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‘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.

The Realtor Trojan Horse

This sounds like a document-processing center where trainees guide consumers through the paperwork and hope they don’t ask too many questions. Sound familiar? They are going to walk right in and take over while the industry stands by idly – and we’ll look up in a few years and wonder what happened, just like we did when they began.

Over the last several years, Zillow has been transitioning from a real estate search portal into a streamlined buying-and-selling entity that offers iBuying services through Zillow Offers, and mortgage, title and escrow services through Zillow Home Loans and Zillow Closing Services. Now, the company has taken a big step further by starting its own licensed brokerage: Zillow Homes.

Zillow Group’s Chief Industry Development Officer Errol Samuelson provided details about the new brokerage in a video:

According to Zillow, starting in January 2021, Zillow Offers customers in Atlanta, Phoenix and Tucson will be working directly with a licensed employee of Zillow Homes. In addition, any Zillow-owned homes in these three markets will be listed by Zillow Homes employees. Although the services will be limited to these three locations to start, the company says it plans to expand into additional markets later in 2021.

In the video, Samuelson emphasizes that Zillow Homes will not be recruiting agents from other companies, but instead will be licensing existing Zillow employees under the Zillow Homes entity.

“We’re excited to add another important link in the Zillow Offers transaction chain to offer our customers greater choice and convenience when considering a move,” said Jeremy Wacksman, president of Zillow, in a statement. “At Zillow, our mission is to give people the power to unlock life’s next chapter and we want to help them on their journey home through a range of services that meet their preferences—whether through Zillow Offers or through a trusted Zillow Premier Agent partner.”

Zillow Offers launched in 2018 and is now available in 25 markets. According to the company, Zillow Homes will be “the brokerage of record for Zillow Offers transactions.” The move also frees up the company from using “thousands of disparate data feeds,” allowing them instead to pull from “MLS Internet Data Exchange, or IDX feeds,” according to the video statement.

“We look forward to working more closely with our agents, industry and MLS partners to efficiently serve our mutual customers,” added Wacksman. “Together, we will push to keep the real estate industry moving forward, and adapt to changing consumer preferences and virtual technologies.”

Zillow says it has plans to join local real estate associations, as well as the National Association of REALTORS®. The company also says it will continue investing and expanding its Premier Agent business—through which buyers and sellers can get connected to Zillow Premier Agents—and added that it expects this to be the “preference of the majority of Zillow’s customers.”

https://rismedia.com/2020/09/23/from-portal-to-brokerage-zillow-takes-massive-next-step-into-all-in-one-real-estate-services/

Being A Realtor in 2020

Here’s what it will take to be a successful realtor from now on – hat tip WSJ!

“It’s an attention game. It’s not who has the better postcards, it’s about who can attract the most eyeballs,” Mr. Serhant said. “I can walk into an appointment with a seller and say ‘there are 30,000 active real-estate agents in the city, there’s hundreds and thousands of us all over the world, but I have a level of exposure you can’t buy.’ ”

Mr. Serhant has decided that it’s time to cash in on his name recognition. After more than a decade at the brokerage Nest Seekers International, he is starting his own company, which will be known as “Serhant.” The new firm will have its own film studio, digital-marketing lab and a tech team dedicated to tracking the reach of the brand and its content across the web. Mr. Serhant said he decided to launch his company now because he believes “the traditional real-estate brokerage model is broken.”

“The brokerage company, open houses, and pretty photos don’t sell homes today the way they did 10 and 20 years ago,” he said. “Buyers of high-end real estate, and their children, go to YouTube and social media on their phones to research homes and agents now. I was already doing things differently from everyone else and it has been working incredibly well so I thought why not do it differently and build a firm from the ground up?”

Eddie Shapiro, Nest Seekers International founder and chief executive, noted that Mr. Serhant is not cutting ties with the company entirely. He will close out the business he signed at Nest Seekers, including his listings and new developments. Mr. Shapiro said that the company’s agents are now involved with a new reality real-estate show on Netflix called “Million Dollar Beach House.”

Mr. Serhant’s new business will crank out social-media content and multiple, dedicated short-form series for its YouTube channel, “Listed by Serhant,” based around his agents and listings. One series, provisionally called “3 in a Million,” will invite regular people into three listings and ask them to guess the price. Another, called “Meals in Mansions,” will be hosted by an agent at the firm who enjoys cooking and who will make meals in the kitchens of the firm’s high-end home listings.

Mr. Serhant, whose YouTube channel has one million subscribers, already produces his own YouTube videos weekly, putting together a mix of listing reveals, personal day-in-the-life style vlogs that showcase his family and personal life and business advice tutorials with titles like “How to OVERCOME self-doubt” and “How to SUCCEED in a VOLATILE market.” While these videos don’t directly sell his listings, Mr. Serhant said, they help him build a global following, which, in turn, gives his listings better exposure.

These tactics aren’t for everyone and some competitors snipe that Mr. Serhant is more interested in being famous himself than dedicating his time to his clients. Others said these stunts are more likely to attract voyeurs than actually result in deals, since ultrahigh-net-worth buyers aren’t likely to be shopping for multimillion-dollar properties on Instagram.

But Mr. Serhant argues that the numbers prove out his concept: His team at Nest Seekers did $1.4 billion in closed and in-contract sales last year, mostly in New York and in the Hamptons, making him one of the most successful agents in the country. He estimates that since he started in the business, he and his team have sold over $4 billion in property. Last year, they sold a $40 million house in Bridgehampton to a prominent executive who reached out to Mr. Serhant after finding him on YouTube, he said.

“If a listing video gets 10,000 views or a million views, that’s a big difference,” he said. “I tell clients, ‘I work incredibly hard to grow my brand for your benefit so I can put your listing in front of more eyeballs than anyone else in the business.’ ”

Mr. Serhant said many of his wealthy clients have secret accounts on Instagram that aren’t registered in their real names. One former client, so privacy-obsessed that his chauffeur-driven car had blacked-out windows, had an Instagram account and mentioned several of the properties he’d seen on Mr. Serhant’s account.

“Instagram isn’t a joke now,” Mr. Serhant said. “People will go to your Instagram to see who you are as a person before they pick up the phone. You don’t need a business card, you need a powerful social-media profile.”

(more…)

MLS Upgrade

I spent 10-15 minutes watching the first zoom call by our MLS representatives yesterday who were informing us about the big MLS upgrade coming on September 21st.

But it turns out that the big ‘upgrade’ doesn’t mean we will get a shiny new car to replace the turd we’ve been driving around since the mid-90s.  Instead, they will tear our current system apart, and hope we can figure out how to put it back together – see the FAQs above.

Not only that, but the ‘upgrade’ will means from September 17-20 they will turn the MLS into ‘read-only’.  No new listings, no price reductions, no new pendings, etc.

Great – put us on an involuntary four-day vacation while you deconstruct the main tool we use to sell homes, and then make us put it back together by ourselves.

The real purpose for the ‘upgrade’ is so our MLS will better conform to RESO standards, which would make it easier to create a national MLS someday.  The only reason to have a national MLS was if you were going to have a search portal to go with it, and mount an attack on Zillow.

We did get more news about that today.

The Broker Public Portal announced they have hired a face of the project.  Inman News wrote a full article on him, where he said that he expects to overtake Zillow in the next two years.  Here’s the closing segment:

“When that shopper is ready to become a buyer, and wants real information about the property she’s interested in, she doesn’t get re-directed to some random agent who has probably never seen the house. She goes right to the agent who knows that property best. That’s better for the client, and better for the agent.”

Rather than spending hundreds of millions to advertise to consumers, the BPP will spread the word on Homesnap via agents, according to Rand.

“It’s a lot easier and cheaper to market to a million real estate agents than 250 million raw consumers. If we get the agents, they’ll bring the consumers,” he said.

He thinks consumers are going to leave Zillow because agents tell them to use Homesnap?  The Homesnap app would have to be a far-superior portal for that to happen, AND the Premier Agents who make a good living from advertising on Zillow would have to want a change.

Sounds far-fetched to me, especially within two years.

Getting Into Real Estate Sales

Generally speaking, the realtor community is a nice bunch of folks who welcome newcomers into the business and offer encouragement…….while muttering under our breath, ‘They have no idea what they are getting themselves into’.

New agents bounce around like a pinball for a year or so, while the business is happening to them.  The more hours invested, the quicker the education, and the potential is truly unlimited.  It’s why agents stick it out as long as they can, in hopes of success being right around the corner. But seven out of eight don’t make it.

Last week we talked about getting your license first.

Next, recognize the hard truths about the business so you can position yourself accordingly:

The majority of your sales will involve another realtor you don’t know, and most of them won’t share your selling skills or desire to succeed. You want/need to be a chameleon and meet them on their level – and you will learn something every time.

You want to spend money on your business. Keep an eye out for the best options.

Get comfortable with failure – it happens a lot.  You’ll learn to live with losing fair-and-square, but there will be multiple times that the human condition will disappoint you. The majority of the time it’s inadvertent; where agents get in such a rush to sell something they forget about everyone else, including you and their seller.

Listings are the name of the game. If you want to minimize the negative impact of the things above, then concentrate on getting listings and everything else will take care of themselves.

Down-Payment Accounts

Here’s a way to support homebuyers at all levels without taxpayer money:

WASHINGTON (August 7, 2020) – Legislation introduced by Senators Doug Jones (D-AL) and Cory Gardner (R-CO) is being recognized as a critical component of the national effort to address the barriers to first-time homeownership in America. The National Association of Realtors®, which previously submitted a letter in support of the legislation, expressed optimism that the American Dream Down Payment Act and other similar proposals to address housing affordability would continue gaining momentum on Capitol Hill.

“The resiliency of our residential real estate market has been one of the few bright spots of America’s economy during this pandemic, but numerous would-be homebuyers are finding it difficult or impossible to save the money needed for a down payment on a home,” said NAR President Vince Malta, broker at Malta & Co., Inc., in San Francisco, CA. “This is especially discouraging given record-low interest rates are making it easier for aspiring homeowners to afford monthly mortgage payments.

“Modeled on the very popular 529 education savings account concept, the American Dream Down Payment Act would allow savings for the down payment of a principal residence to grow tax-free, offering a responsible and commonsense approach to the multi-faceted problem of housing affordability in America.”

In its letter sent Monday to Senators Jones and Gardner, NAR relayed hope that these accounts could serve as a tangible resource to aspiring homeowners who have been unable to save sufficient funds for a down payment. According to the Urban Institute, two-thirds of renters have identified the inability to save for a down payment as an obstacle to homeownership.

“We appreciate your initiative in putting forth a reasonable proposal that should attract support from your colleagues as well as the growing population of those for whom down payment assistance would help open the door to their all-important first home purchase,” Malta wrote to the lawmakers.

As described by Senators Jones and Gardner, the American Dream Down Payment Act would:

  • Let states establish American Dream Down Payment Accounts, which they would manage in the same way they manage 529 Plan accounts;
  • Allow prospective homeowners to save as much as 20% of today’s home cost, indexed for inflation, to use for an eligible down payment and other housing costs;
  • Facilitate long-term savings for a down payment and allow contributions from family and friends; and
  • Allow homebuyers to use those savings and earnings tax-free at withdrawal for eligible expenses.

The National Association of Realtors® is America’s largest trade association, representing more than 1.4 million members involved in all aspects of the residential and commercial real estate industries.

https://www.nar.realtor/newsroom/down-payment-assistance-legislation-backed-by-nar-gains-traction-in-u-s-senate

More Coming Soon

Just when we thought there was a set policy on Coming Soon listings, they change it again.

The IDX is the agreement among realtors to share each others’ listings on our own personal websites, which was a great idea before search portals.  But IDX was written off as a waste of time because now consumers have found better options like Zillow.

Are they going to change to their realtor’s inferior website, just to see the Coming Soons?

Wasn’t the idea of Coming-Soon-listings-on-the-MLS supposed to give realtors the distinct advantage of controlling the distribution?  Oh well, maybe that was just me who saw that advantage, because it sure wasn’t considered in this decision. They are all going to be out in the open now, and we might as well let Zillow have them too.

The water is already muddied by Zillow allowing the Premier Agents to do their own Coming Soon listings separate from the MLS, and by agents ignoring the rules on social media. Who knows if agents are flagrantly abusing the rules or just forgot them already (more probable) but I see the old standard Coming-Soon pitches on social media now that are supposed to be inputted into the MLS by the next day – but they show up a week or two later, just like before.

Here are the new/updated rules for those who care:

No mention of Private Exclusives – which are allowed by N.A.R.’s Clear Cooperation Policy – where any agent in the same brokerage can sell an in-house listing without any MLS or public exposure.

I don’t get the No Showings policy either.  Do they really think an agent is going to deny showing their Coming-Soon listing to a buyer who contacts them directly and promises to pay full-price cash? I’ve already showed Coming Soons listed by other agents to my buyers, and the listers didn’t think twice about it.  If they had a chance to double-end the commission, wouldn’t they just pay the fine and be on their way?  The max fine is only $2,500.

This whole topic was a mess, and now giving buyers direct access to the list is not only going to tempt them to go directly to the listing agent (which is opposite to NAR’s intent) but consumers will also get a better look at how disorganized and unruly we are.

Getting Started in Real Estate

I’m going to help a few people get started in the business, and hopefully make a career of selling real estate.  I figure I should just publish my guide right here on the blog, and Fridays are a good day to do it!

Let’s explore what it takes to become a realtor in 2020!

Where to get your license: First Tuesday

It’s so easy to get a real estate licensee, demonstrate your commitment to yourself and get one.

Online training courses give you the basics and prepare you for your state test, which is 150 multiple-choice questions – get 70% of the answers correct and you pass! You can’t sell real estate without one, so if you’re in it, to win it, get a license so you can get paid right away!

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There are two sides of the business; sales and transaction coordinating.

If you are a great people-person, then being in sales is for you.  It’s called a ‘salesperson’s license’, but so far all you’ve done is pass a test.  Getting out and speaking with people regularly about buying and selling homes is the job.

If you’re not a people-person, or want to work your way into the sales business, you can take a more clerical job in transaction coordinating. Once the salespeople have brought a buyer and seller together and completed a written purchase agreement, then we have staff assist with making sure all the necessary details get done to close the sale.  This job pays around $30,000 – $50,000 per year if you don’t mind working a few 12-hour shifts along the way. There is a limited future unless you can create your own company.

Oh, you want to be in sales? What’s the difference?

You don’t get paid anything along the way. You’re paid on commission. You need to sell, to get paid.

It’s not that comfortable for the first twenty years, but you’ll get used to it.

What’s realistic?

You probably won”t make much money during your first year, so have sufficient financial backing that you don’t have to sweat it.

Expect to spend money on your business.  You are an entrepreneur – a business owner – and it takes money to make money. But if you are a socialite who can generate leads from the yacht club then more power to you. We will help you pursue leads. Compass is touting our new AI engineering, and it promises to help.

You need someone to teach you the ropes. You need a mentor.

The big brokerages offer a mentor program with classroom training and a manager.  It’s the basics, and better than nothing.  But ideally you want on-the-job training where you are learning while doing.

In summary: Get a license, have some money in the bank, and find the best mentor you can.

More next week!

Industry-Disruption Podcast

Here’s a thorough discussion on the the state of realtor disruption – early on, Rob refers to this post:

https://notorious-rob.com/2020/07/two-steps-forward-one-step-back-the-story-of-innovation-in-real-estate/

For every tech platform that sets out to disrupt real estate, there’s a story of slow evolution to working with brokers and agents. And while companies like Zillow, Opendoor, and Offerpad have brought about minor changes to the home buying process, they always end up morphing into our traditional system. Why is it that these so-called disruptors just can’t change the way we do real estate?

In this episode of Industry Relations, Rob and Greg are exploring why would-be disruptors have such a hard time changing real estate. Greg walks us through his five-stages-of-grief analogy around how tech platforms always end up working with brokers and agents, and Rob compares real estate with the auto industry, reflecting on how little buying processes have changed despite advancements in technology.

Rob and Greg go on to introduce the idea that the human connection is what prevents tech disruptors from succeeding in our industry, speculating that agent teams have been the biggest disruptor in real estate in recent years. Listen in for insight on how human knowledge and connection factor into making tech platforms successful and learn why the human need for approval is not disruptable.

What’s Discussed:

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Own the Entire Process?

Reader AI said that “Eventually the big guys will own the entire process from beginning to end and the consumer will suffer, and pay more to do so”.  Zillow is on the verge of owning the entire process, but they aren’t the only ones trying.  Here’s another example:

In addition to resuming iBuying across 800 markets, Offerpad is now offering to list and sell homes for their customers.

According to Offerpad, “We aren’t a discount brokerage. Actually, we provide more services when listing than anyone else can. We’ll maximize home values in the end and get the home to sell for more so the customer can earn 3x, 4x, 5x, more than the difference of our commission fees and those of discount brokerages. Fees could be 5.5% – 6% depending on the market.”

Because the definition of real estate service has never been established, newcomers make any claim they want.  They hope that in the end, the winner will be whoever advertises the most – truthful or not.

Compass is the last bastion of old-fashioned realtors. The company is hiring successful listing agents, and supporting them with additional tools in order to build market share that will survive the disrupter onslaught.  We’ll see if it works, but it will probably include expanding into the mortgage/escrow/title business too, just to keep up.

The rest will claim to be top-notch professional realtors, but will consumers know the difference? Or care?

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