Do realtors steer buyers to listings that pay higher commissions? This new study by NBER says we do – I chimed in at the comment section:
Maybe it’s my rose-colored glasses, but doesn’t it seem like every issue facing realtors can be solved with the auction format?
Reader 3rd Gen SD sent this in yesterday:
JtR, have your sales and experience led you to a percentage of listing price that should be devoted to making deferred maintenance and aesthetic updates? Perhaps a suggested metric other than percentage of LP?
To wit, I’m sure there are some listing agents who would love for their clients to dump as much cash into the front end as they can. No skin off the agents’ backs, right?
Hypothetical: If a CMA led to a listing price of 800K, would you advise your client to invest 8K, 16K, 24K toward making it truly marketable?
Am assuming paint and flooring, kitchen and master bath updating if needed, but there has to be a point of diminishing returns. I mean, there are “cream puffs” and there are “cream puffs”…
Any general guidelines you’d care to share would be appreciated.
General guideline: Make the house look and smell clean. Add new carpet and paint, do a thorough cleaning, and remove all clutter and half the contents. Include staging to provide emotional appeal and make it memorable.
Let’s go back to his paragraph two.
Not that anyone reads the contracts (principals or agents), but our listing agreement encourages sellers to consider all offers. But once the home is on the market, sellers tend to dig in on price. Their family, friends, and neighbors have seen the price, and sellers feel the need to defend it – at all costs.
It’s not necessarily a conscious thing – it is human nature….in this society.
It is miraculous that buyers are willing to satisfy the sellers’ demands approximately 3,000 times every month in San Diego County (3,568 detached and attached-home sales last month).
Agents hope that trend continues and are willing to list a home for sale at no cost to the seller. Yes, we can score a big bounty at the very end if we can get buyers and sellers to the finish line. But we do so without having a vote on the eventual sales price.
From Paragraph 7 in our listing agreement: “Seller is responsible for determining at what price to list and sell the Property.”
It happens regularly that a listing agent will spend weeks, months, and sometimes years trying to sell a house. They may procure several offers, which would seem to indicate what the market will bear. But the seller has no obligation unless a full-price offer is produced.
To tie it back to 3rd Gen’s question – Because every seller wants to sell for the top of the range of what homes are selling for in the neighborhood, agents are smart to tell them to buff it out before listing.
If sellers were willing – and committed – to sell for what the market will bear, then we could throw a house on the market in any condition and see what it’s worth.
But most sellers won’t sell for any price – they want to sell for their price, regardless of what the market will bear. Thus, fixing them up improves everyone’s chances of a successful sale. You’ve seen me personally get involved in the improvements too – I know it helps our chances!
If we could all understand and agree that a house will sell for what the market will bear, it would change everything. But instead, sellers are motivated to hire the agent that quotes them the highest price, regardless of condition. Some do the fix-ups, and some don’t, and then buyers are left to figure out the rest.
Another reason why realtors should be proponents of auctions!
The effective date of the TRID has been determined – October 3rd:
http://www.realtor.org/topics/trid-tila-respa-integrated-disclosure
The way some people are acting, you would think it was the end of the world.
The changes in loan disclosures were supposed to take effect sooner, but the mortgage industry pleaded for more time. The lenders’ software needs to be changed and employees need to be re-trained, but once in place it looks pretty simple to me.
There will be two required forms: a Loan Estimate that must be delivered or placed in the mail no later than the third business day after receiving the consumer’s application, and a Closing Disclosure that must be provided to the consumer at least three business days prior to consummation.
Lenders will have to be a little sharper about printing loan documents in a timely fashion. The companies that already have strong, organized clerks who can handle their desk and can print out loan docs will take it all in stride. The lenders who don’t pay enough to get good clerks will struggle with these new timelines. Get Good Help.
People are worried that buyer credits arranged late in the transaction could delay the closing, because the lender will have to re-issue the Closing Disclosure. But credits negotiated during the 17-day inspection period still give the lenders another 13 days to close a regular sale. If your lender is on their game, there shouldn’t be a problem.
But if buyer credits are a problem, what other alternative is there?
“AS-IS” Offers.
Let’s have the sellers supply a written inspection report to every buyer. Have each buyer make an ‘as-is’ offer after reviewing the inspection and termite report, knowing the condition of the house. Buyers might procure their own inspection reports later, but with good inspectors, the findings shouldn’t vary much.
How often does it happen where the buyers make a retail-priced offer thinking the house was in good condition (staged or otherwise), only to find out it needs a lot of work. It happens ALL THE TIME. The sellers won’t do much for them, they are tired of the pursuit, and close the sale any way – and then spend $50,000 to $100,000 over the next 12 months to make it right.
At least if the buyers saw a decent inspection report before offering, they can say that they made a knowledgeable decision.
Handling the repair requests are a major part of a realtor’s job. We would prefer sales to be ‘as-is’, so once we make a deal we can just head for closing.
With ‘as-is’ sales, we’ll only be one step away from auctions.
None of the wranglings with Zillow or others will matter much if auctions take hold. Here’s another example of how they are being presented:
LINK HERE to story.
An excerpt:
The property is being auctioned through Premier Estates in conjunction with local listing agent Shelly Tretter Lynch of Sotheby’s International Realty. Tuvia Sablosky, director of sales for Premier Estates, is directing the auction, which is the first Premiere Estates has conducted in Greenwich.
“This is the first time we’ve done this in Greenwich, but we’ve done it all over the United States and it’s been very successful,” Sablosky said. “It’s not so much affected as far as location, it’s more sellers who are interested in an accelerated sale. There’s a specific date where the property is expected to be sold and buyers have to make a decision by a certain date if they’re going to make an offer. That’s really the biggest difference.”
Lynch said the Greenwich home located at 591 Indian Field Road has been off and on the market for several years, and now the owners simply want to get the house sold as quickly as possible. As a result, she sought alternative sales strategies and decided auctioning the home could be a great way to accelerate a sale.
“We’re really putting this on the fast-paced plan,” Lynch said. “This is a fairly new process in this area of the country, but it has been successful throughout the country and there’s no negativity surrounding the auction. It’s a homeowner making a choice to have an auction and that’s really important to note. It is entirely the homeowner’s choice.”
Selling homes at auction was once considered a last-ditch attempt to unload a property that wasn’t selling, but in recent years auctions have become a viable option for luxury home sales by replicating marketing techniques used to sell high-end art, antiques and collectables. According to the National Association of Realtors, the perception of auctioning a mansion is changing because it allows homeowners to set a deadline and hope a bidding war will result in a higher selling price. Sometimes the method results in the home selling below its market value — a risk associated with this method of home sales.
Did this guy just fall off the turnip truck?
$11,500,000 opening bid:
Tres Paraguas — from Concierge Auctions
Rob Dawg said, quoting this latines.com article:
“Regular marketing doesn’t work anymore.”
Seems the RE industry is at a crossroads. Marketing or facilitating. One need only read the quote and see which way the wind has shifted.
Houses are worth different prices to different people on different days. Employing a marketing strategy that exploits the initial urgency will produce the max value.
P. S. If all agents offered all the same services, it would force consumers to examine the agent’s expertise and track record.
Home auctions are making their way into the mainstream – if they becomes the standard, we won’t have to worry about portals, shenanigans, etc.
http://www.clickondetroit.com/news/a-new-trend-thats-selling-houses-in-a-snap/33234956
This is another installment in my quest to change how homes are sold.
In Australia, 98% of the homes are sold by auction. The guy who was the main auctioneer for Harcourts sold over 6,000 homes there by auction, and has since come to America. They are offering an auction option as one of the ways they will sell your home.
They don’t insist on an auction, they will sell your home the traditional way too – it’s just one of the choices for sellers.
They do include an undisclosed reserve price to make sellers feel comfortable that they won’t have to ‘give it away’ at the auction. They then input the listing onto the MLS at the below-reserve opening bid, and do several open houses leading up to the auction about a month later.
I had a long talk with one of their agents yesterday about their results.
Since they started about a year ago, the local office has sold 49 properties with the auction format. Here are the results:
62% of the homes sold before the auction.
12% sold at the auction.
23% sold after the auction.
While I’m a big believer in the auction format, it appears that our local society has yet to embrace it as the most effective way to sell for top dollar. While we were talking, I told Kayla she should get her auctioneer’s license and just hope it happens in her lifetime.
The big takeaway is how well the “attractive-pricing” format works.
Because the properties are listed on the MLS at the opening-bid amount, they look like deals. But sellers have no intention of selling for that price – they have already designated a higher reserve price.
Yet nearly two-thirds of the time they are able to make an acceptable deal with a buyer at some price point above the opening bid.
Buyers don’t mind paying a little more if they see the value. They know that if they really want the house, they might as well step up now and make the deal while certainty is available.
Our MLS already allows the goofy ‘value-range pricing’, where two prices are listed and buyers are supposed to guess what to do. We probably don’t need to replace that format, but the MLS should offer a new option:
List your home at the opening-bid price.
Every seller should consider adopting this format as the best way to instill excitement and urgency in buyers, and give them reason to bid early and often to win the property. Making it a contest where buyers compete for the home is the best way to drive the price up – and in most cases, more effective than pricing above comps and hope you get lucky.
You don’t even need the actual auction – it isn’t working that well anyway. All you need is an agent who can conduct a proper bidding war once the interested buyers emerge.
The traditional method of pricing above the comps works great when prices are rising rapidly, because eventually the market will catch up with you. But the frenzy is over now, and buyers are being much more cautious. If you don’t sell early, the buyers are watching the days-on-market closely, and will hold them against you, price-wise.
If we never get to the actual auctions, or we just work our way towards them over time, then fine. But what sellers need is attractive pricing to stand out from the crowd, and get the buyers’ attention. Conduct some open houses so they can see other potential bidders eye-to-eye, and then offer the chance of buying now when they have an open shot.
I will take your listing using either format, and give you everything I got. I’m suggesting that as the market ‘matures’, and prices flatten out, buyers are going to be increasingly reluctant to consider homes listed at 5% to 10% above the comps.
Using the ‘attractive-pricing’ format will set you apart from the crowd, give you maximum exposure and an obvious format to cause a buyer to pay a price that is acceptable to you.
That’s what you want, isn’t it?
Here are some of the details about those RSF auctions you don’t find online:
Not mentioned here – a bidding war is the fairest way to select the buyer. Home sellers should read this carefully – this is not an April’s Fools joke!
I offer this service at a discounted rate, and have a long track record of selling homes for retail-plus prices using this technique. Contact me for more info:
Three hundred people came through the open house, 25 made offers, and the bidding war lasted eight rounds and four days. By the time it was over, in early March, the owners of the 2½-bedroom, one-bath condo in Brookline — on a busy street, but tastefully decorated and near the Longwood Medical Area — accepted an offer that was tens of thousands of dollars above the $570,000 asking price.
Eric Glassoff, the listing broker, a man with 13 years of experience, said he could have listed the property at a higher price, “but then we wouldn’t have made as much money.”
It’s a scenario being repeated around Greater Boston, as some real estate agents employ a tactic that seems counterintuitive in a sellers’ market. Rather than setting prices high to take advantage of a market where buyers have few options because of low inventory, some agents in communities with hot markets are going in the other direction — listing properties for less than they expect to get in order to trigger even more interest.
The goal is to attract a mob to the open house and set off a frenzy where emotion trumps the cold math of price-per-square foot.
“You can get a ‘Hunger Games’- style fight,” said Cambridge real estate agent Lauren Holleran.
Boston agent David Bates , the author of “Context 2015,” a forthcoming e-book that analyzes the culture of “over asking price,” said that once multiple offers come in, “people are not bidding to buy the property for value, they are bidding to win. Those are two totally separate things. If you are buying for value, you are negotiating. If you are bidding to win, you do whatever it takes to get that property.”
READ FULL ARTICLE:
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