New Jersey Estates/Weichert Realtors/ NJ Luxury Real Estate/ New Homes: May 2009

"It's an ever-changing pendulum," says Jim Amorin, president of the Appraisal Institute.

No longer arrived at by using a simple drive-by inspection, computerized automated valuation model (AVM) or even just comparative analyses of similar properties, appraisals have become yet another sticking point along the already viscous road to home ownership.

"Everyone got seduced by double digit property value increases and never thought the bottom would come. Doing an appraisal today is a complex deal with foreclosure sales, short sales and fewer sales. You want to get the most experienced folks doing appraisals," Amorin added.

An appraisal of a home is supposed to be a fair, impartial and professional evaluation of a property's true value. The risk-management tool is designed to assure the owner gets a fair price, the buyer pays the right price and the lender's risk in making the loan is commensurate with the property's true value.

A appraisal can make or break a sale, refinanced mortgage or equity loan. It can also attract or repel buyers.

During boom times, in the first half of the decade, lenders typically used desk-bound, in-house appraisers to determine home values when skyrocketing values boosted the use of drive by inspections and computer generated values.

Now, lenders are compelled to send appraisers out into the field to inspect a property before making a final assessment.

But that doesn't mean lenders take that approach, especially when the property is a foreclosure or other distressed property.

Appraisers who complained about pressure to up the value of homes when values were skyrocketing, are now not only under pressure to lower values, but also work in a market where values are skewed by unprofessional appraisals.

Appraisal practices lacking uniformity

A primary culprit is the Broker Price Opinion or BPO. BPOs are used when lenders and mortgage companies want to expedite the sale of repossessed (real estate owned or REO) properties, foreclosures, short sales and other unconventional, distressed properties.

A BPO involves a real estate broker conducting a drive-by inspection or internal comparative analysis to come up with the value. The broker conducting the valuation is also often the broker who lists the property for sale.

"There's a lot of controversy about this end run. The person contracted to do the BPO is the sales person who is going to get the listing. How can you be impartial and objective when your conclusion is based on you getting the listing of the property?" asks Ted Faravelli, Jr., a forensic appraiser, expert witness and executive director of the California Association of Real Estate Appraisers.

There's also fallout for the homeowner with the foreclosed property. If the property is priced to move at a level lower than the amount the foreclosed owner owes (and, perhaps, lower than the house could actually sell for) the owner will have to come up with the difference to clear his or her name from bad credit hell.

"It's a real hot button for appraisers when brokers are doing work appraisers should be doing," says Amorin.

Also, the values of the BPOs get thrown in the pot of homes appraisers later must consider when doing professional valuations. That makes it tough to decide when, when not to and how to use properties assigned BPOs.

"One of the biggest problems we see is the conflict over the use of short sales and REOs and foreclosures. They are dominant in some segments of the market and we have to take them into consideration, but we have to temper our opinion when we use those," said Faravelli.

Recognizing how the pressure cooker property valuation process contributed to busting the boom and how it now may be prolonging the bust, the Feds recently put in place, the Home Valuation Code of Conduct (HVCC).

In an agreement, effective today, May 1, 2009, between New York Attorney General Andrew Cuomo, Fannie Mae and Freddie Mac, and federal regulator, the Federal Housing Finance Agency, HVCC is designed to enhance the independence and accuracy of the appraisal process, and provide added protections for homebuyers, mortgage investors and the housing market.

The hope is that by relieving appraiser pressure, appraisals will become more reliable across the board.

Unfortunately, good intentions don't always pave the way, according to the Appraisal Institute.

Amorin, testifying before the U.S. House of Representatives' Financial Services Committee said the institute believes HVCC has too many shortcomings.

The institute says HVCC:

 

• Doesn't focus enough on appraiser competency.

   

• Undercuts professional relationships between honest appraisers and reputable mortgage professionals.

   

• Increases the influence of bottom-line oriented appraisal management companies.

   

• Encourages the continued use of AVMs and BPOs, which lack relevance in today's market.

For similar reasons, the National Association of Mortgage Brokers unsuccessfully filed suit to delay HVCC.

Next Week: What's a consumer to do? How consumers can play a leading role in the appraisal process.


Written by Broderick Perkins
May 28, 2009 

When consumer confidence about the economy hits its highest level of the year, mortgage rates hit the lowest in decades, and home sales jump by amazing percentages in key markets, all in one week, what do you think that adds up to?

There's no way it's anything less than outstanding news for real estate.

Sure it's true that there are still very tough situations out there on job losses and pockets of severe unemployment where local companies are laying off hundreds of people, but on a national basis, the forces driving real estate right now are increasingly turning positive and encouraging.

Take last week's mortgage interest rates. Though they were already close to all-time lows, rates fell again last week to 4.6 percent on average for new 30-year fixed loans, and 4.5 percent on average for 15-year fixed loans, according to the Mortgage Bankers Association.

The Chicago Tribune interviewed Mark Zipperer, an agent for ReMax Edge in the city, and he said: "I am so thankful. It's like after a drought, it's (suddenly) raining." Shoppers are suddenly out looking at houses again -- and they're making offers!

In Florida, statewide sales jumped by 30 percent in March over year-earlier levels, and were up 33 percent over the previous month. Even condo sales were up by 25 percent.

Similar gains were reported in California markets hardest hit by price declines during the past two years. Statewide sales rose 64 percent in March compared with March of 2008. Unsold inventory is now just five months -- that's down from 12 months the previous March.

And here's a possible indicator of things to come: Median house prices may be bottoming out. The California Association of Realtors reports the median price of homes sold was up by 2.2 percent for the past month. Prices are still down by 40 percent or more from the boom year peak in many areas, so even the slightest increase is a surprise event.

Meanwhile consumers across the country say they're feeling better about their economic futures, which is always an important factor for future home purchases. The Conference Board's Consumer Confidence Index hit its highest point for the year this month, with the "expectations index" component up by 65 percent over February.

What's it all add up to? We call it a turnaround getting underway.


Written by Kenneth R. Harney
May 5, 2009 

"Housing prices and new home construction are at an all-time low right now. Instead of trying to sell, many homeowners have turned to retrofitting their homes and investing in comforts that will make their home more enjoyable," said Utz Baldwin, CEO, CEDIA in a recent news release. "The trends and technologies we've identified are upgrades that will enhance homeowner satisfaction and ultimately add to a home's value."

David Pedigo the Sr. Director of Technology at CEDIA says before you electronically retrofit your home, "Think about what you want not just now but three to five years from now." He says be sure to take into consideration future wiring needs such as connecting computers to your TV to stream shows right into your living room or, if you have toddlers, think about several years from now and the necessary wiring to connect their video equipment. "Making sure the house is wired to support all those mechanisms is certainly a big deal." According to CEDIA, green energy-efficient home technology is very popular.

So, too, is mobile connectivity. CEDIA reports in its news release that, "Residential security, audio/video and automation systems are being integrated into fully functional mobile devices. For instance, CEDIA experts are installing systems that make it possible for homeowners to turn on the air conditioning remotely, open the garage door after walking the dog and even start the oven for dinner, all with a push of a button on their cellular device." Pedigo explained the most popular upgrades.

1. Structured wiring system: all cables are pulled to a single outlet within the home. It gives the homeowner a lot of flexibility. "It's very easy then to upgrade from cable TV to satellite or from regular phone service to, say, Internet-based Voice-Over IP (VOIP)," says David Pedigo, Sr. Director of Technology, The Custom Electronic Design and Installation Association (CEDIA).

2. Automation for daylight harvesting: allows homeowners to use touch panels or computers to control the home. "We can do what's called 'daylight harvesting' which is we can take the shades, motorize those shades at certain times of the day based on an astrological clock. I know the sun is going to come into the living room in the mornings and that's going to heat up the house and let's say it's summer, so we want the shades to go down so that the morning sun is not heating up the inside of the house and causing the air conditioner to run more. Then around one or two o'clock, those shades go up because the sun is now over the top of the house and by four or five o'clock, the shades on the other side of the home are going down. So, we're 'harvesting the daylight' to decrease the amount of heating and cooling that's required within the home.

3. Monitoring systems: products that are installed to monitor the energy consumption for particular outlets, water, or gas. "I can have a sensor in the master bathroom and then I can have a sensor in the kids' bathrooms," says Pedigo. "I have a 10-year old daughter who is now getting into the I-want-to-take-a-30-minute shower." He says with sensors installed he can monitor and determine where and with whom water consumption needs to be addressed.

Pedigo says it will also help to spot which outlets are using up a lot of energy and increasing your bill. He says you can then decide if you need to replace whatever electrical device is connected to the outlet with a more energy-efficient product.

4. Media servers: are computer appliances that allow you from a central location to view videos, music, Internet video-streamed shows, and more. "We're seeing a real shift in consumer viewing," says Pedigo. He says, "You'll see more and more that the content that you get on your display, is actually Internet-streamed content. You'll be watching a YouTube or a media server like Boxee or something like that to control all of your content on your TV and it's basically coming from a computer inside the TV or you'll be using an Internet connection to interface between the two." Pedigo says more TVs are being sold with an Internet jack that's on the back of the TV, enabling a quick connection to the World Wide Web. "No one thinks about running a computer cable for your TV but you have to start thinking about that." Pedigo says it also helps streamline repair service needs. "Now that there's an Internet jack on the back of the TV, as a service company, I can figure out what's going wrong with your TV without having to make a service call because I can log right into your TV," says Pedigo.

"Without a doubt, find a professional," says Pedigo. He says homeowners will often purchase thousands of dollars of electronic equipment and then end up hiring someone who is not qualified to install it and therefore they risk damaging the equipment. "The biggest thing is to look for someone who is a professional, who is really trained, and is going to give you exactly what you need." CEDIA was founded in 1989 and has more than 3,500 member companies worldwide. Its members are established and insured businesses with bona fide qualifications and experience in the specialized field of designing and installing electronic systems for homes.


Written by Phoebe Chongchua
May 1, 2009 

You've heard at least some of the reasons agents use in order to avoid adopting sound prospecting techniques. "My market is different" or "You don't understand how we do things here in Mayberry" are among the many. Truth is there are techniques that work in every market area, everywhere in the world, at any point in time. So, bury the myths, starting with the ones that follow.

There is a "Magic Pill" ...

Real estate success is built on a series of fundamentals. One of those fundamentals is prospecting.

There are plenty of people working to sell agents on some "magic pill" they can take to avoid the fundamental need to prospect. They are greeted by a willing market, since many agents secretly want and hope for a prospecting-free existence. We secretly hope those guys on the late night infomercials are right that we can buy a home for no money down at below market prices, or we can eat whatever we want and not have to work out and still lose weight and have a sculpted body.

Dream on. There is no magic mailing program, calendar, magnet, marketing piece, or website that will make up for the fundamental need to pick up the phone and start prospecting for new clients.

An Approach Too Good to be True...

Agents are quick to share with you how they got where they are today - passionately describing their techniques, people who helped them, or products that made the difference.

While a few of these agents can tell you the cause and effect link between their actions or techniques and their sales and revenue, better than 95% truly have no idea or can't quantify their success for you.

Your job is to pull the curtain back. In the movie The Wizard of Oz, Dorothy, the tin man, the scarecrow, and the lion were all mesmerized and scared of the great and powerful Oz. It took a dog, Toto, to reveal that Oz was a little man pulling levers and using a sound system to produce the semblance of greatness and power.

In the future, when someone approaches you with great and powerful business-generating techniques, pull back the curtain with these questions.

 

• How many transactions does this technique generate for you annually?

   

• How much time do you need to invest personally to set this up and maintain it?

   

• What does it cost you to use this marketing service to generate leads?

   

• What is the conversion ratio on this technique?

   

• What percentage of your business comes from this activity?

   

• How many buyers did you get from this approach?

   

• How many sellers did you get?

   

• What is your net profit from this activity after all your costs are subtracted?

   

• Have you included the value of your time in that equation?

Most people (whether they are other agents, your broker, other trainers, or sales gurus) couldn't answer most of these questions. However, they are all positive that what they are advocating is the "cat's meow" for you and your business.

I recently received a marketing piece from an agent touting his approaches to business. He had sold 60 homes in his third year in the business - a very respectable number. Based on his personal success, he was promoting his lead-generation model as better than prospecting because he did 60 deals and generated over 1,200 leads a month. The average agent would be frothing at the mouth to achieve those numbers.

I immediately grabbed my calculator and did the math. He generates over 14,400 leads a year, which means his 60 transactions represent a lead-conversion rate of .004167 - less than ½ of 1%. Put differently, he has converted only one person out of 240 leads that were generated through his so-called "prospecting technique".

There are only two logical conclusions that one can come to: The leads he is generating are marginal at best, or he is really poor at securing face-to-face meetings and subsequent deals. I will leave you to draw your own conclusion. If it seems too good to be true, it probably is too good to be true.

Top Producers Don't Prospect...

This myth is based on some truth. Many top-performing agents don't prospect once they have "made it" as agents. But you'll be hard-pressed to find top producers who got where they are without prospecting at earlier stages in their careers. And you'll be even harder-pressed to find top producers who can weather the swings and changes of the marketplace without going back into prospecting mode at least on an occasional basis.

To become a top producer, you must prospect. And to remain at the top of your game, you must continue to prospect. Don't quit prospecting -- ever!

As you become more and more successful at real estate sales, you may even do more prospecting - in part because prospecting becomes more natural and easier than ever. As you acquire name recognition and market presence, the people you contact are increasingly honored and pleasantly surprised to receive your calls. They know that you are busy and successful, and they respond not only with their own business but with many referrals, as well.

My Clients and Friends don't want to be Bothered...

Agents who use this excuse are focusing almost exclusively on the canvassing or referral portion of the call, rather than on the connection the call allows with a long-established associate.

Wouldn't you be delighted to get a call from your accountant, doctor, dentist, or insurance agent asking how you and your family are, thanking your for your business, and seeing if there is anything they could do for you?

I bet you can count on one hand the amount of times in the last 20 years you have received a call like that. If you did, you would probably be stunned and appreciative. Your sphere, past clients, and other associates would feel the exact same way.

Every time I work with a new client, I hear the same excuse: They don't want to bother anyone. Then they make calls for a week, and when I talk with them again, they always say the same thing: "I was amazed how easy it was. My clients were really happy to talk with me. I couldn't get them off the phone. It was great to catch up."


Written by Dirk Zeller
May 1, 2009