Did you sell your SOLD before the bell? February 28, 2006
As you may know, HouseValues (NASDAQ: SOLD) is a publicly traded company. As you may not know, they reported their earnings for the quarter and year ended December 31, 2005, this afternoon.
To quote the highlights from the press release from MSN MoneyCentral
“For the year, HouseValues reported annual revenue and net income growth of 82 percent and 101 percent respectively. For the quarter, HouseValues reported revenue of $25.2 million, an increase of 75 percent from the comparable quarter last year. Fourth quarter 2005 net income was $4.0 million, up 117 percent from the prior year. Fourth quarter 2005 earnings per diluted share were $0.15 compared to $0.08 per diluted share in the fourth quarter of 2004. Net income for the fourth quarter and the year included an increase of $1.2 million as a result of the favorable settlement of a state tax audit.”
Blah, blah, Growth Opportunity, blah, blah…
“A recent National Association of Realtors study showed that 77 percent of consumers used the Internet as part of the home search process in 2005. The study also found that buyers who use the Internet to search for a home are more likely to buy through a real estate agent than non-Internet users.* Real estate and mortgage professionals are projected to follow consumer behavior, dedicating more of their marketing spend online than to any other medium by 2009, according to Borrell Associates.”
Blah, blah, Mortgage Opportunity, blah, blah, blah….
“On November 3, 2005, HouseValues announced its acquisition of The Loan Page, Inc. TheLoanPage.com helps consumers find the best deal on all of their home related financing needs by providing them with up to four competitive bids from the nation’s leading lenders.”
So far so good, right? Not according to “Buy on the rumor, sell on the fact” nature of the Street…
To quote another press release from MSN MoneyCentral
“Shares of HouseValues Inc. plunged in aftermarket trading Tuesday, after the company reported a jump in fourth-quarter profit, but said its first quarter and full-year 2006 results would come in well below Wall Street expectations. Shares of the online subscription service for real estate agents and mortgage bankers dropped $3.26, or 25 percent, to $10.14 in after-hours electronic trading, after closing down 25 cents at $13.50 on the Nasdaq.”"HouseValues said it expects first quarter 2006 earnings of 3 cents to 4 cents per share, including about 3 cents per share in stock option expenses. Revenue is projected at $25.5 million to $26 million. Analysts were expecting earnings of 14 cents per share, not including stock options, on revenue of $28.8 million.”
What’s your take on this? Does management think an upcoming war with Zillow is going to hurt HouseValues earnings? Is the slowing housing market at fault? Have enough people seen Ardell’s “Bottom feeder post” to cause this market cap hemorrhaging? Can TheLoanPage.com mount a credible threat to LendingTree.com? Can Batman & Robin save us?
Conspiracy theories and comments?
Sphere: Related ContentWhat makes Commercial Real Estate Different from Residential Real Estate?
(Editor’s Note: I recently came across an interesting blog put together by Stephen Cugier and Nick Papa from Grubb & Ellis that focuses on Seattle’s commercial real estate market. In talking with them, I thought it would be interesting to have them post an occasional article on aspects of commercial real estate that might be of interest to people who generally follow the residential side of things. This first post by Nick will likely be particularly interesting for investors thinking of expanding into commercial real estate. )
The fundamental difference between commercial and residential real estate is the fact that all commercial properties are potentially income producing while most homes are occupied by their owners. While you can obviously purchase a home and rent it out, it is not considered commercial real estate. The four main product types that comprise commercial real estate are office, industrial, multi family (apartment) and retail properties. There are other commercial property types such as hotel/motel or mobile home parks, but these are the primary products and those that an individual investor might consider investing in.
Each product type has its pluses and minuses depending on a variety of factors including, but not limited to the management of the property, the size of the investment and amount of inventory available. Naturally the value of any particular property is also subject to typical market conditions such as location, physical attributes and current demand for that type of product.
For most investors entering the marketplace who have owned residential properties that they have rented out, multi-family is where they feel most comfortable. The benefit to these investors is that multi-family properties tend to be the most attainable commercial properties because you can start with something simple like a duplex and go up from there. One note here; apartment property five units and larger comes with much stricter financing requiring a higher LTV (loan-to-value) ratio while duplexes to fourplexes can be purchased within single-family financing parameters. Apartment properties also allow owners to save money on property management fees by maintaining and managing the properties themselves, typically for buildings less than 10 units.
Office, industrial and retail properties typically require a greater amount of initial investment because it is more difficult to find smaller properties (i.e. less than $1M) to purchase. These types of properties also require, in most cases, some form of professional management. This is because negotiating commercial leases with businesses is much more complicated and difficult than negotiating leases with individuals in rental property. This element can also be a benefit as it allows the investor to simply purchase and monitor their property without having to deal with the day-to-day hassles of management. These types of investments can be very attractive when there is a solid long-term tenant in place or where there is potential to substantially increase rents on the property.
One other factor that needs to be mentioned in this discussion is IRS Code 1031. This part of the tax code allows owners of commercial property to defer the payment of capital gains taxes when they sell an investment property as long as they purchase a property of greater value within 180 days. This is very common in commercial real estate and is a great way for an investor to increase their real estate holdings and as a vehicle to gain tax free cash while leveraging their real estate assets.
If you do consider commercial real estate as an owner or user, it is best to work with trained commercial specialists. They can help guide you through the complicated process of identifying and purchasing (or leasing); which often entails working through proposals, offers and considerable analysis. Commercial specialists often know of unlisted properties that may be available through their network of landlord and owner contacts. They are also a great resource in assessing the financial viability of properties, which ultimately will determine their worth as an investment.
Sphere: Related ContentForget tradition! The New World of Buying and Selling Real Estate
I’ve been going to the MIT Forum’s dinner topics for years as a technology geek. Now that I’m in real estate, I’m still finding applicable topics. Let me put my plug in for the MIT Forum first — The Northwest Chapter of the MIT Forum hosts monthly dinner meetings with topics relating to business and technology. The topics cover the spectrum from computer technology, biotech, nano technology and yes…now real estate technology trends. Always interesting!!
Topic:
Transformation is afoot. Remember how Expedia revolutionized the travel industry? Now companies in our own backyard, including Redfin, HouseValues and Zillow, are offering online technologies that are transforming the real estate industry. From online valuations and lead generation to completing the legal transaction, these companies aim to exploit opportunities in the business of residential real estate. Home buyers, sellers and real estate agents are changing the way that they do business.
Panelists:
- David Eraker, Founder, Redfin
- Spencer Rascoff, CFO, Zillow, Inc.
- Nikesh Parekh, VP of Corporate Development, HouseValues, Inc.
- Gordon Stephenson, Co-Owner and Managing Broker, Real Property Associates, Inc., Director, Zillow, Inc
March 15, 5:30PM - Tickets are $50 at the door (less if you buy ahead of time). Visit http://www.mitwa.org for further details.
The 5:30 time is no-host cocktail with doors for dinner opening later. Come on by and join us.
Sphere: Related Content8 Common Mistakes Made By Real Estate Bloggers February 27, 2006
In putting together Rain City Guide with Anna, I think we’ve made every blogging mistake that is possible… 
In the spirit of learning from our mistakes, here are the top 8 mistakes that are made by real estate bloggers:
- Mistake #1: Posting your listings. Treat your blog as a community resource and you will be rewarded. Treat it as an advertisement, and you will be unread.
- Mistake #2: Too much stuff on the front page (See photo on the right!). In a previous iteration of Rain City Guide I noticed that the site was slow because I was asking users to load too much stuff when all they really wanted was the content! I’ve cleaned up the interface and I feel much better about the site.
- Mistake #3: Create multiple blogs. Except for Jonathan Miller, I’ve never seen a good real estate blogger who could keep more than one blog interesting to read.
- Mistake #4: Using a generic theme. Take the time to personalize the theme of your blog. Simple steps like adding your photo, editing the header graphic and changing around the colors can make a huge difference.
- Mistake #5: Not reading other blogs. I built the original blog for Anna before I began reading other real estate blogs. No one ever linked to that site because I never linked to anyone else. Unless you were one of the originals, you won’t be able to get away with this and expect anyone to read your blog.
- Mistake #6: Too much self-promotion. I stop reading blogs that include a paragraph about the author’s exceptional services at the bottom of every post (especially if this paragraph is filled with links!). Again, unless you were one of the originals, you can’t get away with this and expect anyone to read your blog.
- Mistake #7: Expecting people to comment just because you asked a question. If you want a response out of your readers, you really have to make it interesting. Before asking a question, make sure you’re providing some content that is going to provoke them to respond!
- Mistake #8: Writing a post inspired by another blogger without linking to them. The temptation to keep readers on your site is great, but the benefits of being a good linker are even greater!
As always, I’m interested in your feedback 
, and would be interested to hear if people could add two more so that we could come with a even ten.
Futures and property values: you can bet on the bubble
Last November, Slate magazine posted a piece on the housing market futures. The gist: you can hedge a drop in your house’s property values by buying derivatives that pay if the region’s property values drop a specific amount over a specific time period or even if predicted growth doesn’t materialize:
Next spring, however, investors might finally have a better hedging product. Just in time for the apparent top of the housing market, the Chicago Mercantile Exchange is introducing futures and options on housing prices in 10 cities for the second quarter of 2006.
It’s pitched to big institutions, but it would probably benefit individual investors immensely. That is, if they used it. Unfortunately, the individual home owners it would benefit the most didn’t have enough cash on hand to put money down on their house and are currently just paying interest, so they probably don’t have extra money to invest in hedges.
Also, as Ardell eloquently pointed out a while back, different sectors of the market can “pop” at different times and at different rates. Unfortunately, this could only protect against region-wide shifts:
These options will cover large markets—it will be tough to hedge the value of your own house, which depends so much on your particular neighborhood.
I liken it to buying an index fund (or mutual fund) instead of a single stock, although maybe insurance against extreme price swings is a better analogy; the effect is to reduce the upside and the downside of your investment. It doesn’t seem very exciting in the least so I’m putting this one in the “popular after the crash” basket, as it’s hard to plan for hard times when the good times have lasted so long.
So who’s buying on opening day? And can the market correctly predict housing prices over the next few years, or are investors so oriented toward a bubble popping that they can’t see the inherent strength of the market (or vice versa)?
Galen
ShackPrices.com
Real estate blogs spark key industry debate
Inman is running an interesting article on how blogs are changing the real estate industry (goes behind a subscription wall after today!). Once you get through a bit about Jonathan Miller of Matrix and Adam Koval of SocketSite, you might notice that they interviewed me as well.
Probably the oddest part about a formal interview like that is that after 30 to 40 minutes of talking you know that they are only going to use a few quotes. Nonetheless, I was glad to see that Jessica picked up on the two most valuable aspects to Rain City Guide: (1) the great contributors and (2) the excellent home search tool developed by Robbie.
(photo credit: Mark Reibman)
UPDATE: Surprise, surprise…. The Property Grunt did a much better job summarizing the article: “Jessica Swesey does a kick ass job getting into the heart and soul of real estate blogging.“
Sphere: Related ContentHow cool is our home search? Ice Cold! February 26, 2006
In case you haven’t dropped by our home search tool recently, we’ve made some improvements
. Changes include…
Market Analysis Tool Improvements
We thought it would be helpful, if you could get a second opinion when you get an estimate. So, we’ve made arrangements with Zillow to use their Zestimate web services on our Market Analysis page. That way, when you type in a property address, we’ll give you our estimate, get your property’s Zestimate (and the link to it’s page on Zillow), and save you some typing.
Radius Search
Want to find the all houses, within 2 miles of your house or office? Now you can here! And yes, the search results pages are Bookmark-able, RSS-able, and Google Earth-able. (I wouldn’t have it any other way).
Improved Location Search
The list boxes on the location search page are multi-selectable. Big whoop, I hear you say? Well, ours doesn’t refresh the entire page when you change the city or download a big city / community list when you first navigate to the page. Yes, you are seeing AJAX in action. It’s not something most people are going notice, until they wonder “Gee how come your page is so much faster than all the other ones”?
As always, the results from the improved location search are Bookmark-able, RSS-able, and Google Earth-able.
What’s next
Well, it’s a given that at some point I’m going have to have Virtual Earth or Google Maps integration, instead of static Yahoo Maps. If I’m going to compete with the big boys of real estate search, I gotta do maps. I’m probably going to have to create profiles, so you can save your searches, favorite properties, favorite places and other stuff that requires server side persistence.
What features would consumers and realtors like to see next? I’m more interested in hearing what realtors would like to see next because they are the ones who’ll be writing the check, when I eventually decide to release this. I have a billion ideas for what I’m going to do, but I’d get to some more feedback to find out what features I should implement next. Otherwise, I’ll continue to make it up as I go along…
Robbie
Sphere: Related ContentEscalation Clauses - Downtown Kirkland Condo Market
I wrote an offer yesterday with an escalation clause on a Downtown Kirkland Condo that has been on market for 2-3 days. As I have said before, while there appear to be many things “on market”, most agents are waiting in the wings for something better than what is for sale at present. This is what causes properties to be on market, as opposed to being sold.
When that special property at the right price appears, it is likely to have multiple offers, as happened yesterday. Just before we write an offer, we call and speak with the listing agent to determine how best to write the offer. As soon as we hear there is another offer being presented in a few hours, we know we need to add an escalation clause. Problem is that everyone knows this, so you have multiple escalation clauses in play.
An escalation clause has an increment of increase and a cap. Example: Asking price $450,000. Offer might be $450,000 plus $1,000 more than any other offer in hand before this offer expires, up to a total price of $475,000. You need a cap value, as the reason everyone wants it is because of the location, condition and price. If the price bids up too high, you might as well have bought something else on market that was overpriced by offering a lower bid. So you have to be careful not to place your cap at a point where you wouldn’t have bought it in the first place.
It is amazing to me at times that no matter where I work in the Country, everyone seems to want the same thing. They all want the thing that is not for sale, especially this time of year. So as soon as something comes on market that fits the profile of what everyone REALLY wants…multiple offers. There can be 150 properties on market, but everyone is waiting for that one that is not for sale yet 
Earnest Money - Where does it go and when? February 25, 2006
Some of the most Frequently Asked Questions in a Real Estate Transaction involve the Earnest Money Deposit. The Earnest Money usually follows with the transaction from day one all the way through to the last day, as in “follow the money”.
The buyer usually writes a check for the Earnest Money deposit at the same time that they sign the offer and they hand it to their Buyer Agent. The check can be made payable directly to the Escrow Company they chose in the contract, or to the Buyer Agent’s Company if they have an in house Trust/Escrow Account. More and more these checks are made payable to the closing agent.
When the seller accepts the buyer’s offer, the check gets deposited. Let’s assume the check was made payable to escrow and went directly to the escrow company for deposit.
At close of escrow this money comes back to the buyer as a credit against his costs or downpayment. If it is a zero down loan and the seller is paying the closing costs in full, this $1,000.00 can be returned to the buyer at close of escrow.
If you know you really want the house when you make the offer, and you have no problems at all throughout the transaction, the Earnest Money just slides like butter from your hand and back into your hand. Whether it actually goes into your hand at the end or is paid against your costs varies from transaction to transaction. But it still simply comes back to you like a boomarang.
The only time you should be worried about handing over an Earnest Money check, is if you are not sure you want the house at the time you make the offer
Should RCG Allow Anonymous Comments? February 24, 2006
In my mind, the best thing about Rain City Guide is that the site has grown into a wonderful community with a constant stream of interesting posts and comments. In no way do I want to mess with this!
However, I’m a slightly concerned with the rise in anonymous commenters on Rain City Guide because I’ve seen a few blogs and forums where the discussions degenerate once people start leaving anonymous comments in bunches. So far this hasn’t been a problem on Rain City Guide, but I don’t want to let things slip to the point where anonymous people (like Bob Cat, el nino, Milton Friedman) make others feel uncomfortable posting their comments.
Here are the options I see in dealing with anonymous comments:
- No change… Leave all non-spam comments on the site (anonymous or otherwise)
- Selectively delete anonymous comments that are clearly meant to antagonize or bait people.
- Try to preempt any issues by requiring that all posts be from people with a valid email address. I could check this by emailing anonymous posters after they leave a comment and if they don’t respond in a reasonable amount of time, I would delete their comment.
- Require people to register with Rain City Guide before leaving a comment. This would include an automatic email address verification.
If I was going to make a change, the purpose of the change would be to discourage degrading comments (before they start to occur) and to encourage people to leave comments with less chance of harassment. What do you think? Am I making much-to-do about nothing? Should we just assume that only people with a think enough skin are going to leave comments anyway?
I’m definitely interested in your feedback! (and feel free to comment anonymously… for now.)
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