Fun Coast Realty Live Space

I am not the most organized person, so I am spending more than I can afford. But I am glued to it trying to see if guys out there figured where we are going. It bothers me, there is a lot of uncertainty, and hey, maybe someone has a crystal ball?

Unfortunately, the overall tone of the blogs is not that encouraging. We are sort of enthusiastically complaining. About the media, which causes people to be concerned, the FSBOs who have more and more chutzpa, and about tons of other things. The idea is that if we eliminated those things, everything would become perfect.

Are we dreaming? We tremendously overestimate the ability of the media in creating the bubble, or in creating the cycles. The FSBOs go bananas not because they are losing manners... Are we in denial? Something is changing radically, signs are all over, but who can read them?

We all agree that Internet has changed the way we do business. Is Internet alienating us from this business? We used to control access to the Listing information. You want to buy; you have to deal with us. Now this is less and less the case. You can get so much info now on the Internet, but it is not controlled by us. You can get the values of the internet; you can get the laws, the forms, and the contact info for anything and everything you need.

MLS system will eventually no longer be the monopoly of agents. So, what is going to happen when we are in the same boat with out customers? They can get what we can get. And if they do not know how, Google it, and you will find the procedures, approximate costs. You can find the suggestions, tricks of the trade, pitfalls to avoid, etc. So, what is the value of a licensee?

I am trying to understand how the same phenomenon affects other professions. Let's take doctors, for example. Basically, you can find all the information on the Internet. However, we still won't bypass a doctor for two major reasons: control of prescriptions, and understanding that a mistake in self-diagnosing and self-treating could be dangerous at best.

Some professions would not suffer at all, as they may require training in some physical activity, in a sequence of operations, that can't be replicated without rigorous training. You may buy a Stradivari violin, but this will not make you the musician. Internet will not change much for athletes, artists, and a whole lot of other occupations. It enhances them, though.

So why is that we, realtors, do not have that comfortable feeling that we are indispensable, that we are needed? There should be a reason beyond all our conceivable complaints and naive hopes. The dreadful question is... are we really indispensable? Are we needed as much as we think we are?

The terrible part is that a good licensee is invaluable, BUT THE CUSTOMER DOES NOT KNOW THAT. They will not turn to a surgeon and suggest that they would pay only 50% for appendectomy because this is relatively simply operation. But they do it with us all the time? Why? Why are we here, on AR spending time? Yesterday there was no AR. Not that we needed it, but we did not have it. When we needed it, it came. Why are we talking about Craig's lists, YouTube and many other things, that we did not have, or did not use yesterday? What actually happened to the condos, houses, etc., have they changed so that we now need all that in order to sell? No. We do it because we feel vulnerable in our relationships with customers.

Look, to help sell or buy to our customer, you can simply use a pen and paper. The rest is a desperate attempt to get the customer, to retain the customer, and so on and so forth. We are not willing to admit it, but this is our biggest vulnerability. As an industry we are not fit to work in today's environment. We are operating as a business like it was decades ago, we just masquerade it with all the technology. Generally, real estate is still when an agent is a single person, Master of Everything. You need a condo, no problem. You need a house, no problem. You need a condo 25 miles from here, no problem. You need a multi-family property, no problem. IS IT REALLY NO PROBLEM? But you can't blame an agent for that. It does not matter how many agents are in the office, in general, the agent either pretends that he knows and he is able, and then tries to figure it out, or just goes on a chutzpa, or he will not have what to put on his table.

We do some condo-hotel sales. When agents bring their customers to us to show properties, and we accompany them to the unit, 8 times out of 10 the agents have no clue of the product and the nuances of condo-hotels. They feed their customers BS, and it gets scary. This is just an example, but this is the reality. Yes, there are experienced and diligent licensees, and the customers are lucky to run into one of those. Unfortunately, there are way more agents, who have limited knowledge either of the area, or the product, or both, but don't we all need to bring food to the table?

There is no protection for the customer, and no guarantee that he is dealing with a knowledgeable and diligent agent. We can masquerade by having a glitzy website, references, presentation packages, all geared to impress. Read the gurus. A lot of that is HOW TO IMPRESS. Again, there is a value in a professional in a real estate transaction. Seems like the customer does not see the value, or that much value. So far we tried to IMPRESS. Which means that there was not change in the way we do business, but the way we presented ourselves. Whoever figures this out will survive. And maybe even prosper.

John Paul Getty, a self made billionaire, was quoted that the way to become rich is to buy when everyone is selling, hold on to it, and sell when everyone is buying.

People, who follow his advice, do extremely well. The majority of us do the opposite. We wouldn't buy until every newspaper

and every broadcast screams about the hot market, where everyone is making money. So, that's when we buy. However, it is too late, we paid too much, the market collapses... Now all newspapers and the news are full of apocalyptic predictions, we are scared, so we are selling. We are doing exactly the opposite to Getty's advice. We buy when it is time to sell, and we sell, when it is time to buy. The only comforting thought is that if this would not be the universal rule, Paul Getty and the likes would not be rich. If this is a consolation, take it.

Hot market is a bigger gamble for investor than a slow market. In a hot market you are buying at a high price, hoping that today's high price is tomorrow's low. But you never know when the market reaches its highest point, so you can buy and then not be able to sell. Then you either unload the property at no profit, or wait until the cycle comes back, as every time it starts from a higher point. When you do it as business, then you know that out of a series of transactions, a small percentage would turn to be a loss. When you are not a big fish, and buy one property at a time, you either hit the jackpot, or lose your shirt, or, to be exact, you win the jackpot, and then, eventually lose your shirt.

Buying in a slow market, however, is different. You are actually buying the properties with equity. Like in the deal that we can offer right now. If the average price is $934K and you can buy for $634K, you already have $300K in equity. When the market heats up, it goes to $934K (which is today's market value), and it will go way higher and hit $1.2 to $1.5 Mil mark.

Market is cyclical. It is like a pendulum. It goes all the way to one side, we peak the hot market, and we pay top dollar for a shack within 20-minute drive from the beach. Then it goes all the way in the opposite direction, and you can't give away your shack.

Ideally you should buy at the peak of the slow market to have the most equity in the property, and sell at the peak of the hot market to realize the most gain. The closer you are to the peaks, the higher the profits. However, if you reverse the situation, then if you bought at the high peak of the market, you can't make any money selling the property, until the whole cycle repeats itself, as the next cycle will start with higher prices. That's why when you look at real estate 50 years ago, the homes were under $25K, and now they are over $200K. It took 50 years to add $175K to the average price, but it takes one or two years to add $175K to a $500K villa or condo.

In each cycle the price not only goes back to where it was at its previous high, but sets a new peak. Look at California. Of course, Florida is not California, but from the point of view of Real Estate, Florida is safer. California depends on the job market. Florida is a tourist and retirement state. When Bill Clinton closed some military bases in California, their real estate market died. Retirees and tourists are different story. Both do not rely on the Florida job market. They, however, create service jobs, which pay less, but they are not affected by any President's move.

With 78,000,000 baby boomers (born between 1946 and 1964) starting going into retirement next year, the flow of retirees to Florida will increase from 1,000 to 2,500 people a day. This will create a lot of pressure on real estate, especially on oceanfront, and in just 2-3 years it would be an absurd even to think about something on the ocean for less than a million.

The biggest concern that we often hear is that people are not sure that the market will come back. Guys, no matter how dark it is in the middle of the night, daylight comes every time since G-d had created the Earth. It never failed to come. It never will.

People love the ocean, the climate and the beach. They loved it yesterday, they love it today, and they will love it tomorrow. Politicians are not the competition to God. It really does not matter whether our next President is a Democrat, or a Republican, a man or Hillary Clinton. As long as there is Florida, beach, and warm climate, people will pay top dollar for it.