Paul J. Frank: November 2007 Archives
I've come to the conclusion that there are types of people in the market right now. Serious buyers and sellers and spectators. So we have two real estate markets going on at the same time and it is divided by motivation.
Serious sellers are the people who want or have to sell. They are people who have equity in their properties, who have fixed their property for maximum resale or have discounted it heavily because of the properties flaws. They have sweeten the terms by offering seller concessions such as paying for the buyer's closing costs. If the property gets rejected by the market they quickly adjust to the market to better align their property with the market. People who fall into this category are those who want to move to get to a warmer or cheaper area. Those relocating into the area. Lenders who have bank owned properties. Landlords who don't want to be landlords. Estate sales or people going into nursing homes and finally people getting divorced. They want to preserve as much of their equity as possible.
Some of these serious sellers will also be serious buyers too. Those of us who own a home know if we lose value on the property we own we will make it up on the next house so we are floating with the market. Other serious buyers are people who would rather own than rent. They might be renters now but they are starting to have kids and want to settle down in a neighborhood that's more conducive to raising kids or they are having more kids than their present home can accommodate. They can't wait for the market to turn around. Maybe they are relocating into the area and are used to owning a home and renting is out of the question. Maybe they are making good money and their financial adviser is telling them to trade in the rent payment for a mortgage payment so they can get the tax benefits. Most of these buyers have a long term look at real estate and know the market is still going down but they know that they will ride it out, enjoy the benefits that the property is giving them now and that the market with go back up by the time the need to sell.
If you don't fall into the descriptions above then you are a spectator and that's okay as long as you know you are. If you are a spectator and you are upset that the game is being played without you. Stop watching, become serious and get into the game.
Serious sellers are the people who want or have to sell. They are people who have equity in their properties, who have fixed their property for maximum resale or have discounted it heavily because of the properties flaws. They have sweeten the terms by offering seller concessions such as paying for the buyer's closing costs. If the property gets rejected by the market they quickly adjust to the market to better align their property with the market. People who fall into this category are those who want to move to get to a warmer or cheaper area. Those relocating into the area. Lenders who have bank owned properties. Landlords who don't want to be landlords. Estate sales or people going into nursing homes and finally people getting divorced. They want to preserve as much of their equity as possible.
Some of these serious sellers will also be serious buyers too. Those of us who own a home know if we lose value on the property we own we will make it up on the next house so we are floating with the market. Other serious buyers are people who would rather own than rent. They might be renters now but they are starting to have kids and want to settle down in a neighborhood that's more conducive to raising kids or they are having more kids than their present home can accommodate. They can't wait for the market to turn around. Maybe they are relocating into the area and are used to owning a home and renting is out of the question. Maybe they are making good money and their financial adviser is telling them to trade in the rent payment for a mortgage payment so they can get the tax benefits. Most of these buyers have a long term look at real estate and know the market is still going down but they know that they will ride it out, enjoy the benefits that the property is giving them now and that the market with go back up by the time the need to sell.
If you don't fall into the descriptions above then you are a spectator and that's okay as long as you know you are. If you are a spectator and you are upset that the game is being played without you. Stop watching, become serious and get into the game.
Subtitle: "What You Need to Know to Profit in Real Estate-in a Buyer's and a Seller's Market."
I expected more from this book since David Lereah was the Chief Economist of the National Association of Realtors. You can tell the book was written by an economist as it is not very exciting to read and it is filled with statistics, lists, and charts. I was more interested in where the information for the charts came from so I could compile my own statistics for my area. I am not likely to buy real estate far from where I live now so I am not that interested in what the real estate market is doing in San Fransisco, for instance.
The book explains there are forces outside the local area that affect the value of real estate with chapters like "The Power of Influence, "Baby Boomers and Other Megatrends", and "What Bud Selig and Oprah Have To Do With Real Estate."
For me the most interesting part of the book was the chapter "Real Estate Markets and DNA." The chapter explains that each market is unique and it has it's own DNA. This DNA is made up of notable characteristics such as affordability, sports teams, education/universities, and geographic amenities like mountains, lakes or oceans.
The DNA is also made from the demographics of the people living there. So, do you live in an area of highly educated people? Are you in a retirement area of older people or a town filled with college kids? Are people moving into your area or moving out? It made me look more closely at the area I live in and what my local area's DNA is and what type of real estate would be a good investment.
One thing about the book that surprised me was the talk about buying real estate investments with a negative cash flow with the expectations that rents will go up and you will at some point have a positive cash flow. I don't know about you but I was never interested in owning a rental property where not only did I have to put up with tenants and maintenance problems but I had to pay money every month toward the expenses of the place. I always wanted positive cash flow when I bought a property. My family and I just sold a condo that I bought eight years ago and I was never able to increase the rents that much. More supply kept coming onto the market that kept rents in balance. Luckily, we had a positive cash flow from the day we bought the place. This was the local DNA of my market.
So, bottom line of the book is to know your market and figure out where it is going and what outside influences are affecting your market.
I was able to borrow the book from my local library. I wouldn't recommend spending your own money to get the book but if you can borrow it from the library. I say go for it.
I expected more from this book since David Lereah was the Chief Economist of the National Association of Realtors. You can tell the book was written by an economist as it is not very exciting to read and it is filled with statistics, lists, and charts. I was more interested in where the information for the charts came from so I could compile my own statistics for my area. I am not likely to buy real estate far from where I live now so I am not that interested in what the real estate market is doing in San Fransisco, for instance.
The book explains there are forces outside the local area that affect the value of real estate with chapters like "The Power of Influence, "Baby Boomers and Other Megatrends", and "What Bud Selig and Oprah Have To Do With Real Estate."
For me the most interesting part of the book was the chapter "Real Estate Markets and DNA." The chapter explains that each market is unique and it has it's own DNA. This DNA is made up of notable characteristics such as affordability, sports teams, education/universities, and geographic amenities like mountains, lakes or oceans.
The DNA is also made from the demographics of the people living there. So, do you live in an area of highly educated people? Are you in a retirement area of older people or a town filled with college kids? Are people moving into your area or moving out? It made me look more closely at the area I live in and what my local area's DNA is and what type of real estate would be a good investment.
One thing about the book that surprised me was the talk about buying real estate investments with a negative cash flow with the expectations that rents will go up and you will at some point have a positive cash flow. I don't know about you but I was never interested in owning a rental property where not only did I have to put up with tenants and maintenance problems but I had to pay money every month toward the expenses of the place. I always wanted positive cash flow when I bought a property. My family and I just sold a condo that I bought eight years ago and I was never able to increase the rents that much. More supply kept coming onto the market that kept rents in balance. Luckily, we had a positive cash flow from the day we bought the place. This was the local DNA of my market.
So, bottom line of the book is to know your market and figure out where it is going and what outside influences are affecting your market.
I was able to borrow the book from my local library. I wouldn't recommend spending your own money to get the book but if you can borrow it from the library. I say go for it.
Did you know that there is a private side to the MLS where real estate agents get information that the buyer doesn't get but would want?
In 1991 before I got my real estate license my wife and I were looking for properties to buy and fix up. Back then, if you don't remember, there was no internet or email and only businesses had faxes. So agents would print out listing sheets (text only) on lousy dot matrix machines and mail them to you. One day I received listing sheets that didn't look the same as the ones I was getting before. The agent must have screwed up and sent the internal listing sheets. The ones the agents were suppose to keep private for themselves. It had the original list price, how many days on market for the property, and the expiration date.
When I would look at a property I would ask the agents (who back then were all working as seller agents) how long was the property on the market and some would say, "I don't know." I now knew that if they truly didn't know they could easily find out.
I wanted access to this information. I figured if I could get a Bachelor of Science degree from Michigan State University I shouldn't have any problem getting a real estate license. So, that's what I did. I took the big 24 hour course, passed the test, associated with a real estate company and I now had direct access to the private side of the MLS.
Today you don't need to get a license to access this information. With a click of a button the whole market history of the property including days on market, price drops, whether it's gone under agreement and came back on the market can be attached to the listing sheet. Since most agents in my area work as a buyer agent when working with a buyer they should be giving this information to their buyer clients. For those people who hire me as their buyer agent I give them this information on every property they are interested in. If your buyer agent is not giving you this information I suggest you find out why not and ask them to start sharing it with you.
The more informed you are the better you will be at negotiating.
In 1991 before I got my real estate license my wife and I were looking for properties to buy and fix up. Back then, if you don't remember, there was no internet or email and only businesses had faxes. So agents would print out listing sheets (text only) on lousy dot matrix machines and mail them to you. One day I received listing sheets that didn't look the same as the ones I was getting before. The agent must have screwed up and sent the internal listing sheets. The ones the agents were suppose to keep private for themselves. It had the original list price, how many days on market for the property, and the expiration date.
When I would look at a property I would ask the agents (who back then were all working as seller agents) how long was the property on the market and some would say, "I don't know." I now knew that if they truly didn't know they could easily find out.
I wanted access to this information. I figured if I could get a Bachelor of Science degree from Michigan State University I shouldn't have any problem getting a real estate license. So, that's what I did. I took the big 24 hour course, passed the test, associated with a real estate company and I now had direct access to the private side of the MLS.
Today you don't need to get a license to access this information. With a click of a button the whole market history of the property including days on market, price drops, whether it's gone under agreement and came back on the market can be attached to the listing sheet. Since most agents in my area work as a buyer agent when working with a buyer they should be giving this information to their buyer clients. For those people who hire me as their buyer agent I give them this information on every property they are interested in. If your buyer agent is not giving you this information I suggest you find out why not and ask them to start sharing it with you.
The more informed you are the better you will be at negotiating.
I don't think the Greater Boston market has bottomed out but I think we are getting closer. If for no other reason than there are three articles in the Real Estate section of Boston.com that are not doom and gloom articles on real estate. They gave reasons why this might be a good time to buy and that if buyers wait too long they might miss the chance to buy now when seller's are giving concessions, there is less competition from other buyers, and when inventory is up with lots of good homes to choose from. I linked the articles below for your own reading.
http://www.boston.com/realestate/news/articles/2007/11/05/is_buying_home_today_a_good_investment/
http://www.boston.com/realestate/news/articles/2007/11/09/even_in_a_buyers_market_house_hunters_need_a_plan_to_avoid_mistakes/
http://www.bankrate.com/bosre/news/real-estate/20071108_real_estate_revival_a1.asp
If you look at buying real estate as a long term proposition and you are buying because you want to improve your current living situation. I think it's a good time to buy.
http://www.boston.com/realestate/news/articles/2007/11/05/is_buying_home_today_a_good_investment/
http://www.boston.com/realestate/news/articles/2007/11/09/even_in_a_buyers_market_house_hunters_need_a_plan_to_avoid_mistakes/
http://www.bankrate.com/bosre/news/real-estate/20071108_real_estate_revival_a1.asp
If you look at buying real estate as a long term proposition and you are buying because you want to improve your current living situation. I think it's a good time to buy.
Hi,
This is my first entry into the world of blogging. I have been mulling this over for awhile and decided to jump in. It's seems my reality as a licensed real estate agent since 1992 does not jive with some of the information the public is getting from the media, friends, and family.
I'm get asked the same questions many times so I will give the answer to the person asking and post it here, too.
I have read many books on business, success, and real estate so I'll start recommending and reviewing those books so you can be better informed.
On top of all of this I am learning how Movable Type works and since my skills in HTML and CSS are non-existent this is going to be reflected in the look and functionality of the blog.
Paul
This is my first entry into the world of blogging. I have been mulling this over for awhile and decided to jump in. It's seems my reality as a licensed real estate agent since 1992 does not jive with some of the information the public is getting from the media, friends, and family.
I'm get asked the same questions many times so I will give the answer to the person asking and post it here, too.
I have read many books on business, success, and real estate so I'll start recommending and reviewing those books so you can be better informed.
On top of all of this I am learning how Movable Type works and since my skills in HTML and CSS are non-existent this is going to be reflected in the look and functionality of the blog.
Paul
