Hanging Wit Da Brokahs OR… My Trip To Florida

The legendary, but still hip, Fontainebleau Hotel, Miami, Florida

Like me, you can think of nothing more fun and exciting than going to a Realtor’s convention and hanging out with a gaggle of Realtors. It’s “gaggle”, isn’t it? Pride of lions, pod of whales, eye of newt, gaggle of Realtors?

So down to Florida I jet, staying at the fabulous Fontainebleau, which I hadn’t seen since watching James Bond saunter by the pool in the movie “Goldfinger“. See those pictures on the website of wonderful ocean views? My view was more parking lot and some sort of inland canal, but still, over all, very nice room.

So NOT my view…

This chap talked about international real estate markets, actually interesting, I swear!

Hangin’ by the pool…(there were eight or nine different ones)

One of two iguanas that lived in the palm trees next to this pool. Note to iguana fans: have you ever seen a better pair of caudal spines in your life?

Almost all of my time was spent in various “seminars” but it wasn’t as bad as that sounds. Years ago, I went into NYC to attend some Coldwell Banker broker thing, and the whole time was spent listening to lectures on sales technique, how to ask “tie down” questions, and generally how to steer hapless customers towards a sale.

This was anything but. The brokers I met with are all dominating their local markets and all of them are NOT working for national firms. There entire focus was on “building their brand”, which every broker needs to do, regardless of who you work for.

Still awake? Ok, so besides real estate, they also had interesting speakers like thriller-writer Brad Meltzer, who talked about extraordinary individuals like the cops who started the Make A Wish Foundation, and how maybe you’re not going to do anything that big, but you can still find a way to improve the lives of others (can you imagine such poppy-cock?). But seriously, I liked Meltzer’s speech the best.

I wonder if anyone here suspects I’m a white guy from CT!

 

Come on, who wouldn’t want to pose with a camel!

That building had the views…

Great spot to sit around and smoke a thoughtful cigar…

 

 

 

 

 

Two More Bellwethers

200 Guards Road, Conyers Farm, Greenwich, closes for $13,500,000. List: Michele Tesei. Sell: BK Bates

These two sales, one at the high-end, one at the low-end, tell you everything you need to know about the state of Greenwich’s real estate market.

Starting with the high-end, a Conyers Farm sale for $13,500,000: this sale dispels the myth that “no one wants these big, backcountry estates anymore”. Yes, they do, and they will buy when the price looks right. It started at $27,895,000 and found no takers for two years, four price reductions, and two brokers.

But when the ask got down to $17,500,000, lo and behold, a buyer appeared! Do you see the message in that last sentence? It’s not that people didn’t want Conyers Farm and the backcountry, it’s just that they don’t value it the way they did 15 years ago. That, too, will change some day, so people buying Conyers now will reap the benefit as surely as those who bought Manhattan co-ops in the 1970’s.

11 Dialstone Lane, Riverside, likely tear-down, comes on for $1,095,000, gets an instant deal. List: Helen Maher. Sell: Danielle Scialpi-Malloy.

Next we have this low-end, Riverside tear-down example. At $1,095,000, this is really about as cheap as it gets in this part of town, south of Route 95. It came on the market Feb. 21st and had a deal about 10 minutes later. Hasn’t closed yet, so we don’t know the price (wouldn’t be surprised to see it went over ask), but the lesson here is buyers are SO ready to buy!

Whether it’s a builder who knows he can easily get high $2M’s, maybe low $3M’s on this site, or a young couple who might actually use the existing house, there is money waiting on the sidelines, ready to jump in when the price looks irresistible.

Despite the self-imposed headwinds coming from the economic illiterates in Hartford, people continue to want to live in Greenwich, and they will buy your real estate. All you have to do is price it right. So simple.

The Wimpification Of Greenwich

Scene of devastation: somehow the car was able to make it…

The Friday Morning Snow Storm

I actually felt bad for the snowplow guys. There they were, all buzzing around town, searching for something to plow, finding nothing but clear roads. There was a bit of snow sticking to lawns, but no customers wanted their lawns plowed.

Yep, Friday’s “snow storm” caused every school to close and, more importantly, cancelled all of Gideon Fountain’s carefully prepared house-showing plans, and for what? Essentially flurries, the sort of snow Vermonters would barely notice, let alone change their plans for.

Absolutely pathetic, and a sign that Americans, well, Greenwich Americans, get softer and wimpier every year. This despite nearly every household owning at least one 4-wheel drive vehicle. Driving in snow is what they were made for, dammit! If that makes you nervous, go find an empty, snow-covered parking lot and practice. If you fear snow, you are a sissy, plain and simple, and the world can be a very hard place for sissies. Now, get out there!

At the height of the storm…thank goodness we could take shelter in this handy tunnel!

Sorry, no more skating, no more fun, all because some sissy-pants chiropractor or urologist or something, successfully sued the Town of Greenwich when he broke his leg whilst trespassing on town property.

You wanna see the right attitude about snow? THIS is the right attitude… Copy this guy!

 

Bellwether Sales

10 Copper Beech Rd has closed at $6,400,000 (but sold for $8,050,000 in 2008.

As every school child knows, a bellwether is a “predictor or indicator of things”, so, as I’ve said before, laziness compels me to look for bellwethers. I want short-cuts to help me assess the state of the market. Why spend hours analyzing dozens and dozens of recent sales when you can just point at one or two and proclaim, “There’s your damned market, right there!”

So here’s one of my bellwethers:

10 Copper Beech, as seen above. What is so painful about this one, besides the $1,650,000 difference between 2008’s and 2017’s price, is that these owners did everything right; the house was absolutely perfect inside, each and every room just beautiful. Even the [flipping] furnace room was a work of art, I kid you not.

Yup, it was perfect, no indication of being nine years old, might as well have been built this year. And the reward for all this perfection? $1.650M less, plus the additional money put into it since purchase. Very unfair and definitely worrisome for the Greenwich high-end sector.

My next bellwether:

20 Gilliam Lane, Riverside, closed at $2,150,000.

Here’s another one where the sellers did everything possible (they even increased the lot size!) and the market nevertheless delivered a swift kick to the @#%. I grew up (so to speak) next to this property, know it well, and always pay special attention to its selling price every time it comes back on the market. Here’s how it’s worked out the last few times:

1995:  $937,100.

2006:  $2,355,000.

2011:  $2,150,000.

2017:  $2,150,000.

Believe you me, each one of those sellers added plenty of value to the property, particularly the most recent ones, who did beautiful decorating and paint work, added a full-house generator, updated baths, and, get this, they had the property re-surveyed and discovered it wasn’t the .24 acres they thought they had bought, but was instead .3661 acres!

You mathematicians in the audience will perceive that is over FIFTY PERCENT more property! It went from having zero FAR remaining, to being able to add more than 500 square feet, a significant improvement. Oh, and did I mention that they piped the stream, and filled the gulley in the rear, creating a new, flat back yard? Huge improvement.

The market’s reaction? Ho-hum…what have you done for us lately? Sorry, we’ll pay you exactly what you paid 6 years ago.

And that, my friends, sums up this market: Our buyers are feeling optimistic, their jobs are secure, their stock portfolio way up, but for real estate purchases, they are cautious. They will buy, but they do so almost reluctantly, and if they have their way, they will pay you less than whatever you paid.

Are We Getting Ripped Off Down Here?

123 Riding Ridge Road, Monroe, #@$%-ing CT, asked $649K, now has deal.

123 Riding Ridge Road, Monroe, #@$%-ing CT, asked $649K, now has deal.

Ok, I get it that it’s Monroe, Connecticut, and that’s not an easy commute to most places we work, but still, $649,000?? The land appears to have sold for $155,000, which down here in Greenwich is pretty much the price of a decent summer rental, but how does the builder make money with an ask of $649,000?

The house is listed at 2,889 square feet (1,200 unfinished, walk-out basement), land is 2.88 acres and, well, take a look at the photos…is it so bad? Even a snob like me must admit the house appears livable…nice, even!

And the cost to build was what, $150 per foot? No, that’s too much, there would be zero profit at that cost, so… Ok, I’m stumped, either we’re all getting ripped off down here, what with $400-$1,000/foot building costs, or the Monrovians have figured out how to build houses at $100/ft and they’re keeping it a secret.

Here’s what it looked like as a land listing: 123 Riding Ridge building lot.

Now THIS Is More Like It…

200 Guards Road, Conyers Farm: as good as it gets. last ask $17.5M. List: BK Bates

200 Guards Road, Fabulous house on 31 acres in Conyers Farm: as good as it gets. Last ask $17.5M.
List: BK Bates and Michelle Tesei

Was it only last Tuesday that the Connecticut Post was telling us about the latest Hartford plan to drive out the last remaining profitable business in Connecticut? I believe so, but perhaps because this particular tax plan is actually opposed by the Governor (is that possible?) maybe we can limp along for another year, by golly.

Anyway, today’s big news is that a deal has been struck for a spectacular Conyers Farm property which was asking $17,500,000. A previous broker started it at $27,895,000, carried it through two price reductions over the next year and nine months, but ultimately was shown the door.

I’ve heard it a hundred times, from brokers like Julianne Ward and others, it’s better to just say no to a listing that you know is grossly overpriced. Instead of taking the listing at a crazy price, what you do is this: Make an impressive presentation to the sellers, and include in that presentation a skillful defense of your recommended price.

You will (likely) then be rejected by the sellers, who will instead give the listing to the broker with the crazy price, BUT, a year or two down the road, the sellers, realizing you were right all along, will call you up and appoint you as the second listing broker. That’s where you want to be, that’s how this game is played.

On the other hand, it can be hard to resist one of these big “trophy listings”. After all, your firm gets lots and lots of advertising value from it, you get the prestige boost, which can lead to other big listings, and hey, there’s always the possibility you’ll persuade the sellers to g-r-a-a-d-u-a-l-l-y lower the price, who knows?

I have no idea how things went down with this particular listing, it’s entirely possible that first asking price was the owner’s idea to begin with. In any case, this is a very significant and useful sale. It shows continuing life in the high-end, and in particular, the backcountry high-end.

List: BK Bates & Michelle Tesei

Time For A New Career!

Sorry agents, your career is over, you'll soon be replaced by algorithms!

Sorry agents, your career is over, you’ll soon be replaced by algorithms!

Has there ever been a year in the last thirty that some genius didn’t predict the end of real estate agents? Yet, here we all still are, plying our trade, apparently oblivious to our imminent disappearance.

Why do you suppose that is? Why, in the year 2017, twenty years into the Internet Age, do we still have this old-fashioned profession?

As some fellow brilliantly posted in 2012, it is because we are needed; buying and selling real estate is complicated and difficult and, most importantly, it can be emotional. Almost every deal contains multiple points along the way where the whole thing falls apart without skillful handling.

Can people do it without us? Absolutely. Each year, a small number of “direct” deals are recorded at Town Hall, although, every time I look into one of them, I find that there was broker involvement, uncompensated perhaps, but present nevertheless.

Anyway, so the latest prognosticator of broker doom is this chap, “Brad Inman“. Judging by his website, Mr. Inman does lots of thinking on the subject of real estate, but I disagree with his conclusion that hundreds of millions of venture-capital dollars pouring into entities like “DealPad” or “DealPal”, “OfferPal” or one of those names, means that brokers’ days are numbered.

The concept behind these house-selling websites is that you sellers are going to accept a (likely) below-market price in order to spare yourself the trouble of selling your property in the usual way. Oh, and the sites are using fancy algorithms to determine your “correct” sales price. Wow, now that’s impressive.

But hey, what do I know? I happen to be  skeptical of any business that requires a change in basic human nature, but these venture capital guys are geniuses! We’re told we must think of success stories like Google, Amazon, Uber!, Don’t you see how those models relate perfectly to the complex nature of a residential real estate transaction? You don’t see that? Me, neither.

Below is the long, long, long! article from Mr. Inman’s site. I plowed through the whole thing, but feel free not to (you can also read it on Inman.com, but he requires you to subscribe).

Why home selling will never be the same

Data scientists are charging into the real estate village — what’s that mean for you?

In the movie Jack and the Giant Slayer, the towering giants descend from the beanstalks, provoking fear as they try to conquer the Kingdom of Cloister.

With a sudden ferociousness, data scientists are charging into the real estate village, rattling the industry by changing how people sell their homes.

Consider the well-funded techno house flippers — OpendoorKnock and OfferPad — who together have raised a staggering $1 billion in funding. These are not mom and pops who staple signs on utility poles offering to buy your house, “call 1-800-Pay-Cash”.

Yes, whale-sized investments are pouring into flipping houses. But they are also funding smartypants data scientists and their algorithms for pricing houses and for finding homesellers. And these new companies are testing on- demand showings, instant offers, smart contracts and quicky closings.

This technology & flipping combo is compressing the transaction from the traditional timeline of 30 to 90 days to as little as 72 hours, rejiggering how homes will be sold in the future.

And it paints a sexy portrait for high-profile Wall Street and Silicon Valley investors, who are hankering to get into the $100 billion transaction side of the real estate business — commissions + mortgages fees + title costs.

Why do these new models represent such an opportunity?

First, new and improved home valuation algorithms are more exact in determining a house’s value. Early generations of Zestimates, as we knew them, were like flip phones — so yesterday.

Now, after 10 years of tweaking and improving its valuation tool, Zillow claims its median error rate is only 4 percent, and that is in heterogeneous markets. The techno flippers are operating in more homogeneous markets, where the Zestimate’s error rate is closer to 3 percent.

With more data sources, photos and user input, these new pricing models give sufficient confidence to some homesellers to unload their homes quickly (in a few days) without the uncertainty of a long, drawn-out process of listing their houses. Sellers receive all-cash offers in a few minutes from the techno flippers who are capitalized to do an endless number of deals.

It reminds me of Google when it not only came up with a better search engine than Yahoo but also introduced a scaleable and transformative business model that eventually trumped its competitors.

These polished pricing engines might be less compelling if homesellers had confidence in the current system, which many do not.

Not only is the sales process strung out over a painfully long period of time, but agent home pricing motives are sometimes suspect. We all know the criticisms: “some agents suggest an inflated price to get the listing,” or alternatively, “some agents lowball the listing price to get a quick sale.”

This is not how good agents behave, but consumer perceptions are skewed by the hucksters.

Another edge: These new companies are using data science to understand exactly when a homeowner is going to sell.

Copious data sets triangulate the homeseller — search behavior, demographics, social insights, consumer habits and purchase decisions. Sophisticated algorithms then seize the prey.

If Google knows my daughter is pregnant before she does, then these new tools will soon predict with a 99-percent accuracy rate when someone is ready to sell their house.

What does this mean for the real estate industry? Lots, but let’s focus on a few important things.

The home listing market suddenly faces a fierce new competitor (or partner) that some in the old guard underestimate.

And this time around — unlike the discounters, the portals, the IDX papier-mâché brokers, the Compasses and the Redfins — the sacrosanct home selling process is being turned on its head.

The techno flippers are not slashing commissions, not generating leads for others, not trying to control the data and not building an online consumer brand (for now). Instead, they promise convenience and pain relief for homesellers. An instant home transaction = nirvana.

Compressed transaction timelines are common in other sectors of our instant economy: we buy a car in an hour, receive an Amazon package in a day and book flights, hotels and auto services in minutes.

OfferPad co-founder and top producing agent Brian Bair’s  goal is to make the homeselling “process as simple as possible.”  He just landed $260 million in new funding to do so.

With the old model, there are “things I couldn’t do. I couldn’t tell [homesellers] exactly when their home was going to close and I couldn’t prevent the property from falling out of escrow 10 days before closing because the buyer’s financing fell through,” said Bair.

Critics argue that when it comes to homes, consumers do not place a premium on speed — but, actually, many might if acceleration is coupled with certainty.

Think about it — knowing you will close in a few days for a set price resolves the unknowns with the current process. For some, risking a lower price is worth the certainty. And this works best when you feel like you are dealing with a sophisticated service.

Uber charged the consumer more when it began, but the certainty and convenience outweighed the cost. Plus, the app seemed to know what it was doing.

These new models are all a bit different, and they are far from perfect. Stories are surfacing about sellers who are getting less than market value and paying hefty transaction costs — commissions as high as 13 percent, though the average is purportedly 6 percent to 8 percent.

On an Inman story last week, Arizona Realtor Jerry Murphy commented, “I tried OfferPad to get an offer on one of my listings. They offered $15,000 less than the offer we accepted on the property. That coupled with the exorbitant fees leave me asking what seller in their right mind would leave so much money on the table. You either really have to hate Realtors or be really desperate to do so.”

And for now, these startups can’t possibly do better than an ethical and qualified agent. Today, the dumbest pigeon is smarter than the smartest robot.

But their capitalization allows these razzle-dazzle companies to make mistakes and get better and better. Plus, with machine learning, their tools will soon be as precise as the time displayed on your iPhone.

And expect new products, like mortgages that close in minutes, prompting buyers to participate in these new models. A marketplace?

We will soon know if this is an Uber-like tipping point for the real estate industry. I think it could be. But it’s only threatening if the industry crosses its arms smugly, puts on a grumpy face and does nothing.

Broker-owners can choose to behave like cab companies — ignoring the trend altogether or casting the new models as some sort of evil Slenderman. That approach stalls innovation and puts broker-owners further behind.

Consider the history with the portals, when the industry made Zillow the bogeyman. Now, many brokers have no other choice than to cozy up with the giant portal to keep up with technology that is being built by a new generation of disrupters. The once boring back-end is suddenly sexy, if transaction compression is the name of the game, which it is. Zillow and Dotloop together can connect the dots from lead to close better than anyone.

Brokers must quickly invest in data science to understand when homesellers are going to sell and in tools that compress the transaction — wiping out weeks of wasted time for their agents and their customers. Brokers can also partner with the new fintech companies that are making the loan process quicker than watching a segment of The Big Bang Theory.

Soon, it will be “time” that brokers are competing with — not portals, bots and geeky entrepreneurs.

I hold out hope that this time around brokers will act more like Jack in the Beanstalk, showing leadership, courage and bravery to overcome and even befriend the giants.

What about agents?

Do I think these new models will wipe them out? No. They are like smart Uber drivers, once cabbies and chauffeurs, who made the switch successfully  The best drivers have multiple cars and are building businesses around car-share services.

Smart real estate agents are already changing how they manage their transactions, and they are forming teams to deliver better and faster service. They are survivors and thrivers; they will adapt, adopt and partner where needed. They are as agile as the best entrepreneurs and have leverage if they use it.

Those who don’t will suffer the consequences.

Have you stood in a grocery store line lately when someone ahead of you is writing a paper check? I try not to get impatient, but I wish I could show the person how to use Apple Pay to make their life easier.

Technology is not perfect, but some of it just makes too much sense to ignore.

Email Brad Inman