Is There an App for That?
Can emotions be reduced to an algorithm?
By Rocky Reynebeau
About 10 years ago, in The Point Athletic Club’s steam room, I engaged in conversation with a young man by asking him what he did for a living. He excitely said that he sold real estate and I responded that I did also. He continued that he was in real estate about 18 months and that he just loved it. The he added, “Boy, this business is really changing”.
I asked him what was changing - he looked stunned and knowingly said “everything!” I reflected that in my experience only the tools of the real estate industry have changed but that real estate principles and the involvement of human emotions have not and will not ever change. We enjoyed our pleasant debate - then he said something like “well, you’re just an old fogie.” I loved that - he was right - I am old! We were both correct because we were having two very different conversations.
Real Estate Trump Cards
His real estate trump card appeared to be the efficient use of algorithms in the process of buying or selling a house. Conversely, we believe that real estate is about human beings and their nest. So, our trump card is understanding that finding or selling that nest will necessarily introduce complex human needs and emotions while navigating through the indifferent world of supply vs. demand pressures and as the market balances out price, condition and location factors.
We all embrace the algorithmic tools of my steam room friend but let me digress for a moment.
I love books and use algorithms to build my reading queue, to purchase and to track the shipping. But, the operative question is this - could an algorithm eliminate the need to actually read a book? Or, could a digit tell you that you finished War and Peace and that you enjoyed it very much. I think not, buying a book is mostly void of emotions while reading a book is all about emotions! If emotions become digitized then Huxley’s Brave New World will be the fabric of our lives.
Dirt, Sticks and Bricks
On the face of it real estate is about easily algorithmized items like dirt, sticks and bricks. Set values at two dollars per foot of dirt, one dollar per stick and two dollars per brick and we have digitized values. This is the real world today - Zillow and Tax Assessor values are a manipulation of mostly historical and sterile digits. Still, properly used these are great tools.
Some in our industry use “cost per square foot” to establish an asking price while others use a Matrix algorithm by plugging in an address and checking some boxes - in seconds a suggested value and a four-color market analysis come rolling out of the printer. These tools understand digits but are absent of any knowledge of the emotional impact of new kitchens, great views, being to walk to an elementary school or ever-changing market pressures. What if the wrong box was checked?
We Love this House!
The value of a home is reflective of the emotional impact of that home’s condition and location on a given buyer on a given day - relative to the market pressures of that day. Saleability is established because the emotional ducks of both the buyer and the seller lined up in formation! Buyers never talk about the cost of sticks, bricks or dirt - they simply say, “We love this house and we want to live here.” Even those classic engineer-type buyers, after running it through their mental algorithmic hoops will reduce it down to “We love this house!”
Sellers respond the same way with their emotions wrapped up in their motive, excitement of the move, love of their home, timelines and financial needs. They say something like, “This is a good deal for us; we like the buyers and they will love it as much as we have.”
The impact of emotions does not stop there - a single transaction involves dozens of participants and somehow their emotions work themselves into your real estate transaction - sometimes it just gets crazy! But that is another article.
Algorithmized real estate is easy and some, perhaps unknowingly, abdicate to it. We don’t abdicate to algorithms. We use these wonderful tools but recognize that they add little to the skill-set associated with being proficient in the real estate business. The public is very smart and they will question - “do you know digits or do you know current market pressures and how they will affect the value and saleability of my home?”
An important question.
Gestalt Principles Applied to Real Estate
Gestalt - the whole has an independent existence. The ability to acquire, maintain and manage meaningful perceptions in a chaotic world.
By Rocky Reynebeau
I ‘ve always said to Jason and Jeremy that a Realtor does not really know the real estate business until they’ve done over 200 transactions. At that point a Realtor should have enough experience to see the whole deal (gestalt) in its entirety - then they bring some real value to their client’s table.
At its core - the business of real estate is so simple yet extraordinarily complicated. The concept is that a seller wants to sell and a buyer wants to buy - sounds simple doesn’t it? Yet, when you introduce thousands of sellers and buyers into the equation, all competing with each other for the best buyer and the best property, it becomes interesting. All those buyers and sellers have value systems, personal experiences and emotions which are further complicated because there are economic strata, emotional, financial and physical needs that need to be satisfied. Add some seasoning in the form of advice from family, co-workers and friends and the process quickly gets complicated. Most of these competing influences are sub-limital and surface at various stress points during the process.
Yippie - we got a deal! OK, now throw into the mix Realtors, lenders, loan processors, underwriters, appraisers, government regulations, inspections, title companies and any number of other vendors that also bring their own needs and life experiences into the transaction. A great deal of drama is created with “behind-the-scenes” players and the “simple deal” somehow gets real complicated.
What is always so amazing to me is that most of the drama introduced to a real estate transaction comes from the very people who are being paid to get the transaction to the closing table. You see, for the seller and the buyer this is the most important thing in their life at the moment. But, for any one of the ancillary players it’s just another loan, appraisal, or problem.
There is a very real skill of being able to pull all the pieces of a real estate transaction together, and to anticipate beforehand what potential problems may be laying in the weeds. That’s where the 200 transactions experience level is important - at that point most potential problems have surfaced at some point. Most importantly, that’s when a gestalt skill is a big plus on your side of the equation.
Gestalt skills are important in nearly all parts of life and in all businesses. Think about a restaurant owner that only sees the hamburger but does not recognize that the bathroom is dirty. Being able to pull all the pieces of a real estate transaction together is a very big deal - especially when you have a moving truck in front of your house.
The gestalt skill of seeing the whole deal is earned - it cannot be declared.
The Sizzle vs. The Steak
Why do buyers pay a greater premium for cosmetic updates versus functional updates?
by Jason Reynebeau
When I was in college I waited tables for awhile. The restaurant’s specialty was a steak that was presented to the customer on a sizzling hot skillet. The managers stressed the importance of carrying that sizzling steak at eye level for all the customers to see - most turned their heads to check out that aromatic sizzling steak. The steak was great but it was the sizzling that got the customers enthusiastic attention in the first place. Not surprisingly, this concept relates to real estates as well.
Purchasers often make an offer to buy a house before they actually know what its physical condition is. Buyers are enticed by the sizzle of the home! And, if a buyer sees proper balance between the price and the condition and location of that home, it will go under contract very quickly. We’ve learned, over the last 10 years, that there is a greater demand for homes that have a lot of sizzle vs. those that do not. As you can imagine, homes that have been recently updated with a high level sizzle will sell at a higher price than homes with less cosmetic updating. More importantly, the difference in return on investment from cosmetic updating versus functional updating can be very large.
The steak of the home (furnace and roof to name just two) are extremely important as well. Mechanical updating is expensive for sure and the purchaser will consider and apply a value to the upgrades. However, the buyer’s expectation before a home is even seen, is that the functional items within the house are in good working order. Further, the buyer assumes that a 40-year-old home will have new windows installed over its lifetime. Accordingly, the buyer will pay less of a premium for mechanical updating vs. sizzle-type cosmetic updating.
Whether the furnace is 1 year old or 12 years old - there is life left in it! Same goes for the roof, water heater and sewer lines. Dollar for dollar - a buyer will add value for a home with a 1-year-old roof vs. a 20-year-old roof but will pay an even bigger premium for a home with a sizzling new kitchen. The disparity in premiums can be very frustrating for homeowners that just spent $50,000 for roofs, driveways, furnaces, windows and air conditioning but still have an orignal kitchen. Crazy, but it seems to be the way our world is right now.
Why is there a Bigger Premium for Sizzle vs. Steak?
Many factors play into the issue but three in particular seem to be the driving force for the premium placed on the sizzle.
Less Free Time - Today’s two-income families/couples are very busy. And, life is more stressful than ever before - resulting in less free time. Today, many people want to spend their weekends recreating versus updating a home.
Cheap Money - Paying an extra $50,000 for a home with a lot of updating costs the new owner about $250/month. However, updating a home after it is owned requires coming up with that $50,000 or borrowing it. It is just easier and cheaper to pay a premium for a home that already has the updated attributes they want.
Generational Differences - My mom and dad’s generation was much more interested in the benefits of sweat equity. My generation has a tendency to want it perfect now and are less likely to want to wait and/or work for the results of updating.
The “marketplace” is where buyers and sellers meet to arrive at a value for a given product under a given set of circumstances. In the end a deal is struck because both the buyer and the seller feel they did as well as they could have done. Today, those circumstances will result in high values for homes with a lot of sizzle and a steak to back it up.
In summary, for all the reasons stated above, buyers will pay big premiums for homes that have a great sizzle factor especially if it is both cosmetic and mechanical. Just as importantly, it still remains a fact that all homes are still equally saleable! No matter the condition or location of a home, the market will sort out value if the home is properly exposed.
We do real estate for a living. If we can help you assess your home’s value in an ever-changing real estates marketplace, please don’t hesitate to call. We love doing what we do. 303-989-5462 or email - Jreynebeau@aol.com / Jkendallmb@aol.com.
How Does Great Condition Play Out in Seller’s vs. Buyer’s markets
And, what is the rate-of-return on those invested dollars?
By Rocky Reynebeau
What is great condition - from the buyer’s point of view? And, why are they willing to pay premium prices to obtain such properties. Here are the six most important items that, in our view, trigger high prices.
These improvements do not come cheaply nor easily - the premiums buyers are willing to pay are well deserved. The ancillary question is this - does the effort and the additional monetary investment pay in terms of rate-of-return? Simply put - probably not! There are numerous articles that suggest a percentage rate-of-return for a given improvement. For example: A remodeled kitchen will return 67.5% of the dollars invested and windows will return 58.2%. My goodness - what mathematical calculation could arrive at such specific numbers with any amount of accuracy?
This matters! While most owners improve their homes for emotional reason they still what to know the financial impact of those improvements.
Will those improved homes sell for higher prices - of course. But, it is more complicated simply because the market is complicated. In a buyer’s market those improvements make your home saleable (still at a higher price) while others are not. In a seller’s market, when nearly all homes are saleable, very high premiums are paid over unimproved homes. How does this play out in the market?
Real estate markets are local and complex. Market pressures, as we like to call it, are continually attempting to balance out all those complexities. Further, we know that a “market” has two basic parts. First, in economic terms, is the macro market and then there are the micro markets. Let’s break that down.
The Macro Market - the condition of a macro market is established by jobs, growth and demographic makeup. Colorado, for example, is healthy because we are growing, have good paying jobs and have a vibrant and growing millennial population. Conversely, in many parts of the country the markets are still very weak because they lack these attributes. One part of the country/state/city can be in a seller’s market while another is suffering. A macro market can be the oil patch, Colorado, Denver or even down to an individual city. Again, jobs, growth and population make-up within that macro market establish the general price trendlines.
The Micro Market - Your Home in Your Neighborhood! - under the umbrella of macro market conditions are individual sellers looking for buyers. The value of a given home is established by the demand associated with that home’s condition and location relative to competing properties. This is where those six improvements listed above come into play in a big way. A given home is bumped up against local market pressures and the local market demographics. For example: If the Federal Center was to hire 500 Silicone Valley millennials it would have a very significant impact on local property’s values - especially on highly-improved homes. At the same time - that event would have no impact on Highlands Ranch or Aurora property’s values.
Our Micro Market
The market where we work has good jobs and growth! Our demographics attributes are often millennial young families with double incomes functioning with low cash balances and high stress associated with not enough hours in a day. With those buyers condition trumps price. Those buyers will pay big premiums for a great condition / location homes - they want to close and go to work the next day and the mountains on the weekends. Look at it this way - a $75,000 premium results in $400 of additional payment over a poor condition home. But a poor condition home results in $100,000 of additional outlays to bring a home up to speed.
Why Not a 100% Return
The answer to that is very simple - depreciation and aging neighborhoods. While an owner can put in a $40,000 kitchen in a 40-year old home - it is still a 40-year old home. At some point the mandated premium will push buyers to bigger and newer homes. Further, some improvement will net a higher return while others will increase saleability but not necessarily value. It is all a big balancing act and that is where knowing the market comes into play. Call us if you need to figure out whether your improvement makes sense.
The principles of real estate never change - it is always about price, condition and location under the umbrella of existing macro and micro market pressures. Markets are forever changing in the constant search for value equilibrium. We love it!
Seven Reasons Why the Market has Changed!
Does this market have legs?
By Rocky, Jason and Jeremy
There has been a marked change in Denver’s real estate market in the last couple months. . . . that old supply vs. demand thing again where there’s imbalance with more demand than there is supply. We don’t know if this market has legs but here is what we think is happening.
Our marketplace has essentially assimilated the problems that we were all thrust into in late 2007 and early 2008. This market has normalized and our individual households have absorbed and processed those events, made the appropriate adjustments and is now recognizing that most of us did not fall off a cliff. Many still feel a little nervous but also feel more comfortable - comfortable enough to be willing to make big decisions again.
Bouncing off the Bottom
Last year was the weakest market since this all began in 2007. We believe we have passed the absolute bottom for this real estate cycle. A great number of people are also recognizing that.
Pent-up Demand & Delay Moves
Over the last several years a lot of moves have been put off and that has resulted in a sort of capitulation on the seller’s side and resulted in a pent-up demand on the buyer’s part. Buyers want to buy and many sellers want to move on with their lives.
Wow - interest rates! All of the above have bumped up against the best interest rates of our lifetime. This is clearly the catalyst that is creating this current briskness.
The effect of all the foreclosures and short-sales has suppressed real estate values and may continue to do so for a while until we have cured or purged the market of these properties. At the same time - inflation is coming!
Inflation is endemic and is in our future! We are seeing rising prices even though it is not showing up in measuring indexes. We know that we cannot print money without eventually having inflation. Buyers of real estate have this figured out and know that now is a good time to buy.
Perhaps most importantly - a bedrock belief of most Americans is that owning a home above and we believe that a perfect storm has been created and a new cyclical baseline has been established. The only caveat, and this is important, is that this market does not appear to be rooted in sustained national growth. Accordingly, we don’t know if this market has legs and won’t until we have gone through a couple seasons.
Footnote: Here is how we council our clients. If you are secure in your job, have sensible debt loads, some reserves in the bank and you can see how your life plays out for the next couple years then this might be the time to make that move - either buy your first home or reposition yourself into a home that will better suit your needs.
Of course, we sell real estate for a living - so, if we can help you in this process please give us a call. We love this business during both good and bad times. More importantly, we are always thankful, always appreciative and never take your business for granted.
Testing for Mr. Summerville
The Importance of Pushing the Envelope!
By Jason Reynebeau & Jeremy Kendall
One of the most important conversations we have with our sellers is the establishment of the pricing strategy. That strategy needs to square with the seller’s timeline issues, personal risk management tolerance, emotional makeup, belief systems, product characteristics and, of course, market pressures.
My dad always says that his mother would keep a home on the market for two years if she thought she could get an extra $500 while grandpa would just deal with the value, sell it for what it was worth and move on with life. Clearly, a “pricing strategy” for grandma and grandpa Reynebeau would have to accommodate both emotional makeups.
The Mr. Summerville Effect
With sellers we always explain what we call “The Mr. Summerville Effect.” Here is the genesis. Mr. Summerville was the principal of Kyffin Elementary in Sixth Avenue West during the mid-80’s. Kyffin is A-rated and a high-demand school. One spring, during the enrollment period, a decision was made to limit enrollment to the school’s boundaries. There was an IMMEDIATE reaction within Sixth Avenue West’s real estate market. One home, which dad had listed at the time, had 8 showings in one day and one full-price offer. That home had been on the market for 6 months - just sitting there. Boom, all of a sudden, demand pressures changed and a SOLD sign went up. We call that “The Mr. Summerville Effect!” or testing for unknown factors. Interesting thing is that the following week the closed enrollment policy changed back to open enrollment.
Here is the point! Nobody knows if there’s a Mr. Summerville Effect in play. We never know if a major employer is hiring, if there is a grandma moving to town to help a family out with child care or if there is a divorce and the parents want to stay in the same neighborhood to provide the stability for the children. There are dozens of reasons that could create unique demand for a given home - “The Mr. Summerville Effect.” When developing a pricing strategy we cannot discount that possibility.
We all have different needs and emotional makeups - neither grandma or grandpa were right or wrong. What matters is that the pricing strategy is right for the client and the circumstances of their lives. However, we always recommend that we “Test for Mr. Summerville” and then tweak back into the market if it’s not in play. Real estate markets talk to us rather quickly so there is not a lot of time wasted when we’re “testing”.
At the end of the day, a home is worth what it is worth and almost all homes sell at the right price. Buyers and sellers are amazing in their abilities to figure out values. When counseling sellers we cannot be so smart as to know the value on a given day - but we can give a baseline range. Then we have to be smart enough to work the market and let the market establish the value.
We are always amazed when we see a computer driven “market analysis” - plug in an address and up comes a value based on a per-square-foot price. Real easy. Question: Does that computer model know if St. Anthony’s or lite-rail are factors not baked into the data base. Or, if the countertops are granite or laminate; if there is a view or a busy street; if there is financial stress or that interest rates are 4%. Or, most importantly, is there a Mr. Summerville effect in play. Of course not. If the cost-per-square-foot was the determining factor then we could buy homes like we buy gas or books. We all know, it does not work that way.
We council our selling clients by showing sensible comparable data to establish a baseline range-of-value AND then we talk about current market pressures. We do not try to find comps to support a value to satisfy a seller or to make us all feel warm and fuzzy when we know it is not the truth. Our view is that our sellers are adults and adults do best when they have the facts - honest facts - both good and bad. We explain three price strategy options and we always recommend getting the home under contract within 60 days. Most importantly, we always recommend testing for Mr. Summerville.
There is no right or wrong strategy - just the one that makes the most sense for you. However, we mostly prefer to test for Mr. Summerville - push the envelope, work the market, get it sold shortly and move on with the rest of your life.
What are they talking about!
By Jeremy Kendall
There is an ad running on TV sponsored by the National Association of Realtors. The commercial presents a senior with a grandchild watching people moving out of their home across the street. The copy goes like this! “Grandpa, I sure hope I can have a home like you someday? The grandpa responds sadly “I hope so too.” Implying that housing is under attack - what are they talking about?
Home ownership is not under attack - if you have a job, have good credit, it’s easy to own a home. Values are great - even cheap in much of the country. Interest rates are so low it’s almost like free money after the impact of favored tax treatments.
What had happened is that the view of home ownership was distorted by the policies of abandoning sensible lending policies of the recent past. That distortion threw a big wrench into the gears of the housing markets - it distorted everything that was “normal” and impacted supply and demand factors artificially. Jobs and credit worthiness did not matter about the same time I got into the business 8 years ago. Jason, Rocky and I talk about this often in our daily chit-chat. We are now in a normal market - it is just normal.
All life, from ants to humans need a nest. Raccoons are very happy with a hole in a tree. On the other hand, humans, being at the top of the food chain and having various emotional makeups, require a broader range of nest options. The need for a nest is still instinctive but more interesting when our emotional makeups are introduced into the equation. In any event most of us revere housing and owning a home is a basic part of the fabric of our lives.
Home ownership is not under attack - that is nonsense. Home ownership is so easy, it gets favored tax treatment; it is one of the legs of financial security - plus our economy depends on a healthy housing market. Most importantly, we generally want to own our nest. Really, we feel this might be the very best time to buy a home that we may ever see. Just be sensible and call us when we can help! Thanks, Jeremy
Are the Neighborhoods Surrounding Green Mountain the Next Washington Park?
By Rocky Reynebeau
YES! I suppose it takes a lot of courage to say that - I base my thinking on both hard and empirical evidence. After doing this for 36 years I have a lot of history and perspective that someone deep in the local real estate trenches can have. Here’s my thinking.
All high-demand real estate markets, like Washington Park, have one very big thing in common - A Heart. An iconic draw that forms the nucleus around which a hot real estate market develops. But, like the human body, a good heart is not enough - it also needs nutrition, structure, exercise - in short, all systems have to be functioning at peak performance.
Very strong markets, like Washington Park, Willow Springs, The Valley at Ken-Caryl, Sloans Lake and The Highlands are dissimilar markets that all have very similar attributes. All these markets have a heart but they also have easy accessibility, high activity levels, excellent housing options, strong neighborhood involvement, good government, excellent services and prosperous demographics. Let’s look at these markets and then compare their attributes to Green Mountain.
The Washington Parks of the world all have a very big heart. In the example of Washington Park the heart is the park and its lakes. When it became hot 20 years ago it happened to be an aging market and was very depreciated - values were very low at the time of resurgence. The process of becoming a hot market was slow at first but gained steam and it became repopulated with Yuppies and DINK’s (Double Income No Kids). That demographic group had varied interests which included physical activities and excellent careers. Washington Park did not have a rebirth just because there was an abundance of moderately priced homes - it had a heart!
Green Mountain is becoming a hot market, in our view, because we also have a huge heart. Our demographic base is broad and to some degree, is being repopulated with those former Yuppies and Dinks that are now raising families. Our heart has a respiratory system which nourishes growing families. And, the valve system extends to Bear Creek Lake Park and numerous parks and trail systems which are all vibrant with activities. Green Mountain is our heart - it’s our iconic draw.
In relative terms, all hot markets always have easy accessibility to both employment centers and recreation. In today's busy-high-stress and soccer-mom world accessibility is very important. The accessibility trump card is different to many people. Washington Park’s trump card is a quick and easy trip to downtown AND a short walk to the park.
Green Mountain’s demographic base also wants easy assess to both work and play but it also needs to be amplified to include the activities of a growing family. Employment centers are all over the place - the Federal Center, Coors, Denver West, Union Square, NREL and St. Anthony’s to name the major ones. And, the accessibility to recreation is just outstanding.
The buyers that buy homes in areas like Washington Park are different. These are very physically active people who enjoy being outside hiking, biking, gardening and such. They are young, vibrant, busy and very physically active people. They want that activity nearby and they want to be surrounded with people who enjoy the same. Go to these neighborhoods and you can feel that excitement. A common demographic trait of hot markets is active lifestyles.
The neighborhoods surrounding Green Mountain are populated, and are being re-populated, with generally upwardly mobile, family-centered and grounded people whose principle interest is families, careers and activity. Again, former Yuppies and DINKS who are now raising families. And, they are active!
On weekends it looks like a dozen planes full of hikers, bikers and little league teams blew up over Green Mountain - like ants, they are everywhere. Check out the garages and there are bikes, kayaks, skis, fishing equipment, golf clubs - all outside activities. In Sixth Avenue West, where Ecky and I live, there are numerous trails leading to Green Mountain. Sometimes I think there are more trails and paths on Green Mountain than there are surface streets - and, those paths and trails are linked up with the trail system around the city. From nearly any location on this Hill you can bike to Confluence Park, have a Starbuck’s Frappuccino and ride back seldom leaving the trail system. Yes, our heart is also the center of our activity.
Housing is relative in high-demand neighborhoods. The Washington Park buyer wanted interesting character and were less interested in size and yards. In many cases, the buyer that purchased homes in Washington Park went in and re-nested the home to their needs. Many homes were scraped or the tops were popped. A good example is my great friend Dr. Joe Bebber. Dr. Joe always lived in big suburban-homes until his needs changed and he settled into a 1100 sq. ft. home in Sloans Lakes which he re-nested. He is 10 minutes from his office and a couple minutes from his daily 5 a.m. walk around Sloans Lake. Perfect for him and thousands of others.
We can’t offer the charm of a Victorian home of The Highlands or quaintness of the bungalow of Washington Park but we can match them different ways. Our housing is more family orientated and we have diverse housing options that cover the spectrum from entry level condos like Snowbird and Telluride to the beautiful estate homes of Bear Creek Village, Solterra, Sixth Avenue West and Mesa View.
The core neighborhoods of Green Mountain Village and Green Mountain Estates set the tone with meandering streets that continually adjoin open space, ravines and parks. Our South Slope homes enjoy newer floor plans and are nested between Green Mountain and Bear Creek Lake Park. We have great townhomes like Lakewood Hills and Village on the Lakes that are built around a lake. Our homes are more spacious, have bigger yards and are typically on wide uncrowded and quiet streets in neighborhoods that are perfectly nested in beautiful settings.
Involvement - Pride-of-Ownership
The Washington Park type neighborhoods have high levels of involvement and pride of ownership. Buyers move in and get involved to protect the neighborhood AND they take great pride re-nesting their homes. Seldom is a deferred maintenance home purchased and replaced with another owner who does not care. Almost always, the condition of the dumpy home improves greatly in neighborhoods that have a big heart. All housing markets age, but, at some point, they either continue to age or the market resurges and are repopulated with buyers that see the same things the original owners saw. All neighborhoods are re-populated over time but very few are re-nested.
The older neighborhoods of Green Mountain are currently being re-populated AND re-nested. Emphasis is on the re-nesting part - that is the thing that, in our view, identifies a hot market. This is important to note: About 5-10% of the homes in the older neighborhoods are somewhat depreciated because of condition. But, when those homes are sold they are either fixed and flipped or the new homeowner shows up with a roll-off with the intent to re-nest. Buyers do that because they have great confidence in their decisions.
Government and Schools
Hot markets are measured differently by the various demographic groups. For our demographic group of buyers we need great government and city services and excellent schools. Many buyers match a house to a school vs. taking the school that comes with the house. We are fortunate in that we have great government and great teachers that care about where we live.
Views Don’t Hurt
When Ecky and I moved to Green Mountain in 1972 it was because it was above-it-all. We loved the way neighborhoods were accommodated into the hillside and bumped up to ravines. The meandering streets and the magnificent views were very different from the grid systems off the hill. I suppose we all take the views and the settings for granted after a while - I know I do. But, the people who buy here don’t - they see the views and the settings and they love it like we all did.
Summary of High-Demand Markets!
Aging real estate markets that become hot do so because the area has a big heart - an iconic draw. Those neighborhoods are then repopulated with a prosperous demographic group that re-nest the homes to ever higher levels of functionality. That population group is young and very active with busy lives and great careers. What follows the re-population is services that appeal to this new group of owners - boutique shops and restaurants. The trump cards of these neighborhoods is always a big heart, easy access to employment, high levels of physical activity and great neighborhood and housing options. If my analysis is accurate then Green Mountain is or will become a very high-demand market - we have that iconic draw and a very big heart!
Antidotal & Empirical Evidence
The Morning Sun
I am an early riser and am typically in my office by 5am every day of the week. From my office I often see the morning sun kiss the very top of Green Mountain. It takes my breath away - a special moment which I never take for granted! Morning is also a great time to think about issues outside of the box of day-to-day problems. From this office I think about the empirical and antidotal evidence that convinces me that Green Mountain will become the next Washington Park.
Where You Live
A number of years ago my good friend, John Colnar, told me that he lived on Green Mountain because of the abundance of biking options he had without having to toss his bike on top of his car. John, and many others, want to play where they live. It’s not just biking, take a drive around The Hill and you see dozens of activities taking place. The numerous parks are active with little league during the day and adult leagues at night.
Another good client of ours, Paul Ambrozic, is another good example - he moved here from a large development in the south that had very high density. From the deck of Paul’s former home he could count 11 homes that looked into his backyard. His home in Sixth Avenue West has a big yard with privacy, it sides to an open area and enjoys views of Green Mountain. Paul wanted privacy and the entire package that goes with Green Mountain.
Just recently, I asked someone why she wanted to live on Green Mountain and her response was simple - she said, “Green Mountain has a heart.” Yes, Green Mountain does have a heart!
One might say “well that is normal” - but it is not normal. There are dozens of neighborhoods that have parks and trails but very few have such an iconic draw of the open spaces as represented by Green Mountain, Bear Creek Lake Park and the foothills. Most subdivisions in the metroplex bump up against another subdivision, then another and then another and then the plains. The neighborhoods surrounding Green Mountain bump up against Green Mountain itself and the rest are a stones throw away. The south slope is sandwiched between Green Mountain and Bear Creek Lake Park. And, to the west we don’t bump up to another subdivision but to the foothills and then the Rocky Mountains. Green Mountain is special, it has an iconic draw that makes people want to live here.
W e have just gone through a very difficult real estate market brought on by forces that were uninvited into our lives. Yet, after the dust has settled, and we look at the true numbers and after we net out foreclosures/short sales from the equation, there is significance evidence that most of our homes lost very little value. Why did we do so well when other parts of the city did much worse - in some cases losing 20-40% of value. Simple - our demand trumped supply - same as in Washington Park, Sloans Lake and The Highlands.
Over the last several years we have seen so many distressed homes sold at extraordinarily discounted prices only to be remodeled and flipped at prices beyond the norm and outside of the range-of-value. Why? Again, simple, In the neighborhoods surrounding Green Mountain, buyers do not visit the stressed nature of some homes onto the entire neighborhood. In other words - it was the house that was stressed, not the neighborhood. That individual home lost value, not the neighborhood. A most important distinction.
Have you ever noticed how many new owners show up with a roll-off - they are stripping out the home and re-nesting it. Why would buyers pay market value for a home only to come in and re-nest it. Simple! For the same reasons people do “scrapes” in Washington Park. They want to live there and they assign a high value to the location.
Since the meltdown Green Mountain has held its own simply because the demand overcame general market weakness. That was a result, in my simple minded view, of the amalgamation of all the attributes mentioned above - an iconic draw, activity availability, good government, great services and easy access that brought in these upwardly mobile grounded people who saw our neighborhoods for what they are - a near perfect place to work, live and to raise their families. In all my soul I believe that “the hill” is becoming an iconic place to live on the levels equivalent to the images of Washington Park. We have it all but most importantly we have a heart.
Values rise and fall as a function of the two following issues:
The Sticks and Bricks - In part, housing prices rise as a function of the cost of infrastructure and materials. In the parlance of economics this is called “cost-push inflation” - the increasing cost of materials pushes up the cost of building a home. Housing is a great hedge against inflation for this reason. But, homes also depreciate at the same time they are keeping you even with inflation. Homes get older and market pressures make the appropriate value judgements. For example: Washington Park depreciated tremendously before they appreciated significantly. Why?
The Ground - the value of ground also gains or loses value. When ground goes up it is called “demand-pull-inflation” - high demand pushes up the value of the ground. When Washington Park began its upward spiral it was demand-pull-appreciation that was happening. People wanted to live in Washington Park and soon the trump card was the ground vs. the sticks. In high-demand markets the bricks and sticks are less important than the ground.
How The Real Estate Marketplace Really Works!
Improve your buyer and seller skills by understanding these basic real estate principles
By Jeremy Kendall
When you enter the real estate marketplace, either as a buyer or a seller, there are some very basic principles and concepts that are important to understand. More importantly, when you can understand these principles both from your point of view and from the other side then you can become very good at accomplishing your real estate goals.
Real estate is a very simple business that becomes very complicated when you throw in all the variables of all the various players. Sometimes real estate is like “pushing a rope.” Rocky always says “to be a good buyer” or “to be a good seller” you need to understand some basic principles about this “simple business.” While all these principles interplay with each other, let’s talk about them separately.
Principle #1 - The Four Factors thataffect Saleability
The four factors that affect the Saleability of real estate are Price, Condition and Location under the umbrella of Motivation. Understanding these factors and how they relate to one another is the key to understanding the real estate marketplace.
Motivation - What is the motivation of the players. This is the umbrella that hangs over every real estate deal. Assuming there is motivation then:
Price - Price is the most important factor affecting saleability. The price must reflect the property’s condition and location. Price goes up when the condition and location are good and down when bad.
Condition - The condition of a home significantly affects its value. Poor condition can be compensated for in several ways. Fix the condition problem or adjust the price to reflect the problem. One way or the other the marketplace will address good or bad condition.
Location - Given that we cannot control the location then the price must reflect the location, for good or bad. The only day you can control location is the day you buy it - after that you’re stuck with it.
As the market works a property, buyers and sellers become very informed with each feeling successful when they both feel they’ve done as “good as they’re going to do.” It is amazing at how effectively the marketplace works.
Principle #2 - How the Market Talks to the Players
The marketplace talks to you every day that a property is on the market - it communicates via activity or lack of activity. Understanding what the market is saying will greatly improve your success in the buying or selling of real estate. Here is what the market is saying:
No activity - Providing that a home is properly exposed and it is not Christmas day - no activity means one thing and one thing only - the price is too high. The market is finding better products elsewhere. There are some caveats but on balance this is a fact.
Moderate activity - no offers - This activity level implies that the price is still too high. But, if condition and/or location are excellent you might be able to pull it off. At this point the price probably needs to be tweaked a bit.
Good activity - no offers - At this activity level the market is basically endorsing the price but probably doesn’t like the condition or location of the property. If the problem is location then the only solution is price and if it’s a condition problem then correct the problem or adjust the price to reflect the condition.
Good activity with offers - This just means you’ve nailed it. Here there is good balance between price and the property’s condition and its location. Good job!
Great activity with multiple offers - Here we have fish jumping in the boat. If this happens, especially if on the first couple days on the market, the property was probably underpriced. Take it off the market, reprice it correctly and put back on the market. You are not obligated to sell it if you underpriced it.
A sale happens when both parties feel good about the deal. The marketplace is magnificently effective at sorting out value.
Principle #3 - Basic Pricing Strategies
Assuming that the Realtor and the seller are knowledgeable of product and of current market condition, there are three basic pricing strategies. The strategy employed is largely a function of the motive of the seller. These strategies are:
Make it go away - Here the seller is highly motivated or money is not the most important factor. The pricing structure should always reflect the needs or motives of the seller.
Market Value - This strategy makes sense when value is easy to define (i.e. lots of comparable sales) or when values are not changing. The problem is that values are always changing - we always suggest the next pricing strategy.
Pushing the Envelope - Here the price is pushed to the outer edge to see if there is a market there. If not then the price is tweaked to reflect the amount of activity enjoyed. This is a wonderful strategy when the seller understands the above principles but a horrible strategy if concrete forms around a seller’s ankles. Remember, the market will almost always sort out the correct value on that given day. We use this strategy about 90% of the time and it works.
There is no “right” strategy. Clearly, there are so many variables at play, all of which are a function of the seller’s motive. We always present the three pricing strategy options to sellers and let them pick the one that makes the most sense for their situation.
Again, real estate is a simple business complicated by thousands of variables. You can do better when you know some of the principles involved.
If you have any questions regarding this article or the buying and selling of real estate please call one of us anytime at 303-989-5462. Our business is real estate.
Our Value System
Our core values are deeply rooted in the way we do our business
By Rocky Reynebeau
The backdrop of the Rocky Mountains, Green Mountain, South Table Mountain and the Dakota Hogback are constant reminders of the great place in which Jason , Jeremy and I do our real estate business. We feel privileged to live and work with the residents in this wonderful area and are proud to function with core values that include quality services, integrity and a sensible fee structure.. We like to think that we are good people helping other good people navigate through the maze of real estate.
Our hometown value system is the foundation of our business philosophy. We care deeply for our clients and when they entrust us to help them we take it personally and seriously. We treat our clients like we would want to be treated. We view our clients as adults who can make better decisions when they are presented with adult information about current market pressures.
We don’t mislead our clients with feel-good statements that are not true nor shy away from mentioning things that need to be mentioned. From experience, we know that the worst feelings people have in a domestic real estate transaction is that feeling of being out-of-control. You cannot ever be in total control of any real estate transaction but the feeling can be mitigated significantly by honestly knowing what is going on.
The Truth and Respect
We place a high premium on being honest and factual. There is a great deal of respect that develops when a relationship is built on good and honest dealings. But, it is more than that and the question that one has to ask is this: If a relationship starts out with smoke and mirrors, when in fact do honesty and facts get introduced into the relationship? How can a relationship start off with telling someone what they want to hear and then switch magically to helping people hear what they need to hear? Our values are deeply rooted - they are part of our DNA and we don’t stray from them. We don’t ask our clients to agree with our assessment - they just need to know what it is.
When Jason had spinal meningitis 35 years ago I gained tremendous respect for Dr. Potts when he sat us down and told us what was happening and all the risk and potential outcomes. Honestly, it was so hard to listen to but in the end it gave us a small sense of control over a nearly uncontrollable event. That experience has never left me.
Real Estate is not typically a life-or-death event. But, it ranks right up there in terms of creating uncertainty. So, we go with adult information right from the get-go and I think people respect that.
No Fancy Footwork
When we initially meet with our selling or buying clients our conversations are rooted in real estate. We talk about market pressures, timeline management, risk management, supply vs. demand factors, condition and staging issues etc. Most importantly we connect real estate into your own personal economy and make sure we are doing the right thing. Sometimes that right thing is not to sell or buy. These are the basics of real estate and of a good relationship.
We don’t talk about all the homes we sell, how great our company is and our wonderful market share - that means nothing to you. And, we most certainly never talk about how absolutely marvelous and wonderful we are. This is about you and how your needs plug into the market at that moment.
We will never talk about us, and we will never put a client in the uncomfortable position by asking for their business. If you feel comfortable with what we have to say and we connect - you’ll say “what do we do next?”
A Sensible Fee Structure
Our fee structure is based on the principle that we will “never charge more than what we would be willing to pay for the service.” We have a sensible sliding scale based on price and our clients do not need to “negotiate” with us. Our fees are published in our website under the tab “Listing Interview - 25 Most Frequent Questions.”
We do small discounts if there are two homes involved or larger discounts when we are “registered” with a new home. We also try to do 4 Pro Bono transactions a year for non self-inflicted hardships where this is no or little equity.
We are proud of our fee structure.
Real Estate is such a unique belly-button-to-belly-button business. In our view a deal cannot be assigned into some sort of division-of-labor because all the various facets co-mingle with each other. We all work our own deals from start to finish - you’re not passed on to a series of assistants. If one of us is out of town another of us will take over. From start to finish we’re with you all the way.
I always remember a famous quote by the late Reggie White of the Green Bay Packers. In explaining the relationship between the players and the fans he said “they love us and we love them.” That is a good goal - and we strive for that in all of our relationships.