Melissa Savenko's Richmond Real Estate Review

A Rant About Agents with "Expertise" in Expensive Neighborhoods - A Pitfall of Real Estate + Internet

I am going to be venting a bit in this blog, so just bear with me. But consumers, particularly first time buyers, please think about these points. This was triggered by a few recent incidents that have really, really irked me.

A bit of background: I live and work in Richmond's Historic Fan District. It is a very specifically designated area, the entire neighborhood is listed on the National Register of Historic Places. It also happens to be adjacent to VCU's Monroe Park Campus. The Fan is one of the City's most expensive neighborhoods, for a number of reasons, including :

1. Beautiful Victorian architecture;

2. One of the best, if not THE best, public elementary schools in the City of Richmond in William Fox Elementary;

3. An established walkable urban neighborhood filled with shops, restaurants, art galleries and more;

4. The VCU connection, which creates high demand from both the students and faculty associated with the University.

Certainly since the 1990s, the Fan has traditionally attracted old home lovers, VCU students and faculty, young families with elementary school children, and the urban hipster and young professional population. Increasingly, it is attracting another demographic, the down-sizing Baby Boomers relocating from the suburbs. Some of these folks previously lived in the City, and moved out to one of the Counties for the public schools when their children were old enough. But more and more we are seeing people relocating into the City who have never lived in an old house. This creates issues in and of itself. These issues are further complicated when either of the agents involved in the transaction, buyer's agent or listing agent, is unfamiliar with the issues that can come up with old houses. To name some "biggies": asbestos, lead-based paint, oil tanks.

So, what is my problem? Working in the Fan - and for that matter the Museum District, Carytown, Bellevue, Ginter Park, Westover Hills, I could go on and on naming historic City neighborhoods - requires a certain level of expertise. I would think a buyer or a seller would want an agent who has listed and sold properties in the area. However, over and over again I see people using agents that have no or next to no experience with historic properties.

I really don't understand it. People will do more research to buy a TV or a computer than they will to find the agent that is going to help them buy or sell a home. And that home is for most people the biggest single investment they will make in their life.

Now, part of the problem is some agents represent themselves as expert in a particular area when they are no such thing. This is mainly on the Internet, through websites and Facebook pages. From what I've seen, the representation of "expertise" is typically passive, meaning the agent has sections on their website that discuss the Fan and buying and selling in the Fan. They are using search engine optimization ("SEO") to show up high in search results. But here's what I don't understand: Why don't you, Mr. or Ms. Buyer or Seller, ask the agent how many houses they have listed or sold in the [relevant historic neighborhood]? Or if they have some other nexxus for knowledge of the neighborhood?

I will certainly agree that part of this rant is self-serving, because I do almost all my work in historic City neighborhoods, I live in the Fan, my office is in the Fan, I grew up in Bellevue and Ginter Park, and almost all my business has been in City neighborhoods. It is frustrating when you have spent a lot of time to develop specific expertise, and other agents are using the Internet and SEO to capture leads without putting in the time and developing the expertise. It is especially frustrating when you have to do a deal with one of these agents and end up doing their work, because they don't even know what issues to spot. Or, worse yet, you have a deal fall apart because the inexperienced agent missed an issue that is typical with an old house, didn't advise their client, and their client flipped out over an inspection item that we see all. the. time.

Look, it is no surprise that agents and brokerages would like to get a toe-hold in these City neighborhoods, which are often some of the most expensive real estate in the Greater Richmond Metropolitan area. There have been a number of brokerages that have established offices in the Fan and Museum District over the last several years, in an attempt to capture market share. Many, if not most, of those offices eventually closed.

What is my "solution?" Well, besides having all those buyers and sellers calling me up to represent them? [:)]? I think agents have to earn their stripes the old fashioned way, by putting in the time. I tagged along behind my broker for two years, learning as much as I could about a real estate market that I already knew intimately, because I lived in it and had for 15+ years. But I needed to learn the ins and outs of representing buyers and sellers, how to manage a transaction, what the pitfalls are that can come up in inspection, how to solve those issues, and much, much more. I am a licensed attorney that had done major corporate transactions, so I knew my way around contracts and negotiation better than the typical new real estate agent. But I still had to learn how to buy and sell real estate. My real estate training was like law school, where the teach you how to "think like a lawyer," but nothing about how to actually practice law.

The situation of the buyer or seller calling on the inexperienced agent based on that agent's SEO skills is yet another example of the pitfalls of internet access to data in the real estate world. Information is not knowledge. Consumers, do your homework. Interview multiple agents. Find someone with expertise. Find someone that you feel comfortable with too. After all, this is a professional service relationship, so you need to like the person you are working with. Agents and consumers who want to flame me for this position, I'd love to get some comments back. Meanwhile, I'm off to host an Open House. In the Fan. [;)].

Ginter Place Condominiums and Other Similar Projects - How Do You Solve the Problem If You Have "Live," But Not "Work, Play?"

There was an article in the Richmond Times-Dispatch the other day about things looking up on the sales front at Ginter Place Condominiums.  For those of you not familiar with the project, it was a historic tax credit conversion - state credits only - of the old Richmond Memorial Hospital into sixty nine (69) luxury condominiums, marketed towards downsizing Baby Boomers who loved the Ginter Park and Bellevue neighborhoods but didn't want the huge house any more.

Well, for reasons that are not the developers' fault at all, the Ginter Place project has been languishing.  Only fifteen (15) units have been sold to date.  Reasons for that:

1.  It hit the market in October 2008.  The housing market was in the process of meltdown.  It was a scary, scary time.  No one was moving anywhere.

2.  Meanwhile, credit markets contracted, if not completely froze.  AND, in an almost death-blow to larger condominium projects, the FHA changed its financing rules for condominiums and would no longer provide FHA financing unless and until 51% of the units in a project had been sold.  So, if you've got 69 units to sell, you have to sell 35 units to buyers with cash or conventional financing (20% down or more) before later purchasers in the project are eligible for the most favorable financing product out there.  Well, most folks were conserving all the cash they could, because the general economic situation was so daggone scary.  And many folks didn't want to put 20% down for the exact same reason.

[BRIEF ASIDE ON WHY FHA FINANCING IS SO GOOD:  First, it has the lowest down payment requirement, only 3.5% of the purchase price of the property.  Second, it accepts the lowest credit score, 580-620 scores are eligible.  Lastly, it provides close to market rate interest rates for these buyers, almost as good conventional buyers with the best credit scores.  On the down side, you do have to pay for private mortgage insurance ("PMI") for five (5) years.]

3.  Even if you could find a cash or conventional buyer, a lot of them had a house to sell.  And they couldn't sell their house.

4.  Lots of people are reluctant to be the earliest adopters in a large-scale condominium project.  What happens if the other units don't sell?  This concern is magnified in a down market.

5.  With respect to Ginter Place, the neighborhood association had extracted a DEED RESTRICTION from the developers, prohibiting the use of the units as apartments.  That really tied the developers' hands when the market went south.  In the normal world, the developers would have rented out the unsold units to keep the project afloat, then sold the units when the market turned.  I find it pretty incredible that they didn't just let the bank take the entire thing back. 

So there are the market-based and project-based reasons Ginter Place has suffered in a completely awful real estate market.  But IMHO there has always been another issue with this project and several others - Monument Square at Willow Lawn Drive, Rockett's Landing right across the City line in Henrico on the river - that has made the sales even slower going in this market.  Here's my theory:  Baby Boomers buy condominiums for the "urban" experience.  They want to be able to walk places.  Or they at least don't want to have to get into a car for everything.  They want proximate access to products and services that take care of most, if not all, of their needs.

So I actually have a proposed solution.  Maybe folks will think it's goofy as all get out.  But this is my proposal for Ginter Place.  You aren't quite close enough to shops and restaurants and activities to achieve that walkability that makes the Fan/Museum District/Carytown so desirable.  Yes, you could walk to MacArthur and even Bellevue and the few shops and restaurants there, although it's not a short walk.  And you can hop across that wacky intersection of Hermitage and Westwood to make it to Kitchen 64.  But a walk to the Boulevard corridor isn't easy to do because there aren't any sidewalks, and you have to get past the No Mans Land under the interstate overpass on Boulevard. 

So.....how about running a trolley service for your residents?  It could run up and down the Boulevard corridor, from Ginter Place south to the Byrd Park tennis courts, with stops all along the Boulevard.  It would run north all the way down Lakeside, to the Lewis Ginter Botanical Garden.  People could hop off to go to a ball game, or to go to the Virginia Museum, or to walk through Carytown and shop and have dinner.  They could go to the Lakeside Farmers Market or have tea at Feathernesters.  Start slow, and run it at set times on the weekends.  See how it goes.  Maybe the City of Richmond could help subsidize it, if it's successful, and it could be opened up to anyone.  And you don't even have to rely on the City to make it happen.  Just call Buck Ward at Richmond Trolley Company.  Maybe two private enterprises could make this a win-win for both sides.

Maybe this is the worst idea in the world.  But as I look at the condominium projects over the last several years that have succeeded, and those that have had a difficult time, the idea of flipping the model comes back to me over and over.  If you don't have the work and play right there, figure out a way to make it there.  In other words, if it won't come to you, bring your people to it.   The idea was "if we build it, they will come," even without an additional retail and commercial component.  In a booming economy, with the hyperinflated buyers' market, maybe that made sense.  But in this world, it has turned out the buyers come if the promised new urbanist ideal - the "work, play" of the "live, work, play" mantra - exists in some form or can be seen coming in the not-too-distant future.  Cf. West Broad Village as a good example of that.

So, if you don't have "work, play" as part of your project, and it's not realistically close, make it realistically close.  Just a theory.  Thoughts and discussion would be greatly appreciated.

Zillow Zucks AGAIN! - They Win, Consumers and Agents Lose

OK, this post will probably be of interest only to agents, and maybe I'll get feedback that I'm way off base, but I've got to vent.  AND I am really curious as to the opinion of other real estate professionals, and consumers too, for that matter.

Since 2010, I have been paying for Zillow's "Premier Agent" program.  What it means is I pay for the privilege of having my mug pop up on the right hand side of the screen when a consumer is looking at a property in the particular zip code I "own."  I pay for X% of ____ zip code, which means my contact information will be included one of the three agents in that list X% of the time. 

When I first purchased the Premier Agent program in 2010, it was a big deal for me, because the market was still slow and money, especially money spent on anything not absolutely required, was extremely tight.  But I know how many consumers start their home search on the Internet - over 85%, last statistics I heard - so I bit the bullet and paid some amount for 25% of 23220.  I think it was about $115/month, but I got a decent discount if I paid for a full year.  I told myself if I got ONE sale out of it, the Premiere Agent program would pay for itself.

The program has been extremely successful for me.  It has recently become MORE successful, because Zillow has added a Customer Review section, which allows clients to review you and hopefully say very nice things about you.  Presumably a consumer will chose to contact the agent with the highest rating to get additional information about the listing.  The benefit to the Premiere Agent:  You get the opportunity to capture that customer and hopefully convert them into a buyer client.  Because I have had success with Zillow's program, because it has been a good investment with positive return, I have purchased more coverage for the zip codes where I practice.  So I have coverage in 23220 (Area 10 - City), 23221 (Museum District, Near West End), 23223 (Church Hill, Montrose), and 23227 (Northside, mainly Bellevue). 

Here's the problem, in my opinion:  ANY AGENT can purchase ANY Zip Code.  So the agent the consumer sees in the right hand column, the agent the consumer contacts, might have absolutely zero experience in the geographic area where the property of interest is.  So what does that do for Zillow?  As agents figure out the power of Zillow's program to generate buyer leads, agents buy profitable zip codes.  Demand for profitable zip codes - areas where the real estate is expensive - increases.  The PRICE of those zip codes increases exponentially. 

I just got a call from my Zillow representative letting me know my 50% share of 23220 and 50% share of 23227  is "out of contract," meaning I am paying on month-to-month basis my "legacy pricing rate," which was $137/month.  Because of the "high demand" for this zip code and the LENGTHY waiting list of agents frothing at the mouth to buy it, my monthly payment will now be $576/month.  And, oh yes, by the way, we will no longer do one year contracts, only six (6) month contracts.  So of course they can jack up the rate yet again in six (6) months.

Needless to say, I'm p*ssed.  I've been a good customer, was one of the first to buy into the program when it was brand new, and I feel like I should be able to keep my legacy pricing, or at least get some sort of more graduated increase.  It's like now that the investment is FINALLY paying off, they increase the price 400%.  I'm stamping my foot and hollerin' "It's not FAIR!"  [To which my Dad would reply, "Who ever told you life was fair?"  But I digress.]

So I'm getting screwed, but you probably don't care about that.  But here's how this program screws consumers, which you should care about.  Agents with no experience in an area, but with deep pockets, will get in line for zip codes with the priciest real estate.  In Richmond, Virginia, 23220 is one of those zip codes, because of the Historic Fan District.  Rather than the about $170,000 median home price for a home in the Greater Richmond area, the median price for a home in the Fan is in the neighborhood of $625,000.  [NOTE:  That figure comes from an article in Style Weekly about the battle over the Fan House's downstairs bar].  It's a lot easier to make a living selling $600,000+ homes than it is selling $170,000+ homes.  Agents line up for that zip code, increasing the demand, increasing the price.  Very good for Zillow.

But how about the consumer who clicks on the agent who pops up 100% of the time when that consumer is reviewing  Fan listings?  Isn't it reasonable for that guy or gal potential buyer to expect the agent is an expert in that area in which the property of interest is located?  What if they are a suburban agent in Chesterfield County who doesn't know the first thing about historic property?  Or better yet, what if they are an agent in WILLIAMSBURG,  that doesn't even belong to the local MLS?  Both things have happened with me and my listings, and are going to happen more and more, as agents catch on to the power of the Premier Agent program.

So, what's the ultimate effect?

• Zillow gets richer;
• Agents pay more for access to zip codes and those buyer leads;
• Agents without any experience in a particular area, but with deep pockets, can and will buy the priciest zip codes; and
• Consumers end up with agents that have little to no experience in a particular area.

[NOTE:  Consumers should be doing their own due diligence on the agents they choose to work with, particularly when looking at an area or property type that requires specialized knowledge, like historic property, resort property, farms, to name a few.  But I am constantly surprised at how little research people do on the agents they choose.  Consumers should be asking how many listings in the area that agent has had, how many sales, how long they have worked there, etc.  But that is a topic for another day]. 

What do I think is the solution to the problem?  Well, it's not one Zillow will adopt, I will tell you that.  I think there should be some nexxus between the agent purchasing a zip code and the zip code.  What do I mean by that?  The agent should have sold a property there, listed a property there, have his or her office there, live there...I am sure there are other means to establish nexxus.  My poor account rep, Gus, who has graciously and patiently listened to me vent about how much Zillow SUCKS, said this would be "way too difficult" for Zillow to do.  Horse hockey.  They are running so many algorhithms with all the Zillow data they collect now, I am sure the agent zip code nexxus would be a piece o'cake.

What would the result be, in my opinion?

• Consumers would be better served by Zillow, which already has a host of data accuracy issues, by getting appropriately experienced agents;
• The artificially high demand for pricey zip codes would drop; and
• Agents in an area wouldn't have to pay such exorbitant pricing for the privilege of getting buyer leads off what was originally our own d*mn data [NOTE:  Again, topic for another day].

Yes, I know this is somewhat self-serving.  I want my zip codes, and I don't want to have to pay $576/month to have them!  But this goes to a more core issue for me.  I am continually frustrated with agents practicing in areas they have no d*mn business practicing.   I know what I know, and I know what I don't.  In the 6+ years I have been in real estate I have learned the hard way to stick to my knitting, to practice in the areas where I am knowledgeable and value-added, and to refer any other business outside of my comfort zone.  There are not many people, except possibly my broker and some other of his contemporaries, who can really truly claim to have expertise in ALL of the Greater Richmond metropolitan area these days.   But agents will tell you all day long they can sell anywhere.

Zillow is selling its data to the highest bidder, without regard to any link between that zip code, that agent and that agent's experience.  I'm sure my complaints aren't going to change that.   Free market, right?  But to sell a Richmond zip code to an agent that is not even in the same MLS is, I think, outrageous.  If Zillow really is a product for the consumer, don't they want the consumer to get the best possible service from a true local expert? 

All this and $0.25 still won't get you a cup of coffee.

 

www.rvaopenhouses.com - FREE Open House Advertising for the Central Virginia Region!

Holy snikey pants.  It's been over a month since I've blogged.  Can't believe it.  Trust me, it's not that there aren't super hot topics in real estate and local development to cover.  There are.  The Justin French saga alone could sustain full-time blogging.  I'm just that busy, working 4x as hard for 1/2 the money.  Almost all the deals are difficult.  If it's not financing, it's inspection.  If it's not inspection, it's appraisal.  But I shouldn't complain.  At least I'm doing deals.  [:p].

But this post is a shameless plug for www.rvaopenhouses.com.  It's a FREE website - free to the agents for posting their listings, and free to consumers for searching for open houses.  It's intended to be another channel to advertise open houses, one-stop-shopping to find any open house in the Central Virginia Regional Multiple Listing Service ("CVRMLS") area, any time. 

So, agents, please try it.  www.rvaopenhouses.com.  No tricks, no gimmicks, no secret collecting of information.  For home buyers, it's free, it's easy, it's immediate.

www.rvaopenhouses.com.  Try it.  Let us know what you think, at info@rvaopenhouses.com.  We want to make this work, so we welcome your feedback.  Happy house hunting! 

Attention Sellers: Newspaper Advertising Does NOT Sell Houses!

Here's a great article from Steve Harney, real estate guru extraordinaire, about where buyers START the home buying process.  Sellers, take note:  Less than 2% of buyers start their search in the newspapers or other print media.

Where are buyers starting their search?  Mainly on the Internet (47%) or by contacting a real estate professional, either a real estate agent or a lender (27%). 

Print advertising is EXPENSIVE, not to mention short-lived.  My broker has reminded me many times that a newspaper ad is effective from about 7:00 a.m. to 6:00 p.m. on the day of publication.  At about $100 an ad (minimum) in our local paper, that's a lot of money that could be otherwise allocated somewhere more effective.

So, what does this mean for a seller trying to sell their home in this very challenging market?  Forget real estate guides, newspaper ads, and those uber-expensive specialty magazines.  Make sure your agent has a strong Internet marketing plan.  Get it in writing.  And please, make sure they take great pictures and post the maximum number permitted by the local Multiple Listing Service ("MLS").  I'm constantly amazed at how many listings have only one or two exterior photos, and often terrible ones at that.  Good luck!

Selling Your Home - Staging Works! - Some Simple Tips

Here's a great article titled "Stage to Sell Your Home Fast" with 9 simple - and cheap! - staging tips.  More on the wonders of staging later, I've gotta pick up the Small Person.  Very short version of my opinion = when staging a home, think "Pottery Barn," even if you'd rather claw your eyes out than actually live that way.  

New Real Estate Website for Consumers - Check It Out

The Richmond Association of Realtors has rolled out a new, consumer-oriented website with all kinds of resources about all things home related. Check it out at www.REsourceHome.com.  I haven't had the chance to fully explore it, but it looks like a good thing.  Information is power, people. I think all consumers, especially individuals buying or selling real estate, SHOULD educate themselves about the relevant market.  But I strongly believe a good realtor is still a necessity.  Information does not = knowledge.

Analysis of the Richmond, Virginia Condo Market - And Don't Forget Windsor Court!

Here's an article from this morning's Richmond BizSense about the local condominium market.  A big shout out to Chris Johnson of Monument Construction, who is quoted extensively in the article and is part of the development team on several condominium projects in the Fan and Museum District, including Windsor Court Condominiums, which I happen to be co- listing.

[A big shout out to Tom Dickey as well, the other half of the leadership of Monument Construction.  Hey, TD, whatever happened to the RPS Tourneys?]

The article's conclusion:  It's better to be a smaller project than a bigger one, because it's easier to get FHA financing.  Outside of those mega-projects, the condo market inventory is shrinking, and the demand and supply curves appear to be in equilibrium, with a switch coming shortly, and demand outstripping supply in certain markets, specifically the Fan and Museum District.  So don't expect any price drops in those areas.

There is a pessimist in the piece, who warns of "shadow inventory" coming on the market in the spring, producing a glut of resale units.  I'm not worried.  Resale units can't compete with NEW units, and there are only a few of those projects with multiple new unit inventory  left.  In the spirit of "a rising tide lifts all boats," here are some of the ONLY new condo projects with units available for sale in the Fan and Museum District, listed in alphabetical order:

• The Ambrata, 601 N. Roseneath
• The Hamlet, 7 S. Stafford, starting at $119,500
• The Mews, 1714 Cary Street, starting at $239,900
• Stafford Terrace, 101 N. Stafford, from $234,950 
• Windsor Court, 1608-1614 Grove, starting at $194,500

[NOTE:  There are a smattering of new units out there at projects that are almost completely sold out, such as the old Baptist Home at 1400 Grove Avenue and the studio units at 1641 Cary Street.  But for the most part the five projects above are the only new projects with multiple units for sale left in the Fan and Museum District.  In the interest of full disclosure, they are also all projects in which Monument Construction is involved.  ALSO NOTE, I am NOT including Downtown, Shockoe Slip, or Shockoe Bottom in this analysis.  If I were, I'd have to throw in a number of projects in the Bottom, Miller & Rhoads, and Rockett's Landing.  Those last two have that mega project, "lots of units, hard to get financing" problem, and skew the analysis of the condo market, IMHO].

Oh, and Aaron Kremer?  Next time you need a quote for an article on the state of the local real estate market, I'd be happy to oblige. 

Housing and Economy Headed for SUSTAINABLE Recovery

According to an article in RISMedia, per the National Association of Realtors' ("NAR") Chief Economist, Lawrence Yun, the housing market specifically and the economy generally are headed for a sustainable recovery. 

I personally think that "sustainable" is the key word.  In housing, Mr. Yun predicts that both interest rates and prices will increase in this 4th quarter and then steadily throughout 2010.

What does that mean practically?  Right now, between mid-November to mid-January 2010, is the best possible time to be a buyer.  It's the traditionally slowest selling period, even in GOOD housing markets, and sellers are willing to negotiate to get a deal done before Spring 2010.  Interest rates are at almost historic lows, prices have stabilized, but there are still deals to be had.

The statistics don't lie.  Inventories are down, the sales "velocity" has picked up, the percentage of closing price to list price is increasing.  If you are waiting for the housing market to continue to drop in the Greater Richmond Metropolitan area, in my opinion that ship has sailed.  So if you planned to buy, now is the time to do it.

Carry on.

Building a Real Estate Business and "Social Media" - A Yes or a No?

This is an interesting article on the value of social networking sites like Facebook, Twitter, etc. in developing and building a stronger real estate business.  Here's the author's, Mike Parker's, opinion:

Social media is a sinkhole that absorbs time, effort,  and money that could be better spent on finding listings and selling houses.  Social media is the new blogging.  It too will peak, then decline, with one very large exception: affinity group business communication.

Mr. Parker says a strong Internet presence is necessary to attract buyers and sellers.   I absolutely agree.  According to the National Association of Realtors' ("NAR") Profile of Home Buyers and Sellers (2008), 87% of ALL home buyers, and 94% of home buyers between 25-44, used the Internet to search for their home. 

But why don't Facebook, Twitter, blogging, or any of these other social media tools that Mr. Parker seems to disdain count towards developing and maintaining that "strong Internet presence?"  Social networking is great for keeping up with family, friends, clients, and colleagues.  Again according to NAR, 43% of home buyers, and 38% of home sellers, found their real estate agent through a referral from a friend or family member.  In the case of home sellers, another 26% used an agent they had previously worked with to buy or sell their home.  Facebook and Twitter are great ways to stay in touch with your family, friends, and past clients - your best referral sources.  And in my personal opinion, blogging is a tool to (hopefully) demonstrate the depth of your knowledge and expertise as a real estate agent.

So, I'm not sure why Mr. Parker is so down on social media and blogging.  Aren't these platforms additional tools to establish the strong Internet presence he advocates?