Boomer’s Blog

Real estate entrepreneur and $100,000,000 deal maker Ken Wade has ridden in the front car of the real estate roller coaster through all three market cycles in the past 30 years, and he’ll tell you that today’s housing market is perfectly normal. There’s no nationwide housing crash, he says. But a media obsession with a few markets is driving negative market psychology — and prices — into the ground.

Just the Facts
In reality, Ken says, what we’re seeing isn’t an economic catastrophe, but the natural cycle that moves the market. He recently crunched some intriguing numbers about the U.S. housing market. Between Q1 2002 and Q1 2006, widely considered to be the peak years of the housing boom, Ken reports the following data:

• Only 25 markets, or 7 percent of the United States, experienced a true housing boom, defined by a four-year total home appreciation greater than 80 percent.
• Only 75 markets, or 20 percent of the United States realized total appreciation between 38 percent and 78 percent.
• Half of all local U.S. housing markets realized cumulative home price appreciation lower than 9 percent for that entire four-year period.
• Approximately 25 percent of U.S. local markets never realized even 6 percent total appreciation during those four so-called “boom” years.

The Nature of the Beast
Ken’s data show that a relative few free-falling markets have garnered a great deal of media attention. The ensuing media circus has helped to redefine public perception of the entire U.S. housing market market with trigger words words like: “housing crisis” and “mortgage meltdown.”

Ken is the Harvard-educated architect of the Housing Alerts’ Total Market Master program for research-based real estate investing. He has spent much of his career tracking local real estate trends and profiting from widespread price fluctuations. With his system, Ken translates the “buy low, sell high” adage into hard science and cold cash. We’ll talk about how he does it next week.

How can relatively small improvements in your sales skills spark quantum leaps in your income? If anybody can tell you, it’s Dan Doran and Richard Roop. Today I found some notes I scribbled in my journal from a recent conversation I had with Dan and Richard about Sales Mastery for Real Estate Entrepreneurs, their audio training course we offer at SalesTeamLive. We’ll explore more about that here next week.

But since so many of us have selling on our minds these days, I wanted to take some time right now to highlight some insights I’ve gained from the dynamic duo on the mission-critical importance of negotiations in our business. According to Dan and Richard, negotiating is the world’s highest paying skill, and until now, it’s an issue that hasn’t gotten enough attention in our business

Seven Habits of Highly Successful SalesNegotiators:

• Continuously Practice and Improve: Mastering sales negotiations is both a science and an art. It’s a science in that it necessitates taking specific, measured steps that can be learned; it is an art because it requires an understanding that success can only come with dedication, practice and incremental improvement. When real estate investors commit to making perennial enhancements to their sales skills, the most lofty personal and financial goals are suddenly within reach.
• Master your Approach: Pursue deals with clarity in your purpose. Don’t look for deals with people who are motivated, find people who are qualified and use your sales skills to inspire motivation — even if they’re not encouraging over the phone. By simply shifting your perception and your approach, you can create exciting new opportunities in your business and advance the refinement of your negotiations skills. Approach every deal at your full potential. For meetings and presentations, do your homework and arrive early. Make sure you’re centered and not stressed out.
• Always Be at your Best: A useful trick for anti-stress and instant mood elevation is to recollect your last great transaction or happy moment. Use this memory to infuse your negotiations with passion and confidence. Tap into the resources you’ve got to make an instant change. Affirmations build confidence and self esteem are an awesome way to get into the “sales zone.” Review them before meetings and presentations. Muhammad Ali’s famous self affirmation: “I Am the greatest” became synonymous with his success as a champion. Use your affirmations to create a clear vision of the goals you want to reach and the steps it’ll take to get there. If you follow these tips, your enthusiasm may be so contagious that even your prospective client will catch it.
• Master the Presentation: Use a prepared presentation: this strategy is scientifically proven to boost your sales. Most investors don’t even realize they need one because they’re in a rut of thinking that real estate is just a numbers game. Don’t be jaded. Many of us often forget that we’re also selling a service. Keep your presentations simple, and avoid using technical terms and jargon with clients. Most of them will clam up if you’re using words that they don’t understand. Anticipate your clients’ objections and address them in advance by covering those issues in your presentation. Show clients the magic you can work for them. Embrace your purpose as a problem solver. Address people by name, agree with them whenever possible and follow a script.
• Find the Hot Buttons: Other than the obvious financial problems that are likely to plague your prospective clients, determine what other factors may play a role in their distress. Chances are, the hot-button items are emotional rather than financial in nature. It is not enough to identify the hot buttons, you have to use them to meet your client’s needs. To get a handle on your clients’ hot buttons, you have to spend time with people — 60 to 90 minutes — and be sincere in your motivation to help solve their problems. By spending quality time with clients, you’re able to use the hot-button issues you’ve identified to gage their agitation level. Once you’ve done this, you can draw them into the pleasure zone with your proposal and hopefully, offer some solid solutions.
• Master the Close: A good closer is a great presenter in this business. Many real estate investors don’t realize that the sale is actually created during the presentation, not during the close. A good way to engage with your clients is to apply yourself in conducting a great value-building presentation. Even if you’re not completely convinced that the client is into the deal, you must always mentally proceed with the sale. Here again, attitude is everything. To instantly improve your sales results, commit yourself to performing a great presentation. If you can do that, all that’ll be left in the close is the paperwork.
• Master the Followup: Do what others won’t, or just don’t bother to do: follow up after the close. The more distressed the client is, the more important it is to follow through after the close is complete. This important step lets people that they’re important: It crowns the transaction. It’s also how you’ll get your greatest testimonials.
• Boost your Self Image: Develop a great self image relative to selling. Richard and Dan say they battle this challenge constantly in their personal coaching endeavors. A positive self image is the most powerful sales tool in your kit. If you believe in yourself, you can do anything. Get negative sales experiences out of your head. In coaching, Dan and Richard ask folks to envision what their world would look like without their problems. The techniques and strategies we’ve discussed in this article, repeated over time, will boost your self image and provide you with phenomenal sales. Like Richard says, “In sales, you have to perfect your inner game before you can master your outer game.” Words for any real estate entrepreneur to live by.

Tim Ferriss, author of The Four-Hour Workweek: How to Escape 9–5, Live Anywhere, and Join the New Rich (4HWW), majored in East Asian studies at Princeton University. Soon after graduation, he found his self-imposed cubicle lifestyle wasn’t giving him room enough to breathe, much less twirl. In 2004, Ferriss was working 80 hours a week to build his company and found himself burning out. So he put three days of clothing into a backpack and bought a one-way ticket to London … and wound up in Argentina as a world-class Tango dance champion.

Ferriss’ manifesto, the 4HWW, captures the wisdom and quixotic joy the author found when he traded his cubicle for the excitement-packed lifestyle of his dreams. Published last year, the book quickly became an international best seller.

Escape Inhibitions and Discover your Life
Ferriss urges people to shed the traditional expectations that wedge them into cubicles and create luxury lifestyles in the present using the currency of the new rich: time and mobility. This process is an art and a science that Ferriss refers to as lifestyle design (LD), and in 4HWW, he provides a deceptively simple strategy for achieving it.

Design your Lifestyle
For real estate entrepreneurs, 4HWW nails the formula for maximizing effectiveness in your endeavors. Your business may be surviving, but is it thriving? Many of us escape the regular grind only to become totally submerged in busywork that keeps us from accomplishing the more important tasks that fuel our business growth.

To really excel in this business, no true innovation is needed. When you automate and outsource your grunt work and use systems that have been proven effective, you’re well into the metamorphosis from which you will emerge a true real estate entrepreneur.

Automate and Recreate
For most of us in the real estate game, marketing easily can become a central vacuum system that swallows time and energy and rarely pays off. How can you effectively run your business when you’re struggling with lists, copy writing, mailings and postage?

If this is not your strong point, it may be time to follow Ferriss’ advice: Emphasize your strengths by delegating your weaknesses. When you’re using your strengths to build your business rather than being forced to focus on your weaknesses in mindless tasks such as marketing, your business, your income and your self esteem can reach new heights.

Give your Strengths a Workout
When you’re using an effective marketing system, such as SalesTeamLive, you know it’s working because you’re receiving a steady flow of calls from motivated and qualified sellers and buyers every day. And you’ve actually got the time to make the deals you know will take your business to the next level.

In 4HWW, Ferris successfully reminds us that time is short and we only have one chance to live the lifestyle each of us desires. His lifestyle design provides us with the necessary framework to transform our businesses and to embrace opportunity without fear or regret. Bravo, Mr. Ferris.

Look for my full review of 4HWW, coming soon.

The National Association of Realtors (NAR) latest quarterly report indicates prices are rising in one-third of the nation’s metropolitan housing markets, and appear to be strongest in areas unscathed by the subprime loan debacle. As mixed results are reported for many markets, the numbers alone may fail to show the big picture, especially as it is captured by real estate investors nationwide.

Generally, sales for Q1 were the slowest in high-cost areas. At the same time, foreclosures from subprime mortgages rose dramatically, NAR says. The strongest price gains are emerging in neighborhoods with little subprime exposure, and the most dramatic drops are in those where higher instances of subprime lending has led to record foreclosure rates and bargain sales prices.

Overall, NAR says that total state existing-single family home and condo sales in Q1, at a seasonally adjusted annual rate of 4.95 million units, are 22.2 percent below the 6.36 million-unit pace marked in Q1 2007. Single family homes and condos in some markets however, managed to beat the odds and show impressive gains for Q1.

Single Family Home Gains
In Q1, the largest single-family median home price hikes over the same period in 2007 were:

• Binghamton, N.Y. is up 11.8 percent to $109,70;
• Peoria, Ill. is up 10.4 percent to $119,000; and
• Spartanburg, S.C. is up 10.1 percent to $130,300.

Condo Markets on the Rise
The strongest median condo price gains in Q1 over the same period in 2007 were:

• Bismarck, N.D., is up 36.4 percent to $124,900
• New Orleans-Metairie-Kenner area of La., is up 15.3 percent to $170,500; and
• Wichita, Kan. is up 11.7 percent to $106,600.

Americans are clearly divided on whether homeowners with distressed properties should receive government-targeted aid to help them keep their houses, as are their elected representatives in Congress.

According to a recent CNNMoney.com poll, only half of Americans surveyed believe that help should be extended to struggling homeowners. These results are derived from phone interviews with 1,008 adults conducted at the end of April. When the same survey was taken in December, 51 percent of survey participants favored special assistance, while 46 percent did not.

The split in popular opinion on the issue also is reflected in the U.S. Congress. Last week, the House of Representatives fiercely debated legislation that would provide federal backing for some at-risk loans and cut the principal owed on some mortgages. The bill passed through the House last week on a 266-154 vote.

The proposed legislation would allow the Federal Housing Administration (FHA) insure up to $300 billion in new loans over four years if lenders agree to reduce mortgage principals. In order to qualify however, lenders would be required to drop the debt to no more than 85 percent of a home’s appraised value. Under the bill, sponsored by House Financial Services Chairman Barney Frank, if the FHA-refinanced loans went into default, the FHA would pay the lender the remaining principal owed.

Critics allege that the legislation is unfair to those who didn’t bite off more debt than their finances could chew, and say it is an inappropriate use of the FHA to bail out lenders and homeowners — all of whom should take responsibility for their business transactions.

Still, due to growing support for the measure in Congress, many expect the legislation to survive bipartisan scrutiny — and predict the bill will gain support from legislators who represent states that have been pummeled by the credit crunch, mortgage meltdown and on-going housing market woes. The White House already has threatened to veto the legislation.

Today’s real estate investors have a growing bounty of free Internet-based research options and tools available online. Now we can add to the list a behemoth mortgage applications database from Homethinking.com, which debuted in 2005 with a realtor transactions database.

The company recently has expanded its original concept to dish out data on mortgage lenders. Sound boring? Look a little closer. This nifty tool helps investors see which lenders dominate any U.S. market and access details about the loans they’ve made. This information is a great research and bargaining tool.

Free Mortgage Data and Custom Charts
Homethinking.com has developed this user-friendly approach to providing the Federal Reserve’s Home Mortgage Disclosure Act (HMDA) database, to help real estate professionals and civilians alike to choose lenders and, in the process, analyze credit-crunched markets throughout the United States.

With one click on a specified state or county, the system displays instant data on the percentage of subprime loans, average loan size, loan-to-income ratio, and other statistics that can help investors determine how past lending practices may affect future market performance. The site also shows the top 10 top lenders at the at state or county levels.

Get your Data Embed
An added bonus feature for users, is the ability to embed the charts they generate on-site, into documents, Web pages or e-mail messages. These charts can help with market analysis, tracking and ultimately promote more informed decisionmaking. But the data aren’t as up-to-date as most users would like it to be.

HMDA data are released only annually, and it takes the federal government several months to release it. Although Homethinking.com provides access to the latest HMDA data, they’re currently two years old. Current information is based on 27.5 million loans and loan applications filed in 2006.

Despite ongoing troubles in the U.S. housing market, some areas post green lights for investors looking for relatively high and fast price gains in the next year. According to Money magazine, these markets have what it takes to make for solid real estate investments (REI). (Additional data provided by Wikipedia and the U.S. Census Bureau.)

1. McAllen, Texas:

• U.S. Census data for 2003 estimated the city’s population to be 116,500.
• 12-month forecast: 4 percent
• Median home price: $109,000
• One-year price change: 2.1 percent
• Five-year price change: 23.3 percent
• Change in foreclosure rate: 23 percent

2. Rochester, N.Y.

• U.S. Census data for 2003 estimated the city’s population to be 216,000.
• 12-month forecast: 2.7 percent
• Median home price: $121,000
• One year price change: 3.4 percent
• Five year price change: 20.1 percent
• Change in foreclosure rate: 5 percent

3. Birmingham, Ala.:

• U.S. Census data for 2003 estimated the city’s population to be 236,600.
• 12-month forecast: 2.7 percent
• Median home price: $156,000
• One year price change: 2.9 percent
• Five year price change: 29.4 percent
• Change in foreclosure rate: 20 percent

4. Syracuse, N.Y.:

• U.S. Census data for 2003 estimated the city’s population to be 144,000.
• 12-month forecast: 2.6 percent
• Median home price: $126,000
• One year price change: 0.8 percent
• Five year price change: 29.5 percent
• Change in foreclosure rate: 27 percent

5. Buffalo and Niagara Falls, N.Y.:

• U.S. Census data for 2003 estimated Buffalo’s population to be 285,000; Niagara Falls to be 54,000.
• 12-month forecast: 2.4 percent
• Median home price: $105,000
• One year price change: 1.6 percent
• Five year price change: 24.5 percent
• Change in foreclosure rate: 14 percent

6. New Orleans, La.:

• U.S. Census data for 2003 estimated the population to be 469,000.
• 12-month forecast: 2.2 percent
• Median home price: $158,000
• One year price change: 1 percent
• Five year price change: 43.7 percent
• Change in foreclosure rate: 49 percent

7. Scranton, Pa.:

• U.S. Census data for 2003 estimated the population to be 74,300.
• 12-month forecast: 2.2 percent
• Median home price: $128,000
• One year price change: 7.2 percent
• Five year price change: 41.1 percent
• Change in foreclosure rate: 8 percent

8. Grand Rapids, Mich.:

• U.S. Census data for 2003 estimated the population to be 195,600.
• 12-month forecast: 1.9 percent
• Median home price: $124,000
• One year price change: -3 percent
• Five year price change: 8.3 percent
• Change in foreclosure rate: 37 percent

9. Baton Rouge, La.:

• U.S. Census data for 2003 estimated the population to be 225,100.
• 12-month forecast: 1.9 percent
• Median home price: $170,000
• One year price change: 5.7 percent
• Five year price change: 38.3 percent
• Change in foreclosure rate: 14 percent

10. El Paso, Texas:

• U.S. Census data for 2003 estimated the population to be 584,100.
• 12-month forecast: 1.8 percent
• Median home price: $134,000
• One year price change: 6.9 percent
• Five year price change: 51.9 percent
• Change in foreclosure rate: 32 percent

Technologies offering free on-line property information are changing the real estate business and quietly building a mighty force that is poised to obliterate the National Association of Realtors‘ (NAR) virtual monopoly on property information and decimate the concept of the 6 percent agent commission.

Until recently, it was challenging to operate in the residential real estate market without access to the NAR’s multiple-listing service (MLS) because only realtors really knew what homes in any given area were selling for. Realtors who shared the information generally expected a return for their data sharing and professional services, usually in the form of a 6 percent commission on subsequent property transactions. But times are rapidly changing.

The Holy Grail: Data Accuracy
Soon, an estimate for just about any home’s value will be available online from sources such as Zillow.com. Many already are. But are the data accurate? A 2007 Wall Street Journal analysis of 1,000 home sales shows that Zillow’s “Zestimates” often are accurate, often within a few percentage points of the actual price paid. But when Zillow is off, the disparity can be dramatic.

Zillow.com officials say that constant refinements to their system make the data more accurate today than ever. Changes to the back-end of the system and enhancements like adding a process whereby owners can update their property information in Zillow.com’s system all work to maximize on-target data reporting.

Objectivity Fuels Credibility
Still, services such as those offered by Zillow.com are not yet perfect. Zillow’s valuation protocol is most accurate for mid-price homes in areas where there is high property turnover; it is less effective in neighborhoods where people seldom move. But the time may come when Zillow is seen as more reliable than human brokers, Money magazine reports.

Often, brokers and owners have an incentive to inflate estimates to win prospective clients and are not always tuned in to market changes. Data from sources such as Zillow.com are far more objective and are becoming more widely used by consumers, brokers and by major media media outlets to establish important benchmarks in the real estate market.

In other words, if everyone uses the data, the provider can become a significant force in the market. For example, financial news giant Bloomberg recently reported that U.S. home values dropped 7.7 percent in the first quarter to the lowest in almost three years, based on estimates by Zillow.com. The article says this is the largest decline in 12 years of data compiled by the Seattle-based online data provider. When the media major players cite a particular data provider as a source, it lends great credibility to the quality of the information outfits like Zillow.com provide.

All Aboard the Gravy Train
Zillow.com launched its Web site in 2006 to provide homeowners, real estate agents and potential buyers with value assessments called “zestimates” for single-family homes, co- operative apartments and condominiums. The company has since become a real estate powerhouse, recently expanding its operation to provide mortgage market information services. In the past couple of years, competitors have sprung up for a taste of the gravy snatched from the plates of brokers and others working from the tradtional MLS system data model.

According to Online Media Daily, in December 2007, San Francisco-based Trulia.com managed to edge out Zillow.com, AOL Real Estate and HouseValues in terms of unique visitors. The site nearly tripled its audience from the previous year, growing from 579,000 unique visitors to 1.6 million. Trulia recently sweetened the user experience by offering not only listing info and photos, but access to view the property via Google’s popular Street View Map option. Google Street View where it’s available, gives users an interactive, mobile, street-level view of properties and neighborhoods.

John Vogel, who teaches economics and real estate at Dartmouth, says that the democratization of real estate data imperils the future off the 6 percent real estate commission. Real estate brokers will retain a role as marketers, especially in tough markets. But, Money magazine says, like stock brokers before them, they’ll find that as they lose their traditional monopoly on information, they just can’t command their traditional price.

Below is a list of five top real estate valuation Web sites (My personal favorites are Trulia and Zillow).

• AOL Real Estate
• HomeGain.com
• RealEstateABC.com
• Trulia.com
• Zillow.com

Several times each year, Drill Sergeants Richard Roop and Dan Doran enlist hundreds of entrepreneurs to become lean, mean real estate investing machines by hosting Marketing Mastery for Real Estate Entrepreneurs Boot Camps.

These accelerated training opportunities are legendary in the real estate investor community for whipping businesses into shape in just four short days. The next Marketing Mastery for Real Estate Entrepreneurs Boot Camp is slated for May 20-23, in Long Beach, Calif. So far, almost 200 have signed up and, though the early enrollment deadline has passed, overall enlistment appears to be growing.

Get in Shape Fast
Roop and Doran’s boot camps are effective because they take a multi-faceted, immersion approach to quickly providing you with the armor you need to creatively meet your most pressing real estate marketing, sales and negotiations challenges. Your carefully designed, interactive training experience begins immediately upon enlistment, starting with an array of free training materials geared to prepare you for active participation in your Boot Camp experience.

Build Lean Marketing Muscle
At Boot Camp, be prepared to learn how SalesTeamLive’s robust and automated direct mail marketing services seamlessly integrate with and deploy from Roop and Doran’s flagship platform for generating real estate wealth. This is but one of the proven strategies you’ll learn from the live Boot Camp experience that simply cannot be captured in training and preparation materials alone.

Overall, the knowledge to be gained at Roop and Doran’s Marketing Mastery Boot Camp is priceless to investors seeking real-world strategies for building their real estate investment businesses. These events transcend the potential of the ordinary real estate investment seminar by offering more than training and networking opportunities: they build a holistic support system for those who take the training and implement what they’ve learned. The entire experience is artfully orchestrated to minimize the learning curve and maximize your potential to make real money in real estate.

Here are the Top 9 reasons why you should enlist for the Marketing Mastery for Real Estate Entrepreneurs Boot Camp:

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Federal Reserve Chairman Ben Bernanke has announced his approval of a new plan by the U.S. Congress to help stall the foreclosure rate for homeowners now drowning in debt. The legislation was drafted to help distressed homeowners, and is now snaking its way through the House of Representatives. House Financial Services Committee Chairman Barney Frank of Mass is the bill’s author and original sponsor.

If enacted, the legislation would allow the Federal Housing Administration (FHA) to back as much as $300 billion in refinanced loans for homeowners facing foreclosure. Critics say that the legislation would unfairly punish homeowners who didn’t overextend their finances. Bernanke says that finding ways to avoid preventable foreclosures currently makes for sound public policy. And his support may help Frank find Congressional support for the measure.

The Fed chairman says that there is a strong economic case for trying to avoid the price drops and other economic hardships imposed by the booming foreclosure rate. The costs of foreclosure, he says, may extend well beyond the borrower and the lender. He also has observed that clusters of foreclosures can destabilize communities, reduce the property values of nearby homes, and lower municipal tax revenues. Foreclosures, as we’ve seen, also can drive house prices lower.

MarketWatch reports that one tactic favored by the White House is to reform the FHA and allow it it to increase the scale of its lending. Another approach would be to give stronger powers to the federal government to oversee the affairs of Fannie Mae and Freddie Mac. Bernanke supports these measures and has said that Fannie Mae and Freddie Mac should be used to mitigate the damage of the housing market downturn, and be allowed to do so in a safe and sound manner.

Last week the Fed cut interest rates another quarter of one percentage point to 2 percent.