One South

Back on the Market

February 1, 2019 By Rick Jarvis

Agent: Congratulations! You are under contract!

Client: Great! So we are done, right?

Agent: Not exactly. Anywhere from 10% to as high as 20% of contracts fall apart for one reason or another.

Client: Wait, what?!? There is as much as a 20% chance that the contract I have on (or for) my house will fall apart?!? How can I make any plans going forward with that much uncertainty?!?

Agent: Let’s talk about why.

The Back on Market Statistic in MLS

First, let’s talk about where we get the data.

The Multiple Listing Service tracks a lot of statistics –– one of which is called ‘BACK ON MARKET’ (or BOM).

BOM measures the number of homes whose status changes from ‘PENDING’ (meaning under contract) back to ‘ACTIVE’ (meaning ‘available for sale.’)

This is the home screen of MLS that shows agents a quick update of the day’s (or week’s) activities.

Computing the Failure Rate

A random sample of a week in middle January yielded the following results:

569 homes went PENDING
65 came BACK ON MARKET
65/569 = 11.4% contract failure rate

(A quick note –– a week later, the number of ’Back On Market’ properties, jumped to nearly 14% with 40 of 295 coming back to Active status from Pending –– so this metric will change week to week.)

Released and Temporarily Withdrawn

Now if you note the screenshot, you will see where RELEASED and TEMP(orarily) WITHDRAWN are also highlighted:

RELEASED –– meaning that the listing agent and owner have agreed to part ways.
TEMP WITHDRAWN –– meaning probably what you think, the home has been removed from the market for an unspecified period of time per the seller’s request.

Both of these status changes (66 Released + 38 Temp Withdrawn = 104) often come on the heels of a failed contract –– and thus the count of the Back on Market is most likely higher.

Between 10% and 20%

So, yes, somewhere between 10% and 20% is the correct number.

This number will vary based on what time of year you examine, what price point you are in, and what geography you study and of course, what percentage of the Released and Temp Withdrawn homes you assume were the result of a failed contract.

Why Don’t Homes Close?

A 10% fallout rate is a big number. A 20% fallout rate is even bigger.

When you are making irrevocable (and expensive) commitments that depend on a successful settlement, 80% certainty doesn’t feel great, does it?

It shouldn’t.

Let’s discuss the reasons.

The Primary Reasons

Homes don’t go to settlement for any variety of reasons –– but they generally fall into one of the following categories:

Lender incompetence
Appraisal less than the sales price
Inspection issue
Agent incompetence
Cold feet

Let’s discuss each.

Lender Incompetence

I cannot stress this enough –– work with a lender with the following characteristics:

They are local (not Quicken, USAA, or some other internet lender)
They are tied to a bank (meaning they have ‘shelf loans’ or other specialty products)
They do a lot of business with the agent (you will be on the top of the pile and receive favorable treatment when positive underwriting interpretations are required)
They have a full range of products (many lenders only have a limited product menu and will try to place you in the wrong product because they don’t have the correct option)
They have a ‘Lock and Drop’ feature (meaning that if rates drop during the lock period, you receive the lower rate)
They are not your Credit Union (contrary to common belief, CU’s do NOT give better rates and their representatives are typically not licensed)

Furthermore, when it comes to niche purchases (condos, rehabs, multi-family) or complex underwriting (divorce, business owner, commission income) using a mortgage company with specialists in the specific loan type is critical.

Alas, few borrowers (or agents) know how to find those who specialize in the specific niche required.

The Dreaded Internet Lender

To the Sellers –– if you are a seller and you receive a contract from a purchaser who plans to use an internet/non-local lender, accept the contract at your own risk and do not be surprised when, at the 11th hour, you get the dreaded ‘we have a problem’ message.

To the Buyers –– if you are a buyer and in a multi-offer scenario, using Quicken (or USAA) is an almost near guarantee that you will not be the winning bid. Why? Because listing agents know how difficult and unreliable internet lenders are.

Internet lenders can be decent for refinancing (mostly because a missed closing date isn’t overly penal,) but for purchasing a home, they just carry too much risk.

Cheaper Isn’t Better, It Isn’t Anything

A rate that is ½ point lower that closes late (or not at all), is not a better rate –– it is actually more expensive!

Late closings trigger penalties, loss of deposits, and a handful of other emergency decisions (hotel stays, storage units) that eat up any savings that the rate promised.

The bottom line is that the local lender puts their reputation and well-being on the line every time they issue a pre-qualification letter. If their organization can’t perform as promised, they don’t just lose the current deal, they lose the rest of them.

An Appraisal Issue

When prices are accelerating rapidly (especially in the spring), comparable sales lag where the market is.

Looking at past sales is like driving while looking out of your rearview mirror.

In other words, when you are trying to establish the fair market value of a home in March of 2020 –– and the sales comps are from the fall of 2019 –– you will not find the sales from yesterday you need to justify the price today.

But unfortunately, that is how the appraised value is determined –– via PAST sales.

We like to say that using comparable PAST sales to establish value TODAY is like driving while looking out of the rearview mirror –– it tells you where you were, but not where you are going.

When you, as a seller, have accepted a contract on a home where there were multiple bids, odds are, the sales price has been pushed above the value at which the home will appraise. When a loan is subject to appraisal (as many loans are), an appraisal below the sales price places the loan in jeopardy.

Appraisal Math

Applying some numbers –– if the purchaser is putting 10% down on a $300,000 sales price and the appraisal comes in at $290,000, the seller is responsible to make up the difference –– in other words, they have to find an additional $10,000 in down payment.

If the purchaser has no excess cash (or is unwilling to access it), then the seller is forced to either:

lower the price to the appraised amount
accept the loan denial and put their home back on the market

The bottom line is, as a seller, you have to look at the type of financing the purchaser is using –– and specifically how the appraisal contingency is worded –– to properly judge how susceptible you are to the appraisal causing the contract to not move forward.

A good agent knows how to assess the risk.

Inspection Issues

Inspections are the bane of almost every agent’s existence.

Essentially, you have buyers who feel like they overpaid (and feel entitled to a perfect home,) sellers who see every issue as cosmetic, and inspectors who feel it necessary to point out every flaw, including that the doorbell is not at the correct height (not kidding.)

On the other end of the inspection report are agents who know very little about construction and contractors who both disagree with the inspector’s assessments and cost estimates, and are trying to generate even more business for themselves by spooking the clients –– all trying to decide if a $100 piece of siding is rotten or just soft.

It is maddening.

Call it pride, call it short-sightedness, or simply stupidity, but way too often we see $500 worth of inspection items torpedo $300,000+ sales

($500 / $300,000 = .0016, in case you wanted to see how inconsequential that amount actually is.)

No Home is Perfect

At the end of the day, as a buyer, be prepared to take the home with a few issues –– especially given the market conditions. Are we saying that a cracked foundation, a failing 50 year old roof, and radon readings in the 100’s are not issues? Of course not. But when minor carpentry issues, a few questionable double taps on your main circuit panel, and wobbly toilet are found, it is ok. Don’t freak out.

And a final note for sellers –– I have yet to see a house that comes back on the market get a better offer. Digging in to save yourself $1,000 only to cause your buyer to flee is a poor strategy. You are almost always better off to work with the offer in hand, even if it means swallowing your pride and working out a deal that feels one-sided.

Agent Incompetence

My first broker was fond of saying that, as an agent, when you have a willing buyer and a willing seller, get out of the way.

It is one of the truest statements he ever uttered.

Far too often, in an effort to either feed an ego or justify the commission, agents will engage in activities that complicate or sabotage the transaction. Speaking too much, introducing doubt, blaming the other side, making mountains out of molehills –– all of these actions put unnecessary pressure on a transaction when there needn’t be.

The net result is it exhausts everyone’s emotional energy to such a point that the sides oftentimes become unable to work through an issue that normally would not derail the transaction.

It happens far more than it should.

Cold Feet

And yes, every once in a while, a simple case of cold feet (i.e. –– Buyer’s Remorse) is the culprit.

Typically, buyer’s remorse occurs when a) the deal is too one-sided, or b) the purchaser didn’t fully do their homework before finding themselves under contract to purchase a home.

Agents and Uncertainty

As an agent, it is absolutely your responsibility to make sure the buyer understands their decision:

Educated and confident buyers make decisions that stick
Buyers who never developed a true understanding of market conditions tend to walk away

Agents –– if you want your deals to stay together, empower and involve your clients.

Summary

So yes, not all deals go to settlement.

Statistically speaking, somewhere between 10% and 20% will fall apart for one reason or another. And thus, some percentage of sellers will have to go ‘Back on the Market’ after experiencing the frustration of a contract that did not stick.

So, as a seller, how in the world do you defend against being left at the altar?

Well, that is Part II of the series …

How to Lose Your Dream House (with your agent’s help)

January 28, 2019 By Rick Jarvis

How to Lose Your Dream Home

Earlier this year (January to be exact) I was at the office on a Monday evening while one of our agents was wrapping up the details on a contract for a home she had listed.

She was notifying the agents who had made the losing offers (there were 10) and I overheard a rather testy exchange on the phone with one of the agents whose clients had made a particularly weak offer.

After the call, we discussed what had transpired –– and below you will find step-by-step instructions on how to not win a competitive offer situation and cost your client a home they really wanted.

The Home

I think it is important to understand the home in question.

The home was an uber-cute classically-styled 1930’s era bungalow an oversized lot in an area experiencing rapid price appreciation. The home is well situated in the direct path of investment and development, and had recently undergone a tasteful upgrade.

The price would be considered quite affordable by today’s standards (less than $300,000) and was located quite close to the urban core.

For anyone seeking a smaller, cute, move-in ready home, it checked a lot of boxes –– it oozed charm, was quite close-in, and had tons of upside.

Market Conditions

Now, if you are even remotely aware of the inventory conditions, you would know what the description above meant –– it meant that the house would be in high demand and that multiple offers (like a LOT of offers) were pretty much a certainty.

In fact, over 10 offers were received.

Know Your Inventory

Right now, the inventory in the City of Richmond is at all-time lows, with less than a 4 month supply overall. However, when you look specifically at the market segments below $400k, the supply drops to less than 2 months (1.4 months as this post is written).

1.4 months of inventory –– let that sink in for a moment.

To give it perspective, experts say that 6-8 months of inventory is considered a balanced market (i.e. the number of sellers equals the number of buyers) –– so the number of available homes could increase by 500% and the market would only be considered ‘balanced’!

That is insane.

So even if you are not a statistics nerd, the fact that about 50 people toured the open house (including the ones who lost their ‘dream house’ with their less than compelling offer) should have driven this point home quite vividly.

Apparently, it didn’t.

Contract Structure

nicksplat rugrats GIF — 10+ contracts in January –– what does that tell you?

Most people feel that the sole purpose of a contract is to establish a price for the home. While price is certainly one of the elements of a purchase offer (and a critical one at that,) the contract also establishes the remainder of the terms for the sale –– of which another +15 pages (plus several addenda) are required to establish them all.

So there are several key points (other than just price) that can be leveraged to create a far more attractive contract for the seller when a highly competitive offer situation is expected including:

Will the price change in the event of multiple offers? (i.e. escalation clause.)
How the property will be paid for / financed (mortgage, cash, amount of down payment)?
How any appraisal issues will be handled?
How the inspection will be handled?
When not just settlement –– but possession –– will occur?

In other words, there are a lot of other levers to pull to create an attractive offer.

Winner vs. Loser

So, assume for a moment that the price of the home is $300,000 and a seller receives multiple offers (again, the sellers of this home received more than 10 bonafide offers.)

The winning offer stated:

Want to know more about **Escalator Clauses**? Read here…

A price of $300,000 with an escalation up to a maximum of $315,000 if a higher offer was submitted
10% down payment, but the appraisal contingency was waived and a lender letter was submitted showing the proof of funds to make up the difference if the appraisal was lower than the contract price
A cap on inspections so that only large items would be requested to be addressed
The several items that were not supposed to convey with the sale were correctly excluded from the sale
A post-settlement possession was also offered to the sellers (but not needed by the seller)

The folks who lost submitted the following offer:

$295,000 with no escalation clause
Conventional financing with a 20% down payment
No waiver of appraisal
No modification to inspection
Zero reference to the items that were not supposed to convey
Seller to pay for a Home Warranty

Not Even Close

So when the agent was called and told that they had not won, they were incredulous and argumentative about why they were not allowed to up their offer.

Sorry, but when you have several offers in hand that exceed the asking price, calling the 8th place contract and asking them to raise their offer isn’t a consideration.

The fact that they did not seem to comprehend that is what feels incredulous to me.

Losing Professionally and Graciously

Now, I wouldn’t think that this would need to be said but apparently it does –– when, as an agent, you make every mistake possible with your offer and you are notified with a phone call that you didn’t win –– don’t be combative.

The following was the basic gist of the conversation –– and all of the supposed points were made in aggressive and accusatory tones:

Why weren’t the buyers given a counteroffer?? Well, because there were about 7 better offers.
Why didn’t you ask for our highest and best offer?? Again, you were the 8th best of the 10+ offers.
Why weren’t we informed of the multiple offers?? Well, listing agents are under no obligation to do so, but the line out of the door at the open house should have been a clue –– and 1.4 months of inventory should have been another. Oh, and by the way, the inclusion of a properly structured escalator clause is a perfect way to hedge your bet (which you did not include.)
Why was the listing agent being non-communicative?? Well, because analyzing 10 offers and presenting the best ones to the seller takes considerable time –– and your offer was one of the least competitive of the bunch. Sorry if you didn’t receive a call within 5 minutes of the contract expiration time to inform you that you finished behind 7 other offers. When the best contract was signed, you got a call.

Sarcasm aside, do you know what being chippy about losing did? Do you think it changed the outcome? Of course not. It simply put everyone involved on notice that this specific buyer’s agent was difficult to work with. I can assure you that their attitude will not help their chances when all other contract terms are held equal and the seller needs to choose between two offers.

Lesson? Or Blame?

Is it possible that this agent was acting at the behest of their client and their strategy recommendations were ignored? It’s possible, but highly unlikely given the agent’s overreaction. The overall tenor of the conversation made it fairly obvious that the agent had recommended the strategy and now had to go back to the client with egg on their face.

Furthermore, I can almost guarantee you that the buyer’s agent placed the blame at the feet of the listing agent with some sort of ‘they screwed you’ message. I can only hope that their client is astute enough to sniff out where the blame actually should be placed.

Blaming the other side is certainly convenient, but a very damaging long term strategy. Richmond is a small town and the agent community is even smaller –– word travels. Your reputation (good or bad) can impact the market’s willingness to work with you and your future clients.

Advocating hard is both expected and respected by your peers –– being a jerk isn’t.

Summary

At the end of the day, this market is in an extreme place –– and extreme conditions must be navigated with strong methods. Using 2015 contract structures with 2019 comps in January of 2020 is not a recipe for success –– especially not in the ‘affordable-urban’ market.

As we have stated repeatedly, the market conditions we are in, particularly at the middle and lower price points, is unprecedented, and best practices that were generally accepted even a few short years ago no longer apply.

Everyone acknowledges that losing the perfect home stings –– whether you are an agent or a buyer. But it happens to all of us and will continue to be a part of this market for the foreseeable future. All you can do is prep your clients, take your best shot, and accept the outcome –– graciously.

That said, being wholly unaware of market conditions or winning strategies is not an excuse for poor behavior. Take your lumps, learn the lessons, modify your strategies, and make the adjustment.

The good agents do.

iBuying

January 5, 2019 By Rick Jarvis

handshake hello GIF by Laurène Boglio — Our computer would like to purchase your home.

Ever heard of iBuying? If you haven’t, you can say you heard about it here, first, because it is the newest trend in real estate sales and it is on the way to a market near you –– probably.

So what exactly is iBuying? Well, no one definition exists but generally speaking, iBuying is nothing more than a company (or fund) that buys houses from people directly –– at some amount of discount –– for cash, and typically with a quick closing.

iBuying, in effect, replaces the traditional method of an individual owner putting a sign in the yard and selling to an individual purchaser at a market price.

How Does it Work?

2001 a space odyssey GIF — I’m sorry, Dave. I can’t value your home.

In most cases, the owner of a home will go to an iBuyer website, enter information about their home, and wait for the iBuyer to tell them what they would be willing to pay. The iBuyer company will look at its valuation algorithm and make the seller an offer.

Each iBuyer has a slightly different method, but typically, the offer comes with a mandatory site visit from some representative to verify the condition of the property and the features, size, etc. and to make sure that the information given by the seller is accurate.

If everything checks out, the offer can be accepted and closing will occur quickly and for cash.

Yes, it can be that simple.

The Premise (ok, ‘The Catch’)

The catch is this –- the offers come with a discount.

The iBuyer will use an algorithm that establishes likely market value, but then subtracts the cost of commissions, any required repair money, some carrying cost, and a little bit for profit.

But even if the offers are discounted, they are all cash and come with a quick closing.

The thought is that the offer will be close enough to what a typical seller would net on the sale of their home and, thus, the seller take less to avoid the hassle of the selling process –– and to have the certainty of knowing their home is sold.

i want out house GIF by South Park — Sometimes, iBuying makes sense.

In effect, if the seller believes the ‘hassle to discount’ ratio is in their favor, then they should (in theory) accept the offer. If not, then they can sell via the traditional process.

It is a fascinating idea and one that is taking hold in several markets.

The Players

There are several national players who are attempting to scale this business as we speak –– Zillow Offers being the most notable, but there are others. Knock, OfferPad and OpenDoor are making a lot of noise, while Redfin and a few other brokerages have either launched or are launching their own version of an iBuying program.

And aside from the behemoths mentioned above, local franchised versions also exist –– ’We Buy Ugly Houses’ and Homvestors are forms of iBuying as well, although couched in a more of an opportunistic wrapper.

Heck, even some local investors (typically tied to a local brokerage) have established funds to do roughly the same thing.

The Game

Ok, before you go out and rejoice, thinking that you can trick a computer into making you an above-market offer on your 7 bedroom 1 bath Elvis Pressly themed home that is in need of $50,000 of siding and roof repair, that is not how it works.

The national iBuyers have what is called a ‘Buy Box’ to determine which properties qualify to be purchased. Typically, the ‘Buy Box’ will only include properties that their algorithms can value with a high degree of confidence –– and shy away from the ones that they cannot.

iBuyers will also tend to shy away from thin market segments (i.e. luxury housing) where pricing means fewer buyers and longer marketing times.

So the typical Buy Box will include properties that are newer, more homogenous, less expensive, and otherwise easier to peg a value accurately. Properties that are older, historic, have unique features, are expensive, in need of massive repairs, or are otherwise difficult to determine a fair value for will fall outside of the Buy Box and not qualify for an offer.

So don’t get too excited about an iBuyer coming in and taking your problem property off of your hands at a premium –– they won’t.

Uses and Models

iBuying has applications for sure –– mostly for cases where ‘certainty’ is required or where other factors prevent the home from transferring via conventional means.

If you are a contingent buyer trying to upgrade into a hot market segment, it might make sense to use an iBuyer to sell your home so that you can qualify for the next one
If showing your home repeatedly is burdensome, then selling to an iBuyer makes sense
If you are in need of selling quickly to take a new job, or move to another market, iBuying might also make sense

But in cases where the seller can wait, or where bidding wars are likely to occur, an iBuyer really isn’t necessary.

The Real Uses

So do you know why Zillow really wants to have an iBuyer platform? And Redfin? And the others?

Leads.

A seller inquiring about the value of their home is nothing more than a potential seller raising their hand and identifying themselves as a potential client –– and for any brokerage, that has tremendous value.

So even if the offer is rejected, the lead can still be referred to an agent in the iBuyer network for a referral fee.

Kinda brilliant, isn’t it? You bet it is.

Successful?

The iBuying idea is still rather new and thus, the concepts have not been fully developed and the numbers being reported are not vetted.

Phoenix iBuyer Report Teaser from Mike DelPrete

Phoenix is one of the primary testing grounds for iBuying.

A recent article claimed that iBuying represented as much as 3% of the accepted offers in markets where they were operating, but that is largely a self-reported number (as well as a self-serving one) so it remains to be seen.

But even if the iBuyer does not buy in a large number of homes, the leads generated are still of great value to the Realtor community. So for iBuying to be successful, it doesn’t have to just monetize the homes they purchase –– it has to monetize the leads it generates.

Richmond and iBuying

The big players aren’t in Richmond in force, but they are somewhat close (Raleigh, NC) and in some parts of Charlotte.

The closest iBuyer markets are in North Carolina, but no markets in the northeast are in operation.

Some locals are playing in the space here locally, but no one of any real scale.

And since Richmond is an old city with aged housing stock, the likelihood that any iBuying platform would identify Richmond as a target-rich market is low. When you look at the map above, you see no iBuyer presence in the older housing markets of the northeast.

But that said, at some point, we will see some version of the iBuying model enter our market.

Questions Abound

So stay tuned, there are still many questions to be answered.

suspicious thinking GIF by SpongeBob SquarePants — Hmmm …

One of the biggest is ‘what will iBuyers do with the homes they buy?’ Some will simply resell them and others will employ a buy and hold strategy. If that happens, will it put even more pressure on inventory?
The other question is how will iBuying impact appraisals? If the nearest and most recent comparable sale was an iBuyer sale at a 10% discount, will that impact the value of the surrounding properties?
What happens when iBuyers compete with one another? Will the competition between iBuyers squeeze the profits out of the model to such a point that they exit the market?
What if an iBuyer ends up with enough inventory that it can act like CarMax and offer trade-in options? Supposedly, that idea is being discussed.
Lastly, if and when the market goes through an adjustment, are iBuyers going to be willing to purchase assets that are declining in value? Just ask developers and builders what happened to their balance sheets in 2008 – 2012 and how much fun it was to hold onto housing when it was going down in value by 10% a year for 3 straight years? Hopefully, that adjustment is nowhere near, but most felt that way in the years leading up to the recession, too.

I don’t think anyone has the answers yet.

Summary

The iBuying idea has merit, but there is a lot still to be determined.

That said, the key point is that there is a lot of money backing these firms so the iBuying model is going to be here until someone figures it out.

Like a hammer or a lawnmower, iBuying is nothing more than a tool and it has its specific uses. Learning how to use the tool properly will come with time and practice for all involved.

Having a choice is never a bad thing for the consumer and iBuying will provide the public options that they didn’t have before.

Why July Defines One South Realty Group

August 5, 2018 By Rick Jarvis

I will always have a soft spot in my heart for July.

My wife is a July baby.
My oldest daughter was born in July.
5 years ago, in July, we moved from our old office into our brand new renovated office in the Fan.

And ten years ago in July, we should have gone out of business.

Before the Bubble

In case you don’t remember, 2008 was the year everything changed for the real estate market. The economy that began to really gain speed in the early 2000’s still seemed to be robust, and though we were beginning to see some weakness at the upper price points, development was healthy and opportunities were all around us.

In the last half of 2007, we had made the decision to open One South. We saw an opportunity for a more progressive brokerage that had both a residential and commercial aspect to it. Everyone thought we were crazy. Perhaps we were; or perhaps just crazy enough to make it work.

We were actively recruiting, making hires, finalizing logos, and doing all of those tasks that you do when you are opening a company.

We were equal parts optimistic and oblivious.

One South is Born

So on January 2, 2008, we opened the doors and went to work. Our new signs went up on properties, our logo was proudly displayed on Main Street, and the Realtor community was asking ‘Who are these guys and where in the heck did they come from?!’

For the first 6 months of the year, we went gangbusters. We had convinced some really great agents to come over and were making a bigger splash faster than I would ever dreamed possible.

We represented numerous redevelopment projects — The Emrick Flats, The Reserve, Tribeca Brownstones, the Cary Mews, and the Marshall Street Bakery — and had quickly developed a reputation as the go-to city development folks. It was a great position to be in.

And then it happened: we had a purchaser of one of our condo units get their loan denied for no real reason. It was 2008 and the middle of July. And for the first time, I sensed that something was bad was happening and it was bigger than we could imagine.

July of 2008

When you are a Realtor in the spring, you are busy.
When you are a Realtor in the spring trying to sell and recruit, manage, market, hire, and grow, you are really busy. And you are aren’t really paying attention to the nightly news and the reports of rising defaults in the subprime sections of mortgage.

So when, on July 30th of 2008, former President Bush signed the Housing and Economic Recovery Act that gave the Treasury Department the ability to prop up a collapsing banking industry, it was the first inkling that this wasn’t a blip on the radar but rather, a long and cold winter was coming.

For a company as small as ours, with no history and little working capital, we had big problems on our hands.

We Were Lucky, and Good

Maybe it was fate, maybe it was intelligence, or maybe a little of both, but we had aligned ourselves with smart people and smart bankers. We all recognized that we needed to figure out the best way to get our collective exposure down and get the unsold units we were marketing sold and sold fast. And if Fannie Mae and Freddie Mac were not going to make loans, we needed to figure out a way.

We worked together. Price adjustments, creative incentives, some good hard nosed selling, and a dogged determination to succeed got us through and even earned us several new engagements. We developed a bit of a playbook for solving problematic projects (that we still use today) and earned the equivalent of a PhD in mortgage finance.

Slowly but surely, we managed to maintain growth despite a market that lost 30-50% of its value and a Realtor population that dropped by nearly the same amount by the end of 2011.

July of 2013

But by 2012, we could feel the change coming.

Inventory levels were falling. Prices were leveling out. Banks were coming out of receivership.

We decided to double down on ourselves and started looking for our next home. In December of 2012, we were able to secure 2314 W Main Street, the old Kicker’s HQ, known to all for the soccer player murals on the side of the building and construction began.

7 months later, in July of 2013, the renovation was complete and we took possession of a 8,000 SF mixed use industrial chic renovation in Richmond’s Fan District.

It was a proud moment and a testament to how far we had come.

July of 2018

We recently had an event in our space to celebrate One South’s 10th birthday. We invited many of our architect, contractor and developer clients who had allowed us to help them dream and execute their vision through the creation of new housing.

And in doing so, it gave us time to reflect back on what we had done in our first decade:

We opened with 5 agents and 1 staff member. We now are basically 100 agents and staff in two locations.
We sold a little over $20M in real estate in our first year. Last year we sold over $200M in real estate.
When we opened, we had 4 projects we represented. That count now exceeds 30.
Maybe 5% of our business came from the commercial side in 2008. We now have about 35% of our business come from our rapidly growing commercial team, including two $20M+ sales this year.
And finally, we have been named in Richmond Biz Sense’s RVA 25 for the past two consecutive years as one of Richmond’s fastest growing firms (the only real estate brokerage to make it back to back!)

July of 2028

So as we prepare for fall of 2018 (is it really August already?) and continue to fight the inventory shortage, we are full steam ahead.

We continue to work on creating a better experience for our clients and our agents, and to grow our own knowledge and capabilities. The real estate market is ever changing and the minute you think you have it figured out, you find yourself playing catch up.

We can’t wait to write the July update in 2028.

Rates are Rising – Here’s What it Means

March 28, 2018 By Rick Jarvis

Jarvis Grandchildren: ‘Grandpa, please tell us a story about the way real estate used to be!’

Grandpa Jarvis: ‘Let me tell you a story about 3.5% 30 year fixed mortgage rates …’

Jarvis Grandchildren: ‘Ooooooooo, 3.5% 30 year fixed mortgage rates?!?’

Grandpa Jarvis: ‘Yep. 3.5%. Some people even got 2.9%.’

Rates are Headed Up – For Good

As I write this in the spring of 2018, the recent job report states that the economy not only added 200,000 jobs, but wages rose at their fastest rate in 8 years.

And just so you realize:

Low unemployment tends to lead to wage increases
Wage increases tend to lead to more disposable income
More disposable income tends to lead to more money to spend
More money to spend tends to lead to inflation
Inflation tends to lead to higher long term mortgage rates

Take a look at the correlation:

As you can see, even as the unemployment rate (the blue line) began to fall in the years following the collapse, wages (red line) didn’t really begin to trend upwards until the latter part of 2015, and even then, only negligibly. The most recent jobs report indicates that wages are starting to rise, a trend that is predicted to continue for some time.

So What Does it Mean for Housing?

Not much … yet. And as a matter of a fact, I am not unhappy to see the rise happening.

Why? Because it means the economy is healthy and people see positive things on the horizon. Trust me, I would rather be in a world with healthy economies and 6 to 7% long term rates than one teetering on the brink of collapse with 3.5% rates.

As we discussed in our 2018 Predictions only a few months back, we predicted a rate rise in 2018 and went into some detail about the implications. Effectively, if we are all making more money, then a slight rise in the cost of borrowing is not something that will cause the market to collapse. And furthermore, as long as credit standards remain reasonable (and consistent) then the risk of a ‘2008, The Sequel’ is quite low.

Home Prices Will Still Rise

Expect housing values to continue to rise, especially urban and affordable, due to a complete, thorough, absolute, and total lack of inventory. As the millennial generation begins to exit their downtown rentals and enter the buying market, affordable urban markets will continue to be starved for inventory.

Expect some of the upper end suburban markets to see slowing price gains due to the fact that homebuilding is finally cranked up again, mitigating some of this inventory shortage.

Think ‘Strategic Finance’

Remember, it is the long term rates that are the ones that have more room to rise. The 3, 5, and 7 year adjustable rate mortgages will still give buyers options a point or two below the long term rates, offsetting any rate increases.

But that said, it is time to get a little more strategic about how you finance your home. Gone are the days of just taking a 30 year mortgage at 3.5% simply because it is a no-brainer to do so. Thinking long and hard about how long you expect to stay in the home will become a key ingredient to making the correct mortgage decision.

But it does feel like we have come to the end of an economic era – the end of the 4% 30 year mortgage. And while I will be a little sad to see it go, it indicates much better times are on the horizon.

One South

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One South is Born

July of 2008

We Were Lucky, and Good

July of 2013

July of 2018

July of 2028

Rates are Headed Up – For Good

So What Does it Mean for Housing?

Home Prices Will Still Rise

Think ‘Strategic Finance’

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