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.
Red-hot home prices have more consumers saying now is a bad time to buy
Anyone out hunting for a house knows that bidding wars are no longer the exception, but the rule. Demand for housing has been unusually strong, due to the coronavirus pandemic, and supply is historically lean. That is a recipe for high prices, which are now beginning to take their toll on potential homebuyers’ confidence.
The share of buyers who say they think it’s a good time to buy fell in September, from 59% to 54%, according to a new survey from Fannie Mae.
Home values were up nearly 6% annually, according to CoreLogic, a data analytics firm. More consumers now expect those price gains to grow.
The percentage of respondents to the Fannie Mae survey who says prices will go up in the next year increased from 33% to 41%, while the share who said prices would go down decreased from 26% to just 17%.
More people do think now is a good time to sell a home, which is an improvement from the first months of the pandemic, when potential sellers didn’t want shoppers in their homes and worried about the state of the overall economy.
If seller sentiment improves substantially, that could help bolster supply and take away at least some of the heat in prices.
“Going forward, we believe the wild card to be whether enough sellers enter the market to continue to meet the strong homebuying demand,” said Doug Duncan, Fannie Mae’s chief economist. “The home purchase market requires the proper mix of home price growth and continued economic recovery to achieve sustainable levels of housing activity.”
A bad time to buy? When you can get a mortgage rate under 3%?
Any possible declines in home prices will be offset by higher mortgage rates, so there won’t be much, if any, savings in your payment if prices did come down – but fewer people in the survey think that’s going to happen. You would pay less property taxes, however.
Saying it’s ‘a tough time to buy’ would be more accurate. Finding the right house, at the right price, is extremely difficult – but many signs point to the supply increasing next year. Stay engaged, regardless of what the talking heads tell you about the general market. You only need one!
On Monday, the sale of our Carmel Valley listing on Brittany Forrest closed escrow.
I had discussed previously the valuation challenge when a recent seller had dumped on price and became the comp. It was a model-match that closed for $1,880,000 in May with a similar view but was in all-original condition, so for those who were just looking at the numbers, my $2,250,000 list price looked high.
I needed to deliver a compelling case on value, which I did – and we closed at $2,200,000.
I want to tell a story from when I was showing the home. I had received the offer from the eventual buyer, and knew we had a good chance of making the deal because I already had the chance to discuss the comps with him and his agent, and they saw the light.
But two other showings were scheduled the next day, and one was by a Redfin agent.
I want to give every buyer a chance to compete, so I got back to both agents and told them I had received a very good offer the night before, and to bring their A-game later that afternoon.
The Redfin agent arrived before her buyers did, so we had a chance to talk:
JtR: Are you new at Redfin?
Redfin agent: No, this is my second week!
JtR: Are you one of the showing agents who makes $50 per door, or an agent who writes offers?
Redfin agent: I’m a showing agent, and we make $50 to $80 per door opened, depending on price. I’m making $80 on this one.
JtR: Did you relay to your buyers or to an experienced agent in your office that I have received a good offer?
Redfin agent: I did tell our office agent, and they were going to try and join us, but it didn’t work out.
The buyers clearly had some interest, judging by their deliberate review of the home. They begin the critical walk to the front door, where good agents know that it’s time to ask the right questions, the right way, at the right time…for the buyers’ sake! We are here to politely assist buyers in making the right real estate decisions for them.
Because the Redfin model only includes opening doors on the front side, there isn’t a relationship between this inexperienced agent, and the clients. They’ve never met before. Her response in crunch time?
Redfin agent: Nice to meet you!
I jumped in and mentioned that we had received a good offer, and asked them if they wanted to buy the home. They waved, and walked off.
The sale is in the preparation. If they had been told before they arrived that they would need to make a decision promptly, they would look at the house differently – or cancelled the showing. I’m sure they will have other opportunities to buy a home, so it isn’t the end of the world, but they might not buy one this nice for this price – and they deserved to know that from the beginning.
It saddens me that the industry is going this way. Zillow will follow with the same model, and there are plenty of realtors currently that don’t aspire to any greater heights, either.
The worst part – and the only reason I bring it up – is that the unsuspecting buyers and sellers don’t know the difference between realtors, and there is no attempt by anyone in the industry to tell them.
They say that everyone is fleeing the urban markets for the country, and this is a good example of how much further your money will go. It is fairly close to town too – you wouldn’t really need to change doctors, etc. and for those who need a top-notch granny flat, have I got a deal for you!
29780 Reza Ct., Vista, CA 92084
4 br/4.5 ba one-story house
2 br/1 ba guest house above the garage with kitchen and laundry
Even though the market is blazing, many soon-to-be home sellers are going to wait until the Spring Selling Season of 2021….and take their time getting their house ready. Because it will be hard to tell if it will be a frenzy or a glut until April or May, it won’t be a bad idea to prepare now, and be ready to go early in the season, just in case.
October would be a good time to clear out some stuff!
In the first edition of The Last Move, these were the two companies mentioned to help you:
If you need to donate your belongings to a good cause, then Rancho Coastal Humane Society is a good option because they will bring a big truck to your house and carry out most everything:
Hauling the remainder, including mattresses, can be done by Junk King in Carlsbad.
Here are a few others:
The San Diego Habitat for Humanity ReStores are home improvement discount stores with a simple premise: by selling new and gently used donated goods, we can fund the construction of new Habitat homes in San Diego County. Here is my article about their Carlsbad store:
We have had good luck with Facebook Marketplace too. You can either go onto the general page and take your chances, or get into one of the closed local groups where you can probably count on having a large audience of bargain shoppers nearby.
We have a seller who has had great luck with the mobile app OfferUp, especially when giving away stuff for free. People respond within minutes, and come to your house to pick up stuff from your driveway:
Yesterday we closed escrow on our sale of 12911 Biscayne Cove in Del Mar!
I suggested our initial list price of $1,495,000, based on these recent sales:
The Barbados sale was off-market so we don’t know if that was high or low, so I didn’t use as a price gauge.
Though a list price in the low-to-mid $1,400,000s might have been more appropriate, there weren’t any other houses for sale nearby that were priced lower so I’m going to push it and see what happens over the first few days. We had a parade of buyers – 32 showings in the first 17 days on the market – yet no offers.
Originally I thought we’d see a steady flow of retirees flocking to this one-story home, but 31 of the 32 showings were to young families. Del Mar schools are the best, and while the 1,518sf was mentioned in the listing, I think the lack of other homes in this price range caused these buyers to check it out just to see if they could find a way to fit in a smaller home.
After 11 days on market, the 2,542sf Boquita house listed on the range $1,300,000 – $1,399,000, which crushed my chances of getting more. We lowered our price to $1,388,000 a few days later to stay in the game, and after a couple of weeks, we found a single guy to buy it for $1,344,000.
I found great joy in finding out that the seller had read bubbleinfo in the beginning, and it was one of the reasons why he left Michigan before the crash. Now he and his lovely bride are off to Boise, Idaho to be near the grandkids!
Speaking of the old Carlsbad Raceway, our new listing is about a block away!
Buy a practically new (built in 2019) townhome in a gated community that has already been upgraded nicely with custom tile work, light-colored wood grain LVP, and solar! This is the most popular floor plan in Verano, with one master suite at ground level and two more upstairs with walk-in closets! Two-car garage, central A/C, massive great room with three-door sliders that open wide, plus view of the hills. This premium location has a large greenbelt in front and snazzy pool nearby – wow! Centrally-located just down the street from Bressi Ranch and only seven miles to the beach. Sleek, stylish, and move-in ready – an incredible value for one-year-old home in coastal north county today!
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 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.
After another weekend of multiple-offer situations where the listing agents made no attempt whatsoever to create a bidding war, and instead just shut down the showings, it’s hard to believe there is any downturn coming our way. When you can get a mortgage rate in the twos, the demand is unyielding.
But some authors still want you to believe that doom is around the corner – they should talk to realtors on the street! An excerpt:
The price of low-tier housing in San Diego County skyrocketed after the latter half of 2012. 2015 experienced another price increase, due to the boost given by decreased mortgage rates throughout 2015 and 2016. Lower mortgage rates free up more of a buyer’s monthly mortgage payment to put towards a bigger principal. Thus, San Diego’s high home prices continued to find fuel from increased buyer purchasing power.
But in 2018, home price increases sharply declined in reaction to slowing sales and rising interest rates, which began in late-2017. Home prices have since turned back up, but today lack the fundamental support of home sales volume to continue. The annual pace of increase is now just 5%, lower than in recent years when the annual rise averaged around 10%.
Accurate home price reports run about two months behind current events. Even when caught up, sticky prices tend to persist several months beyond the moment when home sales volume begins to slow. Starting in March 2020, economic volatility and shelter-in-place orders caused home sales volume to decline dramatically. However, historically low interest rates have provided a boost for buyer purchasing power, which has propped up home prices thus far.
Later in 2020, the impact of record job losses will see downward pressure on home prices. The overall home price trend for the next couple of years will be down, the result of job losses and plummeting sales volume. As during the 2008 recession, the drop in sales volume and prices will first be most volatile on the coast, before rippling outward to inland areas.
Sales and pricing should be directly connected to inventory.
When there is hardly anything to buy, sales may decline, but pricing would stay the same or go higher because only the quality homes would be selling. A surge of homes-for-sale in 2021 would fuel the demand and energize the marketplace…..to a point.
There will be a fine line between frenzy and glut!
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