Real Estate Investing

A brilliant, funny, dynamic, amazing agent left our company several months ago.  Amy had earned her broker’s license, so was offered the opportunity to be the managing broker of her own office funded by outside investors.  Her business had dropped significantly while at my company - largely due to the sickly housing market - and she needed to find a stable source of income for her family.  Some investors offered her a broker position so she was paid a regular salary on top of the commissions she earned as a result of her sales.

Amy just stopped by for a visit and I bombarded her with questions about starting a new company.  My cup must be half empty today because I asked her if this is a BAD time to open a new office rather than whether it’s a good time.  Her answer surprised me,

“It’s not as risky now because business is slower, so there’s less to lose.  And I did ask myself, ‘What have I got to lose?  Why not?’”

Amy further explained that the challenge wasn’t in taking the risk, it’s getting a real estate approved office space before you can open.  She said it was difficult to get the letter from zoning saying it’s okay to have office in that location.  Then once you have that, you have to take care of everything including:  signage, obtaining a business license, have your insurance in place, ordering a phone, internet, and all your basic requirements needed to run a business.  And then you have to get furniture!!

Hoo Boy Online gives some tips about opening your own office,

Rent and start up equipment are required if you decide to open your own real estate office, and business education real estate grants can help with this. The cost of starting a new business may be more costly than you originally imagined. Starting your own agency is possible once you have been licensed. Providing you have enough money to tide through the start up phase, you will be able to concentrate on selling real estate and building a successful business that will continue to grow.

A common misconception is that you can get your real estate license and immediately open your own company.  In Tennessee that’s not true.  You must be an affiliate broker - similar to an apprentice-type situation - for a minimum of three years before taking classes and testing to be a managing broker.  You also have to earn many hours of continuing education (I believe it’s a minimum of 120 hours).  I’ve heard the state test if pretty daunting, but have never struck out on my own to conquer it.

There is some online information available about starting your own real estate brokerage firm, including this from Realtor.com.  But we’d be very interested if any readers have done this and can share their own experiences!

Photo from Luxury Home Digest.

I have Van Halen’s JUMP in my head today while reading the news that existing home sales in July rose 3.1 percent - an unexpected JUMP in what Wall Street anticipated.

Clearly my own market is not in an area where the housing market is in a complete state of chaos because business seems strong.  On the flip side of that statement, however, we have fewer agents working in my office than we’ve had in the last five years. Five years ago, there were about 60 or 65 of us. Today we’re down to 41 agents.  Of those, I haven’t seen 16 of them in over two months. Maybe it’s not my market improving so much as there are fewer agents around to share the buyers and sellers who are active in the world of real estate transactions.

The MSNBC article includes another caveat,

“… the number of unsold properties hit an all-time high, the latest indication that the worst housing market slump in decades is far from over.”

On a completely unrelated note, I attended an auction over the weekend in which two properties were sold.  I was counted as a nosey-neighbor, lookie-loo attendee as I had no intention of bidding.

Before I go into more auction information, let me emphasize that I’m not a trained, licensed, or apprenticed auctioneer so what I’m about to say is just from the experiences I’ve had in real estate.  I have been to two types of auctions:  absolute auctions and auctions with a reserve.  An absolute auction occurs when the item on the chopping block will sell to the highest bidder and there’s no turning back.  If someone, for example, bid $100 for a house and they’re the highest bidder, then SOLD!   I haven’t seen a house sell at an absolute auction, just stuff like lamps, couches, etc. 

With a reserve, the seller “reserves” the right to say no to the highest bidder if the price comes in lower than they can part with something.  The auctioneer this weekend said he never announces what type of auction it will be and that he’s prohibited from doing so by state law.

Here are a couple of pictures from the auction:

Though you can’t see them, we counted about 38 cars to be parked around the two homes. Because the auctioneer had two residences being offered by the same seller, they said the first highest bidder would get to select which house they wanted. And if they wanted both houses, they could have both by doubling the price. The first one went for considerably higher than the one shown in the picture because it has an inground swimming pool (with a lot of work needed since bullfrogs are the current tenants).  The first buyer opted not to buy both, so the second auction was conducted.

I was sorely tempted to raise my hand once or twice when the house across the street from me was stagnating at $80,000 (2500′ish square feet, 3-car garage, 2.5 acres, needed carpet, paint, general updating to eventually sell for $180,000). My husband warned me, “Do NOT buy a house. NO.” so I managed to keep from JUMPing in.  The house did eventually sell for approximately $123,000 (plus $20,000 for realtor fees, etc.). I’ll be anxious to see who the new neighbors are.

What the new homeowners may not realize is that they’ll be indoctrinated into Jack’s family. You see, Jack the neighborhood Jack Russell Terrier considers himself king of the ‘hood.  Sometimes if something comes up missing, we’ll call Jack’s “real” family and ask, “Did a rollerblade show up at your house?” Then we walk over and collect it.

I think Jack is excited to see a rebirth in the housing market in our neighborhood (or he’s just friendly and likes people).  I’m just as elated to be reading good news on the improving market across the country!

I have been working with a particular buyer for about four months now.  We started - I believe - in March.  We have written four offers and have been disappointed three times.  Deeply disappointed.

The first house seemed just perfect.  It had an amazing covered carport in the back, fully fenced backyard, and felt great.  Unfortunately the home inspection revealed problems so significant and expensive that the seller couldn’t afford to make repairs and the buyer wasn’t about to inherit those problems at closing.  For example, the old galvanized pipe plumbing in the old house had so much build-up in them that when the shower was on, there wasn’t enough pressure to run water in the kitchen sink. 

My buyer wrote two other offers: one was a multiple offer situation and the seller picked another buyer; the other one was a stunning failure because a former buyer who couldn’t get a loan suddenly came through with a clear to close on the day of the offer.

With that history, you can imagine our nervousness at the inspection today on her FOURTH offer.  There were a couple of minor problems - things that didn’t feel like deal breakers.  However, there was fungi under the house in the crawl space and that’s something that will definitely have to be addressed.  We’re having a “termite” inspector out.  Ironically, they are officially inspecting for “wood destroying insects or organisms” which definitely includes fungi, mold, mildew. 

You know, I try very hard to maintain a positive relationship with the inspectors who work with my buyers.  I’ve only been upset one time and that was because an inspector overstepped the scope of his work by noting that the carpet was dirty and needed to be stretched.  These should have been considered cosmetic and, in fact, we had asked for them to be cleaned and stretched in the contract.

Otherwise, inspectors are there to do a job - protect the buyer or find problems on behalf of the seller.  That’s why I was just stunned to read the nastiness that inspector Russel Ray of San Diego, California endured at a recent inspection.  For example,

• “My inspector would never make someone pay before doing the job.” (He runs his company as he sees fit, and I run mine as I see fit.)
• “My inspector would only have charged $400.” (He probably doesn’t have 43 years of experience in real estate.)
• “Would you give my Clients a discount of a couple hundred dollars?” (No, but since I am a former Realtor, I understand that you are a negotiator, always trying to get a better price. But my time and knowledge are all I have to sell, and I know my expenses, so I know what I have to charge.)

Meanwhile, my buyer and I will definitely ask the seller to address the fungi / mold problem.  It must be done.