Realtor Refrain: 'Put it in Writing'

Realtor Broken Record

Like a lot of Listing Agents (representing Sellers) these days, I find myself sounding like a broken record.

As in the following:

"Would your client entertain a really low offer?"

"Put it in writing."

"Would your Seller consider an offer 30% below their asking price?"

"Put in writing."

"Would your client pay $10,000 in closing costs, replace the (functioning) furnace, and throw in the plasma TV in the den?"

"Put it in writing."

Probes and Posturing

If the Buyer's agent and their client won't even spend an hour putting together an actual, written offer, they're not very serious (or, they're simultaneously probing multiple Sellers to sniff out a truly desperate one).

It's also the case that it's NEVER a good idea for a Seller to negotiate with themselves.

Which is why the standard response to any question beginning with, "Would your client take . . .?" is, "I'm sure that they'd accept a full-price offer; anything else, I'll have to run by them once I've got it in writing."

Finding "The One"

Prelude to a Deal

Courting my wife in Manhattan in the late '90's, I remember my (quick) progression from "Friend," to "Special Friend," to "Boyfriend," to "fiance," to "husband."

(The only interim title that I really objected to was "Special Friend," which sounded vaguely insulting.)

Is there a similar progression in a real estate "courtship?"

Reading the Signs

Usually, there is.

To the Buyer's agent, something about the client's demeanor during the first showing will be a little different, more serious -- see, "Like (vs. Love) at First Sight."

Afterwards, the Buyer's Agent will typically appear on the Listing Agent's radar with some positive feedback and follow-up questions (see, "When Do You Tell the Seller?"), and to make sure no other offer is imminent.

The next step is typically a second showing, and, if the Buyer is contemplating major work, a third showing.

After that comes the offer and negotiation.

The "Fickle Factor"

Just like in real courtships, occasionally Buyers who look poised to make a deal suddenly flake out(?) and disappear.

At the other extreme, some lucky Sellers' homes will be swooped up by a Buyer who seemingly appears out of left field.

In general, however, most deals -- like relationships -- are characterized by a promising introduction, followed by steady, intensifying interest.

Realtor as Conduit -- and Filter

When Do You Tell the Seller?

The Buyer's Agent called you up after the first showing to say it went well, and to ask a few questions about the house's condition.

The second showing was yesterday.

Then, mid-afternoon today, the Buyer's Agent called to say that she is meeting with her client tonight to write an offer, and that she expects to have it to you tomorrow morning.

Question:

When do you tell your client, the Seller, that you're expecting an offer?

My answer (and most experienced Realtors'): never.

(Sorry, it was a trick question.)

Rather, the time to tell your client that you have an offer in hand for their home . . . is when you actually have an offer in hand for their home.

Managing Expectations

Which is not to say that my clients don't know what's going on -- they do.

Depending on their guidance and wishes, I'll typically relay showing feedback as I receive it, and give periodic reports about what's happening (or not) in the market around them.

But I've learned from experience that nothing's worse than calling an anxious, expectant client to alert them that an offer is imminent, then waiting.

And waiting.

A small percentage of the time, I suspect the other agent (or their client) of purposeful manipulation.

However, by far the more common scenario is that their clients cooled off on the home, warmed up on another, or simply got busy at work, home, etc. and couldn't find the 2-3 hours it takes to meet with their agent to formulate an intelligent offering price, then write a careful and thorough Purchase Agreement (add 50% for first-time Buyers).

As a Listing Agent, I'll certainly be in regular touch with the Buyer's Agent (and any other Buyer's agents who've expressed interest).

However, it 'ain't a real offer till I have it in hand.

P.S. As far as I'm concerned, it's not a done deal till my (Selling) client's proceeds check shows up on their bank statement!

Showing Feedback. Or Not.

Deafening Silence

"If you don't have anything nice to say, don't say anything at all."

It drives (some) Sellers nuts, but the cold reality is that not all Buyer's agents respond to requests for showing feedback.

Many requests.

My standard practice as a listing agent (representing a Seller) is to make 2-3 attempts to find out how a showing went, especially the first 7-10 days a home is on the market.

However, there's really no point in persisting beyond that.

Realtors rank pretty high on the 24/7 "accessibility scale" (see, "Getting a Realtor's Attention"); if they have a Buyer with continuing interest . . . you'll know about it.

Is the (Home) Buyer Serious? Here's One Clue

Requesting a Sat. Showing on Wed.

I don't have any statistics backing me up, but it sure seems like there's a relationship between how far in advance a showing is booked, and how serious the Buyer is.

The explanation?

Here's my theory:

Serious buyers are methodical, and methodical Buyers carefully plan what they want to see.

Which is smart: the best way to learn the market is to see a succession of homes at the same price point, in the same general location, all in a row.

That takes a little more advance planning.

It's also the case, that, in late Fall in Minnesota, the market is slower-moving.

So you can set up showings for the weekend several days in advance.

The bottom line?

As a listing agent, when I see a showing booked on Wed. for the upcoming weekend, I take it more seriously than one I see booked two hours -- or two minutes -- ahead.

The latter are almost always what I call "what the hell showings," by Buyers who are already on the block looking at something else.

Or . . . maybe they just have a very disorganized Realtor.

P.S.: contrast this post with an earlier one, "Unserious Buyers."

"Hut. Hut. Hut."

Quarterbacks, Football and Otherwise

"5897."

"T-Y-R"

"927-5201 "

"525-8800"

"377."

Brett Favre at the line of scrimmage?

Try, the listing agent (me) imparting to the Buyer the various house codes and contact information at the closing (my client, the Seller, was out-of-town, and had pre-signed).

Those numbers and codes (not the real numbers) correspond to: the code for the lockbox (left on the front door); the security system code; the Seller's new home number; their handyman's number (scheduled to do a repair, post-closing); and the code for the garage pad.

As I always like to say, "the listing agent is the quarterback of the deal."

Told "No," But Hearing "Yes"

Showing a Home
Without Permission

Showing a home without permission is a big MLS no-no: any Realtor caught doing it is automatically on the hook for a $1,000 fine.

But the operative word is "caught."

Unless the homeowner happens to be home, it's one of those transgressions that you'd guess frequently goes undetected.

And even if it is, it's up to the client to "press charges," with assistance from their Realtor.

That means filing an ethics complaint, and documenting the allegation with evidence that the showing was rejected, and that the listing agent's electronic lockbox was accessed by the offending Realtor (mechanical lockboxes generate no such log).

A certain Realtor active in the west 'burbs' is very lucky that I have especially gracious clients, and accepted an apology from him rather than having him fined $1,000 (he was showing multiple condo's in my client's building, and apparently, wanted his clients to see the full range of choices. When he unexpectedly found my clients home, he told them a baldfaced lie that he had a confirmed showing.)

P.S.: memo to MLS: I'd actually recommend a smaller fine; $1,000 is so draconian that I'm guessing many wronged home sellers (like mine) decline to impose it, or fear some kind of retribution if they do.

P.P.S.: want a guaranteed way out of paying that $1,000? Write an offer on the property.

Showing Feedback & Real Estate "Glass Slippers"

"It's too, too . . . ."

After almost 9 years selling real estate, I've probably been on the receiving end, conservatively, of perhaps 10,000 showing feedback forms (and probably generated an equal number as a Buyer's agent).

So, what do they say?

Usually, not much.

However, on the relatively rare occasions when the agent includes a comment, here's a partial compendium of what they say:

"It's too . . .

--Big
--Small
--Expensive
--Not expensive enough (they can afford more home)
--Open
--Not open enough
--Pink/White/Yellow/Blue/Brown (pick a color)
--Soon (the Buyer just started looking)
--Dated
--Updated (the Buyer wants to do their own remodeling)
--Vertical (they don't like stairs)
--Horizontal (they don't like ramblers)
--Close (to the elementary school/busy street/ugly neighbor, etc.
--Far (from shopping, schools, etc.)
--Contemporary
--Traditional
--Plain
--Loud
--Dark
--Noisy
--Quiet (Buyers from Manhattan)

Suffice to say, this list could be quite a bit longer.

Which is why my listing clients know one of my favorite lines (and hear it often): 'the only feedback that really counts is a good offer from a well-qualified Buyer.'

Finding "The One"

So, what do I tell my Buyer clients?

That I seldom see -- or sell -- a home that's a "10" on a scale of 1-10 (and if it's a bona fide "10" -- you probably can't afford it!).

But I've sold lots of "7's" and "8's" that, over time, my clients have turned into "10's" . . . for them.

And that, for most Buyers, it's simply the case that there are usually at least a couple homes that conceivably would be very good choices -- vs. "the (elusive) one."

Scientifically Proven Home Valuation Formula

"Fair Market Value," Defined

I, along with thousands of other agents, have developed a scientifically proven, 100% reliable way of establishing a home's value.

Ready?

Here's how you'll know any given home is priced at fair market value:

It sells.*

Defining "Fair Market Value"

That may seem unduly glib (if not harsh).

Unfortunately, for many as yet unrealistic Sellers, it also happens to be true.

In fact, the foregoing is the very definition of "fair market value."

Until a Buyer appears who's willing to pay a given price, everything else -- the comp's, what your neighbor got, how much you have into your home (i.e., purchase price + improvements) -- is just noise.

*Of course, that isn't meant to let the listing agent off the hook. I'm presuming that the home's condition, appeal, and marketing are already optimal.

One Sale . . every 5 hours?!?

WSJ/Real Trends
Top 100 Agents

Today's Wall Street Journal is running a list that purports to rank the nation's top 100 Realtors.

Actually, it has four lists -- hence the (slightly confusing) title, "Top 400 Sales Professionals."

The four categories are:

1. Top 100 Agents by transaction sides (representing either a Buyer or Seller)
2. Top 100 Agents by volume
3. Top 100 Teams by transaction sides
4. Top 100 Teams by volume

Background

The distinction between volume and transaction sides is important, because otherwise the top 100 Realtors would all hail from the most expensive markets.

Likewise, it's important to distinguish between individual Realtors and teams.

Also known as "groups," they can encompass as many as a dozen Realtors, and therefore warrant their own category.

So it's especially astounding to see that the top individual agent nationwide by number of deals was someone named Joe Kadaff, who works for RE/MAX in Dearborn, MI.

According to the WSJ, Kadaff closed an astounding 1,743 transaction sides.

That works out to one sale every 5(!) hours, 24 hours a day, 365 days a year.

Phew! (or as the locals would say, "uff-dah!")

(And no, I don't know how it's humanly possible for one Realtor to close that many deals.)

Minnesota Angle

So how did Minnesota Realtors do?

And do the numbers check out?

Minnesota placed three Realtors in the Top 100 agents list: Barry Tanner (#72); Kurt Christensen (#96); and James Onomiya (#98). (Note: Tanner and Onomiya are with Edina Realty.)

They're credited with 135, 109, and 107 transaction sides, respectively.

To double-check those numbers, I searched MLS under each agent's ID, as both listing agent and selling agent, for all deals closed during 2009.

I came up with 126 transaction sides for Tanner (vs. the reported 135), and 114 for Christensen (vs. 109).

Close enough.

However, I could only find 67 transaction sides for Onomiya (vs. the reported 107).

Since the WSJ doesn't report its methodology or even the time span measured, it's hard to know what accounts for the difference.

Other Observations

Virtually all of the transaction sides for Tanner and Christensen -- and the majority for Onomiya -- were as listing agents.

That's because they represented banks selling foreclosed properties.

But what really caught my eye, in small type in the upper right corner of each list, was the disclosure "Special Advertising Section."

Bingo.

Sure enough, a handful of agents on each list had links from their names to their Web sites.

Which would explain why the list was compiled, and who it's being marketed to.

(No doubt the brokers are being solicited to promote their standings on the list, as well.)

That "Being Watched" Feeling (on MLS)

Price Push -- or Shove?

I always feel like
Somebody's watching me
And I have no privacy
I always feel like
Somebody's watching me
Tell me is it just a dream

--Michael Jackson; lyrics, "Somebody's Watching Me"

Got the feeling that someone's watching you?

If your home's on MLS, it may not be your imagination.

That's because prospective home Buyers now have an option that lets them "watch" specific listings; whenever there's a change in the home's price or status, they're instantly notified.

To a listing agent, lots of people watching your listing indicates that it's on people's radar -- but not quite compelling enough for them to move on it.

So, what's usually called for is a price nudge (vs. a price shove).

On the other hand, if few or no people on MLS have saved your listing, a more aggressive price reduction is likely in order.

P.S.: while agents can see how many people are watching their listings, unfortunately, they can't tell the identity of the individuals.

Realtor Rumors & Tall Tales

"It Was THIS Big! No, It Was THIS Big!"

First, stipulate that Realtors as a group are a talkative bunch.

Then, consider that listing agents (at least good ones) hold any sales details very close to the vest -- at least until closing.

The result is an active rumor mill surrounding the status and disposition of a great many real estate properties.

All of the foregoing came to mind as I heard increasingly fantastic stories about a Fern Hill home that sold a few weeks ago (it is currently Pending, or under contract but not yet closed).

First, I heard that there were two offers above the asking price.

Then, I heard that the number of offers was four.

Then, I heard that all of the offers were cash, and that several were well above the asking price.

Where does the truth lie?

Until closing, only the home owner and their Realtor know for sure (sort of like that Miss Clairol commercial from the '70's).

Realtor Cognitive Dissonance

"Ten Showings, $10,000"

I hated discussing ideas with investors. Because I then become a Defender of the Idea, and that influences your thought process. Once you became an idea's defender you had a hard time changing your mind about it."

--Author Michael Lewis, quoting investor and fund manager Michael Burry in The Big Short (p. 56)

I've been using the long holiday weekend to do some recreational reading (yeah!), including the wonderful The Big Short by Michael Lewis (Thomas Wolfe and Lewis are my two favorite writers).

In my experience, something analogous to Burry's experience with investors (above) happens to listing agents, too: namely, in the course of pitching a home to prospective Buyers, it's easy to lose your objectivity about the home's value, and become convinced that it's worth the asking price.

Unhh-unh.

Unless the listing agent is buying the home, it's worth what someone (else) is willing to pay for it.

The Danger of Sitting Tight

That's why Realtors say, "ten showings, $10,000."

Translation: if ten serious, well-qualified Buyers view a home and all pass -- the home's (at least) $10,000 overpriced (make that 3% - 5% for a more expensive home).

So what's so bad about the listing agent thinking a home is properly priced when it's not?

They'll be slow to counsel a price reduction, which will (eventually) cause the home to linger on the market.

In turn, homes that linger on the market often need to be deeply discounted to sell.

Did the Seller Leave Money on the Table?

Four Ways to Tell

In the history of mankind, no first-time Mother has ever under-dressed their newborn in the winter.

--Manhattan Pediatrician

So which pediatrician uttered the above line?

Mine (and my wife's).

What prompted that comment were the 3 layers of clothing my wife had already put on our newborn son (this was 10 years ago), coupled with her anxiously asking him whether he thought "the baby was dressed warmly enough?"

What's that got to do with real estate?

I've yet to encounter the Homeowner who thought their house sold for too much.

Money Left on the Table

On the contrary, a great deal of Sellers seem to believe that their home sold for too little.

So, are they ever right?

To help answer the question, here are the four, inter-related variables I'd weigh:

One. How long was the property on the market?

It's hard to argue that any home on the market listed for more than a month -- let alone six months or a year -- sold for too little.

In today's networked, 24/7 world, serious Buyers (and their Realtors) often know about properties before they come on the market.

If a home is a good fit for a serious, prospective Buyer, it's a good bet that they'll: a) know about it; and b) have gotten in to take a look.

Assuming, of course, that the home was on the market longer than 48 hours.

Two. Was the home professionally and aggressively marketed?

My checklist of "To Do's" for Sellers literally has 143 items on it.

Things like, "work with professional stager to the get the house ready; "arrange professional photography and meet them at the house"; "proof marketing materials designed by professional desktop publisher"; "do pre-list networking with other Edina agents" (all 1,600 of them); "plug new listing at various Realtor meetings"; "draft and proof (flattering) copy on MLS"; "promote the home's Broker Open."

And so on and so on.

All those things come across loud and clear to prospective Buyers.

And so does their absence.

Three. Who was the Selling agent? (representing the Buyer) -- and was it the same as the Listing Agent?

As I've blogged before, there are two types of dual agency: "broker-level," and "single agent dual agency."

In the first type, both the Buyer and Seller have their own agent -- but they work for the same Broker.

While that legally shifts the agents' duties, in my experience it doesn't alter either the negotiation dynamic or the outcome.

The second kind of dual agency-- where both the Buyer and Seller have the same agent -- is much more problematic.

In my opinion, no agent can serve two masters.

Which is why I will only represent one party in the transaction.

Four. Who was the Listing Agent? (representing the Seller).

Good Realtors have good reputations.

They do repeat business in the same neighborhood(s); are known for being thorough and hard-working; and have an established track record.

Mediocre agents . . . don't. (In fact, you're less and likely to run into mediocre agents, because today's hyper-competitive real estate market has already weeded them out.)

So, to sum up . . . . .

If the same (no-name) agent represented both the Buyer and the Seller; the house sold in 3 days with no prep or marketing campaign to speak of; and no other agents had a chance to get their clients through (or even knew the house was on the market) . . . . yeah, it's just possible that the house sold for too little.

Absent one or more of those factors, I'd be dubious.

P.S.: Note that none of the above factors include, "Sold for less than the Comp's would suggest."

While the Comp's (Comparable Sold Properties) certainly frame the owner's asking price and eventual sale negotiation, showings and actual feedback trump Comp's once a home is actually on the market.

"Will Consider All Offers," Explained

Stealth Price Cut

What does it mean when a listing agent puts out the word -- on MLS or just verbally -- that their Seller "will consider all offers?"

Here is a rough translation: a) the Seller knows that the current asking price is high; b) but for perceived negotiating leverage, they don't want to reduce it; so . . . c) please feel free to make an offer well under the asking price.

Surprise, surprise . . . many prospective Buyers go ahead and do exactly that.

Which is why I'm not such a big fan of the strategy.

Rather than elicit offers as much as 25% below their current asking price, Sellers are usually better advised to do a smaller, incremental price cut; test that in the market for a period of time; then assess and repeat as necessary.

Real Estate Myth #37: Sunday Open Houses

"Open House Available For a Terrific Listing That Always Gets Great Traffic"

One of the more durable myths out there is why Realtors do Sunday open houses: many clients (and prospective clients) seem to believe that the primary motivation isn't to sell the client's home, but for the hosting Realtor to troll for future business and ultimately sell other homes, down the road.

The reality is a bit different.

If Sunday open houses were such a great way to pick up clients, you'd see more listing agents doing them.

In fact, the majority of listing agents avoid doing them.

Instead, they try to line up replacements -- typically, newbie Realtors -- by dangling carrots like this: 'Open house available this Sunday for a terrific listing that always gets great traffic.'

Just once I'd like to see a listing agent level with would-be pinch hitters with a hook like this: 'open house available this Sunday for a not-so-appealing home in an out-of-the way location that's already been for sale for 8 months, is (still) priced above market, and may get 3-4 people through -- if you're lucky.'

Notoriously Low Yield

What the (experienced) listing agents know that the newbie's don't is the following:

--Most people coming through open houses aren't interested in buying a home at all.

They're just curious about what the home looks like inside; are interested in interior decorating ideas; want to see what prevailing home prices are so they know how much their home is worth. Etc., etc.

--The distinct minority of prospective Buyers who are serious are invariably already working with a Realtor. Which means they're strictly off-limits.

--The remainder of Sunday open house prospects -- people who maybe, kind-of are looking -- usually are characterized by one (or more) of the following: a) they can't afford the house (or any house); their timetable is next year (or century); they have no idea what they're looking for, at what price range, or where.

So, yes, a new Realtor who has time on their hands and plenty of patience is welcome to follow up with such prospects -- assuming they leave valid contact info -- in the hopes they'll eventually buy something.

Or not.

The Case for Open Houses

All of which begs the obvious question: if open houses have such a poor track record, why do them at all?

For two reasons:

One. As a convenience to serious, already-represented Buyers, who are typically off work on Sunday afternoon and can cover more ground going through open's (vs. having their agents set up private showings during the week).

Two. Because, while the odds may be low . . . you never know. (See, "The (Mythical?) Serendipitous Buyer").

In truth, the vast majority of things Realtors do to market homes -- at least individually -- have a low probability of success.

So, the odds of a private showing leading to a consummated transaction are less than 10%; the odds of exposure at a Broker Open (Tuesdays) leading to a sale perhaps only a little better.

Ditto for blast emails to neighborhood Realtors; direct mailings; high-end photography and literature; "plugging" listings at various Realtor meetings, etc.

But therein lies the rub.

Precisely because you don't know which marketing effort will ultimately sell your client's home . . . a good Realtor does all of them.

P.S.: the foregoing recalls the marketing director of a Fortune 500 company who laments that she knows she's she's wasting half her marketing budget -- she just doesn't know which half.

Buyer's Agents & Networking

Peeking Under the Curtain

Last Sunday I showed my clients five homes in the west suburbs that all met the profile of what they were looking for: within 20 minutes or so of downtown Minneapolis; around 3,500 FSF; at least 4 Bedrooms; a nice master Bath; price between $600k and $750k.

So what?

Only one of the five homes I showed was already on the market.

The other four were either pre-lists or one-time showings.

Missing Out

One of the things prospective Buyers not represented by agents don't know is that homes are often quietly for sale well before "the curtain goes up," i.e., they formally debut on MLS.

Behind the scenes, Buyer's agents are busy broadcasting their clients' criteria, while listing agents are busy promoting their upcoming listings through a variety of pre-list marketing.

Not surprisingly, technology and social networks make this kind of pre-list activity easier and cheaper than ever.

And therefore more important . . .

Home Sellers and Buyers' Intentions

Hiding the Wrecking Ball

Does it matter to the Seller if they know that their Buyer intends to do a "gut rehab?" (pretty much what it sounds like).

Sometimes.

There are certainly some home owners who are so psychologically identified with their home -- and think that its condition and appearance are so perfect, just the way they are -- that any suggestion otherwise is construed as a personal affront.

However . . .

Usually it's pretty apparent -- to prospective Buyers if not the Seller -- when a home is need of a total renovation.

Sellers who hear the same feedback, over and over, eventually become inured to the idea that the next owner of their home "may be making some changes."

Lots of Showings

Too, Buyers planning on doing extensive renovation will usually show their hand in the course of doing showings.

A lot of them.

Of course, the purpose of multiple showings -- typically with contractors in tow -- is to determine the feasibility and cost of the project(s) being contemplated (as a listing agent, I encourage this process -- to a point; much better to have no deal than one that blows up after lots of time wasted on negotiation).

Eyes on the Prize

At the end of the day, though, most home Sellers (properly) are more focused on whether the Buyer is able to perform financially, and what price they're getting for their home.

There can even be offsetting advantages when the Seller knows that the Buyer intends to do a major renovation (or more).

So, a home that might otherwise get picked apart on inspection instead can get a "pass."

There can be exceptions to that, though.

I handled one deal, the sale of a 19th century Victorian, that almost fell apart when it became apparent that the Buyer planned to do a tear-down.

The issue?

Both the owner and the Buyer wanted the home's gorgeous (and quite valuable) leaded glass windows.

"It's not Dark -- It's Safe!"

The Limits of Spin

I addressed overcoming home shortcomings in a post earlier this week, "Fielding Buyer Objections."

Sometimes, depending on what they are, you're better off simply conceding the drawback(s) and emphasizing the home's strengths.

Case in point: a home I showed this week that has a particularly dark basement.

The listing agent's response?

The owner, who'd built the home, declined to put in any windows (lookout, egress, etc.) because "it was safer that way."

Right.

The home is in an upper bracket neighborhood in the west suburbs, and sits on a huge, private lot.

"Tear-downs," Cheap & Expensive

"Tear Down This Wall(paper)!?!"

No, Ronald Reagan didn't say that -- a Realtor did.

Earlier this week I attended a Realtor meeting in a very impressive -- but cosmetically dated -- home, where, after extolling the home's many virtues, the listing agent/host asked for input.

"Tear it down," came the first agent comment.

"The wallpaper," he clarified.

The other agents laughed . . . while the listing agent let out a huge sigh of relief!

(As feedback goes, that's a whole lot better than hearing "needs a new Kitchen").