Jim Minkey

Last night Lesley and I watched the movie "Date Night" with Steve Carell and Tina Fey. It was OK...not the funniest comedy I ever saw but for the most part enjoyable. Anyway, Tina Fey plays a Realtor and in one scene early on she's showing a palatial mansion to some buyers and as they're walking out of the place she tells them the house was originally listed for $1,850,000 but it's been reduced since the market is slower and it's now available for $320,000. She asks her clients if they want to write an offer. They respond by saying; "No, we think the market is going to go even lower".

OMG...did that sound familiar! The question is, when is a deal really a deal? Or maybe another more relevant question could be...when do these rationalizations actually amount to inertia? My good friend and blog reader Michelle Kwok sent me a message the other day on facebook. Seems that she was chatting with a friend who told her she was looking to buy a house. She said:

"I am not in a hurry. I want a good deal, like paying about 60-70% of the value of the house." I asked her, "Value now, value in 2006?" Turns out, she wants to buy a house and pay 70% of the current value, in Redwood Shores, Palo Alto, Menlo Park. And then she said, that she is patient, and is willing to wait for short sale/foreclosure."

It's funny because I had a guy I worked with, temporarily, about 5 years ago who told me roughly the same goal. Not sure what happened to him. It's just, knowing what I do about the market around here, it's hard to take seriously a buyer who states that they want to make an offer of $650,000 on a million dollar listing. Call me zany...but me-thinks it's a waste of time. Oh, and that story in "Date Night"? That reduction would amount to over 80%. Folks...that was a joke. It's a movie...they were joking. You see, it's a comedy and they joke like that.

It's not that I'm saying the market doesn't decline...of course it does. It's just simply that courageous buyers who take a shot are the ones that make the market decline. One small detail...they're not getting 40% discounts either. The buyer's that wait, strategically, and re-enter the market place at exactly the right time (the literal bottom) and scoop all other competitors...simply don't exist. Unless, of course, they're characters in a romantic comedy.

I think it's the buyers that write offers when they have no competition, under asking that get the best deals. It happened after 9/11/2001, it happened in the 4th quarter of 2008 and in most of 2009. Those folks bought when others didn't. It's that simple.

It never fails. When someone sells their home they always feel like their place is the absolute best home in town. There really isn't any competition in their minds. Certainly everyone looking at this place will be overwhelmed by it's unquestioned greatness and line up to give them offers that will undoubtedly dazzle them. Right?

It happens all the time. These same sellers would be very objective about your house or my house...but not their own. Human nature I guess. Many sellers listen to their agent's opinions about the state of the current market, read stories in the media, and on blogs like this, about the state of the current market and even listen to the experiences of friends and family regarding the state of the current market...and conclude that it really doesn't apply to them.

I know a listing in Foster City that's, in my opinion, priced $100,000 too high. It's been on for a couple of months now and has even received a couple of offers. Both offers came in...$100,000 under asking! The sellers said no. The comical thing here is the perception by the seller that they have the leverage to motivate the buyers up to their price. They don't. In this market with ever renewing inventory, that actually seems to be increasing, a buyer would just as soon wait as pay too much for a house. The seller's bravado is actually pretty hallow in the face of that fact.

The truth is that this is a market of diminished seller expectations. What a seller thinks is big and powerful really isn't so much upon close inspection. It's humbling actually. For 10 years around here the seller got exactly what they wanted and then some. Their expectations were routinely exceeded and stories about wild overbids were taken as the norm. It's actually quite fascinating that sellers still cling to that expectation in 2010. It's also interesting that most sellers, after a couple of months of nothing from a marketing standpoint, finally understand. Seller's that absolutely, positively won't take anything less than $1,100,000 for their house when the listing is being signed are the one's suggesting a price reduction down to $999,000.

I guess experience really is the best teacher.

A few weeks ago at an open house I was working, someone asked me if the bonus room downstairs was done with a permit. The sellers had converted some storage space into a little room that they watched TV in and it was actually really nicely finished although there were no windows in that room.

"No, it sure wasn't" I said. "It's not in the square footage in the county record either."

She got this very worried look on her face and asked "Well, can't the city come and force us to remove that room? It's illegal, right?"

This conversation has happened alot in my experience and I find it to be sort of amusing. This person appears to have some fantasy that a SWAT team is going to show up out front after they buy the place, burst into the house with guns drawn and force that offending room to be returned to it's original design! Umm...if that happens I sure have never seen it.

In Daly City and Pacifica for example, there are hundreds of houses who's design has living space above the garage and that garage space has square footage equal to the upstairs living space. Preposterously large space down there at that! Over the course of the last 50 plus years up there, I'll bet two thirds of those homes have added living space into that cavernous garage space down there and still keep room for a car! In my experience, a large number of those additions were done without permits. The bottom line is the unwarranted space is disclosed...and nobody cares. They actually want that living space anyway.

Having said all this, we now come to the square footage topic. I can't tell you how many houses I've seen where the public record has the actual square footage of a house listed incorrectly. This happens all the time. A seller, or maybe a seller in 1968, adds a room or two to the house...with permits, yet somehow the new square footage never made into the county's database. A 2200 sq ft house still shows on county records (and thus on Zillow...etc) as 1550 sq ft.

There's plenty of things that need permits and I sure do want to know that they are in place. Second story additions come to mind. Anything that's structural for that matter. Honestly though, sun room additions, bonus rooms carved out of old storage areas that folks use as a guest bedroom, and even some garage conversions don't really bug me that much. Often these rooms actually add some real value to a house...whether they have the city's official stamp of approval or not.

Posted by Jim Minkey on June 10th, 2010

Last Sunday, at my open house at 1067 Hewitt Dr in San Carlos, a young guy asked me about a career in real estate. He'd been referred by one of my clients and had come especially to meet me and pick my brain a little. He works at Yahoo and had just gotten his real estate license with hopes of making a career change. He had almost all of the same pre-conceptions that I did 20 years ago about this business and it was sort of funny and fun to talk to him. Somewhere deep down he thinks 1) I can make alot of money in real estate, 2) Realtors don't really have to work all that hard to make all that money and 3) I'm really so much smarter and so much more capable than most of those people I keep seeing holding these open houses. I know he thought these things because that's what I thought way back when and he confirmed it when I asked him. Ultimately, he said he wants to try real estate out. Since I've heard that particular expression about 500 times in 20 years I gave him my standard reply...you don't try out real estate, real estate tries you out!

I'm here to tell you...real estate is a never ending seige. It's an incredibly hard business. That's the truth. When I see the marketing of various discount brokers that diminish the work that "brick and mortar" agents bring to the table it makes me crazy. They really have no clue. Actually, I think they do have a clue...it's just that their pitch cynically manipulates public misconceptions to their own end. Alas, that's another story.

When you start in this career the biggest initial hurdle is how to get clients. It's kind of tough to get your hands on all that money without a client or two and it's not the easiest thing in the world to get folks to make the biggest financial decision of their lives with somebody who just got their license, has had very little training and essentially is clueless about the process. Oh yeah, how about that gravy train of cash all those realtor types are rolling in? Last year the average income of Realtors, according to the National Association of Realtors, was $36,700. In San Mateo county a year ago 65% of agents sold 2 or less homes in a year.

Here's the thing, the vast majority of successful agents I know who do indeed make good money...have earned it! They've worked their butts off too. I can't tell you how many amazing stories of personal triumph I've heard among real estate agents. I know many immigrants who have come to this country with very little and who knew almost nobody and have become successful in this business. I admire them greatly. A couple of years ago and agent and friend of mine, Denise Pearson, died when an aneurysm in her brain ruptured while she was working out. I went to her memorial service...along with about 100 other agents I knew, and I was profoundly moved by the pride I felt at being a part of that group of people. They were all survivors, every agent I saw there were just terrific people, who care deeply for their families, their clients and their industry.

I'll say it again...I'm proud of what I do and I love doing it. Here's a link to Denise's obituary. It pretty much says it all:

DeniseObitSFChronicle

I don't know, there's something about this zany viral world we live in that never ceases to amaze me. Ultimately, it's just flat out wacky. Things happen that were totally impossible just a few years ago and transparency has sometimes reached absurd new levels. Let's take the obvious, facebook, for example. Here's a couple of actual updates from my news-feed today:

"Just had my carpets and windows cleaned. Everything is spring fresh!"

"My wisdom tooth! ow, ow , ow! I think it weighs like a pound!"

"looking forward to hangin' with John Stepanek tonight "

"People are driving funny today..."

"Love my friends, love coffee... this morning I had coffee with friends, what a great morning."

"Excited about the new comforter/bedding set I got yesterday. TOTALLY changing up the colors/shades of the MB."

It's deep stuff, huh? Where would we be in life without the knowledge gleaned from social media? We may actually have real conversations or something. Not that I'm judging or anything...I'm on facebook all the time.

Well, into this transparency fray leaps the wonderful world of Trulia Voices. Have you seen this site? Trulia is a real estate search site and when you're there you should check out the tab "advice". There you'll find Voices and it's Q & A section. Why do I mention this? Well, because this week we have an entry from a real live Foster City homeowner who takes real estate transparency to a new level. The first three words on this "Voices" entry...HAVE TO SELL. Hmmm...the seller goes on to share that they listed the home on May 1 and took a price reduction earlier this week. The seller then asks "When should I lower my price again?" The seller even suggests a new price $10,000 lower than the recently reduced price! Don't believe me? Check it out for yourself. Now that's a poker face! Or not! It's not exactly a realtor's dream come true. Your client negotiating downward in the public domain for all the world to see.

What's really funny to me is the answers! A bunch of folks from out of the area chime in, including one from the Chicago area. But really, you've got to take your hat off the the wonderful Vicki Moore of San Mateo's Alain Pinel office who says "My suggestion is that you delete this question immediately."

Like I said...only in the brave new virtual world! I love it! Oh, yeah...if you're a buyer this may be a decent opportunity?