I describe the strategy for sellers here, because buyers need to be on alert 12 months out of the year. Why? Because you only care about buying the right house at the right price – which isn’t affected by the general market conditions. You are looking for the one-off.
Thanks to the readers who sent in the news about Amazon and Realogy teaming up to provide a basket of goodies to customers who get their agent through their TurnKey system:
Real-estate brokerage giant Realogy Holdings Corp. launched a new partnership with Amazon.com Inc. on Tuesday, a fresh attempt at jump-starting the property firm’s flagging business and tumbling share price.
Under the new program, known as TurnKey, home buyers searching for an agent on Amazon.com will be directed to a Realogy agent in their market. These buyers get up to $5,000 of smart home devices and free home services from Amazon, from unpacking and cleaning to furniture assembly and smart home setup.
Realogy is hoping the power of the Amazon brand can energize its own amid a prolonged slide in its stock price. The company declined to comment on the agreement’s specific financial terms but said it is footing the bill for the home services from commissions earned from deals that the venture with Amazon is anticipated to generate.
There are many places that offer to provide a realtor for you:
Who pays for the service?
The agents do, and it can be a hefty referral fee – usually 25% to 40% of the commission.
However, you don’t get directed to the best agent in the area, oh no. You get directed to the best agent in the area who is willing to pay their fee.
We call this, “Buying The Business” and it’s what agents do who can’t earn the business otherwise. Either agents can demonstrate their skill-level and abilities to consumers to earn their business, or for the agents who can’t, gimmicks or discounted commissions are used to ‘buy’ their business instead.
It’s just one more thing about the real-estate-selling business that isn’t disclosed to the public.
This gimmick is a way for Realogy to provide leads and keep more of their agent’s commission:
Will the public ever catch on to how the game is played?
The agents who are willing to pay for the leads either don’t have the skills, or can’t demonstrate them.
Going through Zillow isn’t much better. The big realtor teams get the best leads there, and pass them off to their new agents and then take a large chunk of their commission.
Bottom Line: Agents all look the same, and the industry does nothing to help you differentiate. You must do your own investigation to find out if your agent has the skills and ability to provide the help you need.
Let’s say that the Amazon customers who prefer to just click a button for their every need in life plunges ahead without much care about the realtor they get – they just want their goodies.
What do they get?
The dedicated Amazon customer already owns a few of the goodies – most of the equipment listed above is into their 2nd or 3rd generation by now. Only the Ring Doorbell Pro and the Camelot Deadbolt are attached to the house. So if a buyer already owns the other gear, they can take it with them – and receiving duplicates of the Echo Spots, Shows, etc. isn’t much of a prize.
For the casual Amazon customers, do they even want/need the high-tech gear?
Because they aren’t handing you a check for $5,000 – instead, you get some household goodies that can all be bought separately for $100 to $400 each.
Or will click-a-button real estate be enough of a thrill/reward?
Ryan is probably the most similar blogger to me because he’s in the business and sees what is actually happening on the street. He does a ton of charts and graphs, so if you’re analytical give his blog a look:
He sums up his current market conditions quite well with these thoughts:
Normal: The market felt really dull last year, but it’s been a somewhat normal year so far in 2019. There are certainly concerns about affordability, but from a stats perspective it’s been a pretty standard first half of the year. Pendings continue to be strong also, so buyers still clearly have a strong appetite for the market.
14 months in a row of slumping volume: Despite mortgage rates being low we’re seeing somewhat sluggish sales volume. In fact, sales volume was down 11.6% in the region last month and it’s down 8.6% so far in 2019. Moreover, we’ve had fourteen months in a row with lower sales volume compared to the previous year. In my mind it’s still best to say we’re having a slower year instead of a volume meltdown because levels aren’t alarmingly low by any stretch. Let’s watch this carefully.
Dude, rates will never get below 4% again: It’s been a little surprising to see how low rates have gone again, right? The narrative for a while was, “Dude, they’ll never go below 4% again. We’ve bottomed out.” Yet here we are. My sense is if rates keep going down it’ll only increase competition and artificially inflate prices. That would be temporarily nice for buyers, but an unfortunate byproduct is low rates in a wider picture tend to create less incentive for sellers to move. Why sell if you’re sitting on a 3.5% mortgage rate?
Purplebricks & the tech invasion: Last week it was announced that Purplebricks will be exiting the United States housing market after a 75% loss in shares. This company is going to the grave in the U.S., but the reality is we’re still in a market where tech companies are trying to disrupt the traditional real estate model. Next up? Zillow is said to be coming to Sacramento by the end of the year.
Joe Montana’s $49M overpriced listing: Former Quarterback Joe Montana listed his property for $49M and it didn’t sell because it was profoundly overpriced. In fact, the price has now been reduced to $28M. Many sellers are like Joe in trying to attract mythical unicorn buyers who will mysteriously overpay for some reason. My advice? Be aware that today’s buyers are incredibly picky about paying the right price.
The dream of selling at the top: I met a guy who wants to sell because he says the market might top out soon. His concern is a friend sold two years ago thinking the market was at its peak, but it wasn’t. The truth is it’s not so easy to time a market perfectly. We talk about how simple it is to do this, but most people pull it off from dumb luck more than anything. The reality is the bulk of buyers don’t buy based on price metrics, but rather lifestyle and affordability.
My thoughts on his thoughts:
The first time mortgage rates went under 4%, it did spark a mini-frenzy because no one had seen that before. Those who moved up – or refinanced – were able to mitigate their payment shock with a lower rate than they had before. But now the sub-4% rates are a yawner for those who already have them, and as a result, we’re not seeing the same enthusiasm we saw previously.
I’ll add a bit to his thoughts on Joe’s mansion. Are buyers being extremely picky? Yes, absolutely, yet it’s more about finding the perfect house than the perfect price. Once buyers find a great fit, they will pay whatever it takes. I saw a starter home in Carlsbad yesterday get four offers over list price, which will make it the most expensive sale for that model ever. But it was also a great location and house was dialed in.
Selling at the top used to be a big driver for decision-making back in the old days. But the market is so tight today that you can’t just go out and replace a quality home without a real struggle. Now, selling at the top is only one of the criteria for home sellers, and it’s dropped down the list for most.
Ryan has more thoughts and graphs here:
It looks easy, doesn’t it? With the internet, how hard can it be to buy or sell a home?
There are no shortage of options. Buyers see thousands of homes for sale, and sellers find thousands of agents happy to list a home for fees ranging from $100 to 6%.
Yet the perception remains that the process is stressful and costly. Why, when it looks so easy from the outside looking in?
Here are ten reasons why buyers and sellers should Get Good Help:
Friends and family – Buyers and sellers have friends and family who are happy to critique every move. Most of all, they remind sellers not to give it away, and possible deals get crushed regularly over 1% to 2%.
HGTV – Where consumers learn how the home-selling game works. The fact that HGTV is scripted entertainment doesn’t phase the viewer – the content seems plausible enough that it could be real, and the industry doesn’t provide anything better so by default HGTV has influence.
Inexperienced and unethical agents – Agent blunders can cost you a sale. But whether they were accidental (inexperienced) or on-purpose (unethical), they also cast a pall over the industry that causes participants to be frustrated and leery. You need to get good help to endure and triumph over these agents.
Escrow, title, and lenders – These folks have been over-worked since the beginning of time, and they make mistakes. Consumers need good help on their side just to minimize the impact.
Appraisals – A bottle of scotch doesn’t work any more – appraisers are independent and untouchable now, which means they can kill any deal. They are like baseball umpires – they can strike you out, even if the pitch was a ball, because it’s just their opinion.
Shoddy Repairs – Whether it’s to fix any historical work or corrections done to satisfy today’s repair requests, the house needs to be in decent shape to close escrow – or the sellers need to be willing to take a sizable discount. Having vendors who can quickly make impressive repairs for a reasonable fee is critical.
Packing and Moving – A great agent has ways to prevent your move from turning into an evacuation.
Gimmicks – This business has always been notorious for its deceitful gimmickry, and these days you need a supercharged BS-detector to get the truth.
Correctly Interpreting Market Conditions – Get the right answers to: Are we in a bubble? Should I wait? How much is this home really worth? Are there two birds in the bush?
Consumer Inexperience – This might be the biggest hurdle of all, and what causes buyers and sellers to rush a decision before doing enough investigation. Having proper guidance throughout the process is what relieves the stress and costly experiences you hear about!
Get Good Help – it’s never been so important. These are the highest home prices ever!
Being a casual home buyer is fine, and most people are.
They’re looking for the perfect home for them, and they will know it when they see it. But because virtually every house needs something – even new ones – it can be a long hard road in search of perfection.
Try this approach.
Instead of declaring yes or no on each house you see, put a number on it.
At what price would you buy it?
It takes more time to research the comps and compare the features, but it gets you onto the playing field. Here are some of the benefits:
- Hone your home-evaluating skills.
- Get more familiar with the comps.
- Identify what features are most important to you.
- If you do make an offer, it bolsters your case with seller.
- Your offer negotiations have a specific target.
- If you don’t make an offer, it prepares you for the next time.
When do you make an offer?
If your research concludes that you might pay within 10% of the list price, then make a written offer and see where it goes.
If your price is more than 10% below list, then call it in and see what the listing agent says. Nine times out of ten they will hang up on you….and you’re looking for the tenth!
The yes-or-no approach won’t buy you a house – instead, put a number on it!
To further examine the off-market phenomenon, here are the first few entries snipped today from Facebook realtor groups:
I don’t fault the listing agents – this is realtor marketing in 2019, and everyone is doing it so it must be ok. Agents who represent buyers need to be well-connected and searching for homes in other places besides the MLS.
Our client wanted a smooth transition when moving, and he got the quality help he needed from Neat Method. Here’s an introduction, plus our client’s warm words about Donna and her assistance at the end of the video:
When evaluating which agent to hire, the best thing a consumer can do is check their sales history to help determine the agent’s level of experience.
We’ve known that Zillow has the 12-month sales history of each agent, but those sales are inputted manually by the agents, and can be manipulated.
Homesnap provides the MLS mobile app to agents, and, as a result, has the direct connection to the sales history. They publish the data on each agent from the last 24 months, which provides a more extensive track record, and:
- Helps to iron out any hot and cold streaks
- Shows the average days-on-market and sales-price-to-list-price ratio
- Shows listings that didn’t sell (labeled ‘off-market’)
The average days-on-market and sales-price-to-list-price ratio gives you a good sense of the agent’s pricing accuracy. If listings languish too long on the market, there is an increased likelihood that buyers will offer less.
We know that 40% of all listings don’t sell, so failure can happen. Select an agent who has done better – in my case, one seller decided not to move, two decided to rent instead of sell, and the fourth was when I was mentioned as Richard’s co-agent on a listing.
If they have a huge number of off-market listings, they are probably a serial refresher, which means they like to manipulate the market time – which aggravates other agents and buyers.
Bottom line: An agent’s sales history verifies how successful they are at getting clients to the finish line. With the market changing, buyers are putting up a fight now, and you want an experienced agent on your side to ensure success.
Here’s the link to Homesnap (their mobile app is better):
Get Good Help!
Great news about the doc-film – it will be available on iTunes on June 4th. Here is Giorgio’s blooper reel of my actual homebuyer tips (and the first time I’ve cussed on video – beware):
While some folks can’t make sense of a move up or down, there are others who have specific wants/needs, and are willing to forge ahead – if they can just sell their existing home and pour their equity into the next one.
I’m three for three this year with contingent sales already, and I wouldn’t be surprised if half of my sales in 2019 will involve contingent buyers.
The challenge gets more complex when multiple sales are contingent! They stack up like dominoes, all dependent on sales on either side to be completed successfully – and risk all crashing if a problem pops up that can’t be solved.
Up to now, listing agents and sellers haven’t had to deal with contingent buyers because we’ve had enough non-contingent buyers to go around. Not any more.
The #1 reason sellers and listing agents should consider a contingent offer?
Contingent buyers pay more.
They know they are asking a favor, and in effect, they are purchasing a favor.
Plus, their purchase is contingent upon them selling their house (read: getting the price they want), so everybody gets what they want. Win-win!
Contingent sales can be highly speculative, however, and our existing system doesn’t provide a safety net, so there is a risk that every seller could get left holding the bag.
How can we tighten these up?
- Have buyers obtain full loan approval. At least if the buyers are fully approved by the mortgage underwriter, that concern is satisfied. A pre-qual letter isn’t solid enough to tie up a property.
- Review the lender downstream. If there is a chain of contingent sales domino-ed together, let’s take a good look at everyone’s lender letter – because we’re all in it together.
- Review the agents downstream. Is everyone competent? If my sale is reliant upon an agent downstream finding and solving problems, then it’s not asking too much to know who it is. What else have they sold lately?
- Supply comps and photos of contingent properties. Every agent involved should know – and get to render their opinion – on the price/value of the other homes in line.
- Bridge loans. Bridge loans are out there, and Compass should have a good alternative ready before too long. A fantastic option that solves everything.
There is another viable alternative that every contingent-buyer should consider: Selling your home first. The immediate reaction is usually the same – I don’t want to be left homeless, or I don’t want to have to move twice, which is understandable.
But we do have the seller contingency that allows us to find a suitable buyer for your home while not binding the seller to move until they find suitable housing:
Our ability to master the contingent sale will probably make or break the market this year. Without them, will there be enough buyers with the equity, desire, and ability to keep the party going? It’s doubtful.
Most realtors, let alone buyers and sellers, are unfamiliar with contingent sales. But this is where our creativity will pay off in a challenging market!