We attended the Compass REtreat in Los Angeles over the last day and a half.
It was a quick get-together to roll out the future plans, participate in four breakout sessions on the usual topics – social media, team-building, scripts, and risk management – and attend the thank-you party last night.
I appreciate the effort, because the party itself was pretty impressive. Gourmet-food stations, open bar, and a 12-piece live dance band for the 2,000 Compass agents who attended (out of 7,500).
But the thing I respected the most was that the CEO, Robert Reffkin, stood by himself at the entrance and personally greeted every agent as they arrived.
No assistant, no senior staffers or entourage – just Robert by himself, fully focused on expressing his appreciation to each of us. Nobody does that.
They will be investing a boatload of money into the business, primarily in support of the agents being more effective in the coming years.
But it is the human connection with the agents, and commitment to our future together that will make Compass the leader in the industry.
Compass offices, nationwide:
End of 2017: 30
End of 2018: 150
End of 2019: 300 (projected)
Six months ago the company goal of 20% market share in the Top 20 markets nationwide sounded far-fetched. Today it seems very real – we have offices in each of those Top 20 markets, and just need to grow further.
They should ditch the Park Hyatt Motor Lodge, bring back the Four Seasons, and have lunch today with Toll Brothers (who built 672 homes at the 200-acre Robertson Ranch). If they can build 500 homes on the roughly 200 acres of golf course, the dirt would be worth close to what the new owners paid for the whole package. They will have picked up a 327-room luxury resort with average room rate of $250-$300 per night….for practically nothing.
The upscale Park Hyatt Aviara resort, which was taken over by its lender more than a year ago following missed payments, is now under new ownership.
Xenia Hotels & Resorts, a Florida-based real estate investment trust that owns 41 hotels across 17 states, including the Andaz in downtown San Diego, announced last week that it paid $170 million for the 327-room resort and golf course.
The selling price is considerably below the $251 million paid by former owner Broadreach Capital Partners in 2007 to acquire a controlling interest.
Xenia CEO Marcel Verbaas acknowledged the price’s appeal in a news release.
“Our ability to purchase the resort at a price substantially below replacement cost and well below those of comparable resorts in the region provides a significant value creation opportunity for the company,” Verbaas said.
Xenia executives declined to discuss the sale or their plans for upgrading the 222-acre resort but hinted in the news release that there will be upcoming improvements.
“We see substantial opportunities to enhance financial performance at the resort through our asset management initiatives as well as a comprehensive capital plan to elevate the resort above its prior competitive positioning,” Verbaas said. “We look forward to working with Hyatt to improve the asset physically and operationally which we believe will improve the resort’s regional and national appeal and result in strong growth in revenues and profitability.”
Although it’s been almost 1 ½ years since the Park Hyatt was taken over by its lender, CW Capital Asset Management, a sale probably took longer because the property includes a golf course, speculates broker Alan Reay.
Increasingly, more and more golf courses are closing, and in California they can be expensive to operate given the dry conditions and the cost of water, said Reay, CEO of Atlas Hospitality.
“Most properties in San Diego are back at the peak levels of 2007 or above so it’s interesting that this property did not get back to that level, and one of the main reasons for that is the golf course,” he said. “Whenever we’re working on a hotel with a golf course associated with it, most buyers are not interested. It’s not what it used to be.”
“I think they’ll definitely get room rates up if they make improvements, but the big question is what do you do with the golf course,” Reay said. “In many instances, we’re seeing golf courses sold off and then people do residential or a different development on that.”
Kayla returned from Manhattan for the long Thanksgiving weekend, and we were talking about the sluggishness in New York City market, which has been going on for 2+ years. By now agents have learned that there’s no use fighting it – you have to learn to adapt.
It was in the year of her birth, 1991, when I experienced my first market slowdown. All I knew was that there wasn’t a buyer for miles, and with a newborn child, I need to hurry up and figure this out!
This is my third time around the block, so I offered her a few ideas.
First let’s acknowledge how it works in a seller’s market. Buyers find a house that is a good fit, and they buy it. Agents might offer up a strategy to get a discount, but for the most part, buyers pay the sellers’ price. It’s binary – it is yes or no, is this the right house? If it is, then pay the price.
Now it’s different, and if you can get a buyer to look at homes, their answer will be the same everywhere – ‘no’. Because they are looking for any reason not to buy – and every house has one – once they find it then it’s game over. But rather than just saying no to every house and never buying anything, let’s take it a step further.
At what price would you be a buyer?
Price will fix anything, and the price itself is usually the problem – it’s too high.
If the buyer would be interested at a lower price, then all you have to do is present a powerful case to the seller and listing agent to see if there is enough motivation to at least listen, and hopefully make a deal.
If you just make a lower offer without justification, I can already tell you what the answer will be: “No, and get off my lawn”.
To get something, you have to give a little. Here are ideas:
Make an clean offer with quick close date. These work best on vacant properties where sellers might be eating an extra payment.
Make an offer using older comps, and point out that the Case-Shiller pricing (or other) has retreated back where it was X months ago.
Make an offer based on the cost of the needed improvements, and include contractor quotes when possible.
In all cases, include a photo of the family and pets, and an introduction that explains the offer. Usually the listing agent will just forward the explanation right to the sellers, so it’s a way to have influence over the outcome. Without an introduction and explanation, the listing agent has to justify the low price himself, and he won’t try too hard and risk looking bad.
We need price discovery!
The only way to find out what the seller might take is to put an offer on the table. It may seem risky to be among the first to take the plunge, but by April/May we should see more people finding a way to make a deal. Those will probably be with the sellers who have been trying to sell for 90+ days, and are tired of the process. Let’s give it a shot!
With deductible mortgage interest now capped at $750,000 by the I.R.S., buyers who are concerned about write-offs will want to keep their new loan balance in the $700,000s.
The strict equation is $750,000/80% = $937,500.
If buyers find a house priced higher, they could come up with more cash to make up the difference, or they could get a jumbo loan at roughly the same interest rate and live with the non-deductible interest paid on the loan amount above $750,000.
It makes the ideal purchase price in the $1,000,000-$1,100,000 range.
If the tax reform is a big concern for buyers as some have suggested, the homes priced in the $1,100,000 – $1,500,000 might feel it. Buyers above that range weren’t expecting as much benefit anyway, and probably won’t be as impacted – but theoretically there are fewer buyers the higher we go.
Out of curiosity, let’s keep an eye on the NSDCC stats.
Today’s NSDCC Actives and Pendings:
$700,000-$1,100,000: 121/72 = 1.68
$1,100,000-$1,500,000: 157/75 = 2.09
$1,500,000-$2,500,000: 243/81 = 3.00
$2,500,000 and higher: 399/44 = 9.07
The market has been healthy up to $1,500,000 roughly, and like Rob Dawg said yesterday, potential buyers may not know the exact impact of the tax reform until they start on their 2018 tax returns in spring.
The San Diego Case-Shiller Index dropped for the third month in a row, and is now almost 1% below where it was in June. It’s not a surprise to hear that we have tougher sledding in the off-season (see above).
We will probably lose another 1% or 2% between now and Spring, 2019, which would put the index back to about where it was in February.
What happens in next year’s selling season will be the real test.
This isn’t a sign that the bottom is falling out of the market. Instead, after years of rapid price increases, experts say the market is becoming more stable and for the first time in quite a long time, it is shifting in favor of buyers.
That shift is most evident when you look at the number of times sellers have reduced prices. The share of home listings with a price cut grew to its highest level in at least eight years, says a recent analysis from Trulia.San Diego had the most reductions — 20.5 percent — of the 100 biggest metro areas in the United States so far this year. (It tied with Tampa, which also saw 20.5 percent of homes with a price cut.)
7171 Terra Cotta Road — $545,000. The four-bedroom house (1,804 square feet) in the Bay Terraces area has had four price reductions, starting at $569,000 at the beginning of November.
4225 Florida St., Unit 4 — $395,000. The two-bedroom condo (794 square feet) in University Heights has had three price reductions, starting at $425,000 in mid-October.
3655 Ash St., Unit 2 — $322,100. The two-bedroom condo (824 square feet) in Fairmount Park has had six price reductions, starting at $330,000 in mid-September.
Listing agent April Khamphasouk said the tough thing about selling the house at 2873 Upas St. is that it is basically two homes in one (the property is 1,698-square-feet and has a guest suite above the garage).
She first listed the home for $1.1 million in early October. By mid-October, the price was lowered by $19,000. There were three more price reductions and by Nov.12, the asking price for the home had decreased by $55,900. It is still on the market.
Khamphasouk said the recent price reduction seemed to be greatly increasing interest. Still, she said a lot of the issues in the past month have been related to rising mortgage interest rates.
No mention was made about the Upas property selling for $775,000 in May. The Terra Cotta house just had a model-match sell for $415,000 nearby, and the Florida St. condo is on the corner of El Cajon Blvd. and next to a paint store. If these homes represent the types of properties that need to lower their price, then the shock is that only 20% needed a price reduction.
The real news was that nearly 80% of the listings didn’t lower their price!
The Inventory Watch started during the last week of November in 2013, as we were coming off a blistering frenzy. Here are the number of active listings logged for the last reading in November:
Total Number of Active Listings, End of November
The 2017 market will go down as one of the best years ever! Like we saw towards the end of 2014, the previous frenzy conditions created overly-optimistic sellers, which is reflected in the higher amount of unsold listings.
The NSDCC median sales price for November, 2013 was $1,030,000, and the average mortgage rate was 3.99%.
This month, the median sales price is $1,310,000 (which is +27% from 2013), and today’s mortgage rate is 4.94%!
Home sellers and agents will conveniently write off today’s market sluggishness as typical year-end slowdown, and in 2019 they will simply do what they’ve always done – put a bloated list price on their real estate.
You can’t blame them – it’s their chance to win lottery-type money. If you got to name any price, you’d want more, not less, right? It is a common mistake to over-price a home though, and homebuyers need to beware.
But over-pricing has been around since the beginning, and is just a reflection of how motivated the sellers are – which in 2019 will be ‘not much’.
What are the additional challenges that will be with us in 2019?
A. The realtor industry favors the home-sellers. Realtors have a contract with the sellers, so no surprise that listings are the name of the game. But now that realtor teams dominate the landscape, the new and inexperienced agents are dispatched to represent the buyers – who won’t be too impressed with the lack of quality assistance offered on today’s market conditions. Buyers without proper guidance will be happy to stay on the fence, unless they find the perfect home, and then they will….
B. More Buyers Will Go Direct to Listing Agent. With fewer experienced agents being willing and able to represent the buyers, we’ll see single agency (disguised as dual agency) become more popular than ever. Consumers don’t really seem to care, as long as the deal gets done, and listing agents encourage the idea. Expect more blatant attempts to exploit the practice, like…..
Glenn first played the race card and tried to disguise his coming-soon plan as a ploy to reach all consumers, rich and poor (but was going to refer low-income people to outside agents). Now he is trying to force N.A.R. to insist on prominently displaying the listing agent on all websites, with a link back to their website. If passed, will be the final dagger in the buyers getting their own representation.
Here he attempts to sell the concept as fair and clear (start at bottom):
C. Coming Soon. The traditional brokerages are promoting their listings on their company websites before putting them on the MLS/open market, and you can’t blame them. Zillow and Redfin started it (see above), and now it’s a war.
But what are buyers going to do, monitor every real estate website? Yes, at least the ones that allow you to set up auto-notifications. If you see one you like, and you inquire with the listing office/agent – who do you get? The faceless internet agent who reps the seller but will process your order as long as it’s reasonable. It gets worse – there is one listing agent in north county who insists that you do a 30-minute, in-person consultation and then agree to see at least two of their listings before they will show you their coming-soon listing advertised on Zillow (and not in the MLS).
D. Sea Change in the Home-Selling Business. The market plateau will cause more desperation among realtors, and the disruption that everyone has been predicting will finally arrive – it will just look differently than people expected. Eliminating the traditional buyer agents will be uncomfortable, especially for older consumers who were used to having their own agent represent them in previous transactions. We should see fewer sales as a result.
E. Fewer Sales Means Fewer Comps. We had 10% fewer sales in 2018, which means fewer comps to help buyers easily reach a conclusion on values. Add in the built-in reluctance to trust the listing agent and we could have a downward spiral of fewer sales….which leads to even fewer comps. Stagnant City!
F. Creampuffs only. At these lofty prices and with fewer comps to justify exact values, nobody will want a fixer unless they can get a real deal. There should be a price gap of roughly 10% between the ‘puffs and the fixers in older neighborhoods, but will sellers agree? Will buyers be willing to pay +10% for a creampuff when they see a fixer down the street not selling, even when priced for less? They did in a frenzy, but now?
G. Prices Might Not Change Much. Buyers going directly to the listing agent won’t find much of an audience for lowball offers. Going direct only means you have an inside shot at buying the house at the sellers’ price, not that you’re going to get a deal – unless it’s been on the market for months.
H. No Help Anywhere in Sight. You won’t hear about any of these market changers in the mainstream media – instead, we will be pelted with reminders that homes are unaffordable and other doomy assumptions to explain fewer sales. Nobody will look beyond the usual excuses – instead, we’ll see more reflections back to previous cycles that have no relation.
Example: This guy compares the 1990s bust caused by the S&L crisis – but ignores that we bail out the banks now, so no bank bust is coming:
Conclusion: In 2019, potential home buyers will be hearing more doom talk and getting less help. They will see more listings at higher prices, and more escrows falling out. It will be natural for them to proceed cautiously, and be resigned to the fact that if they don’t buy this year, prices aren’t going up much so let’s be picky and wait it out – maybe another year or two!
Sellers might get miffed, but they will shrug it off and blame the market or their agent for no sale. Prices won’t be going down much (mostly because only the superior homes will be selling…and getting their price). Sellers will be picky and wait it out – maybe for another year or two!
In the meantime, the industry will be transitioning into single agency.
Mortgage rates moved up significantly last week. Will rates continue to rise? Expect mortgage rates to go up this week closer to 3.1%. Freddie Mac will release the 30-year fixed mortgage rate tomorrow morning. Stay tuned.
Jim the Realtor is legit - I interviewed three brokers; he said list price should be $100,000 higher than the other two brokers; listed it with him and had all cash (no financing) offer in two days, five day contingency period, closing in two weeks - and it closed at his recommended list price. I could not recommend anyone more than I recommend Jim the Realtor.
When we moved to San Diego in 2005 we rented a big house on Mt. Soledad (La Jolla) with 180 degree ocean views for the same payment as a mortgage on a dump in Chula Vista. Clearly something was wrong. Yet, the media was full of the usual happy-talk nonsense, so I was glad to find Jim's blog. I've followed his honest assessments and data since.
We decided to sell and move to AZ at Thanksgiving. Dec. 1st we met with Jim to sell our home. We closed today (29 days later). Jim orchestrated a feeding frenzy -- we had 25 showings in 2-1/2 days, multiple offers, and sold for well over asking price. I'd say he earned his commission! We have owned and sold homes in 5 different States always using experienced, productive, full-time realtors. Jim outshines them all.
You don't decide to sell and close 29 days later over Christmas (with COVID lockdown) without some miracles. Donna was amazing at performing lots of those miracles and ensuring that everything was done right and on time. They are a terrific team with a very responsive and professional network.
Where do we begin..2020 has been a year for everyone. When COVID hit and shut down both my husband and my businesses, we were left with a mortgage and very little income coming in. We were stressed, scared and felt stuck. We made the hard decision to sell our home and move out of state. We contacted the Klinges' and spent a good hour going over what we hoped we could accomplish. Jim and Donna came over with comps in hand and suggestions on improvements to get our house ready for the market. It was overwhelming to think about, but Donna was there and one step ahead in every scenario. Basically we just approved what they suggested and Donna handled literally everything. We placed our house on the market and within the first day we had multiple offers well above asking price! We couldn't believe it. We were overjoyed! Jim countered the offers to weed through them, and everyone came back with way more. It was amazing, and we are ?? sure it was because of the staging and repairs the Klinges suggested we do.
Due to unforeseen dishonesty from the buyers lender, we hit a big hurdle when trying to close. We had already moved out of state and were shocked when three days before closing the lender dropped a bombshell on the buyers and us. However, Jim and Donna handled it like veterans, not afraid to play hard ball and represent their clients. After a few phone calls with us, and several between Donna and the lender, they had a plan B-Z to make sure we were taken care of. In the end we closed with even more money than we ever thought possible and with very little work from us. The Klinges handled this entire "2020" worthy event with the utmost professionalism and did everything in their power to not only make this as smooth as possible for us, but we also walked away with more money from the sale of the house than we ever hoped for. After working with Jim and Donna, you don't ever use anyone else. They are hands down the best team to represent you in any scenario.
Working with Klinge Realty Group was a great experience! They are very responsive, professional and knowledgable about the real estate market! I would definitely recommend Klinge Realty Group.
Jim and Donna Klinge made the sale of our condo extraordinarily easy. They know the market and gave us sound advice backed by details and very considerable experience, reflected both in the initial pricing and subsequent negotiations. They work together as a team and are always available to talk. We had a few challenges with our property and they were able to coordinate the resolution to everything, including items that I would not think would ordinarily be their responsibility to handle. They made the whole process effortless on our part. They are folks with high integrity and we cannot recommend them highly enough.
Review for Member: Donna Klinge
I cannot believe there are no reviews of Donna yet, ugh!! She is the secret sauce of the Jim Klinge/Donna Klinge combo! I will touch on Jim here, but Donna is why I'm so totally loyal to these two (no offense to Jim :)).
I consider myself a rather savvy buyer/seller. I've bought/sold 7 times in about 15 years. On the buy side, Jim is the PERFECT combo of: completely digitally savvy (he will pull data all day long until you feel comfortable with your chosen house, area, school district, anticipated appreciation rate...anything!), he's super well respected and known in the area by other agents, an amazingly cool but strategic negotiator, is totally devoid of desperation for a sale/commission, and more.
Then once you get into contract phase, Donna literally handles every last and final detail in a concierge-like manner -- totally shielding you from the daily back and forth, noodling and annoyances of the buyer's requests. She solves it ALL; it's miraculous what that woman accomplishes over and above what is even expected in a buy/sell transaction.
On the sell side, Jim and Donna do the same, but even moreso. Donna in particular truly takes everything off your plate: she'll manage getting the house painted, the carpets replaced, she'll go on site (as she Jim both did for me when selling our rental properties) to work with the renters and make sure the house is ready to show -- freeing me to have to take time off of work to do so. They work with A+ integrity, too, so you know you are serving all parties fairly and lawfully throughout.
A home purchase/sale is the most considered you'll ever make. HIRE A SAVVY AGENT, not a friend!, and get what you need out of the transaction. Jim and Donna are our agents for life.
Jim and Donna Klinge are by far the most professional, personable and responsive realtors I have ever worked with. They provide VIP concierge level service in every area of the process of selling your home. My home was marketed so successfully that we received an offer the day after our first and only open house. Thanks to Jim's pricing and negotiating, our house is now the highest sold in our community. Jim's vast experience means he has worked with several realtors and knows the market all over north county. Donna is AMAZING in processing everything in the transaction. She scheduled trades people to work on the house in preparation for the sale as well as the repairs needed before closing. She communicated clearly every step of the way about what would be happening. She took the weight off my shoulders for the whole process. I will always use Jim and Donna for my future real estate needs and I whole heartedly recommend them to anyone buying or selling a home.
Jim and the team at Klinge Reality are without a doubt the best in the business! Not only was Jim helpful and extremely knowledgeable, he was patient and determined to help me find my first home. Jim and his team have been in the business for many years, and it shows. Jim is a wealth of knowledge and was my biggest proponent despite the temperature of the competitive market. I ended up getting the perfect property in my dream neighborhood all thanks to Jim. From the day my offer was accepted, Donna was a real lifesaver. She was extremely helpful, responsive, and knowledgeable when it came to every minute detail, and held my hand through the process. As a first time home buyer I had no idea what the process would entail, but Donna curtailed every concern I came across and made the escrow process feel seamless. Jim and Donna provided me the best home buying experience, and I am very grateful for all they did for me. It was truly a pleasure to work with Jim and Donna and I am already looking forward to the next time we work together!
Review for Member: Richard Morgan
Richard is an amazing realtor! He has high integrity and genuinely cares about his clients and their needs. Richard paid close attention to what I was seeking in a home and was very patient in our search to find it. I would highly recommend Richard and will use him for future transactions. Truly a different kind of realtor experience!
Could not be happier with my experience with Jim and his team. He helped me sell a very unique and challenging property. Throughout the entire process he was always available, honest, transparent, trustworthy, and always put my interests as a seller first. A (rare) true professional! During close of escrow Jim went above and beyond to complete the deal. It would not have been possible without his experience, fantastic team, and pure dedication. Highly recommended!
Thanks Jim and Donna Klinge!