Andrew Wetzel's Musings

April 24, 2019

Bright MLS Quarter 1, 2019 Housing Report for Delaware County PA

Bright MLS has released their Residential Market Report for single family homes for the first quarter of 2019.  In today’s podcast I will discuss the results for Delaware County Pennsylvania.  If you would like information about this or any other County in the Delaware Valley, please contact me.

The report compares the current results to one-year ago, same quarter.  As with all Real Estate statistics, two things are true.  First, the performance within individual zip-codes can and will vary significantly from the overall County.  Real Estate is local and results can vary from neighborhood to neighborhood and even block to block.  There is no such thing as a “national” Real Estate market so, whether you may be looking to buy or sell, please contact me for details about your areas of interest.  I can provide current information and keep you informed about the evolving market.  Deciding whether it is the right time to sell or buy is a personal decision typically involving a number of variables.  I posted an article on that topic on my web site AndrewWetzel.com that offers several ideas to consider.

My second point is that, unfortunately, all Real Estate statistics involving sold data is stale.  While a sale may be settled or closed today, the real question is when was the offer negotiated?  Typically sales take 45 to 60 days to close so the market today may be different.  Up-to-date information is important!

As far as the statistics, 1099 properties were settled this year with an average “selling price” of $264,674 and a “median” selling price, meaning that half of the sales were higher and half were lower, of $200,000 compared to 1224 settled last year at an average price of $247,389 and a median price of $190,000.  The CDOM or “cumulative days on the market” for settled properties dropped to 81 from 85.  The underlying data shows a wide range of results among the 49 different municipalities in Delaware County.

Which number is more meaningful, median or average?  We can debate that but what really matters is how your property or one that interests you compares to those appraised and settled with similar location, features and condition.  Appraisers rely on nearby settled properties so average or median pricing loses some validity but may provide insight for both the short term and the long term.

What about the properties that did not sell?  Many came off the market and remain unavailable.  Houses may get showings without generating offers unless buyers think they are priced within the range of their perceived “worth”.  Most property listings whose contracts are canceled or allowed to expire have asking prices considered high for their market and/ or they were poorly marketed, meaning that some buyers may not have known that a house was even available to purchase.  Of course this may well depend on the ratio of buyer and sellers so there is more to this than raw statistics.  If a market has a lot of inventory, some buyers may not be willing to even look at houses priced high compared to the rest of the market.  While sellers may be open to negotiating their price, many never get the chance to do so.  I will happy to discuss specifics with you.

It is worth noting that the weather, despite minimal snow, was somewhat harsh early in 2019 which slowed activity although that has changed in many markets.  The overall economy is doing well with some adjustments here and there.  Pushing statistics aside, what are you planning to do?  Real Estate is generally a long-term investment unless you are looking to fix and flip it.  There are opportunities out there.  As with the stock market, it is very difficult to pick the best time to make a move.  All you can do is get the best available information, determine what is in your best interests and then start the process.  I am a phone call or email away and getting started is easy once you take action.

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

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

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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!

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!

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!

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!

March 22, 2019

Dual Agency: The Pros and Cons

Filed under: Buying,Ethics,Hiring an agent,Price,Selling — awetzel @ 5:52 PM

Let me start with some background and definitions.  Of course you know that this is not legal advice!

According to RELRA, the Real Estate Licensing and Registration Act of 1980, Chapter 2, the word “agency” is defined as a relationship whereby the broker or licensees in the employ of the broker act as fiduciaries for a consumer of real estate services by the express authority of the consumer of real estate services.  The legal definition of agency from merriam-webster.com is “a consensual fiduciary relationship in which one party acts on behalf of and under the control of another in dealing with third parties; the power of one in such a relationship to act on behalf of another.”  Dual of course means two.

In the NAR Code of Ethics and Standards of Practice, Article 1 requires that REALTORS “protect and promote the interests of their client” and says that this obligation is primary.  Further, we have 6 fiduciary duties owed to clients, meaning people with whom we have a formal representation contract.  Briefly, the six are obedience, which requires that we obey their lawful instructions, our giving them our undivided loyalty, our disclosing all information concerning the transaction that might affect their decisions, our not revealing their confidential information, our accounting for monies involved in a transaction and using reasonable care and due diligence to protect them from foreseeable risks or harm.  In most Real Estate transactions each party has their own exclusive agent making these responsibilities easier to understand although conflicts will still arise.

According to the PA Consumer Notice and RELRA, Chapter 2, “dual agency” is defined as occurring when an agent represents both the buyer and seller in the same transaction.  In Chapter 6, Duties of Licensees, Section 606d, it states that a licensee may only act as a “dual agent” with the full disclosure and informed consent of both parties to the transaction.  Further, it states that an agent may not take any action that is adverse or detrimental to either party’s interest.  Can you see how this concept may cause a conflict in terms of our properly carrying out our fiduciary duties to both parties in the same transaction?

The concept of “dual agency” is inherently complicated when you have two parties trying to do business with each other and perhaps at the expense of the other, meaning that a buyer and seller are not always equally happy with the outcome even though a deed may have transferred from one to the other.  A single agent is in the middle of what may well evolve into a “tug-of-war” with either or both sides trying to exert their will on the other party by manipulating the agent.  This can happen with two agents as well.  This is why many agents question how one agent can properly represent two parties with potentially opposite goals.  Some refuse to be “dual agents” even though the practice is perfectly legal in PA.

When we represent both parties, how can we make each party’s interests primary?  Can they be equal?  By definition, “dual agency” requires that we adjust our fiduciary duties.  Can we obey the lawful instructions of two parties?  I think so although there may be some conflict.  We may not be able to provide undivided loyalty to more than person unless their combined goals complement each other.  Accounting for money would seem easy to accomplish.  The two duties that are compromised are disclosure and confidentiality:  I cannot disclose to another what one party considers confidential.  Frankly, what does confidential even mean?  I take it to mean protecting something that could cause harm to another although many people simply demand more privacy than others and want information or details kept private which would not affect a sales transaction or even be of interest to anyone else.

With respect to buyers and sellers working with the same agent, the best way to explain this conflict is to say that an agent cannot reveal how high a buyer is willing to go or how low a seller is willing to go.  Absent “dual agency”, it is common for our clients to ask what to offer or what to accept although I generally respond with advice about how to negotiate based on where they want to end up rather than what to offer or accept.  In “dual agency” we should provide each client with the same market analysis and are told not to advise beyond that.  Unfortunately, many if not most people hate having to negotiate anything let alone money so they may want to rely on their agent.  What is interesting is that sellers expect and deserve to see that a buyer is financially qualified to execute their offer but do they prove they can finance their offer or do they show the maximum amount for which they are qualified?  Some buyers only want to show their ability to execute what they are offering and that could be a problem if the seller wants more and there are multiple offers.  A seller might think a buyer’s offer their “highest and best” and move on.  Frankly I like to show a buyers’ maximum qualification and try to assure them that I want the seller to feel at ease with my client’s financials while making sure that just because a buyer could go higher does not mean they have to.  What about the seller?  The contract language shows that they can transfer title but there is no information that would in any way suggest how low a buyer could go and that is just the way it is.

Both clients should have accepted “dual agency” prior to my “introducing” them and, hopefully, both will continue to accept it and my role as the process goes from showing a property to making an offer, and then negotiating it and the remainder of the terms as the process plays out.  There may well be conflicts at the outset or later on as each party assesses who is winning or losing each step of the way.  Many like to “keep score”.  I have had conflicts where I suggested that I would put everyone in a room and walk out so they could work it out.  I have generally found sales where I acted as a “dual agent” to be the best although not all were perfect.

What happens when either party or the agent starts to question the viability of remaining in a one agent-two party scenario?  The concept of “designated agency” allows someone to ask a broker to assign a different agent to a buyer or seller when a conflict arises that cannot be resolved.  That is a good thing.  However, my opinion goes further.  While I understand and embrace “dual agency”, I do not see how an agent can be separated from one client and still represent the other.  While expanding the number of agents to two seems to allow both parties the opportunity to have exclusive representation, the former “dual agent” still knows more about their “separated client” than a typical non-dual agent does and that could be a problem.  In my opinion, if you cannot represent one, regardless of it being your choice or that of a client, you should not represent either.  Removing yourself entirely seems to be the only fair thing to do.  Of course the broker will be accountable for how either or both parties feel about the agent now designated to represent them.

So, what is the benefit of “dual agency”?  If you think it is the commission you are on the wrong track!  Some buyers like to work with the listing agent although some of them may be trying to leverage that relationship to their advantage.  Same goes for some sellers.  Simply put, the biggest advantage for me is that it removes a body from the process.  While some sellers and buyers may be harder to deal with than others, most conflicts I have seen were made worse by having an extra mouth involved.  Of course, if there is only going to be one agent, they have a lot of responsibility and it is not for everyone.

As far as avoiding “dual agency”, that may be harder than it sounds.  If you have a property listed and someone contacts you to see it or a buyer you are working for likes it, what do you do?  Chances are that most buyers will want their own exclusive agent but you never know and you may be working with two parties now who are destined to meet later.  Life is unpredictable.

I often describe “dual agency” as being like a “Tale of Two Cities”:  it can be the best of times or it can be the worst!

Agency is not always pretty and it is not always easy to explain but it is expected in client relations and its misapplication can and will cause harm, which is the antithesis for our entering into such a one-to-one relationship in the first place.

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

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

Dual Agency: Does having two buyers interested in the same property qualify?

Filed under: Buying,Ethics,Hiring an agent,Multiple Offers,Price — awetzel @ 5:40 PM

In the NAR Code of Ethics and Standards of Practice, Article 1 requires that REALTORS “protect and promote the interests of their client” and says that this obligation is primary.  Further, we have 6 fiduciary duties owed to clients, meaning that we have a formal representation contract with them, which requires giving them our undivided loyalty, our disclosing all information concerning the transaction that might affect their decisions, our not revealing their confidential information and our protecting them from foreseeable risks or harm.  In most Real Estate transactions each party has their own exclusive agent making these responsibilities easier to understand although conflicts still arise.

According to RELRA, the Real Estate Licensing and Registration Act of 1980, Chapter 2 defines “dual agency” as occurring when an agent represents both the buyer and seller in the same transaction.  In Chapter 6, Duties of Licensees, Section 606d, it states that a licensee may only act as a “dual agent” with the full disclosure and written consent of both parties to the transaction.  Further, it states that the agent may not take any action that is adverse or detrimental to either party’s interest.

The PA Consumer Notice states that as a “dual agent”, the licensee works for both the buyer and seller.

The concept of “dual agency” can be complicated enough when you have two parties trying to do business with each other and perhaps at the expense of the other, meaning that a buyer and seller are not always equally happy with the outcome even though a deed may have transferred from one to the other.  Many agents question how an agent can properly represent two parties with potentially opposite goals.  Some refuse to be “dual agents” which is perfectly legal in PA.

However, while not considered “dual agency” in PA, what happens when one agent represents two or more buyers each interested in purchasing the same property?  I respectfully suggest that this is more like “dual agency” than not in terms of its practical application.  Most of us will never have an opportunity to confront this and when I discuss it in my classes many agents admit that they never really thought about.  Let me explore this.

Let’s start with my having one buyer interested in a house and assume they have made an offer and heard a “counter-offer” from the seller.  It is reasonable to assume that our fiduciary duties preclude us from disclosing their interest, including the amount of their offer, to anyone else (think of the fiduciary duties of loyalty, confidentiality and reasonable care) as well as letting anyone else know how a seller countered their offer as doing that could harm my buyer’s position.  So, what happens when I either have two buyers interested in the same or similar properties?  Let’s keep it simple:  whether 2 or 200 makes no difference although it gets geometrically more complicated as the number rises.  While RELRA may not see this as “dual agency”, I think it in the best interests of all involved to treat it as if it were.  Let’s look at two general examples.

First example.  I am working with two buyers, each looking at different price ranges.  One is looking up to $200k; the other up to $190k.  The $200k buyer makes a $180k offer on a $200k listing which the $190k buyer considered out of their price range.  What would happen if I informed the $190k buyer that the $200k seller countered at $195k?  From the seller’s standpoint, since I have no fiduciary duty to them, I would think they have no recourse for my disclosing their counter-offer although how a seller counters an individual buyer does not establish what they might accept from another and, presumably, it is in the seller’s best interests to have more than one interested party.  The real question is how would my $200k buyer feel if they knew that I shared something about their negotiating that might generate competition for them which could end up causing them to have to pay more to get a house or, perhaps even worse, cause them to lose the bidding?  This sounds like a problem even if we do not call it “dual agency”.  How would you feel if this happened to you?

Second example.  Two of my buyers-clients express interest in seeing the same property.  Aside from the planning it might take to manage the process of showing and perhaps writing offers and negotiating them for two different buyers, what is their expectation for how I keep the two processes separate?  As clients, they both signed the Consumer Notice and either accepted or declined “dual agency” and, since they signed a representation contract with me, they accepted the fact that I may be working with other buyers who share the same goals in terms of what they are looking to buy.  If either declined “dual agency”, how would that influence my performance with the second buyer, if at all?  Does the agency selection of either have any impact on whether I can add clients with a similar goal to my list of clients?  We all know that people change their plans from time to time and a buyer may decide to look at houses that I am already showing to someone else.  Of course if I failed to properly manage the process I have no one to blame but myself.

Again I mention the potential conflict and add to that.  In discussing this concept with other agents, I have heard some startling opinions.  Some feel it only “fair” to let both buyers know that they have competition.  One agent even stated that they would stop representing both, allowing their broker to designate a new agent for each, and that they would let both know exactly why.  Perhaps I look at this differently from others but, were I working with a buyer’s agent, I would be appalled to learn that they advised another of their clients about MY interest in a specific property.  Even if we take for granted that the details of my offer are confidential regardless of whether or not the relationship constitutes “dual agency”, advising another of my interest could harm me either in terms of my cost to acquire the property or, even worse, result in my losing the chance to own it.  In this scenario one of us will lose and that person may well have wished to know they had competition but the very act of raising the stakes most certainly seems to only benefit the seller unless neither buyer acted differently.

The last analogy I will use relates to how a listing agent is allowed/ expected to answer an inquiry about the existence of other offers or interest.  It is expressly understood that their ability to answer is dictated by their seller client.  While I would not suggest that a buyer agent’s informing a pair of buyer-clients about the existence of the other’s interest is a violation of the seller’s interest since there is no fiduciary duty, I think that the buyers should dictate whether their buyer agent is in fact allowed to share the buyer’s interest in a specific property with another buyer client.

Agency is not always pretty and is not always easy to explain but it is expected in client relations and its misapplication can and will cause harm, which is the antithesis for our entering into such a one-to-one relationship in the first place.

There is no time for inexperience, empty promises of 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!

The “Seller Assist”

Filed under: Buying,Hiring an agent,Marketing,Price,Selling — awetzel @ 3:37 PM

When I began my Real Estate career in 1996 the term “seller assist” was relatively new with many sellers viewing it as an option they could accept or reject without affecting the selling process or their proceeds.  While it obviously impacts a seller’s proceeds by reducing the selling price, many felt that they should not provide what is really “closing cost assistance” since nobody helped them buy the house they were now trying to sell.

My office is located in an area that always seems to be a “seller’s market”, meaning that there are more buyers than houses to sell.  Those that are properly priced sell quickly, often receiving multiple offers and exceeding the asking price.  A seller assist used to be a deal-breaker unless buyers added it to the asking price.  Then the housing market changed and appraisal procedures changed making that harder to do.  Many areas practically require that a seller assist with buyer closing costs if they want to sell.  While no one can force a seller to do that, they have to understand that how they respond to a request for a seller assist goes a long way as far as determining whether they sell or not and, if so, how quickly.  A serious, motivated seller has to know their market, meaning their competition, decide whether they are more motivated by time or how long it takes to sell or whether the amount of the sale is the major factor.  A quick sale for top dollar is nice but unlikely in some areas so a seller needs to think about the cost of not selling and how that impacts their plans.  I always tell people that you cannot “time the market”:  many held out for higher prices in 2007 and 2008 only to see prices fall dramatically.  If a seller is going to buy, they will need to consider how the parts fit together.

So, what is a seller assist?  In the past a buyer most likely needed to put 20% down to get a loan.  Over time more financing options became available to handle the growing segment of the population that either did not have 20% to put down or who were unwilling to deplete their savings.  As the Real Estate market evolved it faced a variety of challenges.  For many, wages were stagnant and it became harder to save while prices continued to rise.  While lending rules changed which seemed to hurt first-time buyers the most, those who could qualify for loans often lacked the savings to pay out-of-pocket costs that a loan would not cover.  The seller assist made that less problematic for the buyer while obviously adding a “marketing expense” for the seller.  The type of loan and the amount of the buyer’s “down payment” determine how much of a “seller assist” a lender will allow and there are rules covering which expenses an assist will cover.  For example, a buyer is not allowed to walk away with “unused” seller assist money.  Some agents either do not understand that or fail to properly advise their client which can cause a problem at the closing table.  Also, a seller credit to offset needed repairs can pose a problem and be considered “mortgage fraud”.

Listing agents and buyer agents must educate their clients about pricing and related issues, including the use of a seller assist, so that there are no surprises.  I still see sellers who do not understand this even though many of them had their houses on the market before meeting me.  Buyers may delay buying because they are unaware that a seller may help them with their closing costs.  I would like to think that, given the high percentage of consumers relying on the Internet for Real Estate information, they understand the concept of a “seller assist”.  The fact is that many do not.  Buyer and sellers encounter a great deal of data and information online but do NOT have the knowledge or insight to process it, assuming of course that it is not incomplete or untrue.  The fact is that a seller assist is another tool for consumers to complete sales.  What is the cost of not completing a sale because either party lacks the knowledge necessary?

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

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

March 20, 2019

Rates are LOW; It’s a Great Time to Buy?

Filed under: Buying,Hiring an agent,Price — awetzel @ 5:15 PM

I have been a REALTOR for over 20 years and wonder how many others are tired of being told “it’s a great time to buy”, “rates are low”!  They have been relatively low for so long that it is hard to imagine anyone really fearing a drastic rise.  Look at any amortization table to see how much it really costs you when rates rise!  You will be surprised.

Two thoughts.  First and more important, buying Real Estate is a MAJOR “life event” that should only be undertaken when there is a total commitment behind it.  Whether it is a residence or an investment property, make a logical rather than an emotional decision.  Buying simply because rates are low is as questionable as buying a year’s supply of paper towels or toilet paper because the “price was right”.  Frankly houses will ALWAYS come on the market so, unless you have really found THE ONE, make an informed decision before leaping.  That does NOT mean to delay for the sake of delaying: if you are “ready, willing and able”, delaying making an offer WILL allow someone else to swoop in.  On the other hand, the result of a poor decision can be quite serious so make a thoughtful decision based on more that the interest rate.

Second, while interest rates may rise and fall, SO DO ASKING PRICES!  While perhaps not completely “elastic”, meaning that pricing is not exactly inversely tied to interest rates, there is a relationship.  High interest rates tend to depress activity, especially at lower price points, which in turn impacts “moving up” which many fund by releasing home equity, which in turn can suppress prices.  With higher interest rates houses may actually be more affordable in the long run while lower interest rates can create activity leading to competition and higher prices.

First, my former broker said that the best time to buy during his career was when interest rates soared into the “upper teens”.  Sounds stupid, doesn’t it?  His thinking made PERFECT sense: you bought lower-priced houses at very high interest rates BUT COULD LATER REFINANCE TO A LOWER RATE!  Sounds like the “best of both worlds” to me!  Second, when the market was going crazy around 2003 or so I was working with a man planning to get married and looking for his first home.  Low interest rates compelled him to start looking.  Unfortunately, we were not able to find the “right house” so he kept looking and time passed.  Interest rates continued to fall which seemed good BUT the increased market activity caused prices to climb fast which obviously benefitted sellers.

One day I showed him a house that he seemed to like. We got separated during the showing and I found him on the front sidewalk just staring at the house.  I approached him and asked what he was thinking.  I have never forgotten what he said.  He told me that he had actually started looking before rates dropped and saw an opportunity to save money when they fell rapidly. However, because he had not found a house he liked enough to make an offer, the asking and selling prices ROSE rapidly. The net result was that his expected monthly payment had risen to what he expected to pay months earlier except that, with low interest rates and high asking prices, he did not anticipate being able to refinance the interest rate so he would be stuck with a high principal balance throughout the term of the loan.

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

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

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