Sucking on a Real Estate 'Binky'
The Davison Files
By Marc Davison, Tuesday, September 30, 2008.
Flight 168 touched down at 2 a.m., many hours past the time printed on my boarding pass. There's no do-over. No "fly the next time on us" hookup. The airlines dish out bad times and we accept it.
I sat in the middle seat, wedged like a cold cut between two oversized slices of human bread. Each time I leaned forward I had to dislodge myself between two doughy arms on either side that encroached upon my space over the armrests.
The plane sat at the gate for hours while my empty stomach held a press conference. Captain Sprague periodically served up apologies like tapas. In a variety of small and unfulfilling portions he kept assuring us that we'd be cleared for takeoff "momentarily." That seemed to pacify everyone.
Sucking on real estate's Binky
Real estate is no different than the airlines or the government or any entity that doesn't recognize the benefit of being square with its customer. It does the airline no good to tell us we'll be grounded for three hours while they fix the tire. And real estate has found it's far more advantageous to lull us into certain beliefs by shoving as many real estate "Binkys" into our mouths as possible.
I cite the "now is the right time to buy" Binky fueled by the NAR -- one of this country's biggest Binky warehouses. They distribute Binkys of all kinds to sales agents to pacify us into buying homes, believing all Realtors are saints and spending money we (and, turns out, our banks) don't have.
Four years ago we sucked on 0 percent ARMs because "money was cheap" and "the home can only appreciate." The Binky lulled us to sweet dreams of homeownership.
When isn't it the right time to buy, I wonder?
Binkys 'R' Us
I learned about WaMu Friday morning as I arrived early at a conference. I overheard a presentation from someone advising agents to tell consumers all will right itself by late 2009.
I wondered how those agents would back that statement up. Maybe they won't need to. Maybe we'll all be too eager to accept the succor.
I looked through the conference brochure and searched for panels on sensitivity training. Or panels that discuss the difference between a huckster and a real estate professional. Or panels on fundamentals of economics.
I looked for panels that taught the people who handle the most delicate of transactions to drop the economic futurist bit and just do sales. And treat people with dignity.
Not here. Or anywhere. Agents attend these Binkys 'R' Us conferences to get their Binky continuing education points. Jewelry. And cheap advice from other Binky salespeople.
I need a new Binky
I'm frustrated by the war. Gas prices. A government that shoves rhetorical Binkys into our mouths to distract us from the dirty economic diaper in which we sit.
I'm frustrated trying to find ways to explain it all to my children, especially the older ones who are caught in a midlife crisis. They aren't yet even 21.
I'm frustrated that I can't assuage their confusion or my wife's, who has this sinking feeling that we are all teetering on the edge of collapse like a cliff-side home in Laguna Beach during an El Nino.
I'm frustrated that our industry doesn't provide something better than a bunch of Binky platitudes, Binky ad campaigns and Binky conferences that serve to simply pacify all of us rather than dish out cold, hard reality.
Maybe instead of telling us now is the right time to buy, how about explaining why it is the right time to buy? How about explaining every nuance of the bailout and what it means for me, your customer? How about placing that information on a spreadsheet, or on your site, or have the National Association of Realtors back it up with fact rather than some air-spun ad campaign.
People need more from real estate than just a big Binky to suck on. They need the truth. Those who toss the old Binky in favor of a new truth Binky will be glad they did. The public cannot only handle it, they'll reward you for giving it to them.
Marc Davison is a founding partner of 1000Watt Consulting and national speaker. He can be reached at marc@1000wattconsulting.com.
***
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Submitted by Lori Bee , NC/SC Broker on September 30, 2008 - 10:03am.
While I agree with much of the premise of this article, I also wonder... who has the crystal ball? Will you please speak up and give us the "truth?"
I think the real truth is we all have a fear of the unknown, and as FDR once said, "All we have to fear, is fear itself." If we succomb to that fear, it will become reality (aka truth).
So... which is worse, to succomb to the fear, or suck on the binky? I don't plan on misleading my customers by telling them it's a great time to buy, nor do I plan on announcing the sky is falling.
I think just doing my job well, and trying to adapt to the changing (and yes, trying) times is the way I am going. That's what my crystal ball says...
Submitted by Damon Pace on September 30, 2008 - 2:08pm.
Who needs a binky? Just change the diaper and I'd we'd all be much better off.
Submitted by John Arquette on September 30, 2008 - 2:54pm.
Although I agree with some of the article (especially the part about the airlines) one must ask themselves when is it ever a good time to buy. How about the early 1980's when interest rates were at 18% and climbing? How about the early 1990's when jobs were evaporating? I feel NAR is right to promote the buy now campaign. Rates are around 6% in most markets, housing prices have probably fallen as far as they are going to in most markets and many industries are stable with a few even adding jobs. Looking into the future is not yet an option so let's plan on surviving the current economic cycle and move forward.
Submitted by REALonomics .net on September 30, 2008 - 3:02pm.
Marc, welcome back!
Another remarkable piece of penmanship from your quill.
Unfortunately, we've been dry nursing an entire generation of spoiled RE Brats, whose view of the quick money was akin to an entitlement, while ignoring a plethora of opportunities to re-invent this industry.
We have way too much Barnum & Bailey in our bloodstream and for a generation we've believed our own self-diluted right of passage.
Today, NAR sent our another email Binky telling us what to do, i.e., encourage everyone to push Congress to enact the bail out. I attempted to gain some degree of renewed sense of security by succoring on NAR's bloated email teat. To no avail, it too is parched and all attempts to feed only serve as a reminder of our famine.
Still, amazingly, there is no trumpeted cry for reform of the industry. I'm not sure we yet fully appreciate our reputation with the consumer and in this failing we may perpetuate the loathing sense of resentment consumers feel toward us.
Ours in an industry replete with designer Binkies and warm bottles of RE Similac® wrapped in labels with the brand names we all recognize. With each convention we tour the vendor gala and load up our plastic bags with new mirrors and fancy smoke-makers.
Thank you for bringing to our attention the shallowness of our business model and its lack of relevance in a world of increasing complexity.
I definitely needed this today! And, if I may say so, I definitely needed you today!
Oh, one more thing. Did they serve free nuts on that flight or did you have to pay for them?
- REALonomics
Submitted by John Rowles on September 30, 2008 - 3:25pm.
There is a reason that the first step in a 12 step program is admitting that you have a problem.
Until "Real Estate" can admit that its wasted on its own Kool Aid, nothing will change.
Submitted by Jillayne Schlicke on September 30, 2008 - 3:49pm.
"there is no trumpeted cry for reform of the industry"
Yes there is. It's out there. It's faint but it's there.
People who hold power positions want to keep their power. Why reform if it means possibly losing power?
Reform comes from OUTSIDE of a big corporation or from outside of a large national association.
It's very, very difficult to do major reform inside a large corporation or professional association.
Typically it is only done at the emergency level. Case in point, WAMU's board ousting their CEO too late. Or a professional association trying to make major changes AFTER they've lost half their membership.
You want reform?
YOU BE THE REFORM.
:)
So start a national association. Offer cutting edge classes. I'm sure you'll get lots of members.
Submitted by Linda Hutchinson on September 30, 2008 - 5:04pm.
Your message is sound but lost in the drunken use of rhetorical devices. I lost track of your point as I waded through your analogies - "I sat in the middle seat, wedged like a cold cut between two oversized slices of human bread". Was this a homework assignment? In this blog...you may have been too clever for your own good.
Submitted by sean fields on September 30, 2008 - 5:40pm.
When should we advise our clients that it's okay to buy?...when the "market" gives its affirmation that it's okay when diminishing inventories and appreciating prices inevitably return?
I don't know about you, but I buy things when they are on sale...and I advise my clients to consider doing the same.
Trying to help your clients market time this in terms of cost / availability of money and price is a dangerous game.
In my market,the folks that bought value/ location, in the early to mid 90's recession, look like geniuses today....
Submitted by Jeff Bergstrom on September 30, 2008 - 5:44pm.
To quote a famous movie--"you can't handle the truth". We can't. The real estate industry is the most head-in-the-sand body of people in business. The Broker sales agent model is outdated and useless. How many agents can they lure into in fold. Hunderds, thousands, tens-of-thousands. At what point does a franchise Broker's role matter? According to Consumer Reports--it doesn't. Been to your local Realty Board website. I'll bet is states the number one feature/benefit to agents is "prestige". What? Are you kidding me? What year do those people think it is? Been to "ethics" training lately. Its a bunch of people "playing" at being important. The good news is the industry needs change. The exciting part can be playing a role in that change.
Submitted by Marc Davison on September 30, 2008 - 5:58pm.
John,
Now may be great time to buy. I actually agree that it sure could be. And it always may be a great time to buy. But what I'm suggesting is give us substance. Not the saccharine enriched nonsense about how important a home is. We get that. We know how important a home is. I've had emails from agents all day telling me that. What I want to know is why they, you, NAR thinks so. After all, even economists from Harvard, Princeton, etc., are finding it difficult to tell us why. If you or any Realtor can show the consumer with hard fact, now would be a good time to finally push that info out into the world.
Marc
1000Watt Consulting
Turn On!
Submitted by RONDA MORRISON on September 30, 2008 - 6:18pm.
While I agree with much of what you have said, the problems in the real estate industry or mortgage for that matter does not lie with the person that sold them the property or provided the means to purchase the property.
Americans need to stand up and take responsibility for the position that they currently find themselves. In my career I have not once tied someone to a chair or used another form of torture to get them to buy a home or investment property. They decided that they wanted to purchase more than they could afford PERIOD! People who purchased their homes a few years back were not satisfied with merely buying before the market went crazy they had to pull the equity out as quickly as it was building to purchase expensive cars, boats, 2nd homes and the list goes on.
Do not blame the Real Estate Agents for this mess blame yourselves for purchasing properties that you KNEW you could not afford. Afterall if you have a dollar the the "binky" cost $2.00, can you go to the register and make the purchase? Do you even try? If you do, then you are part of the problem as well.
Submitted by Diane Cohn on September 30, 2008 - 6:58pm.
Marc, well said.
Lori, while no one has a crystal ball, as agents we all have access to valuable data. And intelligent interpretation of this data leads to truth about local markets. Truth is a process of discovery. I have found that sharing market data on my blog with anyone who cares to read it has created a conversation about the market, a collective intelligence, that leads to greater understanding for anyone who reads. Though I may not have fully foreseen the enormity of the mess we're in, there were some on my blog who did, and they've been talking about it for two years, which means recent events haven't been entirely shocking to my audience as a result.
People need to know the truth about current market conditions so that they can make intelligent choices. Our industry needs to drop the spin and explore the truth, no matter how difficult that may be.
Diane Cohn
Realtor, ABR
Chase International
www.renorealtyblog.com
Submitted by Socar Chatmon-Thomas on September 30, 2008 - 7:28pm.
Marc,
I'll take a stab at "WHY" its a good time to buy...let's see. It's a good time to buy because:
1) Interest rates are close to a 25 year low.
(NAR or any mortgage company can supply that info!)
2) In most markets home prices have dropped by at least 15%...homes are "ON SALE" if you will.
(homes is Phoenix, Las Vegas, San Diego and Detroit are at least 30% below historic 2006 highs)
3) The surviving lenders have money to lend.
(Lenders and govt want to keep confidence high by continuing to lend, but with more stingent guidelines!)
4) There are tons of foreclosures and short sales
in the market place. Since banks are less likely to be emotional about homes,there are deals to be made (in markets like Vegas 72% of the homes sold are REOs)
And finally...I predict that this trend will only last for the next 18 to 20 months and after that the market will make a huge come back. So my advice to anyone thinking of buying is "buy now before the market rebounds!" And for my seller clients who "HAVE" to sell...I tell them that "PRICING IS THE KEY!" For anyone else who does not "have" to sell, I suggest they wait until the market rebounds in order to get the highest price. Fortunately, I'm in Austin, Tx and our prices increased by almost 4% last month. We're an anomoly!
Always Remember...Live Well, Laugh Often, Love Lots!!!
Socar Chatmon-Thomas
Submitted by Brett Young | Real Estate Keyword Tool on September 30, 2008 - 7:40pm.
Marc,
I will sing your praises again. As always, great imagery, great examples to get your point across.
We need a lot more substance. Take Realtor Magazine for instance--have you ever noticed how many infomercial-like ads there are in that periodical? The shear number of these ads and the fact that these ads continue to appear in that magazine month after month leads me to believe the we have some of the most gullible people among us in this industry.
Brett Young
Real Estate Keyword Tool
Submitted by Marc Davison on September 30, 2008 - 9:11pm.
Great discussion.
To echo Dian, I am not saying it's not the right time to buy. Show us why. And how. And what steps to take to insure we won't lose our home.
Sean, your comment really says it all to me. How your telling all your client to buy. This is exactly what my article addresses. It that mentality that 5 years had agents telling their client that now was also the right time to buy. Just as prices were skyrocketing. Get in while you can. Money is cheap.
It may very well be the right time but what I nd perhaps a few others here want to know is what you know that backs that up.
Read What Dian Cohn wrote. Read what Socar wrote. That's what I'm talking about.
------
Rhonda. To your point. I am not blaming agents. And I have been quite vocal about people needing to take personal responsibility. What I am doing is pointing out how some agents do not learn form history. I point out how some agents are slow to rise to an occasion. I point out how some agents do not see an opportunity when it's presented to them. I believe this is a fair representation of my position.
Submitted by Marc Davison on September 30, 2008 - 9:43pm.
Jillayne
Nice try and good idea. I received many emails today about that actually. But I fear my association would have 7 members. Maybe. Can't seem to bring myself to write rah rah stuff or stay away from the 100 proof bottle of metaphors. Change has to come from the rank and file. The agents. I received an amazing email today from an association member that summed it up. I can't publish without permission but read what Jeff wrote above. Change happens within.
Submitted by Bill Lublin on October 1, 2008 - 1:14am.
Bill Lublin CRB,CRS,GRI
CEO CENTURY 21 Advantage Gold
Visit me at MovePhilly & REreflections Click Here to
Find Homes in PA & NJ
Marc:
So much of your post is rhetoric without substance that I wonder how much is based upon your seat assignment, how much is based upon a lack of information, and how much of it is a position taken to stir discussion. I get that you had a bad flight. I get that the economy stinks right now. I get that your wife is upset. But why is that NAR's fault?
So much of your post is rhetoric without substance that I wonder how much is based upon your seat assignment how much is based upon a lack of information, and how much of it is a position taken to stir discussion.
Now is a good time to buy (if you are able) because of the meeting of lower rates and affordable prices. That is demonstrable and empirical. It really is that simple. That being said, as always, the decision to purchase is based upon the needs of the individual or family and is not something that needs to be proven any further, or indeed could be proven any further.
Real Estate is a long term investment. And one that should be made because of a thoughtful analysis of the individual purchase. I have been in the business for long enough that I have seen other "economic readjustments" and I can tell you that people who buy real estate to fulfill a need or a longer term investment plan based upon sound financial principals make money. People that invest without sufficient resources, or anticipate appreciation as the core of their investment plan, or try to convert real estate into a short term high return investment are taking a high risk position and therefore may (and often will -) lose money - And while you lambast NAR, where have you ever seen NAR (or any state or local association) take a position that people should spend money that they don't have? NAR, as a trade association, promotes and supports its members (which any trade organization does) and speaks to the best interests of their membership.
As far as Trade Associations go, NAR was founded 100 years ago by members of our industry to improve the industry at a time when there was little or no regulation of the industry or its practitioners. Our Code of Ethics (which is 95 years old) is a living document which provides protection for consumers and practitioners from improper acts by members of the Association, the principles of which were used by many states in the creation of their first state regulations. Ethics training is required by members on a quadrennial basis, and if the conference you attended didn't have "panels that discuss the difference between a huckster and a real estate professional" perhaps that was a deficiency of the planning of your conference. But you do know that NAR mandates quadrennial ethics training for its members, and that training on the Code of Ethics is part of every new member orientation. NAR also creates and distributes lots of resources for companies and associations to utilize in training their associates on ethics, diversity (if not sensitivity), and professionalism among other topics.
Having spent almost 3 decades working in our Professional Standards systems, teaching the Code, working on the Professional Standards Committees on the local, state, and national level, I can tell you that the system works well and is recognized by courts across the country as an exceptional example of self-policing and due process. Not to mention the Millions of dollars in legal fees that our members have saved by utilizing our arbitration process over the years. Nowhere have I ever seen NAR take a position that "all Realtors are saints " . An example rather than unsupported rhetoric would be nice here.
In closing, I agree that these are trying times, that the economy is scary, and that we need to do what we can to get through these times, because all cycles, good or bad, are cycles – nothing lasts forever – so if you are frustrated because no one knows when this will end, and people tend to try to make predictions - then ignore their predictions, knuckle down, and do the best you can – this too shall pass. But stop blaming NAR for all of the ills of the industry and recognize it, and the state and local associations for what they are – people in an industry who care about the industry and are doing their best to improve it- they just don’t deserve your abuse
Be part of the solution instead of part of the problem
Submitted by Matt Case on October 1, 2008 - 6:28am.
I regret that we all let sunshine be blown up our pant legs for too long with the "There is no bubble" speak. But what did you expect leaders of national organizations and franchises to say? "Yes indeed, we're staring at a world class bubble here. Bad idea buying a house right now. Real bad."
Yeah right. They'd have had their members in revolt. All it would have done is move up the timing on the slide. Many factors played upon one another in this issue- unchecked consumerism and a penchant for instant gratification, bad loans, greed, mass denial, stupidity...
I think it is a good time to buy, so long as you are making the decision to buy for the right reasons. My association and my franchise provide examples of why, if I choose to listen. Low interest rates. Declining housing starts combined with continued propulation growth. Baby boomers. Shelter. Economic security. But all markets are local, so it's upon me to determine what factors are important in my market. I know enough to know it is a good time here in Northwest Michigan. We've got the best market in the state, natural beauty, quality of life, population growth and people WANT to live here. No national entity can speak to these topics as I can.
If you're looking for substance from NAR on nuances in the Bailout, you didn't look very hard. When I realized I didn't have a good sense of what the EESA really entailed (imagine that, the national media only covering the controversy, not the content) I went to the REALTOR.org to hear what they had to say about it. There I quickly found a link to a two page summary of What's at Stake for REALTORS. Here's a link http://tinyurl.com/4ghbho
You've still got to think for yourself, but NAR broke it down well enough to substantiate their position.
Matt Case, GRI
Coldwell Banker Schmidt Realtors
(231) 357-1609 mobile
(231) 882-8000 office
(231) 882-0374 fax
http://nwmirealestate.blogspot.com
http://www.2cases.com
http://www.benzierealestate.com
Submitted by Marc Davison on October 1, 2008 - 10:15am.
Way to go Bill. Answering my rhetoric with more rhetoric. Who cares what prompted my article? The message between the lines is clear as a bell.
Step up. Do more than pacify the consumer with age old, staid verbiage, acronyms after your name, and jack of all trade abilities in your signature file.
I had a bad flight. My hotel experience sucked. We have a dysfunctional government. My wife and kids are all confused. That all coincided with a flood of emotion about how the real estate market is being impacted and how NAR is doing little other than issuing pablum to the America.
My contribution is this simple - to illustrate an opening. An opportunity. An alley opp to grab the ball of change and slam dunk it. A chance to do a bit more than the casual, average, everyday, thing we all do to get by. A moment in a world of utter chaos when you can get on a video, get on a blog, create a power point presentation, write an article locally that explains what is happening and clearly define why now is the right time to buy.
That's it dude. If that mantra is worthy of debate, bring it on.
Submitted by Missy Caulk on October 7, 2008 - 4:14pm.
Hi Marc,
Some people should not buy now, it depends on why they are purchasing, how long they will be there. In Ann Arbor we have many PhD candidates, grad school students,Physician residents moving in and if it is a 2-4 year time frame, many times it is just better to rent. Depends if they have big dogs, and can't find rentals, or kids they want in certain schools. Each client deserves our attention to see if it is best for their particular situation.
Missy Caulk
Ann Arbor, MI
Missy@MissyCaulk.com
www.AnnArborRealEstateTalk.com
www.SearchAnnArborHouses.com
Submitted by Justin Zimmerman on October 9, 2008 - 8:29am.
Great article. Many truism! I like the Binky analogy.
Submitted by Marc Davison on October 9, 2008 - 11:46am.
Exactly Missy. Nail on the head. Hence my position that if real estate as in industry would induce some real local knowledge and honesty into it's campaign as you do personally, everyone would benefit to the point where there would be more leads, more inquiries and perhaps more sales that currently exists by virtue of it current "now is the right time" campaign that stands open ended and on not all that believable.
Marc
1000Watt Consulting
Turn On!
Submitted by Lori Bee , NC/SC Broker on October 10, 2008 - 11:09am.
I agree with Missy as well.
I just took my BIC CE class and learned that of the 7.5 million subprime loans issued since 2005, that 53% were to African Americans and %30 to Hispanics and only 18% to Caucasians. And 70% of these have pre-payment penalities. I dare somebody to arugue with me that there wasn't reverse red-lining involved. Not all of these people should have been allowed to buy a home.
Should we encourage minority homeownership? You betcha... but this is scandalous. I could not sleep at night if I was issuing a mortgage to someone who I knew would default in a year or two. But maybe I'm just one of the precious few who cares about my customers and my integrity.
I also agree with Marc, that this is where we need to grab the bull by the horns and CHANGE. We need to care more about doing things the right way. There is a reason why for years, we required 20% downpayments and good credit history.
I will be spending my time educating my customers on why this is happening, and how greed is the #1 factor. And that I am here to guide them thru a "lifetime" commitment of OWNING a home. Not defaulting on one...
Submitted by Joe Cline on October 11, 2008 - 3:42pm.
If you have money right now and can carry property until the market takes an upward turn, now would be the PERFECT time to buy. Many builders are dumping land and other assets at a loss for the tax benefit they can get by drawing on taxes paid in 2006 and 2007 when the market was much better. I think DR Horton is expecting hundreds of millions in tax rebates based on taking huge losses on asset sales recently. Here is the link to the story about it.
http://www.star-telegram.com/metro_news/story/951833.html
Anyway, long story short, if you are looking to pick up assets at good prices, you might take a look at builder inventory and make an offer. The builders love the cash flow generated by the tax rebates.
Joe Cline
Austin Real Estate
Davenport Ranch Texas Real Estate
The Preserve at Lakeway Real Estate
Submitted by Walter Boomsma on October 14, 2008 - 4:09am.
Well said, Marc.
Personally, I thought the "now is a good time to buy" campaign was both a major waste of money and a disservice to consumers and members.
In addition to being "head in the sand" as an industry we are also one of the most self-serving. Like all special interest groups, we've fallen prey to the "if it's good for us it's good for everybody" mentality.
While it's certainly fun to debate and prognosticate, at the end of the day the glittering generalities fade. I've never seen a market at a closing. I have seen buyers and sellers. They are who matter and as Marc and Missy suggest, they are best served with highly personalized local knowledge.