Matrix Blog

Brokers, Agents, MLS, NAR

Multi-millionaire Motivational Speaker Dean Graziosi Shares His Appraisal Wisdom

October 4, 2015 | 4:40 pm | irslogo | Favorites |


Over the past few days I’ve been sent this blog post by a number of real estate appraisers who are upset with its derogatory reference to our profession. It was written by Dean Graziosi in the Huffington Post guest blogger section. I’ve never heard of him but perhaps that’s because I’m not a real estate agent. If you insert the word “scam” in your google search, there are a lot of additional insights that come up.

His Huffpost bio and web site indicates he is a NY Times Best Selling Author along with one of the top personal motivation and real estate trainers in the world. I also learned from his bio that he is a multi-millionaire, a guru in the personal motivation sector and cares deeply about his students. Translation: He basically teaches real estate agents how to sell.


Good. While it’s not my thing, I’m happy for Dean’s success (notice how his watch is strategically placed within his Facebook head shot as an indirect confirmation of his success) assuming no one was hurt. However as a public figure (as indicated on his Facebook page with 340K+ likes), Dean has a responsibility to convey information accurately to his students if he does indeed care.

While I doubt he wrote it it personally, his brand handlers managed to mischaracterize two key issues in a small blog post on HuffPost:

  1. Graziosi frames the current housing market as equal to the bubble’s peak but doesn’t accurately describe what that means.
  2. Graziosi frames the real estate appraiser as something other than a real estate professional while the real estate agent is a professional.

1. Housing Market

Graziosi cites the FHFA trend line as breaking even with the 2006 peak. Yes, based on FHFA methodology that’s certainly true and taken directly from the most recent FHFA report. I do feel the need to split hairs here since his “brushstroke style” of simplifying everything misaligns with reality. He says:

First, and most important, it requires repeat sales of homes, so if there aren’t huge numbers of sales, then we’re looking at a number derived from a small set of sales data. So, we’re not necessarily seeing an excited bunch of buyers flocking to the market. We are seeing a whole lot of homeowners who aren’t selling, waiting for rising values. So, we have a small inventory and competition for it.

The problem here is that there are a lot of sales outside of FHFA data – and FHFA only tracks mortgages that go through Fannie and Freddie. Roughly 30% of home sales are cash and another 5-10% of them are jumbo loans, too large to be purchased by the former GSEs – so they don’t get included. FHFA also excludes new construction.


The Case Shiller index is also a repeat sales index like FHFA but shows a different price point for the current market because it includes transactions outside of the GSE world.


If we look at the number of sales, which is the key point he makes, sales activity is low because we’re not necessarily seeing an excited bunch of buyers flocking to the market. But in reality, home sales are not low and they have been rising for 4 years. Of course sales are not at pre-crash highs because those highs were created largely by fraudulent lending practices including the unethical behavior of consumers caught up in the systemic breakdown that included nearly all particpants in the mortgage process.


Graziosi is right that inventory is low, but not because buyers aren’t flocking to the market – many buyers are being held back credit access has over-corrected. Many homeowners can’t qualify for the next purchase so there is no point of listing their home for sale.


Conclusion – we are not at the pre-Lehman market peak unless you only look through the eyes off FHFA, a distorted subset of the overall housing market. I would think that real estate gurus understand this.

2. Appraisal Industry

Let’s move on to the real reason I am writing this post.

I can ignore Graziosi’s “lite” market commentary but I can’t ignore his misunderstanding of the appraiser’s role in the purchase mortgage process (buyers applying for a mortgage to purchase a home.)

Don’t call an appraiser, as their approach to market value is different than that of a real estate professional. The real estate agent is trying to get you a sold price near to the top of the market, and their CMA, Comparative Market Analysis, is going to give you a pretty good idea of its value.

There is so much to talk about within these two sentences I’m not sure where to begin. It’s mindbogglingly simplistic, misleading and uninformed. Perhaps this is how he makes his students motivated?

Lets go for the big point first:

“Don’t call an appraiser, as their approach to market value is different than that of a real estate professional.” He must be thinking along the lines of the IRS definition, which is

To meet the IRS requirements, you need two things: spend the majority of your working time spent performing qualified real estate activities (regardless of what you do), and rack up at least 750 hours. Qualified activities include “develop, redevelop, construct, reconstruct, acquire, convert, rent, operate, manage, lease or sell” real estate.

Nary an appraisal-related definition within that list.

The problem with Graziosi’s communication skills as a best selling author and nationally renowned real estate guru who gives seminars for a living to communicate to his students (agents) how to succeed is – if we (appraisers) are not “real estate professionals” then it is a hop, skip and a jump to suggest we are “unprofessional” as if appraisers are something less than a real estate agent. Ask any consumer if they hold real estate agents in higher regard than real estate appraisers? In my view both industries don’t have sterling legacies but one isn’t more professional than another. Remember that he is used to speaking to his students who are real estate agents, the kind that sign up for this type of course. Promote BPOs and help agents get more listings – has got to be his recurring mantra.

The second issue with his quote concerning an appraiser’s value opinions – “their approach to market value is different” than a real estate agent. Providing an opinion of market value is likely the intention of both. Most real estate agents are hoping to get the listing and the appraiser is not incentivized by the home’s future sale. The agent may be the most knowledgeable person in the local market but there is an inherent potential conflict. Graziosi suggests that the broker will give you a price you want to hear. However I do like his idea of getting three broker opinions – that’s a very common practice – nothing new there. Ironically both an agent and an appraiser are looking at closed sales, contracts and listings but the appraiser doesn’t have an inherent conflict. They aren’t going to get the listing no matter how accurate their value opinion proves to be.

One problem with today’s appraiser stereotype as this column brings out indirectly, is that bank appraisers now generally work for appraisal management companies (probably about 90%) and the best appraisers tend to avoid or perform minimal AMC work because they can’t work for half the market rate. As a result, good appraisers aren’t necessarily known as well by the brokerage community as in years passed unless they get in front of the brokerage community in other ways, like giving seminars, public speaking, etc. Competent brokers within a market will know who the competent appraisers are.

There are unprofessional professionals in every industry – doctors, lawyers, deepwater diving arc welders and farmers, so please don’t make sweeping pronouncements to the contrary – especially if you are in the business of communicating information to “real estate professionals”.


The real estate appraisal industry is not unprofessional
IRS definition aside, real estate appraisers are real estate professionals

As I’ve walked through this response, I realized that the silly advice blog post in the Huffington Post by an infomercial guy did what it intended, stir up conversations of any type to get his name out there when his actual content was devoid of useful information. There is a great post I stumbled on the industry of motivational speakers: Real Estate B.S. Artist Detection Checklist. Worth a read.

Looks like I’m never going to be a multi-millionaire wearing a huge watch strategically placed in my head shot. If you notice my own head shot in the righthand column, my watch is very small.


UPDATE From the I have no idea for whom the appraisal is being performed but I am a 20+ year real estate professional (see definition above) department: Here’s an article from the Santa Fe New Mexican “Be cautious of appraisals” that damns appraisers using a stunning lack of understanding of the appraiser’s role in the mortgage process given his experience. This piece was written by a mortgage broker who was also a former financial consultant and real estate agent. The author states:

Everyone in every business falls under some measure of accountability. Certainly appraisers must also be accountable to their customer. The customer is the homeowner, not the AMC.

No it isn’t.

The appraiser’s client in the mortgage appraisal situation you describe is not the homeowner. The AMC is acting as an agent for the lender in order to for the lender to make an informed decision on the collateral (of course that’s only a concept). The appraiser is working for the AMC (who works for the lender) and not for your homeowner. Your logic from the housing bubble still sits with you today.

Yes I agree that the quality of AMC appraisals for banks generally stinks, but blame the banks for that, not the appraisers. Quality issues don’t change who the appraiser is working for. AMCs do internal reviews and make ‘good’ appraiser’s lives a living hell for half the prevailing market rate loaded with silly review questions by 19 year olds chewing gum to justify their own institution’s reason for existence. No wonder you are frustrated with appraisers from AMCs. ‘Good’ appraisal firms like mine avoid working for AMCs whenever possible. Yes I would be frustrated as a mortgage broker today because your industry got used to using appraisers as “deal enablers” during the bubble and nothing more. I contend that the current mortgage process post-Dodd Frank is clearly terrible and AMCs are a big part of the problem.

ASIDE This new era of online journalism for print stalwarts like the “Santa Fe New Mexican” and new versions like the “HuffPost” rely on filler-like the above 2 articles discussed here. Very sad.

Tags: , , , , , , , , , , , ,

Bloomberg View Column: Real-Estate Agents Ride High Again

March 1, 2015 | 8:00 am | BloombergViewlogoGray | Charts |


Read my latest Bloomberg View column Real-Estate Agents Ride High Again.


It was disappointing to have so many Realtors go on the attack over this piece showing they missed the entire point – I was writing about the trend, not the dollars or the splits. Are commission incomes higher in say Manhattan than in rural Texas. Doh! The very idea that incomes are rising after years of low transaction volume plus the lack of resurgence in NAR membership since the financial crisis has made for a little less competition today. This seems like good news to me for the industry. But with the barrier to entry so low, the window will close sooner than later.

I even had a PR executive at NAR send me a critical email concerning my numerical calculations and results but made the mistake of exposing her significant lack of understanding about what data NAR actually publishes. To avoid embarrassing her I opted not to share the letter in this post.

Here’s an excerpt…

This is turning out to be a pretty nice time to be a residential real-estate agent. As the housing market recovers, average income has been rising faster than sales largely because there are fewer agents planting for-sale signs…

[read more]

My Bloomberg View Column Directory

My Bloomberg View RSS feed.

Tags: , , , ,

My First Post on Bloomberg View: Homebuying Gets a Housecleaning

July 28, 2014 | 9:28 pm | BloombergViewlogoGray | Charts |


I was recently approached by Bloomberg View, the editorial arm of Bloomberg LP, to provide commentary on the housing market. I seem to be in good company.

Although their well oiled machine began to append my additional title “Bloomberg Contributor” earlier in the month when being sourced, it wasn’t an oversight on their part. I didn’t submit my first post until last week. It took me a few weeks to get my groove on as I was in the midst of a 2Q14 market report release gauntlet.

Last Wednesday evening I wrote my first post about Lawrence Yun’s attendance at the Zillow Housing Forum and how NAR had become just one of the crowd, and the symbolism of it all. I got the idea when I was sent the Zillow e-vite to attend the conference and I noticed that Yun was to speak.

Excited, I submitted my first post on Thursday morning, unfortunately just before the Zillow-Trulia bombshell deal jumped into the headlines. So I needed to add this new twist – which thankfully made my original point even stronger. I re-wrote my first post and it was placed online last Friday.

Here is the first column of hopefully many to come: Homebuying Gets a Housecleaning

My Bloomberg View RSS feed.

Tags: , , ,

Cluttering Luxury Housing Markets with Listings Made for TV – Manhattan Edition

June 28, 2014 | 4:55 pm | wsjlogo |

[Source: WSJ]

A little over a week ago the WSJ’s Candace Taylor broke the story about 3 contiguous listings to be marketed together at the top of a 15-year old ground lease condo in Battery Park City for $118,500,000.  At 15,434 square feet, that works out to $7,678 per square foot.  CNBC’s Robert Frank provides more details in a video tour that was broadcast shortly after the story broke.

Normally I don’t bother to do the math on this sort of thing but after the Cityspire listing a while back, I thought I’d tweak my thinking a bit as the luxury market gets more than its fair share of confusing “milestones.”

Doing the Math
Here’s my listing price logic using content in the near viral news coverage of the record Battery Park City listing – I break down the 3 units:

$56,500,000 ($7,406/sqft) listing - 7,628 sqft 5-bed listed last year for 5 days and removed.

$11,700,000 ($3,330/sqft) purchase - 3,513 3-bed in April 2014.

$19,000,000 ($4,425/sqft) listing – 4,293 sqft 4-bed $23M January listing dropped to $19M, then removed.

$87,200,000 is the aggregate total for the 3 units that total 15,434 square feet ($5,640/sqft). The current list price of $118,500,000 represents a $31,300,000 premium for the combination of all 3 units before we might assume the millions in renovations to combine if you believe that the $87,200,000 total is what aggregate of the individual properties are worth.

Given the $3,330 ppsf recent sales price of the 3-bed and the unable to be sold for $4,293 ppsf after 6 months on market 4-bed and the not-market tested 5 day listing period 5-bed at $7,406, I can’t figure out how the listing agent gets to $7,678 ppsf as an asking price for all 3 together before the cost of renovation to combine? Perhaps the seller set the price.

The listing broker tells us that the pricing “is justified by the square footage“, as well as the views and building’s amenities.”

Got it.

Tags: , , , , , ,

Gold Jacket: How Does The Real Estate Brokerage Industry Change Its Image?

June 28, 2014 | 11:52 am |

I’m not sure we needed all of the (Century 21 – style) gold jackets, 4 women to 1 (bumbling) man ratio and house pocket logo imagery to get the stereotype being portrayed in this AT&T Mobile television commercial.  It is played over and over and I find it really annoying. The gold jacket stereotype has appeared in movies, ie War Games, Adam Sandler’s Happy Gilmore.

This tv ad use of props to convert the stereotype is intended to insure that the viewers understand that these people are aggressive, almost cartoonish, real estate sales agents. There are plenty of sales related industries with exaggerated stereotypes like used car salesman, stock brokers and insurance salesmen (of course some would argue they are accurate portrayals).


The gold jacket was a marketing idea from the 1970s designed to thwart another company’s use of red jackets. And do you remember ABC’s Wide World of Sports Blazer?

Appraisers are also stereotyped as wearing polyester blazers (infers they are out of touch), carrying clipboards (most still do) and a “wheel” or tape measure.  All fairly benign when compared to the C21 gold jacket.

I wrote about this back in 2006 back in the early days of this Matrix blog.

Century 21 ended the gold jack requirement way back in 1996 but tried to implement again in what one would argue as a failed 2008 rebranding – but the stereotype lives on.

Should the real estate brokerage industry combat this portrayal? Is it too late? Does it even matter?

Tags: , ,

New Angle: Blame Low Mortgage Rates

June 23, 2014 | 10:37 am |


The National Association of Real Estate Editors just held their annual conference and one of the experts was Lawrence Yun, the chief economist of the National Association of Realtors.

Admittedly he has always seen the real estate world through different lenses than I so I am often thrown for a loop when I come across some of the rationale for the current state of the housing market.

A local media outlet recapped his NAREE speech but since I didn’t attend and there is no transcript, I’ll go with the following paraphrasing:

Mortgage rates reached record lows in 2012 and 2013 of around 3.3 percent for 30-year home loans. Homeowners don’t want to let go of those once-in-a-lifetime bargain mortgages, says Lawrence Yun, chief economist for the National Association of Realtors. So homeowners avoid putting their homes on the market in order to keep those low mortgage rates and that has resulted in super low inventories of home for sale. Although rates are still low (less than 5 percent) many people are opting to rent out their houses so they can hang onto great mortgages, Yun says.

Here’s another way to look at what he says is happening:

Yun – Home sales are not rising (year-over-year) because mortgage rates are so low that would-be sellers won’t sell. They simply love their low mortgage rate more than moving.

My view – Home sales are not rising (year-over-year) because of a combination of rapidly rising home prices that reduces affordability and historically tight mortgage lending standards that resulted record low inventory. Tight credit keeps the roughly 40% of home owners with low or negative equity from selling because they don’t qualify for the next mortgage. Hence, sales fall.

There is clearly way too much emphasis on mortgage rates in our housing economy.

Tags: , , , , , ,

Status Quo Bias: ‘Linear” Thinking in the Real Estate Industry

June 8, 2014 | 8:09 pm |


When we look at forecasting, planning, trending or anything that includes a look out over the future, I find the real estate industry (i.e. appraisers, real estate agents & brokers) generally thinks along linear lines.

For example:

  • When housing prices rise…they will rise forever.
  • When housing prices fall…they will fall forever.
  • When sales activity rises…they will rise for ever.
  • When inventory falls…it will fall forever.
  • When rental prices rise…they will rise forever.

…and so on.

Where does this status quo bias come from?

I don’t think this bias only specific to the real estate industry – but I describe it through the industry only because it simply happens to be my area of focus. I do find that real estate professionals can be quite disconnected from the mindset of their clients when the market is at extreme points in the trend i.e. peak and trough.

For example, in the dark days following the Lehman Brothers bankruptcy, I was giving a speech to a large group of New York real estate agents in October of 2008. Roughly a dozen agents approached me before and after my presentation saying they were getting offers on their listings at roughly 30% below ask, characterizing the offers as “lowball.” It was quite amazing to hear all the agents use a similar characterization of the post-Lehman market. Of course when nearly all buyers are behaving in the same manner, that becomes the new market condition.

Towards the end of 2008, I found that New York real estate agents rapidly changed their view on the market as sales contract activity fell by 75% YoY. The real estate agent disconnect with the consumer was evident by the early spring of 2009 when it was apparent that buyers were not as negative in their outlook of the coming real estate year as the typical agent was. Needless to say that the market did see a significant rebound over the following year and the consumers were ultimately right.

My takeaway from all of this is never to get too comfortable with a trend. Although we like to say “the trend is your friend,” it is only your friend “until it ends.”

I would think this “status quo bias” behavior manifests itself more strongly in professions that are sales commission heavy, i.e. where commission incentives and generally over-the-top positive thinking are the norm and the agent tries to feel like they have some control over the impact of the market on their livelihood.

Of course the real estate market could care less what anyone thinks.

I was away last week, invited by the US Army to participate in a seminar at the US Army War College in Carlisle Pennsylvania after they heard me give a speech about the evolution of our company. Last week was a complete strategic immersion at the college and frankly I didn’t think a whole lot about the housing market or social media. I met an impressive group of accomplished military veterans who are furthering their careers. I also got to meet civilians like me from around the country that were also invited to participate. I gained invaluable strategic insights and friendships from this event that have made a real impact on me and how I interpret information that is presented to me.

Tags: , ,

NAR Pending Home Sales Had Biggest “February to March” Jump in 4 Years

April 28, 2014 | 4:52 pm | irslogo |

[click to expand]

After all the housing news drama of the past month, I thought it was interesting to see the negative streak broken. Still, sales are below year ago levels after what I described as a “release of pent-up demand” that was caused by the expiration of the “fiscal cliff” and the looming rise in mortgage rates last year.

Although home sales are expected to trend up over the course of the year and into 2015, this year began on a weak note and total sales are unlikely to match the 2013 level.

All the indices NAR publishes bother me because they include seasonal adjustments and those adjustments can be very severe. The chart above has no seasonal adjustments so you can see how much adjusting has to take place to smooth out the line. I thought I’d take a look at the month-over-month data that wasn’t seasonally adjusted to see if the same pattern occurred.


Yes, month-over-month pending sales rose the most since 2010 when the market was wildly skewed (higher) as a result of the First-Time Homebuyer Credit (federal first time buyer and homeowner tax credit).

February to March 2014 had the largest increase in contracts than the same period in each year since 2010.

Tags: , , , , ,

How Real Estate Brokers Can Negotiate With Foreign Buyers, Illustrated

March 29, 2014 | 12:33 pm |

Saw this visual over at Business Insider that shows how communication patterns differ around the world – from Richard D. Lewis’s book “When Cultures Collide“.

[Source: Click to expand]

I haven’t read the Lewis book yet but I’ve always been fascinated by the topic of communication and linguistics – another book got me interested in the topic: That’s Not What I Meant!: How Conversational Style Makes or Breaks Your Relations with Others by Deborah Tannen circa 1992. I’ve read it three times.

Tags: , , , , , ,

On Bloomberg TV’s ‘Bottom Line’ 2-12-14 Talking US Housing Slowdown

February 14, 2014 | 5:24 pm | bloomberg_news_logo | TV, Videos |

Had a great discussion with Mark Crumpton on his show “Bottom Line” about the slowing US housing market. You can see this in the quarterly results:

The median existing single-family home price increased in 73 percent of measured markets, with 119 out of 164 metropolitan statistical areas (MSAs) showing gains based on closings in the fourth quarter compared with the fourth quarter of 2012. Forty-two areas, 26 percent, had double-digit increases, two were unchanged and 43 recorded lower median prices.

The storyline of the last 2 years has been “Housing is Back!” yet prices were rising based on fed policy, not due to fundamentals like income, employment and access to credit. I have been labeled as a bit bearish on the “recovery” but I’m really not. I look at this slow down as a good thing for the long view on housing. We need to have sustainable housing growth (ie sales and prices) and 13.7% YoY price gains are in start contrast to economic fundamentals.

During our interview we were interrupted by the signing ceremony with President Obama for the new minimum wage act, so Bloomberg TV spliced the two parts together quite nicely. This is the second or third time one of my interviews has been interrupted by the President of the United States. Yes, I’m ok with that. ;)

Tags: , , ,

NAR Pending Home Sale Index Sort of Goes Negative

October 28, 2013 | 7:31 pm | nytlogo | Charts |

[click to expand]

According the National Association of Realtors, their Pending Home Sales Index fell 5.6% from August to September 2013 (seasonally adjusted), the largest monthly drop since May 2010 after the artificial prop of the 2009-2010 federal homebuyers tax credit expiration caused contracts to drop by nearly 1/3 from bloated levels.

Removing seasonality from the results makes the year-over-year adjustment show nominally 1.1% higher contract volume from September 2013 than in 2012 rather than a 1.2% decline. Still, the results were weak.

Why did pending sales post weaker results?

  • Don’t blame the partial government shutdown – that came later.
  • After the May 2013 Fed surprise announcement, fence sitters surged to the market to lock in before mortgage rates rose further, bloating contract volume over the summer (and why month-over-month seasonal adjustments to this data are so very misleading).
  • The surge in summer sales “poached” from future organic volume that we would have seen in September so we were already expecting a slow down in volume. Didn’t we learn in 2010 what happens when unusual circumstances press volume sharply higher only to see volume fall sharply when that circumstance disappears?

Weaker conditions prevail, but its really not as bad a report result as being discussed – namely because the seasonal adjustments paint a weaker picture than what actually happened, and we expected a decline in activity because the prior several months were artificially pushed higher with so many more buyers rushing to the market to beat rising rates (or the perception of rising rates).

Tags: , , , , ,

NAR July 2013 US Existing Home Sales Unexpectedly Rise 6.5% M-O-M

August 21, 2013 | 12:08 pm |

Source: NAR

After slipping in June, NAR’s Existing Home Sales for July jumped 6.5% unexpectedly from the prior month. Last month the results showed an slight decline (and were adjusted downward for this release) and the thinking was that the market is starting to cool off with the introduction of rising rates to the market in May. The bulk of May contracts probably closed in July, the likely basis of this most recent release. However it looks like the market continued to see a rise in demand in June, following the May bump in rates as people looked to get in the market before rates rose further.

Still, this month over month stuff is pretty ridiculous to place a lot of faith in. The year over year surge of 20.7% (non-seasonally adjusted) and 17.2% jump (seasonally adjusted) is much more telling of the long term market change.

Here are a few other charts to review. Inventory is much lower than a year ago while showing some gains in excess of seasonal trends. Median sales price growth is off the hook. 13.7% YoY growth is not sustainable with flat income, tight credit and high unemployment and underemployment. Thanks goodness for rising rates.

Source: NAR

Source: NAR

Tags: , ,