The Tampa Florida Broker’s Corner

To no surprise, today Bloomberg mentioned Tampa as one of the worst areas for home price declines in the nation. If this surprises you, you need to take your head out of the sand. I predicted at the beginning of 2007 that prices would need to come down in Tampa by 20% and was laughed at. Well, I hate to say I was right but I hate even more to say that I may have been conservative in my estimate. The price run ups and over speculation in Tampa has only been part of the problem. HOA fees, lump sum assesments, high property taxes and even higher insurance rates packaged with lower wages compared to other parts of the nation doesn’t make the area affordable for even employed borrowers with money down. mY revised prediction is you will see many properties in the Tampa area sell for 50% less of what they last sold for. This scenerio is holding true in other parts of the nation and Tampa will not be buffered from significant losses….. yeah I know, I hear it all the time….. “but its FLORIDA, the sunshine state, people want to live here, the baby boomers are coming”. Get over it!

Here is the reality….. First, we are looking at recession. Heating prices are up, gas prices are up, property values are too high, insurance is too high, taxes are too high. Those baby boomers are finding places to retire but it AIN’T Tampa. As a matter of fact, I have spoke to many Floridians that are ready to retire and are heading to North Carolina, Tennessee, Texas and South West Colorado as well as going back to their place of origin…. the midwest. And besides…. who minds the snow when you don’t have to drive to work in it every day?? Especially when you can live more comfortably….. you know, buy groceries and have heat.

Some say that Florida is a target for foreign investment. You bet! But foreigners are stupid. They read the news and watch what is going on. They see that prices are falling and are predicted to fall more. Why are they going to buy now if they can buy later at a huge discount? And if you were a foreign investor looking for a beautiful vacation home would it really be in Tampa?? There really isn’t a lot of beach action in Tampa and a view of the port I am sure just isn’t what these folks had in mind.

2008 will be filled with a large inventory of foreclosures. There isn’t going to be enough qualified buyers to absorb the inventory so the banks will start auctioning these properties off to clear the books. Many of the starting bid prices will be at 50% of the actual “listed price”. And my prediction of a government bailout will hold true. We have already heard talks of plans in the making. And I am not talking about the government just pumping more money into the system or cutting rates or even bailing out the banks. I am talking home owner tax breaks, subsidies, charitable contributions for those facing forecloser. Oh you wait and see.

On the bright side, those of you still holding property and trying to rent to cover payments but find yourselves upside down every month…… rents will go up. And you may even see incentives come your way. If we head into recession and jobs are lost, you may think about applying for Section 8 housing approval. Unemployed people will go on assistance and the government will pay the rent.

Growing up we sometimes fall prey to the pressure of our peers. When I was in school I can recall the need to “be cool” or “fit in” really didn’t start until middle school. These days I find my six year old twins falling victim to pressure of the latest fad. But this doesn’t seem to bother me as much as the under current of peer pressure and politics that plagues the Realtor community. And while there are laws and an ethically code in place to supposedly “ensure competition and protection of the public” it is interested to find that the peer pressure to not “buck the system” is blatant and the “rogue” Realtors that are out there trying to fulfill their ethical and legal obligations to their clients and the public are boycotted and bad mouthed. So what gives?

First, let me start with an article that brought me to write about this issue. There is a Realtor columnist for a local association in another state that writes monthly on real estate or Realtor ethics. He usually writes about some case scenario that is frequent yet questionable and tries to give insight on whether what is occurring is within the ethical code or not. Often he is right on…. other times it is clear that his view of “ethical” is influenced by the peer pressure or backlash he would receive if he didn’t answer in an “acceptable” manner. The latest article dealt with the question of whether or not a Realtor is being ethical by putting a “for sale” sign in a clients yard with a “coming soon” rider on it and hasn’t submitted the property to the MLS yet. He answers by saying “it depends on what the seller’s instructions were to the listing broker.” If the seller expected the property to be submitted to the MLS and actively marketed immediately and was not aware of the coming soon campaign, then he believes that there could be a possible ethical violation…. with this I agree. However, what really rubbed me the wrong way was the blatant peer pressure answer that he gave as a side note. He goes on to say…

“Something else the listing broker needs to be aware of is what other brokers might think of a listing agent who has a sign in a yard and has not submitted it to the MLS. How important is your reputation, even if what you are doing is ethical?”

He goes on to say that even if the seller requests that the agent do the above scenario, giving the listing agent the opportunity to grab a buyer themselves and thus save the seller money on commissions, that this tactic could be viewed by other Realtors as unethical. Reading between the lines this columnist is saying that while if done right would not necessarily be a violation of the code of ethics but it would put you in bad standing with your peers. And you don’t want to be boycotted by your peers because when they refuse to show your clients listing, you are losing potential buyers for that client.

Now, you may ask how this would be considered ethical….. to refuse or avoid to show your buyer client particular listings because you are not happy with the listing agents marketing strategy. Well, it seems that some tactics and questions of “ethical” are more widely accepted than others. Surprised? I’m not. I have been in the game long enough to see some of the long timer egomaniacs that play this game and influence the new comers to play along. And the newcomer that says “that doesn’t seem right” is hushed and trained not to buck the system.

The code of ethics is said to be in place to protect the public and the integrity of the system. But it is clear that the “good ole boys” use it to their convenience. For example, the code states in Article One that we must deal with EVERYONE honestly… hmm…… I lost count of how many lies I have been told regarding offers, pre-approvals, property information. Article 1-3 says that we should never deliberately mislead a property owner regarding value in order to secure a listing….. hmm….yeah, that doesn’t happen ever. Or “we shall submit offers and counter offers objectively and as quickly as possible”…. hmmm….. I have actually been told by Realtors that they would not present my offer at all because it was a “slap in the face”….. hmm…… There’s more….we as Realtors should always respond to another Realtors inquires. However, I have lost count as to how many times I have tried to gather feedback from a Realtor showing my listing or obtain listing information and have never been responded to. The code says we are not to misrepresent a property but there is an endless count of MLS violations regarding square footage or even the pictures used. I could go on for days. I could also spend all my time filing complaints against these folks and neglect my own clients. Not. How would I get my listings sold if I was the whistle blower?? Thus the point.

The Realtor Code of Ethics is there and everyone makes mention of it and how it is there to protect the public. The problem is you have the fox watching the hen house and the fox is afraid of the hens!

Want to invest in real estate but think there isn’t a safe place to make the jump? Think again! Some Denver metro areas are swarming with investment activity. Bad press and some of the highest foreclosure rates in the nation have pushed this area close enough to the bottom that investors are quietly snatching up properties and laughing all the way to the bank. It has only been a matter of time and the stars have aligned. Lets look at the data……

All the foreclosures that Colorado has experienced has pushed many owners back to renting. Historically the national homeownership rate has been about 63%. We have topped that over the last few years with a record rate of almost 70%. However, this number is at a steady decline, currently at about 68%. All the creative financing which led to the foreclosures has created a boom in the demand for rental property. The folks that are forced out of their home because they can’t pay their adjustable rate mortgage aren’t necessarily bad people that don’t pay their bills. And these people still need a place to live after foreclosure. The interesting thing is the rise in bank owned properties has lead to downward pressure on prices. And with the rising demand for rentals, rents have went up and vacancies have went down. This is the perfect investor opportunity.

Investors are happy to see purchase prices less than 150 times rent. Well, in many Denver areas we are seeing prices that are less than 100 times rent. There are over 400 properties listed under $100,000 and many of these are renting for over $1,000 a month. Estimate your property taxes at about 1% of the purchase price and your insurance at about .5% and consider a 7% interest rate. If you bought a property in Thornton for $100,000 with 80% financing and rented it at $1,200 a month you would be enjoying over $500 positive cash flow. Think this is a pipe dream? Its real and happening right now. As a matter of fact, many of these bank owned properties are experiencing multiple offers. And I have talked to one investor who has purchased 40 properties in this year alone. Properties are being picked up at half of what they last sold for. One good example is a house my mother in law sold in 2003. She sold back then for $185,000. It is now bank owned and listed for sale at $119,000. This may sound like a good deal but I bet it sells for less.

So could this scenario hit Tampa? Absolutely. However, two major obstacles to positive cash flow in Tampa is the high cost of property taxes and insurance. Prices will come down eventually…….. after everyone leaves the state. And if you think that is an exaggeration….. go try and rent a U-Haul these days. When I ran into problems with the delivery of my truck I found out that there are more trucks leaving Florida than coming in. The U-Haul centers won’t transfer trucks to other locations and if you try to call Penske, they will charge twice as much IF they have a truck available. True story.

I have been surprised to see prices start to come down more quickly in parts of Tampa but I think they still have a ways to go. In January I said that prices needed to drop 20%. My husband was baffled by my estimate saying it was too steep. Well now there are reports out there that top economists estimated a drop of 28% needed based on June 2007 numbers. The slide isn’t over. So buckle your seat belt and ride it out. There will eventually be an upside. You will eventually be able to buy property in Tampa for half of its last sold price. In the mean time you may think of investing in the West. Taxes are lower, insurance is lower, rents are rising 3-5% and vacancies are falling below 5%.

If you want more information email me andrea@1228home.com

It’s a buyer’s market! That’s old news. Great deals are everywhere for buyers with money to put down and decent credit. Further, buyers are out there looking and even buying today. They aren’t sitting on the fence. Granted, there are fewer buyers than there were two years ago but that doesn’t mean things aren’t selling. To the contrary, things are selling….. and there are many sellers getting multiple offers within only a couple of weeks. So, how do you sell in this market and sell quickly? You may be surprised that it isn’t by the fancy gadgets or dog and pony shows that Realtors are pushing these days. You know…. I am sure you have heard them all from bragging of full color print ads in the newspaper, international websites, weekly open houses, “talking houses”, 24 hour recorded messages, balloons, craigslist, auctions…. the list goes on and on. There is no mystery or no magic potion….. it all comes down to product and price.

First of all, the buyers that are shopping in today’s market are savvy. They aren’t the “make a quick buck” speculators that gave the market such a run up over the last several years. These buyers are the buyers that saved for a down payment and have patiently waited for the market to turn. These buyers are looking for a long term investment that is going to give them long tern results. They are looking for the house of their dreams at a price of their dreams. You can’t buffalo these folks with smoke and mirrors, balloons and gadgets. Further, they aren’t looking for you to pay their closing costs or give them a trip to Hawaii. They want the lowest price and best interest rates available and they don’t want to have to do work to a house. They are looking for move in ready.

So, if you want to sell your house quickly you are going to have to price it to sell. You are also going to have to put the property in top condition. Make repairs, freshen up the landscaping, power wash, replace worn carpet and CLEAN. Yeah, I know everyone has heard all of this before. And Realtors are out there begging sellers to make even the smallest improvements. But it is amazing that sellers still are in disbelief that these things need done or that it really makes a difference. Well, I can tell you from personal experience that it does. I am not only one of the Realtors out there pushing sellers to make improvements but I am currently a seller in today’s market. And as a seller, I took my own advice (even though my husband was reluctant to push more money into the house but he trusted me. And here is how we got MULTIPLE offers in only a few short weeks:

First, we didn’t put the house on the market until AFTER all the improvements and repairs were done. We went room to room and made a “to do” list. We replaced worn carpet, we painted the exterior and mulched the flower beds, power washed, boxed up all the “unused or unneeded items” and got them out of the house. We rearranged furniture, organized closets and repainted some of the bolder colors in the house to neutral tones. We made the house look like a model home.

Then I went room to room and took pictures, rarely happy with the first take….. I took pictures at different angles and used A LOT of light. We took pictures of the outside, front and back. We even took pictures of the house in the evening with all the lights on….. talk about dramatic. We took upwards of fifty pictures. After I had pictures that really highlighted the homes best features, I made high gloss brochures with pictures on both front and back. I gave a very detailed description of the features, new additions or repairs, etc. and included the price. Now, many Realtors argue that you shouldn’t put the price…. I beg to differ. And the more pictures the better.

As for price, well the husband and I differed on opinion on what we could actually get for the house and at what price we would actually get people to look. I always tell clients, everything has a price…. and your motivation will determine your price. You could say we were fairly motivated. My husband accepted a job out of state and was expected to start August 27th. We put the house on the market August 8th. We priced our home “in the middle” of the competition only because we felt we had time and we knew our house showed far better than the competition. Two years ago I would have priced at the top no questions asked. And, we knew time was of the essence….. we knew we would come down in price within two to three weeks if we weren’t getting any activity.

Being in the business, I told my husband that I would be satisfied with a couple of showings a week and a contract within 90 days. Well to our surprise we started to get calls the first day on the market. Further, we had two offers in the second week. Now, granted they were offers eight to ten percent off the asking price but still not bad for the first two weeks. Call it a bold move or just plain crazy; we didn’t accept the first two offers. Let me tell you why….. the activity we were getting told me that there were plenty of qualified buyers for our house and we still had time on our side. So we kept showing the house until something changed our motivation. This change occurred when we realized we would be better off trekking across country with two kids before snow hit. So we dropped our price $10k and received another two bona fid offers with a third very interested party working on finalizing their financing. We did negotiate a deal that suited both the buyer and ourselves and it was more than the first two offers.

And here is what I learned from my own experience trying to sell in a buyers market. Make it shine, DEMAND professional pictures and LOOK AT THEM, put a sign in the yard with a brochure box and keep it FULL, put the listing in the MLS and INSIST on “showcasing and more pictures” on REALTOR.COM, offer a competitive commission to cooperating agents and most importantly….. PRICE IT CORRECTLY IMMEDIATELY. Don’t chase the competition or chase prices down. We had buyers literally come up and knocking on the door wanting to see the house, we got calls from folks that were “just driving by”. There is no magic news paper ad or no amount of website listings that will sell your house…. period. Bottom line, price it right, make it look good and then get the pictures out there. We went under contract in 30 days and expected closing in less than sixty days from date first listed for sale.

Luck…. hardly. We took just under $40k less than our last appraisal. Were we willing to take less than our last appraisal?….. absolutely. Check your motivation as everything has a price.

For long time real estate investors the media hype about the sky falling in the housing sector can be equated to the latest news on the West Nile Virus or the latest shark attack on the beach during Labor day weekend. Sure somebody was seriously hurt or became very sick but the news really doesn’t have an affect on them. They aren’t shying away from the market. On the contrary, true real estate investors are out there and the worse the news is, the happy the investor becomes. They are watching prices and areas like a hawk. They are crunching numbers, viewing properties and yes, still purchasing property. As a matter of fact, they never stopped. But what you must understand is we are talking about true real estate investors…… not the weekend warrior (speculators) that started buying multiple properties on shaking credit terms in the last couple of years. No, we are talking the guy that comes in, sees a property and pays cash and wants to close in two weeks or less. So which one are you? Investor or Speculator?

The true real estate investor is the one that sold property to the speculator, creating the “bigger sucker” trickle down. The investor is the one that started selling off the portfolio a couple of years ago to become more liquid. They held some rentals with positive cash flow and have been raking it in, waiting for the numbers to make sense again. Always on the lookout for a deal and ready to act quickly but never making the decision based on the media hype or popular thought. As a matter of fact, the true investor works in exactly the opposite direction of everyone else. While everyone is out there trying to sell their property out of desperation, the investor is crunching numbers looking for the next deal….. or the next place to call home.

So, if you are looking at buying right now, you aren’t alone. Its okay. And if you have played your cards right…. meaning you have a good down payment and excellent credit…… this may be the time for you to find the house of your dreams with VERY favorable credit terms (meaning historically low interest rate, not free money). In order for the purchase to make sense, you have to keep in mind that this will be a long term investment. Its not a get rich quick, multi level marketing scheme. Plan to hold the investment for at least 5-7 years. Make sure the numbers work for you. Don’t buy an investment property that doesn’t bring positive cash flow and carry an equity position off the top. Further, don’t buy a primary residence that is out of reach. Finally, don’t expect that this market will bare the “perfect house”. There is no such thing as the perfect house. You may find one that fits much of your needs but is missing the one or two features you were really hoping for. Keep in mind that if the location is perfect and the “bones” are good, cosmetics are easy to fix. And often times the seller may be willing to do some of the cosmetics to close the deal.

Make sure you know what homes in the area are selling for and even check the rent rates for the area. Some local areas have actually seen an increase in value of three percent over the last six months to a year, while other areas have seen declines of ten percent or more. Don’t expect to go into an area of appreciating value and get an offer accepted that is ten percent less than the last sold comparable. But don’t be afraid to make the offer either. Finally, keep in mind that some price ranges are fairing better than others. For example, in Hillsborough County the price range on single family homes between $300,000 and $400,000 has faired far better than property priced under $300,000. This price range has been most resilient and the seller concessions ratio has been the lowest. Further, this price range has seen the smallest increase of DOM (days on market). As for rental rates, if you know the going market for rent in the neighborhood, you will be looking through the eyes of an investor. You can determine if you would be able to make a positve cash flow on the property in the event you had to move in two years. Cover your bases. Have an emergency exit strategy….. a back up plan, just in case.

There are deals to be made and while we may not have hit bottom, there are real risks…. expensive risks…… to purchasing at the bottom. Despite what you may have heard, buying a home at the court house steps isn’t always what its cracked up to be. There is no guarantee to clean title. There may be liens, back taxes, not to mention unforeseen damage to the property itself. And buying bank owned property may not be much better. It will cost the bank upwards of $40,000 for the foreclosure process and they will try to get that money back from you in the sales price. You would be much better off to catch a seller that is close to foreclosure but holding equity in a property. This will give you time to inspect the property thoroughly, get a title search and policy to ensure liens are taken care of and have flexibility in closing/financing timelines.

Bottom line, do your homework…… we are clearly on the downward slide. Now that the FED and economists have caught up to reality and they have had a clear change in sentiment regarding the housing market, I believe that we are closer to the bottom. After all, it seems the analysts run about six months or so behind reality. Remember, we may sit in the trough for a few years, but that is how the cycle works. To buy close to the bottom and ride through the trough and back up the other side is far better than catching the ride on the uphill swing. You have much better negotiating power on the slide than the climb.