Facebook Smack Down Between Real Estate Leaders Zillow and Trulia

Posted on October 10, 2011 by Ken Horst

For this post I decided to compare two real estate giants, Trulia and Zillow, on their social media engagement. With all the action in real estate happening online and the buzz about social media getting louder everyday, I wanted to see how well these two industry pillars were taking advantage of the opportunity.

Our comparison starts with a look at each company’s Facebook fan page where we will examine how well they engage visitors at the front door and then will look at both companies from an engagement point of view. The idea here is that these two big brands can show us a thing or two about how to do real estate social media right. We’ll start our tour by looking at Trulia’s Facebook fan page.

The first thing I noticed is that the entry page is the “wall”, which is surprisingly underwhelming. For a company with this much visibility, we would have expected something a little more engaging.

The side bar menu doesn’t offer a visitor much more. When I clicked on the most interesting thing there, Sweepstakes, I get a message that informs me “No promotions published”. Really!

The photo bar shows pictures of nice homes, which I would expect to find on the Trulia fan pages, but when I try to find other pictures of homes, there are few to be found. Not what I’m expecting from one of the leading real estate marketing companies.

They also offer an email sign up link in the side bar menu, but based on what I’ve seen so far, why would I have any interest in receiving an email. Worse yet, the landing page for the email sign up is anything but compelling.

Come on guys, I have a lot of respect for your brand, is this the best you can do? Either no one in marketing knows this page exists or the Trulia marketing team needs some training in Facebook landing page best practices.

All in all, my “front door” experience on the Trulia Facebook page left me wanting something more. If I didn’t already know who Trulia was, I’d probably bail on this page about now.

Now lets take a look at one of the other real estate industry giants, Zillow.

Good news and bad news greets us on the Zillow Facebook fan page. The good news is that at least they know how to land a visitor somewhere other than their “Wall” page. The bad news is we are greeted with this message;

Now, while we have to applaud the Zillow social media team for coming up with a contest on their Facebook entry page. The idea of having people upload their photo and share it with their friends to get them to visit the Zillow fan page to vote on it is border line brilliant. As an added incentive, Zillow was offering $1,000 and $500 Home Depot gift cards to the winners. Again, great example of a social media marketing campaign.

So with all the apparent marketing genius at the front end of this event, we have to ask why they would leave this page up so long after the contest ended. Sure you can click on the link to see the winning entries but was this really the only Facebook marketing idea they could come up with for 2011?

The call-to-action “like Zillow to enter!” seriously loses its allure when the contest is over and I can simply click on the “wall” link at left to enter anyway.

With regards to their side menu bar, Zillow does show some social media intelligence. The Discussions and Poll options are a great way to get people to stay on your site and get engaged.

Having a Twitter and Facebook link open into their Facebook fan page is also a great way to get people to stick around, learn more about you and interact. More often than not, I see companies link out to their Twitter, YouTube or other pages. I’ve never been a big fan of giving a visitor to my site or page an easy way to leave and I’m happy to see that Zillow gets this.

Other than the disappointing entry page, which when it was current, was a great idea, I’d say the Zillow social media marketing team has their head in the game more than their friends at Trulia

Now let’s take a look at the level of social engagement each brand exhibits on Facebook as measured by a cool tool I recently came across, Simply Measured.

The first metric we will compare our two real estate brands on is Total Fans;

This is a simple comparison of the number of fans each brand has. As you can see, Zillow has more fans than Trulia, but this post is about fan engagement so this metric in and of itself is not very telling.

Every great social media marketer could come up with a number of ways to get people to click on the like button. How we engage them after they become fans, followers or connections is a more accurate measure of social media effectiveness.

Next we’ll look at Total Engagement;

This data point is a little more telling as it shows us which brand has more fan engagement from both a total number of interactions (Posts, Comments and Likes) and percent of fans. From this graph we can see that Trulia, which has a smaller number of fans, has more fans engaged with their brand on Facebook.

While this graph is considerably more informative than the previous one, it’s also only part of the puzzle, and it would be too early to tell which brand wins our real estate social media smack down.

The third graph we’ll compare these two brands on measures Fan Page Engagement Detail and allows us to see the type of engagement that makes up the numbers in the graph above;

Things start to get a little more interesting in this graph as we see, more specifically, how the fans of each real estate marketing brand actually engage with the brand.

While Trulia’s total engagement number is higher, according to this graph, the majority of their fan engagement comes from “likes”, which for a well know brand like these two, is the low hanging fruit.

Zillow’s detail on the other hand, is more heavily weighted by fan comments, which require more of an effort, and also includes fan posts. Clearly Zillow’s fan engagement is much less dependent on “likes”.

As I mention above, comments and posts show a higher level of engagement than “likes”. If we were only to look at this graph for our comparison, we could go out on a limb and say that Zillow is doing a better job of social engagement. They are posting things that their fans are compelled to comment on and their fans feel their is value in posting on their fan page, otherwise they wouldn’t be doing it.

Finally, we will compare Zillow and Trulia based on Average Response Per Post:

On this final chart we see that both Zillow and Trulia average 13 likes per post on their Facebook fan page. However, Zillow sees an average of 25 comments per post compared to Trulia’s 9. The bottom line is that Zillow’s posts, which is on the brand side of the equation, are driving more fan engagement.

When you couple this with the fact that Zillow has a more compelling mix of response types ( see Engagement Details above) it looks to me like we have a clear winner in our real estate social media smack down.

Congratulations Zillow, you win!

Before anyone gets too excited I need to point out a few facts about the data I used for this comparison. First, the numbers and graphs above were based on a two week snap shot from September 26th to November 10th. Second, social media is dynamic and anything can happen week to week to tip the scale. If either one of these brands launches a creative Facebook marketing campaign next week, the results could change substantially.

But the bottom line is that in order to be truly effective in social media, brands like these two real estate leaders need to establish a social media marketing plan. This plan needs to include content curation, content creation and delivery, listening, monitoring and responding and finally measuring.

Two weeks is but a sprint. I wonder what the results will look like one year from now? Stay tuned!

Real Estate Agents Jumping On Social Media – 2 Cool Infographics

Posted in Real Estate & Social Media, Real Estate Marketing | Tagged Facebook, fan page, fans, likes, real estate, Simply Measured, social engagement, social media, trulia, Zillow | Leave a comment

Minneapolis Real Estate Continues to See Rise in Median Asking Price

Posted on September 25, 2011 by Ken Horst

As of September 19th, the median asking price of Minneapolis homes for sale was at a new high for the year. According to the recently updated number on www.deptofnumbers.com, a website that tracks and reports on public data, the median price of real estate in Minneapolis, Minnesota recently hit $199,900.

This is a far cry from $179,040 where housing prices started in January of 2011. While home prices have ticked up, the number of Minnesota mls listings has remained fairly constant over the same period.

According to public data, inventory for mls listings in Minneapolis, which includes single family homes and condos, stood at 20,344 in mid September, down from it’s peak of 22,015 in June of 2011. Inventory of Minneapolis homes for sale started the year at 20,244.

It’s certainly good to see the median price rising while inventory has remind relatively flat. The big question is what does it all mean? Normally, econ 101 tells us that as demand for a product rises and supply falls, the price will also rise.

In the case of Minneapolis real estate, we are seeing a rise in the price in spite of the fact that the inventory of homes has remained constant. This could be attributed to a number of different things, all of them good.

One cause of the steady rising median asking price of Minneapolis mls listings is that while inventories remain flat, the number of serious, qualified buyers has been increasing over the same period. I think lost people in the real estate business would agree this is good news.

Another possibility is that while the total number of Minnesota homes for sale has not changed much, maybe the percentage of foreclosures and short sales is declining. This would reduce the number of homes listed at unusually low prices, helping increase the average sale price for closed home sales in Minnesota. And this would contribute to a real rise in the appraised value of Minneapolis homes.

Either way, it’s nice to see the median asking price for Minneapolis real estate is rising as it gives hope to the idea that maybe Minneapolis home prices have seen the floor.

If you are in the process of listing your home, let us know what indicators you’ve been looking at to determine your asking price by leaving a comment below.

Posted in Real Estate | Tagged Minneapolis mls listings, Minneapolis real estate, Minnesota homes for sale | Leave a comment

Netflix Deploys Chute, Exit Strategy Engaged

Posted on September 20, 2011 by Ken Horst

Normally I write about real estate on this blog but today I couldn’t resist the urge to respond the latest blunder by a company that until today, was one of my all time favorite brands, Netflix.

Like many of you reading this today, I started using Netflix many years ago, long before the days of streaming video, after I decided I had paid my last late fee to some pimply faced teenager at Blockbuster. (Incidentally, if you read this post through to the end, you will see why today’s move could also be the final nail in Blockbusters coffin)

When Neflix came out with their streaming video option, it was movie utopia. Anyone with an ounce of geek in them knew this day would come and Netflix opened the door and changed movie distribution forever. (Sure the free download sites existed before that but to the best of my knowledge, none of them were ever traded on Wall Street or had a value of $2 billion)

Fast forward to today’s announcement that Netflix is splitting into two different companies, one for mail delivery movies and the other for streaming movies, and the fact that a $2 billion dollar brand launched a new company, Qwikster, without first securing the Twitter handle, (Wait to you see this guys tweets if you haven’t already) and you have to ask yourself “what the hell just happened here?”

Yes Netflix was hemorrhaging customers as they raised prices and lost access to the better videos they were streaming, but they could still recover, right? My first thought was, this company is going down and this was some last desperate act to separate the future from the past and save the day.

But then I realized that their streaming future wasn’t exactly looking that great. It seemed like no studios or other companies with access to vast movie libraries wanted to get into bed with them. Come to think of it, didn’t I read something a while back about how the studios hated Netflix because they continued to find and rent movies even though the studios weren’t getting a piece of the action?

Here is a couple of quotes from that article in January of 2010;

The studios would much rather sell consumers a DVD than rent them one. Profit margins on a movie sale are higher than on a rental.

Then there was Netflix’s deal with cable movie channel Starz. Instead of obtaining the streaming rights from the studios,’ Netflix found what some studio execs consider a backdoor route to those movies. That didn’t endear Hastings to them.

Read more: http://news.cnet.com/8301-31001_3-10426792-261.html#ixzz1YSdeDPpn

Is it just me or was the writing already on the walls. Then in March Showtime lands a punch to the ribs and cuts Netflix off from it’s current original shows. Hey, I cut my Dexter teeth on Netflix, currently my all time favorite series, and I was really starting to like Californication before I was cut off this past summer. But I still stood by my brand, after all, if it wasn’t for them, I may still be paying late fees to those pimply faced kids at blockbuster.

When they announced the roughly 60% price hike in July jacking the cost of my service from $10 a month to $16, I still supported my brand. I understood in order for them to keep feeding me the kind of movies I wanted to watch, they probably had to pay more too, as quoted in the New York Times article;

Mr. Amel said further changes to Netflix’s monthly prices should be expected in the next couple of years as the company’s growth rate slows and as it pays hundreds of millions of dollars more to license streams of movies and TV shows.

But when Netflix couldn’t renew their deal with Starz earlier this month, roughly the same time they announced their price increase, I started to question my loyalty. The LA Times wrote;

Premium cable network Starz Entertainment will end its deal to provide movies to Netflix, a surprise decision that will deprive the popular online video service of its most valuable source of recently released movies.

So there I was, digging deep for a reason to continue supporting one of my all time favorite brands, and for a moment there I could almost do it, until today’s headline;

Netflix splits DVD, streaming businesses

Now this in and of itself was enough of a reason for me to kiss my brand good bye, but wait, there’s more, as I’m sure you’ve heard.

Not only did Netflix fail me on the product side but they also lost any vote of confidence I ever had in their leadership when I learned they launched their new company, Qwikster, without first securing the Twitter handle.

In today’s social media world, even the dumbest CMO wouldn’t have screwed that up. So I thought to myself, is this company, the one that I’ve held on a pedestal and admired for all these years really this stupid, or is there something else going on.

That’s when the answer hit me! They don’t care about the Twitter account for Qwikster because Netflix’s plans for the future have nothing to do with mailing DVDs to people who won’t even have DVD players in the next 24 months. And, from the looks of the way things are shaping up for Netflix to be able to put together a line up of movies we all really want to watch, their future isn’t in the streaming movie business either.

There only hope for their future today is to divest the brand of the boat anchor DVD business and prepare to be acquired. Think about it, the only real assets Netfilx has today are their dwindling but significant customer list and their brand, which is becoming more tarnished by the minute. Who stands to benefit the most from these assets? The major film studios, who until now, have been kind of screwed out of the post screen movie business. ( Other than their relationship with Blockbuster, which, sadly, is where I will probably start my search. I still hate that brand!)

So in closing, as I say good bye to a great friend and start my search for a new streaming movie services, I leave you with my prediction; Netflix will be acquired by a group consisting of some number of the major film studios within the next 6 to 12 months.

If I’m wrong, it will be a miracle if Netflix is still around in 13 months!

P.S. I mentioned at the beginning of this post that today’s actions, which seemed to signal an eminent sale and the major studios are the best candidate running, could also be the final nail in the Blockbuster coffin.

As it sits today, the major film studios are being a little nicer to Blockbuster than they ever were to Netflix. I think the studios felt some sense of reciprocity for all the years that Blockbuster bought the movies they rented from the studios, giving them a small cut of the post screen business.

If my prediction is right, the studios won’t do business with Blockbuster after their current agreement runs out because as the new owners of Netflix, they will make a lot more money than going through any third party. Sorry Blockbuster, I never liked you guys any way.

Be sure to stop back next week as I get back to writing about real estate and share the results from the social media smack down between two big real estate brands, Zillow and Trulia.

Posted in Real Estate | Tagged Netflix, Qwikster | Leave a comment

San Diego Real Estate Values Decline in August – See Top 10 Declining Zip Codes

Posted on September 17, 2011 by Ken Horst

San Diego home prices saw an overall dip in August, similar to the rest of the country. But whenever you refer to a metro area when talking about median home prices, you need to break it down.

Thanks to Sign On San Diego, this has been done for us. Here are some of the San Diego real estate highlights;

August 2011 median price for all San Diego home types was $320,000,
San Diego median homes prices were down 1.5 percent from July and down 5 percent from a year ago.
Home prices were up in 31 of 92 ZIP codes in the San Diego metro area.
August month over month transactions were up 6.8% from July
August year over year transactions were also up 4.4% from August of last year.

As I mentioned above, we need to take a more granular look at large metro areas when stating statistics like median home prices. In this post I will highlight the 10 zip codes in San Diego that saw the largest year over year decline in median home prices.

Keep in mind that these figures are calculated using actual home sales data. I list them below starting with the San Diego area zip code with the largest median home price decline;

Rancho Santa Fe, 92067 – Recorded a year over year median home price decline of 38.10%. The median home price in August 2010 was $1,532, 500 compared to August 2011 at $947,955.
Coronado, 92118 – With a decline in the median home price of 36.90%. The median home price August 2010 was $1,940,000 and in 2011 it was $1,225,000.
Hillcrest/Mission Hills, 92103 – Saw a 35.90% decline in August. The 2010 median home price was $640,000 versus $410, 000 in 2011.
Borrego Springs, 92004 – The median home price in this zip code declined 33.50% with home prices going from $137,500 in 2010 to $91,500 in 2011.
Vista East, 92084 – Home prices declined 24.60% year over year. In 2010 the median price was $325,000 versus $245,000 in August of 2011.
Campo, 91906 – Median home prices declined 22.60% going from a median price of $155,000 in 2010 to $120,000 in 2011.
Oceanside (Central), 92058 – This zip code saw a 20.90% drop in median home prices going from $411,00 in 2010 to $325,000 this year.
Carlsbad Southeast, 92009 – While homes in this area are still selling at higher median prices than some other areas, $650,000 in 2011, Carlsbad Southeast saw a 20.40% drop as 2010 came in at $817,000.
Ramona, 92065 – This zip code in Ramona, CA saw median home prices decline 19.10% year over year. In 2010 the median price was $349,000 versus $282,500 in 2011.
Julian, 92036 – Julian, California saw the median price of their homes drop 18.80% over the last 12 months as 2010 saw a median home price of $370,000 compared to $300,500 in August of this year.

What does all this mean for home buyers in San Diego? Whenever you see a 20% plus drop in home prices following a massive multi-year decline from the market peak, and interest rates are at records lows, it may be a good time to start considering buying a home.

Unfortunately, for anyone who bought their San Diego home 3-5 years ago is probably not in a great position to sell. As a buyer I would be looking for San Diego homes for sale where the seller bought at least 10 years ago. Unless these home owners refinanced, chances are they can walk away from the transaction with money in hand for a down stroke on their next real estate purchase.

For information on San Diego suburbs and counties or other California city or county information, visit the Community and City information page on www.mlsmaps.com

To see other San Diego area median homes prices by zip code, click here.

Posted in Real Estate | 1 Comment

2 Reasons Why the New Facebook Lists Won’t Help Realtors

Posted on September 14, 2011 by Ken Horst

When I first heard about the new Facebook list features and functionality this week I thought it sounded like a great idea. I thought how great it will be for a realtor to be able to separate their personal contacts from their business contacts so they don’t have to bug their friends’ every time they’re trying to move a new listing. They could even split their real estate contacts into clients and prospects or buyers and sellers. And then it dawned on me, using lists if your a real estate agent is a horrible idea!

One of the biggest reasons business people join social networks is to extend their reach and connect with a larger audience. This is especially true for Realtors as the more people that are aware of their beautiful listing, the more people that can tell their friends about it when they hear them talking about moving or wanting to buy a new home.

In a previous post I talk about how important it is to work with a real estate agent who has a large, visible, online network, especially if you’re looking for an agent to list your home for sale. As we all know, the real estate business has moved online, with home buyers using consumer facing mls listing sites to find homes and social networks to get realtor recommendations. The bigger your social network, the greater the chance you will run into someone wanting to buy or sell a home.

That’s when it hit me, why would any agent who is using social media to expand their reach want to fence of their friends into smaller sub-groups? Think about it, the very reason business people use Facebook is to connect with MORE people not less. So the idea of breaking the huge list of followers you have built over time into sub sets just doesn’t make sense. That’s the first reason the new Facebook lists won’t help Realtors.

The second reason Facebook lists won’t help Realtors is if any of your business relationships on Facebook fence you off into the sales guy coral, they may see less of your posts and updates. In fact, this could actually cut into their social network reach as one of the separations Facebook lists on their blog is the following;

Close Friends and Acquaintances Lists

Close Friends list – Add your best friends to your Close Friends list and you’ll see everything they post in News Feed. You can even jump straight to a view of your News Feed that only shows their photos and news. You can also receive notifications when they post updates, so you don’t miss anything important.

Acquaintances list - Add friends like old classmates or business contacts to your Acquaintances list and you’ll see less of them in your News Feed. We’ll still show you important things they post — like when they get married or move to a new city — so you don’t lose touch completely.

(See that “Friends not on a list” group above? Many Realtors could end up there

But wait, there’s more from Facebook;

See and Share With Exactly Who You Want

Each of your lists has its own News Feed, where you can see just the photos, status updates and other posts from the people on the list. To view list News Feeds, look for the Lists section on the left side of your homepage and click the list you want to see.

I underlined the benefits Facebook mentions that worry me. What this means for real estate agents is that if you’ve spent the past few years friending people you meet around town so you can expand your reach, all that hard work may go down the tube if people start using lists like Facebook mentions on their blog.

The good news is that other than a certain sub set of suburban moms, most of us on Facebook are in business and on social networks to meet people and expand our networks. I for one have no intention of corralling my friends on Facebook into smaller groups, I have a tough enough time being interactive and engaging my friends as it is. The thought of posting different updates for different groups of people just doesn’t seem like a good use of my already very limited time.

As I see it, Facebook lists are a lose-lose for real estate agents. The good news is that by Monday of next week when the media buzz has died down, most people will have forgotten about it and will go on with the business of expanding their social networks.

What do you think about Facebook’s new friend lists? Join the conversation and leave a comment below!

Posted in Real Estate & Social Media | Tagged Facebook, Facebook lists, real estate agents, real estate marketing, Realtors | Leave a comment

“The Future Of Real Estate Marketing” Goes Dark

Posted on August 25, 2011 by Ken Horst

I remember seeing Joel Burslem back in 2007 at the Inman Connect conference in San Francisco and being in awe of the guy. He had single handedly carved out a relevant piece of the multi billion dollar real estate market from his perch in the great northwest. A true thought leader in the real estate technology field, Burslem was the voice of “The Future of Real Estate Marketing” or FOREM, a blog dedicated to thought leading posts about real estate and real estate technology.

This was back in the day when we had just launched Agentopolis, ActiveRain was a rising star, driven by a Realtor blogging craze fueled by a recently released book by Richard Nacht and Paul Chaney called “Realty Blogging”, and the term “social media” had not yet become “social media marketing”.

It was also a time when the real estate industry was coming off the crest of a wave that would prove to be the biggest increase in housing values in the history of the human race and none of us knew just how far down the ride would go.

All of these event and more fueled our appetites for knowledge about how to better integrate the internet into our real estate real estate marketing and keep up with the rapidly changing technology and opportunities. I too was busy consuming as much information as I could find on the internet, through seminars and conferences, and by reading any book on the topic that didn’t have a copyright more than 30 days old.

Stumbling onto FOREM was like finding an oasis on the desert. Not only was the information timely, relevant and thought provoking, but Burslem also demonstrated the value of clean design on his blog. FOREM was easy to look at and fun to read, two things the rest of us can think about for our own blogs.

I was a little dismayed when I learned in 2007 that Burslem had taken a job at Inman News and incorporated The Future of Real Estate Marketing into their network of real estate media. Probably a good move for both parties, (I think Inman News got the better deal on this one) but I was disappointed to see a guy who managed to do so much on his own, carving out a significant brand in a crowded real estate industry, selling out to the big boys. Granted, it’s every entrepreneurs dream but I still still love the story of David and Goliath.

As the VP of Content at Inman News, Burslem continued to oversee FOREM and all the other content opportunities within this real estate media company. The content was still great and thought leading, but the voice had changed just slightly, going from the voice of an inspired and passionate individual to that of an organization. I still enjoyed the news and information but I was no longer inspired by the story behind the source.

In late 2009, Burslem moved on, taking a job with 1000Watt Consulting, and the FOREM was looking for some new life blood at Inman. That’s when Katie Lance took over and became the new voice of The Future of Real Estate Marketing. To put it in Katie’s words, she had big shoes to fill.

In addition to being a great writer, Katie is also very engaged in social media, which showed in the mix of content at FOREM while under her leadership. Timely for sure as social media was fast becoming one of the more interesting real estate marketing channels. And why not, it’s fast, fun and free! Under Katie’s guidance and with her knowledge and experience in social media, the FOREM audience continued to grow, recently reaching roughly 12,000 subscribers.

But as we know, the space for good real estate content has become crowded and the goal of becoming a content marketing thought leader in any space requires more than a team of one. It appears as though this is the reason that Inman News has decided to shutter The Future of Real Estate Marketing and replace it with what looks to be another great real estate media hub, enter InmanNext.

In effort to really give InmanNext some legs, Inman will have two contributing editors co-managing this endeavor, Katie Lance and Chris Smith, co-founder of Tech Savvy Agent. They will be supported by an impressive list of contributing authors including, none other than, Joel Burslem. I look forward to following InmanNext and have high expectations for what’s to come.

R.I.P. FOREM

I think I speak for all tech savvy agents when I say, thanks for being a great source of real estate content for all these years!

Posted in Real Estate, Real Estate Marketing, Real Estate Technology | Tagged 1000 Watt, FOREM, future of real estate marketing, Inman, Inman news, Inman Next, Joel Burslem, real estate blog, real estate tecchnology, realtor blogging | 5 Comments

The Mother Lode of Easy Money for Home Buyers – Just One Catch

Posted on August 20, 2011 by Ken Horst

Looking for a way to buy home home but having trouble qualifying for a mortgage? How does $11.2 billion worth of guaranteed homes loans sound? But wait, there’s more! How about mortgage features like the kind you haven’t heard of since the Sub-prime days? For instance;

•    No Down payment is required.
•    Flexible credit score guidelines.
•    No maximum purchase price limit.
•    Closing costs can come from any source including gifts.
•    Repairs and improvements can be included in the loan.
•    Competitive fixed 30-year rates.
•    Generous income limits
•    NOT limited to first time home buyers
•    Assistance options, such as gift funds, grants, seller concessions allowed.

This can all be yours if you can also meet just one other qualifying criteria;

• The subject property must be located in a rural area. ( Check for eligibility )

That is because the loans are guaranteed by the USDA and are part of their rural development program.

Before you get too depressed because you don’t live on a farm, you might want to check and see if the home you are looking to purchase falls into an eligible area. You may be surprised as there seem to be a number of outer counties around many major metro areas which are eligible.

I have personally seen this USDA home loan program used to purchase a home in the Minneapolis, MN metro area.

While I’m happy that this program can help qualified home buyers purchase a home and hopefully stimulate home sales, I’m a little surprised at some of the qualifying criteria as it smacks of the sub-prime loan days that have a lot to do with the current real estate market problems and our tanking economy.

Specifically these 3;

•    No Down payment is required.
•    Flexible credit score guidelines.
•    Closing costs can come from any source including gifts.

When it comes time to buying a home, I’m a bit of a traditionalist. When I bought my first and second homes, you couldn’t purchase a home without a 10% down payment. Needless to say, 20 years ago there were a lot fewer foreclosures.

In my experience in the mortgage industry, generally the people applying for zero down mortgages were also very light on any reserves/savings. This should be a red flag to lenders, especially in light of the current job market and unemployment rate. All it takes is one layoff to put this home owner at great risk of default.When the employment rate was considerably lower, there was less risk because most of us could find at least some type of work in a shorter period of time so we could stay current with our mortgage.

Without the category of sub-prime loans had a lot to do with creating the housing bubble and then stick a pin in it. So when I see things like “Flexible credit score guidelines“, I break out into a cold sweat.

Once again, when I bought my first home, if you didn’t have a fairly high credit score that proved your commitment to paying your debts, your dreams of home ownership were over. And there is a good reason for that, lenders have been using credit scores to lower the risk on loans since the early 80′s. After 30 years of modeling, they’ve gotten to be a pretty accurate indicator of who will pay and who will default.

So if there is a fairly reliable system of measuring risk on loans, when would it make sense to guarantee a home loan to someone who has been clearly flagged as likely to default? As I saw ever lower credit scores being able to qualify for mortgages in the years leading up to the peak of the housing bubble in 2006, I knew it would only be a matter of time before this thing came crashing down. And of course it did and here were are still reeling from the worst housing decline and conditions since the Great Depression.

Finally, the criteria of “Closing costs can come from any source including gifts” is also one that in my experience, indicates a red flag. I can see where it is very difficult to come up with a 10% down payment at today’s median home prices. But when the buyer can’t even come up with the money for closing costs from their own resources, this is scary!

There was no limit to the creativity I witnessed as a loan officer as people tried to scrape up the money for closing costs. Gifts, cash advance from credit cards, and the occasional mystery source that underwriting would look the other way on to get the loan closed. I don’t see how letting borrowers who can’t even cover closing costs makes good sense for any lender, especially our government.

Keep in mind that our infinitely wise government is backing these loans, $11.2 billion worth, so when the default rate goes up, our taxes go up because the governments is losing their ass.

Don’t get me wrong, I’m all for stimulating the housing market and helping responsible people buy homes, I still believe it is one of the great American dreams. But if the only way our government can accomplish that goal is by stick their/our neck out to guarantee high risk loans, I fear for our future.

Posted in Mortgage, Real Estate | Tagged home loan, housing bubble, mortgage, USDA, USDA home loan programs, zero down mortgage | 1 Comment

Advice for Home Buyers – Be Aware and Prepared for the Mortgage Process

Posted on July 25, 2011 by Ken Horst

With mortgage rates at or near historic lows and extremely affordable home prices, it is no surprise many people have elected to venture into the market and purchase or refinance. The mortgage process today can feel like a journey and understanding the environment better can help set realistic expectations.

The fact is that if you are well-qualified in the traditional sense (employment with verifiable/consistent income, documented assets if needed for the transaction, good credit history and debt levels that keep your total debt-to-income ratio at 45% or below), you will likely come through the process with an approval for the type of loan that fits your needs. You may, however, be left feeling as though you have been examined beyond what was reasonable…don’t take it personally.

The underwriting process today is much more about the quality of documentation vs. the quality of the borrower (actual risk-assessment). All participant companies in the mortgage industry today are trying to make certain they are doing things ‘by the book’ and that means over-documenting ever piece of information and making the assumption that any one document could be fraudulent. This creates the request for multiple sources, from the borrower as well as independent third parties, of the same information.

Expect redundant requests for related information, many times near the end of the process, where ‘double checks’ have now been implemented. Negotiation on the documentation needed, regardless of who you are working with, is likely a lost cause. Have your information organized, and respond promptly.

Compliance to new regulations, disclosures, and guidelines has risen to a level never before seen. There is no question changes were needed, and many are meaningful to the experience and protection for the consumer…but others are simply over-kill and slow progress. Understanding that this aspect of the mortgage loan process has grown larger (and costlier than ever…driving up the baseline cost of mortgages) than the need to simply underwrite for risk helps with one’s perspective.

Having to provide information that seems irrelevant to the risk-assessment or actual transaction can be frustrating, but rest assured the need lies somewhere and without it the loan is unacceptable to the agencies that ultimately need to accept the quality (HUD, Fannie Mae and Freddie Mac). Make certain you are working with a company that has processing, underwriting, and funding in-house so that you are working with the staff that actually controls the process.

Choose a Loan Officer that is experienced and able to convey reasonable expectations and provide an outline of exactly what will likely be needed and describe the time-line. Give your self plenty of time, have your documentation organized and ready, and work with pros… there are no shortcuts today, but you’ll get through it and benefit from one of the most opportunistic times in real estate!

This guest post was written by Paul Schuster, Vice President, Marketplace Home Mortgage in Minneapolis, Minnesota. Mr. Schuster was also the 2009 President of the Minnesota Mortgage Association

You may also want to read, “5 Cool Mortgage Infographics”

Posted in Mortgage | Tagged debt-to-income ratio, Fannie Mae, Freddie Mac, HUD, Marketplace Home Mortgage, Minnesota mortgage, mortgage, Mortgage process, qualifying for a mortgage | 2 Comments

Is Zillow IPO Success a Sign of Hope for Real Estate…

Posted on July 21, 2011 by Ken Horst

Or the beginning of another dot-bomb? Hard to say, no offense to Zillow, but when a company that hasn’t made a profit gets valued out of the IPO gate at $1.6 billion, it kind of makes you wonder.

The Zillow IPO comes on the heels of a few other recent dot-com IPOs, LinkedIn, Pandora and soon, Groupon most notably. Clearly Wall Street has blocked any memory of the dot-com crash of the late 90′s from their minds.

This latest run on dot-com companies is not surprising as Wall Street looks for a way to regain the luster of their mortgage backed security days where they single-handedly brought the real estate and housing finance industry to their knees with uncontrolled exuberance and speculation.

How ironic that the sector of our economy who is responsible for creating the biggest housing bubble in history, by a mile, and than seeing it crash and burn like nothing before, should be rallying around a real estate dot-com play.

Honestly, I hope this is the beginnings of a turn for the better for the real estate industry and all the great people I know who make their living in real estate. Unfortunately, having watched the NASDAQ plummet as a result of the dot-com bubble and having worked in the real estate industry through the most incredible boom and bust we will see in our life time, I can only say, I wish you well Zillow as I watch your public future unfold with cautious optimism.

To see an amazing graph illustrating the real estate boom and bust that took place over the past 11 years, thanks to Wall Street’s infinite wisdom and complete disregard for the investor, see graph #4 in our recent post, “5 Cool Real Estate Infographics“

Posted in Real Estate | Tagged housing bubble, real estate, Wall Street, Zillow, zillow IPO | Leave a comment

Top 20 Real Estate Pros on Twitter

Posted on July 19, 2011 by Ken Horst

As the number of Twitter users continues to grow, recently hitting the 200 million mark, more and more real estate agents are discovering that Twitter is a great way to connect with home buyers and sellers. Realtor’s are finding that Twitter makes it easy to share information with large number of people without having to spend a ton of time drafting the message because of the 140 character limit.

The fact is, not all real estate agents are sending out a steady stream of high quality real estate info, tips and home listings. While there are many tools out there that rank Twitter accounts, we decided to go with WeFollow for our post. The real estate category has over 7,100 real estate agents listed and they rank them on both “Most Followers” and “Most Influential”

For the purpose of this list we used their “Most Influential” ranking as most would agree that having a ton of followers doesn’t mean a person is interesting or relevant. I’m not sure of exactly what is in their algorithm but I did read that one of the factors is how many lists. So with this in mind, it’s possible that a real estate agent with less than 5,000 followers can out rank a Realtor with over 150,000 followers.

That said, here is the list of the top 20 real estate professionals on Twitter with a link to each one’s twitter account, in case you want to follow them;

1. @RealEstate__ Global | Real Estate
Real Estate Global Network: The Social Network for Real Estate Professionals

2. @Agentopolis USA
Real estate agent directory, realtor directory, realtor marketing, home search, Real estate information

3. @InmanNews Alameda, CA
Inman News is the leading independent source of real estate news & commentary.

4. @kevincottrell Austin, TX
Leading Real Estate Media and Economic Expert, I share current and breaking news and critical info focused on real estate, financial/mortgage markets

5. @trulia San Francisco, CA
Timely information on homes for sale, apartments for rent, neighborhoods, markets and trends to help you figure out exactly what, where & when to buy.

6. @MarcoSantarelli USA
Investor, author and founder of Norada Real Estate Investments, a real estate investment company offering turnkey investment property in US growth markets.

7. @Lennar Founded in 1954 in Miami FL
Kay Howard, Dir of Communication Tweeting for Lennar a leading new home builder of Everything’s Included new homes for 1st-time, move-up & active adult buyers.

8. @Swanepoel California, USA
New York Times Best-Selling Author. Business, Leadership & Motivational Speaker. Real Estate Trends Strategist.

9. @DuncanWierman Greenville, SC
Software CEO turned Real Estate Investor / Marketer. I show you how to use creative online marketing methods to do more deals online. Virtual Investing

10. @RealtorRyan Westlake Village, CA
Husband, Father, REALTOR®, Real Estate, The M & M Team, Google, Halo, gadgets, Technology, Social Networking, XBOX, Android, UFC, Airsoft, dogs. Total geek!

11. @nik_nik San Francisco, CA
Mompreneur, Educator, Writer, Speaker, Social Media Enthusiast, Fitness Junkie, Dance-Gram Giver, Lifelong Learner, Founder: Agent Evolution & MyTechOpinion

12. @ReggieRPR San Francisco, Ca
Director of Social Media for RPR. Enough about me, where is the closest Starbucks?

13. @REMarketingTips United States
Real Estate Marketing Hints, Tips, Tricks and News for Real Estate Agents and Brokers.

14. @mclaughlinchris Tampa, FL
Short sale & real estate expert, soci@l media junkie, lawyer, author of daily real estate newsletter, owner of 4 real estate offices with 400+ agents.

15. @davidgoldstein St. Louis, Missouri
I am a partner at the top online real estate school in the USA… RealEstateExpress.com. Visit us for info on state-approved online real estate license courses.

16. @GCTProperties Gaithersburg, MD
MD (DC-Metro) Real Estate Investor – Lease Options, Wholesales

17. @erealestate_ USA
eRealEstate is a social network for real estate professionals, including agents, investors, mortgage lenders, title agents, rehabbers and home improvers.

18. @timandjulie Vegas and Laguna
Realtor Coaching, Real Estate Training. Real Estate REO Training. Realtor Short Sale Coach. Real Estate Scripts. Realtor Social media training.

19. @RETomato Northern California
Over the last 10 years Helped 10s of 1000s of Realtors develop a successful internet presence, and I have just gotten started.

20. @CMYates Earth (most of the time)Chris Yates – Real Estate Investor, Private Money Expert, World Traveler, and the guy that answers your real estate investing questions

So there you have it, 20 of the top real estate professionals on Twitter! If you want to receive a steady stream of current real estate information, I’d recommend following all of these people.

Be sure to leave a comment if you’re an Realtor, real estate broker, or other real estate professional and feel you should have been included on this list.

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