Irrational Exuberance

      Those 600 of you who have used our services or are faithful readers of my newsletter (when I write it) know that my fundamental belief as an exclusive buyer agent is to level the "playing field" between home buyers and home sellers. The traditional real estate field is not level - to the contrary - it is heavily weighted in favor of the home seller.
      If you know anyone who bought a home using the traditional system they may have thought the agent they dealt with worked for them. The agent did not. That agent was a "subagent" who, under state statute, worked for the seller. This is a factual statement that home buyers are reluctant to acknowledge - the stock market equivalent of irrational exuberance.
      Maybe they used the traditional real estate systems latest marketing ploy, the buyer agent.
That means they used an agent who claimed to be a buyer agent but sells homes 90% of the time - for a company that sells homes 98% of the time. At best they are part-time buyer agents and at worst (my suspicion) they sell homes under the guise of buyer agency.
      Those stock speculators who suffered from irrational exuberance lost a great deal of equity in the past 11 months and particularly since the tragic events of September 11, 2001. Homebuyers who suffer from the real estate equivalent of irrational exuberance risk loss also.
      I mention this in these uncertain times because uncertainty affects the stock market and real estate. Nationwide home resales tumbled 11.7 percent in the third quarter. Nationwide, as inventories rose, prices fell to $148,100 from $153,700. That's nationwide.
      However, it is useful not to use generalities to define the real estate market because the market is composed of many regional and local pockets. For example, metro Milwaukee's area sales for October were 9.6% higher than in October of 2000. For Milwaukee, Waukesha, Ozaukee and Washington counties, sales were up 6.3% from the first 9 months of 2000.
      Still, it is useful to understand the real estate system and who works for whom and why homes are priced the way they are if you are to make an intelligent home purchase. Those buyers who relied on the traditional real estate system and bought a home they should not have, or paid too much for a home may, at a minimum, loose some inflationary value. At worst they may lose some equity. Even though rates are low, we may be seeing the advent of a buyers' market and at a minimum, we should see the end of panic home buying.

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Buying a Home You Shouldn't Buy

      Traditional agents are trained to sell homes to buyers. Our job is to help you buy the right home. There is a huge difference. Recently, I counseled a client not to buy a home that they had an interest in. The asking price was $264,000. The home was less than five years old and in good condition. The area was fine with good potential for appreciation in value. The home had a nice view and was located across the street from a vacant piece of land. I checked the zoning for the vacant parcel and it was zoned mixed use - that is, it could be used for single family or rental development. The height restrictions allowed a building up to 3 stories high.
      What I typically say to clients in a situation like this is, "You can buy this home if you choose to and I will still make a living but I would recommend you not buy this home for the following reasons." I then list the reasons.
      In this case I had a concern about the vacant land and what might be developed. Our client heeded our concern and did not buy the home. That was last April. Today the once vacant land is being developed into 85 rental units that are three stories high. Whoever bought that $264,000 home now has a view of 85 rental units and will hear the comings and goings of upwards of 150 cars daily (given some rentals will have more than one occupant). Sometimes our job as exclusive buyer agents is to help you not buy a home

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Never Trust a Man Who Says, "Trust Me."

      That's not my line it's Nora Epron's. So I'm a man. I won't ask you to "trust me" but you can trust the comments of one of our past clients who sent us a very nice note. This testimonial from Kathy H., a second time homebuying client of Homebuyer Associates.
      "We are very happy with our home on Radisson Drive in New Berlin. We appreciate all your help with selling our home on 92nd St.. Your motto/advice was definitely correct with our first home purchase, 'You make money when you buy a home not when you sell.' We're selling for $39,000 more than we paid and we're very happy."
      What Kathy means by "selling" is what I've alluded to in past newsletters. While Homebuyer Associates does not sell homes, we work with our past clients to find the best, most cost effective means of selling their home, (by owner, a conventional broker or discount broker) and then manage the search and purchase of their next home through Homebuyer Associates.
      Our goal as manager of the overall process is to make sure the listing agent sells their home for the highest price possible and that we help them buy at the lowest price possible. This process, avoids the conflicts of interest that can be costly to those who use the traditional system to sell and buy.