The Blog is Coming to Amazon's "Kindle" Platform

The blog is expanding! Amazon is trying to expand content for it's wireless reading tablet, "Kindle", so I decided to join their beta program and publish the blog on it.

I've received so much positive feedback from you on the blog, that I want to do everything I can to expand readership. I think that Terra Firma is somewhat unique in it's approach, and that there's something in it for everyone.

Real estate transactions are almost certainly the largest financial transactions that you will ever be a party to, and while there is a plethora of "how-to" fodder available, I've always felt that the vast majority of it was sorely lacking in practical advice, and more importantly, a thorough analysis of how all the relevant parties interact, what their strengths and weaknesses are, and most importantly of all; what their true motivations and agendas are. (Whew, that was one long sentence)

So whether you're a faithful reader, or a new visitor, I urge you to take a peak back at previous posts for a refresher, and stay tuned for even more juicy tidbits of insight. Keep sending me those e-mails, and I'll do my best to reach out to all of you.

Reach me at: michael.sussilleaux@gmail.com

Bottoms Up!

How do you determine when the real estate market in your area hits bottom? Or, for that matter, how do you tell when it hits the top of the market?

(The Million Dollar Question)
How do I accurately determine what the best time is for me to either buy or sell so that I get the very best deal possible?

Newspapers, magazines and television all report on the state of the real estate market, but there are two important limitations. First, they tend to deal with national data, which doesn't necessarily do you a lot of good. (Remember that real estate is a local phenomenon. If you didn't know that, or don't know why that's true, read this)

Second, sales statistics invariably report on the number of houses sold. On the face of it, it makes obvious and perfect sense, because what else can they report on? I am going to challenge this assumption, but first let's dig a little deeper in to this metric of "properties sold" and apply some common sense analysis.

The actual sale of a property is the last step of a long sales process. What are the components of this long process or "sales cycle"? (Specifically the time that transpires from the moment a sales agreement is reached to the actual closing and recording of the sale at the county clerk's office)

In my market, New York City, things probably work a bit differently than where you live simply because the overwhelming number of home sales represent condominiums and cooperative apartments and not stand alone houses. Condos and co-ops require lengthy submissions of personal and financial information followed by a review and approval process conducted by either the condo association or co-op board prior to the actual closing on the property.

Irrespective of the specific procedures applicable in your local market, most of the components of the sales cycle are the same. Typically, once an agreement is reached there is some form of down payment, an inspection, a mountain of paperwork, obtaining financing, submitting government filings, obtaining approvals, and finally scheduling a closing.

My experience is that the time from agreement on terms and conditions to closing is typically three to four months. At last! The transaction is complete.

Let's apply this three to four month time line to a hypothetical situation. You fall in love with a beautiful co-op apartment in the sweltering heat of late August and quickly reach an agreement with the seller of the property. The clock on the closing process starts ticking, and because from Thanksgiving through New Year's things slow to a crawl, the anticipated three to four months stretches to just over four, and you close the first week in January. Congratulations! You've just purchased a home in the first quarter of the next year!

Now let's get back to the media, and the sales figures they report to gauge where the market is. Where do they get the statistics? The answer is that they are either compiled by major real estate corporations or real estate data firms every quarter and published in "market reports". Your January sale will be bundled in the first quarter statistics that are released to the media in the beginning of April.

You may be thinking: "Whoa! Did he just say 'April'? I 'bought' that property in August the year before!"

And you would be correct.

Do you see the flaw in market news you get from the media? It's old. Very old.  Too old.

SUMMARY
The message is that it's important to understand that the data used to report the direction the real estate market is moving is at best several months old, and isn't necessarily reflective of what's happening now in your local market. If you were to quantitatively know where the market is today, you would have a serious advantage over everyone else.  

Many of the "best" brokers don't have the foggiest idea of how to collect and interpret the necessary data to determine where the market is now; and I mean "now" as in today.  If you want to learn more, let me know.  

Reach me at: michael.sussilleaux@gmail.com

Real Estate Myth Number 1: The Boutique Broker

Your luxury apartment or townhouse is genuinely spectacular. It's a multi-million dollar home, and when the time comes to sell it, you're not going to entrust the sale to just anyone. The broker who represents your property must be every bit as refined and pedigreed as your lovely home. This is clearly the milieu of the "Boutique Broker"

"Edwin Paddington Snodgrinckle" of "Snodgrinckle Elite Luxury Residences" is "the" most prestigious broker in the city -- or so you hear -- and fortunately for you he's been able to squeeze you in this Thursday so he can evaluate the suitability of your humble abode for inclusion in the Snodgrinckle stable of superior luxury homes.

Snodgrinckle arrives punctually, and nods casually at your tastefully decorated home. He remarks that it reminds him of the well appointed servant's quarters of the Rockefeller mansion; where he regularly attended black tie affairs when New York was "New York!".

Oh, it gets better. Old Edwin here has done $500,000,000 worth of business over his career and he conspiratorially -- "I really shouldn't tell you this, but ..." -- rattles off a gaggle of names from old New York Society whom he has represented.

Ask Mr. Snodgrinckle how he plans on marketing your property and he'll wax poetic about the thousands of buyers unique to his rolodex gathered over the course of his 45 years in the business. He'll also tell you that you'll get the best of both worlds; his premium service and the service of all the brokers in Manhattan since he distributes your listing to all the "big name" pedestrian firms.

Flushed with excitement from artfully spun tales of patrician hob-nobbing, and overwhelmed by his 45 years plus in the real estate business, you practically beg for the honor of having him represent your property.

Sounds like a dream come true to me, so what's the catch? Where is the myth?

1. Unfortunately for you the Boutique Firm has no real advertising and marketing budget. They can not hope to reach the number of qualified buyers that the largest firms do. Instead they play up their "expertise" in your type of luxury property as if this will somehow mitigate the fact that they can't and don't advertise extensively. All the alleged expertise in the world is completely worthless if buyers aren't exposed to your listing.
2. Their one page, out-of-date, homemade website; (if they even have a website); is virtually invisible to anyone searching for a property. It may appear on page 2,137 of a Google search, but who realistically looks past page 2 (at most) of the results? No buyer searching for a luxury property is ever going to find your listing on the Internet.
3. The only advertising you will likely get with a boutique firm is the occasional ad in the New York Times. Unfortunately the role of the Times as the "New York Real Estate Bible" has almost completely evaporated in recent years along with its precipitous decline in circulation. My listings typically attract over 10 times the number of visitors to my company website than I receive on the Times site! (Yes, the big firms advertise on the Times too -- we have the budget to advertise on many, many venues.)
   
4. While it (should) be true that Mr. Snodgrinckle will share the listing with other brokerage firms, the other firms will not advertise it on their multi-million dollar prominent websites, nor will they publish it in magazines, newspapers and international venues since it's not their listing. Since all the major firms share their listings, it begs the question why not invest your $500,000 commission with a firm that can actually promote your listing around the city, country and world, since all the one-man-bands like Snodgrinckle will still receive the listing information anyway?
5. Mr. Snodgrinckle almost certainly has a rolodex, but buyers at this level do not "belong" to one broker. If you're a player in New York real estate, you appear in many rolodexes. When your listing is disseminated among all the brokers in New York, you can be absolutely sure that Mr. Snodgrinckle, all the other "boutique brokers" and all the brokers from the big firms will be on the phone to their best buyers within seconds because each one of them will be competing to be the first to reach the big players and therefore share in the co-broke commission.
6. Today's buyer is younger, more educated and computer savvy. They do not read print ads. They use the Internet, and they search on their own. Having no public presence other than a newspaper ad borders on ludicrous. You would be doing yourself a egregious disservice by not doing all you can to reach these buyers.
7. Snodgrinckle's track record of success over 45 years is most likely just that: Snodgrinckle's success, not his seller's! If Snodgrinckle sells a $10,000,000 townhouse directly to someone on his rolodex, he collects $600,000. That's a tidy sum. But what if more buyers saw the property? Buyers not in Snodgrinckle's rolodex, but instead brought by a co-broker? Maybe the townhouse would have gone for $12,000,000. In this case Snodrinckle would "only" make $360,000 since he would be splitting the commission with a co-broker who brought the buyer to the deal. Can you see how it's in Snodgrinckle's best interest; and specifically not in your best interest; to keep the deal close to the vest?
   

This is just the tip of the "boutique brokerage" iceberg waiting below the surface to sink your ship. If you are considering the services of a "Mr. Snodgrinckle", please reach out to me so we can discuss it further. It simply makes no sense to pay such a significant sum of money in commission to someone who doesn't have the capablility of bringing you the best buyers so that you will receive the highest price for your property.

Reach me at: michael.sussilleaux@gmail.com

I Read the News Today Oh Boy!

Unless you live under a rock, you are undoubtedly cognizant of all the bad news of late. The first quarter 2009 Manhattan real estate sales statistics recently came out, and predictably the news was that sales are down. No surprise there.

What is surprising is that signed contracts are on the rise. Hmmm, "So what?" you may ask. "How does this affect me, and why should I care?"

If you were to "buy" or "sell" a property today, you would sign a contract of sale. This is really what the "sale" is. All the terms of the transaction are spelled out in the contract and the Buyer and the Seller both sign the document to acknowledge their agreement to the terms and conditions.

Can you move in to a property you just "bought" today by signing a contract? Heck no. You've got to "close" the deal. A closing is where the Buyer & Seller as well as a bunch of lawyers and other folks sit at the "closing table" and a myriad of documents are signed, fees paid, mortgages issued and monies exchanged. Oh, and at the end of it all, the Seller has his money and the Buyer has the keys.

The closing typically happens two to four months after the contract is signed. This creates a significant lag between when a property is "sold" and when the property "closes". The media reports on closed sales, not contracts signed, so for all intents and purposes, the media's perspective of the housing market is months behind. This lag is exacerbated by the fact that the reports come out quarterly, so if a deal "closes" in the beginning of the quarter, it won't be included in the quarterly statistics until almost three months later!

The news that contract signings are up validates my, and my colleague's "real-life" experiences that there is significantly more activity in the market than last year, and even the early part of 2009.

No one can say for certain that we have hit bottom, but the indication is that we are either there or very close since activity is on the rise. The sad thing is that Buyers who are waiting for the "official" bottom to hit, will only find out about it long after it has actually occurred. By then it may be too late.

You may want to re-read this fascinating article if you're a Buyer.

Reach me at: michael.sussilleaux@gmail.com

Seller's Math

It goes without saying that when you sell your property you want to make as much money as possible. Certainly no one wants to lose money.

Many potential sellers calculate the price that they need to sell their property such that when all their expenses are deducted, they will break even. This is very useful information and I recommend that every person considering selling their property perform this calculation.

Things can get ugly when the break-even price point is lower than what the property is actually worth. A Seller that refuses to consider an offer less than the break-even point may be suffering from a case of what I call "Seller's Math". "Seller's Math" is simply the refusal to accept the actual worth of their property in the current real estate market, and artificially value the property at a number which covers all the Seller's financial obligations.

For the past ten years, New York City real estate has been steadily appreciating. Assuming you owned your property for at least a year or two and didn't wreck the place, you were virtually assured of a profit. Times have unfortunately changed, and some people are forced to sell at a loss.

There are two pitfalls that I see Sellers fall into with alarming regularity.

1. The refusal to accept that however unpalatable the thought may be, buyers don't care that you may be losing money in the deal.
2. The misguided concept that their apartment is somehow exempt from the price declines that have affected all the other apartments in their building or neighborhood.
   

If you don't "have" to sell, then you can opt to ride the storm out and wait for the market to take a positive turn if you're not happy with the feedback you're getting on the worth of your home. On the other hand, if you positively have to sell, then you are doing yourself a disservice by not cutting your losses and taking the best offer that comes around even if you incur some out of pocket expenses. The longer a property sits on the market, the less likely that it will sell for a good price. Read this to find out why this is the case.

The news isn't all bad. With the best marketing and the best broker, you can maximize your sales price in any market. I'm happy to discuss this further, or answer any questions you may have.

Reach me at: michael.sussilleaux@gmail.com