Andrew Wetzel's Musings

April 24, 2019

Why I Enjoy Being a REALTOR®

After working in retail for a number of years I decided to make a change.  Like many, I was fascinated with Real Estate and made plans to get my license.  I did three things to prepare myself for the adjustment.  First, I started reading books about sales and then about Real Estate.  I read 12 books on sales and then 4 about working in Real Estate.  I stopped when the books got redundant and I felt that I knew enough to move forward.  Second, I selected 4 different Real Estate companies to contact and interview.  I found two of them interesting even though I was not yet ready to make a commitment.

The third step was time consuming but critical:  I wanted to try a sales position to make sure it was something I could enjoy before pursuing a career in Real Estate.  While many of us think it too easy to get licensed, it does require investments in time and money so I wanted to be prepared.  After becoming comfortable in sales, I was ready to commit to a Real Estate company.  The rest is history.

I took an extra step and became a REALTOR® which means that I belong to local, state and national REALTOR® Associations and subscribe to a formal Code of Ethics.  I have also taken many courses and earned several designations and certifications to improve my knowledge so that I can better represent my clients.  I consider myself an advisor or consultant rather than a salesperson.  As an Associate Broker I am allowed to call myself that whereas a basic licensee is not.  I work for sellers and for buyers, advising them and helping them reach their goals.  I view our relationship as a partnership although they get to make the decisions.

Like many, I had a mixed perception of “sales people” and did not want to use persuasion to convince people to do things that were not in their own best interests so that I could earn a living.  Sadly, I see people in different sales positions whose only goal seems to be to make money.  This can be especially problematic in Real Estate given the costs involved and the impact on people’s financial situation.

As a seller agent, I have enjoyed helping sellers move on in their life, many times helping sellers who had tried and failed to sell with one or more other agents.  Listing contracts typically “expire” as a result of over-pricing and/ or poor marketing.  People move for a variety of reasons and they need to determine whether the selling price or the length of time before selling is more important to them.  I have helped sellers who wanted larger or smaller homes, wanted a better neighborhood or school district for their children, were tired of dealing with tenants, who were selling estates of family members as well as other reasons.  I can assist a seller with the preparation generally required before we market a home and make it available for showings and offers.  There are many more details along the way than most sellers realize just as there are a variety of reasons for selling Real Estate.  All agents are not the same!

As a buyer agent, I have helped many purchase their first home, their next home or an investment property.  This can be very interesting if they are selling one property to buy another.  I enjoy showing people houses where they can begin a new chapter in their life or continue on their path.  Having children involved can make it more fun.  There are times when their children do not want to move and there are times when seeing children excited about their new adventure makes the process very fulfilling.  When people buy a home they are buying a lifestyle, making it a very important decision.

Helping clients these days is more complicated than it was during my first few years.  The Internet has changed things and it often adds confusion to the process.  It helps sellers by exposing their properties to the public and allows buyers to shop online for houses to consider.  It can be a great tool but it has its limitations, primarily for buyers.  Many buyers start the process by searching online to identify houses to consider buying.  That can be fun but it can lead to their paying less attention to the preparation required to make a formal offer to a seller.  Some buyers start by contacting a number of listing agents and looking at a number of properties.  Many can get overwhelmed.  Choices are great but can cause confusion!  A serious buyer needs to “position” themselves to be able to make a formal offer to a seller.  This is especially true in a competitive market.  Timing can be everything.

A buyer needs to get pre-qualified with a reputable lender to arrive at a price range for them to consider and determine their wants and needs, including locations.  Their plans will likely evolve but there should be a starting point.  If their market is competitive, any delay in preparing to make an offer could pose a problem.  Some buyers will find themselves unable to obtain the financing they need to make a purchase; others may need to do some work to get financing.  If they find out either after falling in love with a house that can be devastating not to mention being a waste of their time.

Even if there is only a slight delay in getting financing, that may allow a competing buyer to close an offer before they are even in a position to make an offer that a seller will respond to.  My best advice is to get pre-qualified and hire an exclusive agent before spending too much time “shopping”.  I also tell my clients that it may be best to ignore most of what you read online as most information is very general in nature and may have little relevance to any individual house search.

As with retail, I enjoy interacting with people and helping them navigate an endless variety of circumstances.  Unlike retail, selling Real Estate requires a longer interaction.  We establish deeper relationships with our clients than with a retail customer.  That being said, too many confuse the two types of purchases:  buying Real Estate is NOT a retail transaction.  Even if financing is not needed, a Real Estate purchase may take a few weeks and will generally include a number of “contingencies” that must be met to keep the process moving forward.  There are typically several points where either party may change their mind.

I believe that, despite the influence of the Internet or perhaps because of it, our role is more important than ever.  A professional, ethical and knowledgeable Real Estate agent was always expected to educate their consumer.  Today, I find that I often have to uneducate them as far as showing them that what they think they know may not be accurate and could be holding them back.  So much of the information the public relies on is incomplete or wrong.  While they may have access to date and information, I can provide knowledge and insight.  This does not always sit well with our clients.

I have seen a lot over the years.  In addition to working with buyers and sellers, I also teach other REALTORS®, I mediate disputes between agents or between buyers and sellers and I sit on hearing panels making decisions about possible violations of our REALTOR® Code of Ethics.  You cannot make up the things I have seen.

I have been protecting and promoting the best interests of my clients since 1996 and always tell people that, when you are planning to sell or buy Real Estate, there is no time for inexperience, empty promises or false expectations!

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

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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.

Multiple Offers: To Disclose or Not?

Real Estate offers many opportunities to peer into the personalities of people with whom we work.  Sometimes what we find is not what we expected.  As a professional I have laws and a Code of Ethics to guide me as well as my integrity and value system.  My clients have the same except for the Code of Ethics, of course.  One topic that brings this into focus is that of “multiple offers”, meaning that more than one buyer is actively interested in buying the same piece of Real Estate.

Some buyers are so interested in a specific property and so willing to compete for it with others that they will plunge into the deep end of the pool to do whatever they can to win.  They may start with their “highest and best offer”.  Others, despite being interested, are either risk-averse or perhaps distrusting of others when told there is competition.  Some may wish to avoid competition to prevent over-spending or they may need to meet a deadline for finalizing a move.

One of my favorite analogies is comparing buying and selling Real Estate to “playing poker”:  each party wants to know more about the other.  Buyers may want to know whether there is competition for a specific property.  Some people, including licensed agents, may think the answer a matter of courtesy or simply being honest.  However, the PAR listing contract is the governing document.  The language in paragraph 13 (“Additional Offers”) states that “Unless prohibited by Seller, if Broker is asked by a buyer or another licensee(s) about the existence of other offers on the Property, Broker will reveal the existence of other offers”.  A separate matter is whether the actual terms are confidential or not.

Let’s assume that the word “existence” means written, executable offers and not the mere expression of interest from someone.  If the seller permits this disclosure, the listing agent must say “yes” or “no”:  they have to answer truthfully!  If prohibited from answering the question, the agent must respond with words to the effect that they are not authorized to answer the question.  Is providing knowledge about competition in the seller’s best interests?  How important is the “if asked” aspect?

One of the primary reasons that a seller should hire a professional is to rely on our knowledge and insight.  The Internet and your friends and family may or may not provide a great deal of data and knowledge but a professional can put it all together.  I tell my seller-clients that I assume that I AM PROHIBITED from making this disclosure and discuss my thinking with them.  I may ask them to change that later but I have never had a seller disagree.  Which is more likely:  a buyer will make an offer when they know there is competition OR a buyer will walk away when they do not know?

Taken literally, if not prohibited from answering the question, a listing agent would have to disclose the existence of low offers which may not interest their seller-client.  Does that make any sense?

Unfortunately, many buyer-agents do not even ask if there is competition.  I am told that many listing agents are allowed to disclose the existence of other offers and think it a great strategy but should they disclose that without being asked by the buyer’s agent?  Many buyer-agents do not even make the effort to confirm that a property is still available.  Bright MLS allows listing agents 3-business-days to update the listing status so an “Active” property may not really be available.  Can a buyer be harmed by their not knowing that someone else purchased the property?  At the very least, time was wasted preparing an offer.  Even worse, perhaps their showing should have been canceled!

Strategies may differ but it must be noted that the seller is the boss and makes the decision about disclosing.  An experienced agent can advise but is compelled to abide by their client’s wishes.

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

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

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!

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!

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