Real estate dreams – fact and fantasy

I was intrigued by the title “Big box broker lays off thousands, puts best producers on salary plus commission“. Who could it be, what company had done this? Reading the article, however, I realized it was just wishful thinking. No large brokerage has actually converted their commission-based agents to salary plus commission because it doesn’t make any sense.

If converting agents to employees or paying them a salary made financial sense, then brokerages would rush to convert all of their commission-based sales people into employees.

If it were possible to make money hiring agents and paying them a salary, then Foxton’s would still be in business.

If it made financial sense for real estate firms to have agents become employees, then Zip Realty wouldn’t have had to lay off all of their workers.

The argument made is that Redfin has agent employees, and they are “profitable”.

Do not believe Redfin’s press releases.

They may have, on occasion, made more money in a month than they spent, but they are still far from profitable.

Redfin is still $30M in the hole and the money they are refunding to their buyers is the money that they received from venture capitalists. The only hope they have to pay that back is to find a gullible buyer.

If this kind of business model made financial sense, there would be more imitators.

QR Codes prohibited in NWMLS listings

Two dimensional barcodes, “2D codes”, such as QR codes and Microsoft Tags, contain patterns of black-and-white blocks or colored shapes that can be scanned by smartphones to bring up a website. Many NWMLS members now add 2D codes to signs or flyers so potential buyers can scan the code and view additional property information on their smartphones. However, 2D codes are not photos, and cannot be uploaded as listing photos or used in the listing.

The rationale behind this ruling is that QR Codes often point to websites with additional information about the listing and these websites are usually branded with the listing agent’s contact information and branding and, as per Rule 10(i), advertising is prohibited in listing data.

Some brokers believe that QR Codes are silly or superfluous, but others love the idea and have some great ways to capitalize on the QR craze.

I’ve used them a few times on flyers for the sign boxes, but not sure if anyone’s paying attention. However, I’m glad to have another tool to assist Sellers in marketing their homes Visit This Link.

A visit from a friend

Cindy Saver dropped by my broker’s open house last week and shot a few impromptu photos with her fancy camera and noted my internet efforts online, and I was thrilled with the results.

Cindy is a broker with Gerrard Beattie and Knapp on Capitol Hill, and we were neighbors briefly when I lived on Federal and she had a home around the corner on Blaine. Seattle’s such a small town.

She has a wonderful real estate and photography blog called Residential Longings, and it’s full of beautiful pictures and a sort of stream-of-consciousness writing style where Cindy muses on the bits of everyday life she comes across during the day.

When she starts doing photography professionally, I think I’ll have her shoot a few new headshots. The ones I’m using now are so old, I think I’m wearing a power suit and shoulder pads from 1982!

RIP ZIP

A few months ago Zip Realty announced that it’s changing its agency model by transitioning the employment status of its real estate agents nationwide from employees to independent contractors.

This transition is described as a lay-off in the news, without much comment.

What does this transition in one company mean to the residential real estate industry?

The firm lost $15 million in the third quarter this last year, following a loss of $0.8 million during the same period last year. Because of losses, the firm decided to cut costs, including the benefits it has been giving to its agent. Employed agents have been receiving medical, dental and 401(k) benefits from the firm. When these employees become independent contractors, they will stop receiving these benefits.

Zip Realty hired agents as “employees” and gives a 20% real estate rebate to buyers and offers a less-than-standard listing fee to sellers. If they can’t make money doing this, what does this mean for the other major real estate employer, Redfin? Even though they claim to have reached profitability, I think they meant that for one month they actually brought in more than they spent. But to reach true profitability, they have to do that consistently, and I doubt they can do that by paying agents as employees (along with all the accompanying benefits) and giving back 50% of the commission to buyers. And at what rate would they be able to return any part of the $32M given to them by investors? Their angel investors can be paid dividend payments or profit sharing over time, but if there’s never any true profit then the only way they’re going to get their money back is when there is a liquidity event, either by being sold or having an initial public offering. But who would buy the business or the stock if there aren’t any profits? As Zip has found out, they cannot consistently make a profit by giving the “profit” back to the customers. In Redfin’s case, they’re not just refunding the profit, but actually giving their customers the angel investors money. It’s a massive money transfer and eventually the money will dry up. I predict they will move to a more traditional model in the next year because they cannot continue giving away their investors dough.

Russell Shaw wrote on Bloodhound Blog a few years ago about the problem with Zip Realty:

Here’s the problem the company has created, unsuccessful agents leave because they’re not making any money. Successful agents also leave because they’re not making enough money.

I think that statement is the simple truth of the problem with having employees v.s. agents.

To motivate, there must be a profit incentive. If there’s no profit, what’s the point of working? I ran across a Findwell blog post about trying to find an agent/employee for the business. The author complained about the quality of applications for employment at his firm. But who but the least successful or the least ambitious would be looking for a job like this? Everyone in the real estate business knows you have to work nights and weekends… who would want to do this unless highly compensated. And Findwell, like the others, refunds 50% of the profits back to the buyer. Yikes! I’d rather sell 10 houses at 3% commission than 20 houses at 1.5%. That’s just common sense.

As Russell pointed out, they’ve got to get rid of the rebate. The rebate is unnecessary.

Zip rebates about 20% of their gross commission to their home buyer customers. They provide a similar discount to home sellers. In my experience, the discount/rebate attracts buyers and sellers at the low end of the market. I sold houses for Zip and gave the required rebates. I also sold homes for traditional firms and never gave a rebate. Guess what happened when I stopped giving a rebate. My average home sales price went way up and so did my average revenue per transaction. Most of my leads were sourced online just like Zip’s so, this is a relevant comparison.

All three of these companies listed have great websites, and they all rebate. Yet, the companies that have the highest sales volume are the traditional firms which do not refund a percentage of the profits to their customers.

I think they should quit doing the rebate and just focus on good customer service and doing a good job for their customers and clients. It’s difficult to compete on price as there’s always someone more desperate and hungry than you are. Focus on exemplary customer service and reap the rewards.

Seattle Dream Homes is having a Gingerbread Dream Home contest!

Seattle Dream Homes is having a virtual Gingerbread House contest on the website and the judge is Jessie Oleson from Cake Spy. The winner will receive a $75 gift certificate for photo books from Kodak.

Just send your photo to GingerbreadHouse@SeattleDreamHomes.com by Midnight, Xmas Eve December 24th. The winner will be announced online on the website.

NOTE: We have a winner! Please see Gingerbread Dream Home for details. Thanks to everyone who participated this year!

Passages

photo: Daniel Sheehan

Seattle real estate lost a wonderful person and an incredible resource when Windermere broker and home staging expert Jan Sewell died in September.

Jan was a vibrant and creative source in our field, and she is incredibly missed.

Jan was our “Wolf’, like the character Harvey Keitel played in “Pulp Fiction”, who was brought in to clean up and take care of the details after a murder. Jan was often brought in, in the same way, to clean up, pick up the pieces, keep everyone calm and be a problem solver. Like “The Wolf”, Jan cost a lot of money, but it was always dough well-spent.

Almost everyone has a story about how Jan went in and cleaned up one of their listings, turning a sow’s ear into a sparkly silk purse. If it was just once or twice, it wouldn’t be remarkable, but it was house after house, month after month, year after year, where we would watch her sell an “unsellable” home.

Observing her talents was a test tube experiment happening before our eyes, and measuring the results were quantifiable in a way we could all understand.

One day there’d be a nasty, rat-infested, outdated, functionally obsolete crapper. Maybe it had been sitting on the market for months. Enter Jan and her crew and they could do a transformation with illusion, furniture, art and a couple of cans of paint.

Her creativity and inspiration would transform a hovel into a home and we’d seen it time after time. From teeny-tiny little crackerboxes to stately homes in Madison Park, she weaved a spell with spackle and duct tape, creating a vision of a life well-lived.

Just a few months before she died, Redfin’s CEO, Glenn Kelman bought one of her “creations”, a transformed 1904 home that was bought and flipped by a builder. The builder paid $1M, then called in Jan Sewell to design, decorate and weave her magic, and it worked! The Redfin exec bought the home for $1,780,000. Real estate sales at Redfin must be going like gangbusters. Or maybe it’s just money magic with investors and their venture capital. Don’t know, but good thing he got that Redfin rebate.

You can see “Before” and “After” photos of Jan Sewell’s magic and be amazed. Though the contractor did quite a bit of work, it was all designed by Ms. Sewell.

(According to Redfin and KC tax records, the same Redfin exec recently sold a townhouse for $610,000 that he had bought in June 2007 for $745,000. Maybe he should have called in Jan Sewell to stage it and he wouldn’t have taken that $135,000 hit!)

Last month, we received a note from Jan Sewell’s partner that even though Jan is gone, Jan Sewell Design will still live on. From the note:

Jan Sewell was an icon in Seattle’s staging community. Since her passing many of you have asked what the future holds for her company. Over the past few years Jan was able to turn the responsibilities of her staging business over to her design team, allowing her to devote herself fully to real estate. Although we miss Jan dearly, the team is still intact and we are moving forward, as she wanted. Jan Sewell Design has earned a reputation for excellence and a distinctive design style. We are proud to carry on this legacy.

This evening is a special sale of some of the fabulous art work Jan collected throughout her life, and this private sale will take place at the Art Stable, designed by Tom Kundig of Olson Kundig Architects. This should be an exciting, but melancholy art sale and memorial to a talented designer.

Several years ago I had a housing complex of 12 homes for sale in a development that were listed for over a year before I took over the listing. I asked Jan Sewell to partner with me, and we got every single one of those listings sold, through her design magic. I’m still looking for some “Before” pix, but you can see “After” photos here.

Jan’s own home for sale on Windermere.

Madison Park Blog obituary. Very nice memorial and comments.

I miss her very much. Goodbye, my friend, until we meet again.

Anti-bailout website run by Washington insiders who own million-dollar houses.

The anti-bailout website AngryRenter.com is run by Washington insiders who own million-dollar houses.

As the WSJ reported, the website is the brainchild of Freedom Works, a think tank run by Dick Armey (pictured), a conservative Republican from Texas who once served in House leadership.

The Journal: “Angry they may be, but the people behind AngryRenter.com are certainly not renters. Though it purports to be a spontaneous uprising, AngryRenter.com is actually a product of an inside-the-Beltway conservative advocacy organization led by Dick Armey, the former House majority leader, and publishing magnate Steve Forbes, a fellow Republican. It’s a fake grass-roots effort — what politicos call an AstroTurf campaign — that provides a window into the sleight-of-hand ways of Washington.”

The Journal reports Armey is pulling down a comfortable $500,000 salary at Freedom Works, and that he lives on 78-acre spread in Texas valued at $1.7 million.

Dino Rossi: Profiting from the foreclosure crisis?

Dino Rossi, who twice ran for Governor of our state and lost and is now in a senate race with Senator Patty Murray, spoke at several Homeowners Conferences this year that focused on how investors can make a profit buying foreclosed properties. The invitation and advertisements said investors can learn how to make a 50% return on investment each year from foreclosed properties. From the website: “With the current financial and real estate meltdown an opportunity has been created like never before in history.”

If you are running for public office and you want to make yourself seem more credible and caring in the eyes of your average voter, don’t peddle tips on how to profit off of human misery and suffering. Even though the owners have moved out, it is still a sad, sad story.

(Note: Dino Rossi’s smiling face has since been removed from the website, however you can see the original “ticket” for the event here:)

If one is running for public office, wouldn’t it make more sense to spend time helping and assisting those in foreclosure, rather than speaking at seminars that promote the purchase of foreclosures and profiting from human misery?

Those who use these techniques taught at the foreclosure seminars don’t care about the people who have been displaced. They only want to buy the home for a fraction of its value so they can flip it and make a quick profit.

Even if Dino Rossi is not speaking specifically about how to buy these homes for fifty-cents-on-the-dollar, his attendance there seems to condone this kind of behavior.

(Note: Rossi is not a REALTOR, though he does have a real estate license and is involved in commercial real estate sales. He gives thoughtful and ethical people in the real estate business a bad name.)

From Latte Republic:

Current law prevents distressed homeowners from purchasing their home at the Sheriff’s Trustee Auction, even though some of the distressed homeowners could afford the home if they could acquire it at the trustee sale price. (Some homeowners have become re-employed after long periods of unemployment, but the loan servicer refused to allow the distressed homeowner access to the federal Home Affordable program). For more information about how homeowners are being wrongfully foreclosed on during the modification review, see “On the Hill” blog post, Homeowners Working With Servicers Often Blindsided by Foreclosures.

In states with non-judicial foreclosure (WA is one of them). Distressed homeowners are not allowed to re-purchase their home before or after the Sheriff Trustee sale.

If Rossi truly wants to connect with the voters, he would ask the state legislature to provide distressed homeowners the option of redemption. After all, the people who are being foreclosed on in 2010 are not “sub prime borrowers.” They are individuals and families who have lost jobs or businesses due to the recession.

In most cases, the foreclosure redemption process provides distressed homeowners a lengthy period in which to save the home. ( Please note that some states have redemption periods of only a few days). Certain foreclosure laws place the redemption period before the sheriff sale, while most others place it after the sale but before the eviction.

Of course, promoting consumer protection legislation wouldn’t help Rossi raise campaign funds from Real Estate investors who are making a killing at the expense of Washington families who have lost everything they have worked for their entire lives, thanks to the Financial Crisis and wrongful foreclosures.

The big banks got a bailout – despite the contributions they made to the financial crisis. The American people who have been adversely affected by the recession are losing their homes to greedy real estate investors who don’t give a damn what happens to displaced American families.

It may be legal to strip homeowners of their primary residence – but it sure as hell isn’t moral or ethical.

Rossi getting most anonymous outside dollars campaign donations (Seattle PI)

Political Smell Test: Dino Rossi’s Foreclosure Profits (News Tribune)

Rossi Still Helping The Rich Profit Off Distressed Properties During Senate Campaign (TPMDC)

Rossi: Good time to buy a million dollar house?
(Seattle Times)

Realtors vote to prohibit members from discriminating on the basis of sexual orientation.

This year at the National Association of Realtors Conference in New Orleans, there will be a historic vote to add language about sexual orientation to Article 10 of the Realtor Code of Ethics. For the change to take effect, the vote must be approved by NAR’s Delegate Body, which meets Nov. 8 at the REALTORS® Conference & Expo in New Orleans.

If the Delegate Body passes the change, Article 10 will read:

REALTORS® shall not deny equal professional service to any person for reasons of race, color, religion, sex, handicap, familial status, national origin, or sexual orientation.

REALTORS® shall not be parties to any plan or agreement to discriminate against a person or persons on the basis of race, color, religion, sex, handicap, familial status, national origin, or sexual orientation.

REALTORS® in their real estate employment practices shall not discriminate against any person or persons on the basis of race, color, religion, sex, handicap, familial status, national origin, or sexual orientation.

The board of directors’ vote puts NAR one step ahead of Congress, which is considering a change to the Fair Housing Act. The Fair and Inclusive Housing Rights Act of 2010 would prohibit discrimination on the basis of sexual orientation and gender identity. It would be the first change to the law since 1988, when handicap and familial status were added as protected classes.

Told you so

Several months ago, I wrote about Michael Hellickson and his radio ad featuring the populist superstar of Fox News, Glenn Beck. The ad, which you can hear on the Hellickson website, enumerates the many ways Michael Hellickson was not like other agents. I had written about all of the fines leveled by the NWMLS, fines totaling over $30,000.00, month after month, and the point of my story was that Yes, indeed, he was NOT like other agents, as most agents go through their entire career without being fined.

Several days after posting, I was contacted by a representative from the NWMLS asking me to remove the specific information about the Hellickson’s fines. I was asked to remove this information as this was “private” information and the fines were “internal”. The odd thing is, many of the fines were for amounts such as “$5000, $2500 stayed if no further infractions occurred”, yet month after month, I saw more infractions and more stays. I thought at the time that he and his brokerage were somehow getting a free pass.

After the phone call from a NWMLS representative, I didn’t want to lose my membership, so I complied and took off the actual listings of infractions and the actual amounts of the fines leveled towards Hellickson, while keeping the rest of the post intact.

Fast forward 6 months later, and news breaks of his rule-breaking and shenanigans and after a 17-month investigation by the Washington Department of Licensing, he’s lost his license.

I first found out he lost his license when I received an irate phone call from a guy who identified himself as an ex-employee of Hellickson. He said he’d just lost his job, he’d read the complaints, they were all bogus, and Hellickson’s name would be cleared and he just wanted me to know that “Hellickson Company is a family company”. I expressed my disgust with Hellickson’s business practices and his deceptive Glenn Beck radio ad and he said that Beck did the ad for Hellickson because they’re both Mormon. The guy raved for about 15 minutes and seemed to be in complete denial about his ex-boss’s alleged criminal conduct. But one point he did make, which I think is important, is that the Hellickson firm worked primarily with sellers in distress. Many of these people were desperate and in real trouble and were losing their home. They were looking for a scapegoat and blaming their real estate broker might have been very easy for them to do. So not to defend this company at all, I’m just thinking that there’s a grain of truth in there somewhere, that some of Hellickson’s actions could have been misconstrued by angry and desperate underwater homesellers.

But that aside, his website and radio ads were very deceptive and dishonest. He claimed to be the #1 agent in Washington, Oregon and Hawaii, which I knew was not true. Turns out he wasn’t even licensed in Oregon or Hawaii. And he’s certainly not the #1 agent in Washington State.

If you listened to the radio ad, he also has Glenn Beck claim on his behalf that he spent more than $500,000.00 in advertising and marketing (“More than 99% of what other real estate agents earn!”) and that his website attracted over 600 buyers per week.

Baloney, of course, all of it. Lies and more lies, from the mouth of Glenn Beck.

It’s interesting to note that one of the charges against Hellickson is that he intentionally underpriced homes, listed them and lowered the prices of homes for significantly less than what a bank would accept in a short sale situation. Why did he do this? I am guessing he did this in order to advertise these screaming deals and attract buyers to call his brokerage. 600 calls a week as he claims in his radio ad? Hardly. But if he got 60, that’s still a lot.

At the high point, he had as many as 400 listings at a time, way too many listings to service personally and ultimately as we know, real estate sales is a personal service business. Buyers and sellers fell through the cracks, phone calls went unanswered, offers went unpresented and sellers went unrepresented. Lives were ultimately ruined on both sides.

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Though Glenn Beck lost about 80 advertisers since he called President Obama a “racist” who has a “deep-seated hatred of white people” he still has a few advertisers left. Do I smell a boycott?

Photos of Glenn Beck’s house for sale.

Related: Rush Limbaugh’s NY Penthouse for Sale