QUESTION:  What’s wrong with this scenario?

You need a new refrigerator. You go the big box store and are engaged by an energetic salesperson.  She knows the specs for all the models off the top of her head, but you have done some research too and ask her some questions that require studying factory specs, and a call back to you at a later time.  Within minutes you are doing everything you can to beat down the prices on the your favorite models.  You leave with the salesperson’s card, and the she calls you back in a couple of hours with the answers to all your questions, offering to fax you the information.  You are a picky shopper.  You call her with more questions.  You visit the store and the salesperson 3 more times,  spending time with “your” salesperson, while other eager buyers wait.   On one visit, you prevent her from getting her scheduled lunch break with your persistent questions.  Throughout all this the seasoned salesperson maintained her professionalism and helped you at levels far beyond your exepctations.

You see, the majority of her pay was based on commission, and it was in both of your best interests for her to establish a relationship and provide you with superior service.

A few days later the lizard part of your brain gives you the BUY signal.  As you are driving by another branch of the same big box store, you swing into the parking lot, go in, and tell the first salesperson you encounter the make and model of the refrigerator you have decided on.  He  writes it up, schedules delivery.  You whip out your credit card, and in a total of 15 minutes, you have bought yourself a refrigerator.  The salesman gets full commission for his 15 minutes of work.  The first salesperson, the one who spent  all that time with you, gets ZERO.

You run into that salesman from time to time when you are shopping at her store. You always greet her with a smile, and have even asked her advice on other appliances you will be needing in the upcoming months.

ANSWER:  Nothing.  You got what you wanted. End of story.

Lots of people depend on commissions to survive.  As a real estate agent, 100% of my income is based on commission, yet, it is not unheard of in this business to work with a home buyer for weeks, taking calls at crazy hours, juggling and re-juggling business and family schedules at their whim, establishing levels of rapport that rival those of family members, and showing them scores of properties, only to have them go to another agent to show them that ONE last house, which they buy without consulting you.  No guilt at their loyal agent making ZERO, while their second agent who probably spent all of 2 hours with them takes a 5-figure commission.

Real estate and other straight commission people don’t talk about this much.  If  you even think about it, it makes you crazy.  It’s part of the business of commission sales.  You just suck it up and go on.

I have a business card stuck in the corner of my white board from a big box store appliance salesman.  I took up a lot of his time when I was researching dishwashers a few weeks ago.  I am not quite ready to buy yet, but when I am, I know who my salesman will be.

By the way, if you use Google+, I have just started a brand new business page. Visit it HERE.

Joe Spake is a Memphis, Tennessee based Consultant, Real Estate Broker, and Blogger. Call 901.214.5563 for a consultation or click to make a social connection.
If you enjoy this blog, please subscribe to the RSS Feed. 

If you use Google+, I have just started a brand new business page. Visit it HERE.

Here are a few recent real estate stories I found interesting and will be watching.  The mortgage interest deduction that we mortgag-paying home owners have come to take for granted may be in jeopardy.  Are pending sales numbers an indicator of a market upturn?  Downtown condos at a discount?  How are Memphis home sales going?

Mortgage Interest Deduction

The government cost cutters are looking at ending the mortgage interest tax deduction.  My accountant, who seems to have some insight into the proposal, thinks that any tax implications for the deduction will be on a sliding scale, based on income.  How will losing this subsidy for home ownership impact future sales and current homeowners’ tax bills?  I guess we will see.  Here’s the NAR’s take on the situation.

Pending Sales Report

Once again the NAR pundits are touting pending sales as an indicator  and predictor of a market upturn.  I disagree with this approach. The way pending sales are reported varies from locality to locality and even agent to agent.  Does an executed contract constitute a pending sale?  Or contingencies like inspections, repairs, and financing have to be removed first?  How many pending listings actually get to closing?   Questions the pundits need to answer.  They should not be using pendings for any analysis unless the term is defined.  And if you mark a short sale as pending early on, it could stay pending for months, then not close.

Memphis Condo Auction brings Deep Discounts

Eleven units at the Harbor Lights Condos, 426 N. Front St., were auctioned last Thursday and some pretty good deals were made.  Many of the units went for less than 50% of recent asking prices.   I didn’t get much info on the motivations of the buyers or is speculation on the success of  Bass Pro was involved.  The building sits across the street from the Pyramid.  Development Consultant Tony Bologna mentioned in the Commercial Appeal article that there is nearly a 3-1/2 -year supply of completed and available condos Downtown, based on recent stats.

If you have thought about a condo purchase in Downtown Memphis, this is a great time to have a look at the inventory.  There is financing available in many of the buildings, and owners are eager to negotiate.  Contact me for a list.  I remain bullish on Downtown.  Those who wait may be kicking themselves a couple of years from now.

October Home Sales

October showed another drop in number of transactions and a very slight drop in median home prices, as reported by the Memphis Area Association of Realtors® (download report).

The Daily News has a pretty insightful article on the meaning of the market numbers.  Hopefully, we are nearing the end of the after-bubble-burst price corrections.  As I always say, we won’t be able to define the bottom of the market until we have passed it.   Buyers: there is just not going to be a more perfect storm for home buying.  Interest rates remain very low.  Inventory is good, and sellers (including the banks) are ready to look at offers.

In Conclusion

I am feeling more positive about a real upturn in the real estate market in the near feature.  From the greatest inflation of the housing bubble through the fallout of the bust, I have tried to tell the truth about what’s going on and avoid the industry hype that has often painted a distorted picture of real life.  Homeowners are definitely taking paper losses from their value positions a few years ago.  Home sellers feel a financial crunch, especially if they bought during be bubble years.  Buyers with good credit are in the driver’s seat.  Please contact me if you have  questions about the market in general, specific home values, recent sales history in your neighborhood, or if you are interested in finding out if you are really ready to buy a home.

Related articles

• It’s time we come to grips with the Memphis Real Estate Market (memphisrealestatebuzz.com)
• Bargain-hunters score in auction of Downtown Memphis condos (commercialappeal.com)

Joe Spake is a Memphis, Tennessee based Consultant, Real Estate Broker, and Blogger. Call 901.214.5563 for a consultation or click to make a social connection.
If you enjoy this blog, please subscribe to the RSS Feed. 

If you use Google+, I have just started a brand new business page. Visit it HERE.

According to the Memphis Area Association of Realtors®, there were 1,026 residential real estate sales in the MAAR MLS area in September, 2010 (full report).  Year-to-date sales at the end of September were 10,865.

Contrast that to the numbers from 2005, just before the bubble burst, when September sales were 1,516, and September-ending YTD was 14,009 ,  22.4% higher than 2010 YTD.   You can work the numbers a lot of ways to make things brighter or more dismal, but, bottom line, not as many homes are selling these days. The Memphis market has had it better than  other areas, but we still have a high foreclosure rate, and it seems that everyone who can’t get their house sold is buzzing about short sales.

As much as we ego-driven, type-A real estate agents, who have survived this epic down market and are still doing at least some business, don’t like to admit it, times are tough.  An article in the 11/28/2010 Commercial Appeal about agents supporting each other brings the point home. It’s a bit disheartening to pay the ad costs and do the preparation for an open house, only to have no one show up; or try to explain to a home seller why her competitively priced house has been on the market for 2 months without a showing; or have to tell a potential seller that they are so far underwater that they will have to look at a short sale to get out of their house, or else figure out a way to stay for a while.  It seems that any conversation I have with other real estate professionals gets to, “It’s just not fun anymore.”

Where have all the buyers gone?

People still have jobs.  They are getting promoted.  Many of the self-employed folks I know are doing quite well.  It’s only a bit harder to get a mortgage than it was 5 or 6 years ago, and no problem for someone with good credit buying a decent property.  I have negotiated some incredible deals with my clients this year.  There is an abundance of good, well-priced inventory.  As much as we whine about some of the goings on in our city, Memphis is making progress, and it’s a good place to settle down.  So,  why are so few people buying houses?

The hype of   ”now’s a great time to buy”, the American Dream, and “all markets are local”, invest, buy, buy buy…. as the market was crashing and burning probably didn’t do too much to build consumer confidence.  And now we are starting to hear rumblings of eliminating the mortgage interest tax deduction.  The overall effect of the $8000 tax credit programs was to cause a slight up tick in sales.  Most of my clients who benefited from the credit would have bought anyway, and the credits have only prolonged the market correction.   We still haven’t had a good signal that the market has bottomed and is recovering.  I believe that the buyers who are active are more savvy than ever.   They know it’s a buyers’ market without being told.  They expect DEALS, and are not hesitant to ask their agents to write offers that would have been laughed at and gone straight to the trashcan 5 years ago.

Time will correct the market and demand will increase, but probably not in the conventional ways that we have come to expect.  The real real estate pros will weather the recession and emerge stronger.  And in the meantime, those buyers who do decide to purchase will be rewarded as the market recovers.  No one will be able to call the bottom until we have passed it.

I welcome your comments and ideas.

Related articles

• In difficult housing market, real-estate agents find new ways to motivate one another (commercialappeal.com)

Joe Spake is a Memphis, Tennessee based Consultant, Real Estate Broker, and Blogger. Call 901.214.5563 for a consultation or click to make a social connection.
If you enjoy this blog, please subscribe to the RSS Feed. 

If you use Google+, I have just started a brand new business page. Visit it HERE.

Charts and Graphs

For those who love stats about the Memphis residential real estate market, here are some graphs from various “reliable” sources about our market. Remember, though, they don’t necessarily tell the whole story.

Altos Research: 1 Year Median Price vs Average Days on Market

Data is, of course, reflective of the areas Altos has chosen to describe as Memphis, TN, but the 1 year trends reflect the market pretty well in general.

(note:  this doesn’t come close to the Memphis area’s inventory as reported by the Memphis Area Association of REALTORS® report a number closer to 9000 for the area it covers.  The up tic in the number of listings is reflected in the MAAR numbers, and we can expect inventory to increase as we move into the warm months.

Median Prices as reported by Zillow:

similar shape, different numbers.

Here is the way the actual recorded sales figures went for 2009, compared to 2008, as reported by MAAR:

Number of units down 12.4% in 2009 from 2008.  Median price down 2.5%.  Average sales price down 5.3%

What does all this mean?

You can follow the trends.  You can wring your hands over falling prices and lost equity, or the fact that just not as many houses are selling as they were in the housing boom.  OR, you can accept the FACT that real estate is local MICRO-local.  I am not talking about the Memphis metro area, or Cordova,  Germantown, Downtown or Hickory Hill – I am talking your neighborhood, your block.

We are constantly bombarded with numbers spun by the national companies, local real estate boards, and real estate agents themselves.  It makes interesting copy for blog posts, press releases and advertising, but what is more important to you than how those numbers impact YOUR particular situation?  Now, more than ever, is the time to consult a real estate professional if you are considering a purchase or sale.  There ARE solid win-win real estate transactions happening in our market place.  Don’t let the generalities of the stats alter your perception.  Get out the microscope and analyze your micro-market.

Joe Spake is a Memphis, Tennessee based Consultant, Real Estate Broker, and Blogger. Call 901.214.5563 for a consultation or click to make a social connection.
If you enjoy this blog, please subscribe to the RSS Feed. 

If you use Google+, I have just started a brand new business page. Visit it HERE.

>>>>>Caution: Language<<<<<

“Coffee is for closers only.”

Alec Baldwin almost won an Oscar for his role in Glengarry Glen Ross (1992).  The best movie about the real estate business ever made.  This clip should be played periodically in every real estate sales meeting.  Here is Blake teaching the agents the A B C’s.

Joe Spake is a Memphis, Tennessee based Consultant, Real Estate Broker, and Blogger. Call 901.214.5563 for a consultation or click to make a social connection.
If you enjoy this blog, please subscribe to the RSS Feed. 

If you use Google+, I have just started a brand new business page. Visit it HERE.