balls. I plunked down my dollar and spent some time with the worlds largest horse. I have to confess, I even spent the money to see the two header raccoon and five legged goat.

The time spent on the midway always seems to tire me out. As luck would have it, when the heat and walking finally hit me, I was standing in front of yet another pizza vendor that was situated adjacent to the Bingo tent.

Those of you that passed by in mid-afternoon may not have noticed, but that content looking fellow wiping the pizza off his t-shirt really did say BINGO. The magic continues.

County Fair.....Diary Day Two

2007-08-14T11:24:00.000-07:00

I had the early shift Saturday arriving at the fair grounds a little before 9 a.m. There is something special about directions that include "turn right at the goat barn, go to the end and then turn into the vendor lot next to the livestock exhibitor parking".

The gates opened and the first visitors began their search for giveaways and as much free stuff as their plastic bag would hold. I was ready. I had a full helium tank and a 4 boxes of balloons prepped with ribbon and a nifty little filling cap. Soon the midway was adorned with small children holding on to red, yellow and blue Long and Foster balloons.

There was an occassional break in the action which afforded me the chance to slip next door to the Cheese booth and purchase a delightful grilled cheese sandwich. Later in the morning, I headed north to avail myself of a couple free samples of italian ice.

About mid-morning, I actually had the chance to chat about real estate. Two women came up and explained that their mom had recently passed and wanted to know if I could explain how they could sell the house when they both didn't live in the area. I went over the process as best I could, got the information and made an appointment to visit the home after the fair and list the property.

Then came the pleasant surprise. The real estate editor of our local paper dropped by to chat me up about the market and what folks were saying when they visited the booth. We talked for a while and she made sure to fill out a form to enter her name in the drawing for one of my paintings.

As my shift came to a close, the sweetest little bundle of joy on the fairgrounds rolled up in the stroller her mom was pushing. She squealed with delight when I tied the bright red (just like Elmo) balloon to her little wrist. It was her first visit to the fair. Rather than pack and go, I offered to walk the grounds with her and her mom.

I made sure to point out McDonalds farm and enjoyed the wonder in her eyes as she stroked a bunny rabbit. Our last stop was at the ice cream booth manned by the Lions Club. We ordered and sat back in the corner so this little princess could watch people come and go. She actually has acquired the talent to bite an ice cream cone and soon her smile had a sticky chocolate ring around it.

I walked them to the exit and gave her mom a hug and thanked her for letting me pass on the tradition. Can life get any sweeter than having your daughter bring your first grandchild to the fair so that you can share a family tradition? I think not.

>

My beautiful granddaughter Rylee

Daily Fair Diary... Day One

2007-08-10T21:43:00.000-07:00

Well, my first day at the fair has come to an end. I have a feeling that the people that stopped by to chat and ask questions represent many of you that haven't had the chance to stop by. I thought I would share a little of the information requested.

Bob T. came by and shared that he and his wife had recently sold and were now renting a condo. He said that they got less than they thought they would get for the house and decided it would be better to rent for a year before buying another home. He and his wife saw a couple homes they liked. They figure with all the turmoil in the market, the prices will drop and they will get a better deal next spring.

I just happened to have my laptop with me (had to use the battery, the fair did not include an electrical outlet in the package). I pulled up the two homes that he mentioned to see if the price had come down. He and his wife just stared blankly at the screen when both listings came up as sold. Not only that, one of them sold for a bit more than the asking and the other sold for full list price.

I told Bob, prices may come down a bit. No one has a crystal ball. The downside of waiting is that someone else may like the property you want and they may not be willing to wait. There may be another house just like the one you didn't buy. No one has a crystal ball. All we can do is act on the facts before us.

If you buy the home you want today, and a similar home sells next spring for less money, you still own the home you want. Next springs prices have nothing to do with today's prices. In the long term, home values go up. You are buying a home, not investing in real estate. Tomorrow will always have the possibility of being better or being worse. Today you can make decisions based on facts...not possibilities.

So......that was the most involved question of the day. Two steak sandwiches and one ice cream cone later...my day was done (now if I only get them to call B7, I will have Bingo 2 ways on one card and a four corner on another).

If it is 100 degrees and August....it is time for the fair

2007-08-08T14:06:00.000-07:00

Folks are sitting around pools and the temps are reaching triple digits. The Redskins are in training camp. Commercials are heralding back to school specials. These occurences can only mean one thing. It is time for the Montgomery County Fair.

Now, I have been going to the fair since Gaithersburg was the outer fringe of Montgomery County. Directions to the fair included things like...go on out the Washington Frederick Road past Agnew Inn about 10 miles, once you go over the bridge the fairgrounds will be on your left. Today folks will use 270 and exit right into the fairground area or drive over to Lake Forest Mall and take the shuttle.

There is more information at www.mcagfair.com/

I will be working in the commercial building during the fair. My personal schedule is:
10th 3-6
11th 10-2
14th 6-10
15th 2-6
17th 10-2
17th 6-10
18th 2-6

If you can stop by, I will gladly answer any questions you have about real estate and I may even throw in a hot tip on the "pig races". If you come by at times that are not on my schedule, check the BINGO booth. The old guy eating cotton candy, playing three cards at once .... that will be me.

Enjoy...it remains Montgomery Countys finest tradition.

Mortgage chickens coming to deny your roost

2007-08-06T06:51:00.000-07:00

While you've been away.....the mortgage industry has been imploding. Over the past few years, it has been mentioned here and in many other places that the amount of money being offered to anyone with a pulse would erode the foundation of the mortgage market. If you follow financial news, it is occuring before your very eyes.

The most recent casualty is American Home Mortgage. Their demise has caught the attention of those of us in the real estate profession. They were not making their living off of questionable practices. They did not lend money to anyone that applied. A lot of their money was lent to borrowers with very good credit scores. A lot of their money was lent to people that borrowed more than the $417,000 conforming amount.

The $417,000 figure is important to note. $417,000 is the threshold for loans that can be funded by Fannie Mae, Ginnie Mae and Freddie Mac. Those three institutions regulate government backed loans. If a loan is greater than $417,000, it is refered to as a non-conforming loan and must be funded by private investors. These private investors are usually found on Wall Street.

Here is a basic overview of how loans are funded. There are two ways of funding - public funds or private funds. A mortgage broker or lender sits down with an applicant and takes an application. Information is checked, a credit report is reviewed and the information is entered into a desktop underwriting program which will direct the lender towards the best solution for their customer. They may and often qualify for more than one program. The solutions are presented and program is selected. If the amount needed for the first trust is $417,000 or less and all other necessary criteria can be met....the loan is most likely funded in concert with one of the aforementioned agencies. If the amount needed is greater than $417,000 and/or other criteria can not be met....the loan will be privately funded.

If the lender has its own resources, they may choose to fund the loan and sell it off to an investor. If the lender does not have their own resources, they shop the loan to the investors on Wall Street.

Someone once said "If you want to get to the bottom of anything, follow the money." Mortgage lending is no different. It gets tricky when you involve investors and the stock market. It becomes a little more clear when we follow the money. No one is doing this altruistically, everyone wants to get paid.

For example purposes, I will use a $500,000 loan. The mortgage company offers the loan to a customer at a 6.75% rate and goes to Wall Street to seek funding of the loan. The investors on Wall Street figure that loan is worth $505,000 to them. The 6.75% return is a good one compared to what other investments are yielding and they will be receiving payments for a long enough period of time that they will show a profit on their $505,000 investment.

In this scenario, the lender can make the loan without having to charge any extra money. The lender is making 1% ($5,000) for processing the loan.

If a lower rate was offered, the investor would most likely pay less for the loan. An example might be the same $500,000 loan at 6.625% could only result in $502,500 and a 6.5% loan could only result in $500,000.

The lender has to make money in the process, so the lower rates must be paid for by the borrower. These are usually deemed "origination points". In order to maintain the same revenue...the lender would probably charge 1/2 point on the 6.625% loan and a full point on the 6.5% loan.

If the borrower wants an even lower rate, we get into "discount points". For instance, they borrower wants the loan at 6.25%. The investor may only offer $495,000 for that loan. The borrower would have to pay the additional $5,000 (one full discount point) as well as the origination point which in our scenario would be another $5,000. The borrower would have to pay $10,000 at closing to get the half point reduction in his rate, rather than take the market figure of 6.75%.

Everyone was fine with this system as long as mortgages were being paid on time.

Well, as we all know, that has stopped happening. Defaults on loans are increasing at an alarming rate. The investors on Wall Street have always measured the risk against the potential gain on any investment. The investors are constantly revising data and reviewing the current risk against historical analysis. The recent increase in mortgage default has increased their perceived risk. The increase in their risk has either lowered what they will pay for a mortgage or in some cases they have decided to not fund any mortgages.

Those that have continued funding mortgages have drastically reduced what they will pay. The $500,000 loan at market rate that was purchased last year for $505,000 may only bring $475,000 now. In order to make money, the lender would have to ask their borrower to bring $30,000 at closing (that's 6 points and none of them discount the rate - they are all origination fee). The other choice is to ask for a point and lose the other $25,000.

Unfortunately, the lender is in a no-win situation. The majority of borrowers would balk at this request on the lenders part. Recently, the news of these cost came at the last minute. Investors do not lock in rates. Lenders lock in rates for a short period using their best guess as to what they will be able to sell the loan for at the end of the lock in period.

So last week, the good folks at American discovered that the loans that they had to close at the end of July were going to cost them considerably more than they could recoup. I will not get into the spiralling behind the scenes cost that all lenders and investors are seeing daily. American could not fund the loans. Closing their doors was their only viable option. Other lenders face the same predicament.

Lenders have billions of dollars of unsold loans on their books. These loans have been funded. They were funded by loans the Lenders took out from their banks. You see banks will loan money to lenders based on the revenue the lender anticipates receiving once they sell the loans. This revenue is the value of the loans that have not been sold. When the investors reduce the amount of money that they are willing to pay for loans, the value of the loans decreases. The lenders can only borrow a percentage of the value. When the value goes down, they have to immediately pay down the loan so that the amount due the bank is a percentage of the new value. It sounds a bit confusing to the layman, but it is very devasting to the lender. If they can not pay down the loan, they are in default and that usually triggers a series of events that culminates with the doors being closed.

It also begins the ugly cycle because now a bankruptcy judge has to sell the loans that were funded and not purchased. Investors usually do not pay top dollar for assets sold at bankruptcy. The value of the loans is decreased and the overall impact is yet another increase in risk assignation and the possible reduction of what investors will pay for new loans.

I don't pretend to be an expert, this is just a general overview. I wanted to try and explain how the mortgage market is reacting and what causes a big company to go under.

The safest route for borrowers is to keep their loan a conforming loan and to provide all the documentation your lender requires. The statement "We fund all of our loans" does not guarantee that origination points will not be charged nor does it eliminate to possibility of discount points being charged. Consumers have to understand that almost all mortgages will be sold and the cost of that sale may be included at loan origination.

Steps from Metro, Minutes from Downtown

2007-07-08T07:39:00.000-07:00

Solitude minutes from the maddening rush

2007-07-08T07:35:00.000-07:00

The State of The Union

2007-06-11T10:34:00.000-07:00

There are issues of wars being fought on foreign soil, there are issues of a growing illegal immigrant population, there are issues of mankind's impact on his environment. Nothing paints a clearer picture of who we are than the ongoing plight of our fellow countryman still suffering the effects and after effects of Hurricaine Katrina. Until we as a nation, collectively extend a helping hand to those in need, we will continue to exist as self indulged nuclear families living a life stimulated by ongoing sound bites about celebrity dramas and "would-a, could-a, should-a" remarks from candidates running for office.

Please consider your personal ability to help. The links below offer opportunities to assist those still suffering.

Family to Family.Org

Emergency Communities.Org

One Day Trip...Lots of Answers

2007-05-07T05:12:00.000-07:00

I finally reached my limit yesterday. I have been spending weekends attending to the needs of buyers and assisting my growing group of clients attempting to sell their home. I may sound impossible, but I think it is likely, we can not see the forest for the trees.

Let's face it, the market is still sluggish. (note: sluggish is fancy real estate technical term for the fact that activity is maybe 80% of where we "thought" it would be)

I read the headlines. I watch the nightly news. I read trade publications. I have become proficient in an entirely new vocabulary. "The market has changed."" The market has died.""The bubble has burst.""The sky is falling." O.K., maybe not the last one.

It has been heralded that we are in a "buyer's market". Really? Call me crazy, but my assumption would be that a "buyer's market" would have ready, willing and able BUYERS.

If those buyers were out there, wouldn't they be buying?

I had to see for myself. I pulled up 15 listings in a price range comparable to what I would list my home for and went out to view homes like a buyer. I made the necessary calls. I went through all the steps that I normally follow for my clients.

Our first stop was Normandy Farm for brunch. It is the easiest $26 to spend on a Sunday morning. The food is wonderful, the service top notch and the experience makes you want to make it at least a monthly event.

Everyone looking for a home should hit the market on a full stomach feeling like a special person. Normandy Farm will take care of that part of the mission.

Then we began. The first house was being held open by the listing agent. Out of the 15 we visited, 6 were being held open. I am sure that the first agent had a lot to share, but we could not hear her over the traffic that roared by outside. It seemed to me that she should keep that front door closed. The flier pointed out the wonderful location. I asked why the price was the same for over 4 months and the agent just shrugged her shoulders and told me...."two years ago there would have been a line out the front door, contract in hand to buy this house." As we were leaving, I mentioned "This is 2007 and we aren't in Kansas anymore."

I won't bore you with a blow by blow description of the day. It did take 6 hours to visit all 15 homes. It was very tiring. When showing homes to clients, you keep a practiced eye on the structure of the home, how it is presented, etc. Your main focus is on your client. (I may have mentioned this - I have a home. When working, my client is buying the home. The advice and counsel are mine. The decision is theirs.)

Anyway, since the final decision rests with the owner of the home, I have something to say. You all need to rethink pricing. If you are sitting there month after month and your house is still on the market, IT IS PRICED TOO HIGH! I really don't care what the neighbor sold their home for last year. It really doesn't matter what you paid for your home. Your indebtedness has not relation to the market value of your home.

The media is running out of ways to explain the market. The "correction","bubble bursting", "change in mortgage guidelines", "impact of gasoline cost","buyer on the sidelines", "paralysis by analysis" and every other thought is sugar coating the bottom line.

There is only one word that neatly describes the reason for the current market. There is only one label that covers the main reason houses are sitting unsold. It has nothing to do with the mortgage industry. It has nothing to do with the willingness of buyers to make offers. It is not meant to blame anyone. It just describes in total, the underlying issue.

GREED

That's right, plain old fashioned GREED. We have the proverbial stand-off at the highest level. And the level is so high, no one is bothering to challange the sellers. Buyers see the house on-line, see the price of the house and do not bother to even drive over and walk through the door. They don't ask their agent to make an appointment. They just sit at home an wait. They are not even going to initiate a search until sellers realize that the gains of two years ago are gone.

You are not going to sell your home for more than the neighbor sold theirs. It is not going to happen. If you truly want to sell your home, price it like you want to sell it.

Of course, our trip yesterday took us from the Bethesda area to Derwood. The first house and the last house and every house in between was priced higher than it should have been priced. We don't have to rush back, we know they will be there next week and next month. The agent may change - sellers often like to use the agent as a scape goat when the house won't sell for the price they want. I imagine it is very difficult to accept that your home is not worth what you believe it to be worth. If you have the chance, try to remember the little voice in your head that whispers "what are they thinking?".

I know it will not sell headlines or keep folks riveted to the nightly news, but, the headline should be -

HOUSES LINGER LONGER WHILE OWNERS LANGUISH IN GREED ! ! !

I do feel much better. I was beginning to worry that there was a horrible reason that the housing market is sluggish. At least we can be comforted. GREED has been around a long time. We know how it will end.

The greedy owners will sit back and wait. They will fire their agent. They will contemplate for-sale-by-owner. They will continue to believe that their situation is different. They are not asking too much. Then time will become a factor and the price will come crashing down. They will sell for less than they could have received in the beginning. Prices will come down. The market will pick up and we shall have survived yet another cycle in our economy.

My wife and I will now just sit and wait. We learned two valuable lessons. One, the couple homes we did like will not be sold at the price they are asking. When they come down, the owners will be weakened by the experience and we will be able to negotiate strongly for every term we want. Two, when we put our home on the market, it will sell within a month. Homes priced correctly move quickly.

GREED is such an ugly word. Maybe that is why the market seems so....well, ugly.

The last day of April

2007-04-30T10:45:00.000-07:00

So, I have been busy. I have been very busy and I am very grateful for the opportunity to practice my trade. Representing buyers and sellers is far more enjoyable than sitting around the office wondering what happened.

It is not a mystery! Spring has sprung and the pent up demand from last year's hiatus has erupted. Buyers have stepped up and out and they are looking again. The sub-prime fiasco has not impacted everyone. First time buyers are finding out that there is a way. I suppose that I will end all suspense and share the secret

Bank of America

That's right, just when everyone was beginning to believe that the home of their dreams was beyond their means - Bank of America has risen to the occassion.

I have no ties to the bank. I do not own stock in the bank. I don't think I have any relatives working for the bank. I just happen to believe that the Bank of America has the best loan program for first time buyers.

Are you concerned that the financing offered you is an 80% first trust and a 15% second with 5% down? Are you concerned that the financing offered you is an 80% first trust with a 20% second and no money down? You should be if that is what is on the table.

Call Bank of America and ask about the program that will finance 97% of the purchase (up to $450,000) with NO PMI. Find out what you can afford. There is a drawback. You actually have to have enough cash to put 3% down. Closing cost can cost you up to another 3%, but they can often be negotiated with the seller.

Before I leave, I just have to say....you need representation. If you have any doubt about whether or not you should talk to me, let me clear it up. You want me on your side of the table when negotiating begins.

My clients become home owners.

Isn't that what you want to do?

Sub-prime torpedoed

2007-03-28T20:55:00.000-07:00

Dateline. Washington, D.C.

The ticker feed from all wire services is reporting the financial tsunami of defaults on sub-prime loans. Bernake is reported to have "said that uncertainties over the economic outlook had increased, most notably the future trend in oil prices and a possible knock-on effect from the sub-prime lending crisis into the broader US housing and credit markets. Thus far, the Fed chairman declared, the difficulties faced by sub-prime lenders - which deal with customers who are shunned by mainstream lenders - were being contained. He argued that the shakeout caused by defaults on mortgages by overstretched and less creditworthy borrowers was a necessary correction after the lending excesses of the past few years."

So we are to understand that investors pulling out of the market is a necessary correction after lending excesses.

Paul, just a word here....that dog won't hunt.

The same regulatory agencies that looked the other way while no-doc provisions were being abused will have to come to the table with some way out of this mess. The same regulatory agencies that allowed predatory lending to continue will have to come to the table with some way out of this mess.

It is rather ironic. Not to many years ago, the government was all about protecting minorities and the disenfranchised. Lenders across the county were complicit in "red lining". The folks in the board rooms determined it was not profitable to lend money to what they considered customers of greater risk. Of course, credit worthiness was not always the only yardstick and the purse strings became much tighter when the customer was of color.

Times have changed. Now lenders couldn't wait to pour money into loans for risky borrowers. It became the front end of high stakes bait and switch game with investors and bonds. The house of cards was built rather shabbily and it has begun to tumble down.

In the end, the same people will be hurt. Years ago, credit was denied and the opportunities that went along with credit were denied at the same time. All the legislation and affirmative action will never change what occurred.

Now, the reverse has occurred and credit has been granted that can not be repaid. Terms have been granted that were not understood and can not be met. All the new legislation and continued affirmative action will not change that it has happened again.

We won't see much of it here in this market. We will just see the effects of it. We will read of the fore closures in other parts of the country. Politics will keep it's hold on our headlines. The nightly news will do human interest stories. We just won't feel the pain.

I know that I am a big believer in people taking responsibility for their actions. There are many that would point to the people that borrowed the money to buy homes that they could not afford and say that it is their own fault. They put themselves in that position.

I will merely say that I believe every lender is a public servant with an inherent responsibility to be good stewards of funds that they are entrusted with and an obligation to be reasonable counselors in financial matters they are asked to supervise. I believe that every real estate agent is a public servant with an inherent responsibility to represent one side of a transaction in a fashion that is totally loyal and focused on the best interests of their client.

We can legislate ad infinitum. We can create associations with by laws and code of ethics. We can place hands on bibles and swear to the living God.

It won't change anything.

There are enough laws on the books. Enforce them!

I am sure that it is a violation of someones civil rights if you are placed in a position of trust and put them into a bad loan that ends up bankrupting them. I am sure it is a violation of someones civil rights if you put them in your car and show them homes that are out of the range of what they can reasonably afford and convince them that owning more house is a good idea. Cajoling people to extend themselves and then introducing them to a friendly sub-prime lender would seem to me to be a pretty egregious violation of their civil rights.

The laws weren't written for that you say? Oh, I just sort of take that word "civil" in a literal fashion. It is not civil to feast at the expense of an other's famine.

I will not be surprised to see the Federal Government intervene and come up with some sort of bail out plan for those that find themselves on the verge of foreclosure. I will also not be surprised to see the culprits slip out the gentle back door of corporate protection and never be held accountable for their actions. There may be the show case public hearings to justify the bail out. If so, there will be a great deal of pontification and holier-than-thou grandstanding.

As it unfolds, please remember, this is not happening in a far off land. This is your country. This is not a quirk in a system. It is just another step taken by people in positions of trust to destroy that trust. The same legislators that decry the behavior of the guilty were in power when the actions took place.

And when the dust settles, we will have returned to a place where folks save up money for a down payment before buying a home. If they save a little bit, the FHA has a program. Many professionals will learn that the advice to protect their reputation was really an admonishment to act professionally.

The sub-prime torpedo will finally have hit the correct mark and imploded. I think Dorothy was right when she sang "tomorrow, tomorrow, the sun will shine tomorrow".

Hell, go mow the lawn!

2007-03-23T10:48:00.000-07:00

I am a member of a loosely knit group of Realtors across the country. We have our own website where we share ideas, complaints and commisseration with one another. No, we don't have a secret decoder ring or one of those fancy hand shakes, but we do take the time to support one another.

Recently, an issue came up and a Realtor asked for advice on how to handle the situation. All the names have been changed and faces re-arranged but the facts are basically accurate. Jim was approached by another agents client. The person told Jim that she hated her current agent and wanted Jim to represent her. Jim would like to accomodate her, but he is also bound by our code of ethics.

Jim shared his story on our forum. My good friend Stephano replied that he would be well within his rights to suggest that he would be glad to speak with the woman after her agreement with her current agent ended. Others shared that since she had contacted Jim, he had every right to explain to the woman how she may extricate herself from her agreement. A few even suggested that Jim just sign an agreement because no broker will ever risk bad publicity by going after an agent. (This is probably true, most brokers like to play nice and overlook issues that may be perceived in a negative fashion).

I shared the following vignette. It probably says more about lessons learned in life but I thought I would post it on my blog. I do want to keep my growing readership happy.

James,

Back in the day, I was a junior in high school and madly in love with Kathy K****. Now Kathy was drop dead gorgeous and sadly enough for me, going steady with Bruce B***.

One weekend, we were at one of those parties and Bruce passed out on the couch. Kathy grabbed me and pulled me into another room. She planted the most wonderful kiss on me and said she couldn't wait to dump Bruce. She claimed undying love for me.

Well, Kathy was way more advanced in the ways of the world than I at the time. Soon, I was cutting class and sneaking into the room above the gym for afternoon tryst with sweet Kathy. That went on forever. It must have been at least two weeks. Kathy dumped Bruce and began sporting the $1.00 silver ring I purchased at the Ben Franklin around her neck.

We were going to be lovers for life.

JMAC had become Bruce.

Sad to say, Barry S**** soon became JMAC. It was a few short weeks later that my ring was returned and I was left with the devasting heartbreak.

I could not believe that it could happen to me. Heartbroken, I sat in my personal hiding place, a storage room under the basement steps in my home, listening to Gene Pitney croon "Only Love Can Break a Heart". I figured that I could just die there and everything would be ok.

My father opened the door and asked "Dummy, (he always chose the most tender of nicknames) what are you doing under the stairs? Turn that damn radio off and get the hell out of there."

"But Dad, I have had my heartbroken"

"Really, well the grass needs mowing. Get out there and get it done or your rear-end will be broken too."

"But"

The look in his eye and the smell of alchol on his breath just washed ole Kathy and my heartbreak out of my mind.

It was first experience with a term that became quite significant during the Viet Nam incursion.

DON'T MEAN NOTHING

It also gave me the first lesson that if someone is willing to cheat on someone else to be with you, they will probably cheat on you to be with someone else. That sentence says more about self image than anything else.

I think that you deserve clients that will be loyal to you. I am sure there are exceptions, I just don't care to deal with them. I try not to agree with Steve too often, but in this case, I almost do.

I wouldn't want the client. I would be concerned that she/he would be crying the blues to another agent the first time I handled an issue in a fashion that was not satisfactory.

Hell, go mow the lawn.

jmac

Who are these people ???

2007-03-14T16:49:00.000-07:00

I have this listing in the American Finmark. It's a one bedroom condo on the second floor just waiting for a young professional that wants to own his or her first piece of the rock. I had already warned the owners that the condo market was a bit soft and they would have to price it attractively to generate interest. They thought about it, looked over all the information that I gave them and decided on a figure.

I crossed my fingers and scheduled an open house.

Who are these people?

I had folks, young and old, with and with out agents coming through the door from when we started at 1pm until we shut it down at 5pm. At one point, I turned to my wife and asked her to pinch me. I asked, "Is this 2005 or 2007?"

Once again, the real estate market in our area has turned on a dime. Shifts that were once slow now occur in moment. Buyers are showing up in the office seeking help. The phone is beginning to ring on a regular basis. It seems that the realization that now is a great time to buy has finally sunk in.

I don't share this to startle anyone and I certainly don't want to give the impression that I am so busy that I just can't help anyone else. I always have time.

I suppose that my joy is best explained in this fashion. I love the Christmas season and I love shopping. The excitement in the air is palpable. The crowds, that some of you dread, represent a whole lot of happy people to me. Every long line is a sign that lots of people are going to have a happy Christmas morning.

The increased buyer activity is an indication that soon, lots of folks will be enjoying a new home and in many cases it will be their first home of their own. I can't represent all the sellers and all the buyers, but I sure can enjoy an active market. Some of those that I do have the chance to work with will become part of the new generation of home owners. The opportunity to play a small part in the ongoing community transitions around me is a wonderful reward for the effort I make.

Who are these people?

They are your new neighbors, your new friends, and in some cases - my new clients! It is a great time to be a Realtor.

Did I happen to mention...

2007-03-14T11:44:00.000-07:00

It seems as if many people have responded to my call to get back into the real estate market. I have been blessed with several clients in the past few months. I truly appreciate the requests for buyers and sellers guides. The information is free and part of the service I offer to any interested person.

There is so much in the local and national news about real estate, I thought I should take a break and comment on all of it

The stock market is in a free fall after reports of sub-prime lenders going belly up. This is an interesting situation. I don't know where to begin with a comment. Did those that invested in the "blood sucking", "immoral" leeches on the bottom of the mortgage industry really think that their investments were sound? Did those that propped up the sub-prime thieves think that the cash cow would be offering milk forever? If those holding stock in companies that have been bilking the weakest and most vulnerable among us find that they are going to lose a lot of their money, so what!

Let's take time to call a spade a spade. A sub-prime lender has a customer base of people that either can not document their income, have credit problems and can not qualify for the most lenient FHA loan, or use english as a second language and do not know any better. Our housing market is not built on the shoulders nor the integrity of sub-prime lenders. It will be a cold day in hell when I start to feel sorry for people that were getting rich off of the surplus profits sub-prime lenders provided them. The only difference between those that mug the weakest in our society and the sub-prime lenders is the sub-prime lenders are not armed with a weapon. Sub-prime lenders are armed with a more devasting tool. They use the promise of a better tomorrow, the promise of owning a home and hidden in the small print is a price no one can pay. My advice is invest in those that invest in your community and let sub-prime lenders and those that support them rot.

Our economy is strong. Our housing market is strong. The trickle down effect of the sub-prime collapse will smooth out. The agents that have referred people to them will be easily identified. They will be selling snake oil on the street corner. It is a pity that we have outlawed "tarring and feathering". Any one that has abused a position of trust in order to achieve personal gain has no right to hold the position any longer and does not deserve a second chance. Real estate agents that "have been in bed" with sub-prime lenders are the pedophiles of our profession. They can not be cured and should be banished.

On a brighter note, my friend Glen finally has a home of his own. It is a long story that I related here moments ago. My little finger hit the tab button and erased the entire post. I only had the energy and time to re-type the rant against sub-prime lenders. Maybe another day....

Baby Boomer's Babies Backlash

2007-01-04T09:25:00.000-08:00

There. I think that sums up the past few years of the real estate market in the Maryland suburbs outside the District of Columbia.

Yes, I am pointing that collective finger at my peers. The children of post World War II were labeled the baby boomers. Their history is still being written. They witnessed more change and turmoil than any other generation. They grew up in homes that were parented by adults that in many cases had lived through the great depression. They watched "Leave it to Beaver" and "Father knows best". They rebelled against the status quo and gave the world Woodstock and political upheaval with anti-war demonstrations during the Viet Nam era. They became parents.

It is the parenting that led to the current group of young adults. Baby boomers reacted to the upbringing they endured. They went to great lengths to make sure that their children never had to suffer the indignity of hand me downs and non-name brand clothing. They made sure that their children had a safe automobile when they reached driving age. They made sure allowances were available.

Something got lost in the love that was shared.

The sense of understanding the value of the nicer things in life somehow morphed into a very strange sense of entitlement. The perception of earning and working for long term goals was replaced by the sense that "I want it now!" is justified.

Apparently, when the need to earn money is replaced by parental grants, the understanding of the value of money is lost. Price tags no longer have a relationship to hours worked to earn the cost of the item. Price tags have just become another number.

Our market saw incredible increases in home prices. Income did not go up at the same rate. There was a perceived reduction in inventory. The reduction in inventory did not create such a shortage that prices would increase as dramatically as they did. There were a few factors that fueled the fire.

Traditional mortagages were cast aside in favor of newer non-traditional loans. The children of the baby boomers were presented with new options for financing their home. They would not be saddled with the old 20% down and finance 80% over 20 years. The new home buyer could now pick and chose from a plethora of programs. 100% financing became vogue and interest only loans came into favor. These changes increased the buying power of those entering the market.

What occured is history. The scenarios played out across the area were something like this. A young couple starts looking for a home. They meet a Realtor that advises them that they need to be pre-qualified in order to begin searching for a home. (This is normal. You have to know what you can afford to set your home search criteria.) The young couple calls a Mortgage Broker and finds out that they can qualify for a $600,000 loan. They don't stop and realize that they will have to make timely payments on that $600,000 loan. After all, if they could not afford it, the lender would never have qualified them for that amount. (This happens a lot. After all the lender doesn't have to make the payments for them.)

Pre-qualification letter in hand, the young couple begins searching for a new home. They find many that meet their criteria. They decide on one and ask their Realtor to prepare an offer. Unbeknownst to them, a few other couples have been searching and they also selected that home. The seller receives multiple offers and the bidding war begins. The home may have been listed for $450,000. Other similar homes have sold for $450,000. The home is actually worth $450,000 at the beginning of the bidding process. Our featured couple decides that they will pay up to $460,000 for the home. The home sells to another couple for $465,000. Our featured couple is crest fallen. The couple that bid $465,000 has an accepted offer (Now faced with hopes that the home will appraise.).

Our couple strikes out again. They find another home and go through the same process. They lose again. They ask the Realtor "What can we do?" The Realtor explains that patience will win out and that they will find a home.

Unfortunately, the young couple decides that they will get the next home come hell or high water. They look and find another home to place an offer on. They instruct their Realtor to use an escalation clause that will go to the max that they are qualified to spend. (The Realtor explains the escalation clause. The Realtor probably does not explain that the escalation clause is not worth the paper it is written on.)

The place an offer on a $450,000 home and win with an offer that is $600,000. They somehow believe that the home is now worth $150,000 more because they were willing to pay that.

Today that couple is sitting in a home that could sell for maybe $500,000. They owe $600,000 on the property because they have been paying interest only. They got the house.

How did this happen?

Baby boomers tried to make sure that their children were never lacking anything. It seems that this focus was on material things. Somehow the baby boomers forgot to instill a sense of value in things. Somehow these children never learned that the monetary value of desire is like quicksilver or fool's gold. There are practical rules regarding the value of real estate. Our prices are in the process of adjusting. The fancy non-traditional loans are resetting every year. As interest rates increase, the monthly cost of "I have to have that home" is increasing.

Now is the time for new buyers to learn from the mistakes of the past. Advice for them is quite similar to very old adages. Buy today what you can afford today. Plan for tomorrow based on fact and not emotion. Seek credit and financial counseling so that you truly understand the value of the dollars you earn and purchase accordingly.

Oh, and before you buy your sixteen year old child a brand new car, think about the message you are sending and the lesson you are teaching.

Seasons Greetings

2006-12-18T14:25:00.000-08:00

This is a painting I did after returning from New Orleans. My lovely wife crafted the words. Our wish is that each and everyone of you enjoy the season!

Pogo said it all..............

2006-12-05T15:32:00.000-08:00

"We have seen the enemy and it is us."

Not too long ago, the media was proclaiming that home sales were sizzling. Folks read the paper and joined the buying frenzy. Last fall, the media proclaimed that we were on the verge of popping the real estate bubble and sales activity came to a screeching halt. Now the media is letting us know that interest rates have not been lower in the past year.

Sound bite driven decisions rarely make sense. We have become our own worst enemy. I know that your cousin Ralph told you that you should wait out the price drops before you buy. I know that your aunt Alice said that prices still have room to fall and God forbid you pay too much for your home.

I do this stuff for a living. I don't sit in a cubicle writing articles attempting to sensationalize every wind that blows in the economic market. I don't have to make this glamorous. I live in the real world, where people have been buying and selling homes every day, every week, every month of the year. People have bought and sold when the interest rates were around 20%. People bought and sold when they actually had to have money for a down payment. If we only go back 25 years, there are some interesting facts about real estate in the DC market area that don't grab headlines.

Let me share.

The surge in prices over the last few years was the result of reduced inventory and historically low interest rates coupled with the introduction of interest only loans.
Real estate has always been the king of increasing personal net worth through the use of OPM (that's other peoples money). You don't even need a down payment with some of the programs available.

For example purposes, let us assume that you will put 10% down. If you purchase a $400,000 home, you will only need to put down $40,000. Over the last 25 years in the DC area, homes have appreciated 6.9%. The $400,000 homes value would increase to $564,240 over a period of 5 years. I am not a wizard but that is about a 22% return on the investment.

Can prices remain level or go down? Sure, that could happen. Prices in the past have gone down briefly, but the fact remains that over the last 25 years, they have averaged the 6.9% annual increase I have stated. No glamour, just facts based on verifiable information.

It gets better.

Rates can not remain low. They will have to go up, based on all sorts of fancy formulas that include stuff like M-1, the bond market and the cost of the war. We are at the bottom of this interest cycle. If you take advantage of these rates, you will be pleasantly surprised at the impact that decision will have on you. Prior to this cycle, the lowest they had been in forever was 8.31% back in April of 1997.

Back to the $400,000 house with 10% down.

A $360,000 loan at 6.25% = $2,216 monthly vs. 8.31% = $2,720. That is a savings of $504 per month and $181,440 over life of loan.

If you are in a 30% tax bracket that is a $7,000 tax deduction in year one and a $33,600 tax deduction over five years.

And now there is inventory. Of course, the level of inventory could change quickly. I don't really care how the scribe choose to share the information. I think you have the right to understand, there has never been a better time to buy.

Of course, you could just listen to the media or relatives. This is fair warning. If you fail to act now, you will see Pogo in the mirror with you and the words floating through the air will be............We have seen the enemy and it is us.

The wonderful world of forums

2006-12-02T11:52:00.000-08:00

We Realtors are a group like any other. We have our boards where we share information with one another. We also pontificate about the world at large. Sometimes this sharing turns ugly. Toes are stepped on, posts are volleyed back and forth and often someone removes themself from the fray, vowing to never visit that particular forum again.

We Realtors are a group like any other. After some recent acrimony between members of two boards, I thought, there must be others such as this. There are probably folks across this broad interweb that are dipping their toes into the water and reaching out to communicate with other like minded folks.

If you happen to frequent any message boards or forums, I would like you to consider the following.

Everyone has to live within the confines of their own shoes. There are many people that happen to cross our paths on a regular basis and we judge them for the fraction of time they spend in our awareness. It is unfortunate, that often, we base our decisions on the "tip of the iceberg".

There are agents that have very close friends suffering from incurable diseases. As with anyone else, the stress of watching someone you care for deeply die a slow and painful death occasionally causes folks to act out. It is very hard to maintain control of all aspects of your life when you are losing one of the reasons you live that life.

There are agents that have great professional success and go through personal changes that challenge their ability to present a fair and balanced image to others all of the time. Regardless of market, there are agents that are moving through the maturation process that everyone struggles with when they go through the transition from 20 something to early thirties.

I don't know if there is a medical term to describe a condition in which a person falters and flounders when attempting to share on a forum. I have heard of a stroke in which speech and the ability to write is temporarily lost. I do believe there are many that sit before a keyboard and know what they are trying to say and it just doesn't come out that way.

There are many possible reasons that the online personna of agents is nowhere near the person behind the keyboard. Often a phone call and a ten minute conversation will ferret out the truth.

It is only my opinion, but the last thing I believe anyone should do is take it to heart that those on any forum are as good, bad or indifferent as they may appear.

These are just people. Some have internet experience, some don't. Some have the ability to express themselves fluently and some don't. There is value in what is shared by anyone.

I am not without blame. I too have judged and castigated and irritated. I have fallen short of my own standards. I will continue to attempt to become the person I can be. Hopefully I will avoid the piling on that occurs when others stumble in their journey.

Science has explained "buyers market"

2006-11-07T08:17:00.000-08:00

I have been just as busy as most Realtors the past few months. New buyers are beginning to show up and appear ready to put there proverbial toe into the water. Rates have held at around 6% and that is about as good as they have been for the last year or so.

These new to the market folks are stunned to see the wide array of homes available to them. It is the housing version of sensory overload. Apparently, the total volumn of homes has reached a point that clients are once again asking for advice regarding the "best home for the money" on the market. This allows me to actually do my job.

Of course, I shouldn't have to mention that as I sift through the multiple listing service, for sale by owner.com, and craigs list for properties that will meet my clients needs and stay within the range of their comfort level regarding price, I am still puzzled by how many homes are still priced above current market levels.

I understand that the market did an incredible 180 degree turn around over the last 9 months. If Katrina were a pregnant woman, we have delivered a brand new, shock to the system, it can't be possible price adjustment to the housing market. Sellers that have not adjusted to the market are not really sellers - they are extra logs in the river of buying and selling houses. They are trying to be part of the market but they are the bottleneck to a smooth market.

And apparently, it is beyond their understanding.

Scientists have done research in the field of neuroeconomics. Neuroeconomics is the study of the psychology of finance. A recent article in the Washington Post shared the following.

Psychology of Money Drives Housing Market
Studies of the psychology of finance indicate that emotions play a huge role in decisions people make about money.

"There's a whole emotional processing system that goes on in the brain that's largely beyond our control," says Kevin McCabe, a professor of economics, law, and neuroscience at George Mason University in Fairfax, Va. "The general view is that our emotions control us, and not vice versa."

The study of neuroeconomics has illuminated a few key concepts: Many people will pass up sure profits for illusory ones. Some will turn down profits if they believe someone else is unfairly profiting more. Some will even refuse to sell if they believe they may come to regret it, because fear of future regret can be as powerful a motivator as money in the pocket today.

While little of this has been applied scientifically to real estate, it is easy to make the leap.

For instance, much research has been done on the concept of "loss aversion," which shows that people tend to deny reality when something they own, such as a house, declines in value. Sellers maintain the asking price even at a level that makes no sense, economists say. Similarly, home sellers become attached to the prices their neighbors received at the top of the market rather than current prices, and they become reluctant to sell unless they get that higher price.

"There seems to be a psychological resistance to taking losses on the sale of a house," says David Laibson, who teaches psychology and economics at Harvard University. "People think they'll make money on it....That logic worked for a long time, and now anyone who bet on that logic is being burned."

Source: The Washington Post, Kirstin Downey (11/04/2006)

My thanks to the many participants that allowed science to identify things that we Realtors have always known. I have to say that I read the report, jumped up and yelled outloud "AFFIRMATION BABY." My wife came in the room to see what the ruckus was about. I showed her the article. I told her that there was a reason that the house in King Farm wouldn't sell for a million. I stammered see, this is why the kids took the buyout and the relo company is stuck trying to sell their townhome in Germantown. It wasn't my fault.

She just gave me that "look" and reminded me it was trash day tomorrow and I had better move the garbage cans out front before it gets too late.

The last I saw of the Post article, it was on the top of my newspapers in the recycle bin. Sometimes you can know reasons for actions, sometimes you can even have scientific reasons for actions............but.......my understanding can only be shared with those wanting to sell.

They have to choose - become another log in the jam or take the smooth route to selling your home and doing what the smart folks are doing. What's that you ask?
Why it's the subject of the next post - buy up in a down market!

Safe neighborhoods

2006-10-03T06:50:00.000-07:00

As a Realtor, I have the chance to meet many people seeking a new home. I am fortunate in that they come to me from many sources. Some are referred by clients, some walk in the door of the office, some have read this blog and others come from various lead generation programs that I use.

The size and price of the home they are seeking varies. The ethnicity of the clients vary. The age of the clients spans the spectrum. One thing remains constant. It doesn't vary. Everyone includes the feeling, and I will paraphrase here, I want a safe neighborhood.

As a Realtor, I am bound by a code of ethics. I am old enough to remember a country much more divided than today. As a young man I witnessed the changes in our laws that were brought about by the various legislation created following the work of Robert Kennedy and Martin Luther King. Those changes began almost thirty years ago.

Our code of ethics dictates that we show homes in the price range and style that our clients request. These guidelines are proper and necessary to ensure our country continues in the direction of equality.

If the issue of schools comes up, we are directed to advise clients that they can check with the local school board for any information. If the issue of crime comes up, we are directed to advise clients that they can check with the local police station for that information. If the issue of zoning or changes in the master plan come up, we are directed to advise our clients that they can check the local planning office for that information. Each of these agencies has the facts and a consumer should have the facts when making a decision about where they choose to live.

Many clients respond to the reply "you have to go to ......(fill in the appropriate agency) and check on that" with a quizzical look that reads "what am I paying you for?????". To those that share that look, I am doing my job and making sure that you make one of the biggest financial decisions of your life based on the facts.

I mentioned Robert Kennedy and Martin Luther King. I don't know what else they could have accomplished. No one does. They were both taken from us and our possible future was stolen by men with guns. The Civil Rights bills were passed by Lyndon Johnson with the emotional support of a congress on the heels of the assasination of John Kennedy. In my lifetime, I have lived through the loss of our best and our brightest to guns and violence. They are only the tip of the iceberg.

I have heard both sides of the debate regarding gun control. I am so tired of the propoganda that supports the thought that James Madison wrote the Bill of Rights so that sociopaths, crazy people, angry people and racists could open fire and slaughter innocent men, women and children with handguns, assault rifles, uzi's, mak-10's, etc is one of the most despicable theories ever crammed down the throat of it's potential victims.

The statement that if citizens can no longer own guns then only criminals will have guns is emotionally charged rhetoric. The same paraphrasing can be put on any law. Is this any different, if citizens can no longer kill one another then only criminals will kill. Laws are written to dictate behavior and identify those that do not comply and in the end laws are used to prosecute those that do not conform.

Safe neighborhoods are everywhere and they are nowhere. If the NRA and the rest of the gun lobby is allowed to buy and secure votes on a national level, the change must come locally. It must begin with you.

A change in gun laws will not guarantee all neighborhoods will be safe. Such a law will just remove one of the tools we currently use against one another.

I can still remember a time when children played in neighborhoods and the worst thing a child might face in school was the reprimand following "my dog ate my homework."

A Heartfelt Tribute to Shadow

2006-09-25T13:52:00.000-07:00

I am like most men I know. I like to think that I am my wife's best friend. This weekend, I sadly accepted the title by default.

Fourteen years ago, my wife brought a new puppy home. This new bundle of joy was a mix between a golden retriever and an australian shephard. This was long before I entered the scene. She sat up nights with a scared puppy and came home from work every day at lunch to check on her. This love and attention was returned many fold over the next fourteen years.

Shadow was a constant companion. My wife shared the ups and downs of jobs that came and went, a marriage that did not work, a few "how about me" gents that came by and me. Shadow was always there. Looking back with soulful eyes and offering a well timed nuzzle when sorrow turned to tears.

Shadow accepted life for what it was. She loved to play fetch in the spring, sleep in the shade through the summer, chase squirrels in the fall and prance and roll in the winter's snow.

Shadow loved to chew sticks. I have no doubt she could have chewed her way through trees from here to California and back again. She was smart, she never chewed shoes or tables or other things.

A new playmate and I arrived on the scene at about the same time. The new playmate was a chow mix named Yuengling, I was the "man". We became fast friends and I understood her relationship with my wife.

I can not share all the joy she brought to us over the last few years. She was our constant companion on road trips and one day journeys. She loved to walk and ride. Like Robin, she had a passion for food, loved cats and dogs and almost every person she met. There were only two things that bothered her, fire crackers and thunder. Either of the two could send her seeking the comfort and safety of the bathtub.

Last week, she came up lame. We took her to the vet. The initial thought was that she had sprained her leg. The phone call four hours later contained much sadder news. She had cancer in the bone in her leg and the leg had broken. The cancer had spread and she had a few days left.

We brought her home and hoped that everyone was wrong and she would rise above the dire predictions. It did not happen. She got worse. We contacted a wonderful vet named Dr. Weiss, who agreed to come to our home Sunday and put her to rest.

Sunday morning came too quickly and her final hours were spent sitting with us in the back yard. It was overcast and gloomy. The Doctor came and gently put her out of her misery. She laid in our lap and as her last breath escaped her lungs, the sun peeked through clouds.

I will always be grateful that she set such a wonderful example of unconditional love. It is something we all need to stop and remember.

Now I have the official title of "my wife's best friend" and I only hope that I will be as good a friend as Shadow has been all these years.

The summer is ending and the Fall Market is here!

2006-09-10T06:51:00.000-07:00

Isn't it time that I put an end to the rumour that I have lost my laptop? I can only say that the market conditions here have changed. The increased number of homes for sale has impacted all aspects of our market. I have been busier with activities for my clients. I have more listings and my buyers are taking a little longer to find the perfect home.

More listings increases the amount of time that a Realtor have to spend servicing listings. Yes Virginia, not only is there a Santa Claus, today, more than ever, it takes more than a sign in the yard and fresh cookies during an open house to get the house sold.

The pool of buyers remains constant, but the increase in inventory has ended for now the need to write an offer on the hood of a car in an effort to beat the competing offers. If the house a potential buyer likes goes under contract, there are many more available quite similar to that one.

Buyers are looking for houses on their own.
Buyers are hesitant to act.

I suppose with interest rates up and prices still holding, some folks feel that maybe they can negotiate a better deal on their own and save "commission". I hope that they realize that if they allow the agent selling the house to handle "both sides of the deal" - they have no representation.

The agent selling a home in Maryland CAN NOT represent anyone but the individual selling the house. They may talk fast and gloss over that fact and point out that they can cut their commission to save the buyer money, but the fact is - they are working for the seller and they CAN NOT offer any advice or counsel regarding price or anything else about the home that is not public knowledge.

It would seem that the the hesitancy to act is related to the amount of homes on the market. If we buy this one, we may have missed a better home. Maybe we should look at a few more? The fallicy in that logic is plain to see for a Realtor and is lost in the haze of so many homes seen by the buyer. If you have found a house that you feel can be home, buy it. If you wait, it will be gone. It is far worse to spend the next 10 years in your second choice bemoaning the fact that you could have had your first had you written an offer.

The Fall Market is beginning and we are seeing an increase in activity. Sales in Montgomery County are down 26% but prices have risen around 5%. Those that have waited all Spring and Summer for prices to crash need to reconsider that plan and act before Fall turns into Winter and the home they have been watching is occupied by a new family.

I have to share, my wife and I had our eyes on a home we wanted to purchase. We watched and waited. We watched and waited some more. The other morning, to my horror, the house went under contract. It did not sell for less. The seller got their asking price and I am faced with a long winter of "Honey, why didn't you make an offer? Now some stranger is living in MY house!"

I should have listened to my own advice.

If you wait on the sidelines, you never get in the game

2006-08-03T08:07:00.000-07:00

Well friends, we seem to have reached an impasse. It is amazing how one event can trigger a series of events that eventually change to course of a nation. This is a real estate blog, so I will focus on the chain of events that turned the market 180 degrees over the course of just about one year.

It was August 29th, 2005 and most Americans were glued to t.v. sets watching images of a large storm covering what seemed to be the entire gulf of Mexico. The storm was headed for the area between Louisiana and Mississippi. At one point, it was a class 5 hurricane. As it approached land it began to diminish in strength. Officials relaxed and felt that maybe it would not be so bad. Then the storm surge hit and destroyed an area that ran from Florida to Louisiana including areas in Mississippi and Alabama.

We watched in horror as levee's were breached and the crescent city of New Orleans began to disappear under water. Several days of non-ending coverage of the plight of those left behind began to erode our faith in elected officials.

Shortly, another storm was in the gulf and officials began to react to avoid the problems that had just encountered. Oil refineries were shut down. Cities and highways were in chaos. The first storm problems led to the second storm problems.

The problems that began last year, continue to impact the real estate market today.

What happened? The cost of living began to creep up in areas that could not be controlled by government actions. Energy costs shot up. The cost of gas began to move towards and past $3.00 a gallon. Providers of electricity and natural gas and oil all raised their prices. As soon as deregulation hit utilities (in the hope of increasing competition and therefore lowering prices) there was little competition and rates across the country were raised anywhere from 30% to 70%.

The feds began an unprecedented series of rate increases in the prime rate. The cost of money moved beyond the reach of many first time home buyers. This was coupled with the fact that many new home owners had financed all or part of their purchase with loans that were adjustable and tied to the prime rate. Some home owners that viewed the perceived equity increase in their home as a financial boon, took out equity lines that were tied to the prime rate. The rates began to rise and the payments began to rise as well.

Little rebuilding has been accomplished in the Gulf States. We have yet to feel the impact on the demand for building supplies. That will come. We have yet to see the employment picture change dramatically in the Gulf area. That will change.

All of this has happened. Now many of you that thought it was time to buy, have returned to the sidelines to wait out the economy.

The result of that decision is that you are missing the best time to buy a home!

All of these factors have stifled sales. Homes are on the market longer and sellers are now realizing that they will have to make concessions in price and other areas in order to sell their home. Today, you can buy more home for the money than was possible over the last few years. Prices for sold properties have leveled off. When listed, they may seem like they cost more than last year but that is just the hopes of those putting a home on the market. Bidding wars, that occurred over the last few years are all but non-existent today. A good Realtor can guide you through the process and negotiate a better deal for you.

Understand, the cost of living is not going to come down. Major oil companies do not expect gasoline prices to ever return to the levels of last fall. Utility companies are not going to reduce their prices significantly. Even start up competitors will have use the cost of fossil fuels in their price structure. Fuel costs impact every other item we buy.

The only factor that changes over time is the interest rate. Waiting on the rate is never a good game to play. If it goes up, prices go down and that is our current situation. If the rates start to fall, the demand for homes will increase and the prices will begin to rise again. This cycle has been repeated over and over throughout the history of home buying.

Now is the time to purchase. You can buy more home for the money and you will own the property when rates decline in the future. At some point, you will take advantage of a lower rate through refinancing and you will then own the home at a lower cost. Should rates increase a bit, you will be in your home and the rate increase should not impact you.

I encourage anyone that has gone to the sidelines to rethink there position. If you wait on the sidelines, you never get in the game.

The greatest gift............

2006-06-29T21:05:00.000-07:00

I was recently asked what is the nicest gift a client has given you. I thought about that one for a moment or two. My reply follows.

This easily could be titled "Why I am a Realtor."

Very early in my career, I was giving business cards to anyone that slowed down long enough to take one. Sales people at registers, waiters, waitresses, gas station attendants were all on the receiving end. One evening, I was standing outside a dressing room while my wife tried on a dress. The sales lady was standing there and I turned to her and asked "Are you or is anyone you know looking to buy or sell a home? If so, here is my card." She told me that they were living in a 2 bedroom rental unit with their 5 children. They had fled Afghanistan with the clothes on their back and they were trying to make it in this country. Her husband had a job as an engineer with the local government water and sewer agency. She invited me to come to her home at 10 the following Sunday morning. Being eager and wanting to make a good impression I figured that showing up at 830 would dazzle them. They answered the door in pajamas. Rather than be upset, they welcomed me heartily. They made tea and cakes and we sat down and discussed how they could purchase a home.

They had not been pre-approved and I thought that my lender would be delighted to chat with them. I called the lender at about 9 or so. She was not as happy to hear from me as they were when I placed the call. I handed the phone to the husband and waited. After a few minutes, she told him that she would call back. We shared tea and cakes and waited.

She called back. I smiled while the voice in my ear said "John, what are you crazy. They have no credit. They have no credit score. They have nothing." I cheerfully replied, "Well then, what can we do to fix that situation?" She outlined a plan for them. I left and decided that maybe it was too early for them to be looking and went about my business.

Eight months later I received a call, "Mr. John, I now have credit. Will you help me find a home in this country for my family?" He was approved. We went out that Saturday in the most frantic time of our recent sellers market. We looked at two well priced townhomes. He chose one. I wrote the offer for list price and included a home inspection. Those offers were dying before the ink was dry at that time.

It was accepted.

We went to closing. His wife turned to me and handed my a piece of candy before the settlement began. She explained in her country this was done for good luck. Throughout the settlement, they turned to me and asked "Is this o.k., before signing the "boiler plate" documents. When the last paper was signed and the sellers handed them the keys, they stood and smiled at one another. They then turned to me and took me in their arms with tears in their eyes. The husband softly said "When I came to this country, I promised my wife and children, one day we would have a home of our own. Today, because of you Mr. John, I have fulfilled that promise."

Perception is reality. I cried and had the understanding of what it is that we do. That understanding and thanks for me just doing my job is the greatest gift I have ever received from a client. Others since then have probably been as grateful, but I will always remember that day.

Father's Day

2006-06-17T13:49:00.000-07:00

So, I was already to share my views on the local housing market. I read an article written by Ron Sitrin, an associate of mine at Long and Foster that appeared in the July issue of Montgomery County Insight. It is worth the read.

Then somebody said........"What are your plans for Sunday? It is Father's Day."

I will be holding and open house. Both of my children are grown. My son and his new wife have just opened their second restaurant in Fort Lauderdale and my daughter is great with my first grandchild. Father's day no longer includes bad neckties, hand written cards or things purchased by someone else for me. Those days are long gone. They remain fond memories.

Father's Day is now the one day that I can take a moment to be thankful that I have had the opportunity to be a dad. Every experience from the first burp to walking my daughter down the aisle are memories I cherish. I thought I would not bore you with all the details, but I will share some of them.

Rocking my daughter (colic stricken) throughout her first few months, bouncing her on my knee while I sang the Notre Dame fight song. Crawling through sleep deprived periods at work only to come alive upon arriving home to her gurgling smile.

Watching my 2 year old man-son mimic my professions in our front yard. Tapping my foot impatiently through each day so I could get home and play.

Sitting in the backyard on a cool Autumn night, waiting for meteor showers to rain down upon us. Believing every cry of "I saw one dad, I saw one!".

Spending time observing my little gymnast spin and twirl through routines and swearing afterward that I had turned my head during the performance as promised.

Loosing the feeling in all my toes while my answer to Wayne Gretzky went through his paces at various local outdoor rinks at 6 in the morning in the dead of winter.

Loading an entire team of flag football players in a step van after games and stopping at the closest 7-11 for slurpees and delighting in the fact that no one cared who won or lost the game.

Enjoying a late night hot fudge sundae with my daughter after picking her up from a party she attended. (Years later, I discovered that she had tried beer for the first time and was feeling more than queasy while I told her to "eat up". She is still convinced I knew she had been drinking.) Ah, the beauty of being a dad and being oblivious to the world around you. Hell, I loved hot fudge sundaes.

Then came the dreaded teen years, the divorce and becoming the man that destroyed everything. I won't share the guilt here, but I will share that I don't believe anyone under 40 understands the impact that all of their behavior has on their children. I was the same dad. I had just turned their world upside down.

We got through that period. Both children discovered that life does have ups and downs but overall it is really ok. These little people were becoming young adults and all of the sudden they could share things they liked with me. We enjoyed music and road trips and pizza.

Music is the web that catches one mid-day and takes them back to a place or time. Music is a thing we shared and more than a few artists bring a tear to my eye today. We had such good times. It was great being the dad.

Then, like little birds, they had wings and were gone much quicker than I expected. One to California and the other to Florida. I was alone. They were starting the grownup phase of their lives and I had the occasional phone call (only if I placed it).

One day, I did receive the call - "Dad, I want to come home. Will you come get me?" I flew to Los Angeles met my daughter, loaded up her car and began the 53 hour journey home. Another wonderful memory. I was dad to the rescue.

Then last year, I sat in the front row and cried when my boy married his bride. We shared a brief embrace that I will hold forever. Later in the year, I walked my daughter down the aisle. We shared the father daughter dance and shared an embrace I will hold forever.

Happy Fathers Day? Thank you for the opportunity. I am the luckiest guy I know.

2006-05-24T07:32:00.000-07:00

Something I just never understand...

The spring market seems to be caught up in the ice cold winter market. There does not appear to be a thaw on the horizon. It seems that everyday more people decide to list their home. You can drive down some streets and see three, four or five for sale signs. At the rate we are going, open houses will be replaced with block party's.

Speaking of open houses, I had the opportunity to host one this past weekend. I like to have copies of the listings for comparable properties available for any guest with a small map that shows where the other properties are located. This weekend's map looked more like a walking tour of the neighborhood than a poor man's version of mapquest.

I did notice one thing about the visitors that seems to be more prevalent than in years past. The guests that replied to the question "Are you represented by a Realtor?" in the affirmative, had no Realtor in tow. They were either just out looking on their own or their Realtor gave them a list of "open houses" and told them to report back if there was anything that interested them. This is a rather disturbing trend in our industry.

I first noticed buyers coming by "open houses" without their Realtor a few years back. They were usually represented by an agent that offered a cut rate service. The deal was something like - you go out and find a home that you like and I will then write an offer for you. These poor folks would faithfully take newspaper ads, a full tank of gas and go off spending their Sunday's visiting as many "open houses" as they could fit into the one o'clock to four o'clock schedule. If they came across the home of their dreams, they would call the agent and start the ball rolling.

Those agents set a precedent that is horrific to those of us that understand the importance of true representation. Their cost saving business plan has begun a trend that does nothing for the poor consumer and lines the agents pockets with commissions paid but not honestly earned. Homebuyers are supposed to be excited when they find their dream home. The prospect of possibly paying less for full service and getting the home they want seems like a great deal.

All that appears on the surface is not the total picture. When a buyer enters an contractual agreement with a buyer's agent, the agent's responsibilities are much more than just writing an offer. Agents are trained in every aspect of the transaction. An agent sees more in a house than any buyer will see in a potential home. A Realtor begins using their knowledge when they first review a listing in the multiple listing service. Who is the agent representing the seller and what is the reputation of that broker regarding how smoothly the transaction will unfold? Does that broker have a reputation that indicates the transaction may not close on time if at all? How long has the house been on the market and why has it been on the market that long? What are similar homes in that area selling for? After compiling a reasonable list of homes that meet their current buyer's needs, a Realtor goes over this information and PLANS TO VISIT the homes with their clients. Realtors know that the listing agents will give directions that take you through the best and enticing route. The agent representing a buyer should make sure that their client is aware of everything in the area surrounding the home.

Buyers love the feel of homes. Their Realtor is supposed to review the disclosures and condition of the home. Many first time homebuyers don't know the difference between a furnace and a hot water heater. If they know that, they usually don't know the tell tale signs of trouble on the horizon. Most buyers can not decipher the condition of a roof. A Realtor can judge the wear and tear with a glance. The list of potential pitfalls is quite long. It is much bettor to have these potential problems pointed out in the beginning. It is a disgrace that the "stay in the office and let them look agents" fall back on the "we can do a home inspection" route. Information gathered at a home inspection comes well after the buyers have fallen in love with the home. A hot water heater with little life left may not seem as important after a home has already been emotionally purchased. If that information had been shared at the initial viewing - it may have knocked the house out of the dream home category.

I suppose the major problem I have with buyers left to their own devices is that it represents a total disregard of what our profession used to stand for. People became Realtors because they enjoyed helping people buy and sell homes. Sending clients out on their own is a total abdication of responsible behavior. The agent is still liable for problems that arise out of their action or lack of action. Those that cut costs and fail to fully do their job may be rolling the proverbial dice and hoping nothing bad will happen, but I dare say they have failed miserably when it comes to doing the job they should be doing.

I am not soliciting anyone, I am just sharing a fact. If your agent is sending you out on your own, you may save a dollar now, but you are not getting the representation you deserve and are paying for.

2006-04-27T09:44:00.000-07:00

Why are listings priced like grapefruit?

Real estate agents price homes like produce in a super market. They go into a listing presentation and they close the deal. Everyone agrees the home is worth $300,000 so the agent suggests that they put it on the market for $299,900. Everyone knows the psychological advantage of slipping under a price point by a penny or a dollar or a hundred dollars or even one thousand dollars. It just makes the price look like a bargin.

Why?

You are not selling grapefruit. You don't put a big sign in the yard "For Sale, ABC Realty, $299,900."

You put the home into the multiple listing service. I have never met an agent that pulled up listings and highlighted all of the "almost" numbers. Agents representing buyers, usually do a search based on what the buyer is qualified to spend. Does anyone ever get an approval letter that states the buyer is approved for $299,900? Does anyone ever get an approval letter that is not in round numbers that always end in 000? I don't think so.

I think you have someone in your office that can spend up to $325,000 and you enter a search with the list price range $300,000 to $325,000. And I know (even with my limited understanding of search engines and bells and whistles in computers), the home that is listed at $299,900 will never appear in that search.

What does this mean JMac?

It means that by listing the home at $299,900 you have precluded a large segment of the buying population from ever seeing your listing. It means that the buyers that would find your property a true bargin (remember $300,000 is at the bottom of their search) will never see your listing. Anyone looking between X and $300,000 will find your listing but it will be at the top rung of their search, and your listing will be competing with what they may deem more affordable homes.

They are not buying grapefruit and their purchase will not initially be swayed by the difference you create using the 999 or 900 in your price. You are just using yesterday's produce pricing mentality and losing traffic to an archaic way of marketing.

Maybe it is time we understood the tools we use and dropped the 9's.

Just a thought.

jmac

2006-04-27T07:41:00.000-07:00

Bricks, mortar, fear mixed up in a new real estate chess match and stalemate means no check.

O.K., I think I have figured out our current market. Everyday I check the multiple listings to see what is new on the market, what has been marked down and who has given up trying to sell. It is important. Someone may actually call hoping to buy or sell a home and I like to have enough knowledge to guide them in the right direction.

Today there are twice as many listings as there were this time last year. I checked public records and we have not seen a double in population in the last year. Babies are being born, people are dying and folks continue to be transferred into and out of the area. Hmmmm.

Prices are leveling off and even dropping below sales figures of a year ago. Fear is taking hold of the market. Those that are attempting to sell are discovering that unless they price their home correctly, they will not get any offers. Those that do price their home correctly are finding out that buyers are still coming in with an offer that is a bit lower than hoped for and the buyers want to actually be able to have the home inspected. Some people are even realizing that they will have to make needed repairs to sell the home.

Buyers are sitting on the couch. Nobody wants to buy at the top of the market. Nobody wants to buy at the top of a market that may see values go down a bit. Interest rates are rising. Some buyers are paralyzed by the notion that last year they could have gotten more money for the monthly payment they can afford.

It is an emotional stalemate and no checks are being passed from buyers to sellers.

There is hope.

At some point, sellers will become educated about the shift in the market and they will sit with a Realtor that understands the market and they will price their home to sell. They may not realize the same gain as folks did last year, but they will sell their home and they will move into a nicer home. They will be able to buy more home for the dollar this year than they could have last year! If they price their home favorably, they may even receive multiple offers. It is still occuring everyday on homes that are priced for the current market.

At some point, buyers will realize that there has not been a better market for them in a long time. While interest rates are going up, they are still well below what we have seen in the past 20 years. As a matter of fact, they are half of what they have been in the not so distant past. It may be true that your monthly amount does not buy as much house this year as it did last year. The facts are, you can get more house for your money today than you could have gotten last summer. If a buyer works with a good Realtor, they will benefit. Any dip in property values will be short lived. It will not take long for your home to increase in equity. Interest rates are always in flux. When they take a downward turn in the future, you can refinance your home and at that point you will be in more house for less money. It is a great time to buy.

F.D.R. may have said a lot of things, but he was never more accurate than when he shared the following - "We have nothing to fear but fear itself".

Just remember, those that step boldly forward are rewarded with the spoils of those that feared to step at all.

2006-04-20T06:22:00.000-07:00

What, me worry?

The Washington Post continued it's attack on the housing market this morning. Those of us that work in real estate have watched the market change from optimistic to "running scared" as the Post has continued to print articles predicting a burst of the housing bubble. Today's offering, under full color photo, questioned the stability of the DC housing market. The column written by Tomoeh Murakami Tse went to great lengths to reveal that no one agrees which direction the market is taking. Different experts and institutions are quoted to support widely diverse theories on whether or not the market is up, down or sideways. Who to believe?

I live this industry. I work in a very active office. The market has changed. That being said, the market is always changing. There is a normal ebb and flow that occurs in this market. Buyers and sellers are impacted by interest rates, the cost of living, government policies and the amount of first time buyers in the market. This area does not feel the pain of a fluctuating job market. Local governments continue to support the housing industry. The market is alive and well in the Maryland suburbs.

The one thing that impacts the housing market above all other factors is the media. If the press begins reporting gloom and doom, the populace seems to follow. If reports tell of a booming market, sellers end up receiving multiple offers and prices soar. Local and national papers can offer findings from all the ivory tower institutes that support both sides of every equation. Thousands of dollars can be spent to produce reports that are then in turn analyzed to explain pricing of property. No one can seem to agree on the reason that home values shot up in the last two years, nor can the offer a concrete reason why things have leveled off.

A visit to your local library and reviewing news articles will reveal stories that told of the wild market we were experiencing over the last couple years. Agents were unlocking doors at open houses while a parking lot full of buyers waited a chance to quickly walk through and make an offer. Homes were listed at one price that was the starting point of a bidding war that rivaled EBay. Sellers were accepting offers at a certain point in time (a deadline to the bidding war) and then review multiple escalating offers for their property. As one house sold, another up the block came on the market at a higher price and the cycle began again. Stories continued to be printed.

As last fall began, the natural slow down in home buying occurred. One reporter after another began to herald this annual event as the actual end of the wild market. Housing sales began to slow somewhat, but the media continued to predict the bubble was bursting and lean times were ahead. Interest rates began to creep up and the market slowed some more.

Spring is here and the market is not as frenzied. Today the Post printed the story I mentioned. I do not have concerns. I have been around long enough to understand the natural cycle of our market. It is slower. There was no bursting bubble. The cost for the first time homebuyer has increased beyond the comfort zone. It is not just interest rates, they remain very low from a historical perspective. It is the ugly appearance of points which have re-entered the loan approval process. Points translate to increased cash needed to purchase a home (on a $300,000 purchase, 2 points equal an additional $6,000 needed at settlement). The uncontrolled cost of living increases such as gasoline headed above $3.00 per gallon and Pepco rates increasing 40% are an example of items that are depleting expendable cash available to first time buyers. As budgets are adjusted, the market will become more active.

I can only share that if you are thinking of buying or selling a home, today is the best day to do so. Housing may go up and down over the short term, but it remains the American Dream. If you must read the Post, understand that they have to sell papers and touching your fears does that much better than just sticking to the facts.

2006-04-08T13:29:00.000-07:00

It seems that a lot of the folks I talk to say that they wish they had bought a home two years ago. The market has changed and even the wisest of experts can not predict which direction it will take. We have experienced a few years of price increases that have far exceeded any past predictions. Homes have literally doubled in price in some areas. Oh to have had a crystal ball in January of 2003.

I thought about it. I have to agree. If you are sitting there today, considering purchasing a new home, it is easy to say "we should have done that two years ago." Looking at today's prices, it seems logical that a purchase in 2003 would have been a great investment. I suppose you should remember that you are looking at 2003 prices with a 2006 income. Maybe you were not really in a position to buy two years ago.

I have one hope in talking with these folks. I don't want to be sitting with them in 2008 and hearing them say "we should have bought two years ago." Prices may level off or they may actually go down a bit, but as sure as the sun comes up every morning, those prices will rise again. There is no better time to buy than right now.

The current market stagnation has created an environment that supports buying now. There is more inventory and there are fewer buyers. Everyone seems to be waiting for someone else to make a move. Today's buyer is operating from a position of strength. Prices and terms can be negotiated to create the best deal for a buyer. Home owners are conceding points they held firm just six months ago. This current status will not remain.

People continue to receive jobs that include relocation. Babies are still being born. The need to find a new home remains. Those that act will reap the benefits.

If I hear from you, that will be fine. Just don't say "I should have bought two years ago." Now is the time to say "I'm ready."

jmac