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This article was published on: 03/01/2007

COVER FEATURE: The List Issue 2007

"Those who look only to the past or present are certain to miss the future."
— John F. Kennedy

THE BUZZ



5 real estate trends that already affect your business

Stay ahead of the curve by keeping up on what’s happening in your industry.

1. EMINENT DOMAIN: Allows governmental entities to take (and pay a fair market price for) private property to serve the public good, such as building roads and schools.
  • What’s the trend: A long established governmental power, eminent domain has been used in recent years to take land for private development. Recent takings of private homes have drawn the ire of owners and real estate practitioners and prompted efforts by the National Association of REALTORSŪ to support home owners’ rights over government powers.
  • Why it matters to you: “Until Kelo vs. the City of New London (Conn.), the vast majority of the population didn’t realize that municipalities were taking land for private development. Once people found out, the overwhelming majority found it deeply offensive,” says Dana Berliner, senior attorney at the Institute for Justice and an advocate for home owners’ rights in eminent domain cases. The result is new laws limiting the use of eminent domain in 34 states. If you’re in one of the states that haven’t changed their laws, be aware that Kelo makes it even easier for developers to take your client’s dream home for a public use.

2. TENANT INCOMMON INTERESTS: In general, permits each multiple owner to have an undivided fractional interest in a piece of property, as opposed to a share in a partnership that owns the property.
  • What’s the trend: Since an IRS ruling in 2002 allowed TIC interests to be used as a replacement property in a 1031 exchange, investor interest in TIC deals has soared. An added appeal has been the management free aspect of the ownership for soon retiring boomers. The catch for real estate practitioners is the ongoing debate about whether they can receive a commission on a TIC when the interests are classified as securities. Receiving a commission isn’t an issue if the TIC is structured as real estate.
  • What it means to you: “TICs solve a basic problem for investors who want to reinvest in a better class of investments, aggregate their portfolios, and defer taxes,” says Tim Snodgrass, president of the Tenant in Common Association and head of Argus Realty Investors. Although Snodgrass foresees the dramatic rate of TIC growth leveling off, he expects overall market caps for the sector to grow. Currently, real estate practitioners may not be able to earn compensation for advising individual investors on deals that are structured as securities, but that doesn’t mean they aren’t getting a piece of the TIC pie. Almost every property that’s bought or sold for a TIC portfolio is sold through a commercial broker, who receives a commission, according to Snodgrass.

3. ONLINE SOCIAL NETWORKING: Connects individuals or groups via the Internet. Social networks draw their strength from individuals’ ties to others.
  • What’s the trend: The wide ranging connectivity of the Internet makes it a natural for social networking around a shared interest like real estate sales. The connectivity concept seems tailor made for real estate relocation and the needs of a mobile society. (More: See “5 Web sites that help you get connected online,” page 33.)
  • Why you should care: “Real estate is all about personal relationships, so it’s a natural for online social networking,” says Matt Heaton, CEO of ActiveRain, a social networking site for real estate professionals launched in May 2006. The advantage of networking in the online universe, says Heaton, is that participants aren’t limited from sharing information or referrals because of geographic differences. The blogging aspect of social networking sites also gives sales associates a way to assess the skills and personality of another salesperson before making a referral, says Heaton.

4. FRACTIONAL OWNERSHIP: A middle ground for second home ownership between an individual vacation home or condominium and a time share, in which a property is held jointly. Fractional ownership is applied to homes that are intended primarily for use, not purely for investments.
  • What’s the trend: Soaring vacation home prices have spawned this alternative form of ownership. With fractional ownership, buyers own a portion, such as one sixth of the property, and can use it for that portion of time. The same trend is spreading to everything from luxury cars to yachts to, yes, handbags. (Don’t believe it? Check out www.fractionallife.com.)
  • What it means to you: “Fractional ownership reduces hassles and gives buyers more amenities and less maintenance responsibility than would owning an individual home,” says David Hehman, president of EscapeHomes.com, which tracks the vacation home market. At the same time, sales associates need to make clients aware of the annual dues and other expenses often tied to fractional ownership. You pay a premium over the cost of a comparable stand alone home, but these properties are selling a lifestyle, not just a house. There may also be opportunities for practitioners to bring parties together and sell a home to several fractional owners, Hehman suggests.

5. GREYFIELDS: The term a play on brownfields, which describes polluted infill sites refers to the obsolete, old, underused retail sites that have prime locations but are no longer correctly configured to meet today’s retailing needs.
  • What’s the trend: Changing demographics and the continual need for retailers to innovate are just some of the factors that continue to turn once viable malls into greyfields, says Lee Sobel, author of Greyfields Into Goldfields, published by Congress for the New Urbanism and PricewaterhouseCoopers. Developers are breathing new life into some greyfields, converting them into mixed use projects often with a transit component.
  • What it means to you: Today both consumers and real estate developers are embracing more walkable, interrelated forms of building, from lifestyle centers with a Main Street feel to mixed use properties with apartments and condos over shops, says John Norquist, president and CEO of the Congress for the New Urbanism. Investors, too, are finally recognizing that mixed use and lifestyle developments offer more long term value than many traditional malls, according to the latest ULI/PricewaterhouseCoopers Emerging Trends in Real Estate survey.

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Test your hipness quotient with these up-to-the-minute trends

IN HOMES...

What’s hot What’s not
Cozy, small homes on a big lotMcMansions
Earth colors, brown, green,
as well as handmade accessories
The cold look of modern
Informal living spaces like an oversize
family room and an open kitchen
Formal dining rooms
Mudrooms with cubbies, chests,
And benches for kids and dogs
Carpeting
Marble, limestone, and
Concrete kitchen countertops
Granite countertops

IN MARKETING...

What’s hot What’s not
Videos or video podcasts of
You offering market updates
Enewsletters on trends
Listing property at all Available sites, including REALTOR.com, Craigslist, and ZillowJust putting your listings into the MLS and hoping
Handwritten thank you
Cards and invitations
Thank yous sent by email
Multiple property
Photos and virtual tours
One static picture
Word of mouth referrals built on buzzAnonymous lead generation sites

IN TECHNOLOGY...

What’s hot What’s not
HTML email brochures Expensive paper flyers
Ms. Dewey, Microsoft’s virtual librarian With attitude, personalizes your searchStarting at a plain white search screen
Automating showing
Feedback requests by email
Leaving showing salespeople
multiple feedback request
messages that are never returned
Voiceover Internet
Protocol services like Skype
Paying for long distance on a phone
Learning how to use every Feature and maximizing the Use of the technology you have Buying the latest tech gadgets and never reading the manual

Sources: Steve Melman, director of economic services, National Association of Home Builders, Washington, D.C.; Bruce Wentworth, president, Wentworth Inc., a residential remodeling company in Chevy Chase, MD.

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It’s easy sounding green

The triple whammy of gas prices, global warming, and health concerns about chemicals has made green buildings red hot. Take a first step toward working with the growing segment of buyers who appreciate green building materials by greening up your vocabulary. If you want more depth, read the NATIONAL ASSOCIATION OF REALTORSŪ’ smartgrowth green publication, On Common Ground. Or see what the green house of the future will be like by checking out the NAR cosponsored exhibit The Green House at the National Building Museum in Washington, D.C., or on the Web at www.nbm.org.
  • Energy efficient mortgage: This FHA product enables home owners to finance the cost of energy efficient features added to a new or existing home. The program insures loans for up to 97 percent of the value of new purchases of one to four family homes.
  • LEED for Homes project: The U.S. Green Buildings Council, the granddaddy of green commercial building, has finally embraced residential with this program, which will launch a rating system for green homes in June 2007. Factors influencing the rating include energy efficiency, sustainability, and a healthy interior environment. Once in place, LEED (Leadership in Energy and Environmental Design) certifications will give buyers an objective way to rate the greenness of homes.
  • Miles per house: How far a home is from retail, education, jobs, and entertainment may become a bigger factor for buyers as traffic intensifies and if gas prices continue to rise, according to a blue ribbon panel at the fall 2006 Urban Land Institute conference.
  • Passive solar: Using a home’s windows, walls, and floors to collect and store the sun’s heat. Unlike active solar, which uses fans and electrical controls, passive solar uses large, specially glazed windows to capture heat, and special insulation to hold heat. Although easiest to add to homes during construction, passive solar can also be installed during a renovation.
  • TOD: Short for transit oriented development, these often mixed use developments include higher density housing built along rail or bus routes. A return to less car dependent configurations of living, TODs have gained traction in such car centric places as Atlanta and Dallas.
  • Xeriscaping: Often used to describe gardening for dry climates, this form of landscaping emphasizes the use of native plants that have evolved to survive the area’s climate and water availability. Generally easier to maintain than traditional landscaping, xeriscaping can also save home owners a lot on costly water bills.

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8 really useful Web sites

1. Public Records Online Directory(http://publicrecords.netronline.com) A one stop portal to access online info on property tax assessments, deeds, and recorded property documents. Options also include parcel maps, property detail reports, and comparables. There’s also a foreclosure search by ZIP code for the intrepid investor. Note: Not all counties have records available online. But enough counties do to make the site a great first stop before trooping to the courthouse. Access to public records is free, but the site charges small amounts (beginning at $5) for property detail reports.

2. MarketResearch.com (http://www.marketresearch.com) The ultimate site for the statistics geek, it includes research on market segments, individual companies, the real estate industry, email marketing best practices, and much more. A great resource for commercial practitioners who want to research a company or an industry before leasing. One caveat: Reports can be pricey, with the low end starting at $200.

3. Real Estate Software Directory (http://recenter.tamu.edu/soft) Whatever your software needs from call management to video imaging this Real Estate Center at Texas A&M University site is a great place to narrow your search, though it doesn’t review products. Each listing gives such critical info as price, support options, release date and current version, and copies sold. And it’s free.

4. Knowledge@Wharton (http://knowledge.wharton.upenn.edu) Sign up for the RSS (real simple syndication) feed at this site, maintained by the Wharton School of Business at the University of Pennsylvania, and you’ll soon find insights from some of the best business minds in the country in your inbox. The site includes sections with articles on technology, marketing, finance and investment, business ethics, and entrepreneurship. Although much isn’t specific to real estate, it’s a great way to learn best practices from other industries.

5. U.S. Census Bureau (www.census.gov) Serving as a demographic ground zero, the Census site offers hundreds of ways to slice and dice data on population, income, age, and other factors that can affect home buying. The American Community Survey is a new annual nationwide survey on how communities change. Free.

6. National Bureau of Economic Research (www.nber.org) The next best thing to having NAR Chief Economist David Lereah on speed dial, this private, nonprofit site gives you free access to a wide range of the latest key economic indicators, from mortgage applications to employment numbers. You can also read abstracts of economic research papers and download them for a few dollars each.

7. REALTOR.com Your very own national MLS is a one stop shop for consumers looking for property, but there’s also plenty of valuable marketing advice and add ons for you, such as Featured Agent and Featured Homes Marketing Systems.

8. REALTOR.org Information from NAR, including The Center for REALTORŪ Technology: Industry specific takes on technology that can change your business and tips on how to use technology better. Realtor BenefitsSM: Save money on top real estate products from insurance to laptops.

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5 facts about today’s buyers

1. They can afford those higher prices. More than 25 percent reported a household income of at least $100,000; median income was $71,800.
2. Friends help friends. Almost half of first time buyers found their salesperson through a referral.
3. Children aren’t the only impetus. Fewer than one in five buyers had children under 18 residing at home.
4. The nesting instinct is gender related. Twenty two percent of 2006 buyers were single women, but only 9 percent were single men.
5. Being U.S. born is no requirement. Eleven percent of buyers were foreign born.

5 facts about today’s sellers

1. Smaller isn’t better. Half of sellers traded up to a larger home; those 55 and older were more likely to buyer smaller homes, however.
2. They still love you. Eight four percent of sellers used a real estate salesperson, and FSBO sales declined by 6 percent during the last decade.
3. Time means business. Sellers who had little urgency in selling a home were 2 percent more likely to sell the home themselves.
4. It’s a repeat business. Eighty seven percent of sellers had owned at least two other homes; average tenure in a home for today’s sellers was six years.
5. Home turf is still home turf. Sellers moved a median of 17 miles after selling a home.

Source (for both): The 2006 NATIONAL ASSOCIATION OF REALTORSŪ Profile of Home Buyers and Sellers

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Beware: Common Identity Scams

U.S. citizens lost $680 million to identity theft scams in 2005, according to the Federal Trade Commission’s Consumer Sentinel database.
  • Tax audit scare. With an audit hanging over your head, would you say no to the Internal Revenue Service? That’s what scammers are counting on when they call and ask you to verify information on your tax return or complete a questionnaire requesting personal info. Lesson: Never give out critical info, such as your Social Security number, over the phone. If you do get a call, call back to verify the request, then ask for any inquiry in writing. The IRS generally notifies taxpayers by mail, not phone or email.
  • The cost of civic duty. One of the new identity theft scams reported by the FBI involves a call from a “court employee” informing you that you’ve been called for jury duty and asking you to call a certain number and verify your Social Security number. According to the FBI, those who refuse are threatened with a fine. Lesson: If you do get a request for personal info, never call back to a number provided. It could be a front. Instead, look up the appropriate number in this case your local court clerk then call and ask whether such a request has been made.
  • Yet another bank merger. A favorite phishing scam is an email informing you that your account has been transferred to a new branch of your actual bank, and that the bank needs you to complete a little paperwork on a click through form. Lesson: With a little programming knowledge, a scammer can create a Web site that looks and feels like your bank’s. Call your bank to verify. And it’s best to go in person to fill out any confidential forms.
  • Someone stole my credit card. Be suspicious if you get a call from a customer service person questioning unusual spending on your card and asking to verify your account number. Although credit card companies do provide this service, they should have your card number. Lesson: In scams like this, you must guard not only your account number but also the security code number on the back of your card. That number, which is intended as a preventive against fraudulent chargers by phone, will give scammers access to your credit.
  • Charity begins at home. Many legitimate nonprofit organizations solicit donations over the phone, and many prefer to get a credit card number so that donors don’t back out on pledges. Lesson: Giving out your credit card number gives hackers instant access to your account and may be a leverage for getting other critical information. Make donations by check. That will give you an easy record for tax purposes.
  • I’m just trying to pay and get out of here. In a retail store, a scam artist using a cell phone will often call a store employee while your sale is being completed and, pretending to be store security, ask the clerk to read your credit card or driver’s license number over the phone. Lesson: Ask to get your ID and credit card back immediately and call store security.
  • Getting too chatty on MySpace. As you’re talking to a contact on a social networking site, a seemingly casual question could come up about such personal information as your birthday, your mother’s maiden name, or your pet’s name. Lesson: Asking what astrological sign you are is one thing, but asking about dates or names that too often are used as computer passwords should be a red flag.
  • Free credit report. An email encourages you to take advantage of your legal rights to receive a free credit report annually. You do have such rights, but initiate the request yourself through one of the three major credit bureaus Equifax, Experian, or Transunion. Lesson: Many of the free offers on the Web are scams of one type or another. As grandma said, “If it seems too good to be true, it probably is.”

Source: Identity Theft Research Center (www.idtheftcenter.org/alerts.shtml)

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