More Real Estate Miscellany

Some thoughts that deserve sharing. The measure of how many days a listed property is on the market before sale is an important factor in determining value. That an MLS may choose two different time frames, (either one or the other, not both) never entered my mind until the appraiser I hire in my mortgage business told me that the format had been changed by my MLS. This was a couple of years ago when the market was first showing some signs of stabilizing in our area. Previous to the change the measure was from listing date to close of escrow on the sale. A reasonable measure since to the seller the period from listing to money in hand is the important time span. After the change the measure is from date of listing to acceptance of offer. Not the same thing at all since escrow periods generally range upward from 30 days to 45/60 on average, to 90 on the long side. This little accounting change paints an entirely different picture of the same event. Just as an aside for why my appraiser was concerned. They make a value representation to the lender that predicts the likelihood of a sale at that price within a predicted time frame should the lender have to take possession. If the previous "days on market" figures aren't realistic then the prediction isn't either.
Another issue altogether which is now appearing in some markets is the tactic of agents withdrawing a listing which is about to expire, then re-listing the property. This effectively starts the "days on market" count all over again and conceals an important fact from the prospective buyer. Our MLS has warned members that the practice is fraudulent and should be avoided to avoid lawsuits. I applaud the warning. The reason for not doing it however should be simply because it's dishonest, not to avoid lawsuits. As a buyer you can protect yourself against this practice by insisting that your agent provide you with an MLS history for the property. This history will reveal all appearances of the property in the MLS system, whenever they took place.
Another MLS item. Just yesterday I learned that our MLS, through a committee decision, has decided to end the sale of real estate forms to non-members. This decision apparently came about to try to place impediments in the path of those of you who are attempting to sell your own homes without an agent, or to interfere with the flat fee crowd who get property on the MLS but then don't offer any service other than that. This behavior is probably going to be about as successful in holding back the winds of change as drilling a second hole in a leaky boat to let the water run back out. We all know that ultimately the consumer will triumph, so why not do the right thing from the beginning and help the consumer to triumph? This is a form of short-sightedness that ophthalmologists cannot address. A shame really. Our office believes knowledge empowers, and for us to be a meaningful help, we need you informed. To that end we offer links on our site to realtytrac.com, homegain.com, and zillow.com. If you want other information feel free to call us and ask. If you have suggestions for improving our site, please offer them. If you want to do it all by yourself, do so by all means. We don't think you need a real estate professional to tell you to trim your roses, mow your lawn and dust the furniture to make your house presentable. If you want a full service broker to help you in the marketing and sale of your home, or the purchase of a home, which we recommend naturally, since that's what we do; compare services and price, interview and ask questions, then choose accordingly.

Real Estate Miscellany

When you think about calling a broker for help in selling your home, or buying one, for that matter, probably one of the major national franchises comes to mind. Naturally, since an enormous amount of advertising money is spent to bring about that reaction. The advertising money comes from the 8 to 10% fee charged to the franchisee on every single dollar of commission coming into the office. Your commission dollars. Brokers apparently feel that's a good deal for them because a lot of business is driven to them, but what's in it for you? Not much. These offices characteristically have a great number of agents. You can see them generally in newspaper ads, row after row of smiling faces, (what I call the high school yearbook approach to advertising), all apparently standing by ready to serve your needs. These ads are placed for two reasons. First, it looks like a bunch of people are ready to go to work on your sale. Second, the agents have to pay individually for placement in the ad, so the broker winds up with close to free advertising. If your property is listed on the MLS, every agent in that ad, and in every other office in town has an equal interest in selling your property. The only agent with a specific and greater interest in the sale of your property is the one with whom you listed it, so all those smiling faces don't mean a thing. Except to the broker. The moral? Find the lowest fee full service broker you can find. Full service because you want your listing broker working for you in all aspects of the transaction, lowest fee because if you go on the MLS you will have "hired" every licensed agent in your market area, including all those big offices. For an agent to show preference for one listing over another for personal economic interest is a violation of the NAR code of ethics, and in California, a violation of DRE regulations. At a more personal level for a client, for an agent to place their interest before yours tells you all you need to know about their character.
On a local note. The Chico, CA MLS has 561 single family homes listed for sale today, approximately 3.5/4 times the number listed last year at this time, and our year to date sales are running just under 80% of last year. Gives you pause. Orland, CA, or Glenn county actually, has 138 sfr compared to 1/2 that number last year, although sales are about 100% of last year YTD. These are MLS figures and don't account for some increased level of FSBO offerings. To me it seems that while interest and gas prices are having some impact, the greater buyer reaction is a kind of "let's see what happens" as prices have been reducing recently. I believe the glut of home listings are caused by owners with no real reason for selling but a desire to see if it's still possible to cash in on the intense price run-up of the last couple of years. I'm hoping sites such as Zillow.com will help us, and help home owners catch a dose of reality. It would be good for everyone.

Elements of Service

All we offer as real estate brokers is service. We don't own the product we're offering for sale, all we do is bring a seller and buyer together to a satisfactory conclusion of a sale. With the dominant business models, those with high percentage based fees, generally you get full service, all of the elements are covered. This full service is not their exclusive province however, and that level of service is available with other business models. Our own being a case in point. Still other models such as the flat fee for MLS listing types offer no services whatsoever. These being the ones that advertise for a couple of hundred dollars upward to put your listing on an MLS, put it on Realtor.com, and give you some blank forms. All MLS listings go to Realtor.com automatically, and the blank forms you can pick up for ten bucks at your local MLS office. The next level are the brokers advertising as discount brokers. Beginning with the false premise that there is some percentage entitlement owed to brokers for their services, reducing that percentage allows them to reduce the level of service they provide. One such broker in our market area advertises a fee for their full services, and advises that they will show the property for an additional 1%. Really tough to get these folks to let go of that percentage of your equity concept.
Let's look at the elements of service due you. Brokers are marketing and selling engines in my view, so the first and foremost element is marketing. We cannot create the desire to buy a home. What we can and must do is identify the people whose desire has moved them to the level of action, either imminent or longer term, and try to attract their attention to our office and our listed products, plus our ability to serve them in their search for a home. Since almost 80% of buyer searches now originate on the internet we are shifting our print media dollars to maximize internet exposure. Interestingly enough a print media product called the Real Estate Book is capturing an increasing share of our dollars. That's because this national company produces regional books, and these guys are so aggressive in their marketing that all of our advertised properties, through their efforts, appear on all the major real estate sites. Each of our properties is keyed right to our web site from all of those appearances. Next in importance in marketing will probably surprise you. That is the real estate sign placed at the listed property, and in the vicinity of it. Prospective buyers have identified the neighborhoods of interest, the signs show them what's for sale. An example: very recently we listed a modestly priced home in a good neighborhood and in two days, without any other exposure, we had 37 phone calls to our office and to the phone of the listing agent. The sale and the negotiation, (the next elements to talk about), are over, the property is in escrow and some of the inspections are being done. Pretty powerful stuff, and not to be under-estimated. In our office we spend a few extra bucks on our signs and use a reflective material that really makes them jump out in the evening hours. One last sign comment, most offices now place flyer boxes, or brochure boxes on their signs to provide a colorful photo description of the home. The "selling" part of our service is really just the exercise of training and experience, listening to our buyer prospect and determining how a particular home fulfills his wishes or needs and pointing out how the features of the home or neighborhood being examined can meet those needs. The showing of homes mentioned above is just part of the selling process and is naturally an integral part of our full service commitment.
This thing is starting to stretch out a bit, so rather than lose you I'll just touch on the other stuff you should expect in a full service listing agreement. Negotiation is a large issue but should result in equity and not in a clear victory for one and disadvantage to the other. We're brokers, not hired guns.
The dreaded paperwork. We hear so much about this and it's mostly nonsense. Brokers quite often use paperwork to exalt their position and indispensibility in the transaction. Actually the paperwork is mainly disclosures about the property which you sign, the rest a fairly simple purchase agreement. Brokers spend a lot of time distancing themselves from responsibility. If asked a relevant question about title the easy answer is asking you to consult a lawyer, if the question is about the house, the answer becomes, ask a home inspector, etc. We can maybe have some future dialogue about this area. Then again,maybe I should ask my lawyer if it's ok to talk about it. The paperwork is a simple clerical exercise. Some brokers charge 1% just to do the paperwork if you and the buyer both show up and have concluded negotiating. Outrageous.
Next array of services have to do with opening escrow, arranging appropriate inspections,and in our office, because we're a mortgage broker, arranging a mortgage if the parties want us to.
If I've left something out, my apologies. In our office our last act of service is to be there at escrow with our clients for the signing of documents. We don't actually do anything, we just feel the people have placed their trust in us and they're entitled to see us there at what is inevitably an emotional time.

No question that real estate commissions are too high and inject an unnecessary cost into the real estate transaction. Because the dominant business model for real estate brokers uses a percentage of the home value to establish their fee or commission, the escalation of home prices has likewise escalated the fees. There is nothing in logic or reason to suggest that the home value has anything to do with the process of selling it, nor that the broker has any right to participate in that value. Most of the blogs I've read complain, and rightly so, that the percentages are too high. Brokers have responded in some markets by negotiating these percentages down. Two problems with that. First, if the lower percentage is ok with the broker, then the guy who is not aggressive enough to negotiate is being deliberately overcharged. Second, and really the only problem, the percentage of home value should not be used for fee setting at all. As brokers we provide a service, and in future blogs I'd like to talk about that and a variety of other things involved in your real estate transaction, but for now, just the fact of service. We know what our job involves and we know what makes for a reasonable profit and knowing those things we should be able to come up with a fee for our service that is fair to seller and buyer alike. And we can. A flat fee for service is the only reasonable way to charge an owner for the process of selling his home. Because of the loose use of language even the words "flat fee" can't be used without clarification because some brokers advertise a flat fee and all they do is put it on an MLS with no service, other brokers descibe themselves as "discount" brokers, not a meaningful expression. If you'll permit me, in future blogs I want to expand on these and other issues and make as transparent as possible the entire process of selling or buying a home, including the distribution of your commission dollars. The latter may be of little interest since like a guy who's been robbed at gunpoint, what the robber does with your money is the least of your concerns.
Some of the blogs I've read and much of the talk I hear about the elements of the real estate transaction reflect the legitimate concerns of people with some "aspect" of the transaction, and why not? However like the parable of the blind men descibing an elephant, having heard the description you still wouldn't recognize an elephant. With your help and input I'd like to paint a complete picture of what you're up against when you want to sell or buy your home and the resources available to help you, one blog at a time. Thanks for reading.