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Friday, February 1, 2008

Jeffrey Bastress-Inman TV Video Interview-Startpoint

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Truth About Mortgage Rates & The Fed Cut

Is the media correct in their assessment on the Fed rate moves and how that relates to mortgage rates and the lowest mortgage rates ever? Are we as real estate professionals thinking this to be the case also?

Just so you know, fixed mortgage rates directly correlate to the 10 year treasury bond, which is an investors haven of choice when other markets such as the stock market are tanking. With a flush of investors money into mortgage backed bonds, rates drop as supply and demand dictates.

However, when the Fed lowers the short term discount rate, this is designed for consumer spending on short term credit and therefore investors may see the stock market as the better investment as profits pour into retailers etc. They bail out of bonds, and interest rates are on the rise to enhance back the now elusive bond investor.

This all happens with lightening speed, and in many cases it happens prior to any Fed move as investors hedge on the expected or react to the unexpected.

Here is what occurred over the last wild 10-day period: (NOTE: The 10 yr. bond is what affects the 30 year fixed rate mortgage rate)
· January 22nd (TUESDAY): 10 yr bond starts day at 3.60%. Fed drops short term lending rates by ¾% (75 basis points) which such a decrease had been unprecedented for 24 years! By the end of the day, the 10 yr. bond had dropped 18 bps to 3.42%.
Rates were set for the following day based on this information, and Wednesday morning opens with the best 30 year mortgage rates in many many years. It was short lived however. Like 1 hour!
· January 23rd (WEDNESDAY) The 10 yr bond goes up 16 bps during the day to end at 3.58% which is basically where it began the day before. Almost ALL wholesalers and the investors changed rates 3-4 times that day before finally just “calling it quits” and STOP taking rate locks until the dust settled on a very volatile market. Rate lock websites were jammed and rates at one minute were not good the next, all day.
Only a very lucky few got their rate locked, the rest either fell in the trap that rates are dropping so they wait, or they simple could not lock due to rate fluctuation and black outs.
· January 29th (TUESDAY) Fed drops short term lending rate AGAIN. This time by ½% (50 basis points)
· January 31st (THURSDAY) As of 11:30AM est. the 10 year bond is at 3.62%
Summary: Fed has dropped short-term rates an aggregate of 125 basis points in the last 9 days. This 1.25% drop is HIGHLY publicized and “every Tom, Dick, and Mary” consumer has seen it on the news and ASSUMES this directly affects mortgage rates going DOWN 1.25%. In fact the media hype it as exactly this.
In fact the 10 year bond started at 3.60% prior to Fed cuts, and is at 3.62% Thursday 31st. It is safe to say that there has been NO discernable over all decrease in mortgage rates in the last 10 days, except for a VERY short period of time on Wednesday January 23rd for one hour.
The good news in all this for the housing market is that the media, consumers and even real estate professionals believe that the Fed move means mortgage rates must be at an all time low. And this media hype is priceless to the perception needed right now in the housing market.
Perception is reality. So I am not here to dispel the hype, just to inform. After all, I am along for the ride as every one else, and my success rides on a robust housing market. So I for one say...."Thank You Ben Bernanke for lowering the mortgage rates by 1.25%!"
Maybe that's all any of us really need to know anyway.
Thank You
Jeffrey Bastress

Startpoint Realty Broker Manager:
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Tuesday, January 22, 2008

Back to Basics in 2008

Back to basics....
2008 has come full circle to taking the time to build personal relationships with our leads, customers, past clients and new contacts we make. We have had the luxury of the information highway in all our clients hands and all we had to do was wait for them to call us for help. We still have the information highway, but reaching out and building relationships once again is the key to our success in 2008.

I strongly urge you to regularly contact all past clients and simply tell them what your doing and you are there for them. Surprisingly as it seems, they will not refer friends and family if you do not ask them to do so. In fact in most cases they will over look us also if we are not asking for their new business and referrals. Just letting them know your still alive and well is good, and letting them know of your new services is better, and letting them know how they or their friends would benefit greatly from one of your services right now or the near future is the very best.

Past clients are by far the very best source of new business. If you are not contacting them on a regular basis, you are missing the very best opportunity. Do not settle for an email to them once a month, which is good and better than nothing. Email, mail a card or note, call and even drop over every once in a while. And when you do, make sure to spend at least 50% of any conversation listening to them and their needs. This will allow you to know how you can help them the very most, and they will know you care if they know you are listening. You have 2 ears and only one 1/3 of the time and listen the rest.

Leads in our data bases need to be reached out to in the same way. The days are gone where we can expect them to receive our daily emails, drive by all homes and then call us when they find the "one".

Nope. They need personal information about neighborhoods, mortgage programs, schools, home values, and through building these relationships they will be encouraged and have the confidence to buy. It used to be that a buyer had 20 minutes to decide on buying a home or not. They were not concerned if it was a good investment or schools or anything. Only if they were the highest bidder or not.

2008 we need to be a whole lot more. Buyers are afraid, uncertain, misinformed and have no direction or confidence in buying a home. They don't even know what mortgage options are available in many cases, and may not even ask. So reach out and listen and respond to the buyers needs that are in your pipeline of leads. Do not just wait and do nothing, as I can tell you how that will go for you.

FSBO's are Sellers and Buyers and need a mortgage. 70% of all FSBO's list with an agent that ask for their business. If nothing else, they may need other assistance if they find a buyer, like escrowing, contracts, mortgage needs. I would walk up and meet in person as many FSBO's as you can. It will open doors and if will open our minds to opportunities otherwise missed. Make 2008 the year to personally meet and talk to 6 FSBO's a week. After all, they are easy to find, they are selling a home, and they are eager to hear what you have to offer, and if of benefit to business. What could be easier? I know, I know....doing nothing is much easier:)

Your Sphere of Influence is every one you know or have known. It also can grow by introducing yourself to every one you meet during a day. The cashier, the hair stylist, the UPS man, the Teller, every one. Why not carry a card and hand it to...every one. Better yet, why not make a tri fold card as a mini brochure of your services, and hand it to every one new you meet. If I told you your immediate sphere of influence had 200 people in it, you may not think so. But sit and list every one you know and their spouses and workmates, old schoolmates, friends and family members, and their friends and family members you know. Social groups, church groups, business acquaintances, clubs, kids school, PTA, etc. Do they all know what you do and how they could benefit from knowing? They should! Your sphere of influence needs to know. How many times has someone in your sphere of influence bought a home or refinanced, and said to you.."I didn't know you were in the business"! How simple is that.

I was at the grocery check out when I got a real estate call. The cashier then asked me if I was in real estate and asked for my card, as she was looking to buy. She asked me! What a wake up cal that was. Back to basics and handing my card to every one I meet will put new business on my table for 2008. How about you? If they know, they are more apt to ask you. If you ask them for their business, you will get it every time. Your personal sphere of influence is huge. Put it to work for you.

That's it for now. Let me know if any of this is useful, or better yet let me know if you try any of my suggestions and they work for you. I will pass it on to the rest.

Be safe.....
Jeffrey Bastress

Tuesday, June 5, 2007

MLS Compensation; The Ugly Truth Today

The good, the bad and the ugly truth today
Guest perspective: MLS offer of compensation needs to go away

Jeffrey Bastress

Real estate compensation structures are wrought with problems, which could be effectively eliminated if the MLS-mandated offer of compensation were done away with.

Agent compensation is set by office policies that support a specific company's fee philosophy and income. But the system doesn't take into account how it affects consumers' opinion of value received, or how it can clash with other companies' compensation policies. These policies also contribute Compensation: The good, the to uneducated agents blacklisting certain properties -- either intentionally or unintentionally.

One major contributing factor to the compensation problem is that a buyer's agent is paid according to the selling agent's office policy. This totally disregards the buy-side agent's office policy on compensation, the buyer's contract with his agent and the seller's best interests, which are to remove any barriers that may keep potential buyers from seeing their home.

One problematic result of the mandatory unilateral offer of compensation is the belief that the seller and his agent are the ones paying for the buyer agent's fee. In reality, both the seller and buyer agents' fees come from the negotiated sale price, and are deducted from the proceeds at closing. It is the buyer who put the money on the table and who has agreed to pay back the lender.

It's no wonder that sellers feel brokers' fees are too high -- they think they are the ones paying for the buyer's agent fee. They've been conditioned to feel this way by seller agents who simply dictate company policy that's based on the MLS compensation offer. It is all sellers and their agents have known without questioning for so many years.

The practice of including the buyer agent fee in the commission fee that sellers pay has directly contributed to the growing number of for-sale-by-owners. FSBOs in many cases offer a fee to the agent who brings the buyer, which shows the seller is not averse to paying a fair fee to one agent to secure their home sale.

If the MLS offer of compensation were not offered to buy-side agents, then many if not most FSBOs would gladly let a seller's agent handle the entire transaction, knowing the one fee they would incur. Also, all buyer agents would negotiate their fees in the offers from the closing proceeds or be paid by the buyer.

Consumers get it. Most agents and their companies do not. The MLS definitely does not.

Fixing this fundamental compensation flaw would eradicate the entire debate over high commissions charged by so-called "traditional" firms versus the "discount" brokerage fees. By eliminating the MLS offer of compensation, traditional firms can list homes for any fee their company sets on the selling side and know that buyer agents will be compensated either directly by their buyer or from negotiated proceeds at closing.

The difference is that the seller and buyer each pay for the services they bargained for, and the negotiated sale price includes all these facts on the table. Buyers would get to see all properties, not just ones that fit the agent's company policy. Sellers would get more showings and opportunities to entertain offers that they don't see now due to the invisible barriers set when the compensation offer is perceived to be too low.

One-size-fits-all company fee policies do not take into account what the consumer pays for compared with the perceived value of service they receive. Agents of all experience and education levels charge the same for their services. It's company policy!

The internal office splits favor the company on new agents versus experienced agents, but the consumer pays the same no matter the experience level. This is another reason consumers feel they pay too much -- 90 percent of the time they pay the same amount for inexperienced service that the other 10 percent of consumers paid for more experienced service. This contributes to the bad rap that real estate professionals have to combat, and makes it harder for the experienced agents to justify their fees as horror stories abound.

If we eliminate the MLS offer of compensation, we could eliminate:

--Sellers' adversity to high fees;
--"Traditional" versus "discount" fee battles. Each will simply negotiate their fees with their clients and get paid from proceeds at closing;
--Blacklisting certain companies' listings due to low co-broke offers of compensation. More showings and more offers is a good thing;
--Agents thinking the world spins around their office policy. So why doesn't everyone else?

And instead we could:

--Empower consumers with decisions on offers based on more than just one office policy;
--Enable consumers to more easily shop and compare agents to ensure value received;
--See more FSBOs hiring selling agents;
--Minimize MLS arbitration (as 90 percent currently is over compensation disputes);
--Enable buyer agents to negotiate fees based on anticipated workload for "entry-only" or flat-fee listings.

The days of MLS compensation's usefulness are over. It had a purpose back when information was hard to come by and all agents basically worked for the seller.

Just like sub-agency, which recently became an issue of mandatory disclosure, it will have to be mandatory for brokers and agents to disclose the MLS offer of compensation to clients for it to go away. Otherwise the issue of whether the office policy best serves agents or clients will not be considered. The ugly truth of offering compensation through the MLS will not, in my humble opinion, be considered unless the MLSs mandate changes themselves.

The many agents that not so long would never have worked as buyers' agents or only allow sub-agents to show their listings have learned only by mandatory agency disclosure why to change for the better. These will be the same ones that will only accept the obvious truths of MLS offer of compensation, only by a forced MLS mandate. Sadly, this encompasses the vast majority of real estate company policies and their agents' blind acceptance.

Jeffrey Bastress is president of Sterling, Mass.-based Startpoint Realty. He will be hosting a roundtable discussion on problems with the MLS offer of compensation at Real Estate Connect in San Francisco, Aug. 1-3, 2007.

Sunday, February 25, 2007

Response to "Why Your Worth It" Realtor Magazine

Response to "Why You're Worth It"
Article in Realtor Magazine
by Elyse Umlauf-Garneau
February 2007 Realtor Magazine

Is it NAR's job or charter to try to help the 90% of realtors on how to justify their commissions by promoting that they defend their companies inefficient and expensive ways of conducting business?

I thought it was individual realtors that make up NAR's membership, and not the real estate companies they work for. My dues should not pay for how agents should justify to sellers why they chose to work where they did.

If they need to justify their offices inefficiencies such as premium large offices, high paid personnel, and the costs of maintaining hordes of agents that average 3 transactions a year by charging consumers the fees they do, then they should develop their own plan internally for doing so. Not by using my membership fees in articles as this that encourage misleading consumers.

Professionals that help sellers price homes correctly and use efficient low cost marketing plans is what sells homes in a shorter period of time, and therefore always nets the Seller the most every time. This is in the Sellers best interest, and also the agents best interest, and what consumers are demanding. Not what this article points out by telling sellers that since their home will sit on the market longer, is one reason why I need to charge you more!

Obviously this article is for the 90% of realtors that have no clue in what they are worth and work for companies that set policy on what to charge which is not based on the proficiency of the agent what so ever.

I am appalled that my due's are being used to tell these realtors to mislead sellers with statements such as "History has taught us that in every profession, the people who charge less 'typically' give less service because they have less revenue to actually fund those services".

History in fact shows that those new to a profession, or those less educated get paid less, or those with less experience get less. Seeing this article is geared for the 90% of realtors that fit this description I don't see the correlation for justifying higher fees.

Also history has shown us just the opposite. Need I point out Southwest Airlines, Wal Mart, Home Depot and Lowes that have great service and lower costs. McDonalds is a huge would this author explain this? What about wiping out the entire travel agent business? Has anyone rented a car from Hertz lately? Avis certainly tries harder and gives better service and fees.

Further this approach is demeaning to the consumer, who "typically" are much smarter than this author would give them credit for. They are the same ones that use expedia or priceline to travel, and home depot for hardware and lumber. If an agent gave me the pitch this article teaches I would tell that agent they are working for the wrong company, if that is all they get paid at the end of the day, as it is the agent I am hiring.

How do realtors explain to sellers that 90% of realtors cannot explain agency proficiently, none the less open lock boxes on their own, and which are "typically" working for companies that expect the highest fees? That would be an article I would applaud.

How about: "History has taught us that in every profession, the people that charge less are typically the most efficient at what they do and therefore do a lot of business and actually have more revenue to give you superior service at a fair price." This is more the truth.

I know, how about an article that teaches the realtors that they are in business for themselves and consumers clearly are not wanting to pay for the "fat" any longer, and history shows that by doing nothing about it other than trying to explain why such as this article preaches, are all doomed like the way travel agent has gone.

How about an article that teaches realtors that to be a top producer, it is not the company behind them that makes it happen, and that "typically" the fat can be eliminated by working on their own or for a low fat company and by learning how to be highly proficient, educated, and efficient they can as a real estate professional charge fair fees they are truly worth and be a huge success.

Thank You
Jeffrey Bastress
978-337-9745 cell