Real Estate News

Branding is everything. Think about the power of Nike, Coke, Ritz-Carlton, Southwest Airlines, McDonald’s or Starbucks. Just what is it that these brands do?

They make a promise. A promise of something verifiable by the consumer during or after the purchase: quality or consistency of product, service, pleasure, cost savings or experience.
Even if the verification is entirely subjective, a meaningful brand can be verified by the consumer: Did that BMW really deliver “driving excitement” for me? Do I actually feel more like an upper-class yuppie wearing a Ralph Lauren polo shirt? The perception is certainly there.
An effective brand is one that can be differentiated, one that makes a promise over and above the baseline promise of safety, minimum quality, etc. General Mills doesn’t brand its cereals as, “Not poisonous!” because that baseline promise is assumed.

For a Realtor to promise customer service, attentiveness, and expertise is to live on the baseline. Consumers assume that all Realtors deliver those things because that’s what they all say. All Realtors position themselves as the biggest or the best in their markets, so that is simply not good enough.

A living brand, a meaningful brand, is enforced. Nordstrom’s brand is “unparalleled customer service.” More important, they prove it every day. You can bet that Nordstrom spends millions of dollars and thousands upon thousands of man-hours every year training its sales staff, training its call center, training its people, educating them, reinforcing the brand value of customer service, thereby delivering on the brand promise of “unparalleled customer service” to consumers.

It is absolutely amazing how few real estate companies have a differentiated brand promise to begin with, and how even fewer enforce their brands.

Our brand is elite and our mission statement follows consistently: “Creating outstanding customer experiences at every point of contact.”

Our mission statement says it all. A call to the front desk, a showing, a closing, a contract negotiation or the resolution of a problem must all be handled in such a way that our client experiences a feeling that is far above the baseline.

Our business model reinforces our mission statement. Non-selling managers, well trained agents and support staff, top-notch systems and technology and hands-on leadership articulating the importance of our mission are all essential to meet our goals. That’s how we must support the brand that we market.

The NAR recently published its annual report on home buyer and seller statistics. Below is a brief summary of some of the relevant findings:
• Forty-seven percent of recent home buyers were first time buyers. The typical first time buyer was 30 years old and the repeat buyer was 48 years old.
• Over 90 percent of home buyers used the internet to search for homes.
• Seventy-seven percent of homes buyers purchased their home through a real estate agent/broker.
• Forty-four percent of buyers found their agent through a referral from a friend or relative.
• Ninety-two percent of home buyers financed their purchase.
• First time buyers who financed 100 percent of their purchase dropped to 15 percent from 23 percent.
• Eighty-five percent of home sellers used a real estate agent when selling their home.
• Recent sellers typically sold their homes for 95 percent of the listing price and 60 percent of them had at least one price reduction.
• Among recent sellers, 81 percent reported that they would use that real estate agent again or recommend to others.
• Of the approximate 10 percent of sellers who sold their home without the assistance of a Realtor, half knew the buyer prior to home purchase.
• Internet usage in buying and selling a home increased among all age ranges.
• Nearly 90 percent of all home buyers and sellers consulted a real estate agent during the process.
• Of the four most common methods of marketing homes for sale, print advertising is the least used at 37 percent. The Internet is used 90 percent of the time, yard signs 82 percent of the time and open houses are used 59 percent.

Realtors have been up in arms about the Home Valuation Code of Conduct since
Fannie and Freddie implemented the new rules governing appraisals implemented in
May.

Jerome Nagy, senior policy representative, said on Friday that NAR was concerned
when, this summer, FHA Commissioner David Stevens indicated FHA would also adopt
the rules. After NAR met with Stevens, FHA announced new appraisal guidelines that
will go into effect Jan. 1 that address some of the group’s concerns.

Although FHA is adopting components of the Home Valuation Code of Conduct, it also
included guidance on geographic competency of appraisers, appraisal portability and
hiring appraisal management companies that should address some of the problems
Realtors have had with Fannie’s and Freddie’s rules, he said. Nagy said he hopes Fannie
and Freddie will adopt similar guidance to ensure uniformity.

Nagy also noted that HR 3044, a bill that would put an 18‐month moratorium on
enforcement of the Home Valuation Code of Conduct, now has 121 sponsors, and that HR 3126, legislation to create a Consumer Financial Protection Agency, includes language that would require the agency to draft new rules for appraisals that would supersede the code. HR 3126 has also been amended, at NAR’s behest, to exclude Realtors from the definition of groups providing financial services and which would be subject to oversight by the new agency, said senior policy representative Tony Hutchinson.

I continue to receive questions daily about the future of our local market and what real estate sales and prices might do next year. I’m not sure why anyone would think that I have a better crystal ball than they, particularly since I have stated for two years that we won’t know the market has actually turned until several months after it occurs.

What I can state today is that we are witnessing the emergence of two distinct markets, and they are behaving quite differently. I will call them the “traditional market” and the “distressed market”.

The traditional market is the smaller of the two, at least in terms of unit sales. This market is characterized by a limited inventory of houses owned by private sellers. These sellers have made the decision to sell their property even though prices are at historic lows. They are not being forced to sell. Rather, they have decided for personal reasons to sell now, even at low market prices, and get on with their lives.

Homes in this segment are typically in good to excellent condition. One of the key features of this market is that buyers can negotiate with traditional sellers, expect reasonable response times and set reliable closing and possession dates within a fairly short period of time.

The distressed market now accounts for over half of all closings. It includes foreclosed bank owned properties and short sales. Short sales are owned by private sellers, but the properties involved are encumbered with more debt than their current market value, and therefore require third party lender approval in order to be sold.

Homes in this segment are usually in average to poor condition. Moreover, negotiations on these types of properties can be very cumbersome due to bank bureaucracy. Average closing times are measured on months, not weeks and many never close at all. Bank owned or approved transactions are structured quite differently than traditional transactions. Buyers of these types of properties face considerably more transactional risk. For these reasons, distressed properties are normally best suited for speculators and investors.

While there is plenty of distressed inventory available (and will be for some time to come), I am being told by our “agents in the trenches” that there is actually a shortage of well priced homes currently being offered by private sellers. Multiple offers are not uncommon as traditional buyers seek the certainty of a transaction with a traditional seller.

Economics 101 would indicate that properties in the distressed category will continue to suffer from price compression as supplies continue to overshadow demand. Private sellers, however, may see a bounce in prices if current demand continues to outstrip supply.