The XBroker

Who is to blame for the housing and mortgage markets undoing depends on who you ask. Consumers blame everyone, brokers blame banks, banks blame brokers, appraisers are in the cross-hairs, even real estate professionals are not immune to the finger pointing...I think Michael Jackson had something to do with it all, but I can't prove that.

We need to blame someone, so I ask the echo chamber: Who were the architects and engineers that created and enabled all of 'this'? Before I answer, lets use the drug trade for my first analogy.

First loan is for free...

Who are the real criminals in the illicit drug trade? The users, the street level pushers, or the cartels who manufacture and make the drugs available aka The Enablers? One could make legitimate arguments that all are to fault for varying degrees. If users didn't use, pushers couldn't push and manufacturers would be out of business cause there is no demand for the product...yet that's more tail wagging the dog. IMHO thou who enables is at the root of fault.

In theory, if the enablers didn't produce the illicit product in the first place, there would be no pusher or user. The banks and other institutions who engineered the easy to acquire, downright addictive financial products framed an environment where unchecked growth dominated, deceit was rewarded and ethical business practitioners were punished.

Unchecked Growth is Bad, mmkay?

Follow me into more analogymnastics...What is uncontrolled growth called in the human body? Cancer. Without an internal system of checks and balances and proper detection techniques cancer manifests silently, usually until its too late when the organism has been consumed, ravaged to (near) death. You picking up what I'm putting down? Mortgage industry hell bent on growth until it consumed itself and imploded *pffft*

How is cancer treated? Traditionally with chemotherapy- an indiscriminate, very thoughtless killer of all things living. Wipe everything out and hopefully the body regenerates enough good cells to recuperate. This is effectively what's happening to the mortgage industry- important aspects have been or are being primed for indiscriminate eradication. As nonsensical as mortgage qualification standards were just over a year ago, so are the proposed 'fixes' being introduced via legislation.

Self-medication is a bad idea, thus charging the same people who architected the demise of entire institutions with implementing a cure is a bad idea, mmmkay?  Medicine has evolved by studying and understanding what makes organisms tick on very (very) micro levels- further, how small thoughtful changes in the right places can cause substantial improvements. Business, industry as a whole, needs to adopt similar methodologies of implementing micro-evolutionary change rather than blow it all away, Bruce Willis-Die Hard style.

We will protect you, promise.

What is currently being proposed by law makers as solutions to the mortgage mess is incestuous at best. These changes are couched as 'protective measures for the consumer', which is a bunch of bullshit, seeing that the new Home Value Code of Conduct (HVCC) and H.R. 1728's proposal to ban Yield Spread Premiums serve to do nothing of the sort. Instead they will (try to) eliminate the mortgage broker, compromise the real estate professional and ultimately harm the consumer...all for the banks gain.

Think that our policy makers in Washington wouldn't let such things happen?  Think again...after all, they've invested heavily in these institutions that are 'too big to fail'.

Next:  Review of the Home Value Code of Conduct (HVCC), H.R. 1728 and why they're bullets designed to kill off the mortgage broker.

Take it easy on me if you call in to chat

Realtors Federal Credit Union

Jay Thompson wrote about the NAR's foray into the world of controlled finances over a year ago...Eric Stegemann brought the topic up while at RE BarCamp-Phoenix, indicating it was his understanding that after a few delays, its a go. Fascinating implications. 

The largest trade organization in the United States, with all its lobbyist power, is for all practical purposes a lender.  Yes, yes, NAR and the Realtors (INSERT COPYRIGHT SYMBOL HERE) Federal Credit Union (RFCU) are separate and apart in all the right places but I love the messaging coming off the article on realtor.org:

Because operations will be on the Internet, REALTORS^® FCU will be sensitive to the work habits and lifestyles of REALTORS^®, most of whom are independent contractors who are compensated by commissions.”

All REALTORS^® and their families are eligible to become REALTORS^® FCU  members. REALTORS^® employees and staff, including NAR, state and local boards and associations, and NAR’s institutes, societies and councils are also eligible. REALTOR^® clients and customers, such and home buyers and home sellers, are not eligible.

Whats clear:

A year ago, pre-credit crisis, this was a borderline *yawn*, today its stands to be a pretty big deal.  Access to a credit union is a real benefit, yielding -->credit<-- to its members using  their own underwriting guidelines, separate and apart from Big Bank or gov't regulated programs. 

Mortgages for those of self-employed and commission based income ilk don't (really) exist in the mainstream anymore.  My opinion, which isn't usually positive when it comes to NAR's moves is just that, positive.  RFCU stands to provide real benefits to the member contingency, substantiating the dues to be a Realtor (INSERT COPYRIGHT SYMBOL HERE).  

Whats speculation:

Right now, clients and consumers are not eligible as the RFCU is careful to not trip the line hypocritic with their hard stance against banks getting into the real estate sales industry.  But I can only wonder how 'Americas Largest Trade Orgaization' might choose to flex their lobbyist muscles in the future? NAR can actually compete with Big Bank lobbyists on Capitol Hill.

If the banks won't lend in a common sensical fashion (a common theory), then consumers can't buy...if consumers cant buy, then Realtors can't pay NARs dues...NAR loses income and voices...

Does this 'force' NAR's hands to get in the mortgage game?  The argument is compelling and someone needs to check the Big Banks actions.  The irony of NAR, recently accused of anti-competitive practices by the Dept of Justice, chipping away at The Banks increasing monopolistic nature would be great theater.  

Do they push to allow clients access to RFCU mortgages?  Now that's a neatly marketable reason of solid tangible value to use a Realtor (INSERT COPYRIGHT SYMBOL HERE). 

(I know health benefits are important too...thats another subject for another day...)

The same banks that recently used Mortgage Brokers as agents to sell their products are now trying to set an unfair playing field that will ultimately eliminate brokers from the lanscape. 

If passed, H.R. 1728 would turn out to be an Epic FAIL that harmed the consumer and broker while lining the banks P&L...but thats just 'good business' I guess.

The following post is simply one non-conformists opinion, albeit a relatively educated one...Its my hope that my words, cutting as they may come across, cause an epiphany for more than a few...

This entire post is based on The California Association of Realtors 2008 Home Seller Survey (released in July 2008, I just happened upon the PowerPoint presentation a few days ago) but the statistics are just as relevant today, if not more so...Granted this survey is but a snapshot of an industry, yet pictures are worth thousands of words...You can read the entire survey here.  (All statistical references in this post are derived from the aforementioned survey).

Public perception of the real estate professional and the greater industry is amongst the lowest of any on record.  Consumers are looking for an alternative to the 'traditional' Agent and they're defining what this alternative is, yet relatively very few professional are heeding this demand and actually providing a tangible solution.  This Survey demonstrates to me that 90% of Agents are not providing what the consumer wants...and it is ALL ABOUT THE CONSUMER.

Personally I know alot of fantastic real estate professionals.  Genuinely great people, passionate, always striving to better themselves, their clients, the industry they serve and represent...they're worth every penny they command...they dont suck...I'm just a sucker for a good title (no pun intended).  I could fill this page dropping names like Jay Thompson, Kris Berg, Missy Caulk, Bill Gasset and 30 others nobody has heard of as examples of who I consider to be the vanguard of where this industry should look to as ministers of positive change.  Unfortunately, they're in the minority and a few good apples don't ripen the bunch. 

Agent Perception:  I can Has Consumer!

Talk to most any real estate professional and they will tout their expertise, knowledge and marketing prowess as the main reason you should retain their services.  Most will maintain that commission rates (should) mean very little to the consumer and they're worth every penny. 

Consumer Reality: You Suck! 

According to the respondents:

Number One factor considered when choosing an Agent?  Lowest Commission. 

Last reason?  Most knowledgeable. <-- If this doesn't snap you into reality, nothing will.

You'd best start putting your knowledge out there if you hope to attract a client...get a blogsite that rocks, start dropping neighborhood knowledge, get a killer IDX solution...substantiate your value!!  The days of being a prude with your listings and expertise until you had an executed contract are over.

I can find out more than you know. 

~70% of respondents polled on 'Information from The Internet vs Information from Agent' indicated that the Net provided information that was as useful, 'different' or more useful than an Agent.  I can only surmise that 'different' means information an agent couldn't or simply didn't provide.  In the Age of Information, lack thereof is akin to being useless.

The ~31% that said The Net provided less useful information than an Agent are part of a 50% declining trend over the past 5 years.

You're still (a) very necessary (evil?). 

~95% of respondent sellers still used an agent, which makes perfect sense.  I often state that: While technology won't replace a good real estate Agent, the Agent that properly utilizes technology will replace Agent that doesn't. 

Consider- 74% of 1st time respondent sellers considered not using an Agent, up 46% from 2007.  

You can't market your way out of a brown paper bag. 

Of the reasons given for using an Agent only 7% said it was for 'Better Marketing Exposure'.  Ummm, isn't this what an Agent's core value proposition is supposed to be, to market property?  Consumers clearly do not believe Agents can effectively market their property...yet online and offline marketing is the 1st and 3rd highest reason for choosing an Agent.  This is a huge disconnect and opportunity at the same time.

84% of respondent sellers are searching online and 96% Agents polled use print advertising. Helllllooo!?!  Can you say poor ROI, waste of money?  Newspapers and other print media are going out of business because less and less people read them.  Advertising in these dinosaurs is of almost no value going forward.  

Only 57% of agents use multiple photos or a virtual tour as part of an online home listing.  This just blows my mind.  I'd guess that 50% of the 57% that actually use multiple photos look (kinda) like these:

Proper Feng Shui can do wonders for a small space.

Extra long chain for convenient access to light. 

Sweet shower curtain stays with home!

Thanks to MLS Trash Can for the pictures.  Descriptions by me. 

Seriously, an agent who can't manage to market a property with quality photographs should have their license suspended on principle alone.

You're being perpetually judged. 

97% of respondents interviewed 3 or more Agents.  50% interviewed 6 or more Agents.  Consumers are getting more and more finicky about who they hire.  Agents better step up how they present themselves.  Better have an impressive resume and a killer suit = a slick engaging blogsite & robust IDX solution. 

Here's a scary thought (depending on who you are): 

Consumers are lurking on your blog, stalking your FaceBook page, following your Twitter stream, viewing your Flickr account, reading your answers on Trulia, Zillow & ActiveRain, evaluating your IDX, the quality of your multi-media marketing, processing how you engage comment threads and otherwise perpetually judging you under the cloak of anonymity.

How are you representing yourself in public and when you don't think anyone is looking?

The silver lining in this post could be that 'The Bar' is so low in a consumers eyes, those Agents willing to set aside their perceptions and confront reality are in a great position to capture some huge marketshare.  Take this information and use it to your advantage rather than deny its validity.

Many Agents are out there cleaning up despite this 'depressing' market...Find them, reach out to them, study their successes...I find the most successful people in life are more than willing to share their successes and help others get there too.  Reciprocity is still live and well...

To hear more, check out this interview with Tim Harris…