Andrew Wetzel's Musings

March 25, 2019

Data Integrity: How Accurate is/ was your Property Listing?

Filed under: Buying,Ethics,Hiring an agent,Marketing,Price,Selling,Technology — awetzel @ 5:42 PM

What is “data integrity”?  It means that the data we collect, store and report is accurate.  What do I mean by data?  It could be the status of a property listing (is it available to see and buy? Has it been put under contract?  Has it settled?), the price, the type of property and its features.  I want to relate the importance of accurate data to three different groups of people, all part of a sale.

Let’s start with buyers.  A seller needs a “ready, willing and able” buyer to complete a sale.  Whether a buyer hires an agent to search the MLS or they search online, the expectation is that properties matching what the buyer is looking for will appear in their search results so they can evaluate whether to take the next step or they will not know a house is even available to consider.  If they cannot find it in their search results, they will not see it and they will not buy it.  Even worse, a listing agent may not know there is a fixable error and ask the seller for what may be an unnecessary price reduction which reduces their proceeds and still not make it any easier to find the property in search results.  I have many examples and will share two.

  • Early in my career a buyer identified two possible elementary schools for her daughters to attend. She drove the neighborhood and found a “For Sale” sign on a house, called me for information about the house and asked me to search the area for homes like the one she was fortunate to find.  I found several other houses for the family to consider but the one she saw was not in my search results.  The listing agent had entered the wrong zip code.  Imagine if she had not seen the yard sign and the house had remained on the market unsold.  She would have missed seeing the house they bought and the sellers may have been asked to lower their price.  By the way, the family is in the same house many years later;
  • A frustrated seller called me. His property had been on the market recently and his listing contract expired without a sale.  He called me to see what I could suggest.  I looked up the property, discussed it with him and quickly found a major error:  the MLS showed the house as having a single bathroom.  He said it had two full baths.  People searching for two full baths did not know his house was available even after he reduced his asking price.  This is sad and avoidable.

In addition to limiting the number of available houses for buyers to consider, which could lead to a buyer not seeing their best options, errors will affect a market analysis.  Buyers usually want to know what comparable houses have been selling for before they make an offer.  Houses that are not accurately listed as well as those whose statuses are not correct could impact a buyer’s perception of what to offer, perhaps causing them to lose a sale.

Similarly, a seller looking to price their house according to its location, features and condition may be relying on incorrect or incomplete information.  Their house could sit on the market unsold or they could accept less than they should have.  Over the years I have seen a number of houses not properly reported as being sold.  Instead, the listing contract expired or the agent withdrew it from the market making it look like the property did not sell which is often interpreted as meaning that the price was too high.

The last person this misinformation can impact is the appraiser.  They evaluate selling prices based on reported comparable sales.  They can only rely on what is reported even if it is inaccurate (how would they know?).  In addition to the status, appraisers rely on pictures, features and the public remarks to try to identify the prior sales most like the house they are appraising.  What is the cost of inaccurate information?  If it falsely appears that a buyer paid too much, the process may stop unless the seller lowers their asking price OR the buyer comes up with more money OR they somehow work it out.  Mortgages are based on a percentage of the appraised value so errors matter.

To conclude, data integrity is a BIG deal.  Many of my seller clients were unsuccessful with one or more agents before we met.  Many of their property listings contained at least one error and there were often errors serious enough to prevent a sale.  In many cases I was able to improve their chances simply by adjusting the marketing to enable potential buyers and their agents to actually find their property in their search results.  It is like a “Google search”:  how many inaccurate entries do you see before getting the result you were looking for?  You may give up or never find the best answer for your search.

Today many buyers start their searches on the Internet before contacting an agent which only magnifies the potential damage as they may not be as proficient identifying listings as a professional is.  People rely on our training and our experience which is why a higher percentage of consumers use our services than ever before.  I do not mean this to sound like a commercial but this is what we do.

Of course there are times when price may still be an issue especially if the length of time on the market needlessly scares buyers into thinking there is something wrong with a house.  Either way, a seller should not have to suffer a financial loss because their agent failed to do their job.  In  addition, many of my clients say that they never saw their MLS sheet with a prior agent or searched online to see how their property information looked, if it was even there.  Some said that their agent never gave them a copy of their printout and that may be true as I suspect that many know they have not generated a good listing printout.  Many listing printouts, in addition to being incomplete as far as features, lack pictures or offer only a few bad ones, some taken with cell phones, and have no public remarks section or have a poorly written remarks section that is boring, incomplete or loaded with bad spelling and poor grammar making them hard to read.

The MLS syndicates the information on your listing printout to the major search engines we all know as well as thousands of others.  If the MLS is not done well this only magnifies the problem:  “garbage in; garbage out”.  Your printout is literally like a resume.  So, unless your house is on a well-traveled street exposing your “For Sale” sign to lots of traffic, the MLS and Internet may be the only ways anyone will know you want to sell.  Does that make you feel comfortable?  What is the cost of delaying your plans or being asked to accept less money than you should?  What does your printout look like?

There is no time for inexperience, empty promises or false expectations! 

Remember:  HIRE WISELY!  We are not all the same!


Another Spring is Here: What are your plans?

Filed under: Buying,Hiring an agent,Marketing,Selling — awetzel @ 5:31 PM

We moved our clocks forward and Spring is here.  Are you planning to make a move this year?  Every year around October I see the same thing again and again and 2018 was no exception.  Many sellers took their homes off the market, apparently adjusting their plans:  some delaying them, others perhaps giving up entirely.  That is obviously their choice but I always wonder why so many owners decide to remain in a house they were willing to leave.  Many of those properties are still off the market.  What is the cost of not selling or delaying your plans?  Let me offer a few thoughts.

Perhaps some think they cannot achieve their financial goal so they give up even if only temporarily.  Price is NOT always the issue when a house sits on the market unsold.  I have seen and helped many frustrated owners by simply adjusting the marketing.  I use the term “Google search” to demonstrate this point:  buyers and their agents must be able to find YOUR house in their search results.  Unfortunately many MLS listings are inaccurate or, frankly, so pathetic that people cannot identify all of the houses that really match their needs.  Even worse, the listing agent may not realize what is really going on and ask for a price reduction when one is not needed.  How much does that cost?  How does that impact your plans?

Buyers are out looking every day of the year, even if only online.  While there is no guarantee that your house will sell if it is on the market, it will not sell if it is not.  If buyers and agents cannot find a house in their search results, they will not know it is available so they will be unable to schedule a showing and it will sit unsold.  Sellers who keep their houses on the market when others do not will increase their odds even though fewer buyers may be looking at any particular time of year.

I fully understand that selling Real Estate can be inconvenient even if a property is vacant.  Agents you do not know bring buyers they may not know (and who may not be qualified to buy) into your house and look at your stuff.  They come when they want, perhaps late, and impose on your lifestyle.  Showings are a must but we can do a better job managing them.  It gets worse if you have a lot of activity with no offers or low offers but showings are a vital part of the process regardless of what is in the MLS and online.

The two busiest selling times are Spring and Fall.  Now is the time to plan for Spring.  Of course the reasons people buy their first or next home are varied but these are the best times so frustrated sellers often take their homes off the market until the next “best” time comes which is also when they will have the most competition.

When October arrives many of us think about the upcoming holidays and we want to enjoy time with our families.  Many sellers do not want showings during those months which is a shame because houses tend to look their best inside during those months.

Whether you are thinking about selling for the first time or if you have taken take time off, I encourage not to wait too long to resume the process.  The earlier you start the better.  My suggestion, if you have not already committed to an agent, is to call me so we can discuss the market, your house and your plans.  I will give you honest advice with no obligation.  If you plan to buy another home I can also provide information about areas and houses that may interest you.  All I suggest, respectfully, is that you make a decision that works for you.

I can help you now or in the future, whichever works for you!

There is no time for inexperience, empty promises or false expectations! 

Remember:  HIRE WISELY!  We are not all the same!

How Sellers Sell Real Estate: Who is the Typical Seller?

Today I want to discuss the 2018 NAR or National Association of REALTORS Profile of Buyers and Sellers.  The report comes from a survey using 129 questions mailed to over 155,000 home buyers who purchased a primary residence between July 2017 and June 2018.  7191 were returned.  The focus of this podcast will be buyers who sold one home to buy another.  This was a national survey so your market may be quite different.  Real Estate is local:  there is no national Real Estate market so please contact me for information about your local market.

  • NAR has been collecting seller data since 1985 when the typical owner remained in their home for a median time of 5 years. In 2018 that number was 9 years which suggests that buyers may want to think long-term about their investment.  What appears to be a solid investment today may look different later.  Unfortunately, I still see sellers who paid more for their house than it is worth today and that can delay being able to sell it;
  • Sellers between the ages of 18-34 typically sold within 4 years while those over 75 sold after 17 years;
  • The median selling price was 99% of the final asking price. If you are an owner whose house is not attracting serious interest, meaning offers, this is important to know.  Many buyers think they are better at negotiating than they really are and are hesitant to start with their “best offer”.  In a very competitive situation they may not get a second chance.  On the other hand, a buyer may prefer to make an offer on a house closer to its market value to avoid having an appraisal issue or risk losing their second choice to another buyer when their offer on a house expires.  Whether a listing agent should disclose the existence of other offers is debatable but this should only be done when a seller allows it.  In some markets and with some buyers, competition may be welcome.  In others, not so much.  Sellers may also think themselves better at negotiation than they really are so they need good advice from a trusted and respected representative.  Ego can be a terrible thing to overcome.  Last point, showings are nice but they do not guarantee a sale;
  • 13% of houses purchased sold for more than asking price with 26% achieving the asking price and 24% selling for 95% or less than asking price;
  • The typical seller was 55 years old;
  • 68% were repeat sellers while 32% were selling for the first time;
  • 70% who purchased another home stayed in the same state; 16% moved to another region; 14% stayed in the same region but a different state;
  • 44% bought larger homes; 29% bought a similar size; 27% down-sized. The age of the seller strongly correlates with these statistics;
  • 50% bought a newer home than they sold; 28% bought one the same age; 22% bought an older home;
  • 47% spent more than their selling price; 27% spent less;
  • The most common reason for selling was that the house was too small (15%), followed by moving closer to friends and family (14%) and job relocation (13%);
  • 29% of first-time sellers cited size as being too small whereas repeat sellers cited moving closer to friends and family (17%). Selling is an expensive proposition so having to move in the short term because you outgrew a house or simply needed more space can be costly;
  • 91% of all sellers used a Real Estate agent with only 7% being a FSBO. 91% is the highest result recorded despite the presence of the Internet.  The % of FSBOs has steadily declined since 2000 even though the Internet was thought to have helped with exposure;
  • The median selling time for all sellers was 3 weeks. There is a correlation between the % of the final asking price achieved and the length of time it takes to sell.  While it can be a distracting obsession, many buyers look at the “days on the market” as an indicator of a home’s desirability and may avoid homes that are simply over-priced although they have no issues.  Houses that sold within 2 weeks or less achieved 100% of the final asking price whereas houses on the market for 17 weeks or more achieved only 94%.  Keep in mind that many houses are reduced in price to attract attention so looking at the final asking price as compared to the selling price is only one part of the story.  Sellers determine the asking price but buyers determine the value.  If nothing else, easy access to the Internet has allowed buyers to competitively shop meaning they at least know what is on the market although relying on valuation algorithms is risky.  Houses tend to get the most activity within a week or two of hitting the market.  Once the current supply of buyers knows a house is for sale and no one buys it, something has to energize and existing buyer or other buyers have to start their search;
  • 44% of sellers used buyer incentives to attract interest. The top two were home warranties and closing cost assistance.  These are not guaranteed to get the job done and should be discussed at the outset;
  • 64% of sellers were “very satisfied” with the process; 25% were “somewhat satisfied” and 12% were dissatisfied;
  • The overall median selling price was $259,900. Remember that this is a national number.  The median selling price for FSBOs was $200,000; for agent-assisted sales it was $264,900 and for FSBOs who eventually used an agent the median selling price was $227,900.  This clearly shows the advantage of hiring and paying a professional.

The bottom line is that this can be a very confusing process.  This NOT a retail transaction!  It is typically costly enough without making expensive mistakes.  Unless you do this regularly, I respectfully suggest that you trust a trained, experienced professional.  Whether you want to trust your most valuable asset to someone with little experience or someone who has a long track record is up to you but any professional is likely to know more than an average seller looking to save a few dollars.  I understand that signing a formal contract with someone, even if recommended to you, is quite a leap of faith.  Most of us can offer options to increase your comfort level.  After all, we want to make sure that you “fit” with us as well.

Selling Real Estate is unique compared to most typical purchases:  not only is it much less frequent than other purchases, it typically involves multiple steps, each offering its own challenges.  If you would like to discuss selling or buying or if you have any thoughts about this, please contact me.

There is no time for inexperience, empty promises or false expectations! 

Remember:  HIRE WISELY!  We are not all the same!

Technology and Real Estate

Gordon Gecko might say “technology is good” but Dirty Harry Callahan would add (paraphrasing for effect) that humans have to understand its limitations!

In the 1970’s I was fascinated with Texas Instruments calculators.  They quickly went from very basic to very complicated.  Just look at a modern-day financial calculator!  Today many of us seem unable do simple math without a calculator.  In the 1980’s I was fascinated with dial-up modems and being able to send and receive email.  Then I was introduced to Lotus 1-2-3 and Symphony.  Wow!  In the 1990’s I got my first home computer.  It had a huge storage capacity of 8 megs (yes, I said megs!) and enabled me to set up a spreadsheet for a pool team I ran.  I could also word process a weekly newsletter for my team.

In 1996 I became a Real Estate agent.  The industry was evolving from what the more experienced agents call “the books” for distributing information about property listings to Internet-connected computers running on 3.5″ disks.  Until that change, property listings were collected and disseminated to offices and agents in books every couple of weeks and manually searching for listings and comparable sales was time consuming and inexact to say the least.  The data was beyond stale when received.  It was a major achievement to be able to access information about property listings online and then in our homes!  OOOH!

The Real Estate world shifted monumentally in the new century as the public was allowed to peer behind the curtain and get property listings in their homes and businesses, allowing them to bypass over a million trained agents who had controlled the data since the first cave dweller decided to relocate.  Over time, while the data was limited to active, coming soon and under contract listings, third-party web sites began using valuation models to help buyers and sellers “understand” the financial landscape better.  At least that was what they were told.  There is so much more to say about that but I want to focus on technology and how it has inserted itself into Real Estate.

Seth Godin recently blogged about the evolution of technology and he accurately describes the first three cycles, stating the we are now in the fourth.  However, at least as far as Real Estate is concerned, the fourth, while on the horizon, is far from settled.  Sure, we saw a computer beat a Grand Master in chess and win on Jeopardy BUT they have not come close to perfecting a self-driving car and the track record with predicting home values is pathetic.

So, while many of us will continue to love and embrace technology, with many being “early adopters”, I would respectfully encourage my fellow humans to engage with professionals when it comes to Real Estate.  Buying and selling is not so easily predictive as answering a question, creating a question when offered an answer or even moving chess pieces and predicting the outcome of a head-to-head chess match.  There is no doubt that computers can do a seemingly endless array of lengthy calculations faster than we can blink or access a history of information if entered and stored properly but, can computers act illogically or emotionally?  Buying and selling Real Estate are emotional decisions justified with logic.  It is one thing to provide quick access to property listings and then to try to display comparable sales history to evaluate but it is quite another to create and present a purchase offer and then negotiate what may be many steps to make sure that both parties remain committed to completing a sale.  This is not a retail transaction!

Technology certainly has its place and there is no going back in time.  The critical factor is knowing its value, its limitations and where it fits into the process.  Information and data are not the same as knowledge and insight!

There is no time for inexperience, empty promises or false expectations! 

Remember:  HIRE WISELY!  We are not all the same!

6 Buying, Selling Myths Clients Believe

Filed under: Buying,Hiring an agent,Marketing,Price — awetzel @ 4:41 PM

Today I want to discuss an article posted on “REALTOR® Magazine Online (December 2018).  The article discussed 6 myths about buying and selling Real Estate and I want to add my thoughts to each of them.  The article can be found on my Facebook business page.

Since the Internet inserted itself between the consumer and the Real Estate professional, which is called “disintermediation”, the so-called Internet Empowered Consumer (IEC) has often sought information on their own while delaying contacting a professional.  We humans tend to do that and, in terms of buying or selling Real Estate, it can lead to costly mistakes.  We tend to be drawn to sources that reinforce what we think or which offer pleasant information.  While buying and selling Real Estate is NOT “rocket science”, it typically involves doing basic things to achieve your goal and delaying or failing to manage these steps can derail the best of intentions.  Here are the 6 myths and my comments.

  1. The longer a home has been on the market, the more negotiable the deal is. Prices are what they are.  Sellers have various strategies in mind when attaching an asking price to their property.  Buyers have strategies when making offers.  However, if there is a mortgage involved, the lender will order an appraisal which will consider how a specific property compares to recent sales of similar homes and a loan will either be approved or not.  Aside from any perception about seller flexibility, I would suggest that buyers not avoid a house simply because it has been on the market for a long time.  Do not assume it is a bad house just because it has not sold.  Of course, if it has been under contract and then re-activated there may be something you need to know.
  1. An open house must be part of the marketing plan for a home. While practices may vary, I generally discourage sellers from having open houses because I have heard of too many issues with them.  While they may work, the percentages are low.  I prefer private showings for my buyer clients.
  1. A 30-year fixed-rate mortgage is the best form of financing. The length of the loan should be considered, especially if you have a specific idea as far as how long you plan to own a house but I am more concerned with the interest rate and my client’s comfort with their monthly payment.  A professional lender is better able to advise my client than the Internet and I prefer a face-to-face meeting rather than chatting online.
  1. Overpricing your house leaves room for negotiation. Perhaps true but the bigger concern is whether or not your house will come out in a buyer’s or agent’s search results.  If a prospective buyer can find suitable options at a lower price, even if your house is in their search results, they may never come to see your house or prefer to make an offer on a house that is already more affordable for them.  In the long run, a sale that is financed involves an appraisal so thinking that a buyer will pay above-market may not be the best plan and your sale could fall through.
  1. Online evaluations can give you an idea of home value. The primary tool or attraction of so-called third-party web sites is property listings.  They use them and assorted ancillary tools like property evaluations to attract eyeballs so they can use “views” or “hits” to solicit advertising.  That is how they make their money.  While these sites cost money to operate, I am not convinced that they spend enough on quality information or that they can do everything needed to ever replace human beings.  Much has been written about valuation models and their algorithms and it has largely been negative, meaning that the valuations are too often off the mark. While they may have more relevance in some areas than others, they rely on recorded data rather than recent settled data so the information is stale.  The valuations are also geared towards “average” properties and may be unable to properly evaluate what interests you.
  1. You have to put 20 percent down on a home purchase. There are many programs and many offers involve a seller offering some financial assistance.  A professional can provide advice.  We do far more than open doors and write contracts!

There is no time for inexperience, empty promises or false expectations! 

Remember:  HIRE WISELY!  We are not all the same!

Municipal Inspections

Filed under: Buying,Inspections and Contingencies,Marketing,Selling — awetzel @ 3:59 PM

A Real Estate sale is a negotiation between a buyer and a seller.  While either may be more knowledgeable or have better representation than the other, it is a “one-to-one” exchange and most are what we call “arm’s length” meaning that neither party is under duress or pressure.  A seller puts their property on the market and prices it however they see fit.  A buyer can make an offer based on how much they like it and want to own it.  If the sale is financed, an appraiser will compare the selling price and terms to the market.

There are various steps that may occur between executing a purchase agreement and getting to settlement.  One of them is a resale or “use and occupancy” inspection that is required by many municipalities regardless of the details of the agreement.  Who pays for the inspection and any subsequent repairs, if any, is subject to negotiation but a clear certification or a “conditional” one may be required to settle.

The municipal inspection allows the municipality to collect a fee for inspecting the property.  Many require an additional fee should a reinspection be needed.  These inspections generate revenue.  Beyond that, what is the point of their poking their nose into an otherwise private transaction?  They will tell you that it is to make sure that there are no safety issues which would be understandable if they only inspected “public” areas like sidewalks, curbs and anything that could cause harm to the general public.  I think that reasonable although the obvious flaw in that logic is that this intrusive process only encompasses those properties being sold, whether they settle or not, ignoring the majority of properties that do not change ownership.  What happens if they have broken sidewalks or curbs?  People who sell their property are essentially being penalized.

My concern is that many municipalities go beyond what seems appropriate, choosing to enter the structure and dictate what has to be done in order for the transfer of ownership to be allowed.  I had one inspector require a Living Room wall to be completely re-painted because someone had drawn a line on the wall with a magic marker.  Regardless of whether the purchase agreement has any inspection contingencies or not, regardless of how much the buyer is paying the seller to complete the sale and regardless of the competence of the principals and anyone else involved, many municipalities think it their business to inject themselves into a private transaction, some to the point of being as onerous as an actual property inspection.  I consider this meddling and an example of over-reach.  It also fails to achieve a realistic goal as many houses do not change hands for many years so they are not inspected regardless of their condition.  Look at how many people perish annually because properties lack working smoke detectors?  I am not saying that this is the fault of the municipality but wonder why they don’t visit every property regularly if safety is their priority?

I do believe that rental inspections make sense as, unfortunately, there are many landlords who do not properly maintain their properties and many rentals occur without the benefit of a licensed Real Estate professional.  I do find it interesting that many sale inspections are more intrusive than rental inspections which makes no sense to me.  I think that tenants deserve more protection than many of these inspections afford them.  At the very least, both inspections should be similar.

Over the course of my career, I have heard many horror stories about municipalities requiring repairs that were costly, made no sense and were in fact not wanted by the buyer or seller.  They have even caused consenting adults to delay settlement.  Fortunately, the Real Estate community in PA pushed back and was able to have the law changed so that people could complete a Real Estate sale even if repairs were not completed.

Houses should be priced and are typically sold based on their condition.  The PA agreement of sale has a section devoted to the municipal inspection.  The seller does have the option to require that the buyer be responsible for ordering the certification and/ or paying for repairs.  Unfortunately, many houses are marketed with that stipulation without providing an actual list of what the buyer is expected to do which makes no sense.  Have the inspection and provide the list so buyers are not surprised later.  Many buyers simply cannot tackle the cost of these repairs as they have enough trouble saving for paying their closing costs.

It does seem that lower income areas are more heavily burdened by municipal inspection requirements which makes some sense as some of those owners may not be financially able to maintain their properties over time.  In that case, a sale offers an opportunity to make changes which could benefit buyers.  However, an owner who has completed municipal repairs only to learn that a buyer could not get financing has two problems:  they owe contractors money and they have no sale.

The ideal situation as far as I see it would be to hold all property owners to some standard in order to protect the public.  If this could work, there would be no municipal surprise when a property is sold.

There is no time for inexperience, empty promises or false expectations!

 Remember:  HIRE WISELY!  We are not all the same!

March 23, 2019

Compensation in Real Estate

Filed under: Buying,Ethics,Hiring an agent,Marketing,Price,Selling — awetzel @ 4:31 PM

While there are many different business models as far as how sellers and buyers compensate their Real Estate representatives, the one that seems to remain the most popular is based on closing a sale meaning that the agents work on full commission.  Typically the seller pays the listing broker a fee due at settlement and that broker offers a portion of their fee to buyer agents as an incentive for them to show their listings.

Anyone working on a full commission-basis has to constantly focus on finding new clients if they want to continue to generate income.  While most agents will have opportunities to work with friends and family as well as people referred to them, we also need to identify prospects from people we do not already know.  The point I want to stress is that Real Estate agents, and perhaps anyone who works on full commission, have two commodities to trade for the opportunity to earn a commission.  One is our time, meaning that any time we devote to developing leads and working with prospects, customers and clients has to be invested wisely as the amount of time we have is finite.  Time management is one of many topics we have to master.  How much is our time worth?  Can we differentiate between important tasks and urgent ones?  How is our time best spent?  Some agents have a better handle on this than others.  One of our challenges is to evaluate which clients to accept based on the likely outcome of our working for them.  It boils down to probability:  am I likely to sell a client’s house or is a buyer likely to buy a house?  Of course nothing is guaranteed and we all will spend some time for which we know we will not be compensated.

The other commodity we have to trade is the combination of our skills, knowledge and ability.  Our actual experience is only one part of this as some of us spend a lot of time, money and effort to learn more so that we are better prepared for the unexpected.  While some clients may be more self-sufficient than others, perhaps minimizing what we do for them, others are much less so and will need more time from us as we advise and counsel them.

One of the basic facts of Real Estate is that commissions are negotiable.  In fact, when a group of agents get together we are NOT allowed to discuss commission as doing so may be perceived as collusion.  Offices and companies set their rates or fees, we try to avoid the word “commission”, and may or may not allow their agents the flexibility to charge what they can or need to in order to acquire clients.  There is more to our fees than simply comparing one company to another.

I have heard since my first day in business that our fees were under assault.  Different business models have done a variety of things to capture market share and, frankly, many focusing on low fees have not survived.  Some consumers do not value our services as highly as others, reducing our role to preparing documents and unlocking doors while others demand a lot of our time, seemingly expecting to learn everything we know regardless of whether or not their situation requires it.  I do know that when the market went crazy, some sellers thought our job easier so they wanted to pay less.  Of course, I never had a seller offer more when it took longer to find a buyer for their house.  Conversely, no buyer ever offered me more even though it took writing and negotiating several offers to get them a house.  I often joke that when I look at my commission check I either think I was overpaid or that it was not nearly enough!

The word commission is an interesting one as is the concept of only getting paid when a house is sold regardless of how much time and effort we have invested or whether or not the seller and buyer were really motivated to get it done.  Many sales fall through when a buyer cannot get a loan or when the two parties cannot agree as to how to address a home inspection list.  Even if the sale falls through during or just prior to settlement, there is no payday.  That is part of what we accept.

Our commission is a marketing expense.  I understand that buyers and sellers prefer to pay less rather than more.  From the buyer’s perspective, the seller typically pays the buyer’s agent although the fee comes from the funds offered by the buyer.  From the seller’s perspective, the less they pay, the more they walk away with.

What is the reality?  Some sellers will settle on an agent solely based on the fee they charge.  You do generally get what you pay for and if an agent is willing to accept less than their competition, perhaps they are not as capable of earning the trust of prospective clients.  Sellers might want to question the negotiating skills of an agent who accepts what the seller wants to offer:  how hard will they negotiate the selling price?

In addition, sellers need to understand their competition.  Part of the fee charged by the listing broker will be used as an incentive for buyer agents to want to show and sell the listing agent’s property.  The portion offered is determined by the agent and the seller but if it is not competitive with other listings a buyer agent might show their client, the seller could see their house sit on the market longer than it should.  Houses with a high “days on the market” can become stigmatized, meaning that buyers and their agents wonder why someone has not bought it.  Even worse, houses that go under contract and then come back on the market may be thought to have repair issues.

More to the point, assuming that a buyer has “hired” an exclusive agent to represent their best interests, the buyer and their agent likely agreed to a fee owed to the agent at settlement.  If the contract allows the agent to accept compensation from the listing agent, it may well include a provision that the buyer has to make up any difference between what they agreed to pay their agent and what the listing broker is offering.  Why would a buyer pay “fair market value” for a house and still be willing to pay a portion of their agent’s fee?  Of course, if the agent does not have a formal contract with their buyer, this may not apply.

One of the many possibilities in today’s market is for the seller to agree to pay their listing agent but to expect the buyer to compensate their own agent.  Sounds simple and fair, doesn’t it?  However, our local MLS requires listing brokers using the MLS to advertise, expose and promote their property listings to offer some compensation to buyer’s agents who successfully “procure” a buyer for their listing.  The answer for some is to keep their listings off the MLS.  These are called “office exclusives”.  When used, it is important that the listing agent respond to inquiries even though they will be offering no compensation.  I doubt that any seller, even those not willing to compensate a buyer’s agent, would expect their listing agent to prevent agents from other companies from showing their property to their buyer-clients.

When I talk to prospective seller clients I need to gather information.  Prior to our actually meeting, I need to learn what I can so that I can prepare a market analysis for the house so that I have some idea about the possible range of asking and selling prices.  At our meeting I need to walk through the house to see how it compares to others on the market, under contract or recently sold so that I can better assess its marketability and pricing.  In addition, I need to discuss the seller’s motivation, is it more based on the price achieved or the length of time it takes to sell?, their expectations as far as asking and selling prices and, whether we can work together.  There is a lot more to taking a listing than signing paperwork.  I need to make sure that my clients understand the market, the process, the paperwork and how I do what I do.  A significant part of this is explaining the commission and how it works:  is it more than a “line item expense”.  Do they understand the need to compete with other available listings, do they value what we do and do they value my time?  They may simply want to know a price so that they can try to sell it themselves without spending anything on commission.

As I hope I have explained, there is much more to selling Real Estate than deciding how much commission you want to spend.  The fee is a marketing expense and studies over the years have shown that houses offering lower commissions to buyer agents tend to take longer to sell.  While we all want to save money, there is nothing wrong with that, signing a listing contract based on a low commission may not work.  I have seen the same result time and again:  a low commission is offered to buyer agents, the houses may get shown but not sold and the listing agent asks for a price reduction which more than likely offsets any perceived commission savings.  While the new price may appear attractive, the commission has not changed so the house may continue to sit unsold.

There is no time for inexperience, empty promises or false expectations!

Remember:  HIRE WISELY!  We are not all the same!

Cooperation in Real Estate

Filed under: Buying,Ethics,Marketing,Selling — awetzel @ 3:45 PM

Real Estate, like many professions, has its own vocabulary.  In addition to using many acronyms, Real Estate uses what appears to be common words that really mean more than they imply.  One such word is “cooperation” which generally means “the process of working together to the same end”.  While largely true in Real Estate, a profession which is based on bringing sellers and buyers together, there is more to it than that simple statement.

Cooperation among competing professionals in any line of work is unique and competition is at the heart of the Real Estate community.  We compete for and on behalf of buyer and seller clients and then cooperate to match them with each other, with each party typically having their own exclusive representative.  While the “end” result may appear similar, meaning that both parties have to agree to transfer ownership of a property, there is much that happens along the way.  This is NOT a “retail transaction” where funds and goods are swapped instantaneously.  Cooperation embodies the relationships among agents and our rules define the requirements.

REALTORS have a Code of Ethics consisting of 17 Articles.  Our Code of Ethics is built on the principal of protecting the public and advancing the interests of home buyers and home sellers.  Cooperation is so important and intrinsic to what we do that it has its own Article and it is number 3.  It begins with the statement “REALTORS shall cooperate with other brokers except when cooperation is not in the client’s best interest.”  The client is the boss and gets to make or not make the critical decisions and we owe our clients 6 “fiduciary duties”.  One of them is “obedience”, meaning that we have to obey their lawful instructions.  There are times when clients will not want us to cooperate with each other but that does not relieve us of the obligation to act ethically and professionally.  For example, we need to respond to inquiries even if to advise the person inquiring that we are not “cooperating”.

Article 3 has ten “Standards of Practice” (or SOP) which interpret the Article.  Standard of Practice 3-10 defines cooperation.  It says “The duty to cooperate relates to the obligation to share information on listed property, and to make property available to other brokers for showing to prospective purchasers/tenants when it is in the best interests of sellers/landlords.”   That means that listing brokers will make their property listings and information about them, such as property disclosure and lead hazard statements, available to other brokers.  The goal of course is to identify prospective purchasers or tenants.  Accordingly, the default position for REALTORS is cooperation.  Sharing listings and listing information benefits the consumer.  Sharing increases “exposure” which should theoretically result in maximizing the selling price while minimizing the marketing time.  There are many variables that can affect either of those but no one can doubt the potential benefits to consumers.

Article 3 also discusses respecting the private ownership rights of the seller.  SOP 3-9 says “REALTORS shall not provide access to listed property on terms other than those established by the owner or the listing broker.”   This means that a broker must have permission to enter or to allow others to enter a property which includes how to schedule showing appointments and inspections, arriving when scheduled, managing delays in arriving on time and canceling showings when necessary in addition to who must be present for appointments and showings.  It is safe to assume that an agent is expected to accompany all showing and appointments.

The Code of Ethics was created in 1913 and has been amended over the years.  The greatest changes to it have been those related to technology and the law.  For example, since 1913 we have seen the inventions of fax machines, email, texting, scanning, electronic signatures and the Internet, all of which changed how we do business.  Exclusive buyer agency and the multiple listing service have also dramatically changed our profession:  allowing each party to be exclusively represented and making marketing so much easier than before.  That being said, the competitive nature of the profession will always cause issues and misperceptions about our conduct.  Are we working for our client’s best interests or our own?  That question often arises when an agent is dissatisfied with something that has prevented them from getting what they or their client want.  While it is a good question, we need to ensure that we are not jumping to conclusions that are wrong and we need to make sure that we have done all we can to resolve any discord that arises.

Not surprisingly, the perceived lack of cooperation can be very frustrating.  We are expected to share information and to be honest with each other.  The primary focus of this involves making properties accessible and disclosing when a property is under contract.  Few things in Real Estate are more frustrating than having a buyer interested in a property for which we have no information and are unable to get the information that our buyers need to decide whether to request an appointment or not.

“Coming Soon” listings generate much of that frustration as many agents point to a lack of cooperation when simply trying to get the information their clients want, need and expect.  The practice itself is perfectly legal and acceptable if handled according to our rules and regulations.  Cooperation, at the very least, may simply mean that we return a call, an email or a text when a fellow agent inquires about one of our listings.  If the listing is an “exclusive” one, meaning that the seller has agreed that you will not compensate other agents for bringing a buyer to them, that must and should be communicated so that the inquiring agent can advise their client and plan accordingly.  When communication is lacking, it is too easy to assume something is wrong.

One of the great lines in literature is “no man is an island”.  As REALTORS, we are independent contractors in business for ourselves.  However, through our network of associations and our Code of Ethics, we are not in business by ourselves.  Cooperation is what makes our profession work best and, aside from the issue of ethics, failing to cooperate, even if that means telling a fellow agent something they do not want to hear, is unprofessional, short-sighted and reflects poorly on the profession.  We are judged by the company we keep.

There is no time for inexperience, empty promises or false expectations!

 Remember:  HIRE WISELY!  We are not all the same!

March 22, 2019

“Coming Soon” Property Listings

Filed under: Buying,Ethics,Marketing,Selling — awetzel @ 5:29 PM

Sharing property listing information and making our listings available for other agents to show to their prospective buyer-clients is at the heart of the Real Estate profession.  Listing agents control the inventory and how they handle their inventory greatly affects their seller clients and how buyers and their agents perceive them.  We call how we do this “cooperation”.  There are two related issues:  compensation and procuring cause that I will avoid at this time.

One of the hottest topics today is “Coming Soon” property listings.  These are properties not yet on the active market or available for showings where the agent has put up a “For Sale” sign with signage that says “Coming Soon”.  Whatever the thinking behind it, these signs generate interest which could help a house sell fast or it could frustrate some agents and buyers if not handled ethically.  Many buyer agents seem to feel that the practice is deceptive and designed to allow listing agents to find buyers for their own listings thereby earning them more commission dollars.  Like most things in life where there are opposing points of view, this issue can quickly develop into a hot debate involving feelings and emotions regardless of the actual facts.  The practice is perfectly legal and can be very effective for sellers if handled properly.  My concern is that it may cause some buyers to have a less than favorable impression of us and our industry.

As I like to say, we are not all the same.  Some agents may do things that do not conform to our rules and regulations and I like to think that these instances are unintentional, perhaps resulting from a lack of understanding the rules or not thinking about how an agent’s actions may be perceived by others.  However, when a listing agent’s actions cause a buyer to miss out on a house they like and/ or a seller is deprived of additional competition that could have earned them a higher selling price, that is unacceptable.  A competitive market for scarce listings only adds to the situation.

Let me start with two disclaimers.  First, this NOT intended as legal advice.  Second, while the practice is legal if done properly, the devil is in the details and that is where “Coming Soon” property listings intersect with rules, regulations and emotion.  The fact that someone feels slighted may not necessarily mean that something wrong happened.

If a private citizen posted a “For Sale” sign on their own lawn with a sign that said “Coming Soon” we would have nothing to complain about.  Of course we would expect them to allow anybody interested in their home to see inside so that they could try to sell it for either the highest price or in the shortest period of time, wouldn’t we?  That changes when another agent posts the sign.  The difference is “competition”.

Our PA Real Estate Licensing and Registration Act, RELRA, and our Code of Ethics both require that an agent have a seller’s permission to post a sign on their property and to advertise a property as being “For Sale”.  Whether an agent is a REALTOR or not makes no difference.  The ideal documentation for this permission or authorization is a formal listing contract such as the one PAR created and updates from time to time.  I say that because it is a legally-approved form that also includes details relevant to forming a business relationship including the term or length of the arrangement, the duties of the listing agent, the amount of compensation earned and how it is earned among other important protections.  I suppose that a seller could send you an email asking you to put a sign on their lawn and authorizing you to advertise their property but would you?  If you only want the opportunity to generate buyer leads and are not concerned about selling the specific house or getting paid when it sells, this could work but I would not advise doing that for a number of reasons.

What happens when an agent, either on their own or through a buyer-client, becomes aware of a “Coming Soon” sign on a property that may interest their buyer?  If the agent knows of no one who may be interested, chances are nothing will happen.  Otherwise, the agent may soon find that the house is not listed in the MLS or it could be listed as “Coming Soon” for up to 21 calendar days without running up the days-on-the-market statistic.  In that case they will most likely call the listing agent to ask the price, features and anything else relevant to their buyer.  If the listing agent answers the phone or returns the call, this may go no further.  The problem comes to a boiling point when the listing agent, for whatever reason, does not respond and the agent placing the call feels that others are gaining access to show the property.  When there is a buyer chomping at the bit to learn about a house or a buyer who wants to see inside and their agent cannot get answers, the situation gets worse.  What to do???

In addition to rules governing signage and advertising which I mentioned earlier, agents who belong to the multiple listing service must abide by their rules.  The relevant one here is that once a listing contract is signed, the property must be uploaded into the MLS for other agents to be able to search within 3-business days.  That process leads to “syndication” which means that, if authorized by the seller, the information is disseminated to the Internet for the public to find in their searches.  I am aware that some sites allow agents to upload listings even though they are not on the MLS and that may or may not be a problem depending on what the seller has authorized and whether there is a listing contract.  While probably viewed as a benefit to the listing agent and seller, buyer agents can get frustrated when their clients learn about listings before they do especially if a property is not in our MLS.

If you see a “Coming Soon” sign on a property, regardless of when you think it went in the lawn, by the end of the third “business day” the property information should either be in the MLS for all agents to access OR the listing agent should have filed a waiver with the MLS which states that the seller has authorized the listing agent to withhold the listing from the MLS.  Many buyer agents question why a seller would do that and seem inclined to speculate that the listing agent did not properly advise their client about how this could harm them by preventing competition but the fact is they do not know what was discussed and the Code of Ethics and the general concept of professionalism should prevent them from speculating and judging another agent’s conduct just because they feel it unfair or because it does not meet their needs.  The seller is the boss and has the right to make decisions even if they may not make everyone else happy.

If the listing is uploaded to the MLS, all seems right unless the house quickly goes to “pending” or “under contract” since the buyer agent may feel that they were blocked from showing the house and that their buyer was treated unfairly.  True or not depends on the details and it may take filing a complaint to find out but, in my experience, things are not always unethical just because we did not get what we wanted.  Perhaps you or your buyer saw the sign and hesitated taking action.  Real Estate works at the speed of life and competition can be fierce!

If there is a waiver, the listing agent should still respond to another agent’s inquiry even if to tell them that they can show the house but that it is an exclusive listing where the listing broker will not be offering compensation to the buyer’s agent.  That is another subject I will ignore.  In addition, if there are no showings until a specified date, that should apply to everyone.  Of course, that does not stop a buyer from making an offer “sight unseen”.  All offers, even verbal ones, must be presented to the seller.

If the listing is not uploaded to the MLS and there is no waiver, the situation gets real cloudy because you do not know whether there is a listing contract or not.  I cannot tell you how to handle this but if you alert the MLS they will most likely contact the agent or company named on the sign although that may not happen quickly or make you feel any better.  If an agent does not call to ask if there is a waiver, they need to accept some responsibility for the tension that may arise with their buyer, perhaps to the point where the buyer no longer feels that their agent is working in their best interests.  These situations have ripple effects.

I will conclude by stating two of my truisms about Real Estate.  First, buying and selling is like playing poker:  you have two or more people who would like to know what the other people are thinking.  This includes agents.  Second, in most cases, even if everything is done ethically and professionally, the listing agent is in the preferred position.  They are working with the seller and may know them on a personal level.  All routes to a sale go through them and that is just the way it is.  While protecting and promoting the best interests of our client may not make everyone else happy, we should conduct ourselves as ethically and professionally as possible in terms of how we handle what is going on.  Buying and selling Real Estate often involves emotions because you cannot always get what you want when you want it.  While we cannot control other agents, we can keep those who wander ethically or professionally on track if we take the initiative.  While we cannot control our clients, we can do what we are expected to do and document what we have done so that we can at least rest assured that we did our best.  Again, the devil is always in the details.  This will not make everyone happy.  My goal is to clarify what I believe to be the proper way to handle “Coming Soon” listings so that we can at least minimize the controllable problems.

In the ideal world, every buyer would know their financial qualifications and limitations and know their wants and needs.  Every property listing would be made available to every possible buyer and all would be given a specified time to evaluate a house, schedule a showing and make an offer.  This should maximize the seller’s price and would give all buyers an equal chance to make an offer.  This is not an ideal world.

Here is the reality:  many buyers will delay getting pre-qualified or determining exactly what they are looking for which may prevent them from getting a house they think they want; buyer agents will continue to work with unqualified or not-yet-qualified buyers which may waste everyone’s time.  Some buyers and some buyer agents will always be more diligent than others when it comes to managing the buying process and identifying houses to consider, some will take action more quickly than others and be more realistic in terms of what they offer and how they construct an offer.  Human beings are funny creatures, aren’t we?

One of the best management aphorisms I ever heard is this:  “some people will make things happen; some people will watch things happen; some people will wonder what happened”.  On a related note, “Lead, follow or get out of the way”.  I mean no disrespect but too often people blame others when things do not go their way.  Buying and selling Real Estate often lacks etiquette and it is not for the faint of heart!  Be prepared!

There is no time for inexperience, empty promises or false expectations!

Remember:  HIRE WISELY!  We are not all the same!

Feedback: What is the fuss all about anyway?

Filed under: Buying,Ethics,Marketing,Price,Selling — awetzel @ 4:34 PM

What is showing “feedback” and why do listing agents and sellers complain when the buyer’s “exclusive agent” doesn’t respond to feedback requests or tell them anything substantial about their showing experience and why the buyer is not making an offer?  I have used the analogy that buying and selling Real Estate, or, for that matter, any type of serious negotiation, is like playing poker:  you have two or more people trying to satisfy themselves while knowing little if anything about what the other person is thinking or willing to do.  Trying to reach a mutually beneficial outcome takes work especially if the parties are far apart from the beginning.  It would be nice but completely unrealistic to think that every buyer and every seller will be able to get what they want when they want it.  There is often no interest in a house based on what the buyer needs or wants so any feedback they might offer would be meaningless.

Selling Real Estate is unique in that we have “showings” where agents we may not know bring prospective buyers they may not know (and who may not be financially “qualified” to buy) into your house to look at your stuff.  Your “first showing” occurs online these days so the number of actual showings has generally declined making each one that much more important.  Frankly, most showings do not result in a sale, many agents show up late or not at all and the seller is often left wondering what happened.  It can be very frustrating but showings are important.  This is not a “retail transaction” and there are typically a number of moving parts to manage.

Many seem to think that feedback will provide the necessary answers.  What stopped the buyer from making an offer?  Was it the asking price?  What the house has to offer or its condition?  Did they find something they liked more?  Was it the location or neighborhood?  Many agents assume that the asking price is the issue while sellers should question the marketing or the seriousness or financial ability of the buyer.  Admittedly, getting showing after showing without any offers, even low ones, can be very frustrating but is the lack of feedback to blame?

If a buyer is interested in a property their agent will contact the seller’s listing agent to make sure it is still available and, if so, begin a conversation that might lead to a formal offer.  This also applies to investment and commercial properties.  However, if there is no feedback or contact from the buyer’s agent, the buyer may simply not be ready to move forward at the moment.  That may or may not change but it is too easy to assume that there is no interest.  Shouldn’t a listing agent follow up?  There are times where we are told an offer is coming and then we hear nothing further.  So, why do we rely on feedback?  Most feedback offers nothing substantial.

Prior to “buyer agency” all Real Estate agents were “sub-agents”, presumed to be working for the best interests of the seller so they were expected to tell a listing agent what a buyer thought about their property listing.  There was no buyer representation or “confidentiality”, regardless of what the buyer thought.  This is why we have a Consumer Notice in Pennsylvania.  We want to make sure that buyers and sellers know their options for representation and what our duties are to them based on the nature of our business relationship.

Sellers often tell me that their prior listing agent said that buyer’s agents did not offer any feedback.  Perhaps.  When I act as a buyer’s agent I know that most listing agents will not ask for feedback unless they use an automated email process.  Even then, they may not question what I tell them to see if my buyer may have some interest or to learn something that might their sellers with future showings.  So much for “promoting the best interests” of their seller-client.  Even if a buyer is not going to make an offer, it would be nice to know what happened, wouldn’t it?  Showings are often inconvenient, taking time and effort so dismissing them does not make sense.  Even selling vacant properties can cause showing-related stress!

What does feedback provide?  It is meant to be what the buyer thinks and should only be offered with their permission as it could harm negotiations.  What the buyer’s agent thinks does not matter and should only be shared with their buyer-client unless something unusual happened.  For all intents and purposes, the agent is the buyer when it comes to communication.  Even if a specific buyer is not interested in a property, the buyer agent may have a future prospect interested in it so their opinion could hurt a future negotiation.

As a listing agent, respectfully, I really do not care how another agent feels about the price unless they tell me that it is the only concern or one of several that we might need to work through to generate an offer and a sale.  Otherwise, changing the price is not going to accomplish anything but lower my client’s proceeds.  If you want to compare the asking price of my listing to other similar houses in the area that would make sense but please do not tell me that the seller’s asking price is good if you do not know the local market or if your buyer is not interested in making an offer.

So, other than telling me whether your client may be interested in making an offer or not, what do I hope you will tell me?  Please call me immediately if there is an urgent issue such as a water leak or a gas odor.  Please tell me if something made you feel uncomfortable while you were at the property such as owners who are overly friendly or intrusive.  It is the sellers’ home so it is their choice whether to be present or not but they should respect the importance of a showing and provide the visitors some privacy.  I look at a showing as a private time for a buyer and their agent to walk through a house with the idea of discussing whether it fits what the buyer is looking for or to discuss if it can be made to fit their needs.  Some sales are impacted by how the people feel about each other and that can be good or bad.  Selling and buying Real Estate should be handled in a business-like manner:  too often emotions affect the people involved and that can get in the way of completing something that both parties want.

I have our appointment center automatically send all feedback to my seller-clients so I strongly encourage buyer agents to keep that in mind when they submit feedback.  The types of feedback I am looking for do not affect your duties to your client.  That being said, I have heard some troubling accounts regarding buyer agents who thought they were being funny or who may have been a little unprofessional with their feedback comments.  Selling a house can be frustrating enough without having a buyer agent add unwelcome commentary and, again, the resulting emotion can affect a possible negotiation.

I believe that there is a buyer for every house but every house will not appeal to every buyer.  An experienced listing agent should prepare their seller-clients for what can happen with scheduled showings as well as having been honest about what the sellers are trying to sell.  Buyer agents should be respectful of seller’s homes and, even if they will not provide feedback, they should arrive when scheduled or reschedule their appointment and cancel if they are not coming.  They should follow the showing instructions.

When houses get showing after showing but no offers, it would be nice if feedback could provide the answer but it may not.  The answer may really depend on trying to determine why some buyers did not come at all.  Showings are necessary so having the proper expectations about the process is a must!

There is no time for inexperience, empty promises or false expectations! 

Remember:  HIRE WISELY!  We are not all the same!

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