Industry Newsflash: Week of June 24th, 2013

Here’s how the Atlanta housing market stacked up against Dallas, Chicago, Los Angeles & New York over the past twelve months, and yes we are counting anyway.

Real estate firm rides market rebound.

June 23, 2013

Retention, recruiting remain the biggest problems for CEO.

By Bill Hendrick For the AJC

Dane Ellison, who has endured grueling Iron-man Triathlons, believes that kind of determination led to his recruitment as CEO of RE/MAX Regional Services. Ellison, 47, was not hired to sell houses, but franchises for selling houses. He and his headquarters staff of 21 employees in Alpharetta sell franchise rights to entrepreneurs who want to hang out the RE/MAX label. Ellison’s office then provides franchisees with the tools they need to make money for themselves, and for RE/MAX Regional Services, which he refers to as RRS.

Ellison’s company oversees 300 offices and close to 4,000 agents in Georgia, Kentucky, Tennessee, southern Ohio and southeastern Michigan. Last year, sales volume for the region totaled $11 billion — far below the $30 billion figure in 2006, before the housing bust and the Great Recession.

RRS is a one of seven independent divisions of Denver-based RE/MAX, which has 90,000 sales associates around the globe, including 1,278 RE/ MAX agents in Georgia.

   Q: Do franchise owners have to be brokers

   A: No. Some of our most successful people are investors. They have to have a broker’s license, or hire brokers to run the operation. A broker has to have a broker’s license and a real estate license.   Each agent is an independent contractor. The agent is not an employee of the broker or franchise owner. Franchise owners recruit agents, who share fixed expenses. The franchise owner pays RRS a fee each month for each agent they have. We provide all the support, the technology, the advertising, the marketing.

   Q: What does a franchise cost?

   A: The cost of the initial franchise fee can be as high as $25,000. The total investment can go a lot higher, depending on the size you want and the number of agents. Also, you have to have the right amount of working capital, and access to other money. The real cost comes in overhead. Some may have 40 agents. Some may have 15. Each agent pays a fee to the broker and the broker pays a fee of $226 for each agent. A large portion of that goes into advertising funds for the RE/MAX brand.

   Q: Why did RE/MAX create RRS?

   A: The owners decided to sell some master fran chises. There are six others like us that provide support to their region of Broker/Owner offices. We pay the owners a royalty fee, but we are our own operation. We make our own policy and do our own advertising and marketing. We also have human resources, finance, accounting and IT.

   Q: How did the recession affect your business?

   A: It was tough. In percentage terms, the fallout from 2007 to 2008 was about 20 percent, and about 25 percent from ’08 to ’09. From 2009 to 2010, there was about another 20 percent drop, and about 8 percent from 2010 to 2011. Then, 2011 was flat and 2012 was up by 9 percent. We are up 4 percent so far, year to date. It looked bad for a long time.

   Q: What is the biggest problem you face now?

   A: Retention and recruiting. A lot of agents weren’t selling enough houses and went elsewhere. For many, a part-time job wasn’t big enough anymore.

   Q: Are a lot of people still interested in their own franchises, even after what’s happened?

   A: Yes. You are changing a person’s life when they buy a franchise. For them it’s a dream. They are investing their life savings to pass on a business to their children. I’m selling these people a dream and it’s my responsibility to make sure they are successful.

   Q: How’s the current market in Georgia?

   A: The overall trend in every feasible way is positive for the market. Inventory is down. It’s a seller’s market. There are multiple offers on many houses. We have someone who bought a house six months ago, then sold it in four days. Commissions are up 20 percent in Georgia year-over-year. Volumes are up 17 percent, though here in Georgia transactions are a little lower than last year.

   Q: How about Atlanta specifically?

   A: It’s the same all around Atlanta. It’s a boom in every price range. Building is up. It’s been going on for a year now, almost. Houses below $500,000 are doing a lot better and luxury homes above-$600,000 are starting to come back. So are second homes.

   Q: Are we headed for another bubble?

   A: I have faith that we all in the industry will be smarter this time. The funny thing is people think the bubble lasted only four or five years, but it really started back in the 1990s. Then we really got clobbered. We need to figure out what went wrong and fix it. It has to be a combination of banks and government. I think there are more responsible people who want to see things done in a sustainable way.

   Q: Is it true that institutional investors are buying houses, driving up prices in the hope to profit later?

   A: It is happening and has been since the bust. It’s not as much now. But it gives me pause when it’s equal or the majority when investors are buying.

   Q: Those investors have helped push housing inventory to lower levels. What’s too low?

   A: Once it goes below six months inventory, it is called a shortage. It limits your choices. My wife and I were looking at a house and before we could make an offer, there was a sale. The last time prices went up so quickly and houses were selling this briskly was before 2007.

Industry Newsflash: Week of June 17th, 2013

Luxury home market steadily heating up

Low prices, low interest rates. International buyers make up 5% of Atlanta market.

By: Lauren Beale Los Angeles Times

The U.S. luxury home market is being driven to new heights by relatively low prices, low interest rates and a more stable economy than in many countries, experts say.

California had 697 home sales of at least $5 million last year for an all-time high. Where luxury prices end up has yet to play out, but the Multiple Listing Service recently experienced a new high with the offering of a $190 million estate in Greenwich, Conn.

Buyer interest is recovering quickly, said Kofi Nartey of the Agency in Beverly Hills, Calif., who was part of a panel of real estate agents speaking at the recent National Association of Real Estate Editors conference in Atlanta .

“We get a lot of immediate gratification and bounce back,” Nartey said.

Among those buying are people in the sports world, whose accountants are suggesting they get into real estate, Nartey said.

On the East Coast, baby boomers are buying luxury second homes as a reward for a lifetime of hard work, said Jack Cotton of Cotton Real Estate.

“A property on Cape Cod may function as a magnet for bringing family back together,” Cotton said.

Younger people are buying second homes for aspirational reasons, Cotton said. “They want to grow into the person who would have a beautiful property like this.”

International buyers in Cotton’s market are looking for homes with a tale to tell or an architect of note. A portrait of the original owner’s wife at a house built in 1880 has hung to the left of the fireplace since the house was constructed. “That kind of story would appeal to an international buyer,” he said.

Luxury housing agents around the nation are reaching out to international buyers. Even though they make up only about 5 percent of the Atlanta market, David Boehmig of Atlanta Fine Homes said he is planning on traveling to Hong Kong to take part in a real estate show. “It’s an expensive proposition.”

Some brokers are working in conjunction with art sales in far-flung locales in Asia. Attendees have to pass displays of luxury properties on their way to the show.

Bus tours for potential international buyers have been taking place in the Los Angeles market for the past several years.

West Coast buyers in the $20 million price range are looking for a wow factor, Nartey said. One house being built in Beverly Hills will be surrounded by a moat.

“I definitely think we will see a $250 million listing,” he said. “Price at that level is just a suggestion.”

Just having the highest price in a market will have people lining up, Nartey said, and quickly reach the top-tier buyers.

“Some of the numbers are justifiable and some are slightly arbitrary,” he said. His office is marketing the home of a sports star for whom the No. 25 is significant, he said. “So we listed it at $25 million.”

Appeal your assessment now or forever hold your peace

Information, advice and expert opinion from those in the real estate industry.

JOHN ADAMS

I am just about ready to declare the Great Recession over. Home prices stalled, then dove in 2006, and apparently hit bottom in 2012. Most (not all) have seen some recovery in home values since then. I know unemployment is still a major problem, Federal Reserve Chairman Bernanke is still artificially holding down long-term home loan rates, and thousands of foreclosed homes remain in limbo. But I see a dramatically reduced inventory of homes for sale, prices beginning to firm up, and fewer vacant houses festering in otherwise attractive neighborhoods. I even hear Bernanke’s nebulous statements about the direction of interest rates. All of these are signs of real progress.

I have spotted one silver lining that you can enjoy, if you move quickly.

1. First, know that you are likely paying more than your fair share of property taxes. The Atlanta Journal-Constitution has repeatedly documented that Georgia’s 159 counties have been slow to reduce property tax assessments, while property values have been falling. Your home has likely lost value faster than the county has cared to admit, as reflected in your assessment.

2. It’s really easy to protest your 2013 assessment. I’ve given you a sample blank form and instructions on my website. You have to spend 46 cents on a stamp.

But is it really worth the hassle factor? I emphatically say “yes,” and here is why:

* By law, property assessments for the current tax year (2013) are based on the value of your property as it existed on Jan. 1, 2013.

* On New Year’s Day this year, we were beginning to see some positive signs of a recovery, but not much. We were still reeling from a disastrous 2012.

* The value of your home at any given time is a function of the sales prices of similar homes nearby that have sold in the 12 months PRIOR.

This means that, for most of us, the really terrible sales of comparable homes, even the foreclosure resales, are indicative of the value of our home on January 1, 2013.

Finally, here is the icing on the cake:

Most county tax assessors have a three-year review cycle for real property that is appealed to the local Board of Equalization (BOE) and has experienced an adjusted value. In plain English, that means if you appeal to the BOE and get your valuation dropped, even by a penny, then the tax assessor will likely leave that value in place for the current tax year, plus two additional years. Because your home is likely over-assessed, your chances of a successful appeal are high. And if the BOE grants you any relief whatsoever, its dollar savings will be magnified by a power of three unless you make a major improvement or sell your home during that period.

But your deadline for appeal is fast approaching.

Your tax assessor is required to mail you a NOTICE OF ASSESSMENT, usually delivered in May or June. Some counties are faster , some are slower. Once it’s mailed, the property owner has exactly 45 calendar days to file a protest, and after that date, no protests or appeals may be accepted. If you live in Gwinnett, Hall, Clay-ton, Henry or Forsyth counties, it’s already too late. Your final deadline has passed. If you live in Cherokee, Cobb, Fayette, Fulton or DeKalb, you still have time, but not much. For other counties, call your local tax assessor and ask for the deadline for protesting your assessment.

For detailed information and access to forms and filing instructions, visit my website at Money99.com.Statistically, one in three owners who file an appeal receive some reduction in property valuation. This year, I suspect it will be substantially more than one third. But you’ve got to ask. John Adams is a broker, investor and author. He answers real estate questions every Sunday at 3 pm on WGKA-AM(920). He welcomes your comments at Money99.com  , where you will find an expanded version of this column.

Post Properties to plant new tower next to Phipps at Ga. 400

Post Properties Inc. is launching the development of a 19-story apartment tower overlooking Georgia 400 — the latest in a wave of residential projects slated for Buckhead.

Atlanta-based Post (NYSE: PPS) would break ground on the nearly $76 million project later this year. It will become the second phase of its Post Alexander development.

The company trying to get a jump on its competitors. It should have one of the best sites, because of its access to Georgia 400 and its proximity to luxury shopping at Phipps Plaza.