The Elephant in the Room

These days I am sure we are all paying attention to the nation’s recovery report card, the stock market’s daily mood swings, the price of gas, the staggering unemployment numbers, and oh yes, the foreclosure market that has been like a wild fire in the Southern California hills; it just keeps growing and spreading. The GDP appears strong at a fourth quarter annual growth rate of 5.7%, but home sales in December were down 7.6%. Does that make sense? Oh sure it does, because December is always a slow month for sales and there was that hiccup in the home buyer tax credit program. I’m not forgetting about unemployment, but why talk about it even though it is the biggest elephant in the room. Well, I guess we have to talk about it because our local flagship newspaper needs a sensational story to fill column inches.

Much to the displeasure of the real estate community, the Gazette once again decided to paint a most negative depressing picture about the real estate market, and the overall state of our union all in the name of truth penned by its resident editorial curmudgeon. The front page headline reads, “Foreclosures and Joblessness Up”. Sure we have about 24 bank owned properties in Dukes County that we are working to absorb, and there will surely be more on the way during this year. However, the writer insists on going on and on about the column inches all the foreclosures are taking up in print, and now we can put a number on unemployment predicting 50% over the next couple months, compared to about half that in normal times. With no new home starts, everyone counting pennies, only buying essentials and eating at home instead of going out to dinner, is this really breaking news?

The good news in this editorial according to Chris Wells, president of MV Savings Bank is petitions to foreclose are not nearly what they are in the rest of Southern New England and the median sale prices in some towns actually increased from 2008 to 2009. West Tisbury shows a 2% increase and Edgartown a 14% increase in median sales prices. According to Mr. Wells, in the other three Island towns, Oak Bluffs was down 27%, Tisbury was down 19% and Chilmark saw the greatest reduction at 43% median sales price.

Martha’s Vineyard continues to bravely soldier on, its citizens doing all they can to make ends meet and keep a stiff upper lip. We have always been a hot and cold running Island with jobs for everyone during the tourist season and one of the highest, if not the highest unemployment rates in the Commonwealth for what amounts to 8 months during the off season. The Island greeting has become variations of “we’re hanging in there” and assurances that “we are all in this together”. Whew, I feel better already. What we all look for every day is some good news, news that will inspire us to keep on because we know summer is coming and with the sun we look forward to greeting all those visitors who love what Martha’s Vineyard has to offer, a simpler way of life.  Oh by the way, bring your checkbook and support the Island economy.

The Nationwide Mortgage Licensing System and Registry launches NMLS Consumer Access Website

The Office of Consumer Affairs and Business Regulation announced that the Nationwide Mortgage Licensing System and Registry (NMLS), a mortgage licensing system operated by state financial regulators including the Massachusetts Division of Banks, launched the “NMLS Consumer Access”. There hope is that it will help protect mortgage shoppers from unscrupulous loan originators.

NMLS Consumer Access is a fully searchable single-source consumer access website that allows the public to verify state-licensed mortgage lenders, brokers and individuals currently licensed through NMLS. Future updates to NMLS Consumer Access will provide a record of applicable disciplinary actions taken against a licensee by any jurisdiction in the country.

The NMLS Consumer Access website was finally launched in January 2010 and the NMLS Resource Center, claims the website will bring greater transparency to the mortgage industry and compliance with provisions of the SAFE Act.

The database of companies and individuals will be updated nightly and will tell consumers whether the person they're working with has had their license suspended or revoked in another state, and will list any aliases the individual has used since the age of 18. It will also seek to discover whether that person is engaged in other sidelines and what that person’s license status is in other jurisdictions.

You can download a .PDF pamphlet of Information about NMLS Consumer Access prepared by the NMLS Resource Center.

Is Your Real Estate Agent a Spy?

Is your agent a spy? What kind of question is that; it's an important question spawned by the constant controversy and confusion about AGENCY. Who does an agent represent and how do they represent them? The answer to that question can mean thousands of dollars in or out of a buyer's pocket.

I try my best to illustrate the nuances and various types of Agency to consumers on my website, but no matter how I explain the differences, I find most people just don’t get it. However, I really don’t blame them because it is the real estate industry that prefers to keep the smoke screen smoldering to allow for maximum personal gain.

The organization I belong to, The National Association of Exclusive Buyer Agents (NAEBA), continues to lobby for a clearer definition or distinction and separation between those agents that proclaim loudly that they can represent buyers as exclusive buyer agents, yet under their breath slide in the disclaimer or, more appropriately, the caveat, “with the right to transition to dual agency”. That is where the true distinction lies and dual agency is the problem. Attorneys and those in the know think dual agency is a double standard and fertile ground for suspicion and potential favoritism ultimately resulting in litigation. Some states already prohibit the practice of dual agency.

I was reading an article in a trade news publication where a consumer was buying a home and wanted to know how the process would work if the home she was interested in was being offered by a real estate agent who would be working as what the buyer ironically called a “double” agent? In other words, working for both the buyer and the seller. What was really interesting was the choice of words since what she was talking about was a “dual” agent. Subconsciously, she viewed the agent as a double agent. The definition of double agent is “A person pretending to work as a spy for one government (company, etc.) while actually working as a spy for another government (company, etc.).

To pull this back into the real estate vernacular let’s look at this as what is called single-agent dual agency, that being a relationship where one agent represents (?) both the buyer and the seller in the same transaction. That agent can no longer offer the same fiduciary responsibilities to either party as if they were representing one exclusively. The dual agent cannot provide Undivided Loyalty. This is an important point because as a client fiduciary an agent representing a buyer or a seller exclusively is sworn to treat the client’s best interests above their own. Other obligations that cannot be met in a dual agency arrangement are Obedience, Reasonable Care and Diligence and Full Disclosure. The dual agent is required not to disclose any confidential information about both parties. But let me ask you this; in 99% of cases, who do you think the (seller) agent has had the longer term relationship with? You, the buyer or the seller they have the listing agreement with? As a buyer, did you tell your agent the maximum amount you are willing to pay for the property or any other tidbits you would not want to the seller to know about you? Do you think the seller told their agent what their bottom line is or why they are selling? If the agent divulges any of that privileged confidential information without authorization, it is an actionable offense. There is one important point to note and that is that you as a buyer have the right to say no to dual agency when signing an exclusive buyer agency agreement, but that means your buyer agent cannot show you properties listed by their broker agency. The same holds true for a seller.

Most people entering into the Martha’s Vineyard real estate market do not live here and are usually from another part of the country. They know nothing about this market and if they are wise they realize they will need help, not just with looking for the right property or formulating a negotiation strategy, but most importantly with all the due diligence that is essential between the Offer to Purchase and the day of Closing. They need to be exclusively represented 100% of the time.

NAEBA continues to advocate for a clearer explanation of the differences so the public can be better protected. I was speaking to a web advertising sales representative yesterday and asked him why they cannot change the category headings in the real estate agency listing section to read SELLER AGENCIES and BUYER AGENCIES, instead of SALES AGENCIES and BUYER AGENCIES. Wouldn’t that make a little more sense? I doubt we will ever see two distinct categories --- BUYER AGENCIES and EXCLUSIVELY BUYER AGENCIES, because the National Association of REALTORS® continues to allow for the oxymoron labeled as Exclusive Buyer Representation with the right to transition to Dual Agency, but Brokers who believe in my business model will continue to educate the public about the advantages of being represented “Exclusively”.

Traditional Real Estate Agencies Rarely Sell Their Own Listings!

Did you know most listings are not sold by the agency representing the seller? The national average a number of years ago was around 13%. However, I was speaking to the principal broker of a large real estate agency not too long ago and she told me her company probably sells only about 5%-10% of their listings in-house. Isn’t that interesting?

I think this is actually a good thing for consumers and real estate professionals alike; it avoids a very precarious situation known as Dual Agency which means neither the buyer nor the seller are represented. The listing agency always represents the seller’s best interest and cannot assist a buyer unless unilateral consent to Dual Agency is given. Therefore, for those who think they can get a better deal by going directly to the listing agency, that is generally a false assumption. Undisclosed Dual Agency would be breaking the law. That is why buyers should find a buyer agent who knows what they are doing, has good relationships with seller agents and is a good negotiator.

Here on Martha's Vineyard, most seller agents realize their listings are overpriced, but they have to appease their seller clients who think they know better. The good-guy, bad-guy dynamic created by the separation between seller agent and exclusive buyer agent usually produces a much more advantageous outcome for all concerned. To be safe and have full access to all properties for sale, I suggest you always hire an EXCLUSIVE Buyer Agent. That way there can be no necessity for creating a Dual Agency relationship and the possible conflict of interest. To be blunt, you want SplitRock Real Estate on your side, and if you need representation in another part of Massachusetts or another part of the country, I will help you get the best exclusive buyer representation.

The Bottom Of The Market Feels Like A Bumpy Road

It’s the New Year, and just in time the banks are raising interest rates, but just a little – so far. However, the banks are also relaxing their down-payment requirements because they are seeing increased confidence in the housing market. The truth, according to one banker friend I spoke with is because they are not making any money. They need to make loans to make money. In some markets borrowers can now borrow 95% of a property’s value. Of course one would hope this means property values are not going down any further and loan applicants are going to be scrupulously vetted?

Despite favorable sales figures as we finished out this year, Tim Warren Jr., CEO of the Warren Group sees home prices bouncing up and down along the bottom during the next 3-6 months, and possibly throughout most of 2010 even though sales figures will appear to continue trending positively. This is the way it was in the early 90’s as we pulled out of the last recession. Some economists call this an “L” recession. For sure the recovery is going to be slow, but I do think it is safe to say we are at the bottom albeit a bumpy bottom. I believe in making a decision about when is the best time for you to buy an investment property one indicator you should pay attention to is interest rates. When interest rates go up this can herald the onset of an inflationary period.

Warren feels it was the rush to take advantage of the initial first-time home buyer tax credit by signing contracts before November 2009 expiration that contributed the biggest boost to the market. Wednesday’s WSJ reported that first-time buyers made up 51% of purchases in November, according to NAR. The initial first-time home buyer tax credit has been extended and broadened to include more potential buyers which may once again give a boost to the housing market. Contracts have to be signed by April 30, 2010 with closing dates on or before June 30, 2010. According to Carl Reichardt, an analyst with Wells Fargo, “The spring selling season would be critical to determining whether a possible double-dip is at hand, or whether housing’s recovery will regain steam.”

Tim Warren believes another reason for the upturn is the brighter unemployment figures in Massachusetts which in turn enhance consumer confidence. Okay, but one of my sources tells me the actual national unemployment figure is above 17%, if you factor in the non-registered ‘shadow’ unemployed.

News Flash: Massachusetts unemployment rate drops slightly from 8.9% to 8.8%
Read about it here > http://www.businessconnector.biz/news/show/523

In January, it is predicted that 1,000,000 unemployed workers will lose their benefits. Another prediction is going to be a surge in commercial foreclosures as more companies lay off workers and close doors in leased office spaces. But who knows? I still believe in miracles.

THERE IS A LOT OF UNCERTAINTY AS WE HEAD INTO 2010

Will we see more Foreclosures? Will we see more Short Sales? Will we see more Unemployment? Sadly, the answer to all these questions is yes. Most likely all of these events will once again push home prices down further. Here’s another question: will interest rates go up? Most analysts say yes; they will go up in 2010.

It’s clear that people are in the market now making purchases. They are taking advantage of the low – very low interest rates and the newly rewritten and extended first time home buyer tax credit. Many are using this new opportunity to trade up to the home of their dreams. But does this mean the market is recovering or do we have further to travel before we bottom out? I just don’t know.

Here's what HomeGain.com, a web marketing company that tracks the real estate market, has discovered in a recent survey.

62% of home BUYERS think homes on the market are overpriced.

76% of home OWNERS think their homes are worth more than their real estate agent recommends.

41% of home OWNERS think their homes’ listing price should be 10%-20% higher than their real estate agent recommends.

24% of real estate agents think home prices will go up in the next 6 months.

48% of real estate agents think home prices will remain flat in the next 6 months.

Note: NAR says 2mm people benefited from the first go-around of the tax credit. During this extension period of the Home Buyer Tax Credit, home owners who have been in their homes for 5 years can realize a tax credit deduction of up to $6,500 expansion, but they have to act soon.

Click here to read more > http://www.marealtor.com/content/Homebuyer_Tax_Credit.htm

What I do know is, as long as you have job stability, the monthly payments of your loan are affordable and not a stretch or based upon any projected rental income, and you are buying the home of your dreams that will make you happy for the long term, this is the time to buy. As I have said before, up or down, in ten years $10,000 to $20,000 will not matter, but don’t buy something just because the prices are attractive now – at least not on Martha’s Vineyard.

There are a number of properties on the market right now that appear to be very attractive buys. However, many of them are using an “As Is” caveat. That is because the seller usually does not have the funds to make any repairs that could possibly be discovered during a Structural Home Inspection. He is telling you the Buyer up front that no matter what the problem is; it is your problem. Your home inspector or your real estate agent may try to minimize the costs of the required repairs, but let me assure you nothing is inexpensive here on Martha’s Vineyard. Don’t romance yourself into false assumptions; have your buyer agent get you the facts. I do that for all my clients because I hate surprises.

So as this year skids to a close, let’s keep our eye on the prize, have a clear vision of what is important and move forward with intelligent thinking.

If You Don't Buy a House Now, You're Stupid or Broke

Interest rates are at historic lows but cyclical trends suggest they will soon rise. Home buyers may never see such a chance again, writes Marc Roth for Business Week.

NAR 2009 Profile of Home Buyers and Sellers

The National Association of Realtors® just released their 2009 Profile of Home Buyers and Sellers. The report summarizes the responses of 9,138 buyers and sellers who bought or sold a home between July 2008 and June 2009.

47% of all buyers were first time buyers.

62% of first time buyers reported that the primary reason for buying a home was the desire to be a homeowner, 35% of all buyers reported that as the number 1 reason.

The median age of all buyers was 39, same as last year.

83% of all first time buyers are under the age 44.

62% of all buyers are under age 44.

68% of the buyers surveyed in the Northeast make less than $100,000 per year.

63% of all buyers had no children residing at home under the age of 18.

Buyers in the Northeast moved an average of 10 miles from where they currently lived.

90% of all buyers used the internet to search.

84% of buyers reported the photos to be the most useful information.

The number one action taken after viewing a home online was to drive by or visit the home.

66% of buyers reported that they used a print ad to search, but only 84% to 90% (depending on the print medium) reported that those sources were "not useful".

36% of buyers found the home they purchased through an agent, 36% found the home they purchased online, less than 3%found the home they purchased in a print ad.

77% of buyers purchased their home with an agent.

85% of sellers sold their home with an agent.

39% of the mortgages were FHA loans.

87% of buyers viewed real estate as a good investment.

Let's Play What's My Market

I was reading an article the other day that posed an interesting question about the current market. What kind of market are we in, a Buyer’s Market or a Seller’s Market?

As you know, the definition of a Buyer’s Market is one where there are more properties on the market than there are buyers willing to buy them. When a buyer makes an offer on a property, and the seller does not accept the offer, the buyer is likely to end negotiations and move on to another property because the market is perceived to be the land of plenty.

Is that true now? Are you looking for a particular property or type of property? Are you finding an abundance of properties that fit your profile? If the answer is no, then this is not a Buyer’s Market for you.

Conversely, a Seller’s Market is one where there is a large audience of eager buyers and limited inventory, resulting in multiple offers and a frenzy that inevitably drives up the final sale price. Believe it or not, this is happening in many areas of the country like California. Is it happening on Martha’s Vineyard and what is your view of the Martha’s Vineyard real estate market?

My opinion is that we are in a market we have never seen before. This is a bipolar or, dare I even say, a psychotic market. This is a market where the banks, lenders and appraisers control and determine the value and the fate of the market. This is also a market that depending upon the price line, location or circumstance can be a seller’s market, a buyer’s market, a lien-holder’s market, a lender’s market (there is a difference) or an appraiser’s market. Another facet of this market is what we call shadow inventories. There is an inventory of properties that are not on the market but available for sale if and/or when the market appears stable enough for those silent sellers to get their price. The banks are also holding inventory they have reclaimed through foreclosure, not so much on the Vineyard at this time, but to a great extent in other areas of the country. They are holding them until they feel they have a better chance to recoup their loss. Many of those properties were originally part of the ‘short sale’ inventory.

It would seem with prices and interest rates at historically low numbers first-time home buyers and trade-up home buyers would be running into the market and into the grateful open arms of eager sellers anxious to make a deal. Buyers should realize what a once in a lifetime opportunity they have to purchase the home of their dreams at today’s dollars and historically low interest rates. However, there is a pervasive sense of entitlement on both sides in today’s market that is preventing buyers and sellers from coming together.

Okay, so what is the problem? Ironically, as I am writing, I got my answer in a response to a conversation I am having with a seller agent regarding a buyer client who is interested in a couple of her listings. She says, “… both are pretty motivated...but these are not distress sales. We'll obviously consider any offer.” Who would put their property on the market today if they are not ‘motivated’ to sell? Ignoring the market data, sellers believe they are entitled to higher prices for their homes, and buyers believe they are entitled to even further discounts on homes that have already been heavily discounted. So once again, just like when we were children at our first dance; buyers will sit on one side, sellers will sit on the other side, both acquisitively looking at each other and missing the ‘last dance’.

HouseLogic.com - A Great New Educational Web Site

I am a REALTOR® which means I belong to the world’s largest professional association with 1.1 million members. The National Association of REALTORS® or NAR has become one of the most powerful lobbying groups in the nation since its inception in 1908.

Most consumers do not understand what NAR does and probably think it is self-serving and has no relevance for them. NAR cares about the homeowner as well as those dreaming of becoming homeowners. That is why it enforces a strict Code of Ethics for its members. However, that is not all.

In an effort to bring better understanding for the real estate profession NAR has launched a new educational website, currently in beta format, that is aimed at engaging as many of the 75 million homeowner households as possible even if they are not currently in the market. HouseLogic.com is not merely another marketing channel for REALTORS®; it is focused on becoming an informational mecca for consumers providing useful tips, hints and articles, aimed at motivating homeowners to take more interest in their homes, more interest in maintaining and improving the value of their homes, and ultimately more interest in taking political action that supports home valuations, home sales and homeownership. If successful, with the voice and concern of the nation’s homeowners behind it, NAR would become an invincible force at practically all levels of government advocating for homeowners and the REALTORS® serving them.

Take a cruise through www.HouseLogic.com and see what you think. Knowledge is Power and SplitRock Real Estate creates Power Buyers.