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Mortgage Rates Heading for 6%

I picked a great day to start the mortgage-rate tracker in the right-hand column! >>>>

Mortgage rates haven’t been in the 6% range since 2008:

How many agents have operated in a 6% environment? It will be less than half of the active agents today. To check, their license number would have to be around 01850000 or lower (real estate license numbers in California are sequential).

Wondering how to cope? Here are my tips:

  1. Sellers – Offer to Pay Points. Even if the buyer won’t use your lender, offer to pay 1%-2% of the loan amount to buydown their interest rate. If their lender keeps the money instead of giving a lower rate, well then, heck, at least you tried. But the buyers should appreciate the effort, and two points should reduce the rate by at least 1/4%.
  2. Sellers – Carry the Financing. If the seller carries all or part of the financing at a reasonable rate, it will help the buyers. Plus, sellers only pay capital-gains taxes on the money you receive, so you’ll get a break there. The big bonus will be if the buyer stops paying – you’ll get your house back too!
  3. Buyers – Get a Short-Term Mortgage. We call them ARMs, or adjustable-rate mortgages which sounds scary after the neg-am debacle last time. But they offer a fixed-rate for the initial term – just get a seven-year or ten-year loan and refinance once we go into recession and the Feb has to back off again (because they owe $30 trillion themselves, it will probably happen sooner than later).

While the impact on the buyers’ monthly payments is real, it’s the market psychology that will make it worse. Buyers will be expecting lower prices, so instead, consider one of my tips above as an alternative.

Realtor Pay

This week, the Wall Street Journal ran a story entitled, ‘How Should Realtors Get Paid’.

The author is a general freelance writer who describes herself as ‘a versatile writer with experience covering a wide range of topics. As a freelancer I contribute regularly to the Wall Street Journal, writing about personal finance, healthcare, aging and technological innovation’.  Because she isn’t a real estate expert, she relied on three college professors for content:

https://www.wsj.com/articles/how-should-real-estate-agents-be-paid-11645568774

They went off on some crazy tangents and no realistic conclusions were found, other than to note that there are discount brokers if you want to pay less.

My thought:

Would you do your job for the same pay if these were part of your job description:

  1. You invest your own time and money along the way.
  2. You don’t know when/if you will get paid, and….
  3. You don’t control the final decisions – the clients do.

There should be a hefty bonus for those factors.

That being said, I would agree that the majority of realtors are grossly overpaid, relative to the services provided.

I see it every day, and if you go to open houses, you’ll see it too. The standard agent knows how to identify each room (this is the kitchen, this is the family room, etc.) and then ask you if you have any questions. Most can complete the fill-in-the-blank contracts too.

But they aren’t professional salespeople who can deliver expert advice on the fly, recognize good and bad features and assign costs/values on the fly, and put the correct price on a home based on the complete package of home’s condition and location, market conditions, and buyer pool….on the fly.  Those are the realtors that deserve full compensation because the piece of mind delivered is worth extra.  It is a service that is more than just taking an order.

Unfortunately, the order-takers are prevailing though, because consumers don’t know the difference and we all get paid the same.  The industry isn’t motivated to disclose this to consumers because they get paid more on the lousy/inexperienced agents, so it will be up to consumers to seek out the experts in a quickie, push-button world.

Eventually, companies like Zillow will determine the values, and consumers will decide if they can live with that.  Most will – it is what they are being fed by the new-age disrupters who are advertising the most. It should be just a matter of time before they prevail, and the old guard packs it up.

There will be lower costs eventually, and virtually no good help.

Zinnovations

People say there will always be a need for a realtor, but consumers may adapt to new methods:

JG: How is Zillow addressing these different aspects of the consumer journey?

ES: The problem that we are spending a bunch of time on right now is how do you fix the home-touring problem. We’ve noticed that a lot of times we had a consumer who wanted to go see a home, and couldn’t get in. We went and talked to ShowingTime and they told us that there were 92 million showing requests on our platform last year, but only 68 million of those got fulfilled.

This is a boring problem, and what we are doing is attacking it in three different ways.

The first is a new technology that we call “3D Home” and it’s sort of like your next-generation, virtual tour that allows you to walk through the house. What we found is that homes that have these 3D Home tours are viewed 45% more than homes that don’t have them and on average they sold 14% faster.

Then, we’re putting a bunch of technology, resources and engineering into ShowingTime so that when that buy side request comes in to see a home in person, we can make sure that the agents can connect and we can get that person into the house. We also just launched a beta test of a product where you can actually use the Zillow app as a mobile control to get into the house.

So with these three different projects that we have going on right now, we are going to try to fix this boring but incredibly impactful problem of getting into a house.

JG: What other innovation can we expect that will help drive the next generation of Zillow and its business model?

ES: There are a bunch of things that we are doing to simply help consumers buy homes. We have a really sophisticated artificial intelligence engine that sits behind our user search interface.

We’re doing essentially the same thing for listings that Netflix does when it sends users a “here is a show that you’re probably going to like” suggestion. On the second time you come back to the app or site, we’ve looked at not only what you’ve been searching, but also what people similar to you are searching, and our goal is that on that first page of search results to get you a house we think you’re going to like.

The goal is you should never have to go to page two to get a home that you like.

Another thing is we just launched a feature that we call SharePlay, and what it does is set up a FaceTime call and you and another person can use the app at the same time. In our research we found that 86% of our users on Zillow said they were shopping with someone else—either a spouse, housemate or parent.

https://www.rismedia.com/2022/02/11/zillow-looking-ease-homebuying-journey-post-ibuying/

Wire Fraud

Written by Richard Hopen from COMPASS Short Hills NJ:

When my wife and I sold our house in 2017, our $239,000 mortgage payoff was stolen.

The money was never recovered.  We were victims of real estate wire fraud.

I’m not only a victim, I’m also a real estate agent and lawyer. And shame on me for not knowing about wire fraud when I sold my house. Real estate wire fraud is perpetrated by cyber criminals who exploit the trust between home buyers and sellers and their real estate agents, title companies, lawyers, and mortgage lenders. Criminals steal home deposits, down payments, and mortgage payoffs by accessing and monitoring email accounts of the parties in a transaction.

When a criminal finds an email with attached wiring instructions, they change the depository account number and email the fraudulent wiring instructions to the person who will wire the funds. If the target is duped, the money will be wired into the criminal’s account. Accessing email accounts is easy for cyber-criminals and opportunities to commit the crime are unlimited. According to a 2021 ALTA survey, 1 in 3 real estate transactions are targeted.

Real estate transactions are ripe conditions for thieves. Each transaction involves multiple parties, working under pressure to meet the closing deadline. Many of the parties share information over unsecured email accounts that can lead a savvy criminal to the wiring instructions. Home buyers and sellers are vulnerable, and real estate agents need to do much more than include wire fraud warnings on emails or have customers sign wire fraud disclosures. At a minimum, every seller and buyer should know about the risk of real estate wire fraud and how to prevent it.

Rich Hopen of COMPASS Short Hills, NJ has worked closely with ALTA to create www.stopwirefraud.org. He has sat on a wire fraud panel with a U.S. Senator; participated in a roundtable discussion with the FBI, ALTA, the Mortgage Bankers Association, American Bankers Association, and NAR; was interviewed and quoted by HousingWire and the Wall Street Journal; and has spoken to many real estate offices and organizations.

https://stopwirefraud.org/

Another thought: Avoid Friday closings to help stop wire fraud.

Friday is the most highly targeted day of the week for wire fraud at real estate closings, because the next business day is on Monday, and there is only a 24 hour window to identify a fraudulent transfer and reverse it, and criminals know and exploit this weakness.

Always tell your clients to follow up with their bank in the hours after closing to be sure wire transfers were done but to also check very first thing the next morning.  If the next morning is Saturday, there is no live person at the bank to follow up on the wire, and by Monday, the window to reverse it is past.

Online Home Auctions

I had a good conversation this week with the people at Doorsey, and they are well on their way to providing a sharp and effective online home auction platform that could change how homes are sold.  If/when Zillow buys them and provides online auctions nationwide, agents will be wondering what happened.

https://www.doorsey.com/

This article is from November:

https://www.spokesman.com/stories/2021/nov/05/spokane-based-online-real-estate-platform-doorsey-/

Excerpts:

Doorsey, an online real estate platform founded by a group of Spokane entrepreneurs, launched this week and secured $4.1 million in a seed funding round.

Founded by Jordan Allen, Nick McLain and Matt Melville, Doorsey is an online bidding platform they say takes the guesswork out of buying a home by providing real estate agents with real-time home prices and upfront sales terms and disclosures.

“Today’s home-buying offer process is rife with frustrations for all parties,” Allen said in a statement. “Buyers and their agents want to know whether their offer can win. Sellers and their agents want to know they’re getting the best offers. And agents want to close more deals in less time.

“Doorsey solves this by allowing sellers to define upfront what it takes to win, so that buyers can compete on a level playing field and sellers can find the right buyers.”

The co-founders sought input from the local real estate community and subsequently evolved the online platform into Doorsey, which provides buyers with such things as access to home-inspection reports, sale contingencies, photos, a 3D virtual tour via Matterport and a community forum for interacting with sellers and neighbors.

Buyers can also schedule showings and view desired closing dates on the platform.

Doorsey’s listings are posted on the Spokane Multiple Listing Service and distributed through national real estate websites, including Zillow, Trulia, Redfin and Realtor.com.

Doorsey has obtained $4.1 million in seed funding – an early stage of capital investment in startups – allowing it to build-out its product, hire more employees and expand to key markets nationwide within two years, according to the company.

The funding round was led by 166 2nd Financial Services with participation from Agya Ventures, Liquid 2 Ventures and SRM Development, among other investors.

Former NFL quarterback Joe Montana is a managing partner of San Francisco-based Liquid 2 Ventures, while 166 2nd Financial Services is led by former WeWork CEO and co-founder Adam Neumann.

https://www.doorsey.com/

Publicizing The Listing Agent

The old rule was that any agent could advertise any MLS listing via the IDX, as long as the listing agent’s name and brokerage was displayed. But now you have to include their contact information too. He sounds confident because this is clearly a shot at Zillow but the unintended consequences from directing the consumer to the listing agent is promoting single agency which will eventually eliminate broker cooperation as we know it.

The discouragement of buyers getting their own representation from a buyer-agent is part of the dumbing-down of the business.  Sellers and listing agents prefer buyers who just pay whatever it takes and don’t ask questions, and when the History of the 2020-2021 Frenzy is written, it should include that it was fueled in part by crazy buyers getting no good help. 


In an emailed statement, a Zillow spokesperson said, “As part of our switch to IDX feeds and becoming CRMLS participants earlier this year, we agreed to comply with all CRMLS rules and regulations, which includes adhering to listing credit and display rules — such as the updates that went into effect this month.

“One of our core values is to empower consumers and increase transparency in real estate, which includes efforts to give shoppers the information they need to connect with listing agents. For more than a decade, our philosophy of ‘turning on the lights’ for consumers has meant that we’ve consistently displayed listing agents’ names and contact information, something not done on all IDX sites today.”

Get Good Help!

Good-Faith Deposit

It is a very rare occurrence where a buyer wants to cancel the sale after releasing all contingencies because they know they could potentially lose their deposit. Would they give up a five-figure or six-figure deposit easily, or fight it out with the seller? If they fight, then the property gets hung up in litigation and can’t be sold, and most sellers want to get on with the sale. Because in almost every case, the buyer will get his deposit back one way or another, should we just quit collecting them as part of the sale?

According to CAR – we don’t need a deposit to have a binding contract:

Q:  Must a buyer give a good faith deposit in a purchase agreement for there to be “consideration” to make it a binding contract?

A: No.  The buyer’s good faith deposit in a real estate purchase agreement has no legal significance. It is not required as consideration for the contract because the purchase agreement is a bilateral contract and the mutual promises of the parties serve as adequate consideration to make the contract binding and enforceable on both parties. (Bleecher v. Conte, 29 Cal. 3d 345, 350 (1981).)

Under the C.A.R. purchase agreements, if a contract is entered into and the buyer fails to make the good faith deposit as agreed to, the seller cannot simply cancel. Instead, the seller must go through the procedure of issuing a Notice to Buyer to Perform and giving the buyer adequate time to perform, and only then can the seller issue a cancellation.

Compass #1 in San Diego County

In less than 4 years, Compass has become the dominant residential-resale brokerage in San Diego County, and it’s not close. Even if you added the two CBs together, their market share is less than half of ours.

It’s been the aggressive recruiting of top agents that built the sales force, and the vast majority of those agents came from the other brokerages on this list.  It tends to be a zero-sum game too – as we get bigger and better, the others are going to struggle to keep up.

Want to be a part of the Compass juggernaut?  The Klinge Realty Group is hiring!

Did you know that 87% of new licensees quit during their first year in the business?

Your training is critical to your success!  Whether you have a few years of experience or are just getting your license, we can help you build a solid real estate practice.  Contact us today!

The Typical Bidding War

Here’s a great snapshot of how the vast majority of listing agents handle multiple offers. They just grab one, and kiss off the rest – which isn’t good for the sellers, it’s not good for the losing buyers who might have made a better offer if there was a highest-and-best round, and it’s not good for the buyer-agents who should have the right to compete fairly to sell the home.

But the listing agent gets to go back to sleep, so there’s that.

The most common response? “I just did what the seller wanted to do”. But isn’t it your job to advise them of a way to create a fair competition that could get them a better offer and more money? I think so.

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