Buyer’s Choice Realty blog

Dirk Zeller wrote an informative article over at Real Blogging, a real estate industry site. If you get a chance, take a look at what he has to say. Mr. Zeller provided some solid insight regarding the current market and helping avoid conflicts between potential buyers and sellers with homes on the market. Some highlights - talk about every aspect of the offer before presenting the price. It is the hope here that you can find some common ground with the seller ahead of money talk. The next step is to present the offer price, and break down the difference between the offer and the asking price over a period of years so the amount does not appear as large to the sellers. Explain to the sellers that the $15k difference is only a few bucks a day that the sellers would have to pay on their next mortgage over the next ten or fifteen years. Most sellers would think differently about this as opposed to looking at receiving much less than they hoped. In the same way, this opens a path for negotiating between buyer and seller. Explain the same numbers to the buyer and see if there is any common ground that can help the deal get done. As with any offer, you should always explain how your buyers arrived at their offer price. Explain your interpretation of current market conditions, identify comparable properties that have sold recently, etc. This will help justify the offer being presented as legitimate.

This is all well and good, but many list agents (sellers’ agents) do not want you to present offers face-to-face to their seller. Presenting as much as you can about a buyer’s ability to close on the deal, and remember, the worst they can say is ‘no’. There are many different strategies for negotiating, and if you are a potential buyer, you must be sure to ask your agent about negotiating experience, if they have had any negotiation training, etc.

I came across an interesting video at 1000 Watt Blog . In it, various people talk about how they are not leads. We here at Buyer’s Choice Realty really like the message behind this video. Consumers in general, and especially potential buyers, do not like being treated as just another commission. Our goal of helping everyone who wants to purchase real estate by acting as consultants as opposed to salespeople goes hand-in-hand with this message. If you are currently interviewing real estate agents, please keep this in mind as you talk to them. Are they willing to describe, in detail, and back up in writing, what services they will provide to you and how they will provide them? If not, don’t deal with them. As a consumer, you essentially own your agent after signing an exclusive agreement to work with them, and they are responsible to work in your best interests. Unfortunately, in the REALTOR(r) culture, agents are encouraged to think of themselves and their paychecks ahead of everything else. Yet another reason to work with an Exclusive Buyer Agent (EBA), who will have your best interests at heart and will make every effort to show you every listing that is on the market. Consumers deserve that at least, and they do not deserve to have someone try to ’sell’ them a house.

The National Association of Exclusive Buyer Agents has released comments regarding the case that has found the national spotlight in which a couple sued their agent. You can read more about the case at MSNBC. Please read the press release below and feel free to comment with your thoughts.

BUYER AGENT ORGANIZATION COMMENTS ON UMMEL HOME BUYING CASE

The case of Marty and Vernon Ummel suing their real estate agent has increased media interest in the home buying process. The National Association of Exclusive Buyer Agents (NAEBA) suggests that this case be an important reminder to homebuyers that they need to be fully aware of their agent’s motivations and allegiances. Not all real estate agents will have the buyer’s best interest at heart. NAEBA recommends that buyers ask these four important questions before entering into a relationship with a real estate agent:

1. Will they discuss and evaluate the properties you view together and compare each property shown with your ideal property?

2. Before preparing an offer to purchase, will the real estate agent inform you about any defects or problems he/she has observed or in any way discovered.

3. Before preparing an offer on your behalf, will the real estate agent prepare a comparative market analysis, including explanations and documentation, to determine the market value of your potential purchase?

4. Finally, ask the agent to sign a contract that sets out explicitly the fact that they are working for you exclusively.

“Under the common law of agency, a buyer’s agent should always provide and discuss relevant valuation information with a buyer client,” said Barry Nystedt, President of NAEBA. “This certainly includes comparable sales data. However, many state real estate associations have worked to get legislation passed that distorts the buyer agent relationship to limit the liability of the real estate companies. Buyers need to understand who they are hiring and under what terms.”

“If the Ummel’s complaints are found to be true, then their “buyer agent” clearly breached his duties under common law,” continued Nystedt. “But, not knowing more of the specifics of the relationship and how the events unfolded, it is difficult to draw other conclusions at this time. If a buyer chooses to use agent representation such as the hybrid dual buyer agents currently being promoted by a national real estate trade associations, then buyers must be very careful to understand the level of service that the brokerage/agent is offering.”

The National Association of Exclusive Buyer Agents was founded in 1995 to help consumers become educated homebuyers. NAEBA is a nonprofit organization whose purpose is to be the “champions of real estate buyers’ rights and representation.” NAEBA offers industry standard certifications, ongoing education, client referral services, technology and information sharing. The NAEBA Code of Ethics pledges undivided loyalty to real estate buyers only. More information about NAEBA can be found at www.naeba.org.

A few years ago when the average time to sell a house was shorter than the current 9 months, a much different type of valuation and expected sales price was in place. One could normally expect to pay about $100k over the assessed value when purchasing a given property in Massachusetts. My, how times have changed.

In today’s buyer’s market where there is a glut of homes for sale and not enough qualified buyers to buy them, sellers feel rather lucky when they get $10k over assessed in many towns. Indeed, many homes today are listed at under assessed value in the hopes of a quick sale. Of course, in places like popular seaside towns and some affluent areas of Boston and its immediate suburbs, the market stresses that everyone else feels are not as evident. Though, the vast majority of sellers are forced to continue to drop their asking price if they want to have any chance of attracting a buyer.

A parallel of the not-so-recent shift from seller’s to buyer’s market has been the change in bidding/offering strategy for buyers. No more than three years ago buyers would be laughed out of the building if they offered much less than 95% of the asking, or list, price. It was typical to see many full-priced offers during a time when interest rates were extremely low and buyers’ appetites for space and luxury were bigger than their pockets. Agents would commonly recommend that their buyers offer 96-98% of the list price if they wanted to come across to the seller as legitimate.

Today? Not so much. It is becoming more and more common for buyers to offer only 90% of the list price with their initial offer. To see how much pricing and bidding has changed, let’s look at some hypothetical numbers. In 2003, a seller prices their home at $300,000. Depending on their location, quality of home, etc. etc., a buyer would offer anywhere from $285,000 at the low end (95%) to $294,000 (98%), and in many cases, full asking price of $300k. That same seller in the same neighborhood with the same house could expect, and should expect offers ranging from $270,000 (90%) to $282,000 (94%). That may not seem like much of a difference, but imagine if it were your home on the market and you received $25,000 less than if you had sold three or four years ago. Also take into consideration the fact that $300k is on the low end of home prices in this expensive state of Massachusetts.

All in all, it’s a great time to buy in many areas, and sellers are increasingly negotiating with “lowball” bidders who they would have completely ignored just a short time ago.

If you watch TV, you can’t help but see the commercials many of the nationwide real estate firms run. With millions allocated for advertising, these companies develop aesthetically pleasing spots presenting themselves as saviors for real estate buyers. The average viewer sees beautiful homes that average Jack and Jills buy with the help of their smiling agent. Is it really that simple? Let’s go in depth for some truth nuggets.

One advertisement I have seen recently says this - “We show you all the listings.” Really? I see evidence to the contrary. An agent I met recently from one of the enormous firms had not heard about exclusive buyer agency. Her thoughts on servicing buyers were very clear, “Well sure I’ll help someone buy a house, but I have better things to do than spend my time chasing down fizzbos (for sale by owner homes, aka FSBOs) and ‘entry only’ listings for a buyer.” This particular agent could not believe that I would ‘waste’ my time seeking out all available properties for my potential buyer. I tend to believe this is the case for the vast majority of agents who work with, but not necessarily for buyers.

Next time you see one of these ads, take a second to consider what you as a consumer would want from someone you hire. An Exclusive Buyer’s Agent really is the only way to go to ensure a comprehensive look at the market. We will show you all the listings.