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Market Conditions As Seen By Realtors

Of course the current conditions look worse when comparing to the hottest real estate market ever. Having bidding wars on 21% of homes for sale sounds great to me.

The discouraging part about Bill’s post today is how the realtors have bought into the negativity.

This is the first downturn to be affected by amateurs on social media, and realtors can either price ’em high and repeat these same negative talking points seen everywhere now, or they can get better at their craft, price their listings attractively, and be part of the solution:

#Houston, TX: “Home prices have most first-time home buyers priced out of home ownership. It’s even worse with the higher interest rates decreasing what the buyers can qualify for.”

#Denver, CO: “Cost of living [and] interest rate [increases] are keeping most buyers from buying.”

#Baltimore, MD: “The market is transitioning. Inventory is still low and the number of buyers looking is less due to rising interest rates. Buyers are qualifying for less, so they are pulling back. [I am] seeing less as-is sales, more home inspections, and negotiations overall.”

#Sarasota, FL: “I’ve had numerous buyers looking but the prices are much higher than they want to spend. Many pulled back waiting for the market to go down.

#LosAngeles, CA: “Skyrocketing interest rates are pushing buyers out of the market (they can no longer afford homes that were in their price range just a few months ago) and making homes more difficult to sell for sellers and their agents.”

#Phoenix, AZ: “Buyers are very nervous about making a decision.”

#NewYork: “Open house attendance is weaker than usual, and sales take longer.”

#Minnesota, MN: “Still seeing a fair number of cash sales as competition to financed sales.”

#StLouis, MO: “Things are slowing down slightly, but I have found that the good properties are still moving quickly with multiple offers and going above ask.”

#Barre, VT: “Our local market in Lamoille County is very flat and challenging. Local working families are outpriced by the prices and interest rates. The neighboring resort town has slowed but there are still cash buyers for the million plus market.”

#OrangeCounty, CA: “Interest rates have put the brakes on the market.”

I did sign up to be on their realtor-comments list!

https://open.substack.com/pub/calculatedrisk/p/interest-rates-have-put-the-brakes

Reverse Offer

The local market conditions appear to be getting worse every day, mostly because the headline writers and social-media experts are piling on now.  What can listing agents do?

When most agents are content to show their listings and then go wait by the phone, there are alternatives. Hat tip to our manager Steve Salinas for bringing up the Reverse Offer technique in our sales meeting!

For two years, the buyer-agents have just been telling their clients to bid hundreds of thousands of dollars OVER the list price, so now they may need some help with advising their buyer on how to proceed in this market.  When a buyer shows some interest in the home, the listing agent can reach out to the buyer’s agent with more than just a casual request for feedback.

The Reverse Offer is where the listing agent suggests price and terms to the buyer-agent that might be the foundation of a potential deal. It needs to be handled tactfully, and with the seller’s knowledge so it’s not a breach of fiduciary or a waste of time.

It can be as casual as mentioning any needs the seller might have in their exit plan, or for terms that would be advantageous to the buyer like seller financing or rate buydowns.  But it can also be as formal as issuing written offers signed by the seller for the waiting buyers to consider – here’s more:

https://www.alexwang.com/blog/considering-the-reverse-offer

It’s worth considering because what’s the alternative? To just sit by the phone and hope it rings, and when it doesn’t, go tell the seller to dump on price?

This is the Wait-and-See period when buyers are so comfortable on the fence that it’s going to take something different to get them to buy a home.  Dumping on price during the Wait-and-See period only makes the home buyers think that if they just wait longer, the prices will go down more.

Agents should offer their sellers some alternatives to that!

Contingent-Offer Season?

Over the last few years there are two groups of buyers who have been left behind; the self-employed who have a tough time qualifying for a mortgage, and the contingent buyers because there have been enough non-contingent buyers that sellers would prefer.

There hasn’t been any relief for either group, and probably none forthcoming.

Those who want to use the equity in their home to purchase their next house can usually find a solution if they want to move bad enough. You can always do the double move, where you sell first, then rent and wait patiently to buy the next one.  You can get a bridge loan, though expensive and qualifying isn’t easy.  You can leverage yourself to the hilt and buy the next home before selling.

But for some, those options don’t fit.  Just the ease of having the next purchase be simply tied to the sale of the last home might be a relief for some sellers to get comfortable with moving.  But will listing agents consider an offer that is contingent upon the sale of another?

They just might – especially over the next four months. Those who should consider it are the listing agents of the 171 homes for sale between La Jolla and Carlsbad that have been on the market for more than 60 days (41% of the total number of active listings).

The CAR just revised the COP form in June:

I’m sure all of these paragraphs are necessary, but they leave out the most important ingredient and the fact that would make a difference – the listed price of the contingent property!

If I had a listing that had been on the market for 60+ days and was heading into the 2022 off-season (otherwise known as the Post-Frenzy Apocalypse), I’d consider an offer contingent upon the buyer’s home selling – and I’d give them the 17 days in paragraph 7C2 checked in red above.  But I’d want to know what your list price is!

If I thought the buyer’s home was priced aggressively, then what do I have to lose? Seventeen days of market time, during which I can still be looking for back-up buyers……in an era when I might not get another showing, let alone an offer?

Heck yeah, I’d consider a contingent offer – if I just knew what the list price was!

If I was representing the buyer, I’d include my signed listing of the buyer’s home to show – and sell – the listing agent on how our contingent offer would be a viable solution. Let’s do it!

Compass #1

A remarkable achievement considering that Compass has only been a nationwide company for 3-4 years.

It will matter more later too.

CoStar is going to change the search-portal landscape, and if they spend enough advertising money to get all the eyeballs, the buyer-agents will be cooked. Unlike Zillow and Redfin who encourage viewers to contact their own set of agents, CoStar will direct people back to the listing agent of each property.

You can imagine the advertising that could change everything:

“Would you rather be represented by a third-party who doesn’t know a thing about the house in question, or do you want to speak to the listing agent who knows everything about the property – including how to get you the best deal?”

CoStar got a head start when they bought homes.com, and are rolling out their first version this summer in New York City.

Buyer-agents will be forced to join realtor teams who have the listings, or just fade away.

Who has Compass been recruiting for the last four years? That’s right, the realtor teams.

Stay Tuned!

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!

State of the Frenzy

Buyer fatigue has hit San Diego’s real estate market as some people are taking a break after making offers on several homes to no avail, according to several real estate agents.

“In my opinion, I feel the buyers are feeling beat up and a little tired,” said Dawn Suprenant, with Windermere Homes & Estates. “It’s still crazy. It’s not as crazy as the spring. I think they feel like, ‘I’ve tried everything. I’m going to take a break,’” Suprenant said. “There’s only so many times you can make an offer and be rejected and want to come back.”

Julia Maxwell of Berkshire Hathaway HomeServices California Properties said that for most buyers, “it’s a very frustrating and emotionally draining market.”

“Currently we’re seeing a very subtle, I can’t emphasize how subtle, softening in the upper range prices where we were seeing market times of two days, three days or less, we’re seeing slightly longer market times,” Maxwell said.

Even so, the market remains hot, with multiple offers still commonplace as prices continue to rise, interest rates remain near record lows and buyers far outnumber sellers with no letup seen anytime soon. Suprenant said she recently sold a Rancho Penasquitos home for $101,000 over the asking price. She said it’s become more common for buyers to pay more than list price.

Carlos Gutierrez of eXp Realty of California said the market is shifting ever-so-slightly, but that it remains very much a seller’s market. “We’re starting to see inventory creep up, longer days on market,” Gutierrez said, adding that there are fewer “hyper bidding wars happening.”

“We still have bidding wars but I don’t see them happening as much,” Gutierrez said.

Nancy Layne, president of North San Diego County Realtors, said she’s noticed a letup in the market, like Suprenant, attributing it to buyer fatigue. “We’re finally seeing more stuff come on the market. It’s getting a little more competitive, Layne said. “I think it’s flattening out.”

Dina Brannan, vice president of operations for Century21 Award, said the market “has kind of lost its panic mode.” “Things are not flying off like hotcakes. They’re still going fast, but they’re not this crazy where things are selling before they even hit the market,” Brannan said.

Melissa Goldstein Tucci of Coldwell Banker West said that the overall market is “the strongest it’s ever been,” although she said the number of offers being made on a particular house has dropped a little since mid-June. “The values are still skyrocketing and it’s still a great time to buy because I don’t personally see anything changing anytime soon,” Tucci said. “I see the market remaining strong.”

Wendy Purvey, chief operating officer of Pacific Sotheby’s International Realty, said it would be wrong to say the market was softening. “The frenzy has tailed off. I would not say it has died down. We still have frustrated buyers that can’t get what they want,” Purvey said. “There’s no way that there’s a softening in the market. What’s happening is a tiny correction and that correction is way, way needed in a healthy market. The price and values can’t keep going up at this rate.”

Sean Caddell of Pacific Sotheby’s International Realty, said he’s seen more people paying cash instead of having a mortgage, and they’re willing to pay more than the seller’s asking and they’re eliminating contingencies, “buyer investigations, everything.”

“We’ve had almost every property we sold recently, the buyers have removed their appraisal contingency, whether it’s financed or cash,” Caddell said. “I have not seen it like this before where people are so anxious and excited to get a property.”

According to Reports on Housing, an agency that tracks housing in San Diego and Orange counties, the inventory of homes on the San Diego County market was up by 11% in mid-July, to 3,059 listings but that still was a near record low and compared to 4,577 homes on the market at the same time last year.

The inventory in 2006 – a year before the Great Recession – was 18,000 homes on the market, reaching 20,000 in 2008. Meanwhile, housing prices appreciated at a rate of 14.6%, the highest rate of appreciation since 1988, according to Reports on Housing.

Read full article with more realtor quotes here:

https://www.sdbj.com/news/2021/jul/27/san-diego-seeing-tightest-housing-market-years/

Pocket Listings in 2021

The Journal touched on pocket listings yesterday – excerpts:

Real-estate agents are selling more homes to select customers while bypassing the public market, a move that squeezes supply tighter for many buyers when inventory is already near record lows.

In the vast majority of transactions, an agent lists a home for sale on a local database and markets the property widely to drum up interest and get the best price. But in certain cases, a broker will show an unlisted property to a small circle of potential buyers more exclusively, often in hope of getting a deal done quickly.

These private sales are known as pocket listings, or whisper listings. They have been around for many years. But they are on the rise now even though the National Association of Realtors adopted a rule last year aimed at discouraging their use following complaints from some of its members.

Pocket listings persist in part because they benefit big brokerages, which can shop listings in-house and advertise to potential clients that they have properties that aren’t available anywhere else.

On brokerage Compass Inc.’s website, a search for active listings or those coming soon in San Francisco pulled up 1,320 online listings as of midday Tuesday. The website also said 105 listings in the city weren’t publicly available but were available through a Compass agent.

A Compass spokesman declined to comment.

Link to WSJ Article

My thoughts:

Compass is known for the in-house Private Exclusives program, and it was one of the main reasons I joined. If any big brokerage were to mount a strong in-house campaign, they could commandeer the market – especially if they had the #1 market share. I wouldn’t recommend it for my sellers, but it could be a boost for my buyers.

Last year I did four off-market sales with my buyers, and only one was with a Compass listing agent. But I haven’t even sniffed an opportunity this year. Why? Because in 2021 every seller and listing agent wants to go on the open market to see if they can get bid up. They’ve heard the stories of sales going for hundreds of thousands over list, and they want their chance at glory.

We still have a Private Exclusives section, but every time I contact a listing agent who has a home listed there, they say they are going on the open market (there is some confusion on what the PE program is supposed to be). I’m sure there are off-market deals happening, but I don’t think they are any more than normal – and they have been around since the beginning of time.

In Northern California, the Compass presence is huge, and I’ve been told that management there is really pushing the Private Exclusives. But in the WSJ article, they mentioned that only 8% of the listings were Exclusives, and my guess is that many of those are heading for the open market.

Another unintended consequence of the frenzy? Slowing down the off-market sales!

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.

Buyer-Agents Being Crushed

Home buyers deserve to have their own representation.

The broker cooperation system which allows every agent to share their inventory with all other buyers via the MLS has worked well for 100+ years.  But it has been under attack for years, and it may not survive the tight-inventory era where sellers and listing agents want to minimize or eliminate buyer-agents altogether.

An agent sent this in today:

Do you know that Lennar is no longer paying agents a commission or referral fee?

I have been working with a client for almost a year. She wouldn’t have known about the Lennar at Treviso community without me bringing her there. I registered her as my client and when her name got called on the list, they told her they’re no longer cooperating with agents and if she tried to include me she’d lose the house. Thank you Lennar for putting my client is a horrible position. Hey builders. Don’t ostracize the brokerage community! The market may be busy now but when the tides turn, you’re going to need us again. This is bad business.

I know for a fact that Lennar isn’t paying commissions on any of their SD communities currently.

I agree that it’s bad business to have an agent sign in their buyer as required to receive the commission, but then rescind their offer of compensation when the buyer steps up to purchase.  But nobody cares about buyer-agents, and the abuse will continue. Lower or no commission being offered, no clarity on how multiple offers get handled (other than the usual “I just let the sellers decide”, which is a lie), and no easy path to show and sell.

What is the result of buyer-agents being snuffed out?

Here you go:

https://www.cnbc.com/2021/05/17/64percent-of-millennials-have-regrets-about-buying-their-current-home.html

Buyers don’t recognize the need for getting good help.

An apprentice from a realtor team will suck them in with the promise of getting them an ‘off-market deal’, but then get sold a 1,200sf two-story house in a gang-infested area for 10% to 20% over value (true story).

We should probably just drop the seller-paid commissions – though they should have the right to offer a bounty – and have buyers pay their own agents. Those who value good help will seek out the best agents, and those who don’t will get what they get and wind up with regrets.

 

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/

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