A penny for my thoughts, oh no I’ll sell them for a dollar

They’re worth so much more after I’m a goner
And maybe then you’ll hear the words I been singin’
Funny when you’re dead how people start listenin’

~The Band Perry

Last week the real estate community lost an icon.  Carole Rodoni was an economist, a real estate guru and the toughest sub five foot woman you will have ever met.  I know real estate and I’m smart, I bowed to her insight.  She was the President of Fox and Carskadon, COO of Cornish and Carey and the President of Alain Pinel Realtors.  Most Realtors were not qualified to have a conversation with this little fireball.  Whenever I asked her a question I was always mindful to not sound like this guy.

Isn’t it true….and I would be the worm.

She gave out some of the best real estate advice I’ve ever received.  She understood how the bay area worked and how the world worked.  She would start with a view of the world’s economic situation and chunk it down to the United States and then chunk it down to California and ultimately to the bay area and Contra Costa County.

I would have liked to have heard her thoughts on the tariffs.  I am deeply concerned that they are the canary in our collective coal mines.  Most go into effect starting October 1, 2018.  I’ve had business owners tell me that their cost of goods will be going up.  Spun Bicycles in Cincinnati has received notice from several providers that various bicycles are parts will be going up in cost by 25%.  I spoke to the owner of Chase Customs who told me that a roll bar that used to cost around $350 was now costing him $700.  Steel parts were already doubled in price in some situations.

Our economy is not strong enough to withstand this kind of rise in COG and I am doubtful that it can continue to grow under that pressure.

We are used to Presidents who negotiate in a certain manner.  I believe this President is a brash, bare knuckles type of negotiator and that’s what is happening right now.  He is blustering to get the Chinese to the table and the tariffs will not ultimately be in effect long, if at all.  If I am wrong, we could be in for a long cold winter.  I wish I could give Carole a penny for her thoughts on tariffs.  She will be missed.

 

Waiting on the world to change

It’s hard to beat the system
When we’re standing at a distance
So we keep waiting
Waiting on the world to change

~John Mayer

I hear it all of the time.  We’re going to wait.  Wait to buy, wait to sell, wait for the real estate world to change.  I get it.  No one wants to make a mistake with the largest financial transaction of your life.  And adulting is scary, right?

The thing is, in this world there is a cost for everything.

Just last week I took one of my cars into the shop.  The air condition wasn’t working.  It’s not my daily driver, but my daily driver has proven to be a little unreliable.  It’s brand new and has spent 11 days of it’s first year in the shop.  It needs to go in again because the seat belt chime won’t quit bleating at me.  So I took my steady Eddie into the shop to get the air conditioner looked at.  That car has an oil leak that is going to take a day’s worth of work to correct.  That’s an expensive job and I’ve been putting it off for two years now.  Well, there’s a cost for procrastination.  In my case it was a hose in the air conditioning system that rotted out because oil was dripping on it…from the oil leak I put off fixing.  The cost of procrastination for me was $400.  I might as well have dropped that $400 in the street and set it on fire, because had I fixed the oil leak when it was discovered, the air conditioning would have never failed.  The cost of waiting.

Ten years ago when I moved into my home I installed an air conditioner at my house.  I rescue dogs and always have at least one male dog here.  Apparently air conditioners are a big deal with male dogs.  Once they lift their leg on it, the unit warms up when it’s being run and their scent goes all over the neighborhood.  It’s a four legged win/win.  And it will rot out an air conditioning unit in about 8 years.  I could have built a fence around it, or hosed it off weekly and that would have saved it.  I never got around to it so I got to spend another $11,000 replacing the entire system because the old kind of freon systems have to be completely replaced.  The cost of waiting.

Now I get waiting.  I’m have it down to expert level.  It’s not always the best course of action.

Bay Area homes are expensive.  Ridiculously expensive.  Buyers want to wait to buy because they think prices are going to come down.  Sellers want to wait because they think they’re going to keep going up.  I’m going to suggest that the cost of waiting can be insurmountable.

I could tell stories about buyers who wanted to wait for the market to cool in 2013 and are now completely priced out of the market and will probably never own unless they have some windfall in their lives.  Or sellers that wanted to wait in 2006 and ended up loosing their home to foreclosure in 2009.

Hi, I’m a Procrastinator and I like buying air conditioning equipment.

I don’t.  I hate buying air conditioning equipment.  And I hate watching people make decisions that I know are not going to benefit them in the long term.  After all, with very few exceptions, people who own real estate have 36 times the average net wealth that renters have.  Thirty six times!

Part of that is that homeowners are creating equity with every house payment as opposed to making their landlord wealthy with every rent check.  I don’t know how the new tax law is going to affect the mortgage interest deduction (which you can thank me and every other dues paying Realtor member of the National Association of Realtors who fought to keep that deduction in place) and property taxes going forward, but there are still deductions available to homeowners that renters don’t get to benefit from.

OK, so what is the real cost of waiting.

Factors:

  1. Interest rate
  2. Cost of purchase
  3. Tax benefits

Current interest rates are hovering around the high 4’s.  We’re going to use 5% for this example.  And we’re going to use Bay Area prices.

The median price in the Bay Area is hovering around $900,000.  I know, that’s nuts.  There are plenty of homes in other price points in the Bay Area.  Buyer has 5% down so it’s going to be a jumbo loan with PMI.  The total amount to close this is going to be around $72,000.  The payment is going to be around $4,589.82.  Taxes are going to be around $10,000 a year and there is going to be PMI (private mortgage insurance) on the loan at around $335.00.  The house payment is going to be around $5760.  Over a period of two years, this loan will pay down to $827,990.74 adding around $22,000 to your equity.  Now you have around 7.5% equity, plus you’ve been receiving the tax benefit for two years.  What if the market goes up?  Yay!  More equity.  What if the market goes down?  Boo, your equity disappeared, but you’re still living in your own place and no one (except the City) can tell you what to do with it.  You keep paying your mortgage and the market recovers after a long arduous five year wait and the market starts running again.  Yay!  You’ve paid it down to $783,817.23 in your first five years and can probably dump the PMI.  Yay! Again!  And for those five years you’ve been writing off all of your deductions on the home.

Now let’s say you’re the seller.  You want to wait to next year because you want to squeeze every penny you can out of it.  After all this is the Bay Area and it will keep running….right?  Well maybe not.  The same guy who bought the home above could qualify for the large loan today, but interest rates returned to the historic norm which is 6%.  Now that payment is $5126.16 plus $335 PMI and $833 in taxes and that buyer just can’t afford your home any more.  Now you aren’t average and there is pressure on the market and what was $900,000 this year is barely $800,000 because they can only qualify for a $755,000 loan.  That buyer isn’t going to buy that home any more, they’re looking at a smaller home and as a seller, that seller is feeling the downward pressure on the market.

There is a cost of waiting.  Sometimes, it is appropriate.  Sometimes it’s misguided and will ultimately doom someone’s hopes and aspirations.  Don’t let that happen to you.  Find out what you can, can’t, should and should’t do right now.  Call or text 925-381-2998

Will you still need me, will you still feed me

Several of my clients celebrated birthdays over the weekend.  I was lucky enough to speak or see quite a few of them.  As each of us takes another trip around the sun, the truth is we’re all getting older.  And that beats the hell out of the alternative.

Roughly 10,000 baby boomers are going to turn 65 today.  Another 10,000 will turn 65 tomorrow.  And so on.  Our population is growing older and as they do, they need help.  Some may not need help at 65 or even 75, but there will be a point where they need assistance.  Maybe they can no longer safely get in and out of their shower or bathtub.  Maybe they forgot whether or not they had lunch.  Interesting fact, seniors tend towards dehydration because they forget to drink water.  Many falls are the result of undiagnosed UTI’s.  Once someone falls and breaks something, the road back can be long and difficult.  Each of my parents fell and broke a hip.  My father spent the night on the floor because no one could help him up.  Scammers prey on our seniors.  They become lonely and the scammer knows how to be of comfort…right before they get their checking account information.  There is now the Sandwich Generation.  Those folks still have to work, they have kids either still at home or are paying for college and their parents are retired and need help.  The weight can be crushing.

While my father was alive, my mother was able to care for him.  We did not know that my mother was suffering from Alzheimer’s disease.  She was a very intelligent woman and hid her symptoms eloquently, until one day she couldn’t any more.  With my father gone my brother and I struggled to balance work, life and making sure our mother didn’t 1) burn down the condo complex 2) wander away 3) give her credit card to a scammer 4) let a scammer into the house (I called one day and she said she couldn’t talk that the vacuum cleaner salesman was vacuuming the rug.)  Add to that a plethora of things we could not begin to predict.  It was stressful.  We cooked meals in advance for her so we knew she had good food to eat.  We checked on her daily to be sure she hadn’t “fallen and couldn’t get up”.  We took phone calls that barely made sense.  I canceled my New Year’s Eve plans to take her to the hospital because she fell that night.  I left events and parties because she called confused and if I didn’t I had no idea what crazy thing she was going to do next.  She called me at 5:30 in the morning to tell me not to worry she was getting a ride to the hospital with the firemen.  She wasn’t hurt, she called 911 got an ambulance ride for an old shoulder injury.  Her mind was gone but she could still dial a phone.  That doesn’t count the times I was out of town and my brother dropped everything to ferret out what was going on in her failing mind.

If any of this sounds familiar, I’m with you.  I get it.  Been there.  Done that.  Got the t-shirt.

Mom is still with us, living in a memory care facility, which in our case was the best decision to keep her safe.  Each family has different dynamics and different abilities.  In our case, everyone has to work to keep our own families afloat so keeping her in place or having her move in was not an option.  For some families, that’s the perfect option.  Sometimes that’s the sweetest time together.  Sometimes in home care is the solution.  We did that until it was not enough.

One of the resources we used was Senior Helpers in Concord.  Jenny’s staff took great care of my mother after she broke her hip and going forward until it was time to place her.  Jenny even helped us place my mother in the best place possible and helped us with the details of the best way to move an Alzheimer’s patient.  (Hint: it’s not easy).

Another resource I wanted to share was the VA.  If your senior is a veteran the VA has a program to give you a respite of 16 days if the family is the primary caregivers.  The vet goes into the VA for up to 16 days and that gives the family a break.  Sometimes it’s just a mental break, sometimes having the senior out of the house allows for deep cleaning or flooring to be replaced that would otherwise be impossible.

The bottom line, no matter how unique your situation, you’re not alone.  There are resources to help you honor your loved ones as they age.  I can be reached at 925-381-2998.  I would be pleased to connect you to reputable folks who can help your loved one.

No one gets out of here alive

Christopher Bullock first uttered these words in the Cobler of Preston in 1716.

“Tis impossible to be sure of anything but Death and Taxes.”

Ben Franklin usually gets credit, but he was not the first, and certainly not the last.  Jim Morrison famously wrote “No one gets out of here alive”.  And no one does.  Death is the great equalizer.  We all leave this life toes up.

In our society, we spend a tremendous amount of time avoiding the subject.  We don’t look forward to answering the question “what might happen when I die”.   Personally, I had a near miss last year.  Doctors misdiagnosed me with the flu.  I had pneumonia.  They treated me with a cough suppressant which is the worst thing you can do for a pneumonia patient.  By the time they properly diagnosed me I was starting to go septic.  While I was laying in that hospital bed I thought “I have to come back from this, my house is a disaster!”  I did and today my house is less of a disaster.  Because when you die, someone has to deal with your living space, whatever that is.  It can be a miserable task.  In my mind the less hellish I can make that for my family the better.  Since I got out of the hospital, bags of clothes I haven’t worn in over a year have been taken to Goodwill.  Truckloads have gone to the dump.  While this isn’t an article about organizing, it could be.  And I still have a long way to go, but I am living a much less cluttered life.

Most of us don’t get to choose when our ticket gets punched.  I was minding my own business when a guy sat down next to me on a plane.  He was sweating and coughing and three days later I had pneumonia.  Over the years I have known people in their 40’s who went to bed and never woke up.  People in their early 50’s who have suffered massive, fatal heart attacks.  People who have died driving to work, riding their bike, watching the stars.  I’ve seen random acts of God, earthquakes, fires, hurricanes, tornados all end the lives of otherwise happy and healthy people.  And I almost got my ticket punched just for taking a flight from Vegas to Phoenix.  We.  Just.  Don’t.  Know.

So the question is, knowing that information, why do we not at least make some cursory plans for the one thing we all know we will do?  It’s really not that hard to do some estate planning.  Take a couple of hours and set things up so that while your family is grieving your passing they also don’t have to deal with attorneys and courts and appraisers and the government standing there with their hand out.  They are going to probably have to deal with your stuff.  I’ll write about that in the next installment of this series.  Your real estate is going to be a major source of aggravation.  Billy Bob wants to live there rent free but his other brother Billy Ray and their sister from another mister Billie Jo want their money so they can go out and buy the dualie they always wanted and aren’t you spinning in your grave yet?  In truth, you knew your sisters kids were a bunch of knuckleheads and you really wanted your home to be donated to Habitat for Humanity and without specific instructions, that’s just not going to happen.  The thing is, it’s your life.  Your legacy, your way.

The State will divvy your stuff up according to a predetermined formula without regard for your wishes.  If you do some estate planning in advance, your possessions and your wealth can be distributed to the people and organizations you want.  Your wishes are fulfilled.

The first step is to determine what the best way to set up your estate.  Are you a key employee?  Are you self employed?  Your death could mean the end of income for your family.  Is that part covered?  Do you need life insurance?  Should you have a trust?  Only an Estate Attorney can answer these questions for sure.  Don’t rely on a google search to properly provide for your loved ones once you’re gone.

Every individual’s situation is different, yet at the end of the day, no one gets out of here alive.  I have extraordinary estate attorneys that I work with.  I would be pleased to refer you or someone you care about to one of them.  Don’t let the government determine what happens to your life’s work once you’re gone.

 

It’s not me, it’s you

I talk a lot about the difference between a skilled practitioner in real estate and a hack.  If you’ve followed me for any length of time you know I have no time for bozos.  Yet, consumers keeps hiring clowns.  Yesterday I wondered, at what point does the consumer have to take responsibility for their own experience?

I have often gone to a home to talk to someone about selling their home.  They tell me how terrible their last experience was, and the one before that and the one before that.  That sounds awful I think to myself.  As the conversation progresses the client wants me to list their house for a deeply discounted commission, doesn’t want to make any of my suggested repairs, doesn’t want to stage and wants all the bells and whistles than come with full service pricing.  They don’t end up going with me.  They end up with an agent who will discount their commission because they are green or real estate is something they just “dabble” in when they’re not at their “real” job or they don’t know what they’re doing and have questionable ethics.  Next thing you know, the home sells for way less than the seller thought it was worth and they’ve gone on to talk about what a bad experience they had.  At what point does the consumer have take responsibility for their experience?

I don’t want to pay $5 for a cup of Peet’s coffee so I go to the truck stop across the street and get something that’s been sitting on the burner for three hours.  I only pay $1.25.  Can I complain about the coffee?  I had an opportunity to get a quality product, I was just too damned cheap.  At that point aren’t I responsible for my own experience?

I don’t understand why someone would want to sell the largest asset they own, on the cheap.  I want the best marketing, best pricing, most aggressive, most experienced hand I can find to guide me through that process.

For instances, God forbid that you should need surgery to save your life.  Do you get the guy who is fresh out of the med school on a Latin American island because he’s cheap?  Or do you choose someone who has done that surgery numerous times and knows what to do if something goes wrong?  Don’t you want someone with experience who has been there before?  Or the guy is filling in this afternoon because he needs to pick up some hours?

Granted real estate is not brain surgery, or rocket science, but it is an art.  Choose your practitioner wisely.  Here’s some questions you can ask:

  1. How long have you been selling real estate?
  2. How many transactions have you closed in the last two years?
  3. Are you a full time agent?
  4. Are you part of a team?
  5. If you go out of town who will take care of me?
  6. How often will I hear from you?
  7. Are you planning any long vacations?
  8. How many other clients are you working with?
  9. How many homes have you sold in my area?
  10. What is your marketng plan for my home.
  11. Will you hire a professional photographer to market my home?

A lot of other sites recommend you ask for references.  I am amused that no one ever does, perhaps in this day and age of online reviews that’s not a necessary question any more.  I always bring copies of a few reviews from clients who I know don’t mind being a reference to my listing appointments.

There is a difference between agents.  Sometimes that difference is huge.  If you are in the Bay Area I would be pleased to show you how different I really am.  If you’re reading this in another part of the country, that’s okay, I know professionals throughout the country who can and will take great care of you.  Give me a shout and find out for yourself what the difference really is.

Don’t hire a hack

It is becoming my life’s work to eliminate hacks from the real estate industry.

Every day thousands of internet geeks wake up and try to figure out how to make Realtors the Travel Agents of that year.  Expedia killed Travel Agents.  Why?  Because they provided minimal value and couldn’t articulate their value beyond “I have access to Sabre and can shop reservations for you”.  You can shop tickets now on Expedia, Kayak, Travelocity, Orbitz and about a hundred other sites now.  The information is all there.  Hotels can be shopped on anything from hotels.com to the Westin’s own website.  The real estate industry is in danger of going the same way.

Realtors are currently up in arms about Zillow’s new instant offer roll out.  I’m not worried about that.  All that needs to happen is one seller lets one buyer into their house and gets robbed or worse and that’s the end of that.  There will be other onslaughts.  We must be eternally vigilant.

The elephant in the room is the fact that my industry needs to clean house.  We need to rid ourselves of the hacks.

Hacks come in all forms.

There are those who don’t bother to educate themselves.  Our test is easy to pass.  I passed my Broker’s test after a night of drinking.  I hadn’t had time to study and figured I’d get a report of what I needed to study and go back and take it for real at a later date.  I was 45 minutes late and had to sign a waiver.  And I passed it.  The thing is, I knew that there was a lot of stuff I didn’t know.  It is my practice to take a minimum of one class per month to further my real estate knowledge.  I travel four times a year to conventions and seminars to further my ability to serve my clients and I have two business coaches.  I care about doing the best job possible for my clients.  My team has a rule: If you see an opportunity to one plus our client’s experience, it is incumbent upon you to take that opportunity and make that client’s experience even better.  Sadly a very small percentage of my colleagues take the same approach to this business.  90% of real estate sales are handled by 10% of the agents.  The other 90% fight over the last 10%.  They don’t have the experience and won’t do the work to get better at their jobs.  Yet consumers still hire them.  I am sad that those clients won’t ever know what it’s like to work with a great Realtor.

There are those that just do a crappy job.  MLS photos.  How freaking hard is it?  iPhones are very cool.  Don’t market someone’s $500,000 house with your freaking phone.  Hire a professional real estate photographer.  Listing agents have one major job, market the client’s home to get the best exposure resulting in the most amount of money in the shortest amount of time.  Seriously.  Would you buy this?

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Doesn’t that client deserve better from our industry?  It’s embarrassing.

There are those who do not have any ethics.  They need to go.  They say things to clients they have no business saying.  One just fell apart because the buyer stopped by an open house on the way to the house they in contract to buy.  The open house agent, talking out of his butt blew the transaction.  What he represented as fact about the subdivision was in fact folk lore and the buyer cancelled the transaction.  Total hack.  Agents cannot talk to clients under contract with another agent beyond casual conversation.  Unscrupulous listing agents routinely tell them they will get the house if they do business with them so they can “double end” it.  Don’t hire these hacks.  They lie to their clients, they don’t do what they need to in the time they need to do it because they don’t understand the contract.  They write unreasonable offers.  They don’t educate their clients.  Don’t hire these hacks.

Before you hire an agent, ask them how many homes they’ve sold in the last year.  The average agent sells six.  A house every two months is not enough to build what I call Deal IQ.  Deal IQ is acquired when an agent has done a lot of deals.  Something comes up and they know what to do because they’ve been there before.  Only a good, well practiced agent can do that.  In this market, with your largest financial asset at stake, I don’t know why you would want anything else.

For more information on how I properly market homes call me at 925-381-2998

 

It’s a dog’s life

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Do you love dogs?  I love dogs.  In particular, I love my breed, the Doberman Pinscher.  I love their loyalty, their protective nature, their silliness and I feel safe when one is sleeping next to my bed.  If it were up to me, I would have one of my dogs with me at all times.  But it’s not up to me.

My job entails going in and out of other people’s homes several times a day, meetings and appointments that may last for a couple of hours, lunches in corner cafes and five star restaurants.  My dog isn’t welcome in many of those places, so I leave my dog home when I’m working.  I never take my dog anywhere he’s not welcome.  I was very ill last month.  I heard a dog collar in the hospital hallway on several occasions.  Finally I was able to get to the hallway and see a schnauzer walking by.  I asked my nurse “Are dogs allowed here?”  She said, “Yes, I see the all of the time”.  Can I have my brother bring my dog to see me?  “yes, of course, we’ll just shut the door to your room while he’s here”.  And I got to see my dog which helped me heal.

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That gets me to the point.  Dogs don’t belong in real estate.

I had a listing on the market when I went into the hospital.  I received a call that an agent who witnessed another agent in my listing with their dog.  The agent’s dog peed on my clients carpet.  I am laying in a hospital bed and I had to deal with this.  How unprofessional to you have to be to bring your dog to a sellers house and then allow it to pee on the carpet?  This agent should be run out of the business.

Dogs don’t belong in real estate.

I had an open house this weekend and not one, not two, but three different parties showed up to view the open house with their dog in tow.  I’m sorry, are you kidding me?  If you are previewing homes, leave your dog at home.  I can assure you that your dog will love any home you buy as long as you are there.  Dogs are like that.

Here are some of the issues to consider before bringing your dog to someone else’s home.

  1. The homeowner has cats who may become freaked out because your pooch’s scent is now in their space.
  2. The homeowner has dogs who may become freaked out because your pooch’s scent is now in their space.
  3. The homeowner’s pet mentioned in 1 and 2 above acts out due to the new scent and starts marking territory thereby destroying what was previously a nice and odor free home.
  4. The homeowner is severely allergic to pet dander and you’ve now polluted their home.
  5. The homeowner is a severe asthmatic and you’ve now sent them to the hospital.

An open house is a private home that has been placed for sale and is open for viewing by potential buyers.  The general public does not have a right to pass and an agent can refuse entry on behalf of the seller if the agent feels the seller’s private property at risk.  Agents can even restrict visitors to those who have provided the ability to purchase the property.

With one notable exception, dogs don’t belong in real estate.  There are a few agents in our area with situations where they have service dogs.  Service dogs can be used for a number of situations including alerting to seizures in their owners.  I am not talking about these dogs.  These dogs are highly trained, highly disciplined and highly necessary to their owner’s well being.  These dogs are an exception.

Every other dog, does not belong in real estate.

Clowns to the left of me, jokers to the right

The thing I am hearing a lot of right now is that people want to wait and see what happens in this election. The little voice in my head, you know, that screaming lunatic that I have to filter every waking moment of my life says “Why? It does not matter!”

Oh, I know. It does matter. If X is elected to office you’re moving to Canada. Or Mexico because they now have a wall keeping Americans out…right?

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The truth of the matter is every four years this country holds a Presidential election. While this is the most contentious of my life time, every four years in spite of the rhetoric, the Republic stands.

The Republic will stand this time as well. It will stand because we have checks and balances. We have three arms of government for the specific purpose of allowing the Republic to stand in spite of political shenanigans. The Executive Branch can only do so much without the Legislative Branch which can only do so much without the Judicial Branch. Those old guys were pretty smart when they set this thing up.

At the end of the day, the Republic will stand. The question is where do you stand? Are you an early adopter? The early majority? The late majority or a laggard?

In real estate the early adopters get the return. The early majority do well in real estate. The late majority generally see a midland return and the laggards are the ones that get beat up in real estate.

Who are you?

Is there such a thing as too much information?

We are drowning in information but starved for knowledge. ~John Naisbitt

We all know about Zillow, and Trulia, and Redfin and of course there’s bankrate and Quickenloans and Lending Tree and home.com and ZipRealty and Realtor.com and and and…and who knows what else.

Then there are all the counterculture real estate sites.  Like the guy that tells everyone not to buy real estate because there’s a bubble, although he can’t really define what a bubble is except that real estate is really really expensive right now.  Remember a bubble is a function of a fundamental flaw in the marketplace.  Appreciation is a function of demand in the marketplace.  Never and I do mean never confuse the two.  And now you’re smarter than that guy.

Opinions are great I suppose.  There’s a saying about opinions, and like a certain body part, everyone has one, which speaks to the valuation of a lot of opinions.  Some of course are based on facts, but in today’s visceral political world, even facts have become optional.   Personally, I prefer facts.  And data.  The thing is, there is a lot of data out there.  Now you have to identify accurate data sources.

How do you identify accurate data sources?  It can be difficult.  For years and years the government has not considered the unemployed that have just given up to still be unemployed, yet they are in fact jobless and would like a job.  While everyone gets all jacked up when that number is good and the stock market has a gay old time, that number has been false for about 30 years give or take.  Garbage in, garbage out.

As a Realtor, I really get to feel the pulse of the buying public when I hold an open house.  I’ve heard it all.  Sometimes I just stand there and think “Dude, you will never own a house, why don’t you just go to the game?”  Other times I think “Whose stirring your Kool-Aid?”  The theories out there are amazing, including all theories that have anything to do with a sitting President.  And I’ve been in this business since 1976.  I’ve been through a few sitting Presidents.  They leave and I shake my head wondering where they got their information.

As Realtors we have access to the most accurate information.  We have access to all of the sales and while many of the websites pull from our sources, the truth is many of them scramble the information or label it in such a way that the end user can’t decipher it for any meaningful purpose.  The next piece is now that we have that information, what to do with it?  Well, it’s good information when it comes directly from the source, but there are a lot of variables you just can’t see on the internet.  Like are the floors uneven?  If so, is that the foundation or an anomaly?  What does it cost to fix?  I sold a house for some clients last year that had rolli-polli floors.  They had several contractors through and the foundation was fine.  They evened them out as best as could be done without rebuilding the house and moved on.  There are people that will tell you that is a foundation problem without any understanding of foundations.  My personal home has numerous cracks and doors that open about half the year.  There are people that will tell you that is a foundation problem and stay away.  It’s not.  It’s adobe soil.  There isn’t a house in the Bay Area that’s been looked at by more contractors.  Sometimes the soil is full of water and expands.  Sometimes we’re in a drought and it contracts.  Sometimes the bedroom door sticks, sometimes the bathroom door sticks.  You can’t see that from pictures on the internet so you have to actually see the homes.  Good Realtors are looking at homes every single day.  Does the house smell good?  Seriously.  My house smells like dog.  I can’t even smell it I’ve been living with these guys for so long.  Yet I know it does.  If I were to sell my home I would have to accept the discount or move out and eradicate the dogness that is my home.  The internet will not tell you that my home smells like dog and that’s why it sold for $25,000 under what it should have.  Or that I moved out, replaced all the carpet and window coverings, painted and got a premium for the recently upgraded home.  As a typical internet user, you cannot see our Realtor confidential notes, you won’t have all the information.  You don’t know that the reason the house sold for $25,000 under asking was that the former owner hung himself in the garage.  Or that a horrible crime was committed inside the home.  Or that the home was the scene of a drive by shooting ten years ago.  Garbage in, garbage out.

That’s where a good Realtor comes in.  They’ve seen all of those homes, they are selling a good number of homes, they are working with a good number of buyers and sellers and they know what’s going to happen next.  I call it Deal IQ.  I had a client yesterday who has a family member that is in the industry in another area in another function.  He asked about why we had two days to look at inspections and release the contingency.  In our area, that’s the standard right now.  Seller paid for these inspections and it was take it or leave it.  I would have loved to have a week to pour over these inspections but I had to read them that night and my client had to make a call within about 48 hours.  Insane, but if you’re actually working the market, you know that this matters.  The internet won’t tell you if the seller took on all sorts of inspection issues or got a credit or if the repairs were done.  Garbage in, garbage out.

Pick a place you are comfortable with.  It doesn’t matter what it sold for in 2014, 2004 or 1984.  What matters is can you afford it.  I’ve had buyers tell me they aren’t going to pay $100,000 over what the seller picked the property up for 6 months ago.  Forget the seller did a full remodel, gambled that the market would hold and is now placing the refurbished home on the market while paying a commission to have it sold.  If you wanted it for $100,000 less you had to have been in the market six months ago and have had to be willing to gamble.  That’s the difference.

The guy I think has it best is Dave Ramsey.  Real estate is an asset.  Whether it appreciates or depreciates in a certain cycle, at the end of the day, it has some value.  I would argue that it would have value until there was a nuclear event affecting that quadrant.  Until then, it has value.  Perhaps for housing, perhaps for agriculture, perhaps for commercial venture, but it is tangible and has value, even if that value is low.  As Gary Keller says “It is the one asset that will never depreciate to zero.”  We have established it as an asset.  If we are talking about primary housing, then it provides shelter.  As the loan is paid off, equity grows, even in a contracting marketplace.  Every rent payment made to a landlord increases their equity and decreases yours.  Dave says if you can afford to buy a home you should.  It’s the only credit he thinks you should utilize!

 

Are we in an housing bubble?

Yes.

Well, no.

Well, maybe.

Well certainly not like what you’re talking about.  That’s right.  If you asked that question you are thinking about 2006 and we are not in that kind of bubble right now.  Great!  Now let’s all head out to yoga class and find our namaste.

Not so quick there Bucko!

You can go back to the beginning of my musings and you will find me saying “Business is cyclical”.  Over and over again.

What does that mean?  It means, and if you paid attention in your economics class you can skip over this part, businesses expand and contract in the natural course of their life.   How they react in times of contraction determines the length of that life.  Businesses that did not save for a rainy day and/or over-leveraged may find their life shortened by those decisions.  Real Estate is a sector in the economy.  It is cyclical.  It expands (goes up) and contracts (goes down).

At the end of the day, unless you’re going off the grid, you’re going to need to live indoors.  When we are talking about where to live, that matters right now.  Right now regardless of what the market is doing.  If the market is super high and you’re not planning on going anywhere and you can afford the payment, ride it out.  Why?

Real estate is the only asset that you can purchase that will never depreciate to zero.  In the US at least.  I would caution about other countries and their practices regarding foreign nationals, for instance, American cannot own real estate in Mexico under many circumstances.  But that’s another article for another day.

Let’s take a look at the cost of waiting.

cost-of-waiting

Can you afford to wait?

Now let’s add your mortgage interest deduction into your tax picture, can you afford to wait?

Alright, fair enough.  Now consider the capital gains exemption of $250,000 or $500,000 for a couple.  Now can you afford to wait?