For my Dad, Chaplain (COL) Jim Thompson, USA,  Ret. and all who have ever served.
Thank you, from the bottom of my heart.

It is easy to take liberty for granted, when you have never had it taken from you. 
– Author unknown

In war, there are no unwounded soldiers.  – José Narosky

I think there is one higher office than president and I would call that patriot.  – Gary Hart

Courage is almost a contradiction in terms.  It means a strong desire to live taking the form of readiness to die.  – G.K. Chesterton

America’s veterans have served their country with the belief that democracy and freedom are ideals to be upheld around the world.  – John Doolittle

This nation will remain the land of the free only so long as it is the home of the brave. –Elmer Davis

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Spend much time on real estate blogs, internet message boards and the like and it won’t take long to hear Realtor Bashers making wild claims about over-paid real estate agents.

And while it’s true that one can make very good money in real estate sales, the simple fact is the vast majority of real estate agents actually earn very little.

Here is some data that was shared by the Arizona Regional Multiple Listing Service (ARMLS) in a “Broker’s Breakfast” this morning. Apply a little simple math, and it highlights what real estate agents typically earn, at least here in central Arizona (though I suspect the numbers are similar across the country).

Some facts:

• At the end of 2008, there were 33,500 agent subscribers to ARMLS.
• 20,466 of those agents (61%) had at least one sales transaction.
• Conversely, that means 39% of agents in the Phoenix area sold nothing in 2008.
• 7,156 agents (21%) had $1 million or more in sales volume.
• Those 7,156 agents had $23.6B of the areas $29.4B in sales transactions (80.1%)

In short, it’s the age-old “80/20 rule” – 20% of the agents do 80% of the business.

What does this mean?

Let’s start with defining “$1 million in sales volume”. This does not mean an agent earned $1 million dollars. Not even close. You may often hear an agent puffing out their chest with pride, proclaiming, “I’M A MILLION DOLLAR PRODUCER!”

Big deal.

“Sales volume” means the value of the homes sold. So if an agent sells one home priced at $1 million, they are one of the coveted MILLION DOLLAR PRODUCERS! Ditto if they sell ten $100,000 homes or four $250,000 homes. You get the idea.

What does this equate to in dollars of actual income for the agent?

Let’s say, for example purposes only, the commission on the sale of a home is 3% of the purchase price. (Before someone jumps all over me, yes, commissions are negotiable. And they vary wildly. But 3% is pretty typical around here. You’ll find some less, and some more.) Simple mathematics will tell you that on $1 million in sales volume at 3% commission, the agent has just earned $30,000.

Let’s not even go down the commission split road. For the uninitiated, real estate agents typically split their commissions with their real estate broker. I’ve seen splits of 50/50 to 90/10 (90% of the commission to the agent, 10% to the broker). There are offices that claim to be “100%” offices. That’s really a fallacy as trust me, brokers don’t work for free. They get money in one form or another from agents.

Then there are of course taxes. And expenses. But for the sake of argument, let’s just say the agent clears $30,000 on every $1 million in sales volume.

Then by ARMLS’s numbers, 79% of the real estate agents in the Phoenix area made less than $30,000 in 2008.

That’s hardly a boatload of money.

I’m sure someone has already whipped out their calculator and determined that the 7,156 agents that did $23.6B in volume averaged over $98K in gross earnings. That’s a pretty nice annual income. But averaged of course, means exactly that. There’s going to be a distribution of incomes in that 20% of top producing agents, and this data doesn’t tell us what that distribution might be. The entry wage to get into that “top producer” group is just $30,001 in annual income. No question though that some of that 20% are doing very well financially.

But still, four out of every ten agents in the Phoenix area made NOTHING in 2008. and eight out of ten made less than $30,000 in annual income (significantly less if one factors in commission splits).

What does this mean for home buyers and sellers?

Finally, Jay gets to the point!

What this all means is that you, oh home buyer or seller, is that you need to be very careful in who you chose to represent you in the sale or purchase of your home. Obviously the majority of agents out there aren’t making a living selling homes. Don’t you want an experienced agent representing you?

This is not to say that a part-time agent, or an agent that has a “real job” supplementing their income is incompetent. I know *many* wonderful agents that are in this situation. (I also know some lousy agents that are in the 20% group). An agent can also receive (or not) a lot of help from their broker, and/or other agents on their team.

Whether the agent you chose to represent you actually makes a living doing this is one of several factors you should consider. But it’s definitely a consideration. No, don’t go asking your prospective agent for their last five tax returns. That’s just wrong, and honestly, it’s no one’s business knowing what someone else earns.

But questions like, “Is this your full time occupation?”, “How long have you been in real estate?” “Will there be times you can’t help me due to other commitments” and similar questions are perfectly acceptable to ask.

Should you rule out an agent that isn’t full time? Personally I don’t think so. I’d rather hear an agent say, “Real estate is my passion, and I’m darn good at it. Yes, I supplement my income but you’re getting me, a great broker and I have tons of support to help you” than something like, “Hire me, I’m in the Million Dollar Club!”. One agent is being honest and upfront, the other one is full of crap.

Whether an agent has a secondary income or not may or may not be a critical factor for you. That depends on you and the agent. If it is important, you should know the numbers and I suspect that much of the general public is quite unaware just how many agents aren’t making their primary living selling real estate.

Now you are more aware.

And that’s the point!

Going to Inman Connect NYC 2010?

Want to save $100?

Just enter the promo code PhoenixREGuy at registration checkout, and you’ll get an additional $100 off. (If you are an Inman Premium member, be sure to log in first, and you get an additional $100 off.)

Why should a real estate professional attend Inman Connect?

It’s the best collection of real estate minds assembled in one place that I’ve personally experienced. The program for this Connect looks fantastic. Some speakers have already been identified, and more are being added. I can’t count how many real estate visionaries, leaders of technology companies and ground-breaking thoughts, ideas and products I’ve encountered at previous Connects.

For what it’s worth, it’s the single best real estate conference I’ve attended.

And let’s be honest, New York City is a cool place to hang out. And the parties are epic.

Of note: If you are in the Phoenix area (or even remotely close) and want to attend, let me know because if we get a group of 5 or more, I can get us an additional discount. If we can get 25 or so, it’s possible we can get an even sweeter deal with some extra “benefits”.

Be SURE to enter the promo code PhoenixREGuy at registration checkout to get your $100 discount! But hurry, this discount code expires on November 21!

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Disclosure: This discount code is offered through an affiliate program. Yeah, I get a discount too if you use it.

I’ve been running this poll on Twitter for the last couple of days and would love to get more responses. No registration is required, and no one will see your answer.

Of course it’s not a scientific poll by any stretch of the imagination, but it’s interesting data none the less…

It’s easy… just select your choice and click “vote”. You’ll then be taken to the results page.

Here’s a clip from CBS5 News with a small portion of my thoughts on the home buyer tax credit. But don’t let that influence your selection…

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As we announced here back in October, Thompson’s Realty has expanded to serve the Tucson metro area. Everything is in place and the “doors” are open!

“Doors” in the metaphorical sense of course as we’re virtually based and have no “brick & mortar” office space. We don’t need a shiny and expensive office building to provide superior customer service.

There is now a Tucson home search installed here on Phoenix Real Estate Guy. You can access it via the button to your right (that’s a placeholder graphic – a better one will be in place shortly), or under “Phoenix Home Search” in the navigation menu up above.

It’s powered by Diverse Solutions, the same provider we use for the Phoenix home search here, and like that search, no registration is required. (If you want to save searches and get automatic updates, you’ll need to register with a valid email address).

We’ve also got our first Tucson listing. It’s a real beauty, so check it out! Just think, YOU can say, “I bought the very first Thompson’s Realty listing in Tucson!” How cool would that be?

Stay tuned. We’re not done…

UPDATE Nov 6: According to UPI, President Obama has signed this legislation. NOW it’s official.

The extension of the existing $8,000 tax credit for first time homebuyers is now all but a done deal.

Moments ago, the House of Representatives passed HR 3548 – The Unemployment Compensation Extension Act of 2009 with a vote of 403 -12.

“Whoa, hold on there Jay. You said the tax credit extension was passed. What’s up with linking to some unemployment legislation?”

That would be because the Senate attached an amendment (SA 2712, Section11) to HR 3548 that extends (and expands) the home buyer tax credit. The Senate passed the amended HR 3548 on Wednesday by a vote of 98 – 0.

The bill now moves to President Obama’s desk for his signature into law. Some mainstream media is reporting the President will sign this on Friday, November 6. THEN, and only then, will the tax credit truly be extended and expanded (regardless of whatever you may read on Twitter, on blogs, and in the press).

So what’s in the bill?

Amendments are difficult to read as they cross-reference multiple documents and contain gobbledygook that looks like this:

(1) by striking “and” at the end of subparagraph (M),

(2) by striking the period at the end of subparagraph (N) and inserting “, and”, and

(3) by inserting after subparagraph (N) the following new subparagraph:

“(O) an omission of any increase required under section 36(f) with respect to the recapture of a credit allowed under section 36.”.

Good luck deciphering that…

Here’s what I’ve gleaned from reading the amendment, cross-referencing it, and digesting various media reports:

The “New” Home Buyer Tax Credit Details

• The existing $8,000 tax credit is extended to May 1, 2010. (The credit is for 10% of the home purchase price, up to $8,000.)
• If a home buyer is “into a written binding contract before May 1, 2010”, and they close on that contract before July 1, 2010, the tax credit can be claimed.
• A new tax credit for “long-time residents of same principal residence” has been created. This has been reported in many places as a tax credit for “move up buyers”. Here is the actual verbiage of the new tax credit for existing home owners:

  EXCEPTION FOR LONG-TIME RESIDENTS OF SAME PRINCIPAL RESIDENCE.–In the case of an individual (and, if married, such individual’s spouse) who has owned and used the same residence as such individual’s principal residence for any 5-consecutive-year period during the 8-year period ending on the date of the purchase of a subsequent principal residence, such individual shall be treated as a first-time homebuyer for purposes of this section with respect to the purchase of such subsequent residence.

• The tax credit for existing “long time resident” home owners purchasing a new home is 10% of the purchase price, up to $6,500.
• The old $8K credit had income limits of $75,000 for singles and $150,000 for married couples filing jointly. The income limits have been increased to $125,000 / $225,000.
• No credit shall be allowed for the purchase of any residence if the purchase price exceeds $800,000.
• All of this applies to primary residences only. No second home or investment properties are eligible for the tax credit.
• For members of the Armed Forces deployed on duty outside the United States, the tax credits are extended to May 1, 2011 (must close before July 1. 2011) Must be deployed outside the U.S. for at least 90 days between Dec 31, 2008 – May 1, 2010.
• “Fraud prevention” measures have been implemented. The tax credit can not be claimed by anyone under 18 years of age (some knucklehead tried to put it on the tax return of a four year old). Also, a “properly executed copy of the settlement statement used to complete such purchase” must be attached to the tax return claiming the credit (I take this to mean a copy of the signed HUD-1 Settlement Statement. But check that with your tax advisor!)

That’s it in a nutshell.

Of interest: According to economists at Goldman Sachs, around 70% of all current homeowners would be eligible for the expanded home buyer tax credit. The NAR and other Realtor Associations will no doubt be salivating over the extension and expansion of the tax credit. Some Senators have said that the chances of the tax credit being extended again come next April 30 are virtually zero.

Personally, I’m not a fan of the tax credit extension. I realize that flies in the face of a large majority of my fellow real estate agent / broker brethren, but that’s how I feel. It’s going to cost a TON of money (almost $11 billion by some estimates), and I am far from convinced it encourages people to buy homes (and if it does, that’s one BAD reason to buy a home).

Disclosure: I am clearly not an elected politician and my interpretation of the legislative text could be incorrect. Also, I am not a lawyer nor a tax professional, nor do I have any desire to be either. You should seek their counsel.

AND DON’T FORGET!! Until President Obama signs this bill, it’s not in effect!

Sources:

HR 3548
SA 2712 (Sec 11 is the applicable section)

Associated Press: Congress set to expand homebuyer tax credit
Wall St Journal: Tax Credit Extension Would Keep Home Prices Up
CNN Money: Senate throws a lifeline to the jobless

National Association of Realtors, Government Affairs: Here is a GREAT summary of the current and proposed home buyer tax credits (PDF file).

One of the facts of the mortgage business today is that it can sometimes be a hurry-up-and-wait game. When it comes to buying a house, I have seen it more than once lately where the seller’s lender who has to approve the purchase contract (because it is a short sale or a bank owned property) takes months to approve the sale and then request/demand that the deal must close in 21 days or less.

It can sometimes be a game of wait, wait, wait… hurry.

Wait, Wait, Wait... Hurry!

I don’t really spend too much time wondering why this is, I just make the observation that sometimes it is.

Which makes it all the more important for you to ask this one important question of your loan officer up front:

“How long will it take to close my loan once I have everything to you that you require?”

By asking this simple question, then if you somehow end up in this situation where you have had to wait, wait, wait… hurry you will know if your loan officer is up to the task or not.

So if you are planning on buying a home in Arizona and find yourself in this situation – who do you call?

Not me.

Call these guys.

They promise with their checkbook that they can get your loan closed in 10 days or less.

Which in my opinion is absolutely-eye-popping-remarkable for today’s lending environment. They have managed to put all of the pieces together under that are required to do this and if it were up to me, I would put them on the Today Show for being able to pull it off on a consistent basis.

But they haven’t asked me to write on their blog.

Yet.

About the Author: Justin McHood is a mortgage broker with VanDyk Mortgage Corporation. You can find him at Arizona Mortgage Team, on the Zillow’s Mortgages Unzipped Blog, and at most East Valley Friday Nights gatherings. He’s the one in the blue shirt.

Hey! I’m growing a moustache to help raise awareness and funds for men’s cancer.

“Uh, dude you’ve already got a moustache,” you may be thinking.

Not any more!

For only the second time in… 25 something years, the ‘stache is gone.

Why in the world would I do this, and why now?

Because it’s Movember – a worldwide movement to raise awareness and much needed research funds for men’s cancer.

Prostate cancer will strike 1 in 6 men in their lifetime, and testicular cancer is the most common cancer afflicting men aged 18 – 35 (but us older guys are not immune).

Perhaps it’s just me, but I’m rather fond of my prostate and testicles and I have no desire to lose them. Or my life.

Funds raised will go the The Prostate Cancer Foundation and Livestrong.

So fellas, join our team and grow a mo! Ladies, you can join too and be a Mo Sista! (no donation required. A little publicity would be cool though.) We need your support!

And if you can spare ANYTHING, even a buck, you can donate here. Why not give up tomorrow’s latte and donate $5?

One does not have to drive far in Gilbert (or anywhere in the Phoenix metro area) to see this:

 
This would be an abandoned subdivision. The streets and sidewalks are in, utilities are run to individual lots, there may even be some common area landscaping done.

But there aren’t any homes.

The builder’s bailed at some point for a variety of reasons – low/no sales, financial difficulties (including bankruptcy), you name it.

Sometimes you’ll even find them with half-built homes – full of tumbleweeds.

It’s a sign of the cratered new home construction market.

However… there are some signs of life, particularly in Gilbert.

Here’s a photo I took yesterday about a half a mile from my house:

That would be active new home construction, and every one of the homes in this photo are already sold.

The Arizona Republic reported yesterday that three builders – Toll Brothers, Pulte and Meritage homes – have purchased about 230 ready-to-build lots in Stratland Estates (near Higley and Germann roads) and plan to start building early next year.

This subdicvision was left nearly empty after the developer, Stratland Estates LLC, filed for bankruptcy on July 2008, according to the Republic article.

Pulte bought 107 lots and plans to build three models ranging from 1900 to 3000 square feet. Sales should begin in March 2010. Meritage expects to build 65 homes and Toll Brothers about 60.

Additionally, 34 spec homes were sold to an independent investor.

This comes on the heels of news that the Town of Gilbert has issued nearly 1,000 new home construction permits this year – twice the number officials expected. In September, Gilbert issued 116 new home permits, more than any other Valley municipality, including Phoenix proper.

What this may mean for “traditional” sellers

From an overall real estate market perspective, an increase in new home construction is generally considered a good sign.

But if you are a “traditional” seller – meaning you are trying to sell the home you are living in – there may now be even more competition for buyer’s eyes. You are already competing against foreclosures and short sales, along with existing new homes – many of which are offering loads of buyer incentives.

That is a LOT to compete with. Many real estate buyers think they can get a “better deal” with a foreclosure or short sale (this is not always a safe assumption, but it’s something you have to contend with). And it’s hard to look past incentives like $30,000 – $80,000 in free upgrades on a new home.

You can’t really directly compete with a new home builder offering crazy incentives. But you CAN make your home clean – immaculate clean – offer a warranty, get it pre-inspected and do repairs, make it easy to show, be willing to negotiate and price it realistically. That will help level the playing field.

A traditional seller in the Phoenix market can get their home sold. It’s not easy, it will probably take time, and in all likelihood you won’t get as much for your home as you’d like. But it can be done.

I know that’s not what anyone wants to hear, but you’ll get no sugar-coating here.

Good grief.

I’m seeing all sorts of communication coming across Twitter, blogs, Facebook et al such as this:

Home Buyer Credit is Extended! Yeah!

The tax credit as been extended and includes repeat buyers.

I have confirmed the $8k tax credit with CPA as well as mortgage regional manager

Homebuyer tax credit deadline extended…a $6500 credit given to those primary home purchasers.

Extended!! First-time home buyer tax credit and NEW current homeowner tax credit!!!

And this goes on and on and on.

Here’s the deal folks, and pardon my shouting, BUT THE TAX CREDIT HAS NOT BEEN EXTENDED!

I’m not saying it won’t be. In fact, it is looking like it probably will be extended and maybe even expanded to include “move up” buyers as well as having the income limits raised.

BUT IT HASN’T EVEN BEEN FORMALIZED AS A BILL YET, and not one single Senator or Congressman has cast a vote for (or against) a tax credit extension.

Period.

This “reporting” by droves of people, the vast majority of which are real estate professionals, that the tax credit has been extended is completely and utterly incorrect.

And in my opinion, it’s incredibly unprofessional.

READ the mainstream articles your are linking to people.  Statements like these should be your first clue:

Senate negotiators reached a tentative deal…

If the Senate actually passes the bill, the House, where over two dozen versions are floating around, may finally decide to act.

The White House doesn’t fully support the extension and expansion because it’s concerned about the cost and adding to the deficit.

Senate likely to extend homebuyers’ tax credit

When you see words such as “negotiators”, “tentative”, “if”, “may”, “likely”, etc. that is a pretty damn clear indication that nothing has been finalized.

The other huge clue that this extension / expansion isn’t final is in the Constitutional process that dictates how legislation is passed in this country.

Seen any press regarding the Republicans? How about the House of Representatives? Think it doesn’t matter that the White House “doesn’t fully support the extension and expansion”? Seen a Senate or House vote yet???

Don’t understand the legislative process? Crack open a government text book. Ask your kid. Watch this video:

For the love of humanity, please stop with patently false reporting that the tax credit extension is a done deal!

My friend Shane Hollenback, an outstanding Certified Mortgage Planner, summed up my thoughts on this ridiculous “reporting” in less than 140 characters:

A-freaking-men.

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Update: I originally posted this article under the title. “Sigh. THE TAX CREDIT HAS NOT BEEN EXTENDED. Yet.” I quickly realized the *sigh* could easily imply that I’m sad the credit hasn’t been extended. That’s not the case. Though I’ll likely be arrested by the Realtor Associations for Treason, I don’t think the credit should be extended (more on that later). The *sigh* was meant to signal a sigh of frustration for the lame ass “reporting” my fellow professionals are doing.