The Minneapolis Real Estate Blog: December 2007

Christmas holds special traditions for everyone. Over the years, we seem to stumble onto things that make us smile and appreciate the season. We even marry into families and merge traditions. I think that is one of the most fun things to discover about us all, the little quirks we all have. Each of us is so similar, but yet so different.

One tradition I have married into is the yearly Christmas viewing of "It's A Wonderful Life". Yeah, it can be cheesy in a few places, but it has such a great message(s). Here are the two I like:

1. Touching someone's life - think about it. How many people have you met over the great course of your life? Have you ever stopped to think how something as simple as just saying hello could brighten some one's day so much that it would cause them to change? What would life be like without you in it? I tend to think it would be a much sadder place without you. I look back on my life and think about people from my past. Everyone I have ever met has in some way shaped who I am.:

-the teacher who told me I am terrible at writing would be surprised to see me writing a blog

-the father who told me I could be anything if I just put my mind to it kept me believing in myself

-the sales lady that was rude to me always makes me remember "Do unto others as you would have them do unto you"

Who has influenced you during your life? While we all appreciate the good, even the negative can mold the clay.

2. The Silver Lining: I guess I tend to look at life knowing there is always a silver lining, always a good side to everything bad that happens. One motto I like is "Don't Sweat the Small Stuff". I also feel that "everything happens for a reason". Often I tell buyer clients that lose out on a home they think they love, that it wasn't meant to be their home. Their home is still waiting for them, we just need to find it. Amazingly, each time this happens, my clients are surprised to find out how right I am.

Life is a journey. If we never have bad days, how will we know what is a good one? If we never fail, how will we ever succeed? There is always a silver lining...you just have to look for it in the oddest places sometimes.

The movie, though old, holds a great message. If you haven't seen it, then you might want to check it out. I for one am glad to take on a new tradition. After all, growing is part of life, and if you stop growing, then life becomes boring. Here's a new years resolution - stop being boring and do something new this year.

So, after a few years of hearing complaints about the FTC lawsuits going on against all these Multiple Listing Services across the country, it appears that the Gestapo tactics of intimidation are starting to back fire on the FTC. Just this week, two MLS boards have been vindicated in the court of law for NOT having anti-competitive practices in place.

The most recent case comes from Michigan, Realcomp II, Ltd., a regional multiple listing service located in southeastern Michigan. The issue presented was whether the MLS treatment of "Exclusive Agency Listings" (EAL), those that allow a seller to not pay a commission to the listing broker should the seller bring the buyer, was anti-competitive and in violation of antitrust law.

• "The FTC argued that: the MLS's policies discriminated against discount brokers utilizing EAL listings by limiting the distribution of their distribution and making it more difficult for other MLS participants to locate these listings. In particular, the FTC identified two policies which caused the alleged harm: the Website Policy and the Search Function Policy. None of the policies prohibited the submission of EAL to the MLS; rather, the policies addressed how the MLS would treat the listings after submission"...to read the full review visit here. (Login Required)

The Website Policy only submitted "Exclusive Right to Sale Listings" (ERS) to Realtor.com and IDX feeds.

The Search Policy only showed ERS listings but gave the MLS participants the option of checking a box to include all EAL listings in their search.

To claim a violation against Antitrust Laws, three standards must be used:

•  per se analysis, when the restraint is obviously anticompetitive
•  quick-look analysis, for restraints with some pro-competitive justifications
•  the rule of reason, for restraints where the effect on competition is harder to determine

The administrative law judge over the case determined that the "rule of reason" best described the way to judge the MLS rules. He then looked to see how these were anti-competitive and if they harmed consumers. Here is what the judge found:

1. The Search Policy was not anti-competitive because it gave the option of checking a box to include ALL listings.
2. The Website Policy was not anti-competitive because the FTC was not able to show any proof that the policy harmed the public or competition.
3. The judge further found that the alleged broker victims (discount brokers) had actually increased their gains revenues and increased their business during the years the Website Policy was in affect, so the claim that the policy hurt their business was false.
4. It is not against anti-trust laws to charge a broker an additional fee for submitting EAL listings.
5. Most importantly, the judge found that the MLS had the right to protect itself from "free loaders". It's policy helped "prevent sellers, who do not pay a commission to a MLS participant, from receiving advertising provided by the MLS but without paying dues to the MLS like all other MLS participants must. The MLS's policy of excluding the EAL from public websites and IDX addressed this problem." It also protects buyers that are working with a broker from being forced by sellers to ditch their agent representation, in order to negotiate on the home.

NO BIG SURPRISE...the judge dismissed the FTC complaint.

So there you have it. The FTC is not winning some of its cases. For those MLS boards that have caved before going to trial and given in to the FTC, they should seriously rethink their decision. Just because the government comes a knocking and threatens to take you down for anti-competitiveness, doesn't mean you have to get scared and give in. It's time we all stood up and said enough. Thankfully the law, which the FTC is trying to use in it's cases, is proving to be more on the side of the MLS boards, then with it.

Regardless of what Internet users might think, NOT all information is free.

The buzz words of 2007 are most likely going to be "bank owned", "foreclosure", and "short sale". As you can imagine, there are thousands on the market right now in the Twin Cities that are trying to compete with each other, and sadly, no one is buying.

So imagine how difficult it is going to be to sell a Million dollar home that has gone to the bank. The property is automatically stigmatized by the words "bank owned" and any potential buyer of a high-end home is going to want a nice discount to purchase it.

According to the Regional Multiple Listing Service, there are five homes currently for sale,priced above a million dollars, owned by the bank or subject to bank approval.

1. The most expensive is priced just under $3 Million in Edina. The original 1972 home was torn down in 2000 and a huge mega-mansion was built in it's place in 2003. The home is a prime example of "just because you build it, doesn't mean they will come". The "estate" has been on the market for the last four years, originally priced at $6 Million. That's a pretty hefty price tag, even in Edina. It is a beautiful home, but it has never been lived in and I doubt it will sell any where near it's current asking price. (For those of you not local to the area, Edina is known as the "Cake Eaters")
   
2. A home in Mahtomedi listed for $1.1 Million was just built in 2006, having replaced a tiny home that was torn down. Hmmm, could tear downs not be such a good idea anymore?
   
3. A beautiful Craftsman inspired home is for sale in Inver Grove Heights. Bought just a year ago for $1.4 Million, the current price is at $1.3 Million. Sadly, the price will have to come down a little more to attract a buyer to that area.
   
4. The Wayzata address keeps one listing high at $1.5 Million, but the home was built in 1989 and needs some updating. I hate to say it but the indigo blue kitchen cabinets are going to be a hard sell in the price range. It also doesn't look good to have been on the market for a full year with a price reduction of $800,000. I think this home will have to come down even more, especially with the bank being involved.
   
5. Lastly, the one that might be the hardest to attract a buyer, is a modern designed contemporary home in Medina. Modern doesn't do too well in rural Minnesota. It (modern design) has a better chance in downtown Minneapolis. I hate to say it, but it is just plain ugly. Minnesotans that live on lakes and acreage, tend to lean more towards traditional and Craftsman styled homes. This one, priced at $1.3 Million, is going to be a very hard sell.

So there you have it, even Million dollar homes can have a tough or tougher time selling than other homes. Many times, an expensive home has been built in an area that doesn't support that type of home. People forget about the "resale" factor when building.

Finding the right buyer becomes even more difficult because most will see that they can buy in a more affluent neighborhood for the same price. It will be interesting to see what happens to these homes. Since the banks are involved, I am sure price reductions will be few and far between, and the homes will just start to rot from neglect. That is the one big down side of banks getting involved in real estate. And it also doesn't help that a couple are labeled "As-Is".

I think the disconnect between home sellers and real estate agents can best be summed up by the following video:

Oh, and in case you don't realize who is who, the buyer is the Boss, and the seller is Cool Hand Luke. Now some real estate agents, might like to use the wip, but I don't think it will get the point across.

I don't know if you have all heard about this little story coming out of Ohio. A contractor was hired to remodel part of an 83 year old house for the owner. While he was gutting the bathroom he found boxes of money stashed in the walls. He notified the owner and they were both giddy with excitement over the hidden treasure.

The money dates back to 1927- 1929 and contains many rare Federal Reserve Notes, as well as $500 bills and one $1000 bill. Worth a total of about $182,000 when it was stashed, the currency had been appraised near half a million dollars.

So what's the big deal?Well, maybe the contractor should go back to Customer Service 101 and Real Estate 101.

The contractor is claiming Finders Keepers and trying to claim the money for himself. The owner told him no way was she giving him the money, but offered him a 10% finders fee. He counter-offered back at 40%, which she refused. Big surprise but he is now suing for allthe money, trying to claim the money through a Pirates type law saying he is entitled to all the money since the original owner of home (who's money it most likely is) cannot claim it.

Last time I checked, walls are fixtures when a home transfers hands, so anything behind those walls would be the property of the new home owner. How can this guy truly believe he has the right to the money?

If he had found a Tiffany Lamp in the attic would he try and claim that too?  I don't think so.

I am going to go out on a limb here and say this type of publicity isn't going to get this contractor too much business. Screwing your client won't get you any great testimonials.

The lawyer for the homeowner said a great line "He in essence expects to be rewarded for not stealing this money."

What do you think? Should the contractor be entitled to any of the money he found in the homeowners walls?

 Winter in the Twin Cities causes real estate activity to slow down. Compared to July, it really slows down. But it doesn't have to be your worse enemy.

If you look at the graph below for the past three winters, 2005-2007, you can see that there is a huge dip around December.

• red represents New Listings
• blue represents Pending Sales
• yellow represents Closed Sales

With so many holidays clustered around each other, people have other things on their mind besides buying a home. Buyers don't have the money to buy because they are shopping for Christmas, and sellers aren't listing their homes because they know market activity slows way down at this time.

However, it might be good to remember that as a buyer, your best deal could be made in the winter months. Homes that have been on the market for a while are itching to sell before the flood gate of new listings opens up in April. For instance, if we ever need a new vehicle, we always buy in December. Car dealerships see their lowest sales during this month so we know we have more negotiating power. It is the same with real estate.

Along the same guidelines, the number of active homes is less, and means that the competition is less. Sellers have a better chance of selling in this atmosphere because their neighbor is waiting for Spring to sell.

So in a way, selling/buying in the winter months is a win-win for both sides of the real estate transaction. It all just depends on how you want to view it. I often tell clients to wait until after New Years to list a home. The first couple weeks the listing hits the market are crucial, but if the listing comes on the market when no one is looking, then you have just wasted the "good news", so to speak.

If you have any questions about selling during the winter months here in the Twin Cities, don't hesitate to ask!

Last week I talked about how to survive a Minnesota winter by keeping your vehicle stocked with items you might need should you find yourself stranded or in an accident. This week I want to touch on things you should do for your home to help get you through any emergencies during a snow or ice storm.

Probably one of the most important items to have for your home is a back-up generator. Yes, not only do you need them during Hurricanes, but you need them for ice storms, too. A generator can help keep your perishable items cold for a little bit longer, or run a space heater to keep your feet warm. Just remember to read the instructions on proper installation and keep generators outside.

Should your electricity go out due to ice on the power lines, call your local power company's emergency line to report the outage. Keep the following items available as well:

• flashlights (battery powered)
• radio (battery powered)
• extra batteries
• bottled water
• coolers for perishables
• ice
• blankets, coats, hats, mittens
• land line phone (non-battery / non-electric)

After the storm, don't forget to inspect the roof for possible ice-dam build up and remove any seen. Ice-dams can cause water to back up under your roof and into your home, a mess no one wants.

This weeks featured Historic Home in St Paul is 749 Summit Avenue.

Built in 1888 by the famous Clarence Johnston and in collaboration with William Willcox, the home was commissioned by The Wheeler Family and cost around $12,000 to build.

At first glance, you might think the home was built in the Richardson Romanesque style, mostly impart to the rough cut stone on the exterior walls. However it lacks any of the arches that define that style. Instead, it fits rightly into the a Queen Anne Victorian "masonry" category. The tower on the left has been built into the home and does not rise higher than the third story ridge line.
The home has been wonderfully restored to its former beauty. The wood work alone inside is something that could never be duplicated today without great cost to the home owner. At approximately 6500 square feet, the home has six bedroom, 5 baths, and a detached two-car garage. This past June, the home sold for $1.475 Million. Hard to believe a home would sell for that much and not have air conditioning. But many of these old homes still do not have the luxury as the cost to install, without disrupting the historical integrity of the home, is extremely high.

Every Christmas I sit down and write personal Christmas cards to all my past clients and those in my Sphere of Influence. Sometimes I even get Christmas cards from my clients, those being the ones that truly love me. Sitting down last night, I poured over the list of people and addresses trying to judge if I needed more stamps. I got to a name that brought back memories and knew he once again would not get a Christmas card.

In 2004, I received an email from a gentleman that lived in Washington state. He was an investor and he was looking to purchase a property as a second home that he could rent out. He wanted me to do all the leg work for him, which I was happy to do. He wasn't going to come to town, but would purchase long distance based on photos I sent, information provided, and my professional opinion.

He wanted to be near the military base so the unit could attract military renters. I knew the perfect neighborhood. While previewing some homes, I came across a FSBO. I gave the owner a call, set up an appointment. To my amazement, the home was phenomenal and priced great, everything and more my client was looking for, and it would attract renters. The owner told me point blank he would not pay a real estate commission to me and if the buyer wanted the home, he would have to pay me. To make a long story short, my buyer liked the house and even agreed to pay my commission on the home. Needless to say, he was very please with my work and even wrote a letter to my broker stating such.

One month later, he called me letting me know about a property his friend had told him about and wanted me to go by the listing to check it out, as he might want to buy it too. Happy to do so, I went to the home. It was about three miles from the other property, had renters in it, but unfortunately, was NOT in the best of shape. It was also listed $20,000 more than the other home he just bought. I sent him photos, pointing out problems with the house, and letting him know the home was overpriced. I also let him know that I did not think this was the house for him.

All my advice didn't matter, he had the "investing" bug and wanted to purchase it. He put in a full price offer and got the home. He was happy as could be. A month later from this, he called me and said he was in town, and wanted me to meet him at the house. Of course he stopped by the beautiful one first and was bowled over by how great the home was. He then met me at the "crap" house, as I call it, and that's when he was no longer happy with his purchase.

I was immediately informed that the house looked like "crap".

-Um, yeah, I told you that before you bought it.

He was unhappy that the grass was over a foot high.

-Um, It's called rain and it makes grass grow, besides, mowing yards a month after closing is not my responsibility.

The hot tub needed repaired and looked horrible.

-Um, I sent you a photo of it, the home inspector told you that in the report, but you chose to ignore it.

The four foot high pile of cut fire wood had not been removed.

-Um, I pointed that out before you bought it and you said you would take care of it.

 So now all of a sudden, the condition of the home was my fault. I was his favorite agent in the world two hours ago, but now he was standing there telling me I had "dropped the ball" on this one.I am a nice person, but my Irish blood can quickly come to boiling in a couple seconds. But, I kept the lid on it. Smiling at him, I apologized and told him ways we could fix the problems. I let him know I would have the fire wood removed, the hot tub cleaned up, the yard mowed, etc. He sounded OK with this. He contacted our rental department and prepared to put the homes up for rent.

A week later, I got a call from Rental and they informed me he pulled his agreement and was going with another company, stating he was very displeased with my work and didn't feel comfortable having us manage his properties. I absolutely could not believe it! He made the decision to purchase the home, didn't take my advice, and now I am to blame for his mistake.

Ever the optimist, to try and win him over, I sent him two bottles of expensive California wine as a closing gift. He thanked me for the "gesture" but implied our relationship was over. It really hurt to be rejected, especially knowing I had done everything right. After a few months of reflection, I tried to convince myself that I shouldn't dwell on this one deal gone sour. But three years later, I still think about it.

So now, I use the transaction as a reminder that I can't win them all. Looking back, I learned alot from the deal, especially concerning buyer's expectations that they won't let you in on, and ways to really drive the message home to a buyer about condition. Remember, the most important things to a client are the ones never discussed. Let's just say, its the little things that matter most and that as real estate agents, we sometimes have to read a clients mind to make them completely happy.