SuburbanDigs

A Competitor Falters

So Foxtons, the NY-NJ-CT discount broker with the flimsy signs, is nearly gone. I'm sure very few tri-state, full-service Realtors will mourn if an expected bankruptcy filing follows today's announcement that most of the company's employees have been laid off.

This is a company that made it very difficult to sell homes. Luring unsophisticated sellers into their fold by offering a discounted commission structure, Foxtons generally eschewed lockboxes and made every agent outside the company call and set up an appointment to see a property only if the owner were home. Untrained owners were told to show their own properties, which they often did hovering over buyers to the point of suffocation, pointing out a home's virtues even if there weren't any ("We painted the whole house 29 years ago when we moved in.") Making an offer on a Foxton's property was also an experience. Their  "Senior Negotiators" -- who had never seen the properties -- sounded 12 years old and had little knowledge of local markets. On one occasion, I brought in an offer just $5000 under asking for a terrible split level with some kind of weird mound in the backyard. The negotiator said it was asking price or nothing and my buyers walked away. Months later -- in what was then a high market -- that house remained on the market, even more forlorn than before.

It wasn't uncommon to be fielding leads at the front desk of a one's real estate firm and hear a beleaguered Foxton's seller wondering how he could get out of his airtight contract.

Early on, when it was called YourHomeDirect, Foxtons was funded by its British namesake real estate company to the tune of $20 million dollars and the stateside operation grew to about 500 people, most, it seemed when one called, very, very young. Their wet-behind-the-ears buyer agents, who got their clients from Foxton's website and Sunday paper ads, were equipped with company cell phones and cars and paid a salaries.

So, out they went to compete against hungry commission-driven agents. I'm sure the results weren't pretty. The company did better on the sell side, currently with more than 4,000 listings soon to be without a home. In good times, the days-on-market count for Foxton's listings seemed, in many cases, interminable. Now, probably much worse, as they were often promoted at oddly inflated prices reflecting little knowledge of local neighborhood nuances. There's one I can think of right now locally, priced at $850,000, which should be hundreds of thousands less.

The Foxton's business model was flawed from the beginning. It offered bargain commissions but nothing else that would even remotely be considered service-oriented and made it twice as much work for outside realtors to show their properties, while paying them less anyone else. As it turned out, people will pay more for more.

According to Inman News, the online service, "the company had its share of critics and opponents in the real estate industry -- Foxtons officials complained to state officials in New Jersey after receiving dozens of letters from Realtors advising that they would offer a 1 percent share of the commission to Foxtons when the company represented a buyer in their transactions as payback for the company's own 1 percent offer."

Observers are saying that it was Foxton's reduced commission schedule that made it harder to compete in today's complicated market, with homes lingering month after month despite their marketing and advertising efforts. I know some Realtors just bypassed these homes altogether.

It's beginning to look as if the discount model was a high-market model only, impossibly to maintain when houses are, on average, lingering for 9 months on average in NJ and even longer elsewhere.

A company spokesperson said today that the Foxtons business model "has proven itself and, we believe, will have lasting influence on our sector ."

I don't think so.

Our Changing Business

Describing what he calls a "disconnect" between the actual monetary details of the crisis in the sub-prime mortgage market and our healthy economy, a recent New York Times column by economist/actor Ben Stein urges "a little sanity."

"By the metric of a large economy" he wrote, "the effects of the loses, is nothing. The total wealth of the United States is about $70 trillion. The value of stocks listed in the United States is roughly $15 to $20 trillion. The bond market is even larger." But, Stein, wrote, generalized fear and terror have "knocked 6.7 percent off the stock market's value in recent weeks. This amounts to about $1.1 trillion, or more than 30 times the losses so far in the sub-prime market. In other words, these sub-prime loses are wildly out of proportion to the likely damage in the economy from the subprime problems."

A little fear goes a long way, both on Wall St. and on your street and mine. Real estate deals are caving more frequently. Buyers are fearful of making a mistake on a house, overpaying. They want to negotiate starting low -- very low. They worry much more about water in the basement, lack of up-to-date amenities, things that need fixing. A little dingy old wallpaper, something people once expected they'd deal with, has suddenly morphed into "too much work." They’re so consumed be fear that they can’t imagine living in a house without seeing dollar signs in their eyes. Just let us know, one nice young couple asked me the other day. If we live here 5 or 10 years, will it be a good investment? Individual sellers are determined not to capitulate to market changes. They don't want to counter a low offers. They don’t want to reposition the price or capitulate to defects. What about the water pooling in the basement? Sorry, the garage sag isn't that bad. The pipes only leak a little bit. Take it or leave it. At the end of the day, some buyers still take it; they love a house, they want it no matter what.

But, for the rest, the search for the perfect place to live, framed by more rigid mortgage guidelines -- higher credit scores, less debt, more money down, etc. – will be increasingly frought in the days and months to come. The other day, a local attorney told me one of her deals fell apart the day before closing. It just fell apart. Like that; without warning the buyer walked away. At a closing of my own last week, the buyers found some mean scratches in the bedroom floor during their walk-through. They produced digital snapshots taken when they’d first seen the home of a dresser which obviously had been dragged across the floor by the owner as she was moving out. The seller, meanwhile, protested that there had never been a dresser positioned there. The deal was held up two days while the disagreement continued. Whoa!

And so, I got up the other morning, looked at myself in the mirror and said: Roberta, admit it, every day is a stressful day. That way, I don't have to be surprised when stress hits an hour after tranquil morning coffee on my deck, when a client/seller pulls a home off the market in defiance of a lower-than-expected outcome or a client/buyer asks for $10,000 in credits where a year ago he would have asked for $500.

Are things out there discombobulated, or what?

Win Some, Lose Some

I don’t think I’m being corny when I say that every listing that comes my way is a gift. Earlier in my career, when I had very few of them, I wondered what it took to become a real player in the marketplace, someone who would regularly be called in to compete for business. These days, while I have many times the personal inventory as a decade ago, it’s still impossible to fathom why some people trust you implicitly from the get-go and others choose someone else to work with when you know you’ve done a fine job presenting yourself.

Twice this week, listings for which I competed went to someone else. In both cases, the sellers (or sellers’ families) took copious notes about my ideas for sprucing up their house while educating them to the changing market and realistic pricing, and then didn’t use me. In one case, the grandson even called me twice for the names of contractors he should use to make my suggested repairs.

In the other case, after rushing back from a summer vacation weekend to catch out-of-town family interviewing Realtors until 5 pm Sunday night, (“yes, of course we want to see your PowerPoint!”), following up with detailed staging proposal the next day – which was never acknowledged – I received this lovely note in response to still another email I sent their way last weekend:

“Sorry I haven’t gotten back with you but things at home and work have been crazy. We decided to go with another Realtor but really appreciate the interest and effort you gave to us. You had some really great ideas which we will most likely use on our [own] home.”

Do tell. My ideas, which have always gotten me in trouble, are good enough to take to another state but not good enough to list a little house in my own town.

About a decade ago, I worked with my first million-dollar clients. Young and beautiful, they were full of promise. They drove a convertible. They drank lattes and sometimes brought along one for me. When you’re a novice agent, it’s not so easy to find expensive people who trust you and I treated them with kid gloves over a period of several months while they waited for the absolute perfect show house. I literally bounded off the gurney after an important CT scan in Manhattan to rush back home to meet them. Bucking up as I met them, I didn’t say I had been on intravenous just an hour before or that I was actually quite tired. We roamed through the mansion of the week, for which they expressed incredible enthusiasm and promised to make an offer the next day.

In fact, I never heard from them again. Through my time in real estate, I have come to believe that, in those instances when I really go the absolute extra 10 miles, rise up from the sick bed, cut short a vacation, work on a national holiday or in the middle of a snowstorm, or disappoint my husband and family in some way because I’m convinced clients need me desperately – those are the times when…nothing happens; when I don’t make get the listing or make the deal. At times like this, I find myself asking, How much is too much? When is value-added just a joke on me?

Once a Realtor has invested considerable time in a client without an outcome -- a conclusion to the exercise -- it’s incredibly difficult to pull back and speculate if and when that person will make a successful offer. I’ve discovered that some people, no matter how energetic their search, will never buy. They’re predisposed to a fear of spending too much, of the commitment inherent in a house sale and, in some cases, they just can’t make a decision. Our job, at that point, probably is to convince them not to buy or sell and just be happy with who they are and where they live.

Weird, but true!