Open Book: Alison Rogers on how the real estate market has changed, and what you can do about it

Welcome to WalletPop's new book club, where we will have an author-in-residence to give us a peek into a new book and be on hand all month to answer reader questions. Our inaugural writer is real estate expert Alison Rogers, who was the founding editor of the New York Post real estate section and a licensed real estate broker. The following is a Q&A with her about her book,
Diary of a Real Estate Rookie, which was called "must reading" by the Wall Street Journal and a "Witty bunch of horror and success stories mixed with real advice for other Realtor newbies" by Newsweek.

ZB: How has the home buying process changed since the collapse of the credit-driven bubble? Since your book came out?

AR: My book came out in June of last year, and the credit crunch started that August. Suddenly lenders wanted larger down payments and higher credit scores. I even had one lender who had approved a client of mine do everything they could not to make the loan -- the lender asked for a second appraisal, changed the loan terms, even funded the loan late. We closed anyway, because I'm kind of (cough) persistent, but there's no question it's tougher now.

On the other hand, in some areas of the country first-time buyers have more to chose from now. And most homeowners are going to be owners, of some home or another, for decades, so getting away from the whole carnival-barker "ACT NOW!" mentality is probably good for them. It's okay, first-time buyers, to take time to shop around.

My book was also very conservative in terms of how much I advised people to borrow -- I stand by the rule-of-thumb that you can carry a loan amount of two to three times your annual income. But at the height of the boom, lending standards were a lot more relaxed than that. A few years ago, my mortgage debt was five times my income. I called the bank, they gave me the money.Are short sales and foreclosures a good way to get a bargain, or is the market too crowded? How can someone who wants to explore that route get started?

Let me start with the caveat that I work the luxury market now and I don't work short sales. In general, though, I think with over one million real estate agents in the U.S., the pros will get to the best bargains before you do. The best ones will be cherry-picked. You may get a savings by trying to by a foreclosure, but it's not likely to be as big a savings as you'd like, and you don't know what condition the home is going to be in.

That said, there are buyer's agents who specialize in that market, and if I were a buyer who was interested, I'd find one. And then I'd ask to see references from their other clients.

Everyone wants a bargain these days, and think the sellers are vulnerable. Are there risks of coming in too low?

You always need to have a Plan B. What that Plan B is will dictate the answer to questions like, "do I need to worry about offending the seller?"

If Plan B is a home that's just like Home A, go ahead and offend the seller all you want. If Home A is really unique and you must have it, then, yes, you have to be careful.

A real estate agent is incentivized to sell the home as quickly as possible. Given that the difference in commission on a $230k sale vs. $220k is not that big, how can a seller trust that my agent isn't trying to get him or her to list at below-market price to sell quickly and move on?

You know, just because some real estate agents are lousy doesn't mean all real estate agents are the devil, any more than all lawyers all the devil. Craig Newmark of Craig's List used a realtor, for heaven's sake.

Once Freakonomics said that realtors sold too cheaply, everyone believed it. But in reality, your realtor is trying to get you the best price within a certain time frame, and you're allowed to discuss whether you'd like to go slower, and hit an even higher price, or go a little faster and risk leaving a little money on the table. Your Realtor works for you, not the other way around.

And a good one will be able to justify the price of your home by showing you comparable things that have sold and are on the market in the area. If he can't do that, don't hire him.

What is the incentive, then, for agents to get the top price?

This is a referral business. Real estate agents do make money on volume, but we are small businesspeople -- and if we screw our existing clients, then we don't get new clients. And if we don't get new clients, we don't eat.

Let's say selling your listing at $10,000 cheaper saved me two weeks' work. Well, I'm glad to have the two weeks back, but I'd rather take the extra two weeks and have you tell your cousin use me as her agent! That's better business.

Remember, real estate agents stay in one place so word-of-mouth is tremendously important to us. If we blow our reputation, we have to run off and join the circus.

Got questions? Ask them below and Alison Rogers will answer them while she is our author-in-residence.

Alison RogersExcerpt adapted from Diary of a Real Estate Rookie, by Alison Rogers, copyright 2007 Kaplan Publishing. A summa cum laude graduate of Harvard, Rogers is a licensed salesperson at the Manhattan firm of DG Neary Realty, where she specializes in high-end rentals and the neighborhoods of Greenwich Village and Tribeca. In addition, she offers consumer information through her website,
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