Category: General

Driving along a local road recently, I spied a sign that read “Dog Waste Removal Service” with a phone number handwritten below. Somewhat bemused by this advertisement, I began to guess at its meaning. Is this is a service that comes into a home and cleans up after your Shih Tzu has a weekend-long kegger, and the new boss is coming over for dinner tonight? Failing that, the other mental image I got was of two guys hip deep in someone’s backyard just shoveling load after load into a large dump truck. Either way, two questions leapt to mind: (1) How many friends can Chairman (Bow) Wow have, and did he invite ALL of them over last weekend? (2) How much fiber are these people feeding their dogs?

Regardless of the answers to these questions, it’s clear that we’ve fully played our hand in the universe. We’re done! We’re obviously starting to go backwards. Humankind has broken the hold of earth’s gravitational forces and escaped our stratosphere to explore outer space. We’ve created nanobots that are so tiny that about a million of them can fit on the head of a pin. We’ve created a great technological mountain, ready to take in the grand vista of the future and all that it promises, and yet we’ve allowed the creation of a “need” for a dog waste removal service? Perhaps I can sum up my utter bewilderment at this development with a quote from Bill Murray’s character in Ghostbusters about the impending apocalypse: “Human sacrifice, dogs and cats living together . . . mass hysteria!” Okay, before you call the nice men with the padded ambulance and a crisp white jacket with arms that buckle in the back, I’ll get to my point – and I do have one, I promise.

All kidding aside, I actually applaud the fact the person behind the sign in question saw a niche and wedged her or himself right in there before the corporate fat cats saw the chance to exploit yet another industry and ruin it for the little guy. Ha ha. But seriously, good for them! So, with that said, I put the question to you: what are you doing that’s slightly different than everybody else either to make yourself stand out or create a niche? If you’re a prospective seller or buyer of a house, I would highly recommend that when you interview agents AND lenders, ask us what makes us different. What do we have that’s going to make your transaction as successful and smooth as possible? And then ask us to give you concrete, real-life examples of what we claim we can do.

Let me give you an example of an agent I know who does something to stand out. I’m not going to give away his “secrets” – that would be bad manners. He’s had a number of his clients come to him after their transactions (buying AND selling) and tell him almost an identical story: other agents, when they found out that these clients had gone with my friend, had asked if it was hard working with him. All of his clients were stumped by this question and responded that their dealings with him were phenomenal, and then they asked the agents why they would ask such a question. These agents, with a sort of crooked smile, would say, “Because I’ve been the agent on the other side of some transactions from him, and he’s . . . tenacious (fill in your own adjective for a “no-holds-barred” approach to getting the deal done).” Before my friend can say anything about these comments coming from his fellow agents, his clients say, “I’m glad to hear that you fought so hard on my behalf. I never would have known that by the way you were always so calm when I dealt with you.”

I’m not suggesting a client should expect dog-waste-removal services from her agent. But agents (and mortgage folks) need to break away from “the pack”. In other words, if they’re all being Shih Tzus and Poodles, we need to be Labradors and Jack Russell Terriers (that don’t lick ourselves in public, EVER).

Before you think this publication of ours has gone off the deep end, hear me out. The title of this edition has to do with a popular series of books from Steven D. Levitt and Stephen J. Dubner titled Freakonomics, Super Freakonomics, and Think Like a Freak. It’s very likely that many of you have read at least one, if not all, of these books. The third book in this little trifecta of cerebral swordplay, Think Like a Freak, will start us off on our discussion today.

In one of the early chapters, the authors discuss “the three hardest words in the English language” – and they’re not “I love you”, “Santa’s not real”, or “We’re outta tacos?” No, the three hardest words in the English language are – does anybody want to lay down some bets here before we proceed? – “I don’t know.” Once most of us reach a certain age, we don’t like to admit that we’re not in the loop on something or we haven’t figured something out just yet, and our “bluffing” gene kicks into high gear.

They then cited a study done by this really smart (and extremely patient – you’ll see why in a minute) guy at University of Pennsylvania. He enlisted nearly 300 “experts” – government officials, political-science scholars, national-security experts, economists, etc. – to make thousands of predictions THAT HE CHARTED OVER THE NEXT TWENTY YEARS (that’s patience!). These were smart people, right, who know a lot of stuff about a lot of things. However, the results of the study were shocking. While 96% of these experts had postgraduate training (read: they thought they were smartest of the smartypants), their predictions were about as accurate as “dart-throwing chimps”. When asked to name one of the basic reasons these “experts” were not very good at predicting outcomes, Professor Shifty McGotcha said it was overconfidence. In other words, because these folks are experts in one or two areas, they think they’re experts (or at least smarter than the average bear) in practically all corners of our existence. Rather than admitting their limits, they forged ahead with predictions related to a whole bunch of stuff that’s not even CLOSE to their specialties.

This was all preface to their main point: while it may seem against our nature to admit we don’t know something, and our brains will try to stop our mouths from saying “I don’t know,” those are actually the THREE MOST POWERFUL WORDS (when combined, of course) in the English language. Why? Contrary to what we may initially think, saying “I don’t know” doesn’t show weakness – quite the opposite, it shows that we are willing to go find out. (Now, don’t mistake this with a teenager’s “I don’t know” when asked the current location of his shoes or your car keys – he’s not signifying a deep-seated desire to seek out those items on your behalf; he’d just rather resume texting, tweeting, and/or eating.)

Whether you’re the one on the giving or receiving end of an “I don’t know”, think of the courage (and WISDOM) it takes to utter those words when asked a question. When you’re about to ask your realtor a question and you stop yourself and say, “I can’t ask her that. She won’t know the answer,” by all means, ask the question. It’ll give your realtor the chance to research the answer and get back to you with more information than you had originally anticipated. Win win! If you’re a realtor, you WANT your clients to ask you questions to which you don’t know the answer. Yes, you read that correctly. If they feel they can ask you any question, and they know you’re going to be honest if you don’t know the answer, they’re going to rely on you even more heavily because they know you’re going to research the heck out of their question(s) and not only give them complete but honest answers. And THAT certainly beats having chimpanzees throwing darts (or other objects) at you and your clients!

There’s an old saying that you hear bandied about a great deal in the real estate/mortgage world, and it’s “Always wear clean underwear.” Wait, that’s not it (but I wouldn’t pass up on heeding that advice either)! The saying is “Cash is king.” Sure, there’s something much sexier about having an aluminum attaché case with $100 bills banded and stacked all nice and neat than a piece of paper “saying” you have the money – there’s an emotional pull that you can work to your advantage when you’re sitting across from a seller, and you can hand her cash at that very moment and complete the transaction. In other words, your powers of negotiation are significantly enhanced. But when you take the emotion out of it, cash shouldn’t be king – it should be YOUR slave. Let me explain.

Let’s say you have the cash to purchase a $200,000 home outright (I’ll pause here for all you fans of the movie “Airplane” to join me and say, “You have the cash to purchase a $200,000 home outright”). Let’s also say you have the annual income to make the monthly payment on a 15-year mortgage at today’s rates – Principal & Interest: $1,380 (“You have the annual income . . .” – sorry, I’ll stop). So, before you make that purchase, you look at three options: (1) Pay cash outright and have no debt; (2) take out a 15-year mortgage with 20% down; or (3) take out a 30-year mortgage with 20% down. Which of these three options will be the best FOR YOU for WEALTH BUILDING?

Cash Option
If you paid cash for the house, your reserves would be completely depleted (theoretically); all you would have to invest would be the $1,380/month a 15-year mortgage would have required. If you invested this religiously and averaged an annual return of 12%, at the end of 15 years, you would have $691,434; at the end of 30 years, you would have $4,477,046. Not too shabby. Not shabby at all, to be honest.

15-Year Option
If you took out a 15-year mortgage with 20% down, you would have $160,000 at that very moment to invest. If you invested that with an annual return of 12%, at the end of 15 years, you would have $875,711. If you then took the $1,380 you were spending on a monthly mortgage and lumped that in religiously with what you’ve already made, at 12% at the end of 30 years, you would have $5,485,022. I don’t know about you, but an extra $1 million for retirement sounds pretty good to me.

30-Year Option
If you took out a 30-year mortgage with 20% down, you would have $160,000 at that very moment to invest. The difference in monthly P&I payments between a 30-yr and 15-yr mortgage is approximately $510, or $6,120/year to invest. If you invested the difference of $6,120/year along with the $160,000 with which you began, at 12% in 15 years, you would amass a nest egg of $1,131,301; and in 30 years, you would have $6,447,778 – ANOTHER million dollars!

I know what you’re thinking: won’t this strike a major blow to the aluminum attaché case market? We’re just going to have to take that chance, folks. Tell King Cash to get off his duff and get us some appetizers or something – and while he’s up, see if he can find “Airplane” on Netflix. It’s a classic!

At the gym recently, I walk into the pool area where there’s only one other guy who’s busy getting ready to swim a few hundred miles – I can tell by the swim cap he’s wearing that he’s serious about all of this. I get into the pool and do some stretching (so I can look like I know what I’m doing – I can’t have a dude in a swim cap mocking me). Just as I turn around to face the opposite end of the pool and affix my goggles, this other guy comes from out of nowhere and plops himself into the pool at the other end of THE VERY LANE IN WHICH I’M GETTING READY TO SWIM. I’m wearing goggles for Pete’s sake! How do I NOT look like I’m about to swim here? And there’s no one else in the entire pool – there are four lanes for the taking, and Swim Cap McHundredmiles has yet to choose a lane. The interloper at the other end of the pool could have jumped into any one of the other three lanes, but he chooses mine.

Now, I’ve seen something similar to this before. The lane in which I’m getting ready to swim is closest to the Jacuzzi. I’ve seen people pop out of the Jacuzzi and jump into the pool to cool off and then quickly exit the pool again – I think this is what Mr. Personal Space Invader is attempting, so I stand my ground and wait for him to exit the pool. But he doesn’t! He proceeds to jump from foot to foot all the while staring at me from his end of MY LANE!

I keep staring at him, wondering when he’s going to finish his little exercise jig and depart. Swim Cap turns around and notices what is happening and looks at me. I look at him and say, “You can see me, right? I’m not invisible, am I?” What puts a guy into a mindset like this?

At this point, I’m reminded of a recent article I read that detailed the mindset of the “super rich”. Not to be confused with the “stinkin’ rich” (a whole other tax bracket), those that fall into the “super” category earn over $370K/yr and/or have a net worth north of $2.5 million. (If you’ve read even a handful of these newsletters, you’ll realize I’m going to make a point, so buckle up!) The super rich share these traits:

• A stronger belief in their ability to solve problems, have more control over the things that happen to them
• A greater internal drive/passion to pursue their goals
• Less likely to overspend or gamble compulsively, financially enable others, hoard possessions, or have trouble sticking to a budget
• Money should be saved, not spent; more likely to be anxious about not having enough money

Stop me if I’m wrong, but didn’t that just describe the traits of a successful real estate agent/broker? Didn’t that just describe the traits of someone who is getting ready to purchase his first home or her twelfth investment property? In the case of the first-time homebuyer, the agent’s job 95% of the time is helping that buyer realize that he or she has those traits, even if they’re buried below the surface – and those agents who can help them find them are the most successful, personally and professionally.

As I peer down the lane at Mr. Oblivious, I truly can’t figure out what traits he has that make him think this is cool, so I just move over to the next lane. It’s not worth a fight – and my choice to avoid a confrontation proves to be a good one as I later see him walking around the entire locker room for about 45 minutes in nothing but his birthday suit. He’s either a vampire (because he obviously can’t see his own reflection in any one of the many mirrors) or he has an overabundance of “self confidence” – he never would have seen my point. And as an aside, you can’t unsee that no matter how rich you are – super or stinkin’!

I walked into a local Circle K recently to grab a quick fountain drink – I don’t need anyone telling me how soda is bad for me and my kidneys, so just go with me on this – when I looked up and saw there was a small dispenser that you could use to add a flavor shot to your drink of choice. You love Mountain Dew but want to add a little lemon to it, pop your styrofoam cup under the dispenser, press “lemon”, and out shoots a short burst of yellow-colored syrup that – I’m assuming – is lemon flavored. Variety is the spice (or syrup) of life, right?

What caused me to pause, though, was on this particular dispenser there were four choices: lemon, vanilla, cherry, and cherry (zero calories). Did I mention that the shot that comes out when you make one of these selections is enough syrup to fill, at best, the cap on top of a two-liter bottle of soda? How many calories could there be in the regular, unadulterated cherry syrup that made it necessary to come out with a zero-calorie alternative? Was there a rash of cases of young children and small Chihuahuas being rushed to the ER as a result of diabetic comas brought on by this calorie-laden cherry syrup that Circle K HQ made it their top priority to come out with this alternative? So many questions ran through my mind!

The truth of the matter is if you’re standing there filling up a foam chalice with 44 ounces of soda, is cutting down on the 10-15 calories (if that many) by going with “cherry lite” REALLY doing you any good? Chew and swallow the Twinkie in your mouth before answering. While you’re doing that, I’ll get to my point – I promise I have one.

This past week, I’ve conducted some informal research on millennials (read: I had a conversation with two people who are college graduates and are in their mid 20s) related to the real estate market. To wit, I asked them what is keeping them from purchasing their first home. You can guess at some of their answers and be dead nuts on, but the one answer I got from both of them that caused me to think about the subject of this newsletter is this: they don’t want to be tied down – they view purchasing a home as being chained to a particular city and giving up freedom. Light bulb moment!

Up until this very moment, the vast majority of us had the mindset of “once the millennials take a moment and realize that home ownership is the American dream, we’ll be good to go – just give them a little time.” After talking to these two people, I realized that mindset, when it comes to millennials, is similar to the thinking behind offering a zero-calorie cherry syrup – it’s dumb!

What I’m about to suggest is not intended to be THE answer – millennials, like everyone else, are individuals and have their own opinions – but I think it’s a good one: we need to treat them like investors, not home owners. We need to educate them on how to get the most house in the best neighborhood for the least amount of money. We need to demonstrate to them that a purchase is a wealth-building tool just like many other business ventures they might be considering to improve their station in life. This means helping them understand what others (renters in particular) are looking for in a house and pointing them in that direction – this will help them to see a purchase as a sense of financial freedom rather than being chained down. This approach, in many instances, is going to take more time than just getting a pre-qual and then putting them in a car to go look at houses, but those of us who put the time in now will do much better as this segment of the market is only going to grow. And when we start seeing the benefits of the time we’ve put in to help these investors, we’ll be able to take a break and have a soda – splurge, and get the real cherry.