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Sunday, August 31, 2008

Dual Agency…what’s that all about?

Yesterday I discussed the new real estate law in Michigan, so far as it defines the duties and services of real estate brokers and agents. Basically those laws were set up to define what the consumer can and should expect from a buyer’s or seller’s broker/agent. In addition to the general duties and services that were defined yesterday, the term Buyer’s Agent(s) is also defined thusly:

A buyer’s agent, under a buyer’s agency agreement with the buyer, acts solely on behalf of the buyer. A subagent of the buyer is one who has agreed to work with the buyer’s agent with who, like the buyer’s agent, acts solely on behalf of the buyer. Buyer’s agents and their subagents will disclose to the buyer known information about the seller which may be used to benefit the buyer.

In addition to the general duties and services that were defined yesterday for Seller’s Agents, they are further defined thusly:

A Seller’s Agent, under a listing agreement with the seller, acts solely on behalf of the seller. A seller an authorize a seller’s agent to work with subagents, buyers agents and or transaction coordinators. A subagent is one who has agreed to work with the listing agent, and who, like the listing agent, acts solely on behalf of the seller. Seller’s agents and their subagents will disclose tot eh seller known information about the buyer, which may be used to the benefit of the seller.

Those are both fairly straightforward and clear; but, what happens when a listing agent also brings the buyer into the transaction? This would be called Dual Agency. Many states do not allow Dual Agency, but Michigan does and it tries to define the role thusly:

A real estate licensee can be the agent of both the seller and the buyer in a transaction, but only with the knowledge and informed consent, in writing, of both the seller and the buyer.

In such a dual agency situation, the license will not be able to disclose all know information to either the seller or the buyer. As a dual agent, the licensee will not be able to provide the full range of fiduciary duties to the seller or the buyer.

The obligations of a dual agent are subject to any specific provisions set forth in any agreement between the dual agent, the buyer and the seller.

What a slippery slope this whole dual agency thing can become. Long time agents are used to “double dipping” by representing both parties in deals and getting both the listing and the selling side commissions. I’ve had a couple of occasions to do that myself and I can relate to you that it is a very stressful position to be in as an agent. You really have to be on guard all of the time to make sure that you don’t slip and share some bit of confidential information with one side that would put the other side at a disadvantage. I really prefer not to be in that situation, as I dare say most agents might also agree.

I’d also opine that few, if any, agents take the time to get written permission before jumping into dual agency situations. They may go back prior to closing and get something signed, but in the heat of showing a house or putting a deal together, few take the time to do what’s right (and required by the law) up front. Agency has become a very cumbersome thing to deal with up front, even in normal situations; much less in potential dual agency situations.

Rather than put myself in a dual agency situation; as early as I can, I inform buyers whom I’ve encountered at open houses of my listings or who might call on the sign and want me to show them the house, that I represent the seller for that house and that I would have to continue in that role; even if they want me to help them write an offer. I tell them up front that they should not divulge confidential information to me, because I work for the seller and that I would have to share that information with the seller.

I generally go on to tell them that I am not out to put them at any disadvantage and that I will honestly answer their questions and will help them in an honest and professional manner to prepare an offer, if they would like my help. I also let them know that I can recommend another agent in our office who is not working for the seller, if that would make them feel more comfortable. That’s really about all I can do in that situation.

That last part about recommending another agent in our office brings up the concept of Designated Agency. Real Estate One is a Designated Agency company, not all companies are in Michigan. How Designated Agent works is defined by the Michigan law thusly:

A buyer or seller with a designated agency agreement is represented only by the agents specifically named in the agreement. Any agents of the firm not named in the agreement do not represent the buyer or seller. The named “designated” agent acts solely on behalf of his or her client and may only share confidential information about the client with the agent’s supervisory broker, who is also named in the agreement. Other agents in the firm have no duties to the buyer or seller and may act solely on behalf of another party in the transaction.

So, I can go get any other agent in my local office or any other Real Estate One office and they can immediately become the agent for those buyers, because we are a designated agency company. If the agent that you are interviewing is not from a designated agency company, then you cannot assume that other agents in his/her office are not working for you. They may be sub-agents of your agent or they may be agents for potential buyers. You just don’t know for sure.

You’re just better off with clearly defined agency rules, which designated agency provides. So, ask that potential agent “Is your company a designated agency company?” Listen to the answer and if it starts out with “Oh, don’t worry about that, we’ll get to that later” you should be worried.

Saturday, August 30, 2008

Agency – what should you expect from your broker/agent?

As consumers of services from a great variety of providers, most Americans are a trusting, but relatively naive group. If I asked you what services you believe that your doctor is to provide, how would you answer? “Uhh, to make me well, I guess.” How about what services your lawyer is to provide. You might answer, “to keep me out of jail, maybe; or, to get me money for some injury or loss that I’ve suffered.” So, what are the duties and services that you can expect from your Realtor? Because there was no good, consistent answer to the that question; and, because Realtors are licensed by the State of Michigan, the state passed a law that answers that question clearly.

The new Michigan real estate law concerning agency spells out quite clearly the expected duties and services that a seller or buyer may expect from his/her agent. It starts by defining the duties and the services a full-service broker/agent is expected to deliver and then specifies which services can be dropped off, if the arrangement between the buyer or seller and the broker/agent is less than full service.

Here are the minimum duties that it defines for a broker/agent:

1. The exercise of reasonable care and skill in representing the client and carrying out the responsibilities of the agency relationship.
2. The performance of the terms of the service provision agreement. This is the agency contract between the buyer and the broker/agent and it will normally define in some detail the responsibilities for both sides.
3. Loyalty to the interest of the client.
4. Compliance with the laws, rules, and regulations of the state and any applicable federal statues or regulations. The primary federal statue concerns disclosure about the presence of lead-based paint in the property.
5. Referral of the client to other licensed professionals for expert advice related to material matters that are not within the expertise of the licensed agent. This would include lawyers, accountants, and licensed technicians and inspectors.
6. An accounting in a timely manner of all money and property received by the agent in which the client has or may have an interest.. This includes accounting for the clients earnest money deposit.
7. Confidentiality of all information obtained within the course of the agency relationship, unless disclosed with the client’s permission or as provided by law, including the duty not to disclose confidential information to any licensee who is not an agent of the client.

The law goes on to explicitly define the services that a broker or agent shall provide to a client under a service agreement, unless some of the services are specifically waived under a”limited service” agreement. Those services are:

1. When the real estate broker or real estate salesperson is representing a seller or lessor, the marketing of the client’s property in the manner agreed upon in the service provision agreement.
2. Acceptance of, delivery, and presentation of offers and counteroffers to buy, sell or lease the client’s property or the property the client seeks to purchase or lease.
3. Assistance in developing, communicating, negotiating and presenting offers, counteroffers, and related documents or notices until a purchase or lease agreement is executed by all parties and all contingencies are satisfied or waived.
4. After execution of a purchase agreement by all parties, assistance as necessary to complete the transaction under the terms specified in the purchase agreement.
5. For a broker or associate broker who is involved at the closing of a real estate or business opportunity transaction, furnishing, or causing to be furnished, to the buyer and seller, a complete and detailed closing statement signed by the broker or associate broker showing each party all receipts and disbursements affecting that party.

So, what might you not get, if you sign a limited services agreement? Here’s what the law provides:

Individual services may be waived by a seller or a buyer through execution of a limited services agreement. Only those services set forth above in paragraphs 2, 3 and 4 may be waived by the execution of a limited services agreement.

Full service brokers like Real Estate One provide all of the services. If you hire some limited service broker that advertises that he/she can get you on the Multi-list Service for $500, they still owe you at a minimum that service, since it is what they advertise as their “marketing” service, plus they would have to provide, or cause to be provided, a set of closing statements to you and the buyer at closing. That’s about all you would get from those clowns, if that. You’ll notice also that the law does not provide for waiving or dropping off any of the duties that are defined, just some of the services.

As I cautioned a few days ago, if the agent that you’ve somehow engaged, whether through a sign call or a cal to a local office or because you saw their ad somewhere, doesn’t take the time to disclose these duties to you and go over the rest of the Agency Disclosure Document, which is required by law; be afraid, be very afraid, you’ve stumbled upon at best a lazy or incompetent agent and at worst a dishonest one. Just remember never disclose any confidential information to a real estate agent or broker with whom you don’t have a signed agency agreement – they are, by default, working for the seller.

Friday, August 29, 2008

Is the real estate market stabilizing?

The economy continues to send mixed messages -- some encouraging for real estate, some not -- but this week the positive are edging out the negatives. Yesterday I reported on the July figures released by the National Association of Realtors (NAR), which reflected sales being up even as prices continued to fall. At the end I opined that things seem to be leveling out locally. A recent news article on that topic confirms that it may not be an illusion.

The research company with the largest database of ongoing real estate transactions - First American CoreLogic, which tracks property values in thousands of Zip codes and neighborhoods - reports that nominal price drops have "stabilized" in 883 core-based statistical areas, showing no declines in the past two months.

Why's that important? Because flattening out is what we need before we can see a cyclical turnaround -- in other words, where even in the hardest hit local markets in California, Florida, Arizona and Nevada, prices have hit bottom. They're not likely to drop much further, and in some parts of California are now at such bargain levels that large investors are prospecting for entire packages of houses -- ten or more in some cases -- to buy in bulk and rent out.

The National Association of Realtors sees similar bottoming out -- even the first signs of turnaround -- in a number of key markets in the U.S. In its latest quarterly report, home sales were up year-to-year in 26 percent of all states and 35 percent of metropolitan statistical areas. On the other hand, NAR also reported the national median sales price was down by 7.6 percent from the second quarter of 2007, and now stands at $206,500.

In other key economic developments: New housing starts fell by three percent last month - which is only logical given builders' still bulging unsold inventories. And mortgage rates took a dip this week to an average 6.47 percent for 30 year fixed. Fifteen year rates slipped below 6 percent to 5.99 percent. New loan applications for FHA mortgages to purchase homes rose slightly, according to the Mortgage Bankers Association of America -- even while applications for conventional home purchase mortgages from Fannie Mae and Freddie Mac dropped for the week.

So, is all of this clear, now? The stats are going every which way – some up, some down, some higher than last year and some lower. My gut feel locally is that we are near the bottom and working off the foreclosure inventory at a good pace. Foreclosures, which were running steadily at 50-60% of sales for a long time (it actually reached 100% for one month in back in the winter) are now down to about 33% of sales in the local market that I track – Milford, Highland, Commerce, and White Lake. All-in-all, I'm encouraged by what I think I see starting to happen in our local market. I have lots more shoppers right now than I've had in months. Now, if I could only get a few more to become buyers, too.

Thursday, August 28, 2008

Are we there yet?

Sales of existing homes rose in July, surpassing expectations, as buyers snapped up deeply discounted properties in parts of the country hit hardest by the housing bust.
However, the number of unsold properties also hit an all-time high, the latest indication that the worst housing slump in decades is far from over. Prices nationwide are not expected to hit bottom until early next year.

The National Association of Realtors reported Monday that sales rose 3.1 percent to a seasonally adjusted annual rate of 5 million units, down from June's downwardly revised rate of 4.85 million units. Sales had been expected to rise by only 1.6 percent, according to economists surveyed by Thomson/IFR.

"The process of a recovery has begun," said Joel Naroff, president of Naroff Economic Advisers. "It's not going to be short and swift, but it's begun nonetheless."
Home sales were about 13 percent lower than a year ago and prices were down dramatically. The median price for a home sold in July dropped to $212,000, down by 7.1 percent from a year ago.

Despite the third monthly sales increase this year, the number of unsold single-family homes and condominiums rose to 4.67 million, the highest number since 1968, when the Realtors group started tracking the data. That represented a 11.2-month supply at the July sales pace, matching the all-time high set in April. Until the inventory level is reduced to more normal levels, analysts say, the housing slump is likely to persist. The inventory level is being driven higher by a massive wave of mortgage foreclosures.

Between 33 and 40 percent of sales activity is coming from foreclosures or other distressed properties, estimated Lawrence Yun, chief economist at the Realtors group. While buyers are pouncing on lower prices — especially in places like California, Florida and Nevada — sales are sluggish in formerly stable states like Texas.

One key unknown for the U.S. housing market is the future ability of mortgage finance companies Fannie Mae and Freddie Mac to supply money for loans. The two government-sponsored companies have dramatically cut back the availability of mortgages as they cope with mounting losses from foreclosures. Even with government help, nearly 2.8 million U.S. households will either face foreclosure, turn over their homes to their lender or sell the properties for less than their mortgage's value by the end of next year, predicts Moody's

Locally, I track a little market area on a weekly basis, which includes Milford (Village and Township) and Highland, Commerce, White Lake and West Bloomfield Townships. In that market there has been a trend lately of the inventory decreasing on the lower end (under $300K) and increasing on the upper end, with both ends stretching out a bit on the time that it takes to sell. For the last month or so the medians for listed and sold houses has been creeping up, and the percentage of foreclosed homes in the mix has been going down.

You can see all of the statistics that I track by going to and clicking on Market Statistics. What I think I’m seeing is more “normal” home sales – homes that are not in foreclosure or distress. Just in the last month of so I’ve finally started to see homes above $500K start to sell again, albeit mostly lakefront homes, but still a good sign. I’m still showing lots of foreclosed houses and my buyers are still asking to see them first, before they look at normal homes. Most normal sellers have also had time to internalize what has happened to property values and have moved to get their home prices in line with the market as it exists. They may not be overly happy, but at least they have gotten real about what they will likely get for their houses.

So, are we there yet, are we there yet – have we reached the bottom? Not yet, but we may have started to flatten out near the bottom or maybe we just hit a little ledge on our way into the abyss. At least locally I prefer to see that little ray of sunshine.

Wednesday, August 27, 2008

Keeping the office upbeat…

Last week’s Business Week magazine focused upon life in the office, with features on toxic bosses, work/life balance, how to prioritize your work and much more. One of the articles that I found interesting was entitled "Glum Chums? Call in the Happiness Police." It was about the extraordinary things that some companies are doing to keep people’s spirits and attitudes up, during admittedly tough times. There were examples of providing entertainment for workers, or feeding them or letting them work from home to save on commuting costs. All of these things were designed to get people’s minds off the facts that their companies were struggling and downsizing and that there would be no bonuses this year and likely no vacations. In other words to lift the gloom and let the sunshine of happiness in.

I got to thinking about our little office in Milford and the dynamics of keeping us upbeat. Now, I’ve written about our adventures staring at a little green dot placed on the wall as a coping mechanism – somebody give me an Uhmmmmm! And I know that I’ve talked about Vicki who manages our office – probably the most upbeat person that I know (I sometimes refer to her as Little Mary Sunshine). It has to be a bit of a challenge for her to have to try to keep 15-20 agents, who are really independent contractors and not employees, from becoming gloomy, in the midst of one really tough real estate market. But, I’ll give her an “A” for effort. We have weekly sales meetings and she always has some little game or exercise for us to go through (after the groaning dies down) that eventually results in everybody feeling better.

Vicki and I talk about this from time to time, since I’m one of her biggest challenges. She has a nickname for me, too - Mr. Grumpy. She uses it when she sees that I’m down or having an issue that has left me grumpy and mumbling to myself. My wife is used to life with Mr. Grumpy and she is herself more of a Little Mary Sunshine personality type. I’m not really grumpy, just a bit in the cynical side and I can get a bit negative or down at times; or, more often than not, I'm mad at myself for something that I didn’t do, forgot to do or don’t know how to do- so you can see that I have lots of opportunity for grumpiness there.

Anyway, Vicki and I have reached a détente of sorts. I try pretty hard not to slip into my Mr. Grumpy mode and she otherwise tolerates me up to that point. As for the weekly exercises, I join in with as much enthusiasm as I can muster at the time and try hard not to let my natural cynicism creep in to my participation. Most of the time, I end up enjoying them, in spite of myself. I just can’t see myself evolving into Little Normy Sunshine. I always hated that Normy nickname when I was growing up, anyway. But maybe Mr. Grumpy can evolve into Mr. Happy, at least part-time. Who knows what miracles Little Mary Sunshine can pull off. It’s at least comforting to know that there is someone who cares enough to try to help me and the rest of the crew find a rainbow in the midst of all of the gloom.

I suspect that most successful businesses or offices all have their own Little Mary Sunshines; otherwise they would all sink into despair. There needs to be someone, a cheerleader, in every group, especially in times that are tough, to keep refocusing everybody away from the negative and towards the rainbow - the better things to come or the best things about where they are; so that hope is kept alive. Presidential candidate Barack Obama wrote a book entitled "The Audacity of Hope". He might just as well have titled it "The Need for Hope." The cheerleaders of the world keep hope alive in us all, whether it be at a national level or in our little local office. And hope, backed up by faith keeps us all going. that a rainbow I see outside? Little Mary Sunshine must have just pulled into the parking lot. Got to go now...I'm due for a happiness infusion.

Tuesday, August 26, 2008

How much house can I afford?

A too-big house payment can, at the very least, leave you with too little money for other goals: retirement, vacations, college funds for the kids. At worst, it can leave you vulnerable to foreclosure and bankruptcy. Yet many first-time buyers are still being pushed into mortgages that are bigger than they can handle, based on old-fashioned advice. The old school thinking was that you should buy as much house as you could stretch to afford, since real estate was always increasing in value and so were incomes.

Here's what's changed in the 30 years (or more) since your parents bought their first house:

* Inflation. Rapidly rising prices in the 1970s and early 1980s meant you could count on hefty annual raises. Today, you can't rely on double-digit income boosts to make your mortgage payment less of a burden each year.

* Two-income couples. A generation ago, single-income families were more common. If the breadwinner lost a job, the other spouse could go to work to save the house. With more two-income families needing both paychecks to make the mortgage payment, there's no one on the sidelines to take up the slack -- unless you put the kids to work.

* The lending industry. Thirty years ago, it was pretty tough to get a mortgage for more than you could really afford. Today, it's fairly commonplace. More lenders have loosened their criteria, knowing that the vast majority of their borrowers will do whatever it takes to pay their mortgage -- even if it means trashing the rest of their financial lives.

* Retirement. A much bigger proportion of the workforce was covered by traditional, defined-benefit pensions 30 years ago -- which means they didn't have to save massive amounts of money on their own to have a decent retirement. Today, the onus is typically on you to carve enough out of your budget to fund 401(k)s and IRAs.

* Medical Insurance. Many more would-be home owners are strapped by the need to pay their own medical bills or to self-fund high-cost medical insurance.

It's time to get real.
So how much should you spend on a house? The traditional way to calculate that is to add up all your income and make sure that your housing expenses -- mortgage payment, homeowners insurance and property taxes -- don't exceed a certain amount of that total. The traditional limit, still used by many lenders, is 28% of gross monthly income. Some financial advisers recommend capping your outlay at 25%; others suggest stretching to 33% or more. These limits, by the way, apply only if you don't have a lot of other debt. Most lenders don't want more than 36% of your total income to go toward mortgage and other debt payments. If your total debt would push you over that figure, most lenders will reduce the size of the mortgage for which you qualify.

As an example, let's look at how large a mortgage a person earning $45,000 a year should take on. Factoring in taxes and insurance, which decrease the amount left for paying the actual mortgage, if you are willing to spend 29% of your income on housing, you can afford a house that casts $121,745. It jumps up to $169,370 of you are willing to kick in 31% of your disposable income and tops out at $181,582 for those willing to put in 33% of their monthly take. It would get closer to the $200K mark if you went all the way to the max allowable level of 36%, but then you'd be sitting on folding chairs eating your dinner of hot dogs and baked beans at a card table.

As you can see, the percentage of income used has a huge effect on how much house you can buy. It also has a huge impact on what kind of life yo can lead, after providing for shelter, food, health care and other necessities. The term "house poor" was invented to describe those who have reached too far to buy a bigger house and now find that they are essentially a prisoner to the house (payments).

As a Realtor I try to advise my clients to stay within their means, but I have to be careful about doing that, so that I don't offend them. I usually ask if they have a financial advisor and if they have consulted with them about what they can afford. If they don't have a financial advisor, I try to direct them to a trusted mortgage agent who will help them find the answer to that question. It's also important in the modern two-earner scenario to have some understanding or plan for what would happen if one of the two incomes were lost, due to job actions or illness or for whatever reason. Could the mortgage be met on only one partner's income?

The other issue that I'm seeing results from the high taxes that are still attached to many of the "great deal" foreclosed homes. Often the buyers get so zoned-in on the purchase price that they forget that they will be responsible for the taxes on that $300K house that they got for $180K. Often the first time that they appreciate the consequences of that is on the HUD documents at closing and then it's a little late to back out. The taxes alone on a $300K house in this area will run over $500/mo.

So what's my advice - get good advice! I'm not a financial advisor and neither are most lending agents, so seek help from someone who is trained to look at your situation and advise you about how much you can afford to spend on a house. I can find you the house and I can recommend a good lending agent. I can even point you towards a good finalcial advisor, but you'll have to work out what you can afford with that advisor and then come back and see me.

Monday, August 25, 2008

Be afraid, be very afraid...

Michigan has a new law governing real estate agency, which was just put into effect this summer. The law goes to great lengths to define what agency is all about and what services you should expect from a real estate agent, either a buyer agent or a seller's agent. That new law has resulted in me having to explain about agency, using a three page Agency Disclosure form that my company has produced. I have to do that the first time that I meet on business with new clients, either buyers or potential sellers, and it should be covered before we even start talking. Why is that important? Well one of the main points in the law concerning agency has to do with making sure the client doesn't disclose confidential information before he/she knows for whom the agent is working.

It's important for the consumer to understand that a real estate agent can't be working for no one in a real estate transaction. The law specifies that the agent, by default, is working for the sellers, if he/she has no contract to represent the buyer(s). So that, oh so friendly, agent who says to you, "Don't worry about signing anything now, we'll get to that later" is working for the seller and you should not trust them with any confidential information. In fact, you should not trust them at all, because they are starting out a relationship with you by breaking the law. I've written here before about not just jumping into the car with a real estate agent and assuming that he/she represents you, just because they agreed to show you some houses. Certainly the same holds true for agents that you meet at open houses or call off a sign. They work for he sellers and you should not tell them any confidential information.

What is the confidential information that you might blurt out? It can be as simple as why you are moving or what your upper limit is for a new home. If the seller's agent knows those two pieces of information before negotiations even start, whom do you think has the advantage? And if you are a potential seller, don't tell candidates that you are interviewing as potential listing agents about the on-gong fight with your lousy neighbor over an encroachment or the fact that you've lost your job and may lose the house soon. If that candidate isn't chosen, but comes back later with a buyer, whom do you think will be better positioned to negotiate the selling price.

Real Estate One is a designated agency company, which means that we have very strict procedures for identifying the people in our company who will be designated to represent you, as you agent and supervising manager. You can then rightfully assume that everyone else in Real Estate One, even in the local office, is working for the other side of the transaction. Real Estate One also has very thorough guidelines for agents about making sure that potential clients are given the Agency Disclosure form on the first meaningful contact and are ask to sign a representation contract, if they are buyers who wish to have a buyer agent.

Unfortunately, not all companies stress agency as much as we do, so you still hear of cases of agents with the attitude of "agency, we don't need no stinkin' agency." Be afraid, be very afraid of those agents - some of them big names in the business, with a long time in the business. Sleaziness comes in many forms, but it usually starts by choosing to ignore the law. Ignoring ethics follows on quickly behind that.

So, before you get in the car or before you start discussing the agent's qualifications and plan for marketing your house, make sure that they explain agency to you and disclose to you for whom they are working. In the case of the listing agent interview, the agent whom you are interviewing should state up front that you should not disclose any confidential information during the interview, since you have not yet made your choice and thus have no agency relationship with that agent. Beware of those who don't warn and and who may in fact spend time drawing out information from you. They could be back with a well-armed buyer later.

We'll cover in another posting what the law says you can and should expect from an agent with whom you have a buyer or seller contract. That will also allow us to discuss what you won't get from limited service brokers/agents, the so-called discount brokers.

Saturday, August 23, 2008

Win a Smart Car

Yesterday I talked about one aspect of the company that I work for - Real Estate One - its culture of giving back to the community, mainly through its REO Charitable Foundation, which supports the American Cancer Society and the Michigan Special Olympics. Well here's a perfect example. The foundation is running a raffle to give away a Smart Fortwo car (the Passion model), with the net proceeds going to support the Special Olympics of Michigan.

The raffle is limited to 2,000 ticket at $20 each and the drawing will be held on October 31 at the Real Estate One headquarters. You don't have to be present to win. You can read more about this by clicking here.

This raffle is just one of the many things that are put on all throughout the year by the corporate office and by individual offices to raise money for these worthy causes. Every year a group from Real Estate One (usually the biggest group from any company)participates in the Belle Isle Polar Plunge - a dip into the Detroit River in February - to raise funds for the causes. Polar Plungers get pledges from people for their icy dip.

Our little office in Milford has led the entire company in fund raising effort for the past few years. We try to do something every month to raise money for the foundation, whether it be hosting a purse party at an agent's house or holding a car wash or holding a garage sale int eh parking lot. One nice thing is that our company owners - the Elsea family - have pledged to do a 50% match of all funds brought in by these local office efforts. We took a lot of the Elsea's money and put it into the foundation last year.

So, if you want to help out some good causes and you wouldn't mind maybe winning a new car, contact your local Real Estate One, Max Broock or Johnstone & Johnstone real estate office and ask how you can buy a ticket in this raffle. You'll be glad you did.

Friday, August 22, 2008

A Real Estate Career - Why now and why Real Estate One?

We are kicking off a recruiting blitz for additional agents for our Milford office – both experienced agents and new agents – as we wind down the summer of 2008 and head into fall. I got to thinking about what to say to someone who might ask, “Why should I consider a career in real estate right now?” or perhaps even “Why should I consider Real Estate One for a real estate career?”

Those are good questions which show that the questioner is not being flip about a possible career move; so let me see if I can answer them to your satisfaction.

It is no secret to anyone (even Rip Van Winkle would know this) that the real estate market in Michigan has been in free fall for at least two years. Foreclosures dominate the news headlines along with stories of rapidly declining home values. There are even the occasional articles or story-line references to the impact that the down market has had on real estate companies and agents locally. Several companies have folded and more have downsized, consolidated operations or been bought out by larger competitors. Even Real Estate One has felt this pressure and has taken the appropriate steps to right-size the company and decrease the number of offices to better fit the market demand.

The number of agents who are actively selling real estate for a living has decreased steadily over the last two years, as more and more part-timers or marginal performers have exited the business. Even Real Estate One has lost its share of part-time agents or agents who just couldn’t make it in the business in the current market environment. That’s actually good news for those who remain or those just entering the business, since there is less competition for home buyers and sellers.

So you say; OK, Norm, you’ve painted a pretty bleak picture of the market and the job landscape so far. Why should I even consider getting into this profession now and why with Real Estate One?

Let’s start with one and only one assumption – that you are a salesperson or you want to become a salesperson. It doesn’t matter what you are selling now, if you are a salesperson. Here’s the bottom line. As a salesperson, what you a can make at it is generally constrained only by the market that is available to you. Sure other factors have influence, but if I gave you a market in which the total sales is only a couple of million dollars annually and restrict you to just that market, then your earnings potential would be severely constrained, even if you dominated that small market and made a high commission rate on each sale.

Well, the real estate market just in Oakland County for residential home sales was $2,266,588,000 in 2007 and so far in 2008 is at $1,270,677,000. Those are numbers that people pronounce with a “B” on the end, not an”M”. According to RealComp II Multi-List statistics, 9, 832 homes sold in 2007 and 6,505 have sold thus far in 2008. I did not include leases, which you can also get paid on. Now, if you are a sales person at all; you should be salivating at the prospect of a market that big and that is just in Oakland County. Remember that you can list homes and sell homes anywhere in the state of Michigan. Over the last year, I have done business in Oakland, Washtenaw, Wayne and Livingston Counties.

So, amidst all of the gloom and doom in the papers and on the news, there is a huge market out there. The agents who listed and sold those homes in 2007 made total commissions that approached $68,000,000. So far in 2008 there have been commissions of a little over $38,000,000 that somebody else put in their pockets. If you are a salesperson AND you believe in yourself, a good part of that money could have gone to you – you just weren’t in the game. Or, maybe you were in the game, but didn’t have the support and systems to get your fair share; I’ll cover that, too.

But, to answer the question “Why should I consider a career in real estate even now?” Because, even now; it’s a huge market with a huge potential for rewarding your efforts. Real estate sales have no cap on what you can earn and no territory constraints. No one will tell you that you can’t sell another house or that you can’t sell in someone else’s territory. More than most other sales jobs, what you make out of it will depend on what you put into it and how effectively you expend that effort.

That brings us to the second big question – Why should I go into a real estate career with, or move my business to, Real Estate One? Real estate sales are like other sales in this respect – it is easier to sell if you have a good brand behind you and if you have a good organization behind you. Real Estate One is the largest and most successful real estate company in Michigan. It is not a national franchise operation, which has its own set of good and bad points, but it is one of the most recognized brands in Michigan. Fortunately it's also not a mom and pop operation like so many of the local franchise offices. Real Estate One has the financial wherewithal to weather a storm like we are in now and continue to provide the programs and services to help its agents be successful.

I said that not being a national franchise operation has some negative impact and that is because we don’t get the national brand advertising that is on TV occasionally; but, it is good because we also don’t have a franchiser with their hand in our pockets for franchise fees. What we lose in national advertising, we more than make up in local size and presence, with over 40 offices in Michigan. Not one of the local franchise operations even approaches half our size in Michigan. Our size means leverage with the media and the MLS and other organizations and Real Estate One uses that leverage to negotiate the best deals for its agents. Having been with one of the mom and pop franchise operations, I can tell you that you just can’t be at a better place when it comes time to spend your own money on marketing and advertising, because you can spend it at Real Estate One negotiated rates.

Then, there is the training and the programs that Real Estate One runs. If you are an experienced agent, you won’t need all of the courses that Real Estate One runs for those just starting out; however, you’ll still be amazed at how many courses that REO University offers that you will want to attend, on topics ranging from short-sales and foreclosures to selling to seniors. For the beginners REO U provides a treasure trove of courses, many free, to help you get up and running. Many of the courses pertain to the technologies that Real Estate One supports for its agents, from photography courses to how to leverage the Internet. Even many seasoned agents may find value in many of those courses, too.

And, there are the systems that Real Estate One has put into place or sponsor with third parties to help their agents be successful. From contact management systems to presentation and Comparative Marketing Analysis (CMA) systems to virtual tour and real-time messaging and phone systems, you won’t find more offerings anywhere else; nor will you find a better understanding or a deeper commitment to using and leveraging the Internet than at Real Estate One. Real Estate One has been a leader in Internet presence and continues to offer our agent and customers many unique Internet tools and capabilities.

Finally, there is a big intangible. If it is important to you to work in a friendly and supportive environment, one with positive values and a caring, family feel to it, then you can't ask for anything more than what you'll find at Real Estate One. The company has been family owned from the beginning and is still owned and run by the Elsea family, even though it is the largest real estate company in Michigan and among the largest in the nation. The Elseas have worked hard as they grew the company to keep the values alive that were a key part of the early company history - trustworthiness, honesty, hard work and giving back to the community. The Real Estate One Charitable Foundation works year around through the local offices and agents to raise money for the American Cancer Society and the Special Olympics. Its a company that you'll be proud to be a part of in your local community.

So, is now the time to look at making a move to Real Estate One? If you consider yourself to be a salesperson, or you want to become a salesperson, then now is a great time to find out if real estate sales is for you. And, Real Estate One is the best company that you could choose to help you take your best shot. If you’re a seasoned pro in real estate, then ask yourself, “Why don’t I work for the number one company in Michigan? Why am I making it harder than it has to be on myself?” Do yourself the favor of giving yourself all the advantages that you can and see what you can really do in this market with Number One behind you. Join a company that can help make it happen for you! Call the Milford Real Estate One office today - (248)684-1065 and ask for Vicki. Just say - YES, I want to join the winning team! And, tell her that Norm sent you.

Thursday, August 21, 2008

New Live/Work concepts…

A recent real estate news story discussed a new trend in live/work developments. One benefit of buying a home in the suburbs is that real estate can generally be more affordable there. But, with the cost of gasoline soaring these days, the work commute is looking much less attractive. In response to the cash crunch, some builders are constructing homes with fully functioning home offices. Now you may be thinking, sure most homes already come with an office space, but this is actually quite innovative.

We've seen live/work units for retail or storefront use in this area – Wixom and Howell have examples nearby and Milford will soon have some, too. These new live/work homes are focused upon a different client set – the white-collar home office crowd.

Live Work Builders has created The District at Uptown in Keller, TX, a suburb of Dallas-Ft. Worth. They describe the community as live/work executive residences. It's a combination of residential and employment space that is specifically designed for dual use. A typical buyer would be someone who wanted to establish or grow their existing business and who also desires the convenience and benefits of working from home.

Each office is pre-wired for high-speed internet and features custom built-in bookshelving and filing units. There's an independent, well-defined exterior entrance to the office so that a client can stop by comfortably. There's even exterior signage noting the business inside, and a dedicated parking space for customers. These offices are ideal for professional businesses like attorneys, counselors, web-designers, etc. I can certainly add that they make sense for real estate professionals, too; since I work out of my home office.

The architects of these semi-custom homes note that having a dedicated work space alleviates the time and cost associated with commutes, which can result in higher productivity during the work day. They also remind buyers of the tax benefit of business ownership and the convenience of having only one mortgage for your home and business.

With the direction gas prices are heading these days, this sounds like a trend that might be here to stay. To learn more about the builder mentioned above and the live/work concept visit If these trends continue we might all just never have to leave our homes, except, of course to go to some else’s home to get to whatever product or service they are selling. Maybe they could also build a light rail system, like the people mover, between the units, then you could accomplish things without ever having to get in a car or even to get dressed...but some things are best not even imagined.

Wednesday, August 20, 2008

Getting in touch with my other side...

There was a baby shower in our office yesterday for one of our agents who recently had a beautiful baby girl. It was a pot luck luncheon affair. I decided to attend as a sign of respect for the mom and because I didn't have lunch plans anyway. I was the only male agent from our office to show up! I guess that's not unusual. Baby showers aren't a guy thing.

I was reminded of an earlier time, when I used to work in a large corporate structure. About every month or so the women in the office would invite me out to lunch with them to, as they put it, "get in touch with my feminine side." They always had great sport with that, but I didn't mind. We always had a good time and a good lunch at Olga's Kitchen. I think it's important to take time to get in touch with, or at lease appreciate, the different point of view that people different from oneself can have - whether the differences be gender or race or any other aspect that differentiates.

Last year I wrote here about the gender thing and how differently I saw things from what my female partner saw, when we visited a house. I would see the electrical panel and the mechanicals and the garage and things like that and she would see the kitchen layout and colors and how the house was decorated. I don't have a partner any more, but I try now to remember to look for the things that she used to see, when I visit a house on a listing appointment.

I also try to be cognizant of the differences when I take a couple out to look at houses, making sure that I don't focus too much with the man on just the man stuff - hey, what a great garage - and miss the things that the woman might be looking for in a home. That's harder for me and I have to try very hard to pick up on the things that she might like vs. what he likes. I've often said that as long as it has a couch, a TV and a fridge full of beer, it's good to go with most men; however, women look at lots of things that must be right about the house like the kitchen and laundry, because they might end up spending a lot of time there.

Guys also seem to tire of shopping much quicker than the ladies - whether it be for clothes or houses. A guy will look at 3-4 houses and say, "OK let;s buy that 2nd one"; whereas the woman will say "Let's look at a few more, I just know that the perfect house is out there somewhere." I've had guys love every house that we went into; and yet, 20-30 houses later we still had not found "the perfect house" for the wife. Maybe it was all of the time that I spent in the basement looking at the electrical panel with the guys.

So, I nibbled on fruit and salad and cookies and listened to the chatter as the women of the office talked about this new baby and all of the babies that any of them ever had and how cute they were. Finally, I had to leave and go get a burger, before the urge to take a bubble bath and have a pedicure overwhelmed me. I may be losing touch with my feminine side; so, I'll have to figure out another way to regain that insight. Maybe I'll get a beer, sit on the couch and watch Opra.

Tuesday, August 19, 2008

Liar, liar, mortgage on fire...

From a recent real estate news feed comes this story on more toxic loans, called liar loans. Many homeowners with liar loans are stuck. They can't refinance because housing prices in those markets have nose-dived, and lenders are now demanding full documentation of income and assets. Losses on liar loans could total $100 billion, according to Moody's That's on top of the $400 billion in expected losses from subprime loans.

Fannie Mae and Freddie Mac, the nation's largest buyers and backers of mortgages, lost a combined $3.1 billion between April and June. Half of their credit losses came from sour liar loans, which are officially called Alternative-A loans (Alt-A for short) because they are seen as a step below A-credit, or prime, borrowers. Many of the lenders that specialized in such loans are now defunct — banks such as American Home Mortgage, Bear Stearns and IndyMac Bank. More lenders may follow.

The mortgage bankers and brokers who survived were more cautious, but acknowledge they too were swept up in the housing hysteria to some extent.

"Everybody drank the Kool-Aid" said David Zugheri, co-founder of Texas-based lender First Houston Mortgage. They knew if they didn't give the borrower the loan they wanted, the borrower "could go down the street and get that loan somewhere else." That argument sets as well with me as the “it is what it is” statement that many people use these days as an excuse to just accept what’s happening around us without protest or reaction.

The liar loans were also immensely profitable for the mortgage industry because they carried higher fees and higher interest rates. A broker who signed up a borrower for a liar loan could reap as much as $15,000 in fees for a $300,000 loan. Traditional lending is far less lucrative, netting brokers around $2,000 to $4,000 in fees for a fixed-rate loan.

During the housing boom, liar loans were especially popular among investors seeking to flip properties quickly. They were also commonly paired with "interest only" features that allowed borrowers to pay just the interest on the debt and none of the principal for the first several years. Even riskier were "pick-a-payment" or option ARM loans — adjustable-rate mortgages that gave borrowers the choice to defer some of their interest payments and add them to the principal.

While some borrowers were aware of their risky features and used them to gamble on their home's value or pull out money for vacations, others insist they were victims of predatory lending. I tend to have little sympathy for most of the “victims” in this mess, since so many were just acting out of greed, more than out of ignorance as they claim.

However, there certainly were (and still are) lots of slick-talking mortgage crooks out there preying on the truly ignorant. Somehow most of them find a way to slink away with the stuff hits the fan, only to pop up again somewhere else with a new scheme. Remember the bums running the S&L’s when so many of them went belly up? Well, guess who was running the mortgage companies that caused the current mess? Many of the same guys! Those guys certainly were well qualified to give liar loans to people.

Saturday, August 16, 2008

Michigan makes another bad list...

From one of the news feeds that I get, I think this was from the Forbes real estate section, comes this story of yet another list that you really don't want to be on and which finds Michigan well represented.

The story was about cities in America that are dying - losing significant portions of their population - mainly due to the loss of manufacturing jobs. Obviously that means the rust-belt of America, the Mid-West.

Where's it worst? Ohio, according to the analysis, which racked up four of the 10 cities on the list: Youngstown, Canton, Dayton and Cleveland. The runner-up is Michigan, with two cities — Detroit and Flint — making the ranking. That's no surprise, but still not a distinction that we need in Michigan right now.

These, and four other metropolitan statistical areas, as defined by the U.S. Census Bureau, face fleeing populations, painful waves of unemployment and barely growing economies. They've struggled the worst of any areas in the nation in the 21st century. And they face even bleaker futures.

It wasn't always this way. Despite years of economic decline, in the first years of the new century the employment situation did not look so bad — 3 percent to 4 percent unemployment was the norm, along the lines of metropolitan areas elsewhere in the country. The rest of the decade was not so kind. Thanks to a crushing downturn for automakers like General Motors and Ford, Detroit and Flint, Mich., have seen unemployment approach 10 percent.

Another brutal statistic all the cities share is a diminishing population. So far this decade, 115,000 people have left Cleveland, for other climes. Smaller changes in other regions can be just as painful. Nearly 30,000 people have left Youngstown, Ohio, and they aren't being replaced by either new babies or new immigrants.

Still, the cities found to be struggling don't vary widely by age, and this factor had little influence in the rankings. The oldest city in the top 10, Scranton, Pa., had 45 percent of its population over 45; the youngest, Flint had 38 percent over 45.

The worst news is, of course, economic. When the authors looked at the most recent gross domestic product estimates for 155 metropolitan statistical areas estimated to have $10 billion or more GDP in 2005 — economies about the size of Asheville, N.C., or Tallahassee, Fla. — the news was predictably terrible for the Rust Belt.

In the fall of 2007, the U.S. Bureau of Economic Analysis (BEA) published its GDP estimates from 2001 to 2005. Nearly every city in the country grew during this period (New Orleans, devastated from Hurricane Katrina, was the notable exception), but the struggling cities on our list grew more sluggishly. None of them grew more than 1.9 percent a year, versus a nationwide average of 2.7 percent. Canton, Ohio, managed to grow its economy just 0.7 percent annually. Flint was worse still at 0.4 percent.

None of these cities now face the huge declines in real estate prices seen by Phoenix, Miami or Las Vegas, where the Case-Shiller Home Price Index shows nearly 30 percent declines from a year ago. Detroit is off only about 15 percent, Cleveland only 8 percent. Don't call it a bright spot. Prices never went up in these areas in the first place.

What isn't reported in articles like these is the affect that the decline of these cities have on the suburbs that surround them. If they are the hub around which the suburbs developed, what happens when the hub collapses? The jobs that have disappeared in these large metropolitan areas are the ones that people in the suburbs were driving in to get to. That's why there is such high default and foreclosure rate in the suburbs around those areas.

I had this discussion with an acquaintance who happened to have move here from Pittsburgh many years ago, when that metro area was declining. He said that it took decades for the decline to stop and that the Pittsburgh of the golden era of the big steel companies is long gone. Sure, there's still a Pittsburgh, but it is a metropolitan area that is much smaller than in it's Big Steel heydays and with a much more diverse and maybe somewhat less prosperous economy.

What will Michigan and the Detroit area be like in 10-20 years? Likely a lot smaller and a lot less dependent upon the automotive industry. Hopefully all of the ads that we see on TV about what a great place Michigan is to put a business in will pay some dividends and we'll get some of the high tech or medical and pharmaceutical companies that the are trying to attract. Big cities like Cleveland and Detroit won't really die, but they will significantly change as they evolve with economic and social changes. It may well be that growing and more prosperous suburbs, like the cites of Warren and Troy in Macomb and Oakland Counties, will become the new hubs around which people and the local economies revolve. We shall see.

Friday, August 15, 2008

The Slow Home movement...

I finally got some time to browse through my August issue of Realtor magazine, one of the few remaining paper-based real estate news sources that I get. One article that caught my attention was about the "slow home" movement. This movement was started by John Brown, an architect, real estate broker and Professor of Architecture at the University of Calgary in Canada. The movement is all about a philosophy for housing that takes as its primary analogy the differences between fast food and traditional (or slow) food dining.

Brown apparently had an epiphany while on a vacation to Rome in the early 1980's with his family. While he was there the first McDonald's in Rome opened and he succumbed tot eh entries of his children to get them a meal that they were familiar with, as opposed to the exotic Italian meals that they had been eating. While eating the McDonald's meal, Brown realized that it was the same all over the world – a standardized fast food meal. He started thinking about how architecture had become standardized, cookie-cutter, if you will. His thinking extended to the throw away nature of the packaging and indeed of the whole experience of fast food dining and how our society had adapted the same mentality to many things in life, including housing. It’s getting old, it needs to be updated or repaired – just throw it away and move on to the next cookie-cutter house.

As a realtor, I can attest to the cookie-cutter nature of housing in this area. Even if I'm in an upscale sub; they usually only offered 4-5 different models or floor plans, so every house becomes predictable. It's mainly in the Village of Milford, where I live, that one finds individually designed and built historic homes (I live in one). There are some newer, architect-designed homes in the area; but, even they seem to have fairly predictable sets of features - a trap that all architects likely fall into because of the "fast food" demands of their clients.

So, Brown started the “slow house” movement. One of the basic principals are that it is better – saves resources – to rebuild or remodel in place, rather than continuing the trek further and further out into the suburbs. Another is that it is better to slowly add quality to your home, through remodeling or new furnishings and accessories, than it is to rush to fill the house with tacky furnishings, just to be done with it. Brown espouses taking your old home and restructuring it or refitting it into a more modern and energy efficient home, using "green" building techniques and materials. Slow vs. fast, again. Brown’s philosophies and guidelines for the slow homes movement can be found at his blog – .

Brown perhaps belabors the fast food vs. slow food analogy a bit, but his basic premises are worthy of some thought. We all are seemingly trapped is a rat race of ever increasing speed and duration. Perhaps Brown’s slow homes movement or the growing movement towards cohousing that I wrote about a couple of days ago are ways to fight back or at least to seek refuge from the hectic and growingly impersonal pace of modern life.

Thursday, August 14, 2008

Fannie and Freddie make changes...

From CNN comes this story - The good news: Mortgage giant Fannie Mae is taking steps to shore up its finances. The bad news: You're going to pay for it when you take out a mortgage.

Fannie plays a central role in the market for home mortgages by purchasing loans, securitizing them and selling them to investors. In announcing announcing a $2.3 billion loss on Friday, it also said it would make major changes that could have a significant effect on mortgage liquidity and pricing.

The company said it will increase its fees, stop buying certain high-risk loans and charge a higher risk premium for buying loans in the declining market.

"[These actions] have raised the costs of mortgage credit and reduced its availability," said Mark Zandi, chief economist for Moody's "Policy makers had been hoping they would move forward to provide more credit and now they're just hoping they don't pull back."

Fannie increased fees for some loans by a quarter of a percentage point, based on borrowers' credit scores and the amount of their down payments. It will charge, for example, 1% (up from 0.75%) for a buyer with a credit score of 680 paying 20% down.

And Fannie (FNM, Fortune 500) doubled its "adverse market delivery charge" to 0.5%. That is an across-the-board fee assessed against every loan Fannie buys, according to a Fannie spokeswoman. Fannie first instituted the charge this spring.

"It's very negative," said Lawrence Yun, chief economist for the National Association of Realtors. "Any time there's an additional imposition of fees in obtaining a mortgage, it knocks some potential buyers out of the market."

Fannie's smaller cousin, Freddie Mac (FRE, Fortune 500), which also announced a big loss this week, has been taking similar steps to shore up in finances and reduce its exposure to risky loans.

The additional fees imposed by Fannie will hit newcomers particularly hard, according to Yun. First-time buyers are usually most on the margins and struggling to afford a home purchase. The added fees will be passed on to borrowers and could mean quarter-point increases in interest rates.

Reducing the number of first-time buyers can have a domino effect on the market. Existing homeowners looking to trade up to bigger, more expensive homes may postpone doing so because they can't sell their present home.

Fannie will also eliminate buying Alt-A loans by the end of 2008. Alt-A loans, a category between prime and subprime, accounted for about 11% of the company's loans during the last years of the boom. They have been used mostly by people who couldn't or wouldn't document their incomes, their assets or both. These buyers will find it harder to obtain financing once Fannie stops buying the loans.

According to Yun, however, the cutback in Alt-A will hurt people buying second homes to rent out or resell, rather than first time homeowners.

"These are people who often rely on their good credit to buy investment properties putting little or no money down," he said.

But removing some of them from the market will decrease demand in a market already struggling with high inventory.

Fannie and Freddie, as private companies created and sponsored by the government, have to foster home ownership while satisfying their shareholders. They have to maintain profitability or risk triggering a government rescue.

"They were created to provide liquidity in times of crisis," said Yun. "If they don't do that, what's the point of having Fannie and Freddie in the first place?"

Indeed, many people wonder the same thing. Fannie and Freddie have always been a bit of mystery to the common people who don’t deal directly with either one. We’ve always known they were back there somewhere, doing something that wasn’t quite clear, but apparently was important, since they get a lot of press. So, now the things that they’re doing back there will have a negative impact on all homebuyers. Great! Maybe George W. can stand over their shoulders and say “You’re doin’ a great job Fannie Fred.”

Wednesday, August 13, 2008

What is Cohousing?

From the weekly Iconocast news feed that I get about cultural trends comes an article on a new trend in housing called Cohousing. Cohousing originated in Europe but caught on in the US in California (where else?) and has now spread across the country. We have three cohousing communities in our area; all near Ann Arbor (where else would they be in Michigan?). So what is this new phenomenon and is it for you?

Cohousing communities are usually designed as attached or single-family homes along one or more pedestrian streets or clustered around a courtyard. They may also be detached condos with larger and more useful common areas. They range in size from 7 to 67 residences, the majority of them housing 20 to 40 households. Regardless of the size of the community, there are many opportunities for casual meetings between neighbors, as well as for deliberate gatherings such as celebrations, clubs and business meetings.

The common house is the social center of a community, with a large dining room and kitchen, lounge, recreational facilities, children’s spaces, and frequently a guest room, workshop and laundry room. Communities usually serve optional group meals in the common house at least two or three times a week.

The need for community members to take care of common property builds a sense of working together, trust and support. Because neighbors hold a commitment to a relationship with one another, almost all cohousing communities use consensus as the basis for group decision-making.

In a cohousing community, you know who lives six houses down because you eat common meals with them, decide how to allocate homeowners dues and gratefully accept a ride from them when your car’s in the shop. You begin to trust them enough to leave your 4-year-old with them. You listen to what they have to say, even if you don’t agree with them at first, and you sense that you, too, are being heard.

Cohousing residents generally aspire to “improve the world, one neighborhood at a time.” This desire to make a difference often becomes a stated mission, as the websites of many communities demonstrate. For example, at Sunward Cohousing near Ann Arbor, MI, the goal is to create a place “where lives are simplified, the earth is respected, diversity is welcomed, children play together in safety, and living in community with neighbors comes naturally.” At Winslow Cohousing near Seattle, the aim is to have “a minimal impact on the earth and create a place in which all residents are equally valued as part of the community.” At EcoVillage at Ithaca, NY, the site of two adjoining cohousing neighborhoods, the goal is “to explore and model innovative approaches to ecological and social sustainability.”

Many other communities have visions that focus specifically on the value of building community. Sonora Cohousing in Tucson, AZ, seeks “a diversity of backgrounds, ages and opinions, with our one shared value being the commitment to working out our problems and finding consensus solutions that satisfy all members.” Tierra Nueva Cohousing in Oceano, CA, exists “because each of us desires a greater sense of community, as well as strong interaction with and support from our neighbors.”

The Six Defining Characteristics of Cohousing

While these characteristics aren't always true of every cohousing community, together they serve to distinguish cohousing from other types of collaborative housing:

1. Participatory process. Future residents participate in the design of the community so that it meets their needs. Some cohousing communities are initiated or driven by a developer. In those cases, if the developer brings the future resident group into the process late in the planning, the residents will have less input into the design. A well-designed, pedestrian-oriented community without significant resident participation in the planning may be “cohousing-inspired,” but it is not a cohousing community.
2. Neighborhood design. The physical layout and orientation of the buildings (the site plan) encourage a sense of community. For example, the private residences are clustered on the site, leaving more shared open space. The dwellings typically face each other across a pedestrian street or courtyard, with cars parked on the periphery. Often, the front doorway of every home affords a view of the common house. What far outweighs any specifics, however, is the intention to create a strong sense of community, with design as one of the facilitators.

3. Common facilities. Common facilities are designed for daily use, are an integral part of the community, and are always supplemental to the private residences. The common house typically includes a common kitchen, dining area, sitting area, children's playroom and laundry, and also may contain a workshop, library, exercise room, crafts room and/or one or two guest rooms. Except on very tight urban sites, cohousing communities often have playground equipment, lawns and gardens as well. Since the buildings are clustered, larger sites may retain several or many acres of undeveloped shared open space.

4. Resident management. Residents manage their own cohousing communities, and also perform much of the work required to maintain the property. They participate in the preparation of common meals, and meet regularly to solve problems and develop policies for the community.

5. Non-hierarchical structure and decision-making. Leadership roles naturally exist in cohousing communities, however no one person (or persons) has authority over others. Most groups start with one or two “burning souls.” As people join the group, each person takes on one or more roles consistent with his or her skills, abilities or interests. Most cohousing groups make all of their decisions by consensus, and, although many groups have a policy for voting if the group cannot reach consensus after a number of attempts, it is rarely or never necessary to resort to voting.

6. No shared community economy. The community is not a source of income for its members. Occasionally, a cohousing community will pay one of its residents to do a specific (usually time-limited) task, but more typically the work will be considered that member's contribution to the shared responsibilities.

I went and looked at the Web sites of the three Ann Arbor area cohousing communities and encourage you to do the same. They are Sunward Cohousing at , Great Oak Cohousing at , and Touchstone cohousing at . There is a good deal of idealism expressed at all three sites, but that’s not all bad and perhaps more in vogue right now anyway. Certainly the goals of conserving energy make sense and one gets a strong sense of community and neighborhood at all three sites. There is also a very good FAQ section at the Touchstone site. I suspect that this new idea in housing will find acceptance in Michigan, outside of the Ann Arbor area; but, it is likely to be a slow and wary acceptance.

Tuesday, August 12, 2008

The ultimate cop-out – “It is what it is”

I posted a comment on the sorry state of affairs in the real estate world on the local MLS bulletin board yesterday, specifically about the sleazy practice of listing houses that are in a short-sale mode for ridiculously low prices and then going to the bank later to see if they would take them. It is little more than a bait and switch scam on the buyer and usually a big waste of time. Basically, it was the same rant that I posted here; but aimed, I thought, at other real estate professionals who might share my frustration over the time wasted by agents and customers on these essentially fraudulent postings.

“It is what it is” was the answer that it seemed most of them either returned or agreed with. It is what it is and we all have to live with it. It is what it is and we can’t change it. It is what it is, so get used to it and figure out how to do business that way. BULL! It only is what we all allow it to be. Lazy, stupid, wasteful behavior should never become tolerated and even accepted under the banner of “it is what it is.”

Do we see racist behavior and say, it is what it is? Do we see news of another drive-by shooting and say, it is what it is? Can we hear about an invasion of one country by another and whisper, it is what it is? Do we see some punk grab the purse of a little old lady and mutter, it is what it is? If some sleaze-bag sold you a product that didn’t work, would you shrug and say, it is what it is?

It is pathetic that some Realtors have apparently become enamored of the questionable, sleazy, and downright dishonest practices going on in the short-sale and foreclosure markets. Many see no alternative to playing this game. Of course the crew that haunts that particular forum is an interesting collection of characters for whom “it is what it is” is probably standard operating procedure.

Friends, it isn’t what it is; it’s what we let it become. Some Realtors are making a killing off playing these games or some variation of them. The rest of us are wasting a lot of time trying to do honest business on behalf of our buyers. Sure, there are some bargains to be had, if you wait out the banks, but few of them are in this pre-foreclosure state called the short-sale. Wait until the bank owns the house to try to get a deal.

As for me, I prefer to provide my clients with a clear and honest picture of what is going on in a short–sale (the games that the listing agent and the bank are playing with each other and with the buyer(s)) and give them as much insight as I can provide into the time that will be required and the patience, as well as the risk (fairly high) that nothing will come out of having waited around for the bank for 4-6 weeks (or longer).

Short-sales are a fool’s game that should be played mainly by those who see the whole process as a game. If you are trying to buy a house, look elsewhere and buy a house. If you enjoy dabbling in the stock market or an occasional trip to the casino, then lob a few low-ball bids in on short-sale houses. You won’t get the houses 99 times out of 100, but maybe you’ll have fun.

Monday, August 11, 2008

Watching out for sleazy short sellers

They're at it again; not, I suppose, that they ever stopped. I refer to the sleazy people who hang around any profession or job, finding ways to cut corners or stretch the truth or just plain lie, to make a sale.

The latest ruse is the unauthorized "short sale". A short sale is supposed to be a sale where the bank has agreed to take less that it is owed, just to get the property off it's books and avoid the hassle and wait that are involved in a foreclosure. Even the ones that are done right take a prolonged period of time to get through and require patience and persistence on the part of the buyers. There are many legitimate short sales being done every day.

Then there are the sleaze-balls of real estate. These operators advertise that they are representing a short sale on the house; but, in fact, have never talked to the bank and have no legitimate authority to offer the house at the price advertised. They are basically playing a game of bait and switch with the potential buyers. Since they have had no contact with the bank, they have no idea what the bank might take; so they just throw some very attractive price on the MLS and hope it attracts unsuspecting buyers with incompetent buyer agents. If the sleazy operator can get the buyers to make an offer; then, they try to contact the bank and "negotiate" a short-sale price. Sometimes these guys go even further into the sleazy muck and find "straw buyers" to take to the bank. These are fake buyers who are used to get a price reaction from the bank and then they somehow always disappear.

Even with a legitimate short-sale, it an take weeks to even get an answer from the bank. They are short-handed in the departments that handle their distressed loans and properties and they tend to also wait to see if there are any more (better) offers, before responding. Many banks just ignore these sleazy operators when they try to put in an offer that was unexpected and well below the loan amount. Of course the sleazy agent involved blames the delay on the bank.

I hit one of these listings recently and unfortunately it was on a home that my clients really like. I had to advise them to be very cautious and very weary of making an offer on the place, since the bank had not been involved yet. I call it a bait and switch scheme because the listing agent knows that the bank is not about to take the very low price that he has advertised; however, if he can hook the buyers strongly enough with a nice house at a great price; then, maybe, he can get them to go up to something that the bank might consider. In many cases the lister wouldn't even take an offer at the listed price to the bank, because he knows how ridiculous it is.

The secondary damage caused by this ploy is that it ties up the buyer in a negotiation process that could take weeks or months; and in the mean time, legitimate houses that they might like are being sold to other buyers. It's a waste of everybody's time. It's not illegal, just extremely questionable and certainly marginally ethical - just plain sleazy.

Friday, August 8, 2008

Dancing on the line...

There are songs and poems and stories about “walking the line” – staying true to someone or to principals in general. The story below, from one of my real estate news sources shows how fine that line can be, when Realtors try to find “positive”ways to state things. When does being positive cross the line? You decide.

As the crooner Bing Crosby once sang, “Accentuate the positive. Eliminate the negative. Don't mess with Mister In-Between.”If you’re trying to sell a house, truer words were never spoken.The National Association of Exclusive Buyer Agents has compiled some of the descriptions that emphasize the affirmative in a booklet.

Here are a few of the most memorable ones:
- Cozy bedroom. Room for a twin bed and one very small dresser
- Damp basement. Three feet of water rushing across the floor
- Easy access to everywhere. Backing up to an expressway
- Galley kitchen. A hallway with cupboards
- Gorgeous home with great potential. Refers to the crack through the middle of the foundation
- Grandma’s house. Hasn’t been improved since she moved in and it still smells like her
- Light, airy basement. You can see daylight through the cracks in the foundation
- Low-maintenance front yard. Paved over with concrete
- Move-in ready. Vacant
- Period home. Kitchen in the basement
- Quaint cottage. Frame house from the ‘50s smaller than 600 square feet
- Retro décor. Original avocado appliances and paisley vinyl floors

I've also heard stories, some maybe true and I'm sure some that are real estate legends about agents taking the opposite approach and going negative in their descriptions of homes that they have listed. The most famous is the "This place is a dump" description that a Realtor supposedly used with great success to sell a home that needed lots of work. I've certainly had listings that I wanted to advertise with the words - bring your dumpster and get ready for major projects - but I have not - yet.

It is human nature to try to put the best "face" on whatever situation you have. I've seen a couple of fairly honest listings this year. One stated - "Likely a tear-down, but the lot is worth the asking price." That was probably true, since the lot was 50 ft of frontage on as nice all-sports lake. Then there are the near misses - the listing descriptions where the listing agent is trying to be honest, but just can't bring him/herself to use negative terms. So, they end up using phrases like "needs some TLC" or "handyman special" or "bring your remodeling ideas" (and your wallet, I might have added).

So does all of this wording shenanigans cross the line? Maybe, but I prefer to believe that the buying public is smart enough to be aware that this is just a game to put the best face on the situation. I guess I wouldn't be surprised if I rad some day that a buyer sued a Realtor who advertised a home as 'open and airy" when it had holes in the ceiling and walls. Maybe I'd be surprised if they won the case; but, remember that we live in a society that puts a label on your lawn mower that advises you that you shouldn't put your hand under the mower while it is running. Ignorance of the law is not a valid defense in criminal cases, but ignorance in general seems to work well in civil matters.

Wednesday, August 6, 2008

Reinforcing data...

From one of my real estate news feeds comes this story, which reinforces yesterday's posting on trends that I'm seeing locally.

There was some good news this month for Midwestern cities hardest hit by the housing downturn.

In 10 of the 26 markets analyzed by Altos Research and Real IQ, asking prices increased in July, with the largest monthly gain in hard-bitten Detroit, up 4.8 percent. Denver and Cleveland also showed solid improvement, up 2.3 percent and 2.7 percent respectively.

Asking prices fell in July by more than 1 percent in Phoenix, Miami, Tampa, Fla., New York, Salt Lake City, Washington, DC, San Jose, Calif. and Los Angeles. The largest monthly decline occurred in Las Vegas with a fall of 4 percent.

Inventory levels declined in 20 of the 26 markets followed by Altos with Detroit and Cleveland contracting the most at 6.1 percent and 4.0 percent respectively.

Inventories rose by the largest amount in Portland and Seattle, up 8.2 percent and 2.8 percent respectively. Other markets with inventory increases were San Jose, Salt Lake City, Las Vegas, and Philadelphia.

Days on the market declined in just three of 26 markets in July with Detroit down 3.8 percent. Cleveland declined 7.4 percent and Las Vegas was down 7 percent.

Inventory turnover increased the most in Atlanta, rising 29.4 percent, followed by New York City with an 18.6 percent increase and Austin up 15.4 percent.

I can certainly support these positive findings with local anecdotal examples and the data that I collect and chart on a weekly basis on my Web site I have noticed that the percentage of sales involving foreclosed homes is also down locally, which is good news. That means that more “regular” sales are taking place lately. Some areas locally have also seen a slight decline in their Days-On-Market (DOM) numbers, meaning that homes arte selling faster.

It has also been interesting to see the inventory go up slightly during the summer months (which is to be expected and is an annual thing), while the DOM numbers declined, showing greater strength in the market right now. The expected time to sell has also declined recently, albeit only slightly from 20 months to 19; but, that is another step in the right direction.

Maybe we haven’t really turned the corner yet; but, I get the sense that we are at least peeking around it!

Tuesday, August 5, 2008

A trend or just an uptick?

I track quite a few statistics on home sales in my little local market - see my Web site and click on Real Estate Market Statistics. Sometimes other statistics just fall out of what one is already tracking. recently I've noticed a couple of things in the data that I keep.

One is that, even though record foreclosures were just reported for Oakland County, the percentage of sales of foreclosed homes vs. regular sales has dropped for the last couple of months. That means that people are out buying regular homes, instead of just foreclosed homes. For a while, back in the winter, the sales of foreclosed homes vs regular homes was up over 50% of total sales. Recently foreclosed home sales have represented less than 25% of sales. That's a good thing.

The second anecdotal observation is that recent sales have been made up of more higher priced homes than has been the case in the last 4-6 months. For a while there, it seemed that there was nothing selling over about $250,000. Now there seem to be homes even in the "dead zone" - above $300K - selling on a weely basis. That's certainly another good sign.

As I look at the charts that I update weekly, I see that the median home sales listed prices and final sold prices are also trending up. The number of homes in the inventory is up slightly, but then so is the rate at which homes are selling, so the Days-On-Market (DOM) is slightly declining and the projected Time to Sell (the average length of time that a new listing coming on the market is projected to take to sell) is down.

There are still price categories that are inordinately high, in terms of the DOM. In the Oakland County markets that I track, the Milford $400-500K category is still almost 2 years and in the Livingston County markets the $300-400 category for Genoa Township is about 2 years. Some of that is just stubborness onthe part of a few sellers who have been on the market for years and who refuse to lower their prices to market levels.

Now, I will admit that we are in the absolute prime selling season right now; so, maybe I'm just grasping at straws here. People are scrambling to get into a new home before the school season starts again in September, so that is having an affect; however, I also sense that there is a lot of pent up demand out there and people are getting tired of trying to wait out the current economic downturn before buying. Interestingly, most of the buyers with whom I'm working are not in any way related to the automotivce industry, so maybe that helps a bit. We can't seem to catch a break there.

So, are these trends or just anomolies? Let's be positive here and believe that we are seeing the beginnings of the turnaround for our area. I'll keep watching these numbers to see if they stay positive as we head into the fall season.

Saturday, August 2, 2008

Setting new records...

The 2008 Summer Olympics are about to start and there will undoubtedly be new records set in many events. we are setting new records in real estate too.

I read in this mornings paper that Oakland County had set a new record in June for the number of foreclosed homes (new foreclosures) in June, topping 800 for the month. According to the article, Michigan is on course to set a new record for the year, in excess of 10,000 foreclosures just in 2008. Then I also saw the tidbit below in a news feed that I get.

The Census Bureau says the 18.6 million homes sitting unoccupied nationwide during the second quarter set a new record, attributable to the housing slump and rising foreclosure rate. Year-over-year, the number of vacant dwellings was up 6.9 percent, and 2.8 percent of these vacant homes were non-rentals. The report also shows 4 million rentals standing empty during the second quarter and a jump in vacant homes in the "other" category, including foreclosures and those empty while undergoing improvements, to 3.2 million from 3 million in 2007.

Maybe the government could buy up all of the empty houses and give them to the homeless. That would get them off the streets and get somebody in the vacant houses. Of course the neighbors would have fits. Then again, the neighbors are having fits now. They’d probably spazz-out, if the new occupant showed up pushing all of his/her worldly belongings in a grocery cart.

The sad thing in all of the recent articles about the real estate market is the lack of any end in sight. Not a single economist (with the possible exception of Lawrence Yun, the economist for the National Association of Realtors) is predicting any turn around any time soon. In Michigan all we keep hearing about is more losses for the automakers and more layoffs. Believe me the remaining workers in those companies are not out buying houses right now.

In the face of all of this gloom, our little office in Milford had it best July EVER! How can that be? Well, it was possible because our agents are working hard and selling lots of smaller homes and foreclosed homes. All I see, right now, are people looking for foreclosures. It’s a great time to be a buyer, especially a buyer with some cash stashed away. I have looked at some pretty nasty foreclosed houses and some pretty good ones.

Today I showed a mold house – a house covered top to bottom in mold, the result of burst water pipes last winter. It has buckled floors, ceilings that have fallen and tons and tons of mold. It is so bad that we had to wear protective masks to even go in, yet there are people looking to buy it. It is priced just above the cost of the lot that it sits on, so I guess you could view it as a bargain. I’d view it as a tear-down, but I’m not the one looking to buy it.

So, as we head into the “dog days of summer”; there are folks out looking for bargains, and they are out there in one form or another. I can show you really nice foreclosures in the $500-750,000 range or really nasty ones for under $50,000 and everything in between. Give me a call and let’s find you a deal.