Inventory Watch

Just when I thought having more active listings might slow the market, the buyers responded!

There were more new pendings (46) this week than we’ve had all year, and they out-numbered the new listings count of 45 – which hasn’t happened in months!

Wow!

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Direct To The Listing Agent

The conspiring events – softer market, fewer and less-experienced agents, and lower commissions – are all leading us to the same place:

The destruction of the traditional model of residential real estate sales will be triumphed by the unknowing, but it will be the worst thing to ever happen for consumers because agents will be so tempted to tilt the table.

The only savior will be the company that brings home auctions to the masses.

One-Story Country Living!

Take a drive to the country and see our new listing in Vista!

685 Barsby St., Vista

3 br/2 ba, 1,891sf

YB: 1960

0.51-acre lot

LP = $899,000

Check out this country charmer with newer kitchen and bathrooms on a spacious 1/2 acre lot with vineyard! The huge eat-in kitchen – with granite counters, walk-in pantry, and sleek two-tone cabinetry – is the center of the home, with spacious living and family rooms that all expand outside to create the ultimate indoor/outdoor experience! Hardwoods, dual-pane vinyl windows & sliders, solar, travertine, herb garden plus orange and avocado trees too! This is a hot buy!

Open house 12-3 on Saturday, March 23rd.

https://www.zillow.com/homedetails/685-Barsby-St-Vista-CA-92084/16628107_zpid/

Lower Commissions – The Truth

Oh, you’re going to get lower commissions alright – on the backs of the buyer-agents.

The last time I checked a couple of months ago, there were 30% of the monthly closed sales that offered a buyer-agent commisssion under 2.5 percent. Of the 92 closings so far this month, 25% of them were under 2.5% – and those were determined before the NAR debacle.

The listing agent determines how much the buyer-agent gets paid.

Not the seller, not NAR, not the attorneys – it is the listing agent who decides the commission rate to offer the buyer-agents. It makes for an easy solution. Want a lower overall commission rate? Just take it off the amount paid to the buyer-agent. What’s worse is the MLS rule that buyer-agents are not allowed to negotiate the rate – hopefully that will go away now.

Listing agents aren’t lowering their commission rate – they are taking the same or more than ever, and paying less to the buyer-agents. They are under-appreciating the amount of work it takes to conclude a successful buyer-side transaction (usually 3-6 months of frustration and losing).

If the listing agent has superior skills that result in a higher sales price and a smooth transaction, then no one will mind them getting paid accordingly, but their success is also at least partially due to the buyer-agent doing his job well. The good buyer-agents shouldn’t be penalized, and ideally, there would be a sliding scale based on performance.

But because everyone will be hearing that commissions are negotiable (for the first time, says Biden), the listing agents who feel the need to agree to a lower rate with their sellers will just subtract the same discount from the buyer-agent side. But is that in the best interest of the seller?

This practice will expedite the demise of the buyer-agent.

Buyer-Broker Agreement – The Problem

Every realtor-related entity is scrambling right now to train agents how to get their buyers to agree to a contractual relationship where the buyer pays the buyer-agent commission.

It would all be well and good – and be similar to the listing agreement we have with sellers – if it weren’t for the paragraph in red above that allows for cancellation by either party. Even if the parties agree to Exclusive Representation, the buyer can still cancel with a 30-day notice (in C1ii). Both boxes on the left need to be checked to eliminate the option to cancel.

The big problem is that listing agents will be advertising to buyers to come direct to them to buy their listing and not pay ANY commission.

Will agents be able to convince buyers to sign the Exclusive Representation with no cancellation? Or will it be a happy compromise just to agree to representation that they can cancel at any time. Yes, the happy compromise will be preferred, mostly because it is so clearly laid out on the form.

But it means that the minute the buyers see a hot new listing advertised as No-Fee-If-You-Come-to-Me, they will cancel their existing buyer-broker agreement and go direct to the listing agent.

Buyer frustration builds quickly even if you have a great buyer-agent because the good deals or cool houses are competitive and almost all picky buyers will lose a few bidding wars before they win one. Buyers don’t like losing houses they had their heart set on winning, and the temptation to go direct to the listing agent – especially when you can save the fee – will be very high.

I’m guessing this will all blow over in a few months because listing agents will be advertising to buyers directly – leading with the No-Fee-If-You-Come-to-Me mantra – and it will expedite the industry’s transition to single agency, and eliminate buyer-agents altogether.

Tiny Fest 2024

I keep hoping there will be a cool, high-quality tiny house at any price – even the ones over $200,000 here weren’t that spectacular (including the 3D-printed house made of recycled plastic bottles (65%) and fiberglass (35%) that cost $220/sf):

After the Realtor Settlement

From the WaPo

The reporting on the NAR settlement seems to be focused on creating hysteria, rather than finding the truth. Realtors commissions have always been a juicy topic, and the media is intent on using this opportunity to fabricate wild and salacious stories to attract the maximum number of eyeballs.

The hysteria may just be beginning, however. The NAR settlement included penalties for every brokerage that sells more than $2 billion in volume per year. For Compass, the top brokerage in the country for total volume, it means imposing a fine of $500 million without consulting with Compass management, let alone negotiating. The NAR doesn’t have the authority to speak for us, or commit us to any penalty so who knows what they were thinking but it guarantees the end of NAR – why would any brokerage want to be associated with such bums?

Those fines will get litigated and drawn out for years. The requirement to remove the commission rate in the MLS will start in July, but listing agents can advertise the amount of buyer-agent commission everywhere else. We will hear more about the buyer-agent commission than ever before – and steering done by both buyer-agents and buyers themselves. Buyers will prefer the listings that pay more commission, so they pay less. So much for fixing the concerns about steering!

As realtor-panic goes, the beginning of Covid was much worse – we didn’t think we’d sell a house for months! Those who panic about this hiccup are the realtors who don’t have much to offer – those who aren’t real salespeople. Nobody will mind seeing them either get better, or get out of the business.

But houses will keep selling at a brisk pace regardless of commissions.

This will blow over in a few months.

My previous post mentioned the need for getting good help. Getting cheap help will probably be tempting until people get a feel for the difficulty of what it’s like:

  • We made a clean, full-price offer. Three days later, still no answer.
  • We made an offer on a Friday that was $50,000 under list on a 2-br house in original condition. The sellers decided to take their chances with open houses (in search of two in the bush) over the weekend, instead of responding. We attend, and the listing agent isn’t doing the open house; there is a trainee there instead. We look harder to find something better, and succeed. By Monday, the listing agent wants to re-engage, and by Wednesday she begs me to get back in the game. They receive another offer, but it’s $100,000 under list. We moved on.
  • I’ve had several solid buyers attend open houses in the last year – people I’ve talked to who sure gave me the feeling that they liked the home so much that they were going to make an offer. But then when I follow up with their agents – who usually don’t accompany – they can’t close the deal. It makes me want to sell my listing to their buyer and just send them a check in the mail.
  • Multiple offers – what do you do? I lost another one where we offered the exact same price ($100,000 over list), and the listing agent seller picked the one with the bigger down payment, instead of letting the buyers decide it. Don’t you think there might be some gas left in the tank? Like $25,000 to $50,000?
  • You get an offer while off-market. Then what?
  • When does a seller lower their price? Or not?
  • Buyers and sellers typically have little experience in fixing things – especially the big stuff – and agents aren’t much better. So instead, a proper discount is attempted, but sellers always think in pennies, and buyers think in thousands. With little or no buyer representation, how are those going to get handled? They’re not, and more deals will die. This is a problem on virtually every sale.
  • Inexperienced people tend to over-react, and any bump in the road could be a deal-killer.
  • How much should buyers offer? Most agents respond with, “Well, that’s up to you”.
  • What is the real value of the property? Once a home is on the open market, Zillow and Redfin adjust their estimates to within a buck or two of the list price, so sellers, buyers, and agents must each determine the value themselves. How good are they at determining the value? How much variance is acceptable? Virtually nobody knows, and unless there is a good agent involved, more deals that are 1% to 2% apart will die an unnecessary death.

How do you know when you’re talking to the wrong agent?

Their only line is “Let me know if you have any questions”.

Good salespeople ask the questions, and then offer opinions and advice!

The commission lawsuits are the best thing to ever happen for my slogan! Get Good Help!

What’s Really Needed

Everyone seems to have a take on the commission lawsuits. This is one of the best:

A way to implement an instant solution within the existing framework is to require that realtors possess a broker’s license, which takes a minimum of two years experience (or a four-year degree with a major/minor in real estate), plus passing EIGHT college-level courses.

Getting a salesperson license only requires a passing score of 70% on a 150-question multiple-choice test after talking a couple of classes. Once licensed, the office trainings are thin and too basic in nature, which unfortunately forces new agents to learn the trade on the backs of their first 100 clients or so.

The commission lawsuits may expedite the retirements of a million realtors, but they aren’t going to solve the problem – convincing the public that they should Get Good Help! Instead, the lawsuits will just keep everyone talking about the same old thing, with no advancement of what’s really best for the consumer.

Ryan tries to make the same point here, and look how fast it deteriorates:

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