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Category Archive: ‘Realtor’

Offering Too Low

Part of a realtor’s job is to help manage expectations – not only those of their own clients, but expectations of the other agents and their clients too.

Recently I received an offer on a listing that was 25% under the list price.  They also wanted my seller to carry the financing for 30 years – which is unheard of – and oh yeah, it was contingent upon the sale of the buyers’ home too.

I told the agent (whose email-signature noted they were in the Top 10 statewide for their company) that if I was the seller and that offer was presented, I’d fire my agent.

Just like when we’ve seen a home with range-pricing that is too wide, it becomes impossible to bridge the gap – for three reasons:

  1.  Once a buyer puts a number on paper, their mind starts believing it’s real.
  2.  Buyer’s remorse is real too, and they cool off quickly.
  3.  Sellers are skeptical, and don’t feel like negotiating much.

It may be discussed as just a place to start, but once a buyer submits their price in writing, it becomes a comfortable number.  Going much higher than where they start is usually a function of how fast agents respond.  My rule-of-thumb is two counters max for each side, in less than four days.

In this case, my sellers weren’t desperate, they had already determined that they wanted to sell for at least 93% of list and were willing to wait for it.  I told the buyer’s agent that our price gap was too big, and I nicely asked the agent and buyers to go back to the drawing board.

Three days later, I received a new offer with bank financing, instead of seller-carry, but it still had the original price of 25% under list. It came with the buyers’ love letter; a full-page of reasons why my listing was the perfect fit for the buyers.

Was the love going to make the looming price gap surmountable?

In spite of houses around the county selling for 99% of list this year, we countered with a price that is 4% under our list – not bad, considering the original offer price.  On their counter, the buyers came up to 82% of list, but it took two days to arrive.  I knew the remaining price gap and time left wasn’t looking good.

I always want to respond promptly, because of #2 above – buyers cool off quickly.  We dropped another 2% within a few hours, but it wasn’t enough.  Two days later, the agent emailed that they lost interest – no counter, no love.

Five days gone by (seven days since the original offer), and the initial 25% gap killed our chances.  They knew before writing the offer that it would take at least 93% of list to buy the property, and they still offered – so initially there was some willingness to pay that or close.

If they would have started at 82% of list, and trimmed the time spent to 3-4 days, could we have made it to escrow?  I think so!

Posted by on Apr 18, 2017 in Jim's Take on the Market, Realtor, Realtor Training, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 4 comments

Realtor Rules of Engagement

We are in the business of selling thousands of homes every year (last year in San Diego County we sold 23,962 homes worth $17,168,811,888).

Wouldn’t you think that there would be a set of rules to guide us?  There isn’t, and what’s worse is that you don’t know what to expect on each house for sale:

  • Will the listing agent create a bidding war?
  • Will the listing agent take the first offer?
  • Will they do their advertised open houses, or not?
  • Will the listing agent tilt the table, and take his own buyer’s offer?

Each sale is different, and there is no telling what will happen.  The uncertainty creates an environment where qualified buyers are denied the ability to compete, and the chaos helps to fuel the buyer frustration, which keeps the frenzy going.

Think if we had a marketplace where you knew that every home was going to be sold the same way. Pick any process – it would bring a logical, business sense to the market if everyone played by the same rules!

I believe that the auction format is the process that is the fairest, but there isn’t a consensus among the big industry players to change anything about the current environment.  Will it ever improve?

This week I submitted an offer on behalf of a buyer, and the listing agent reported that he had multiple offers.  I asked:

“Are you the kind of agent who discloses the other offers?” and included this video from last week:

He said he would need to ask someone, and then wondered, “Are you one of those agents who would”?  I said, “Absolutely, it’s in everyone’s best interest – agents, buyers, and especially sellers.”

Twenty minutes later, he tells me the price and details about the offers on the table, and the price of a previous escrow that didn’t work out – it was the highest of the bunch. He also said that he expected more offers, and that they will just take the best one.

He also added, “You were the only one to ask for more info, so there you go 🙂  Good job working for your clients.”

The industry will be reluctant to adopt the auction format, but maybe we can take baby steps and get there eventually.

Posted by on Apr 1, 2017 in Auctions, Jim's Take on the Market, Listing Agent Practices, Realtor, Realtor Training | 3 comments

Relief from Realtors

Hat tip to Richard:

https://www.wsj.com/articles/jersey-city-creates-no-knock-registry-as-relief-from-realtors-1490741911

Longtime homeowners in Jersey City, N.J., are trying to put the kibosh on endless aggressive real estate solicitations sparked by a hot property market.

In response to complaints, the Jersey City Council unanimously passed a resolution creating an anti-solicitation city program referred to as a “No Knock” registry. Residents that sign up will receive “No Knock” decals for their front doors, and violators who continue to inquire at those homes can be fined up to $2,000 and sentenced to 90 days of community service.

“It’s something that we want to address and do it in a proactive way that builds community as opposed to creating conflict,” said Council President Rolando Lavarro.

The population of Jersey City, the state’s second-largest municipality, grew 6.7% between 2010 and 2015, according to the U.S. Census.

Median housing prices there have increased 17% over the last six years, to $305,000 in 2016 from $260,000 in 2010, according to RealtyTrac.

Amid the rapid residential development, longtime homeowners say that persistent offers from real-estate investors and developers have at times escalated to the point of harassment.

Assunta Folcarelli, a crossing guard who has owned her Jersey City home for 35 years, said realtors started calling her six years ago asking to buy her home. She has repeatedly declined but said solicitors continue to call, show up at her door and send her letters.

“They keep on calling up, they want my house. I say, ‘Wait a minute, where am I going to go?’” said Ms. Folcarelli, 57 years old. “It’s kind of scary.”

Michael Griffin, a lifelong Jersey City resident and local activist, supported the registry’s creation but said the city needs to do more to protect vulnerable homeowners from developers. Mr. Griffin said the city needs to educate residents about cash offers, including in several neighborhoods where many homeowners live at or below the poverty line and the old Victorian and brownstone homes are attractive to developers, he said.

“Not too many people in my community have seen that much money at one time,” Mr. Griffin said. “It may look like a sweet deal to them, but they might not be realizing the taxes involved when you take a lump sum of cash like that, or not thinking what their next move might be. Will you be able to sustain yourself just by renting? Rents in Jersey City are high.”

Posted by on Mar 30, 2017 in Jim's Take on the Market, Market Buzz, Realtor | 1 comment

BRE on Realtor Teams

Broker supervision is a nice idea but rarely practiced.  We need perp walks!

In September 2015, the California Bureau of Real Estate (CalBRE) issued an advisory which was captioned “Disciplinary Warning to Real Estate Salespersons Who Act, Conduct Themselves, and/or Advertise as ‘Independent’ Real Estate Professionals — and a Simultaneous Caution to Brokers Who Allow or Support Such Practices”.

(http://www.calbre.ca.gov/files/pdf/adv/Independent%20Real%20Estate%20Professionals.pdf)

Licensees of CalBRE are well advised to review that prior advisory since we continue to see some of the same bad practices identified in that writing.

This discipline “advisory” is being issued as a supplement to that prior warning since CalBRE has taken notice of the use by some real estate salespersons of names and designations (and attendant Internet and marketing materials) that suggest to the public – and mislead consumers into falsely believing – that such salespersons are real estate brokers.

A scenario that we have repeatedly seen is the use by a salesperson (who for this illustration we will identify as John Doe) of a fictitious business name that would lead members of the public to incorrectly believe that the business is operated and managed by a real estate broker. In this example, salesperson Doe conducts business using the name Doe Real Estate.  Doe advertises using that business name, and the advertisements are connected to, or accompanied by, a webpage and other materials that extol the virtues of Doe Real Estate.  The public would not think that Doe is a salesperson who must be supervised by another, and would most certainly conclude that Doe Real Estate is a real estate broker or brokerage.  And the above practices are unlawful.

In addition to the above, many salespersons continue to brand and identify themselves as “independent” real estate practitioners, and they practice and advertise as such.  Unless those salespersons are operating as “teams”, in full compliance with the California laws and rules pertaining to teams (e.g., the disclosure of I.D numbers and the name of responsible broker, and the surname of at least one of the licensee members of the team along with the use of the terms “team”, “group” or associates” with regard to the team), that is unlawful as well.

Further, and depending on the specific language employed with respect to the name(s) and designation(s) used by the real estate salespersons, there might be a violation of the law relative to the use of fictitious names.  Please see the prior guidance given by CalBRE on the proper use and licensing of fictitious names.

As was also stated in the prior warning, under California law, with its two-tiered licensing system, real estate salespersons cannot provide – or advertise that they can provide – real estate services independently of their responsible brokers.

Likewise, salespersons must be associated or affiliated with, and be reasonably supervised by (which supervision includes broker review of the advertising used by the broker’s salesperson or salespersons pursuant to Commissioner’s Regulation 2725(e)) a responsible broker in order to engage in real estate licensed activities in California.  The law provides no exceptions.

CalBRE will take appropriate disciplinary action (including the imposition of significant fines, and  – where appropriate – the revocation of licensure) against real estate salespersons who engage in the unlawful activities discussed above, and against real estate brokers who permit their salespersons to engage in such activities.

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Posted by on Mar 24, 2017 in Jim's Take on the Market, Realtor, Realtor Training | 0 comments

Auction Questions

David from Louisiana sent this in:

Jim,

I just watched your first attempt at the auction and must say that you did a fine job as the auctioneer. I have been a real estate auctioneer/realtor for 30+ years and have often recommended an auction to fellow realtors in high demand situations such as yours. Of course, it usually falls on deaf ears as the realtors usually feel that they don’t need the service nor do they want to share the fee.

I hope you don’t mind the questions but I have been trying to work with realtors for many years and it seems to be a constant struggle.

I’m curious about what made you suddenly decide to utilize an auction when you could have easily achieved more than the asking price without it?

JtR:  Because there were multiple people at the open house that said they would be interested in purchasing the house, I thought this would be the best way to determine the winner fairly, and create maximum urgency.  The agents involved were willing, and so was the seller, so it worked out.  We did close escrow with the winning bidder at the price determined by the open bidding.

What was the seller’s opinion when you told them you were having an auction?

JtR: She was motivated to sell, so that made the difference.  Sellers who aren’t that motivated are suspicious of selling too quickly, thinking that this is like most jobs in the world where you work hard for weeks or months to achieve the desired result at the end.

But selling real estate in this low-supply, high-demand environment is the exact opposite – you stand the best chance of selling for top dollar in the beginning when the property is a hot new offering, and has max urgency. Buyers think something must be wrong with houses that aren’t selling in a hot market.

Did you consider actually marketing the property as an auction for a longer period of time and possible having more bidders?

JtR: No, because the highly-motivated buyers are there first.  There could have been other people interested later, but if they aren’t interested enough to come to the open house, then they probably weren’t willing to pay 4% or more over list price.  Yes, there could always be two in the bush, but our environment has trained buyers to race to hot new listings that might be a perfect match for them.  Not only will they be the most likely to pay more than others, but they are more likely to close escrow too.

I consider the quality/suitability of the property too.  This was a 1,541sf two-story house with a steep slope behind, so it wasn’t for everyone.  There were 3x as many people who didn’t bid.  Sellers and listing agents should consider how many people who came and didn’t offer.

Will you consider using the auction method in the future?

JtR: Absolutely, it is the best way to achieve top-dollar sales.  The animal spirits are driven when competing with your opponent eye-to-eye.

But auctions aren’t commonplace yet, so when I have multiple offers on a listing, I create a similar experience by pitting bidders against each other to increase the price.  I tell them the price to beat, which nobody does. Realtors want you to think it is better to bid blindly, but buyers are much more likely to go higher if they have a number to beat.  I take advantage of the competitive spirit, which you don’t have with blind bids.

For those who might think an auction format would only work for lower-priced properties, let’s note that there have been three sales in Rancho Santa Fe that utilized the no-reserve auction process, and closed for more than $10,000,000.

Those three are the ONLY sales over $10 million in the last five years in the Ranch, and there are 30 for sale today.  Let’s give auctions a try!

Of course, I would be happy to answer any questions that you may have.

Thanks, David

JtR: David, if a trusted name-brand company brought a slick and easy auction process to home sales and advertised it properly, do you think they could succeed?  Do you think they could change everything, and potentially eliminate realtors as we know them today?

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Posted by on Feb 21, 2017 in Auctions, Jim's Take on the Market, Listing Agent Practices, Realtor, Realtor Training, Realtors Talking Shop, Why You Should List With Jim | 6 comments

Ethics Violation

For the first time ever, I’m going to file a complaint against another realtor.  In this case, the listing agent discounted her commission so her buyer would win, even though my all-cash buyer had a higher offer.

It is in the vaunted Realtor Code of Ethics that any different commission deal needs to be disclosed to the buyer-agents:

7.22 Dual or Variable Rate Commission Arrangements. The existence of a dual or variable commission arrangement shall be disclosed by the listing broker by a key, code or symbol as required by the MLS. A dual or variable rate commission arrangement is one in which the seller or owner agrees to pay a specified commission if the property is sold by the listing broker without assistance and a different commission if the sale results through the efforts of a cooperating broker, or one in which the seller or owner agrees to pay a specified commission if the property is sold by the listing broker either with or without the assistance of a cooperating broker and a different commission if the sale results through the efforts of a seller or owner. The listing broker shall, in response to inquiries from potential cooperating brokers, disclose the differential that would result in either a cooperative transaction or, alternatively, in a sale that results through the efforts of the seller or owner. If the cooperating broker is representing a buyer or tenant, the cooperating broker must then disclose such information to his or her client before the client makes an offer to purchase or lease.

Of course, when taking the listing most agents don’t think they are going to discount their commission to screw another agent out of a deal, but once they get into the heat of battle, they lose their mind and forget.

Or they never knew it was against the rules.

The maximum penalty is a letter in the agent’s file for six months, so there isn’t a big deterrent to being unethical.  They say that the reason the MLS exists is to ensure cooperation and compliance between agents, which sounds good – right up until money is on the line.

I wonder how many agents have read the Code of Ethics?

Posted by on Feb 10, 2017 in Ethics, Jim's Take on the Market, Listing Agent Practices, Realtor, Realtor Training | 20 comments

Zillow Dominance

It is Zillow and their high-spending agents vs. everyone else now.

http://www.investors.com/research/the-new-america/zillow-starts-bidding-war-for-prime-real-estate-between-agents/

Zillow has a strategy to help accelerate the real estate industry’s evolution to the survival of the fittest. Zillow is looking to help the best real estate agents — the ones who can best capitalize on the leads that Zillow generates and will therefore pay the highest ad prices — to extend their domination.

“We are accelerating the broader trend across the real estate agent population of higher-producing agents gaining market share from those who are less productive,” Chief Executive Spencer Rascoff said on a November conference call with analysts.

The number of agents advertising on Zillow declined modestly in the third quarter to 89,147, but that was part of a planned shakeout. At the same time, the number of advertisers spending at least $5,000 per month rose 79% from a year ago, while average spending per agent rose 46%.

Read full article here:

http://www.investors.com/research/the-new-america/zillow-starts-bidding-war-for-prime-real-estate-between-agents/

Posted by on Feb 3, 2017 in Jim's Take on the Market, Realtor, The Future, Zillow | 2 comments

Another Disrupter

These new-fangled real estate start-ups are popping up like weeds now, and these guys are pushing alternative facts to justify their 6% program.  Who takes 15 to 35 percent of the sales price?  If they sell a house above the list price, they take 10% of that too?

http://finance.yahoo.com/news/knock-secures-32-5-million-140500970.html

Knock is an online home selling platform that provides homeowners a guaranteed way to sell their home in six weeks or less without risk, stress and uncertainty. Launched by founding team members from Trulia.com, the company uses data science to price homes accurately, technology to sell homes quickly and a dedicated team of professionals to guide homeowners through the selling process. Knock ensures a simple and certain process by guaranteeing the sale of its listed homes or it will purchase the home at full market value.

Rolling out across Metro Atlanta as its launch market with plans to expand nationally in the coming months, Knock is fundamentally changing the real estate industry by leveraging technology to sell homes in six weeks or less, guaranteed. This is made possible through the company’s use of data, including a home pricing algorithm, neighborhood analysis and its proprietary 200-point on-site inspection to ensure homes are priced right the first time. In addition, it offers a Knock Home Certification and an extended warranty, to further increase the home’s value while delivering a painless home selling experience to homeowners.

Unlike old school and new online home flippers that take 15 to 35 percent of the sale price, Knock is the only online home selling platform that provides homeowners a guaranteed way to sell their home at market price in six weeks for the same six percent as a traditional listing. Knock provides homeowners additional pricing assurance via a rebate offer. If the company purchases a home and sells it at a higher price within 45 days, it will rebate 90 percent of the difference back to the homeowner. Finally, by bringing the process entirely online, from paperwork to scheduling repairs and showings, Knock empowers sellers to manage it from any device, anywhere.

“We strongly believe that homeowners should not have to give up a significant percent of their home’s equity and their personal time to ensure a quick and painless move. Our platform is available for the same fee as one would pay a traditional real estate agent, with the added benefit of total transparency and a sales guarantee,” shares Jamie Glenn, co-founder and COO of Knock.

Read full article here:

http://finance.yahoo.com/news/knock-secures-32-5-million-140500970.html

Posted by on Feb 2, 2017 in Jim's Take on the Market, Realtor | 7 comments