Flat Fee MLS Listings in Alaska, Arizona, California, Idaho, Louisiana,
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Archive for February, 2008

Brutal Honesty in Real Estate Advertising

Donald L. Plunkett, Jr. Donald L. Plunkett, Jr.
Friday, February 29th, 2008

REALTOR Magazine Online had a very interesting article about Harry Ackley with Coldwell Banker Schweitzer-Bake Real Estate. Basically, the house he was listing was a dump. Instead of just putting something like “fixer-upper” or “handyman special” he went with a very honest, very straightforward approach. Here is how the remarks read:

The bottom of the barrel! I have avoided listing this one as long as possible, since it will take a miracle to sell. Sure, it has two bedrooms, one bathroom, and an oversized lot in a desirable Plymouth neighborhood. But beyond this, there’s nothing else that’s positive.

The strategy worked brilliantly. He had 15 showings and the house sold within 17 days. The buyer was looking for something he could live in and fix up. Although the remarks were not flattering, they did emphasize the two main strengths of the house: its lot size and its neighborhood. He thought about his potential buyer pool, and clearly it made no sense to stress how nice, cute, quaint, etc. the home was inside. That might have actually attracted the wrong prospects or kept the best prospects away from seeing the home.

The MLS remarks section is one of the best places to market your home. Take the time to write up a compelling sales pitch. Also, put yourself in your buyer’s shoes and avoid fluff content which will do nothing but waste their time or give them inflated expectations that don’t materialize when they actually view the home.

Not all Sellers are distressed

J. Andrew English J. Andrew English
Friday, February 29th, 2008

A mistake I see Realtors® making today is assuming every seller is desperate to sell. It simply isn’t true. For example, recently I had a Realtor® very upset with me because our seller chose not to counter his buyer’s offer. Instead, the seller simply told the agent she wouldn’t consider anything below list price and to submit a new offer if interested. The agent became infuriated, not understanding why our seller would not negotiate.

The mistake the agent was making was not realizing that this particular seller was not desperate to sell in any way. Quite the opposite, she simply wanted to list her home for sale and monitor traffic and response. If someone came along at her asking price, great….. if not, no big deal. One of the great things about the Flat Fee Listing is that you will not receive pressure from Congress Realty to drop your price, etc… The seller is in total control and can make decisions that lead them to their own goals. In a typical listing agreement with a full service agent, the agent needs the seller to sell the property in order to get paid. It can create a conflict of interest when you consider that there are sellers who simply do not want to sell their property at a price below a certain point. They would rather wait it out and see what happens in the future. As you may guess, the agent who is supposed to represent the seller’s best interest may feel differently.

Mexico Real Estate

J. Andrew English J. Andrew English
Thursday, February 28th, 2008

Mexico does not have the equivalent of the National Association of Realtors® currently in place. Real Estate transactions are not heavily sanctioned and as a result, you will see the phrase “buyer beware” on almost any deal you enter into. This lack of governing has allowed many US Realtors® to be successful in Mexico. Essentially, they are using their ethics training and NAR membership as selling points to distinguish themselves against local brokerages who do not have these regulations. As it becomes more and more popular for Americans to purchase second homes, US citizens should be aware before moving forward that Real Estate transactions are handled in a very different fashion than versus in the US.

Below is a link to an article discussing the restricted zones and how non Mexican citizens can proceed in Real Estate transactions in these areas.

Restricted Zone Purchase

Short Sales

J. Andrew English J. Andrew English
Wednesday, February 27th, 2008

I am seeing more and more agents simply pass up on showing short sales because they simply don’t want to deal with the headache. The first problem is that no one is training these agents on how short sales work. As a result, most agents do not understand how the process works and neither do their buyers. With the increasing number of short sales coming on the market, it would make sense for various associations to begin offering training in this field. The biggest complaint I hear from buyer agents is that many times the lender is completely unaware of what is going on. Basically, the listing agent is placing the property for sale at an asking price below what the seller owes on the property, the lender is clueless as to what is going on until the seller or agent notifies them after an offer is procured. As a result, you have a very unhappy buyer agent and frustrated buyer.

If you are a seller in a short sale situation, talk to both your attorney and lender, then talk to your agent about getting the property sold and how to go about this. Disclose to your agent and any buyer that any offer received will be contingent upon lender approval.

Agent Incentives

J. Andrew English J. Andrew English
Tuesday, February 26th, 2008

Seller A listed her home for $600,000 and offered a co broke of 3% to a buyer broker procuring a buyer. The seller called me and asked if she should consider raising the co broke to help increase traffic. We responded by letting her know that she might be better served to pass the savings along to the buyer by dropping her price. Our reasoning was that the compensation she was offering was already very competitive with other competing properties in her area. The seller chose to increase her commission to 6% and also increase her price to $650,000. The thinking for the seller was that the increased commission will lure a buyer agent to her home and help convince the buyer to pay a higher price for the home.

So when does a seller start to see diminishing returns on compensation being offered to another agent? First, I can tell you from my own experience, I have yet to ever see a seller successfully sell their home using the strategy above. Buyers are too savvy for this and agents run history reports on properties prior to submitting offers. What could the seller have done in this situation to help sell the property? I would have left the commission at 3% and dropped the 600k asking price by 3%. On the subject of diminishing returns, there is no right answer to this as it will vary by market. However, my own opinion is that a seller should offer a co broke they feel comfortable with while taking into consideration competing properties and what they are offering. Look at it this way, if raising the commission offered helps sell the property more quickly but results in a small loss with respect to your net gain, is it worth it? Maybe, Maybe not…

When Sellers have an advantage over agents

J. Andrew English J. Andrew English
Monday, February 25th, 2008

After viewing properties this weekend, I came to one very obvious conclusion about halfway through the day…. Agents don’t answer the phone on weekends.

I found that if I was calling a seller directly to make an appt, they were very likely to answer the phone to schedule the appt. On the other hand, of the 10 or so agents I called, 1 answered my call and 1 returned my call. Sellers who are relying upon their agents to make appointments for them are going to very disappointed when they figure out that their agents are simply MIA on the weekends. I was unable to show a large number of properties listed by reputable full service brokerages simply because I had absolutely no way of contacting the listing agent to make the appt as required by the MLS Listing.

Sellers of the flat fee model can really benefit from this. Weekends will yield more showings than weekdays, if you are willing to always make yourself available, you have an advantage over the sellers relying upon their agents. What can a seller take from this post? Be leery of agents who rely upon their transaction coordinators for everything, as transaction coordinators rarely work weekends when most showings are taking place.

This was just one observation from the weekend and I will be posting more throughout the week.

Dealing with Reputable Real Estate Companies

Donald L. Plunkett, Jr. Donald L. Plunkett, Jr.
Friday, February 22nd, 2008

The Arizona Republic reported today on a couple that has been indicted for among other things fraud and theft of more than $1MM from real estate investors. They ran three different enterprises: 1031 Exchange Consultants LLC, Tax Management Consultants LLC and Executive Realty Group LLC.

In a 1031 exchange, an investor has proceeds of one sale wired to a qualified intermediary company that is supposed to hold the funds then wire them onto another escrow company when the investor closes on a purchase (this way taxes are avoided on the original sale). Unfortunately, there have been instances where this does not happen as planned. Southwest 1031 Exchange out of Las Vegas was shut down with $80MM to $90MM of investor money missing.

Dealing with reputable service providers in real estate is absolutely essential. Whether it is a real estate broker, a real estate attorney, a mortgage company, a flat fee MLS listing service, a tax preparer, or any other service provider, make sure that the company can be trusted. In the case of the investors who trusted these 1031 companies with their money, they may very well end up with a massive tax liability and an evaporation of the real estate equity that took years to build.

What is a CMA and how does this differ from an appraisal?

J. Andrew English J. Andrew English
Friday, February 22nd, 2008

CMA simply stands for Comparative Market Analysis. This is a term commonly used by Real Estate Agents when discussing opinions of value. “Comps” are typically similar properties in the subdivision that closely resemble the subject property for sale. Recent sold properties are typically used in any CMA, however, active and pending properties can also be beneficial when determining a value. Let’s looks at two examples:

Subdivision A:

10 sold properties within the past 2 months, 1 active property, 8 pending properties:

We know based upon this information that the seller may wish to price their home above what the sold comps may show. We know this b/c we can measure demand based upon the active/pending ratio.

Subdivision b:

2 Sold Properties, 28 active properties, 0 pending properties:

As a seller, we can examine this data and decide where to price our property, possibly at a lower value.

Essentially, a CMA can help the seller price their home competitively with other competing properties, while also taking into consideration recent sold properties.

Appraisals are completed by appraisers, not Real Estate Agents. Licensees should only provide CMA’s and carefully disclose to their clients that they are not providing an appraisal. Most appraisals completed by an appraiser will include at least 3 sold comparables, including different methodology, such as the cost approach, market value approach, etc…. Appraisals contain much more detailed information than that found in most CMA’s.

Why the Flat Fee MLS Listing works

J. Andrew English J. Andrew English
Thursday, February 21st, 2008

Below is an example from a recent transaction we completed in Southern California. While this is not an uncommon occurrence, I do feel it is important to make light of because it really emphasizes what the Flat Fee MLS Listing can do for a seller in a buyer’s market.

As many sellers know, the Orange County Real Estate market has been soft in areas for the past 12-24 months. Many times full service agents in the area try and justify high commissions by not only promising additional advertising, but also convincing the prospective seller that this advertising is essential for selling your home. The problem is that this simply isn’t true.

We recently took over a listing for a seller in Orange County that had just expired with a full service brokerage. The full service brokerage was unable to sell the property within the 6 month agreement. When I spoke to the seller, he stated that he simply couldn’t lower the price and still pay the 5.5% commission he had agreed to with his 1st brokerage. As a result, he knew his price was high. This same seller sold his property through our listing program within 3 months of the listing date. The seller simply deducted the difference in commission amount from his asking price. As a result, the properties activity skyrocketed.

The reason for this is quite simple. The internet today gives buyers all across the country access to information they didn’t once have. Magazine and Newspaper advertising simply doesn’t have the same success it once did. In today’s market, the best way to attract buyers is through competitive pricing.

Want more proof? Lenders today list a substantial amount of their foreclosure inventory through the local MLS. They do no other advertising at all in many cases.

J. Andrew English – Real Estate Broker

MLS exposure in a buyers market

Donald L. Plunkett, Jr. Donald L. Plunkett, Jr.
Thursday, February 21st, 2008

There is an ad campaign from the National Association of REALTORS, called “Buyer’s market, seller’s market. Either way, it’s an “I-need-a-REALTOR®” market.” Local associations are free to use this as a way to drive business for their members. For instance, the Santa Cruz County Board of REALTORS will be running the ad:

* Feb. 22 edition of the Nogales International- Santa Cruz Valley Profile
* Feb. 27 edition of the Weekly Bulletin
* Feb. 29 edition of the Nogales International

While we don’t think that a full service agent is needed in many cases, there is definitely a strong argument to be made for MLS exposure in a buyers market. With many properties in any given subdivision on the market, a sellers needs the maximum exposure possible to give himself or herself the best chance to sell. This is simply not a market like Austin 1999 or Las Vegas 2004 when people were literally knocking on people’s doors asking them if they would sell them their home. MLS exposure is extremely important, in our opinion, to give your home a reasonable chance of getting sold in a crowded market.