I overheard a comment at lunch today about prices. The specific comment was related to the price of soup and then how it was such a high profit item. Further it was stated that the soup was even more profitable than drinks at this price.
I used to show people how to make a profit from selling food and beverages, so I understand where this thought came from. It used to be that soup was largely made up of “leftovers.” The “leftovers” were factored into the costs of foods previously sold, and therefore they were “free” when going in soup. Roast beef leftover from a previous day added to vegetables create a vegetable beef soup, leftover broccoli added to milk, stock, and cheese turns into broccoli cheese soup etc.
However, not all places approached it this way, either using premium fresh ingredients or a canned or frozen version. The cost of this frozen version is often the highest food cost of all using fresh premium ingredients and having to pay for cold storage as well as shipping the extra weight of the water. In this case the soup itself cost anywhere from 40% to 55% of the price.
What does this have to do with real estate? It is an example of how things change and what we may think we know isn’t the way it is.
Take finance as an example. A couple of years ago, a mortgage company was looking at a policy change (a directive from FHA, VA Fannie Mae or Freddie Mac) about every other week. I’m hearing claims of 380 changes in 2009. That is more than one a day. As a matter of fact, that is on average, just under 2 per work day. This means the rules that were understood when an offer is made, may be different by the time the offer is negotiated and becomes a contract.
Along with finance the banks have also changed the way they market, handle and dispose of distressed properties such as short sales and foreclosures. Contracts and disclosures have changed, and more addendum templates are in place to handle some of the known issues.
Individual home owners and buyers are also looking at things differently. Sellers many times are bringing money to the table so that they can get even better deals on their move up purchases. Buyers are in the driver’s seat one week and the next the sellers have the upper hand due to the amount of suitable product available to meet deadlines like the tax credit. Builders are contracting to build homes and can’t get the financing from the bank to build them.
Marketing homes means new challenges as newspaper classifieds are being replaced by Craig’s List and more serious research is being done online before contacting an agent. More and more successful marketing campaigns are starting in “Social Media” such as Twitter and Facebook and then continued on the huge portals and company web sites.
It doesn’t matter whether you are buying your first home or your tenth home, the rules are constantly changing. We see buyers, sellers and even some agents, acting as if they know the rules because of what they have done in the past. Yet, today the issues are different for every transaction and what you think you know, may not be reality. The theme song of the time may be “Hand in the Pocket” by Alanis Morissette where she sings, “What it all boils down to is that no one’s got it figured out just yet.”
The changes to the market, changes to the rules, changes to attitudes and the confusion they cause, mean now more than ever it is essential to have professional representation. Sitting in a restaurant and eating soup that you think may have yielded a high profit to the operator, when they wonder why they have a low profit item like soup on the menu, doesn’t really hurt anyone. On the other hand, the current real estate market has potentially great rewards, but when mishandled and misunderstood can lead to shattered dreams and financial ruin.
In other words, the times demand an agent that is growing, learning, adapting, and as a result creating and leading to positive solutions in the most dynamic real estate environment, possibly ever.
I always apprecate comments,
John
