Now that the record surge of inventory-gulping home buyers has abated, appreciation has flattened, interest rates have hovered in a narrow range, and foreclosure is the hot new topic on the cocktail circuit, there is a new attitude within the industry.

It is being reflected in listing agents' eagerness to offer higher commissions and even bonuses to agents with buyers. Two years ago, with few listings to sell, some agents were offering as little as one dollar to cooperating brokers.

Builders have stopped ordering resale agents off their property at gun point and most new home advertising now says, "Brokers Welcome."

By now, the building industry, the lending industry and the real estate industry have realized that they should have been educating consumers all through the good times. But, it was just too easy to grab the money and ring the till.

These entities have now combined forces to put forward the message that there is "no better time to buy!"

But, apparently, that message isn't really getting through. In part, because people make moves predicated on events in their own lives and because the message tends to ring hollow and self-serving when inventory is up, traffic and sales are down, and prices are poised to go down, stay flat, or go up, depending on who you talk to.

It seems doubtful that simply issuing fact filled press releases will dissuade the fence-sitters who see no downside in waiting. And, it is even less likely that the ill informed and the misinformed can be so easily converted.

Even within the industry, there is no consensus view that a faltering economy, or rising foreclosures, or tighter money won't precede a value collapse. Consumers often find it easier to believe bad news than good. Particularly if they do not see the bigger picture. And, very few do.

Emotion Trumps Fact

Consumers are frightened. When they are frightened they pull back from the uncertainty. In many cases, people's ideas about real estate are based far more on emotion than fact.

You wouldn't think that the topic of real estate would ring so much passion from people, but all you have to do is scan the blogs and it runs the gamut from sarcastic, self-righteous and smug, to angry, hateful, and vitriolic.

In fairness, in less than five years, a whole lot of people made a whole lot of money for doing nothing more than going to bed under their own roof rather than the landlord's.

These are the smug and self-righteous ones.

Others seized on the opportunity offered in the Tax Payer Relief Act of 1997, bought a second home and really cleaned up.

They are the sarcastic ones.

Some just couldn't afford it. They are angry.

And then there is that last group, renters by choice. They are the nay-sayers, the bubbleheads, the wait-and-seers. They are still waiting and still seeing. They are certain the crash is coming and they blame brokers, borrowers, lenders, speculators, and politicians for orchestrating the coming debacle. These are the "smart guys" who cashed out in 2001 or 2002 to rent until prices came back down.

Here are three typical examples of what real estate blogs are reflecting. These are from the North County Times in North San Diego County. They are unedited.

Jill wrote on February 22, 2007 6:14 AM: "The fundementals of this market are out of wack. For a long time the fundementals were off for lots of the dot coms. They didn't fall for a long time. They finally did. Getting out at the top and buying at the bottom of a cycle is the way to get rich and retire early. How can prices possibly go up more now? Increased wages by what unrealistic percent? Lower interest rates. That is not going to happen. The analysts NOT WORKING for the BIA and Realtors have been right for years. The speculators are outta here, so don't bet on the greater fool model."

Liz wrote on February 23, 2007 6:29 AM: "Market rents won't cover a quarter of today's mortgage payments … so unless you got in during the last big crash or Mumsy and Daddy set you up in life (which is usually the case), it's incredibly smart to be a renter right now and sock away cash for the inevitable foreclosure bonanza."

Susy wrote on February 24, 2007 7:35 AM: "I have been saying I told ya so for the past 5 years regarding the out landish house prices that they would fall. House prices are completely out of line. More and more people are now losing their homes and going into foreclosure. They are having a hard time even renting many of these homes because of the price. Now the developers can suffer and should based on their greed. -- ha! ha!"

Jill is a person who would say that buying real estate today would be a bad investment. Liz thinks it's a great time to rent. Susy wants developers to suffer. Jill, Liz, and Susy are not alone. According to the NAR's 2006 "Profile of Home Buyers and Sellers", 'Fifty-two percent of all buyers view their home as a better investment than stocks.'

So, despite the wave of corporate scandals and reports of retiring executives' lavish golden parachutes, 48 percent of actual buyers do not believe they are making a better investment and, apparently, the fence-sitters agree with them.

Competition Has Framed The Argument

And, this is part of the problem: we have let entities competing for investment dollars drag us into a false comparison with them.

There isn't any comparison to be made. It's like comparing apples to anvils. Companies are perishable; real estate is forever. Stocks are paper and promises; real estate is real and tangible, finite, rare, and all the good places are already taken.

Once, the only sources of comprehensive real estate information were books, periodicals and practitioners. Today there are millions of sources and no one to vet them. There is a blizzard of information, but very few credible authorities to sift out the nonsense and link the rest together.

And, the media knows that bad news is more interesting than good, and that it sells more product and increases advertising revenues.

Never mind that more Americans own homes than ever before, or that interest rates have remained historically low, or that many people got a little bit wealthy during the last five years, the news is all bad. Bad loans, bad borrowers, bad builders, bad prices, bad bubble, and it's only going to get worse. "Nattering nabobs of negativity" as former U. S. Vice-President Spiro T. Agnew once said.

Against this back drop, we need to do a good deal more than talk about the features of real estate ownership; we need to hammer home the benefits.

Persuading is Not Educating

We can't counter emotion with facts and logic alone, or we would already have succeeded. The facts do not explain themselves, nor do they paint a picture that has yet to come into view for most.

We should, as an industry, be able to create a curriculum around clearly identified educational objectives, and present it to consumers and our own practitioners such that they would always be moving in the direction of their next real estate acquisition.

And, that is the other side of the dilemma. Our own practitioners, who should be the frontline in the war on ignorance, are woefully ignorant themselves.

Think for a moment about the phrase most commonly associated with our business. "The three most important things about real estate are location, location, location."

Its only one thing said three times, yet it's wrong on every occasion. It doesn't even make my top three.

The three most important things about real estate are leverage, utility and tax-free profits. Understanding this is key to understanding that the best place to buy property with someone else's money is in the area with the greatest appreciation potential, not necessarily the most desirable or expensive.

Over the course of the last three years, I have done about fifty workshops for consumers and practitioners. Despite wide pre-event publicity, rarely did a practitioner attend, and that's too bad. Nor did any of the leadership of the local real estate and building industry ever attend. I wish they could have seen how people who understand, not just know the facts but understand what they mean, are transformed into advocates of planning to buy more real estate.

A key element of each workshop was explaining my formula: Lx2+(U²)xTFP=$∞.

Once people understand the elements of the formula, they see real estate in a new way -- as the greatest investment opportunity they will ever have -- not a thing to go into debt for.

Educational Objectives

Here are some educational objectives for a consumer education program:

1. Develop an awareness of real estate as a limited opportunity in which participants see housing as but a part of a bigger real estate picture.

2. Create an understanding of money as a force to be used, not a thing to be hoarded; and that leverage isn't debt that they are slave to, but a tool for maximizing the force of money. Explain the mortgage interest tax deduction and the wisdom of maximizing the opportunity by getting $1.1 million in real estate loans. Make interest rates irrelevant, because they will go up at some point anyway. People need to appreciate that a strategy to acquire real estate over time isn't dependent upon prevailing interest rates.

3. Instill a sense of the fundamental rock-solid, long-term value components of real estate such that participants see the value of planned real estate ownership, and will design and implement that plan. Show how no one loses money buying real estate. They lose money when they are forced to sell at the wrong time.

4. Demonstrate the role of utility in preserving the value of their investment. Real estate has multiple uses and, as such, has the potential not only to stabilize a baseline price, a floor, but to increase in value over time as the value of the utility increases.

Important Elements

Important elements of a consumer education program include:

1. An overview of financing. Create a timeline of events in the evolution of financing from the Depression to automated underwriting. Cover credit scoring, as well as, different types of loans and their role in making housing more affordable and how their use might be combined over time, as needs and circumstances change. Underscore that it is no longer one loan for life, but possibly many loans including starter loans and reverse mortgages.

2. A break down of the market by the numbers to show the limited size of the marketplace. Nationally, we know that about seven out of a hundred homeowners sell each year. Individual MLS areas have their own numbers and consumers in most places would be relieved to understand the small marketplace. There is no endless sea of houses.

3. An explanation of the extraordinary tax benefits contained in Sections 121 and 1031 of the I.R.C. and how they can be combined in a long-term wealth building strategy.

4. A look into the future to help people better understand the long-term benefits of real estate ownership. The Megapolitan movement is already well underway, and demand for real estate will increase in those ten economic regions.

5. Discussion of obstacles to developing real estate, as it seems unlikely that we will ever be able to develop future real estate at today's cost. Replacement costs alone make today's existing real estate developments a bargain.

6. Conclusion explaining what some of the reported numbers actually mean as opposed to what they imply. Monthly sales prices are not the equivalent of value and are often less than replacement cost. When an abundance of condo conversions closes in a particular month, the headline would report it as the largest decline of real estate prices in history.

And, while I applaud the interest the industry is now showing in consumer education, much more needs to be done. Real estate is a far broader and more complex arena than any of the various industry components seems to understand.

Builders sell homes, mortgage people sell money, and resale practitioners sell themselves. At the moment, we don't have any unified effort representing the marvelous benefits of that bundle of rights that is the underpinning of real estate value. Being able to own real estate is a far more valuable right than the freedom of speech. And, people who really understand the facts about real estate have an insatiable lust to own more.

Unfortunately, consumers cannot be educated through a few newspaper ads, and it will take a far greater commitment to change current sentiment.

Today, people who already own real estate represent a greater opportunity than first-time buyers. Many have substantial amounts of equity. What they lack is an understanding of the possibilities available to them by fully exploiting existing tax laws. The value of real estate will go up in those areas with increasing employment, the profit is tax free, someone else puts up the money, you get a mortgage interest tax deduction, and you have to live somewhere.

When is the best time to buy real estate? When someone will lend most, if not all, of the money to do so. When the consumer recognizes the truth of that statement, we will have succeeded in our educational mission.

Published: March 26, 2007

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George W. Mantor is known as "The Real Estate Professor" for his wealth building formula, Lx2+(U²)xTFP=$∞. A proponent of educating consumers on using homeownership as an opportunity to build an estate, he has set out on a crusade to educate small real estate investors, fellow practitioners, seniors, and high school and college students about the risk-free benefits of planned real estate ownership. His consumer education efforts include a long-running radio program, Mobile Information Center, monthly workshop series, public appearances, informative website and frequent articles. During a career that has spanned nearly three decades, he has amassed experience in new home and resale residential real estate, resort marketing and commercial and investment property. He is currently the founder and president of The Associates Financial Group, an independent, locally-owned, full service real estate and mortgage brokerage, dedicated to creating long-term relationships with clients. Prior to starting his own firm in 1992, he had been Director of Training and Customer Service for Great Western Real Estate. In addition he has served on virtually every real estate committee, including a term as a Director of the California Association of REALTORS®. He is the creator of the Personal Best System, a business and life planning process and the Red Zone Time Planning System for Business Professionals. In addition to Realty Times, his articles have recently appeared in Real Estate Finance, National Real Estate Investor, The Real Estate Professional, Broker Agent News, and RIS Media Power Broker Network Report. He is available for speaking and customized training. His website is www.myafg.com and he can be reached at GWMantor@aol.com.