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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.

CCP and The Future

Two years ago, the National Association of Realtors began the Clear Cooperation Policy, a directive that compels agents to submit their listings to the MLS within one business day after any public marketing.

It was an attempt to quell off-market sales, but Glenn says that it’s done the opposite.

Specifically, because the CCP allows brokerages to have ‘Office Exclusives’, he asserts that more companies are withholding their listings from the MLS and selling them in-house without any attempt to include outside agents or buyers.

Rob and Sam, two industry titans, conducted a livestream discussion to see what else can be done.

Rob has the likely solution – that any agent who wants to exclude their listing from the MLS will need to get a signed waiver from the MLS committee to do so.

Yes, it has come to that – agents can’t be trusted to play by the rules, and will need a permission slip from the principal to officially withhold a listing from the MLS.

But it gets worse – I left a bomb in the comment section here:

https://notorious-rob.com/2021/05/in-which-sam-debord-and-i-solve-the-clear-cooperation-dilemma/

Disclosing Offer Prices

To say it’s the Wild Wild West out here is putting it lightly, and how realtors handle multiple offers is the primary reason. There isn’t a standard way to handle a bidding war – and heck, we don’t even agree on what is confidential, and what isn’t. Here is the variety of opinions from a FB thread:

Even when presented with a copy of the actual verbiage from our contracts, she comments, “Wrong”.

Is anyone surprised why buyers are so frustrated?

‘No More Showings’

We see it more and more these days – listing agents who shut down showings of their listings. I’m sure most would say, “What do you want me to do? I had 20-30 appointment times available, and they all booked up!”

When faced with having to work harder, smarter, or less, agents always seem to pick less.

  • But they owe it to their sellers to find a way to show their home to every possible buyer.
  • They owe it to their fellow agents too, and their buyers.

Work Harder:

An agent over the weekend was bombarded with requests to show a newer one-story home on a half-acre lot. She TRIPLE-BOOKED the whole weekend, and designated four stations – two inside, and two outside. As visitors arrived, she explained the process, and deftly guided everyone from station to station to keep the parade moving – and it went very smoothly.

Work Smarter:

Can we please require agents to produce YouTube video tours?

If you don’t like the way you sound or you’re afraid you might say something stupid, then just don’t talk. The video is a boost to understanding the flow of the floor plan, and and a way to highlight the biggest benefits. It’s not that hard to do – you’re doing videos of your grandkids every weekend, surely you can walk around a house with a videocam and pretend you’re showing the house to a buyer – of which you have plenty of practice!  Then the buyers who got shut out from an in-person appointment can view the video and have a fighting chance to compete.

Selling homes by video should have been commonplace by now. Let’s do it!

Community Property with Right of Survivorship

Question: Our house was titled “joint tenant with right of survivorship” after my husband inherited the property in 1998. We were not married at the time. However we legally married in 2013. Will one of us get the step-up in tax basis when the other passes, or do we have to re-title the house some way? We also want to avoid probate. We live in California.

Answer: As you know, California is one of the community property states that allows both halves of a property to get a step-up in tax basis when one spouse dies. This double step-up can be a huge tax saver, since none of the appreciation that happened before the death is taxed. Other community property states include Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In Alaska, spouses can sign an agreement to make specific assets community property.

In other, common law states, only half of the property gets the step-up to a new tax basis when one spouse dies. The other half retains its original tax basis.

Although assets acquired during a marriage are generally considered community property regardless of how they’re titled, in your case the property was acquired before marriage.

The current title of joint tenants with right of survivorship would avoid probate but it would not achieve full step-up in basis when the first spouse dies, said Mark Luscombe, principal analyst for tax research firm Wolters Kluwer.

So you’d be smart to get the property retitled as “community property with right of survivorship,” which allows you to avoid probate and get the double step-up after the first death. California allows this “best of both worlds” option, as do Alaska, Arizona, Idaho, Nevada and Wisconsin, have this option. In other community property states, you’d have to choose between probate avoidance and getting the full step-up.

More here:

https://asklizweston.com/qa-a-look-at-property-title/

If you’re not sure about how you filed, email me and I’ll send you a copy of your grant deed:

klingerealty@gmail.com

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Buyer-Agent’s Commission Exposed

This is nothing. What would be entertaining is if they required the listing agent’s commission to be exposed too.

The Department of Justice today filed a civil lawsuit against the National Association of REALTORS® (NAR) alleging that NAR established and enforced illegal restraints on the ways that REALTORS® compete.

The Antitrust Division simultaneously filed a proposed settlement that requires NAR to repeal and modify its rules to:

  • Provide greater transparency to home buyers about the commissions of brokers representing home buyers (buyer brokers),
  • Cease misrepresenting that buyer broker services are free,
  • Eliminate rules that prohibit filtering multiple listing services (MLS) listings based on the level of buyer broker commissions, and
  • Change its rules and policy which limit access to lockboxes to only NAR-affiliated real estate brokers.

If approved, the settlement will enhance competition in the real estate market, resulting in more choice and better service for consumers.

“Buying a home is one of life’s biggest and most important financial decisions,” said Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division. “Home buyers and sellers should be aware of all the broker fees they are paying. Today’s settlement prevents traditional brokers from impeding competition — including by internet-based methods of home buying and selling — by providing greater transparency to consumers about broker fees. This will increase price competition among brokers and lead to better quality of services for American home buyers and sellers.”

According to the complaint, NAR’s anticompetitive rules, policies, and practices include: (i) prohibiting MLSs that are affiliated with NAR from disclosing to prospective buyers the commission that the buyer broker will earn; (ii) allowing buyer brokers to misrepresent to buyers that a buyer broker’s services are free; (iii) enabling buyer brokers to filter MLS listings based on the level of buyer broker commissions offered; and (iv) limiting access to the lockboxes that provide licensed brokers with access to homes for sale to brokers who work for a NAR-affiliated MLS. These NAR rules, policies, practices have been widely adopted by NAR-affiliated MLSs resulting in decreased competition among real estate brokers.

NAR is a trade association of more than 1.4 million-member REALTORS® who are engaged in residential real estate brokerages across the United States. NAR has over 1,400 local associations (called “Member Boards”) organized as MLSs through which REALTORS® share information about homes for sale in their communities. Among other activities, NAR establishes and enforces rules, policies, and practices that are adopted by the Member Boards and their affiliated MLSs.

https://www.justice.gov/opa/pr/justice-department-files-antitrust-case-and-simultaneous-settlement-requiring-national

Agent Referral Networks

Have you been seeing more of this guy lately?

He wants to hook you up with the top agents in your area – AND only charge you a 2% commission.

They keep the 2% circle at the bottom of the advertisement for the entire 30 seconds to engrain in your head that they have some magic network of top agents who will work for the discount rate.

Don’t believe it.

The agreement they have with agents is that you will be presented with a 2% option, which is the typical For-Sale-By-Owner plan – if you find your own buyer, then the agent will handle your paperwork for 2%. At that point, you’ll probably wonder about the more traditional plans where your listing agent handles the whole process. The next thing you know, you’ll be signing the listing agreement at 6%.

Why will these listing agents insist on the more-expensive plan?

It’s because they have to pay a finder’s fee to the advertiser.

Whenever a corporate third-party is referring you to an agent, there is a fee paid by the agent – and it’s hefty. Whether it is a TV-advertiser, an internet pitch, or relocation company provided by your employer, they all take a big cut out of your agent’s commission – usually 25% to 30%.

The great listing agents – the ones you hope will sell your house for the most money – will pass along this finder’s fee to you. It means you’ll be presented with 6% or 7% options, and/or a commission that drastically discounts the buyer-agent’s side of the commission.

The agent-referral industry relies on the bait-and-switch.

If this guy said that he had the top agents in your area that charge 6%, would he get any calls?  No.

No More Love Letters

The time-honored tradition of buyers hoping to sway sellers with a personal introductory letter came to an abrupt halt this month with the new FHDA form (see snip above).

Not only has it been customary to submit a letter of introduction with your offer, but if you don’t, the listing agent usually asks about the buyers. I had one last week say, “Tell me their story” which probably wasn’t meant to gather information to use against them, but who knows?

Paragraph 8A mentions ‘actual or unconscious bias’.  Agents who are stuck in their ways may not realize how this information is being digested.

It’s not just for agents either. Paragraph 7 specifically includes sellers and landlords too.

Nobody reads these forms so the practice will probably continue for a while, which means that those who DON’T include a love letter could be hurting their chances if other agents keep doing it.

(hat tip Annabama)

‘Swamp the Boat’ Offer

Here’s how I handle a hot one when I’m the listing agent.

My listing of 7206 Durango in Carlsbad was appropriately priced at $999,000, given what we were selling and the homeowners’ desire to move sooner, not later. What do I mean when I say ‘appropriately priced”?

Sure, it was 2,699sf but it wasn’t a standard tract house.

We had twelve showings in two days, and for those who had been used to seeing other similar-sized homes nearby in Aviara and La Costa Valley and expected the same….well, you could tell by the look on their face – even with a mask on!  They were stunned, and had trouble comprehending what they just saw.

It was because the house was a funky combination of a 1970s-built 1,517sf house with a pseudo-granny flat added on.

The challenges:

  • The original house was in decent shape, but not a full remodel like the last two comps.
  • The granny flat was one bedroom/one bath, and both were upstairs.
  • The granny flat had an unpermitted kitchen.
  • The granny flat was too big to be permitted as an ADU today.
  • The backyard was 15-20ft of concrete, then a slope that went up about 40 feet.

I knew from the beginning that the buyer pool for this combo was going to be much smaller than it was for the last two comps that both closed for $1,115,000.  They were both fully-remodeled one-story homes on culdesacs, and we were the opposite.

One of the showings on Day Two was a single guy who came with his mom and an older-guy agent.  The agent had only been licensed for four years (his license number on his card was over 2000000), and because they had sincere interest, he asked me what would it take to buy the property.

This is where I differ greatly from virtually all other agents.

Most agents will make some vague reference to how hot the property has been based on the number of showings, and tell you to do your best. If you ask about their rules of engagement, it gets more vague because they usually don’t have a strategy, other than spreading out all the offers on the dining-room table and telling the seller to pick one.

I gave the buyer, his mom, and his agent a couple of ideas. I told them that I had received an offer of $1,000,000 on the first day, and two other parties told me they would be writing offers too.

Then I described his two choices:

Idea #1: Either you can write an initial offer around list price or higher, and I will conduct a highest-and-best round.  You can probably expect that there will be at least one buyer who will pay 5% over list, so it you offer that much or a little more, you might win.

Idea #2:  You can swamp the boat. Make an offer so outrageously high that no one else will touch it.

An hour later, I received his offer for $1,125,000, with no appraisal! On a $999,000 list price!

I shopped the price around with the other three contenders, but nobody wanted a piece of that.

It was a fair and transparent process where everyone had a chance to buy the property.  It’s what is best for the sellers, plus none of the buyers thought they were robbed – they had a fair chance to buy it.

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