Marketing not selling

Yesterday morning I had the opportunity to visit with a family who lives in the area and wants to sell their home and move into a retirement community. They had moved to the area several years ago and own their house free and clear of a mortgage. They were a very nice couple but during my visit I had to smile at the similarities of all sellers regardless of the market.

I had prepared a very comprehensive market analysis to determine the range of value of their home. It was lower than they expected! No surprise there. In 30 years of practice I have never had a seller tell me the market value of their home was too high. All sellers feel their house is worth more than the neighbors, even though the neighbor’s house is larger, newer, has an in-ground pool etc.
There is a difference in listing price and net profit and it is an agent’s job to point out all the costs incurred in selling a home so that the sellers will know their net profit. There was no surprise there either. I have never had a seller tell me that commissions, and selling expenses should be higher than what they are.

While the listings price and costs are the usually the two biggest objections to listing a home with an agent, most sellers what to know what their agent is going to do to sell their house. The couple was surprised when I told them. “I didn’t sell houses, my job was to market the property so that the home would sell itself.” You might be able to sell people some things but no amount of sales pitching, objection handling, or pressure closing techniques is going to make someone buy a house that they don’t want to buy.

More agents will be fired by their principals, (sellers) in the next three months than at any time since 1992, the last time the real estate market began drifting south. They will be fired not because they were incompetent or lazy or unethical. They will be terminated because they did not understand the concept of marketing, which includes product positioning.
A year ago the process of marketing a home involved listing it in the MLS and hanging a sign. There will be a little more work and creatively required during the next 18 months.

Enjoy your weekend. Vicki doesn’t have a show but I am showing a few properties in South County and finish mowing fields.

It's your money

Now that the primary election is over, perhaps the candidates for the General Election in November will give some serious thought to our state’s income and spending. Our billion-dollar deficit is not from a lack of income (tax revenue) but from run-away spending.

As an example, according to the Franchise Tax Board, revenues collected in April (taxes) were 40 percent higher than just a year ago. Revenue has never been higher but the state continues to spend more money than it takes in. How long will that continue?

Area residents are doing their part in contributing to the coffers of the Franchise Tax Board. The median income for El Dorado County finished 2005 with $42,819 and was the fifth highest in California. Placer County ranked just under El Dorado. The median income for 2005 was $41,301, while Sacramento County placed 18th highest in the state income category with a median of $34,772. The state’s median finished at $33,223.

I presume that the Franchise Tax Board calculates the median income by the compilations of all tax returns of any an all taxpayers. The median (not the average) is the point where half the taxpayers are making more and half less.

Chris Thornberg, economist for UCLA has never seen a good growth number that he could not spin into a negative. After reviewing the phenomenal income gains last year he said in a statement “The housing market provided most of the economic oomph in California after the tech bubble burst. That has begun changing in the past year or so. The softening of the housing market will likely be a drag on income growth although it probably won’t cause a recession.” What a drag!

Crime City

Forgive my lack of political correctness but some places in the Capital Region are better to live in than others. Not only by my standard but by the FBI’s annual crime statistical repot. According to the report released by the Sacramento Bee last week, 10 neighborhoods primarily in North Sacramento, South Natomas and Land Park had a 75 percent increase in violent crime in the last 5 years. Violent crime rose 30 percent throughout the city while population only increased 11 percent. So, what’s up with that?

According to the FBI, violent crime while up substantially in Sacramento isn’t increasing in the state or in the nation. Violent crime actually dropped 8 percent nationwide from 2000 to 2004 and declined 11 percent in California during the same period. In cities in California with populations over 250,000, Sacramento had the fourth highest violent crime rate and it is increasing.

The mayor and city council members look for politically correct excuses such as: increased reporting by victims, switching to a new tracking system by city cops and even tired to find differences in the definition of “violent” crime.

Violent crime can destroy not only the individuals affected but also property values of entire neighborhoods. The city should act quickly to implement a plan in conjunction with neighborhood leaders and community activists before crime spreads to other areas. Neighborhoods with a low crime rate experience greater appreciations rates and homes sell more quickly. The mayor and city council should address the problem and not look for politically correct excuses.

Too many homes for sale

There is too much housing inventory on the market. It is the best opportunity for buyers to find a home in their price range since 1994. The over supply is only temporary and will balance itself out in another year or two but until that time, sellers will need lots of patience in trying to sell their homes.

There were 2,212 homes sold last April in the Capital Region. It was the slowest sales month since 1998. It was a 36.7 percent decline from April of 2005 according to Data Quick Information Systems.

The number of homes for sale was the highest its been since 1994 with 11,344 homes currently on the market. In April of 2004 that number of homes for sale was 3,000, in April of 2005 it was 5,000.

El Dorado County reported 192 home sales for the month or a decline of 36 percent from last year same month. Placer County had 371 sales for a 38 year over year drop, Sacramento had 1,500 reported sales with a 36 percent decline from last year and Yolo County had 118 sales and sales volume declined 47 percent from a year ago.

How much worse can it get for sellers? Lots! In 1992 there were 13,500 homes up for sale. Subsequently the percentage of homes for sale in relation to population and number of homes was much higher than it is today. In some neighborhoods more homes were for sale than not. It was not a good time to be a seller. Could inventory get that high again? Probably not as long as our employment gains continue. In the 1990’s three military installations were closed in Sacramento and there were other serious defense industry cutbacks that drove jobs out of the area. Today regional employment gains continue to remain strong but watch any news from Intel. They are a large employer and if they catch a cold, Folsom will get the flue.

Taking on the DRE

The California Department of Real Estate, DRE, announced last week that there are about 500,000 real estate licensees in the state which means that one in every 52 adults has a real estate license. The number of licensed agents has increased 30 percent in the last two years and 57 percent from 2000. Having a real estate license in California is second only in popularity to a having a driver’s license. California will license, regulate and tax hundreds of professions from accountants and acupuncturists to veterinarians and vocational nurses. Real estate is one of the largest vocational groups.

No other state vocational association has grown as much as real estate. And why not? Obtaining a real estate license does not require a higher educational degree, years of apprenticeship or a substantial financial commitment. The entire process of obtaining a license can be completed in less than three months and cost less than $500. Once licensed, the earning potential is unlimited, the work hours flexible and with an unlimited amount of free time. What a dream job!

Not every licensed agent is engaged in listing and selling real estate. The Department also regulates mortgage professionals. Having a group of real estate regulators looking over the activities of loan originators and lenders is like having the Cemetery and Funeral Bureau regulate the Medical Association. While lenders and salespeople both deal in money and real estate, the processes are completely different. Appraisers have their own regulatory agency (Office of Real Estate Appraisers) and so should the mortgage industry.

Jeff Davi, commissioner for the DRE, in a prepared statement said, “The level of interest in real estate licensure is unprecedented. With so many new licensees, the DRE has increased its consumer protection efforts.” The Department’s idea of increased “protection efforts” is to increase their presence on the Internet. Consumers may go to the web site at www.dre.ca.gov/licinfo.htm and check the status of licensure. With 500,000 licensed agents, the probability is pretty good of finding the name, address, and license number of your agent in the DRE’s database. But more information is required.

What consumers will not find on the DRE web site is any type of evaluation or designation process that provides additional information about the licensee. The problem that consumers have is not in determining if someone has a license but determining some level of experience and competency. Before turning over the house keys, sellers might want to know the number of complaints filed against a particular real estate firm, if the brokerage firm maintains professional errors and omissions insurance, what educational background has a licensee completed and affiliated professional designations and membership.

One helpful designation that the DRE could include on their web site is the voluntary Realtor membership. Realtor membership wasn’t always voluntary. It used to be a requirement to gain access to the MLS systems when MLS was owned or controlled by the local Realtor Associations. Today, membership is voluntary. Realtor members have the privilege of paying additional yearly dues to their local, state and national organizations and abide by a code of ethics. Since the department makes no distinction between Realtors with an ethics code and all other licensees, Realtors are placed at a theoretical competitive disadvantage. The Department could easily place an R by a Realtor licensee to differentiate the two.

All motorists are required to carry vehicle insurance and all licensed agents and brokers should be required to carry Professional Liability Insurance. Errors and Omissions Insurance reimburses the public from mistakes and misrepresentations made by the insured. If another driver bumps my car, I have some assurance that an insurance policy exists that will reimburse me for the repairs. Buyers, sellers and borrowers have no such assurance from their agent unless the agent is insured. The Department’s Recovery Fund, is limited to only $20,000 for certain intentional and fraudulent acts. The Department should require all practicing brokers and agents to maintain Professional Liability Insurance or at least recognize the ones who do on their web site.

Academic achievement is no guarantee of success in business or of ethical practice but it does demonstrate a disciplined commitment. The Department already maintains a record of all pre-licensing and continuing educational classes for every licensee. That information should be made public as well as any degrees and professional designations from accepted organizations or institutions.

The use of the Internet can provide viable choices to consumers if the information is available. The DRE’s web site provides the name, address and license number of all licensees. However helpful that information is, it could be more meaningful by providing additional information as to the experience, professional accomplishments and commitment to their profession of brokers and agents.