real/diaBlog - because real estate needs to change

The Widening Age Gap and Changing Relationship Between Buyers and Agents

There's an excellent post over on The Wall Street Journal Developments Blog regarding the growing age gap between buyers and real estate agents. The median age of buyers in America is 39 while the median age of real estate agents is 51. In addition, 49 percent of first-time home buyers are between 25 and 34 years old. This, in itself doesn't mean that much. But when you look at the comments on the post and what buyers are saying in general, the age gap and changing relationship between buyers and agents becomes very evident.

One reader said,

“Most agents are not utilizing technology efficiently.We had a young agent and he did an excellent job with marketing our town home. We ended up getting three dozen offers. He also uses BlackBerry and a few other tech gadgets which many agents simply don’t use or cannot afford or whatever.”

Another reader commented,

"I have to admit that old school agents make me nuts. Half the time they come at me with a couple NAR talking points, not realizing that us younger buyers are running the numbers and doing the research online. It makes them sound archaic and I always wonder if they really think we’re that dumb?"

The one comment that really hit home for me and that I definitely agree with was,

"The future of real estate will be this: Agents will offer their ’services’ in a tiered format - a menu of services for a price. The bulk of their ‘business’ will be in the negotiating, paperwork, etc. at the end of the sale.

The education process, visiting properties, etc. will be done ONLINE by buyers. They will do all the agents’ work, and will use the agent only in the end, for the one part of the transaction that still makes even experienced buyers/ sellers uncomfortable - the negotiations, and the mounds of paperwork. THAT will never be able to be done online,and even experienced buyers don’t feel comfortable doing it.

Is that bad? No. It will just change the way real estate is bought and sold. Just like travel agents. One can still buy a ticket on a plane, or book a vacation or use a travel agent. BUT, their business model has seriously changed in the past 10 years. Real estate will be exactly the same way."

The real estate industry needs to pay attention to posts and comments such as these because they reflect the consumers' growing perception of an agents' value (or lack thereof); what they expect from the real estate transaction (regardless of how long an agent has been doing it a certain way for); and where real estate is headed in the very near future.

D

Days On Market Standards Change In Washington, DC Metro Area

Earlier this month, we published a post entitled "The Debate Over Resetting Days On Market and DOM In General". To follow up on that, here is what the local MLS in the Washington, DC metro area, MRIS, decided to do regarding the matter of Days On Market:

"Effective Friday, February 15, MRIS will change the way that it calculates Days On Market Property (DOMP).  Currently, DOMP will not reset to zero until a property has been off the market for a total of 180 consecutive days.  Effective February 15, DOMP will reset to zero when a property has been off the market for 90 days."

(Note that the DOMP changed, but not the DOM, which is what agents/brokers "game" the most in the first place)

Here's the reasoning behind the change, according to MRIS:

The Debate Over Resetting Days On Market and DOM In General

Though it's been a topic of discussion for some time now, Days On Market (DOM) has really been picking up steam lately. There are debates going on all over the place at the moment regarding the practice of resetting DOM and whether DOM should be used at all.

The practice of resetting DOM is a fairly common one used by agents to make a listing "fresh" in the minds of other agents and consumers (mainly consumers). Since there is a negative stigma surrounding properties that have an above-average DOM, sellers and agents feel as though they need to engage in this practice to remain competitive, even if it means breaking the rules.

There are different sets of rules and guidelines regarding whether you can reset DOM and, if so, when and how. These rules are set by the local Multiple Listing Service (MLS) in that particular area, but most MLS' make it fairly easy to engage in this practice.

The other debate is over whether DOM should be eliminated altogether. Yes, DOM does help illustrate real estate market trends and is used for that purpose on the back end by agents, brokers, economists, the media, etc. But should it be used by buyers and sellers? What purpose does it serve? What are the pros and cons of DOM? These are all questions that need to looked at and answered honestly.

I personally think that DOM is a complete sham. Yes, it’s useful on the back end to track trends in the real estate market conditions. But we should keep it there, on the back-end. Having it on the front-end is completely irelevant and detrimental to sellers and buyers.

For example, I’ve had buyers who wanted to preview property "A" because it was “new on the market” (7 DOM) while they did not want to preview property "B" because it had been on the market for over 4 months and “was obviously overpriced or something was wrong with it”.

Day 10 - The End

Tuesday, March 13, 2007

Sometimes things don't turn out the way you envision them.  In fact, most times they don't.  But you have to keep pressing on.  This will be the final installment of the Transparent Agent.  It seems that most people don't care what an agent does, just as long as the houses get sold.  So I will go back to talking about things that people want to talk about.  Zillow, Redfin, Predatory Lending, Dual Agency, NAR.

9:00 - 10:00  Pick up Listing

It took about 3 weeks, one appointments, several emails and some negotiating but I finally picked up paperwork from a client this morning.  We met at the house to go over what needs to be done to get it ready for market.  The house was in excellent shape and there was very little we needed to do.

10:00 - 11:00  Sales Meeting

This week's meeting was a little better than last weeks but still not as productive as it needs to be.  It is probably because there is no real direction to the meeting.  And without direction the goal of the agents is to get it over with quickly so they can get back to selling homes.

11:00 - 12:00  Phone Shift

Finally got to my emails and voice messages.  It turns out the contract I wrote will probably not get accepted.  The sellers are not willing to take a contingent contract.  I checked with my client to see what she wants to do.  She's going to think about it.

12:00 - 1:20  Meeting with Team Leader

Our team leader was out of the office for two weeks.  She wants to discuss our keyword search program and current online marketing exposure.  I believe that online marketing is the future of real estate and that we should consider bulking up our marketing efforts in this area and cut back most, if not all of our print and traditional marketing programs.

1:30 - 2:45  Pick up another Listing

I just picked up paperwork for a listing that is borderline.  It is a situation in which the seller doesn't want to sell but a neighbor has made the living conditions too unbearable.  Unfortunately, the seller is probably going to lose money because prices have not gone up since she bought the property.  Therefore the price is probably too high to secure an offer.  But she is willing to lower it but the question is high low.

I spent the next 2 hours in the office doing all the little things to make sure the listings I have under contract will get closed on time.  I also work on the financing for a couple of buyers I am working with.  These little things are very tedious and time consuming but they have to be done to ensure smooth transactions.  I have 6 closings between now and the end of the month.  That's a lot of balls in the air at one time.  And that doesn't include the 5 in April.

Day 9 - A Pleasant Surprise

Day 9 - March 12, 2007

My appointment from Saturday sent me an email this morning saying that she went to a new home community on Sunday and registered me as her agent.  She wants to go down with me and check out the community and possibly write an offer.  I said that would be great and I also found 3 homes in the Broadlands area of Ashburn that might also fit her criteria.  We made plans to look at those 3 houses this afternoon.

1:30 - 3:00  Showing Property

I usually preview property before I take a client just to make sure we are looking at appropriate homes but I was able to ascertain from the online descriptions and pictures that the three homes would be fine.   All three were the same exact floor plan and it was just a difference in lot and upgrades between the three.  We went back through one property a second time and my client was ready to write an offer.  Problem was she did not have a lender letter and she still has to sell her townhouse. 

3:00 - 4:00  Prepare Offer

I get back to the office and call my lender.  I have my client call my lender.  I have an approval letter within the hour. Having a responsive and reliable lender is invaluable.  I put together a contingent offer on the property.

4:00 - 5:00  Sign offer with Client

We go over our offer to buy the property, paragraph by paragraph.  I have structured it in a way that allows my client 45 days to sell her house.  If she cannot then we are not obligated to buy the house.  If the offer is accepted we will have her house on the market the next day.  I have explained all the aspects of this offer to my client and she has signed the contract. 

5:00  Submit offer to Listing Agent

I have the offer faxed over to the other agent and include the comparables that support the sales price of my clients house.  I am trying to build a case that the likelihood of her house getting a contract is high and therefore would be less risky for the sellers. 

5:30 - 6:00 Listing Paperwork

My appointment from Friday meets me at the office and we go over the listing agreement.  We set a price for his house and he signs all the necessary paperwork.  He will go on the market next Monday.

Day 8 - Week in Review

Sunday March 11, 2207

3:00 to 6:00  Floor Shift

I finally got the condo sold and my client came in to initial off on the final price and terms.  After severals days of negotiations and a couple of heated discussions and emails, I think everybody is happy or in my clients case, relieved. 

A three hours shift and only one phone call.  But I did get 6 email leads. 

The week in review looks like this: 36 hours of prospecting, meeting, negotiating and blogging.  One sold contract, two listings and some potential new clients.  Not a bad week.

Day 7 - Nobody's Happy

Day 7 - March 10, 2007

9:00 - 12:00  Floor Shift

I was greeted this morning with an email from a home inspection that was 27 items long.  This house and its owners have tested all my negotiation and communication skills from the beginning.  The sellers have been on the market 381 day.  That doesn't include 4 months of being under contract with a buyer in late 2005 and early 2006.  That contract fell out because the agent they were using failed to explain the dangers of a lease option in a falling market.  They thought they were going to sell the house for $600,000.  The current contract is for $492,000.  That has been a bitter pill for them to swallow and they have blamed everyone but themselves. 

The current home inspection items come from 18 months of renters and neglect.  I forwarded the list to my client in Colorado and he immediately told me he wasn't fixing anything.  20 of the 27 items are plumbing, heating, air conditioning issues that will have to be fixed unless he wants to sell the house as-is.  As-is will put the value of the home closer to $450,000.  For some reason he doesn't understand that making $2000 worth of repairs is a better option, but given all that he has done it shouldn't surprise me.   I let him vent for about twenty minutes, we go over the list one by one and come to a much more reasonable response to the items.  It takes about 2 hours but it keeps the deal together.

I think my main job is not to sell houses but to keep people from making dumb mistakes and failing to do that, my job becomes trying to keep people from compounding their mistakes with even bigger mistakes.

Negotiations continue with the condo.  I think I have come up with a solution that will save my client about $2000 thereby making the current offer from the buyers only $450 worse for my seller.  By moving the settlement date up three weeks, we save the interest, taxes, insurance, HOA fee, and utilities for 21 days.  This takes about 2 hours and one elaborate spreadsheet to explain to my client.  Thank god for a background in finance.  Even after explaining the net difference is only $450, my client sends me an email that is the ultimate vent.  It has cuss words and various other references to getting the shaft but in the end he finally sees the light.   Maybe we can get that wrapped up tomorrow.

12:30 - 2:00  Listing Appointment

Another appointment with a lady who wants to make lateral move and exchange her three story, one car garage townhouse with a two story, two car garage house.  Her house was very nicely renovated so selling it will not be a problem.  Finding her a house might take some time, if in fact it even exists.

I'm taking the rest of the day off and going for a bike ride. 

Day 6 - The Problem with Agents

Day 6 - Friday March 9, 2007

It seems the agent I am in negotiations with thinks we are bluffing but we are not.  I explained to her that my client doesn't have any more money and he is already going to be writing a check at settlement for more than he has.  She asked me if I could prove it.  I said sure I can prove it.  Don't accept our counter offer and watch us walk away from the deal.  Sure enough, this afternoon she responded to our counter with a request for $2500 more.  I tried to explain to her that we just don't have the money.  Her advice was to get a personal line of credit from the bank for the difference.  I suggested that if her client couldn't pay and additional 37 cents per day for the condo, then maybe he is buying too much house.  She didn't like that.  I'd hate to blow the deal up over $2500 but sometimes it happens.  Fortunately, our market has showed signs of firming up so I think we can get another contract fairly soon if this doesn't work out.

1:30 - 3:00  Previewing

I hate previewing because it is so time consuming.  But because of the complete lack of reliable information online, I have to do it so that I can know what the inventory is like, what condition the houses are in and what the trends are.  This afternoon I went through 12 houses in a section called Belmont Greene.  I have a listing appointment there this afternoon so I want to have a good idea of the comparables.  I sold 5 homes in this area last year but haven't had a good look at the properties here in 3 or 4 months.

3:00 - 4:00  Listing Appointment

I had a very good appointment with a gentleman looking to sell his small single family home.  He home was very clean and he was very organized.  He had type written his questions on a piece of paper and was working down the list asking me each one.  He also had an article titled "Questions to Ask yourAgent".  We went down the list and answered those questions too.  He never asked about the value of the house.  He just wanted to make sure that he used the right agent. 

4:00 - 6:00  Floor Shift

Friday shifts are usually good for getting new clients but this shift was very quiet.  I had to tell one client he has termites and a major plumbing problem.  He wasn't too happy.  I also tried to come up with a way to get this condo sold but right now I think we need to just sleep on it and see if we can find a solution tomorrow. 

Home by 6:05.  I live right down the street.

Day 5 - Contract Negotiations and a New Listing

Day 5 - Thursday March 8, 2007

9:00am

Went to the office early to pick up the contract from last night.  Sure enough it was lower than I expected or hoped.  The agent submitting the contract included comparable sales from similar units however she did not include the last sale because it has not gone to settlement.  Fortunately, I knew one of the agents in that transaction so I made a quick call.  I didn't ask for the sales price but I did ask if it was sold for over a certain amount.  If it did than it will be a comparable that will support our counter offer.  Fortunately it did sell for higher.  I called my client and emailed the contract to him and explained the contract and provided a net sheet showing his costs and how much it was going to cost him to sell the condo.

In this case he was actually going to have to come up with money at closing in order to settle because his condo had not appreciated since he bought it 2 years ago.  So we spent about an hour or so figure out his bottom line and strategizing our counter offer.

10:00 - 12:00 Floor Shift

I spent most of the floor shift working on getting the counter offer back from my client, calling the other agent and briefly explaining our situation and letting her know we would have an answer back this afternoon.  I explained that my client was going to have to come up with cash to settle and that we were working on figuring out how much he could come up with.  At this time she let on that her client's best friend lives across the hall and he had seen 4 other units and he liked this one the best.  I told her about the yet unsettled condo and that it was going to sell for more than the last 4 sales.  The negotiations are my favorite part of selling homes and one area that I believe is overlooked in training and discounted by the public.  But just one slip up or miscalculation can cost a client thousands if not tens of thousands of dollars.

The entire process from getting the offer, to explaining the offer to the client, to preparing the counter offer, to calling the agent and explaining the reasoning behind the counter offer and finally sending the counter offer back took about 4 hours.  This part takes the longest to prepare and explain but if you do it right it makes the rest of the negotiations a lot easier.

Oh, and I also finally got a decent lead on my shift today.  A couple wants to upsize their home in Leesburg.  I sent her out some listings but nothing caught her eye.  I will put her in a saved search file and check the neighborhood every couple of days to see if a new listings that meets her criteria comes on the market.

12:00

I finished working on the counter offer and faxed it over to the selling agent.

3:00

Emails and follow up phone calls to my listing clients and past clients.

6:00 - 7:30

Picked up listing paperwork from a relocation client I met about 3 weeks ago.  I had followed up with them after the appointment and submitted the required paperwork to their relocation company.  The paperwork was mainly a market analysis for their home and our marketing plan for selling it.  I have done probably 20 or 30 relocations in the last 3 years so I know the routine.  My meeting with the sellers took longer than usual because I explained the entire relocation process in detail.  The listing goes on the market next Wednesday.

Transparent Real Estate Agent - Day 4

Wednesday March 8, 2007

I took the morning off.  I never know when I'm going to get a half day to myself so I spent the first half of the day lounging around.  That's one of the good things about being an agent.  You can sit around in your sweats, drink coffee, answer emails and watch some TV right in the middle of a Wednesday. 

I do not let voicemail or email go unanswered so I always check those in the AM.  It is always easier to just answer them immediately instead of letting them pile up.  It takes 5 or 10 minutes 3 times a day to handle any issues that come up.  That way they don't escalate into bigger problems and take up a whole lot of time at the worse possible moment.

4:00 - 6:00 Floor Shift

Another slow floor shift with 2 internet leads coming in.  I followed up with them immediately.  I also got a call from an agent.  Her client is going to submit an offer on one of my listings.  My client has already called twice asking if I heard anything yet from the agent.  He has already bought another townhouse and needs to get his condo sold so he is understandably anxious.  However, this anxiety was almost certainly apparent when he was at his condo while the buyer and the buyer's agent were going through.  If she is a good agent and picked up on this desperation it will most certainly show up in the offering price.  I always tell my clients to never speak to the other agent but for some reason they hardly ever listen.  And then they are disappointed when they see the "low" offer.  We'll see what happens.