About Chesterfield County, VA

The economic news continues to be grim. The equity markets have been in free-fall. Daily drops of "only" 300 points are heralded as a positive. The credit markets remain frozen. And more money is chasing commodities and government bonds, pushing yields on those investments ever lower.

One bright spot in this debacle? Oil prices have dropped, leading to dramatic price declines at the gas pumps. So there is SOME good news for the average American.

But what to do if you would like to make up some of that dramatic value decline in your stock portfolio?

I suggest you consider investing in income-generating residential real estate. Whether that means your "first" real estate investment, perhaps a small, modestly priced, single-family home, or your 50^th, in major multifamily properties, there are some amazing opportunities.

Please note, I am absolutely not talking about speculative real estate investment, like building custom homes for resale, or "flipping" homes for quick cash. Leave that to the professionals and the risk-takers. But if you have cash to spend, and a willingness and ability to invest time and/or capital up front, income-producing residential real estate might be the best game in town. Here are the Top 10 reasons why:

1. There is a glut of inventory. Supply far exceeds demand. The basic laws of economics mean this favors the buyer.
2. Even in a down market, some people have to sell. I crassly call this the "Three Ds" - death, divorce, disease. Add relocation to this list and you have the basic reasons for "irrational" selling, i.e., selling in a down market.
3. Investor-buyers evaluate real estate differently, and can identify overlooked opportunities. They are unemotional buyers. A home that doesn't appeal to the homeowner-buyer, who needs to L-O-V-E a property, could be a GREAT rental. If you can identify these undervalued properties, you can essentially "buy" equity.
4. Any necessary repairs or upgrades may depress a property's price artificially below what I call the property's "intrinsic value," what the home should be worth in good condition. If you can do repairs or upgrades, you can add value exponentially greater than the out-of-pocket cost.
5. Real estate is still a highly leveraged investment. In real estate, you need invest only 5%, or 10%, or 20%, of an asset's value in order to control that asset and generate income.
6. Foreclosures and job losses mean there are more deals, and even "steals," out there.
7. The macro-economic picture should mean a higher demand for rentals, as people are pushed out of homeownership by foreclosure or job loss, or delay homeownership to save a down payment.
8. Real estate remains a tangible, appreciating asset. Get a renter into a property and have that person pay to build your equity.
9. Income-producing real estate provides substantial tax benefits, including depreciation write-offs.
10. Income-producing real estate can be sheltered from capital gains tax liability in your lifetime through Section 1031, or "Starker," tax-deferred exchanges. Your beneficiaries get a stepped-up basis in the property when you pass.

Now, real estate investing is NOT for everyone. If you do not have the time or the inclination to deal with tenant issues. or the money to hire a professional property management firm to deal with those issues for you, rental real estate may not be for you. But if you have always wanted to give real estate investing a shot, and you have significant cash reserves, there are some amazing opportunities out there. Give me a call. I'd be happy to help you. [;)]

P.S. No matter what, USE AN EXPERIENCED BUYER'S AGENT who knows how to evaluate income-producing property! NOT your sister's best-friend's Mom. No offense to your sister's best friend's Mom, of course.

Richmond Real Estate

Click here for homes for sale in Cary Street Road Neighborhood

Architectural Styles: Styles here vary widely within the build dates between 1910's - '60's. Most homes are traditional in floorplan, with 2-story Colonial facades, but also in varyious Revival architectural styles .Typically,they are architect-designed, and built at the highest quality and amenity levels.

Average home price: $1,025 million (ranging from $400,K to just under $4.million)

Schools: Serviced by Richmond City Schools of Munford Elementary, Albert Hill Middle, and Thomas Jefferson High School. Plus the highly sought-after Open High, and Community High and the International Bachelaureate Programs and the Governor's School Programs. Or by several exceptional Private schools ,several exceptional Private schools St. Christopher's, St. Catherine's, Steward School and Collegiate are within a few minutes drive.

Recreation: Provided by nearby country clubs and private facilities, or as this area is located within the Richmond City limits, there are parks, the James River and Recreation programs to explore. And for those seeking 'recreational guidance', many seek out the SEALS program (especially after the Holiday Season...eh hem). If you prefer water based recreation, try rowing, sailing, yachting clubs, Virginia Boat Club, Richmond Yacht Club. Or if you prefer league sports, try volleyball, soccer, or tennis, plus there are great youth programs in Little League, Lacrosse, and swimming. Don't forget equestrian interests. There's also a premier (indoor) climbing gym, just across the river and a sports park for practicing your batting or golfing skills. Don't forget Socializing and Golf pursuits through many of the private country clubs, especially those located just west, into Goochland county's 'Country Club Corridor'!

Transportation: For business, shopping, etc. the most oftened travelled route is the east-west thoroughfare of Cary St. Rd./River Rd., or/and Rte 6/Patterson Avenue. Both of these offer quick and easy access to Interstates and state routes that circle and bisect the greater Metro area. Truly a very convenient and central place to live...very comfortably.

Well, I got radio silence in response to my October 10, 2008 post on dual agency. I'm actually rather surprised. I thought - and hoped - some more experienced agents might try to tell me why I was wrong, and why dual agency wasn't a bad idea. Oh well, I would have liked to have read the counter-point.

I'm going to pick up where I left off on dual agency. The example I was working with: you have a seller, with whom you have a listing agreement obligating that seller to pay you the standard 6% commission for the sale of the house, to be split 3%-3% with a buyer's agent. A potential buyer, UNREPRESENTED, walks in to your Open House, falls in love with the house, and wants to buy it RIGHT THIS MINUTE. I take the position that you shouldn't represent both the Seller and the Buyer, even though it's legally permissible to do so in Virginia. So what CAN you do?

First, you can write up an offer for the potential buyer, so long as that buyer understands that you represent the Seller's interests, and so long as you do not share any of the Seller's confidential information. In other words, you can commit the potential buyer's offer to paper, write it up with all the appropriate contract forms, and present it to your client, the Seller, for consideration. In this instance, the Buyer is merely a "customer," not a client.

[NOTE: I am not sure whether you can advise the potential buyer on non-price terms that might make the offer more attractive, like (i) a short closing timeline; (ii) waiver of inspections, or short inspection timelines; (iii) waiver of financing or appraisal provisions; etc. I feel like this is a grey area, and you might be able to say something general along the lines of "these types of non-price concessions are not atypical, here's how they work, they can make your offer more attractive." But it makes me uncomfortable, and I think you would have to be V-E-R-Y CAREFUL not to cross any lines. I wish Lem Marshall, General Counsel to the Virginia Association of Realtors and real estate legal expert extraordinaire, could clarify this with some of his wisdom....]

A second option is to refer the potential buyer to another agent, and for that agent to represent that buyer throughout the transaction. This is called "designated agency." Usually, an agent within the same brokerage becomes the buyer's agent, the listing agent being "designated" by the broker to represent the seller and the buyer's agent being "designated" by the broker to represent the buyer. For this to happen, the listing agent would say something like this to the potential purchaser standing in the living room frothing at the mouth to write an offer on his or her Open House property:

"Look, I represent the Seller in this transaction. If you want to be represented also, I can recommend someone who will do an excellent job representing you and advancing YOUR interests."

If the potential purchaser agrees that (s)he wants an agent, and (s)he would like you to recommend one, the listing agent then contacts the agent they would like to "designate" and negotiates a referral fee on that buyer-side commission, typically 20%-30% of the 3% buyer's agent's commission. Oftentimes, agents may have pre-existing referral arrangements, where they refer all of these types of referrals to one or two specific pre-selected agents. For example, this works well within the team structure.

Why don't most listing agents recommend designated agency in the "customer at the Open House" example? I think there are three (3) main reasons:

1. The lure of the entire 6% commission is strong, so listing agents prefer to (i) represent both sides as a dual agent; or (ii) represent the Seller ONLY, theoretically keeping the buyer as a "customer," not a client.
2. If the listing agent recommends designated agency, the potential buyer may get spooked, because they might assume you won't recommend anyone who is any good. But now the buyer has decided they really must need representation, so they choose to work with their brother's sister-in-law's best friend as the buyer's agent. The listing agent loses a potential referral fee.
3. Ignorance or inexperience. Some agents just don't know any better. But ignorance of the law is no excuse. If you violate your statutory or common-law duties to your client, the Seller, or if the buyer does not understand that you are not representing him or her and relies on your advice in the mistaken belief that you are advancing their interests, the fact that you didn't mean to mislead or didn't know any better ain't gonna get you off the hook with the Real Estate Board.

Here's the deal with designated agency. The potential buyer in this example, a stranger off the street who just walked into your Open House, has to trust you to recommend someone good. If they don't trust you, but you have now given them the song-and-dance about why representation in a real estate transaction is so important, they are going to find their own agent. And I'm pretty sure EVERYONE on the planet knows SOMEONE, usually several someones, who is a Realtor. So that potential buyer might just feel better with someone (s)he knows, even if just tangentially. And isn't that a reasonable conclusion?

But the problem, AGAIN, is that possible outcome creates an inherent financial disincentive for the listing agent to recommend designated agency. Instead, it creates an incentive to push for Option 1 above. And in my not-so-humble-opinion, Option 1 does not advance the buyer's interests in any way, shape, or form, but does advance the listing agent's interests, as well as the (deserved?) perception of Realtors as self-serving sleaze balls.

The fundamental problem here is real estate transactions are extremely complicated, extremely significant financial transactions. And most people, even very educated people, do not understand how a real estate transaction works. Is that any surprise? Joe Blow (I feel like I should say "Joe the Plumber") may only buy and sell 2-3 houses in his entire lifetime. To the general public, it's about finding the house you love at the price you're willing to pay. The mechanics of negotiating the deal, arranging the financing, inspecting, appraising, managing the sale to closing - that stuff is all pretty much Greek to many buyers and sellers, and they don't want to be bothered. The average buyers and sellers just want it DONE, so they can get into their new house and start decorating.

Because the general public does not understand how the compensation flows in a real estate deal, agents can take advantage of their clients' ignorance to benefit themselves. And unfortunately, it seems agents often do.

What's the answer? I dunno, but I have some suggestions. I think dual agency should not be permitted, period. [To convince me otherwise, I invite anyone to write a rousing defense of the benefits of dual agency.] Designated agency is fine, with appropriate disclosures. I think agents should be required to provide much stronger disclosures about their fiduciary obligations and who they represent. We need to make sure buyers are actually reading these disclosures. Perhaps there should be a 24-hour "review period" required after the disclosure documents on agency relationship are provided to the potential buyer. Why not make listing agents disclose their commission amount, and how much they make if there is no unrelated buyer agent on the other side? In fact, why not make listing agents provide a copy of the Listing Agreement to the potential buyer? Finally, I think the best and easiest way to nip this problem in the bud is for Sellers to refuse to allow dual agency in their listing agreements. There is a space at the bottom of our form Listing Agreement, Paragraph 5, "Compensation," that says the Seller permits the following types of agency: buyer, dual, designated, or "other." Just don't check "dual." Simple as that. Problem (partially) solved.

Thoughts, comments, feedback?

Richmond Real Estate

Click here for homes for sale in the Windsor Farms Community

Windsor Farms

Style: Custom built. High quality, multi-story colonials, revival styles and transitionals, built from the 1920-1960s, in various architectural styles. Mature landscapes on generously sized lots, characterize this highly desired neighborhood. Home sizes range from modest one-level to estate sized with outbuildings and gates.

Average Sales Price: $913 K

Schools: Serviced by Richmond City Schools of Munford Elementary, Albert Hill Middle, and Thomas Jefferson High School. Plus the highly sought-after Open High, and Community High and the International Bachelaureate Programs and the Governor's School Programs. Or by several exceptional Private schools ,several exceptional Private schools St. Christopher's, St. Catherine's, Steward School and Collegiate are within a few minutes drive.

Recreation: Provided by nearby country clubs and private facilities otherwise. And for those seeking 'recreational guidance', many seek out the SEALS program. If you prefer water based recreation, try rowing, sailing, yachting clubs, Virginia Boat Club, Richmond Yacht Club. Or if you prefer league sports, try volleyball, soccer, or tennis, plus there are great youth programs in Little League, Lacrosse, and swimming. Don't forget equestrian interests. There's also a premier climbing gym, just across the river and a sports park for practicing your batting or golfing skills.

Transportation: Located just west of Carytown, connections to Cary St. and the Downtown Expressway (I-195) just outside the neighborhood, making travel to Downtown, I-95, I-64, Powhite Expressway,Airport, so easy and efficient.

Benefits: Premier location that offers delightful mixture of housing styles and build dates, within a close knit community, that couldn't be more convenient to shopping, schools, downtown business district

AGENT VS. SALESPERSON: WHAT IS THE DIFFERENCE?

The other day I posted my thoughts on dual agency, as it is practiced by real estate salespeople in Virginia. My opinion: It is actually impossible to represent both the buyer and the seller, EVEN IF the buyer and the seller are adequately advised of the consequences and sign all the appropriate disclosure forms. I chose the word "represent" intentionally, because I think representation requires affirmative action on behalf of your client. As an effective agent, IMHO, you should be developing terms for an offer or counter-offer, doing research to support that offer or counter-offer, constructing a rationale for the offer or counter-offer terms, and advocating your client's position in negotiations with the other party's agent. Then, once you have a ratified contract, you need to be managing that transaction to closing.

Notice I didn't say anything about finding these hypothetical clients the perfect house (buyer side) or marketing the house (listing side). In my opinion, finding a house for a buyer, or putting a house on the market for a seller, are the EASY, NO-BRAINER things that real estate agents do. The HARD things - structuring a deal, negotiating an offer, getting to "yes," and managing a contract to closing -are often not even considered when a potential client is selecting their agent. I think that is a completely bass-ackwards way to approach the interview process for a professional service provider. For example, on a "listing appointment" lots of agents will show the potential client the signs, the pretty brochures and the marketing pieces (s)he will produce for the home. My question? Who cares! Any brokerage can churn out that stuff, it all looks pretty much the same, and it has next to NOTHING to do with getting your home sold. Can that Realtor advise you on preparing your home for sale, pricing your home appropriately, dealing with obstacles in this challenging market - appraisals, financing, inspection issues - when you have a willing buyer and willing seller?

An agent in my office, who has been in the business much longer than I, and who I respect very much, made me start thinking about this issue. She pointed out that there is a difference between a salesperson and an agent. The SALESPERSON wants to get an offer on paper, to make the sale, to "seal the deal." They want their buyer to buy quickly, or their seller to sell quickly, so they can get that buyer or seller committed to a contract and they can move on. Oftentimes, once there is a ratified contract, the salesperson hands over the file to a transaction manager and has very little involvement in getting that purchase or sale closed.

The AGENT, on the other hand, is actively working with the buyer or the seller, trying to understand their needs and motivations, sharing their expertise to help that buyer or seller make the best possible decisions, and helping their client get the best possible ultimate result - either getting the buyer into the right house or maximizing the seller's profit while meeting that seller's other objectives.

Getting a buyer into the right house may mean advising them AGAINST a particular purchase. For example, a buyer may not be able to afford the house they really, REALLY want. Maximizing the seller's profits may mean hard negotiating to get an offer price up, or creative structuring with non-price terms to otherwise advance that seller's objectives. It isn't beating up a seller to take a low-ball offer, so you can get your commission and move on down the road.

In my real estate practice, I have run across a lot of great salespeople, and some great agents. I'd rather try to be the latter. That may mean I don't seal as many deals. I've got buyers that I have been working with for just A-G-E-S, and I probably could have pushed them into a contract...or two, or three....by now. A better salesperson than me certainly would have. I'm not going to get as many listings as the top Realtors in my area. I'm terrible at the cold-call and frankly just don't want to do it. I won't "buy" a listing by giving a seller a sky-high list price, and then recommending a price reduction almost immediately after the listing agreement is signed. I'd prefer my sellers find me because of reputation or referral.

I think I'd make more money if I learned how to be a "closer," and focused on being a better SALESPERSON. But I'd rather work to be the best d*mn agent I can be. Goodness knows, I've got weaknesses I can try to improve. I need to figure out how to systematize my communications with both my buyer and my seller clients. I feel like the sellers get a bit neglected, with a "silence means no news" sort of approach, because the buyers' needs are so time-intensive. If I were a seller, I'd want periodic updates. I haven't been able to execute on that goal yet, which makes me frustrated and disappointed with myself. I know I get busy and I get sloppy - both literally and figuratively. Trying to juggle buyers, sellers, and prospects, AND running my household and taking care of my daughter, gets overwhelming for me. And I tend to be my own worst critic, so I beat myself up for the things I am not doing well.

I wish I had a detail-oriented assistant to keep me on track and on time, and to whom I could off-load much of the administrative work. But that would require me to make more sales....[:)]