Jim the Woodworker

Here’s an example of the transformations we do in our quest to achieve top dollar for our sellers.

The existing hardwoods were acceptable, but the darker cabinets and slate backsplash weren’t going to impress today’s buyers enough to pay top dollar. We decided to reface the cabinets with the usual white shaker doors and drawers, and bring the sizzle with new quartz counters.

The quartz slab was ten feet long, and we needed about 10′ 3″ to reach the floor and be a true waterfall. I made the decision to take a chance. As long as everything else was perfect, I figured no one would NOT buy the house just because it was a little short:

But there was more to it than just being short – it was also two levels, with drywall on the left, and wood on the right.

But I knew an easy fix – have our guy Joe at Oceanside Drywall flatten it out:

All that was left was to finish it off with baseboard, and we’d be done. How hard is that?

There are baseboard guys – it’s what they do every day.

We thought that was who was sent to wrap this up, but when I arrived I found that the hackmaster came instead and rushed it. The buyer was coming to inspect the next day – so I had to get busy. I used some drywall mud to patch up the gaps and imperfections on the left side:

But drywall mud doesn’t stain well so I ran to get matching paint instead:

The right side was a disaster.

Not only was the quarter-round hacked together, but his saw nicked the floor too.

This isn’t what I do, normally, so it took me three hours to make it look acceptable!

If it wasn’t distracting to the eye, then the rest of the finished product should carry me:

It did!

Buyers want more than turnkey – they want to be impressed. They want to know that when their friends and family come to visit, they will be impressed too.

As a result, we go all out!

Seller Disclosures

There used to be a belief that any defects that had been fixed, or things that happened to previous owners weren’t required disclosure items for today’s home sellers. But it’s gotten very specific now – and beginning July 1st, AB-968 takes effect.  If the home is being sold within 18 months of purchase, all the contractors and their contact information need to be disclosed too on any repair over $500:

Did You Know ~ All About Historical Disclosures:

  • Past defects, even if repaired by the seller or others, are to be disclosed. Not only that; the seller should provide all relevant information regarding the repairs to any prospective buyer. They must also disclose any improvements or modifications made to property with or without the benefit of permit.

  • The disclosure would include, but not be limited to,  the person(s) who performed the repairs (i) the property owner (ii) a licensed contractor  or (iii) an unlicensed tradesperson.  The documentation would also include all related documentation for all repairs   /improvements/modifications to the property.

  • The authority here  may be found in the  Seller Property Questionnaire (“SPQ”),  Question Number 5. This paragraph specifically prompts the seller to provide whatever material documents they have in their possession.  Questions 7A/8A of the SPQ  also address the importance of full disclosure. The Disclosure Information Advisory (“DIA”) is an excellent tutorial for sellers and should be reviewed with the homeowner before the disclosures are completed.

  • Let’s think about it; if a seller and/or their agent fail to disclose past defects and/or repairs, the buyer will not have the information they need to make an informed decision. For example,  if a past roof leak, flooding, or other water intrusion issues/repairs are not disclosed the buyer may not choose to inspect for other damage that could have occurred as a result, such as environmental hazards or wood / drywall damage that may not be visible. The informed buyer may wish to verify that the repairs were done correctly by a licensed professional, and/or ask for more details on the repairs themselves or the tradespersons or contractor that performed the repairs. It doesn’t matter how long ago the information was obtained; if you’ve got it produce it and by all means document delivery with a Receipt for Reports or similar documents.

  • The fact that a neighborhood or property specific defect exists, even if “well known” by the local residents and real estate community, disclosure is still required.  The buyer may be from out of the area or simply unaware of the issue.

  • Full and accurate disclosure is always the best practice and remember Gladys Kravitz is lurking and just ready to pounce on the buyer and share all that she knows.  You can count on Gladys to be the town crier.

  • When it comes to improvements and modifications to the property the same logic applies. Some homeowners take great care to ensure that all modifications and improvements and even repairs are made with the benefit of permit, comply with code, and are performed by licensed contractors, many others do not.

  • The key is disclosure! The buyer needs to know what they will be dealing with once they become the property owners. In order to make an informed decision, the buyer needs to have sufficient information to do so.

  • Neither agents nor sellers should “cherry pick” or “decide”  what documents are relevant, no matter how well intended. All disclosures, investigatory reports, and inspections, estimates, invoices and receipts, environmental analysis, invoices, estimates, surveys or maintenance records that are in the possession of the listing agent and/or seller are to be provided to the buyer in their totality.  Regardless of when they were obtained and whether the disclosure packet is delivered prior to an offer being written or after the sale is ratified.

  • Last note on this subject for now; disclosures should be thorough and accurate and ought never be minimized or glossed over. Explanations should be clearly stated for the buyer’s review.

Unrepresented Buyer Form

While management believes that buyer-agents will adapt and the implementation of the buyer-broker agreement will happen over the next few months, I have my doubts. It’s more likely that buyers will resist paying 2% to 3% to their agent, unless they are convinced that they can Get Good Help.

Without having to commit to paying anything to buyer-agents up front, sellers will choose to pay less or zero once an offer is submitted, and their listing agents will just let it go and just be thankful that they will be getting paid.

Buyer-agents will either have to accept the peanuts the sellers will be paying (0.5% to 1.5%), and/or talk their buyers into paying the rest. Or they will ‘retire’, which sounds groovy to the agents who are 50+.

Left in the rubble will be home buyers who are mastering the matterports, and listing agents who desperately want buyers to come to them direct.

The form above will be the gateway drug to the future.

It will be used as a defense mechanism by listing agents who resist giving any of their commission to the buyers (who are thinking they deserve a bonus for coming direct).

“Yes, come direct to the listing agent so you don’t have to pay a commission”, and once you get here then sign this form and be unrepresented. Everyone saves!

If commissions are less, agents will want to do less. For those agents who already don’t do much, it will be a struggle – but they will find a way!

They aren’t going to step up and justify why every buyer deserves good representation.

Instead, they will do nothing for you. Sign the form above and good luck getting to the finish line!

In a marketplace where the stakes are rising every day, there will be a growing trend of getting less help – and virtually no Good Help available unless buyers want to pay for it themselves.

Best of the Foothills

I couldn’t be more excited about presenting this spectacular home for sale – mostly just to see if everyone likes it as much as we do. It’s not big enough to have wasted space – but I’d rather have 3,003sf of efficient floor plan than 4,000sf full of extra rooms that nobody uses.

3711 Mastodon Ct., Carlsbad

4 br + loft/4.5 ba, 3,003sf

YB: 2015

HOA + MR = $333/mo.

LP = $2,499,000

Have you said to yourself, “I’ll know it when I see it”? This is one of those homes! Downstairs is one big great room with large windows ensuring max natural light! Gorgeous hardwoods, chef’s island with seating, La Cantina doors that open to a large private patio with views, owned solar, plus a separate ADU too! This home has all of the top features people want – last house on the culdesac, only one neighbor, big views (10% view premium when new), privacy, perfect great room, two walk-in closets in primary suite, extra loft upstairs that is a possible 5br, plenty of natural light, and HOA amenities close by! Walking distance to Sage Creek High School too, which is ranked #8 in San Diego County! This home is an oasis of tranquility!

https://www.compass.com/listing/3711-mastodon-court-carlsbad-ca-92010/1577636919993877481/

Open 12-3pm on Saturday May 18th and 12-2pm on Sunday May 19th.

Disincentive Program

A new $3,000,000+ listing hit the MLS this week that was offering a 1/2% commission to the buyer’s agent.

They also noted that to show the property, buyer-agents needed to submit proof of funds (bank statement) and pre-approval letter plus a 24-hour notice was required. Only one photo was included and no videos or matterport. In other words, they aren’t interested in incentivizing the buyer-agents – instead, they will make it as tough as possible for them to earn a living here.

It’s ok with me if you want to publicly embarrass yourself in front of your fellow realtors.

But know that you are also contributing to the demise of buyer-agents.

When other agents see that you have no regard, or respect, for what buyer-agents do, then they will learn from you – and assume that this must be how the future of commissions is going to play out. Then they will do the same thing.

Because ‘commissions are negotiable’ is such a touchy subject, nobody in the business talks about it. But we should discuss the role of the buyer-agent, and how they will soon be extinct – which is NOT good for anyone involved, especially the buyers.

There are two other new listings this month (of 63) that are offering NO buyer-agent commission.

The agents are happy to note that it will be negotiated in the offer. Your list prices are ridiculously high, you make it hard to show, and you refuse to offer ANY commission rate? Why is that a sound strategy? How does that make any business sense?

If the listing agent is unwilling to commit to paying any commission, then they must be thinking that the eventual rate negotiated with the offer will be less than 2% – because if the listing agent was willing to pay at least 2%, they’d would publicize it as a feature, wouldn’t they?

These are listing agents that prioritize the torture of the buyer-agents over what is best for their seller. It’s a very strange control/dominance issue – and they should really seek some help with that before they take another listing.

As the market slows down – and the commission debacle will be a contributing factor to the slowdown – the buyer-agents will be needed more than ever. Will listing agents adjust in time, or just blindly run off the cliff like a lemming? I don’t have a lot of faith in the former.

Dual Agency & Flawed Appraisal

On the surface, it probably looks like old Jim the Realtor really made out nicely. He round-tripped his listing (represented both the sellers and buyers) on Los Robles, and knowing he’s a full service guy, that must have been a six-figure payday!

Not so fast.

We had a major malfunction with the appraiser.

He was a staff appraiser for BofA, which is one of the most conservative places to get a mortgage. He wandered around the house aimlessly, and took 2x as long as a normal appraiser would take.

Our contracted price was in the $2,800,000s, and he appraised it for $2,635,000.

He used five sales that all pointed to a value in the $2,800,000s, plus one other – the house across the street that I sold for $2,150,000 in December. It was 26% smaller and a total gut job, and it had multiple full-price cash offers on it in the first 1-2 days on the market. Clearly it was an under-value sale, especially when my sale on El Arbol one block away that closed for $2,440,000 was also used.

The official appraisal guidelines state that recent sales should be similar in size:

His one bad comp was 26% smaller than the subject property, and was unsimilar in every way. But the other infuriating thing he did was omitting a similar comp that had just closed escrow!

While the allure of representing both sellers and buyers looks appealing when considering the potential commission, it comes with added responsibilities of having to represent the best interests of each party independently. Many agents refuse to do dual agency because they can’t wrap their head around how to accomplish it.

But I’ve done it a lot and it’s simple – when you are speaking to one party, advise them of what’s best for them without divulging anything about the other party. It’s complicated for the agents who can’t stop themselves from verbally vomiting all over everyone they meet, but for the rest of us it is simple.

There is an inherent problem, however. The clients don’t know if they can trust you.

When I brought up to the buyer that the appraisal was flawed and the actual value of the home was much higher, he said, “Help me understand how you are acting in our best interest in this negotiation given the information we have now.”

The sellers weren’t going to sell the house for $2,635,000, so we needed to find some middle ground.

The buyers were willing to come up $70,000, and the sellers came down $75,000.

But there was still a gap.

This went down was when we were in Cusco, Peru having our last dinner together as a family before Natalie went back to work on the Karol G tour. I took the call from the sellers and they expressed their displeasure with everything (when the listing first hit the market, there was a six-hour delay before the photos uploaded – thanks CRMLS; we fumigated the home which killed the goldfish; and while they were all for family vacations, this is a terrible time for us not to be there for them).

When we hung up, the deal was dead.

If there is any hope that a deal can be resuscitated, it needs to happen quickly – within hours. The next morning, I got the buyers to agree to proceed with the purchase if someone else would make up the gap. The sellers said the same thing.

I threw in $70,000, plus paid for the mold repairs.

Donna was incensed and refused to agree. She sent our boss a text to tell him to not do the deal. Compass went along, but refused to take a hit so I had to pay their full fee. Our two daughters – who have had to put up with business getting in the way of family since the beginning – declared that this would be our final vacation together.

Why would I make the deal?

Because I’d have to find another buyer who would shrug off the low appraisal and mold report (the sellers said the readings were within acceptable levels), and pay full price, or close – because all sellers are going to dig in the second time around.

If I got stuck with an unsold listing that needed extra attention, then the two listings I have coming up this month would be impacted too – let alone the other business I’d like to be doing this summer. Plus, Los Robles has the potential of not selling at all.

In the end, nobody is happy, my kids hate me, my wife barely speaks to me, and I did the deal for virtually nothing. Still think this looks easy?

The New Open House

Yesterday, it was announced that CoStar is buying Matterport. Excerpts:

I look forward to welcoming Matterport to the CoStar Group family and believe that we will be stronger together, in pursuit of our common mission,” said Andy Florance, Founder and CEO of CoStar Group. “The world has changed and today a Matterport is the new open house or property tour. People now select their next home, apartment, office, store, hotel, or warehouse on their mobile device often without ever visiting the property. There is no better way to remotely experience space than via Matterport. CoStar Group intends to support and invest in research and development opportunities to further develop Matterport’s spatial technology, including the application of AI and machine learning to extract information from the 3D spatial data library as well as using generative artificial intelligence to imagine and reimagine physical spaces.”

CoStar Group operates some of the most effective and widely recognized real estate information solutions and online property marketplaces in the world including Apartments.com, LoopNet, CoStar, and Homes.com, all of which feature Matterport’s 3D virtual tours.

In March 2024, there were over 7.4 million views of Matterport 3D Tours on Apartments.com, with consumers spending 20% more time viewing an apartment listing when Matterports were available. CoStar Group intends to utilize Matterports in a similar fashion on Homes.com to further enhance the most comprehensive agent, seller and buyer friendly residential portal on the market.

Great timing! Just when a new rule is going into effect that requires home buyers to hire an agent before touring a home, CoStar will be pushing their 3D tours as a way to experience the home virtually. Buyers who haven’t signed with an agent or those who wish to be unrepresented will have a great tool to use to preview the homes online without commitment.

But then what?

What will happen when a buyer who has only seen the home online wants to buy it?

The renegade buyers will have their attorney draw up a contract. Good luck with presenting that to the listing agent! Others will finally grab an agent friend and comply with the new rule to tour the house in person with their hired buyer-agent.

If you are going to wait until the last minute to hire a buyer-agent, then make sure to check their Zillow profile to see how many buyers they have represented in the last 12 months. It won’t do much good to hire an agent, only to find out the hard way that they aren’t very good at getting buyers to the finish line.

The Unrepresented Buyer

Between the advanced online tools and the realtor implosion, more and more buyers will resist hiring a buyer-agent, especially with the real threat of having to pay them a big fee out of pocket now.

By now, you know where this is going.

More buyers will be going direct to the listing agent – a practice which listing agents will be encouraging!

But the buyers will be divided into two camps.

Those who want to go direct to the listing agent to ‘save the commission’, and those more desperate buyers who just want to buy the house. Guess which one will get the house.

But let’s say there is only one buyer, and he insists on being unrepresented and wants to save the commission. The conversation with the listing agent will go like this:

Buyer: I see you are offering a 2% commission to the buyer-agents, and I’m unrepresented so I want to save the 2%. Will you knock it off the price or give me a credit for closing costs?

Listing Agent: Every buyer has to be represented, sorry.

Buyer: Ok, adios.

Listing Agent: Now hang on, maybe we can work something out. I’ll talk to the seller.

Listing Agent to Seller: I have an offer of $2,940,000 on your $3,000,000 house. Close enough?

Seller: It’s only been 30 days – is that all we got?

Listing agent: Yes, and rates are going up and Trump will be tweeting from jail soon. You should take it.

Seller: Ok, but I want to take my $4,000 toilet.

Listing Agent to Buyer: Ok, I got you the house for $2,940,000.

Buyer: Did you knock 2% off your commission?

Listing Agent: That’s between me and the seller.

The listing agents will be charging their regular commission rate well beyond July when the new rules take effect. They hope more buyers will be coming direct to them to buy their listing. At first, they will want all buyers to have their own representation (dual agency) so they can keep both sides of the commission.

If the buyer wants to be unrepresented, that will be ok too. The listing agent will keep the full commission and just get the seller to eat a little discount instead – and commissions are never disclosed to the buyer.

July Conversations (Or Sooner)

On Friday, the Plaintiffs’ counsel filed a Motion for Preliminary Approval of the commission-lawsuit settlement agreement with the federal court, so the two new rules will go into effect in late July, apparently. The plaintiffs have requested a hearing on final approval of the settlement by the court to be held on November 22, 2024.

The second rule about buyers having to hire a buyer-agent before touring a home is a done deal, mostly because nobody is objecting. At least not yet. It will become a major headache for all.

The first rule about home sellers not being required to pay a buyer-agent commission will be affected by the overall market conditions. Red-hot markets like Silicon Valley will likely be seeing zero percent (or close) being offered as a reward to buyer-agents. The demand is so strong there, the inventory is so thin, and the buyer-agents are so desperate that the sellers will get away with it. How much will buyers be willing to pay to hire a buyer-agent there? Not much – 1% tops – but the entry level there is $3,000,000.

But other markets will have different challenges – especially those that are slowing (or buckling under) from a heavier load of unsold listings and stingier demand.

The conversations will go like this:

Seller: It’s been thirty days, how come my house isn’t sold?

Listing Agent: I feel good, and it should be selling any day now. People are looking.

Seller: What are you doing to sell my home?

Listing Agent: I’m showering every day now in case someone wants to show your home.

Seller: Are you advertising in SF, LA, and NYC where all the rich people live?

Listing Agent: We are advertising world-wide.

Seller: Then what do you suggest we do?

Listing Agent: You should lower the price and pay more commission to the buyer-agents.

Seller: The last thing I’m going to do is lower the price. Aren’t I paying 4% commission already?

Listing Agent: Yes, because you saw in the news that realtors imploded, so commissions are less now.

Seller: You’re saying 4% isn’t enough?

Listing Agent: Correct, because I work for 3% and that leaves only 1% for the buyer-agents. You should increase it to encourage more buyer-agents to show it.

Seller: It sounds like you’re backing into a 6% listing.

Listing Agent: I’m sorry you feel that way, but yes. But hey, you got to try out lower commissions!

Seller: Well, I guess you got me because I want to sell. Knock off $5,000 off my price too.

Listing Agent: Off your $3,000,000 listing?

Seller: Ok, ok, knock off $10,000, but that’s it. I’m Not Going To Give It Away!

Realtors will still be holding all the cards, and will game any system you throw at them. I said this will blow over quickly, and a softer market will help keep the status quo. Listing agents may appreciate buyer-agents (finally), though paying them more won’t be an obvious solution for many. Expect a slower market instead.

NSDCC First Quarter Comparisons

The first quarter of 2024 is the only 1Q in recent history to have increases in BOTH the number of listings AND the median list price. Previously, increases in pricing had a corresponding dip in the number of listings available for buyers to consider.

If you are like me, you’ve seen a noticeable surge in seller optimism in 2024. It’s not just the median list price that is up 8%, doesn’t it seem like everything is $200,000 higher than last year?

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