Realty Bytes October 2009

The “Truth” about Listings:

Recently a Realtor shared a silly saying with me: “It is best to be, the First Born, the Second Wife, or the Third Realtor.” The third Realtor is listing Realtor. The third usually has the advantage of getting the property at the best price and with the most motivated seller. There is some truth in the observation.

For more than 30 years I have made my living representing buyers and sellers in real estate transactions. There are many compensation alternatives in the real estate market. In my experience, compensation has almost always been as the result of a success fee, a contingent fee. If one identifies a ready, willing and able buyer and they are able to close, the listing agent has earned his or her fee.

Most people do not understand the process involved in ‘getting the listing, in the marketing process, and in the challenges of getting the property closed. In other words, earning a fee,

Let’s preface the entire conversation with the absolute truth, that all real estate fees are independently negotiated between the client and the brokerage firm, the real estate company. Each company determines it own fee schedule. Part of that structure is what they will pay cooperating companies if they are the listing company.

First truth: There is competition to obtain the listing. Agents and their companies compete to have sellers list with them. This competition is very intense. There is also competition within offices among agents to get the listings. While many teams work on a cooperative basis that is misleading. Within the Multiple Listing Service there is an agreement by the listing broker to agree to cooperate and compensate other brokers.
Generally listing brokers prefer to sell in their own office, because they would earn both pieces of the brokerage. (There are alternative compensation structures), Sometimes a potential listing agent may say the other agent can always sell it. While that is true it ignores reality. Listing agents try to sell the listings of the owners who have hired them, not their competitors’ listings. When I am hired those sellers can reasonable expect that
I will give them my primary focus.

Second truth: if the fee structure is on a success fee, there is no value in making the process long. Sometimes it takes a long time to sell the home. Since a success fee is outcome driven, then it is best if it is sold quickly. Most listing agreements do not charge on fee basis, i.e. charge for each showing or telephone call. They charge only if they are effective in getting seller, buyer, lender, attorney, to the closing table.

Third truth, the price matters. The best agent, with the most effective marketing strategy, will not be successful if the price is not reasonable. In this market it is more important than a ‘normal market’ Prices need to be compelling, not competitive. Also, price needs to be compelling the first day of the listing. If you continue to drop price by small amounts, rather than listing competitively upfront you are following the market. It will take longer and will likely result in a lower price.

Fourth truth, house must be available for showing. Buyers will not buy a house if they do not see it. Some sellers, and frankly some agents, make it very difficult to set up showing appointments. This is stupid. There are so many houses on the market, the buyer will move on if they do not obtain an appointment. Make your home available for showing, and make certain your agent or their team member is equally available.

Fifth truth: all transactions in this market are tentative. Between inspection issues, buyer’s remorse flu, appraisal issues, and closing logistics, it is not done until it is closed, recorded, and funds dispersed. In other words, it is not sold until you have the money in hand.

Sixth truth: the agent matters. Some agents are better than others. You should compare and evaluate. Experience, designations, marketing strategy, and chemistry are all important. It is fair to ask for a list of sales and clients. Some of my future clients interview past clients. At minimum, you should have confidence that the agent will be effective. In my opinion it would be unwise to hire anyone who is not a Realtor, particularly given the Code of Ethics.

These are challenging times. Choosing an effective agent is important. It can be the difference between a sale and no sal

The Picture of Health (Reform) NAR's Officer's Blog

It is the 13th of October and I am writing from the 13th State. Yesterday, the Senate Finance Committee voted to forward a health care plan. The vote was 14 to 9 with Olympia Snow, Republican from Maine, voting with the Democratic majority.

The self-employed and small employers, such as REALTORS® and realty firms, would benefit from the significant changes that the amended Finance bill makes to traditional insurance underwriting and rating practices, including bans on the use of pre-existing conditions, health status and a number of other rating factors that have made coverage costly or unavailable. Self-employed individuals would be given an added advantage in that they could choose to purchase private health insurance as an individual or as a small business through the new health insurance exchanges.

Before the Finance measure goes to the Senate floor, it will be melded with the Senate Heath, Education, Labor and Pensions Committee bill, which passed earlier this year. The melding will be done by the Senate and committee leadership. Once melded, the combined bill will go to the Senate for a vote. Then, the House has three committee versions of its bill, HR 3200, that are also going through the melding process so that a single House bill will emerge for approval by the entire House.

In short, the legislation is moving forward, but has many steep hurdles to clear before it becomes law. It is important to remember that we are still in the early innings of health reform, which means the actual language that will be in any final bill is very fluid right now. Because of this, your National Association has not taken a position on the bill.

What your Leadership Team and staff have done is to work through the entire process, without a respite, to make sure that any legislative proposal includes provisions that take into account the unique challenges of the self-employed and independent contractors. Moreover, NAR has also been both visible and vocal about its opposition to any proposal that would limit the mortgage interest deduction (MID) as a means of "paying for" health reforms. You can be sure that we continue to be vigilant in that commitment.

We understand how important this issue is to the members. Last week, I traveled to the Maine Annual Convention in Rockport. Much of the conversation focused on health care. What was striking is the calmness of the conversation and the desire to understand and be understood. Over 20,000 people in Maine have lost their jobs over the past year. Its economy is a mirror of much of the country. Generally, the perspective was one of value. If we are going to have a national health insurance program it should have cost controls, be portable, be available to people with pre-existing conditions, and provide quality care. It should have ‘common sense.’ Does this sound familiar? It should. These are the National Association of REALTORS® priorities on health care reform.

All of this was in contrast to my personal experience in Rhode Island. Our small office obtains health insurance through Blue Cross/Blue Shield of Rhode Island. This month’s premium is $3,600. Over the past two years we have cut our overhead by 50 percent, but our costs of health care have increased by 25 percent. This has been necessary and I am confident you have been engaged in the same process. It is frustrating to see my premiums increase in part to fund a beautiful new glass skyscraper in Providence.

Nevertheless, please know that NAR is actively engaged in bringing common sense to the conversation. As Brokers, agents, support staff and Americans, this is a critical debate. -- Ron Phipps, 2009 NAR First Vice President

It's A Small World

We have spent the past week here in Greece attending the CEREAN (Central European Real Estate Association Network) annual conference, held is Thessaloniki. It has been a most educational and productive trip.

First, people are people. Regardless of language, race, color, heritage, baseball teaming branding, people are people. We were warmly received by our Eastern European hosts. It seems that a smile needs no translation. It was surprising to hear many of the attendees
tell us that they were impressed that we were so human, open, and engaged. (We are REALTORS®…that is what we are.) Dale Stinton and I both did formal presentations. As we talked translators simultaneously spoke in Greek and Russian. At first it was distracting, as you wondered how precisely your words were communicated. After listening to English translations of other presenters’ Greek and Russian presentations, it becomes ‘normal.’

Secondly, the importance of engaging international partners became so obvious. The earth may not be getting smaller, but the globe is. The Ukrainians were expressing frustration about buyer’s agents being able to collect a fee. The Romanians were complaining about government interference in real estate transactions. The Bulgarians were frustrated about the lack of mortgage money and credit. Does it sound familiar? One of the best parts of the conversation is it reminds one of how great our ‘system’ of real estate works.

In many parts of the world, there is no MLS system. There is no system of ‘cooperation and compensation.’ The lack of licensing, training, code of ethics, are challenging in the ‘emerging profession.’ It is to our advantage to share our systems and experience to benefit our members. It would be great to know that a referral to Greece would result in a referral fee. It would great to know that the investment our buyers are making in other markets would be with reliable professional advice. The international market is a huge market with exceptional opportunities for our members.

Finally, the international interchange of our organization leads to trust and understanding beyond real estate. It leads to understanding among different people. Its advantage goes way beyond real estate. – Ron Phipps, 2009 NAR First Vice President

To Loud to be Heard: The Health Care Debate

On Wednesday night, my Congressman Jim Langevin, held a constituents’ meeting on health care reform at the Warwick City Hall. The City Council chambers hold 475 people. Every spot was filled and more than 100 people assembled outside. In an effort to educate the public, Congressman Langevin presented a power point presentation. To his credit, he remained civil, patient and attentive. It is not easy to stay on message when people are yelling and screaming at you. It is also not easy to engage in real discussion when people come with an agenda of disruption and distraction.

Obviously, health insurance reform is a major issue for this country. It requires serious, open discussion. For REALTORS®, health insurance reform is about having access to affordable health insurance policies. Our status as independent contractors or self employed limits many agents to purchasing individual policies with high out of pocket costs, or simply to have no health insurance at all. Our membership survey found more than 300,000 REALTORS® have no health insurance at all, countless more have less than comprehensive policies and are at risk of losing coverage due to increased costs. It is a real challenge, in fact, a hardship for many of our members.

As a result, the National Association of REALTORS® is actively engaged in the conversation. We are working toward prudent, effective health care reform that recognizes our unique income situation as independent contractors or being self-employed. Also, we have been arguing for insurance reform and cost control. As Americans, we are involved in the conversation. As an Association, we seek a dialogue that addresses the needs of our members and staff. Know that we are doing that. I should also mention that NAR hasn’t endorsed ANY of the health care proposals floating around on Capitol Hill. And we won’t until a clearer picture of the final package emerges. That is why we are listening, learning and discussing. The issue and our membership require it.

You should expect that there will be more loud public forums. That is the way of public discourse now. It is a way for people to share the intensity of their position, but it would be very helpful to listen and learn before reacting. The majority of sound bites shared by the media demonstrated a total lack of understanding of the proposals. Ideology is important, but it should be argued with accurate information, not innuendo and propaganda. This applies to all sides of the issue. While it would be naïve to expect a change in process, it would be encouraging to work toward resolution of the issue with information and common sense. It is too important an issue to ignore or minimize. – Ron Phipps, 2009 NAR First Vice President

Realty Bytes August 2009

Realty Bytes August 2009:

Why is the bottom of the market so elusive?


The Rhode Island Real Estate market turned down in late 2005. Yes we have been in this market correction for almost four years. The rest of the country has been in this cycle since late 2006 early 2007. Obviously, all markets are local and there are exceptions to these general observations. Some markets like Detroit have been weak for a longer time, and other markets like North Dakota have not seen any down turn at all. Unfortunately, that is not the case in Rhode Island. From the market price peak of over $275,000 to a mean value below $200,000, the change in the market has been huge. Many people have no equity, or ‘negative equity.’ They owe more than the property is worth.

The most common question that we as Realtors are asked: “Are we at the bottom?” In all candor, we really do not know. We would like to think we are, or are on either side of it. The recent numbers of sales activity suggest that the market is improving with more sales, although the prices have continued to lower. Additionally, we will not know that we have hit bottom until we are beyond it. It is a rear view mirror event. Only after you have passed through it do you really know that you have reached it.

The challenging question is not whether we have seen bottom, but rather why is it so elusive? Why has this cycle been so long and the distance between peak and trough been so great?

The answers to both questions are intertwined. Because we had gone so high, as the result of inexpensive and easy credit, the correction is greater than it might have otherwise been. Anyone could get a mortgage and credit was so free flowing that you really did not need to be able to afford the mortgage. The assumption was that prices would continue to escalate, or your income would go up, or your lender would reduce payments. Rarely was there a conversation of ‘ability to afford to pay for the property long term. If you could not afford the month payment, you would just flip it. Obviously those assumptions were and are not sustainable.

With that as a backdrop, we had market and value exuberance that resulted in very high average sales prices. The peak was really high. When we began correcting the lenders process for underwriting mortgages became so rigorous, the majority of people would not qualify to refinance. Then we have the new appraisal rules, requiring direct comparables within 90 days. Mortgage denials became the norm, not the exceptions.

In Rhode Island almost 40 percent of our sales currently are distressed sales, either foreclosures are short sales. This has further reduced average price. Also short sale is an oxymoron. It should be called a LFS; Long Frustrating Sale. The average conventional transaction closes in 45 to 60 days. It takes, on average 9 and half weeks, to get a simple response to a short sale offer. That response could be a rejection or a counter instead of an acceptance. It takes months longer to close.

If is difficult to have price stabilization with so many short sales in the market that are never resolved. There is conversation within the industry that prices would stabilize more quickly if we have a 7 day response time for all offers. Cut the buyers loose and let them purchase something else. It is a total lack of common sense.

Appraisal issues continue to retard any stabilization. Many transactions are falling apart because the underwriters and credit managers are questioning the appraisals. It is difficult to find perfect matches that are only 90 days old. Then when the transaction falls apart, there is one less closed sale to use in other appraisals. It is a downward spiral.
Another lack of common sense.

Many potential buyers are also on the sidelines, wanting to make sure we hit bottom before they purchase. This is understandable and difficult to accomplish. Where is the bottom? Is this the time to buy? Historically low interests, low prices, huge inventory and the $8000 first time home buyer tax credit are all strong incentives. With all of those elements, some buyers are still waiting.

So far we have discussed the challenges in the real estate market. We cannot ignore the larger economic climate. The unemployment rate is a huge challenge. Over 70000 Rhode Islanders are looking for work. Those people need jobs to stay in their homes, much less buy other homes. Job creation is key to recovery.

It is our observation that MBTA rail service to Green Airport, (and Wickford later), will do a lot to stabilize price. Average price in Boston is approximately $373,000, in Rhode Island it is approximately $200,000. That is a huge difference between markets an hour apart. We are confident the rail service will go a long way to stabilize price.

So there you have it. It is elusive, but on the horizon. We are just not sure how far the horizon actually is.

Home Staging Video

New Fox Providence "House Talk" segment on staging

The Grand Canyon between Sellers and Buyers.

As a student of real estate markets and trends, one cannot help but see a growing delta between buyers and sellers in their perspectives on the market. The average buyer has become a critical shopper. He, she, or they spend much time looking at sold comparables, websites like Zillow and Trulia, BEFORE they actually start to look at specific properties. It maybe simply a characteristic of the latest generation of homebuyers… Yet as a group they are extremely analytical. Furthermore, they are surgical in their approach to home acquisition. They learn, and know value. They purchase based on value. The best measure of value is price, or more precisely initially ‘list price,’ but ultimately ‘sale price.’ The current home buyer is looking for great value. The list price must be compelling not competing. Many of the buyers I am working with now spread sheet their search. It is empirical. It is not emotional. It is also based on closed sales, not based on the list prices of competing properties. Buyers know and understand absorption rates… (The number of months, it will take to sell all of the listings on the market, at the current rate of sales.) Also, the ‘average buyer’ is in his. her, or their mid thirties. (The average seller is significantly older). The National Association of Realtors just released a new statistic that 94% of buyers between 25 and 40 use the web as their first and primary source in the home finding/acquiring process. This is amazing. ‘Pretty pictures’ in magazines or newspapers are not as effective as online photos, floor plans, videos, etc. The typical buyer speaks a different language and engages the process in a totally different way than the typical seller. The generation difference is amplifying the void between sellers and buyers. For buyers, this is a ‘strategy’ to find a great value. Sellers are trying to sell their ‘home.’ Most buyers are simply more objective.


The sellers are as a group, well intentioned but somewhat misinformed. The sellers are in most cases genuinely committed to selling. They firmly believe that their house or their neighborhood is better than the recent comparables and competing properties. In many instances they never view any of the competing properties. How do you make an informed decision without ever looking at the competition, (at least online)? Often sellers have only one or two Realtors give them a marketing presentation. The single largest mistake that they make is that they hire the Realtor with the highest recommended list price. What about record of sales, experience, and understanding of the market. I recommend that my potential sellers look at their home’s assessment, Zestimate, and Trulia value before we meet and discuss price. Many sellers are unwilling to discuss the absorption rate. As an example: in East Greenwich, for example, there are 14 houses on the market over 1000000. One is pending above a million and 2 have sold in the first half of the year. 3 total in six months is an absorption rate of 1 house very two months. With 14 listed it will take 28 months to sell the existing inventory. North Kingstown is more challenged. 1 sale, nothing pending and 20 properties above $1,000,000. A normal market would be 6 to 7 months of supply. The buyers know this: many sellers simply ignore this. The pattern and trend is the same in the lower price points, but fortunately not as severe. One of the contributing factors is that competition among listing agents to get the properties listed overwhelms the need for realistic price setting.

I have been speaking of buyers and sellers as universally the same. In fairness, they are not. The effective buyers are buying value and quality, not necessarily luxury. The effective sellers are learning the language of the buyer: it’s called value. With a significant oversupply price will come down. In Rhode Island, there is a herd mentality among sellers. One bases price on the other competing listings that are NOT selling. The price needs to be based on closed sales. This is a very difficult market. Prices continue to adjust downward. If you do not need to sell and want premium value, take your house off the market, and try again in a few years. If you need to sell, price it to be competitive. You should be one of the best two or three ‘values’ in the price point. Do not follow the sellers’ herd blindly over the cliff.

If you do this well as a seller, you will be able to be a BUYER.

Fixing Health Care for REALTORS®

NAR Officers' Blog Entry:

Last Thursday, July 9th, Senator Mary Landrieu, chair of the Senate Small Business Committee held a roundtable on health reform and its impact on Small Businesses. Senators Olympia Snowe, Chris Bond, Ron Wyden, Jeanne Sheehan, and Kay Hagan attendaned for a conversation with 9 ‘stakeholders.’ I was honored to represent REALTOR® stakeholders. This was my second visit in the past two weeks to Washington, DC to meet with health reform decision makers. The process of government is very ‘deliberate.' Two general observations, first, people in Washington are generally well intentioned and are trying to do right by their constituents and the country. Second, it is amazing that anything gets done given the first observation.

In real estate, we have an industry specific vocabulary: PITI, FISBO, HUD-1s, CMAs, BPOs, etc. Washington also has its own vocabulary and the health reform conversation its own vocabulary. (Our Washington Staff does an exceptional job with preparation for each of the meetings. Jerry, Jamie, Marcia, and Ken all met with me to review our policies and to teach me the ‘nuances.’ There is a lot to absorb. In my case they give me a list of vocabulary words to use AND a list of words to avoid). Among the recommendations that I shared with the Senators is the need to use plain speak, understandable language, in the deliberations on health reform, but more importantly with the actual program. It is important for Americans to be able to understand the choices they have in language that they can understand. When I am involved in the conversation, I find it necessary to listen with a very precise ear to actually understand what is being said.

The main message I delivered was the nature of REALTORS® and our business models. The demographics are telling: The average REALTOR® is 54 years old, up 2 years over the past two years, 60 percent of REALTORS® are female. The average REALTOR® earned just over $36,000 before $5,800 of business expenses. More than 300,000 of our 1.2 million members have NO insurance. A significant portion of the remainder have limited, non-comprehensive insurance. Over lay the fact that most REALTORS® are independent contractors. As REALTORS®, we have a need for affordable, portable, comprehensive insurance. You can review the balance of our ‘principles in the health care reform conversation at www.realtors.org/healthreform.

One of the other messages that we have delivered is that health care reform should be funded and paid for from insurance reforms, and cost savings. It should not be funded from any housing related taxes. Our comments are clear: “Do not ask us to choose between health care and home ownership.”

I concluded my comments with the observation that REALTORS® are making economic ‘triage’ decisions right now. Many REALTORS® are forced to make choices between paying their mortgages or health insurance. Obviously, many forgo comprehensive health insurance and rely on the HOPE Insurance program: Hope I do not get sick.”

Among the industrialized countries, the United States spends more of its Gross Domestic Product on health care than any other country, and yet the outcome of that investment is an inferior medical delivery system. REALTORS® want what is good for Americans, but they are pragmatic. Make sure that what is spent has value. Make sure that the costs reflect rather than belie the value. -- Ron Phipps, 2009 NAR First Vice President

Real Estate Metrics: Numbers Sellers NEED to Know

Sellers are trying to understand the market. Buyers have figured it out. Buyers have the upper hand. In some instances, they have the only hand. Rather than expound on the obvious, (it is a buyers market), it makes sense for seller’s to learn what the fundamentals are.

For the past forty plus years, most sells relied more on competing properties to determine value. Clearly sellers needed to look at closed transactions, but the philosophy was price ‘to’ your competition. The assumption has been that there is demand and that the delta between demand and supply was always within realms of reasonable. Some markets were sellers markets and some were buyers’ markets. This market is so extreme that the approach of pricing ‘to’ your competition is now obsolete.

Sellers must price to the price that will generate a sale, not traffic (showings) or interest. In the Rhode Island market generally, distressed sales, foreclosures and short sales, make up almost half of the market. Simply stated, sellers are competing against foreclosed and short sale properties. This means that prices will be lower. In many neighborhoods prices have continued to go down. That makes pricing very difficult.

So what are the numbers that a seller needs to know to price his or her house: First, he or she needs to know about the recently (90 days) closed properties. The absorption rate, how fast are houses selling, is also important. It is usually ‘figured’ in terms of months. How many months will it take to sell all of the properties currently listed and the current rate of sales?

The interest rate is very important. The mostly buyer of your home is going to have a mortgage. Need to understand what the mostly type of buyer your home will appeal to. If it is a first time homebuyer, it is mostly that the loan will be 90 or 95%. Take the time to determine want the potential buyer need to pay on a monthly basis. Most sellers ignore this step, ‘the price is the price.’ But in a market with higher unemployment and limited wage growth, what the buyers can afford to pay will have a profound impact on the sales price. The number you need is the monthly cost of Principle, Interest, Taxes and Insurance (PITI) for a buyer with a 10% down payment. This is what it will cost the new buyer to live in your home.

Two numbers are very misleading: days on market and the list price/sales price ratio. Days on market are difficult to us as each listing agreement starts at day 1. So if a house has been listed three times, the totals days on market may be 430, but the MLS reports that days on market are at 76. You want to look at the ‘property history’ to get a true picture of the total days on market. List price sales price ratio is also difficult and distracting. First because of the multi listing agreement situation just described, but also because of the price adjustments during the listing. If a property was originally listed at 475k and was reduced to 425k and sold at 400k…Which numbers do you compare? Clearly you need to build into your price room to negotiate. You will get there much sooner if your original list price is at or below other sold properties, not other competing properties. (There are still a number of sellers who are shopping for their price. Even if you find a naïve buyer the appraisal process will prevent the buyer from being able to over pay. So as a seller you need a naïve cash buyer to have a chance of selling above the market. Those buyers are 1 in a million.)


Ultimately, you need arrive at a list price that is not competitive, but compelling. You need that price that says to a buyer, we are a great value, not simply a fair value. We have a significant oversupply; price is the only ‘cure.’

One final number you need: a phone number to your local Realtor. This market is uncharted. You need expert advice to analyze and interpret the numbers. Many Realtors, including this one, work on a contingent fee. If successful in selling the property, he, she or I am paid. That is a really pro consumer model. Get professional advice. According to the National Association of Realtors, unrepresented sellers end up netting 16% less after success fee (commission) than represented sellers. Make sure the Realtor you hire is a full time, experienced licensee with a record of sales in this market. It is also appropriate to interview more than one Realtor to represent you. Finally, ask about the success fee (commission). It may be more competitive that you expect. Ask if the Realtor has a variable rate fee, which can be other, (most often lower), if both ‘halves’ of the sale, seller half-buyer half, are completed by the listing firm. That will also involve a conversation about agency and representation. Who represents whom?

You have enjoyed the shelter that home ownership has provided. Make sure to ‘capitalize’ as much as the market will allow when you sell. But that requires that you be realistic and reasonable.


The Numbers the Sellers Need:

1. Sales Price of Comparables (90 days)
2. Absorption Rate (Months)
3. Interest Rate
4. Monthly Payment (PITI)
5. Realtor’s Phone Number

House of the Month: 259 Forge Road, North Kingstown, RI

Just over the Greene River, past the entry to Pojac Point, one will find a meandering driveway that leads into the woods: 259 Forge Road. Five acres of treed privacy ‘wrap this grand estate residence. Originally designed and built by Jim Malm and his team in 2005, this home is a fresh interpretation of the American Shingle Style exemplified by the Tennis Hall of Fame in Newport. In harmony with its setting, the generous use of cedar shingles and native stone in a dramatic, classic statement is ‘of’ its site, not on it.


One of the main design features is that of ‘purposed space.’ As a time when energy efficiency and function have become more critical, 259 Forge Road is a creative application of this philosophy. Each space is large and open without being massive. Each space is versatile and functional: Each space is ‘purposed.’ The main gathering space, the two story great room, is dominated by stone fireplace that is engineered to store heat for the home, (from the boiler). Aesthetic and function in balance. The room enjoys a wine decanting station. The formal rooms are elegantly finished with high details and exquisite craftsmanship. The floors are Brazilian cherry.

One of the most amazing spaces in the house is the kitchen. The cabinets are locally crafted in birds-eye maple. The granite countertops are expansive. The appliances are exceptional and include a GE Monogram gas stove, Advantium oven, warming drawer, two dishwashers, etc. Among the unusual features of this kitchen is the soft drink tap system. The breakfast area has a herringbone pattern in the floor as well as a huge curio buffet.

The main level includes a sumptuous master suite. From the walk closet to the Japanese ‘soaking tub’ this is truly over the top. The marble floors are heats and the shower has multiple shower heads. The sleeping chamber is generous and welcoming.

One reaches the second level via a grand stairway. Hand turned spindles and the mahogany railing are woven together in a breathtaking manner. The terminus of the stair way is a living loft, ideal for causal conversation, reading, or relaxing. Three bedroom suites on this floor are served by two marble bathrooms. The bedrooms themselves have built out closets, window seats, and high tech electronics.

The lowest level is a great surprise. The recreation room is focused on a grand fireplace with a ‘sitting hearth.’ This is one of those places to share family stories and create new memories. The floors are also heated on this level. The full gym has a full bath for showering after exercising. The office is bright and open.

For the engineer in the family, the systems are impressive. From the smart boiler to the communication systems, this is a great example of innovation and execution.

The backyard involves a swimming pool with waterfall, decks, patios, a fire pit and rock outcroppings. This is one of the rare homes that embrace its setting rather than ignoring it. The swimming pool waterfall flows from the natural stone into the man-made pond. Once again there is a balance between the natural and the human.


Now that you know that this is a special home, you are probably asking: Why would anyone leave this home? The family is looking for a new adventure. The house before this one was going to be their last. It is time ‘to do another.’ So if you are looking for spectacular, check out 259 Forge Road, North Kingstown.



Facts:

Constructed 2005
Land Area: 5.06 Acres
Above Grade Living Space: 4034 sq. ft
Total Living Space: 5200 sq. ft.
Bedrooms; 4
Bathrooms: 4 and a half
List Price: $1,750,000.

NAR Officer's Blog: Father's Day and Leadership

My father’s best leadership lesson:

It is Father’s Day 2009 and I am so aware of my great fortune. I have been blessed with an exceptional family and three awesome children. Each shared his or her best wishes, love and thoughts with me today. It was touching and heartwarming. Being a father is the best part of my life: it is the rainbow, the sun, the moon, and the breath of my being. It is who I am.

Yet, I feel hollow today because I miss my father, who passed away five years ago. In between two open houses, I visited my father’s gravesite. We talked, or rather I talked and he listened. It is really hard today to hear him. He was an exceptional father who taught each of children to be people who lived lives of service to others and to do ones absolute best. He was one of those rare people who understood that teachers are most effective when they live the lesson they teach. He did.

This past May, I was voted in as the 2010 President-Elect by the NAR Board of Directors, and I will become President the following year. People who know me well commented on how proud my father must be. I agreed with them, but I still wanted to celebrate the accomplishment with him. He was a procuring cause. He encouraged this fulfilling journey.

In leadership, you realize that you achieve as the result of great mentoring and teaching. No one gets into leadership without lots of help. In truth, my teacher and mentors are numerous. My father’s best lesson was to find the best teachers and mentors, then study them and learn from them. Give them a stake in your progress. It is a great life lesson. You cannot become a NAR national leader without lots of help.

This past week a small group of REALTOR® leaders met to make 2010 Vice Chair of Committee selections. The challenge was to choose just one person for each position when so many capable and talented people had applied. We are working to complete the process. I cannot help but think about the example of my father: pick the best person for the position. We are working hard to do that, but how do you do that when you have so many ‘bests.’

It is also a privilege working with such a talented group of people on the leadership team. They teach my father’s lesson by example: be the best. Moreover, Charles McMillan, Dale Stinton, Vicki Cox Golder and I all have sons getting married on the 25th of July. Who says that the stars do not line up? It is my prayer for each of our sons, that they know unconditional love from their wives and children. We are part of a very special, extended family, the REALTOR® family. Our family includes all of YOU.

Thanks, Dad.

Navigating Rough Seas and Fog: The Summer 2009 Real Estate Market

The most common question most Realtors are asked, particularly in the back slapping among friends: Are we at the bottom of the market, yet? Almost every Realtor wants to say it is here. In truth, we do not know. There are sign of stabilization, and signs of further price reduction. Additionally, you do not know that you have been to the true bottom until you begin to climb out of it. It can only been ‘seen’ with clarity in ‘hind sight.’ What makes it more complicated is that the market is not a single market: In real estate, we talk about all real estate being local. In the advent of a global economy, and a global recession, that seems almost counter intuitive, but it is not. The condo market in Providence is very different from the suburban real estate market in East Greenwich. Furthermore, the markets are very different in the brackets of price points. The first quarter MLS statistics showed a significant drop with the ”average” single family price for East Greenwich, from $474,000 to $323,600. The average price house did NOT drop by a third. Yes there was a significant drop in prices overall, but not as extreme as the numbers suggested. There is a reason, not a rationalization, for the change. More less expensive homes were sold. That is more homes some in the 100-400 range than sold in the upper price point, so the average was much lower than it should have been. What you really want to know is what is the true change in price for a specific property. Naples Florida is now given market information bases on price points: 100-350k, 351-500k, 500-1000k, and up. This is not a rationalization, but rather a long explanation, to the importance of looking at like kind homes to get a ‘true’ picture of the real value of the home. A four bedroom Moorehead colonial is worth more in Signal Ridge than Cindy Ann Farm, overall. All real estate is local, even by neighborhood. You need to compare like kind with like kind to determine true value.

As a seller you need to analysis the properties in your immediate neighborhood. What has sold recently, what is pending, and what is on the market? You need to look at the absorption rate, how many houses are selling each month, and how long will it take to sell the entire inventory at the current rate of sales. A healthy market is about 6 months. Right now we are at 10.2 month nationwide. We are much higher in the upper bracket, above 750k, in East Greenwich. Once you complete this analysis, you need to price in a COMPELLING way, not a competitive way. To be effective, meaning to sell quickly and close to real value, you need to price aggressively low.

As a buyer you need to do the sale process to identify the best buys in town. It is also helpful if you have two are three choices when it comes time to negotiate. The market has an oversupply, and a noteworthy oversupply of overpriced properties. Sometimes the overpricing is the result of the existing mortgage balance, sometimes the result of poor-inexperienced agent advice, and sometimes seller’s exuberance-nostalgia: “My house is the best in town.” Many buyers are attaching a list of the comparables to offer to purchase package. Some sellers are still ignoring the comparables. As a buyer, it makes sense to move on to a seller who is realistic.

What you need to know about this market, very simply is that price matters. You can have the best landscaping, the most expensive kitchen appliances, and the most awesome home theater, but your price has to be competitive to encourage a buyer to make an offer.

Now if the dynamics of the market are not enough to persuade you, be aware of the new appraisal underwriting requirements. In an effort to curb potential mortgage defaults, most lenders have adopted new appraisal guidelines. One of the most challenging elements is called ‘bracketing.’ In truth it is really not new, but now the rule is applied in all cases. Very simply, an appraisal my have comparable sold properties below and ABOVE the value of the subject property within the neighborhood. It makes it very difficult to obtain a mortgage for the most expensive sale in the neighborhood. The result has been that many transactions have been RE-negotiated after the appraisal.

To say it, yet again, price matters. Price where the market is, not where you would like it to be. Otherwise, wait until the market recovers. The cold hard truth is buyers are careful and strategic right now. They will not overpay, even if they are from New York, Boston, or Los Angles.

National Association Leadership Model

Team Leadership

As the newbie on the leadership team, I have lots to learn! Much of what happens in leadership is process driven. In an organization of the size, 1.14 million members, and complexity of ours, there is a lot to do and a tremendous amount to study. While engaged in that process, you cannot help but notice how great the ‘system,’ works.

Specifically, there is an amazing collaboration between the volunteer leaders and our professional staff. Each year the volunteer leaders change, people leaving the team, people joining the team. These include, the President (Charles Macmillan), President-elect (Vicki Cox Golder), First Vice-President (me), Treasurer (Jim Helsel), and Immediate past President (Dick Gaylord), Vice President of Committees (Steve Brown), and Vice President of Government Affairs (Gary Thomas). The annual transition happens seamlessly. That is the result work the professional staff does. Dale Stinton, is the Chief Executive Officer. who with his equally amazing team, forwards the ambitious agenda and critical mission of this organization. This is not an easy task…You cannot help but smile when you think about the different personalities of the volunteer leaders that pass through leadership. As soon as the professional staff gets used to one presidential personality, a new one is in office.

What is amazing is that it works and no one sees or knows of the challenge. (Sometimes staff protects leadership from itself). It is always a balance. The volunteer leaders are responsible to map the strategic course of the organization. Dale and his staff work with us on the plan, but they are responsible for the execution of the programs.

Also amazing is the ‘espirit de corps.’ that develops among the leadership team. You have friends, mentors, and co-leaders. Each one is so committed to doing right by the organization and the membership. Sometimes we commiserate. Sometimes the challenges are overwhelming, but the team members support each other. When we need to fill in for each other, we do. When we deliberate issues, it is issue centric not personality driven. It takes time to create that level of trust and respect.

The Right Tools, Right Now program is a great example of the effectiveness of the model in place. Last fall, the leadership team meeting included a discussion of how bad our individual members were faring. This was as the result of an email sent by Realtor member from North Carolina. As leadership, we were listening, but” felt” unable to do more that encourage people to simply ‘bear it.’ After the first of the year, Dale and his team stepped up and came up with the Right Tools, Right Now program. More people have used it than we would have imagined. It is the effective.

The leadership team model works. Leaders listen and things happen.

Real Estate Questions and Answers APRIL 2009

Right now everyone seems to be asking the same questions. Some have answers, some will have answers, but everyone seems to be asking the same questions:

1. Are we at the bottom of the real estate market? The best answer is we really do not know. You can not know if you have passed through the bottom until you have. In other words it is a rear view mirror event. Only AFTER you have begun to climb out can you say with accuracy that we have passed through the bottom. There are strong signs; both locally and nationally, that we are on either side of the bottom. Many areas have seen improvements in the number of properties sold. More homes are being sold, albeit it at lower prices. Additionally, the number of pending sales is up. While the supply of homes remains fairly high, the absorption rate is going down. The adsorption rate is indicated by the number of months it will take to sell all of the house currently on the market at the current rate of sale. A normal market here would be about 6 months. We have been as high as 18 months. Right now we are closer to a year. Sum total we are witnessing some encouraging news, but we need to see if it is sustained.
2. Is it a good time to buy right now? The best be answer is qualified. One needs to look at his or her situation. Is the employment situation strong and reliable? Is credit in order? Have you been pre-qualified? Are you likely to be in the location for several years, that is longer term? Assuming the answers to these questions are all yes, and then it does make sense to buy now: First inventory will provide you with lots of choices, even if you are particular. Secondly, prices have come down, so there are in fact better values. Third interest rates are the lowest in 50 years. (Less than 5%, when I started in the industry it was over 18% for fixed rate mortgages). Fourth, there is a home mortgage interest deduction on your federal taxes. (Mortgages below $1,000,000 qualify). Finally, there is an $8000 first time home buyer’s credit against your Federal taxes. In short, there are good reasons to seriously consider buying now.
3. What are the details of the $8000 tax credit? While it is described as a first time home buyers credit, people who have not owned real estate for the past three years might also qualify. Income limits do exist with phase outs beginning at 75k for people filing individually and 150k for married couples. If you owe less than the $8000 the Federal government will issue you a check for the difference: You owe $5000. You will receive a credit for the full $5000 and then receive a check for $3000. There is a ‘recapture’ feature if you sell your home in less than three years at a profit. This is to discourage flipping. Finally, you must purchase, close and occupy the house by 30 November 2009 as the program ends 1 December 2009
4. What does a home seller need to do to sell in this market? Many sellers are still nostalgic for the prices of 2006. While this is understandable it makes the market worse and reduces the chances that the seller will sell. First, you should get expert advice from a Realtor who knows your town and neighborhood. He or she can educate you on the market and effective strategies to sell your home. Secondly, and more critically, you need to price the house to be compelling, not just competitive. In a market with an oversupply, you want to stand out, not just on condition and presentation, but on price. Is your price one of the best values on the market? Think of price like an SAT result. Certain schools will not look at you if you do not have the minimum test results. If your house is priced to high, no one will even look at it. This is the real estate equivalent of an invisible, but tangible REJECTION letter. Buyers are rejecting your house based on price. Also, the MLS tends to amply the importance of price per square foot. Your price needs to be compelling not just overall but also on a price per square foot. In a community like East Greenwich the range is very broad, but $200 a square foot is a fairly good ‘rule of thumb.” Obviously, you need to look at your own market area and situation. Waterfront will be higher…
5. Should I try to buy a foreclosure of a short-sale? The answer is maybe. This should be a long term investment. Buy what works for you and your family and pay attention to the most important rules of real estate, starting with location, location, location. Assuming you find the right property, it may make sense to buy a ‘distressed property.” Incidentally, this is a misnomer. Most often the property was not distressed, the owners were. You need to be very cautious and want professional advice, particularly from a Realtor and an Attorney. Make sure to investigate the condition, structure of the property. Distressed properties are sold in ‘as is ‘condition and most sellers will not make any repairs. Foreclosures tend to be easier than short sales. They can generally close much more quickly. Short sales are transactions in which the owner still owns the house but owes more than the house is worth. Say the house is listed for 150k, but the owner owes 200k. The owner will be short when paying the mortgage off. Therefore it is the lenders decision whether they will accept less than full value of the outstanding mortgage. Thus the term ‘Short sale.” These are challenging, because they can take months to get responses to offers and longer to close. As a potential buyer, you must be very patient.
6. Does homeownership still make sense? As with everything, it depends on your personal situation. It you are going to be moving out of state in the next year, and then it would be unlikely to make sense. If however, you are likely to be hear long term, then it may well, the average homeowner in the United States has a net worth that is 38 TIMES more than the average renter. The important observation is that the criteria must be long term. The demographics also suggest that values will come back over time. More households are being created than homes for them. Finally, shelter is a basic human need. We all NEED a place to live. In addition, if you pay your mortgage off over time, you will live in your home at a very modest cost in your later years. For most people, it does make sense to own your home.


So contact a Realtor, and get some expert advice on your situation.


Ron Phipps, ABR,CRS,GREEN,GRI,ePro

Bright Lights in the Economic Night: Ron Phipps's February NAR Entry

Bright lights in the Economic Night

This past week was a turning point. This week, Richmond Virginia was my port of call. Virginian Realtors are tenacious and gracious. Challenge does not dissuade them, it emboldens them. And yet, they do not loose any of their grand sense of hospitality. The meeting in Virginia went well for the Association, Realtors, and their legislative Agenda. All ten of their bills were approved by the State Legislature. It was turning out to be a great week.


Then two bright stars lit the night: First, Charles Macmillan NAR President and Dale Stinton, NAR Chief Executive Officer, introduced the Right Tools, Right time initiative. It is brilliant concept: For over 100 years Realtors, with the effective stewardship of our professional staff, have invested in the Association Reservoir. As a result, the Association has significant resources: tangible, fiscal, human, and strategic. The Leadership Team with the concurrence of the Finance Committee approved the NAR plan to put tools back into member and Association hands to provide assistance through these difficult times. Tools will be delivered to Realtors and Associations, (local and State), to provide direct benefit during these times. I was reminded the old Chinese proverb: Give a man a fish and he will eat for a day. Teach a man to fish and he will eat for the rest of his life. We are re-tooling and re-teaching our membership. We are lighting up the darkness with not just hope and compassion, but rather the tools to help our members actually survive. It is as if we are letting water out of the Association reservoir to make the electricity to power our Realtor business and light, heat our homes. It is the right program at the right time. It maybe viewed as one of the most pivot decisions for our Association in the past twenty years.

With star shinning brightly, the Congress finally approved the economic stimulus package to send to President Obama. What is amazing is that we obtained three of our four goals: Rates are 150 basis points below where they were a half year ago. Conforming loan limits have been reset at the higher 2008 numbers. The 7500 credit was increased to 8000, (we had hoped for 15k), and there is NO repayment provision. By every measure we met those three goals. The final element, the prohibition of banks in Real Estate is still being pursued.

It these two stars were not enough to lit the night sky, we are about to hear the next phases of the Administration Housing Recovery plans. We have not had a lot of light in this economic night, but now we have two North stars to help us navigate out of the darkness and into the life.

Realty Bytes February 2009

Some Light at the end of the Tunnel:

For the past 18 months, the news has been negative. Inventory is up, prices are down, continuing to fall, and many people are facing foreclosure. It has been nothing short of discouraging. In Rhode Island, sales, (the number of units), dropped by 12.8 percent and the average price dropped by 20% over the prior year. Unemployment is now over ten percent. The numbers are serious.

The question everyone is asking: Are we at the bottom yet? It is a great question. Some answers, however, are only available after the event. Or in other words are only visible in the rear view mirror. We will know the bottom after we have passed through it, or at least when prices stop going down. We are not yet there. Hopefully it will be very soon.

So with this sobering information why would anyone anticipate improvement in the market? Very simply is there are a few encouraging signs and events. The signs include the fact that the end of the year reported an increase in pending sales over the end of the prior year. Prices appear to have reached a level that is causing demand to INCREASE. First, inventory overall is down. In truth, this is not due to a huge increase in sales and a reduction in new listings, but rather a combination of slightly more sales and reduction of unsold listings. A good number of unsuccessful sellers have taken their homes off of the market. Unrealistically prices properties will not sell in this market and nostalgic sellers are getting the message. Second, interest rates are now hovering around 5% which is 1.5% BELOW where it was early last year. For a $400,000 mortgage the payments will be $500. Less per month at 5% versus 6.5%. That is a huge savings. Among the most encouraging events it that Congress has passed and the President has signed the Economic Stimulus package. This will be good for employment in Rhode Island and for infra-structure, but it also contains an incentive: an $8,000 tax credit. The credit is available for first time home buyers which also includes people who have not owned real estate for the past three years. The credit is a true credit against taxes owned in 2009. The credit is ten percent or $8000 which ever is less. If you own $5000 in Federal Tax you will owe nothing and you will get the balance ($3000.) in the form of a check. There is an income limit of $75,000 for a single filer and $150,000 for married files. Additionally, the credit is subject to a three year recapture. This means that if you sell the house within three years, the government gets the $8000 credit back. This initiative will definitely produce some additional sales. Another encouraging event is the Treasure Departments new Foreclosure mitigation program which is being rolled out shortly. The goal is to modify mortgages so that the families can stay in the home. The program has had various names, but we will see some real progress. The final event is that we have a new President. While we wait to see what this will mean, it is a positive sign to have a new and different approach to the housing crisis. History will evaluate effectiveness, in the interim; it is a bright light of encouragement, particularly for the State of Rhode Island Real Estate.

Inauguration January 20th 2009

January 20th, 2009 Inauguration, Washington, DC

It was a day of great contrasts. Winter in Washington can be bitter and raw. This was one of those days. Yet there was warmth of heart that ignored freezing toes, noses, ears and fingers. The number of people in attendance was amazing. Yet each of us was an individual witness. It was historic yet in noteworthy way it was an ordinary day; extra-ordinary and ordinary in the same moment.

The day before, my Susan, our daughter Caite and I were at the recently reopened Museum of American History. We were there to see the Ft Henry Flag and the Ipswich House. Those were both interesting. Do know which states were the 14 and 15th States admitted into the Union. The flag had 15 Stars during the War of 1812. (Ok I knew Vermont was one of them, but I guessed several others before finally coming up with Kentucky).

We spend a significant amount of time in the Lincoln exhibit. It was striking how human he was. We saw the hat he wore when he was killed. Our 16th President was amazing. He was tortured by the effort to keep the union together. The emancipation proclamation might not have ever been issued. He needed a victory in the War. Thank God that Antietam gave him the divine sign he sought. It was powerful to watch the people studying the exhibit and the document.

Before we left we stopped at a strange exhibit. It was a Woolworth’s coffee counter.. The same kind that we remember at Newport Creamery. Four swivel seats. They looked ordinary, unremarkable. But these were ‘white’s only’ seats. Four young Africa Americans sat in these seats waiting to be served as a protest. They held vigil, (less than fifty years ago), for 6 months before they were finally served. It is embarrassing that this was our country such a short time ago.

These two exhibits were the perfect preface to the inauguration of the first African America President: Barack Obama. We arrived at the security lines on Tuesday at 8:30 and waited in lines until about 10:30 to take our seats. Security was present everywhere, but we all felt safe. The process was polite, but not efficient. (Keep thinking they should hire Disney every four years to make it ‘visitor friendly’ and quick). This day there were very few complaints. We had a seat at a watershed event in the history of our nation and our people. Strictly on the surface, it was note worthy. The President of the United States, for the first time, is an African American. Racial shackles that precluded opportunity have been unlocked and discarded, forever. The Dream of American Opportunity, that any one could one day be President, was realized. You could not help but think the Martin Luther Kings, a American Martyr, was smiling in heaven. He had poured his last measure of life into this cause and into us. Now the ultimate symbol of achievement had been earned by an African American.

But then when you overlay, the gift of this person Barack Obama, it was almost surreal. It was overwhelming This was a man, a high educated thinker, who embraced discourse and science over belief. He understood the brilliance of founding fathers vision.

Everyone in the crowd was excited about the change. When President Bush and Mrs. Bush were introduced a wave of boos and jeers emanated from the rear by the Washington Monument, and like a wave moved forward. It was awkward.

The formal program was beautiful and spiritual. From Aretha Franklin's singing of the national anthem to the benediction, it was inspiring. The speech will be discussed for decades and has been etched into the American psyche. Barack reminded us that we are American, not just Democrats or Republicans. Christians, Jews. Muslims… Non believers. What was most powerful to me, was the line: “we have chosen hope over fear.” This is particularly meaningful for us here in Rhode Island. Remember: we are the 13th State and our motto is hope. Maybe the confidence of our new President can empower and encourage us to make our State a lighthouse in these perilous times. Just a thought.

The New Interview Questions before Hiring a Real Estate Agent to Sell Your House:

We are stepping over the threshold of 2009 and real estate has changed yet again. This is the most challenging market that many of us will EVER see. While rate are matching those of fifty years ago, prices have changed dramatically. Nationally we are down almost 29% from the highest point of the market in mid 2006. Furthermore, 45% of the closed residential properties in October required money from the seller to sell. These are ‘tough realities.” For Realtors these times are also challenging, particularly given the fact that most real estate listing contracts are written as contingent agreements: If the property does in fact sell, then, and only then, does the agent earn and collect his or her previously, independently negotiated fee. If the agent works for a year and it does not get to closing, then he or she does not earn any fee. This has put great stress on real estate agents trying to earn a living.

With these facts and the stage, it is very important that you hire an effective and proven agent. Several questions will help you determine who that agent is?

1. First and foremost, what is the agent’s license number and are they licensed in the State your properties is located in? Is the firm licensed in said State? Is the agent a Realtor? Realtors must ascribe to the Code of Ethics. Have there been any disciplinary actions taken by the Department of Business Regulation or the Board of Realtors against the agent and/or firm? Are there any pending complaints?

2. What is the agents record/experience? How long has the agent and firm been in business? How many properties have he or she sold in the past year? Is he or she part of a team? What kind of back up does he/she have? Is the agent selling real estate full time, or is this a part time position? Does the agent actually live in Rhode Island year around, or does he or she spend the winter in Florida? What other States is the agent licensed in?
Does the agent use a lockbox? If he or she is going to be showing the property, is he or she available and reachable by cell?

3. How does the agent/company market property? With 87 % of all buyers using the web to search for properties, how does agent market in web centric world? How does agent differential the sellers property with so many listings in the market? Is print advertising important in the Strategy? Based on sources of buyers it should not be, particularly if you believe in “greening’ the marketing process. What is company web site like? Is it central to the marketing plan? Does agent use any video and television? Does agent use social media? If so how? Will agent provide specific marketing plan?

4. How often does agent provide feedback and updates for seller? Generally it should be a least once a week. In additional, the agent should provide feedback in the manner, vehicle that the seller prefers: cell-phone, text, email, snail mail, etc. Communication is key for the process.

5. How did agent arrive at value? Particularly in a declining market, how did agent determine price? What is delta between list price and sales price? How long should it take to sell property? When does the agent anticipate revisiting price if it does not sell right away?

6. Who follows up on closing details to make sure property gets to closing? Smoke inspection; follow up on mortgage approval, coordination of closing attorney, water meter readings, etc.?

7.How much do you charge? How much do you offer cooperating agents? Do you have any referral fees that you are paying from the fee? If there is a dispute with the deposit and the buyer does not ultimately perform, what is your fee?

8.If you are not satisfied with the performance of the agent, is there a cancelation fee and if so, how much?

9.Finally, have the agent provide a list of prior, clients. Finally, call them for feedback and advice.


Good luck!

Ron Phipps, CRS, ePro, GRI, GREEN