Bruce Norris is a very knowledgeable and experienced player in the real estate arena.
His focus is on the buying and selling of trustee-sale properties around the Inland Empire, but he has other related business ventures, including the financing of trustee-sale purchases, and providing a vehicle for investors to participate in the hard-money returns.
He has his own radio show, provides trainings, and even has a blog! Here’s a link to his homepage:
http://www.thenorrisgroup.com/
He recently published a 61-page powerpoint presentation – link below. It’s a remarkable research project regarding the current market conditions with plenty of charts and graphs covering the unintended consequences and false indicators that he is seeing:
http://www.tngacademy.com/pdf/sdcia-5-11-2010.pdf
There are mountains of data in his presentation, but I’d like to address page 59, where it notes that 60% of the buyers went through the listing agent to make their offer.
On page 61 it notes that only 7% of the sales were over $300,000.
I regularly tell buyers who want to pursue homes in the lower price ranges to go direct to the listing agent – that market is too hot/competitive, and the failure rate of offers is extremely high.
You’ve seen the stories here – when we have sold the cheapie REOs in Oceanside that garner dozens of offers, the buyer agents tell the same story, something like this:
“I have written so many offers with this buyer, please take this one, I’m begging you!”
There aren’t that many agents who are going to work for months and months to earn $2,000 to $3,000 after splits and expenses, so I wasn’t surprised to see that the listing agents are representing most of the buyers too.
The big REO listing agents have plenty of buyers’ agents on duty, and most like to put their for-sale signs out prior to MLS-input, so they should be representing the buyers of lower-end listings.
How about in North SD County Coastal?
A check of the last 117 detached sales from Carlsbad to Carmel Valley revealed that 18, or 15% were marked as round-trippers, where the agent represented both seller and buyer. Only a couple looked like they were a result of quick action in the first few days of the listing. There were eight REOs, and none of those were sold by the listing office.
THOUGHTS ABOUT GOING DIRECT TO THE LISTING AGENT
1. It might make the difference when there are multiple offers – you could win the race, but you’ll probably still have to pay top dollar. I don’t think there are many legitimate, professional listing agents that would burn their sellers, and take their own offer when a better one is on the table.
2. Once the listing is stale, and the seller and listing agent are both fatigued but don’t want to lower the price, there might be an opportunity. But I think in both cases (1&2) you could still get the same deal and have your own representation if your buyer’s agent is really good.
3. If you go direct, don’t be surprised if the listing agent is more loyal to the seller, and acts like you owe them a favor. You’d think the listing agent would be grateful – but if they aren’t, it’s because they are uncomfortable with the situation, especially if they burned somebody else to make the deal. And don’t be surprised if they are resistant to sharing the commission either, they’ll think of it as their reward for getting you the deal.
4. If you were working with a buyer’s agent who was helpful, and for whatever reason you decide to go direct, do a little something for your previous agent. If they provided real assistance in your search, consider hiring them separately to consult on the deal, because you might need help along the way. If you feel uncomfortable telling them, then press yourself to at least buy them lunch or do something nice. If you don’t feel uncomfortable burning them, then they didn’t do much to help you anyway.
This is a touchy subject, agents don’t like to talk about it – and I don’t need commenters to load up please. But if there is more real estate revolution, it’ll probably be in this category – having just one agent facilitating the deal. Realtors will have to provide real value, beyond filling out pre-printed forms, and pointing out which room is the kitchen.
When I bought my REO house, I had my own agent. However, as it turned out, he used to work for the seller’s agency and appeared to have left on good terms, so he knew all the principals personally. I have no idea if that helped or not and if so how much. Reading between the lines from what he said, I was against one other offer who offered the same amount I did (list price), but they had FHA and I had a conventional with 20% down. The type of loan probably wouldn’t matter to a private party, but to a bank owned propetry, it seems to (why, I dunno-maybe more likely to close?).
Agreed – Story from the road on this topic: My sister-in-law recently bought a home in the Santaluz area which was an REO property. She asked me to help her and represent her.
I told her that I appreciated the offer to represent, however, her best bet for this listing was to call the listing agent direct as he’d be more motivated to put you in if he was getting both sides of the $$$$$.
I gave her all the listing info and said go for it. They ended up getting/closing the deal, at a very good price.
In our adversarial system wide-spread dual agency will probably never take hold.
So you are going to buy a $1M home? How many years did (does) it take you to earn that much? How often do you buy a home?
Please remind me, why would you not hire your own professionals to represent you?
Buying a cup of coffee for $5 at Starbucks clearly does not have the same impact if the deal goes wrong. Also many people are regular coffee buyers, so the regulars should understand the risks and failures. The seller, Starbucks, stands behind the product, and if there is a problem, the baristas will fix it right away. For these reasons, no professional representation is needed to buy a cup of coffee.
A used car is somewhere between a cup of coffee and a house.
The Norris powerpoint is actually part of a presentation Norris made to SDCIA on May 11th. I attended it and it was a great presentation. Page 59 actually represents part of a survey of hard money loan borrowers/investors who the Norris group recently funded, so you would expect to see a higher percentage of use of the listing agent on the deal.
If you are a SDCIA member, ($45 a year) you can access on line tape recordings of all the speakers at SDCIA, including Norris’s recent 5/11 talk.
I used the seller agent when I gave my bid significantly below an aged listing price. The price I was willing to pay was static so it would either be rejected or accepted. If the listing agent got a bigger commission by representing both the buyer and seller, I assumed it would be more likely to be accepted (or at least represented as “the best deal to the seller” since the agent makes the most $$$). Why is this not the prevailing logic in buying real estate since commissions come out of seller’s net price? If you pay the listing agent more, they should be more likely to recommend your bid assuming it’s the only one.
I bought my current home about 10 years ago without an agent at all. The listing agent negotiated with the seller to increase his comission to 4%, we took 2% off the listing price. Lucky for us, everything worked out ok. But now that I’m shopping for a 500K+ home, and most of the homes are REOs and short sales, I don’t feel comfortable going without an agent. There is just too much at risk.
Using the listing agent is just one step above representing yourself. They’d probably do the bare minimum required. They won’t be fighting to get you a good price, credits, repairs, etc.
Hi Jinx,
On the REOs I’ve seen, and many of the short sales, you don’t get credits, repairs, etc. The property is sold as-is.
Waiting,
There’s part of the illusion – the reason they are ‘as-is’ is because the listing agents don’t want to deal with it.
B of A willingly does repairs on every REO I sell.
Back in ’97 we worked very briefly with an agent (never got in his car or made him show us a house) before working direct with a listing agent to purchase a house. After closing we gave him $500.
Are repairs out of the question on short sales?
Jim,
We had what has come to be known as a “flash listing” in our neighborhood. I had been watching a house for 18 months as it sat empty, grass grew 2 ft tall and the house was stripped of appliances and the a/c was taken for the copper wire. Suddenly, workers appeared at the house and cleaned it up inside and out. There was no for sale sign on the property. Next day, the it was listed in realtor.com for a few hours. It disappeared. Next day it went pending. NOW it has a for sale sign out front, and the listing is gone from all realtor sites. What is this?
If it is in San Diego, I can check it out if you want to send me the address. But it is likely a flipper who secured it within the first couple of hours of being available.
Probably the type of guy that thinks it’s a deal just because he bought it, and will now try to show everyone how to make $100K in 60 days.
I don’t think repairs are out of the question, but the listing agent needs to be at the surrender stage, and not have another buyer in sight for miles.
If the market cools off, it’ll be a different story – for both listing agent and lender. They get less cocky/more humble when buyers aren’t beating down their door.
Redfin’s site has a forum where buyers share this story multiple times. Some recent buyers there specifically give the advice: Don’t waste your time, GO IMMEDIATELY TO THE LISTING AGENT. Sometimes with anecdotes about how the listing agent took an inside offer significantly lower than other bidders “for unknown reasons”. So total offer is not the biggest lure.
So much for free market! For now.
Wait for those baby boomers to downgrade! Then there will be inventory aplenty..