So Many Days have Passed since My Time at Century Homes.

Today, my first ZipRealty trainee wrote his first offer. It reminds me of my first offer that I wrote when I worked at Century Homes, so many years ago. In some ways, my actions today mirrored the look in my previous broker’s eyes(who is also my Aunt) as she explained the legal effect of the liquidated damages clause.  In any mentor-mentee relationship there is a certain level of satisfaction when you see them succeed. I realize writing an offer is not an acceptance, but it is one step closer to the final prize. I especially enjoyed his excitement as he came over to me to show me the signed document.

A few years ago, another individual that I trained sat in my car as I drove him back to his car that was parked at BART and he said, “I don’t think I can do this job”. I told him the same thing that I told my trainee today.  I said, “I would have not recruited you if I did not think you had the skills to do this job”. Now he is a top producer at Redfin. Everybody wants to be a rainmaker, but for me developing talent has always been something that I have taken a great deal of pride in.

It has been over 8 years since my first offer, but the happiness that I felt on that day is something that I live vicariously through the agents that I train.

I am actively meeting all my clients in person now, something that I did not do while I was at Redfin. For me specifically, the fact that I did not meet my clients dehumanized the whole process. Don’t get me wrong, I did my best with each of my client experiences. On average, I received a 92% customer satisfaction rating. My last review was the lowest of the 5 ratings, I received an 87%. I have thought about why my score was so low during my last few months at Redfin. (Tough times) I am convinced that my performance mirrored my morale. (During my last month at Redfin, I closed 7 transactions.) Fortunately,  I am feeling much better now, and I know the experience that my future clients will receive will reflect accordingly.

Redfin to Zip Diaries: The beginning.

Today I completed my transition to ZipRealty.com; the similarities between both firms are endless. Everything from the CRMs to their commitment to quick email responses, but I must admit ZipRealty has an extensive training program that rivals Redfin’s. 

Comparatively, Redfin transacts business in 6 markets while ZipRealty is in 37 markets and boasts 2700+ agents averaging a half deal a month.

When I decided to leave Redfin, I knew that I could not go back to selling traditional real estate. How could I? So I decided to reach out to the competition, after speaking with one of their recruiters I thought that the skills that I developed at Redfin would be valuable at ZipReatly, fortunately I was right.

Ultimately, ZipRealty.com is a lead generator for agents and brokers.  The website provides a search engine for buyers and sellers to transact real estate. Our compensation is directly correlated to our production and is primarily commission, where Redfin on the other hand paid a salary/bonus that was correlated to the overall satisfaction of their customers. In my case at Redfin, I was there for 21 months, closed over $54 million in residential sales closed 60 transactions and was paid $136,000+- (Salary, Bonuses, MLS Fees, Cell Phone Bills, Mileage Reimbursement, WiFi access and my coffee shop breaks). If I had done that at Zip, my 60 transactions would have been close to $360,000 after expenses and fees to the firm (Average $6000/deal x 60 transactions).

Redfin offers 2/3rds of the buyer’s agent commission as a rebate back to the buyer while Zip on the other hand, pays only a 1/5th of the buyer’s agent commission as a rebate to the buyer. At the end of the day, real estate still requires a personal touch, something that Redfin’s model lacks severely. Zip will give me a chance to focus on quality not just quantity(ahh, the old cliche’). Although, because of my training at Redfin, my balance of quantity & quality will be much higher than a normal traditional agent.

Redfin was an awesome experience for me; it gave me the opportunity to work with some uber-talented people. Heck, I would not have trained half their California staff and recruited my previous sales team(Chris Diez & Ernesto Pineda) to replace me in San Francisco. Hell, I would have stayed, but something was telling me that it was my time to move on.  One night after dinner my wife made a great point, she said ‘if you are not happy, then it is time to move on’.  She was right. Talent never goes unnoticed; I guess that is why I ended up at the competitor.

Over the next few months, I will employ all of the skills that I learned from Redfin with my new team. It is going to be an experiment somewhat, because the old formula at Redfin will be tested. Redfin always thought that in order to become a ‘Redfin Super Agent’ new agents must be fast, young, computer savvy and effective on the phone. I start my current project to prove them wrong.  I realize that you can’t teach fast or youthfulness, but I am a strong believer that efficiency, effectiveness, and a commitment to service can be taught to anyone.

My current goal calls for me to apply, innovate and smash two very similar models in a hybrid that I see materializing. Wish me luck.

It is not Going to get any Better….time to get Creative

With all of the fall out that has already occurred with the sub prime mortgage debacle. I wanted to address an old addition that home buyers over the last 7 years typically avoided but had to deal with. Private Mortgage Insurance. Private Mortgage Insurance (PMI) is a premium that can be paid upfront or built into the loan monthly. Simply put, PMI is an insurance that offsets losses in the case where a mortgagor (borrower) is not able to repay the loan and the lender is not able to recover its costs after foreclosure and sale of the mortgaged property. In 2007, PMI became tax-deductible.

In everyday practice, PMI is necessary when a buyer makes a down payment that is less than 20% of the sales price or appraised value (in other words, if the loan-to-value ratio (LTV) is 80% or more). (Hence the rise of the piggy back loans and 100% financing the thorn in today’s mortgage society.) Once the principal is reduced to 80% of value, the PMI is often no longer required. It can happen as a result of a mortgage pay down or through appreciation of the subject property.

The nation’s larges provider is the PMI group (PMI, NYSE) based in Walnut Creek, CA. which services its product for residential mortgages, public finance obligations and our favorite ‘asset backed securities’. In the fourth quarter of 2006 they recorded a net income of $100.5 million or $1.19/share; during the same period in 2007 they recorded a loss of $1 billion or $12.51/share. Here is a snap shot of their stock chart over the last 3 years. The stock was as high as $50/share in May of 2007; the stock is trading at $5.97/share as of May 09, 2008.

According to PMI Group, they expect to pay mortgage insurance claims for its US operations in an amount of $825 - 975 million; this can only mean that the weather is not going to be changing any time soon. Buyers are going to traverse even more obstacles to procure what once was ‘easy money’ and practitioners like me are going to see a real need for seller financing.

Bust them up Bernanke

Today the Federal Open Market Committee voted 8-2 cutting the fed funds rate .25 percent to 2.0%.  For those of you who don’t know the Fed Funds rate is the rate at which banks with a temporary shortage may borrow from member banks with a temporary excess. This active trading of reserves is usually done “overnight.” Because of the OMC operations, it is not uncommon for some member banks to have an excess of supply of reserves, and others to have a shortage. When there is a surplus balances in their accounts transfer reserves to those in need of boosting their balances.

Over the years, while I have watched the FED’s movements and they have always been very defensive. Generally, the FED responds to changes in the currency-holding habits of the public.

In addition, the FED also lowered the Discount Rate to 2.25%. Depository institutions, commercial banks and other associations can borrow from the Fed at this rate. A key feature of the discount rate is that it is lower than the bank lending rates. For example, banks loan money to customers at a rate of 6.5% per year, but borrow from the Fed at a lower rate. I have found that the speed at which this rate is raised and lowered is an indication of how much the fed is concerned about interest rates and the money supply. In the 80’s short-term rates were extremely volatile and often exceed the rates on long term debt. During that period, the discount rate changed almost daily in an effort by the fed to stabilize interest rates. Lowering the discount rate will increase the money supply. Like I said they are just playing it safe.

     So what does this all mean, in the short term there these changes will not have a direct effect to the average tax payer. The move was an effort to lower bank interest rates, which would lower borrowing costs, hopefully increase lending, strengthen the dollar, optimistically increase demand in good and services, and finally lower the unemployment rate.

I realize that is a pretty long wish list, we can only hope that the U.S. economy improves.