As a Realtor, I need to have a list of contractors at the ready for my clients who run into issues either with home inspections or just getting their home ready for the market.  Occasionally, I’ll have the buyer client who, once they move into their new place, may want a recommendation for a contractor.  Hopefully, the buyers will have received a Home Warranty and their first call should be to the Home Warrnaty company to get their approved contractor — if something went wrong.  If they’re just looking to do some home improvement, that’s another story and that’s where I might be able to help.

Of course, I know a really good handyman type guy who is both thorough and very reasonably priced.  He can do the painting and fix up and some of the electrical and plumbing work, too.  In fact, my handyman is more often than not, my first recommendation.

Sometimes You Need The Credentials

Sometimes, though, you need an electrician or plumber or someone who has all the certificates. Licensed, insured, bonded — all the good stuff.  If you’ve had a home inspection, there is a good chance the home inspection addendum will require a licensed professional to complete the repairs.  This makes sense.  The last thing the home seller needs is for something to go wrong with a repair and have to do it over or have it done sloppily.

When you need the pros, I recommend Michael & Son Services.  They really do it all.  Plumbing, electrical work, roofing and even handyman type work.  They are not the cheapest guys in town but they do it right.  The initial service call is $29 which isn’t too bad to get the diagnosis and the cost estimate for the repair.  After that, it’s up to you to say “yes” or “no”.

I’ve used them, personally, for both electrical work and plumbing work and I heartily recommend them.  In addition to being thorough and competent, they are also very clean. They bring this cool Welcome mat thing they lay in front of your door and some shoe coverings they put on so they don’t mess up the inside of your house.  Anything that causes a little bit of a mess is completely cleaned up by the time the serviceman leaves your house.

Discounts

They also offer a whole house service plan that includes maintenance on your HVAC (heating and A/C) system as well as a 10% discount on electrical an plumbing work.  I also learned that they have a Facebook “Like” page where they put some cool stealth coupons for different things.  It might be worth it to “Like” their page to check on the coupons from time to time. You never know when you might need to get our garbage disposal replaced or get some plumbing work done.

Can you do me a favor?  Share the love and click on the “Like” button below and let other people know about this blog post!

A few days ago, the National Association of Realtors reported some pretty startling numbers — existing homes sales had dropped 27% or, put another way, the largest drop since the NAR started keeping records in 1999.  Holy Housing Recession, Batman!  What are we to make of this?

Here are some of the possible causes…and a possible upside.

Tax Credit Go Bye-Bye

As of April 30th, the tax credit was gone.  No more free money from everyone’s Uncle Sam.  Heck, who would want to turn down $8,000.  Even the Tea Partiers liked it.  However, it was really an artificial stimulus to try and jump start the housing market which, in turn would help jump start the economy, in general.  It worked while it was in place.  Now that it is gone, though, nobody is in a mad rush to buy a house.

Mortgage Standards are Much, Much Stricter

Remember the days when, if you could fog a mirror, you could get a mortgage?

You could “speculate” about your income and your assets and someone would lend you money to buy a house.  Sometimes the mortgage interest rate was high, sometimes you were only paying the interest, sometimes you agreed to an interest rate that was real low to begin with but would jump in about a year or two or three.  Those days are gone. Really.  They aren’t coming back, either.

Nowadays, to get a mortgage you need to be super platinum with lots of documentation to prove it.

• Great FICO score
• Good income
• Low debt
• Money in the bank

There are a few specialized mortgages in the world but, for the “Regular Joe or Jane” who just wants to buy a house, the choice is probably FHA or FHA (maybe VA, if they’re military).  That means a minimum of 3.5% down payment plus any of the closing costs that the Seller won’t or can’t pay on behalf of the buyer.

Not pretty

Mortgage Interest Rates

Normally low mortgage interest rates would be a good thing for stimulating home buying activity.  Not so much if they keep going down, down, down.  Home buyers will sit on the sidelines waiting for them to go back up before they realize that the “bottom” has been reached and they missed the interest rate gold rush.

That means that there are probably lots of people who are watching the mortgage interest rates and trying to “time the market”.  This never works well but that doesn’t mean people don’t do it again and again and again.  Of course, the lower the mortgage interest rate, the lower the monthly mortgage payment will be.  So it makes sense to try and get the lowest rate possible.  More to the point, people who are on the sidelines are not really eager to buy a house.  They will, if the planets are in alignment, but not until.

Home Owners That Are Not In Distress

In my opinion, a big reason home sales are down is because home owners have finally come to grips with the fact that they will not get anywhere near the price they would like.  Home owners that are paying their mortgage every month like they signed up to do, home owners that are not in any kind of mortgage distress or income distress and consider their home to be a place to live vs an ATM machine have no reason to sell.

Let’s look at it like this:  a home is a nice place to live because it keeps you dry when it rains, warm in the winter, cool in the summer and has indoor plumbing.  You may or may not like your neighbors or even know your neighbors but they probably leave you pretty much alone and that’s just fine.  You know what school your kids are going to and waht grocery store you can buy your food from and you get that nice mortgage interest tax deduction, too.

So, if you don’t have to sell, why should you?  There’s no good reason.  Result: less home sales.

Fewer Homes For Sale Equals Stabilizing Prices

Finally, fewer home sales could be a good thing for home prices.  Fewer homes on the market (i.e., housing inventory) means that there are fewer choices for the real home buyers (as opposed to tire kickers) in the marketplace. That means that home sellers can stand a little firmer on their asking price.  All this is good.  We need a stable housing market.  No question about it.  The sooner we reach an equilibrium where neither the home buyer nor the home seller have an out sized advantage the closer we will be to a real housing recovery.

As in most professions, real estate professionals are always in search of new clients and customers to serve.  This is especially true in real estate where, statistically, people only move (i.e., sell or buy a house) every seven years. Obviously, waiting around for seven years for my favorite client to want to move wouldn’t put bread on the table.

Part of the strategy is to create an Internet presence through my blog and website. However, there needs to be a way to get people to visit.  Thus, we have keyword research!

This helps with making all the search engines like Google find my blog and website for people who are typing search terms…like “real estate in Maryland” or whatever.

I recently found a great symposium (it’s not that long) that explains how keyword research and keywords work.  If you’re interested in checking it out, just click here.

It works for any blog or website!

Below is a short video produced by Real Estate Business Intelligence, an MRIS company, reporting on the July 2010 ousing numbers for Washington, DC and the Prince George’s and Montgomery County MD Suburbs.

I know it’s the middle of August but sometimes it’s helpful to look at the previous month to see if there is any good news on the horizon.

The important thing to think about when viewing this video is the positive spin it puts on basically flat numbers.  At one point it talks about a very small increase in pending sales numbers (these are the contracts signed…not actual sold homes) in very optimistic terms.  At another point in the video, it talks about the decrease in the median home price as “almost negligible”.

Finally, the report admits that the one thing that will jump start the housing recovery — which means more sales and higher home prices — is a jobs recovery in the private sector.

The MD Suburbs enjoys employment that is higher than the National average due mostly to the huge presence of the Federal Government and military.  Still, this isn’t enough.  If more jobs aren’t created in the private sector, according to this video, the housing market is likely to remain stalled.

As most people know, real estate practitioners work on commission.  The commission is worked out between the person selling the house and their agent (the listing agent) and that agent shares the commission with the buyer’s agent once everybody shows up at the settlement table.

The commission amount itself may vary but the bottom line is that it is usually a certain percentage of the sales price of the house. That’s the price it sold for not the price it was originally listed for. Sometimes it may be a flat fee. You pay [x] dollars and you get [y] services.  Usually the minimum.

So a lot of sellers try to take that into account even though the commission or whatever a home seller pays for real estate brokerage services really has no bearing on the market value of the house.  Mr. Market doesn’t care what you pay for real estate services. Mr. Market only cares what other homes like yours are selling for in today’s marketplace.

The Ala Carte Menu

What if home buyers and sellers went to the “pay as you go” approach or the “I’ll take this service but not that service” approach.  Instead of the “free CMA” that most real estate practitioners offer, you would pay $50 to $100 for a full blown market analysis free of a lot of hype about why I’m the best and why my company is so wonderful.  In other words, you pay for a certain product or service and you get it. No more. No less.

What if home buyers paid their buyer’s agents to show them houses?  Or write the offer with all the appropriate and needed forms? What if the home seller knew that the buyer’s agent was actually getting paid by the buyer and, thus, the listing agent would not have to “share” the commission which means the seller could save some money on the real estate services he is using?

A New Model

Anytime a new model of business is proposed there will be those who can’t imagine things working any other way than the way they work today.  Yet, it seems that virtually every industry and profession needs to re-invent itself from time to time in order to survive.

To be honest, I have no idea how a smooth, workable ala carte real estate transaction would look. I’m not sure what would be a fair price for Service A or Service B or Service A +  B.

What got me to thinking about this is some recent tweeting (yes, I spend time on Twitter) with a Realtor from the left coast — Bob Watson from out in Orange County, CA.  It’s an interesting concept.

So…what do you think?  Would you pay ala carte for real estate services?  No more of this “free” stuff or real estate practitioners waiting until settlement to get paid.  Home buyers and home sellers would “pay as they go”.  It could be a big money saver… or it could be a big pain in the patootie.

It seems like the planets should be in alignment. Home prices are low. Mortgage interest rates are low (incredibly low). Home sellers have gotten the message that they need to keep their place in good repair and possibly offer closing help to the buyer.  There are plenty of homes on the market.

What’s not to like?  Why aren’t home buyers out there snatching up the bargains?

Mortgages

The short answer is that they can’t get a mortgage.

Unlike the early 2000s when anyone who could fog a mirror could get a loan with zero down and no closing costs, today’s mortgage environment is very, very tough.  It seems you need to be made of platinum and, even then, it’s no sure thing.

• High FICO score
• Low Debt
• Good Income
• Money in the bank

…and documentation out the yin yang to prove it all.  Still, that doesn’t seal the deal.

If the underwriter feels a little queasy about a Visa bill you were late on five years ago or if the appraisal comes in fine but the underwriter doesn’t like it because the appraiser had a couple of typos.  Maybe the appraisal came in well under the contract sales price because of all the foreclosed homes and short sales in your neighborhood.

The bottom line is that there are a hundred and one things that can go wrong in the mortgage process and something probably will and it’ll kill the deal or make it a damn bitter pill to swallow.

The sad part is that there is nothing a home seller can do.  Price the home competitively, keep it in pristine condition…and hope the mortgage underwriter isn’t having a bad hair day.

Below are some charts that show Median Price for single family homes over the past year. Of course, median means that there are the same number of homes above this price level as there are below this price level. It can sometimes be a bit misleading. But, in this case, the trend is the important thing to notice rather than any one particular number at any one particular point in time.

The trend is unmistakable and, if you ask me, pretty discouraging.

Beltsville, MD

College Park, MD

Greenbelt, MD

CNBC did a piece yesterday during their Realty Check segment that talked about two things:

1. the oncoming wave of bank foreclosures that heretofore have been in the “shadow: and
2. the fact the the number of home buyers in the marketplace will remain low even with record low mortgage rates.

The “shadow” foreclosure market I’m referring to is the vast number of homes that the banks have already foreclosed on but haven’t released to the market for sale.  The thinking was not to glut the market with foreclosures since the idea is to get them sold.  Too many at any one time and they will sit and sit and sit on the market.  That’s not good for the banks.

However, the fact that more foreclosed homes are about to hit the market at fire sale prices cannot be good for the home owner with equity.  If a lot of the houses around you are selling for cheap, cheap, cheap that means appraisers are going to use them as comparables to your house when it come time to sell.  Not good.

Still Not Enough Buyers

The flip side  of that is that there is still not enough buyers in the marketplace to soak up all this housing inventory.  Even as mortgage interest rates continue to fall (now at or below 4.5%) there is hardly anyone buying homes.  Lots of people are trying to refinance but that will become even more and more difficult as home values decline due to the aforementioned foreclosure wave.

Throw in some uncertainty about the future of Fannie Mae and Freddie Mac and you have a humdinger of a dilemma for people who have been responsible home owners and mortgage payers all these years.  It’s beginning to look like the only people who will be able to sell there homes are the folks who bought before 1999 and did not refinance or take out home equity lines.

Everywhere I go and almost everyone I talk to ask, “Are home values coming back, yet?”…or variations of that question.

Unfortunately, the answer is “No”.

It really shouldn’t be that way.  Interest rates are hovering around 4.5% — the lowest on record — for 30 year fixed rate mortgages. What that means is that, everything else being equal, a $300,000 house is much cheaper to live in month-to-month than it was even a year ago.

House prices, themselves, are low.  Yes.  A lot of that has to do with foreclosures and the like. However, even people who have equity in their homes are pricing them low in order to sell them.

So why aren’t houses selling and why aren’t prices moving back up?

FUD – Fear, Uncertainty, Doubt

FUD is something that’s used in business a lot and in politics to get people a little nervous about the other guy or the other product or just plain “the other” whatever that might be.

In the housing market the FUD is a combination of people’s insecurity about their employment, about the money they’ll need to live on now and into retirement, about home prices and about neighborhoods.  It doesn’t help that we are in the midst of an election year where there is also a ton of uncertainty about what policies will be put into place after the election.

Maryland is strongly Democratic (with a capital D) but with all the screaming and yelling in the rest of the country it’s hard to tell how thing will turn out.

The bottom line is that when people are filled with FUD they don’t act.  They sit on their money, their homes, their jobs.  They don’t take the chance that things will change for the worse if they sink their life savings into a new home.

Hunkering Down

So it looks like most people are going to hunker down.  Don’t get me wrong.  There are always people buying and selling real estate. 24/7. Christmas. Halloween. Sunday. Whenever.  It’s just not as many and because it’s not as many it looks like home values are going to stay pretty flat for awhile.

Better than going down.

This is purely anecdotal and hyper-local.

A lot of home sellers that have plenty of equity in their home are starting to “Just Say No” to ridiculously low offers or outrageously nit-picky repair requests from would-be home buyers.

This is a good thing.

You see, there are puh-lenty of foreclosed homes and short sales (which should really be called “forever” sales since they take forever to close) and some of those homes are being sold at fire sale prices.  Bargain basement. The “good deal”. People who have equity in their homes are being realistic about the current market and, more importantly, the current market value of their home.

It Doesn’t Pay to Wonder Why The Seller Is Selling

It doesn’t matter what they paid for it in 1982.  It doesn’t matter if they’re selling to take a job, get divorced or pay medical bills.  At some fundamental level the reason people sell their house is because they….want to sell their house and use the money for the next phase of thier life.

By offering a price that is significantly lower than the list price, home buyers only manage to insult the home seller and cause them to dig their heals in even more.  Even if the home owner accepts a low price, the home buyer who then nit-picks the home inspection items will almost certainly piss the seller off to the point of killing the deal.

A Good Deal Is A Good Deal, Learn To Recognize One When Your See It

Admittedly, the home buyer wants to buy the house for the least amount possible with the least amount of repairs.  Yet, after negotiating a low price, closing costs and a home warranty it may be time to pause.

Recently, I’ve had the pleasure of representing two separate home owners who have stood their ground when the home buyer pushed too hard.  They both killed the deal.  Luckily, for one another buyer was waiting in the wings ready to step up to the plate and make the purchase.  The other one is willing to wait until the right offer comes along.

Here’s the moral to this story.  Yes, it is still possible to get a hell of a deal on a decent house in the neighborhood you want to live in.  It is even possible to get a killer interest rate so your monthly mortgage payment is actually pretty darn low. However, you can only push so hard until the seller with equity and the ability to make a decision without consulting a bank says “No More!”.