Sellers! It's not your market!

I’ve been touring a lot of homes the last several weeks, in all price points. Working mostly as a buyer’s agent allows me to see what impresses a buyer and, more importantly, what decidedly doesn’t. So I’m taking a break from Buying 101 to talk to sellers:

It takes three weeks longer to sell a home now than it did a year ago. Inventory, at 6.2 months, is higher than it’s been since 2002. With lots and lots from which to choose, a seller needs every advantage.

There are five factors that go into selling a home: Price; Location; Economic Environment; Condition; and Marketing. Note a listing agent has complete control only of the last: his or her greatest responsibility is to use knowledge to assess the others before any marketing takes place. If not, the old axiom applies: nothing kills a bad product faster than good advertising.

Location and Economic Environment – interest rates, local job market, etc. – are pretty much fixed, but both affect the most important consideration, the right Price. Listen to your agent, and be realistic! Twenty percent of the homes I’ve been in since the first of the year the prices are, frankly, delusional; thus selling prices 20% below the original listing price are not uncommon. In almost all those cases, the final price would have been higher if priced right from the beginning.

[I’ll cover this more in later posts, but when picking a listing agent do not pick one just because the comp was the highest, and by all means don’t pick the one that leaves the price entirely up to you.]

Condition. Unless you’re selling a fixer – and have priced it accordingly – make the obvious repairs before listing! Paint, inside and out if necessary. A few thousand dollars spent here can mean many more on the other end. Clean up the landscaping. Polish the appliances, get rid of clutter, clean carpets, get rid of clutter, clean windows in and out, get rid of clutter, deodorize pet and smoking smells, get rid of clutter: you’re selling your home, not your porcelain frog collection. If the home is already vacant – and sometimes even if it’s not – have it evaluated and staged by a professional stager. It can make all the difference, worth every penny.

Marketing. After everything else is in place and, in the real estate vernacular, your home ‘shows easily’, the agent’s responsibility becomes getting as many showings as possible. Make sure there are a full complement of photos – MLS allows eight, but individual sites allow as many as 99 – and make sure they’re good photos; pictures of empty bedrooms don't sell a lot of real estate. Virtual tours will show up not just on the MLS, but other web sites as well. Make it as easy as possible for agents to show: use a lockbox, be flexible, avoid serious restrictions. And, while buyer’s agents should not consider it a factor, make sure the buyer’s agent commission is in the norm, currently 2½ to 3 percent.

Do all this, and you’ll be a full step ahead of half the homes I’ve been in this week…

Home Buying Process (4) Selecting/Viewing Homes; Decision

1. Where’ve you been?

Sorry, busy. Love those buyers!

2. Right. May we start looking at homes now?

Soon. You’ve determined one of the two most important aspects in buying, a price you can comfortably afford. Stick to that price range. Looking at half-million dollar homes when you’re in the $300k range produces little but inflated expectations.

The second most important: location. Even if you’re not new to the area, focus on those things most important to you – schools, commute time, walking distance to shopping, crime rate, neighborhood turnover, etc – get recommendations from your agent and drive through those neighborhoods to see what feels best. Narrow it down to a few and prioritize, remembering that location also determines price. You may have to sacrifice some of one for more of the other.

3. …Now?

Not quite. Broadly prioritize needs: size, yard, bedrooms, baths. At this point don’t get too picky, otherwise you may miss something.

Your agent will have an internet search engine – either directly from the MLS or a more sophisticated map based system – that can give you current listings in the price and neighborhoods of your choice. Study them. Narrow it down to seven or eight; your agent will likely have suggestions based on conversation as well.

4. To the car??

Yep, armed with two things: patience and a notebook. If you have a camera even better, or ask your agent to shoot photos for you. Take your time, take notes, and by all means talk about what you like or don’t like about what you’re seeing. That’s part of the agent’s learning process.

Under no circumstances see more than ten homes in a day; they’ll all start looking the same. Process the notes over tea soon after you’re done.

In the meantime, a good agent will be watching you and listening to what you’re saying. After that first day a good agent can have a good enough idea that he or she can be previewing homes for you and making informed recommendations.

Then: continue as long as necessary and you’ve found the home you want, not one that will simply do.

5. How do I tell the difference?

Instinct.

6. Wow. Cryptic. Explain?

Home buying is equal parts right and left brain, intuitive and rational. I’ve seen a number of people rely too heavily on the latter, talking themselves into liking a home because it has check marks by all the requirements, but no real connection. They end up in a house, not a home, and move as soon as they get the chance.

On the other hand, too much “Oh, I just LOOOOOOOVE IT!” can lead to overlooking problems that may exist. Not good either.

Make the connection – believe me, your agent will know when you do – then rationally weigh all the contingencies. There’s nothing an agent likes to hear more than “We just love it.” at the end of a year or two.

Home Buying Process (3) Lenders; Pre-Approval

1. Why is this after finding a REALTOR®? Why can’t I find a lender first?

Of course you can find a lender first. If you’ve worked with someone you trust, or if you have a recommendation from someone you trust, by all means sit down for a consultation. The main point is you must consult with a broker and have a pre-approval letter before you look at your first house.

2. Why?

Several reasons: First, you need to know accurately how much you can afford. There are many loan products available that, depending on your credit history, might fit your situation better than a standard 30 yr fixed mortgage, thus raise your ceiling, and a good broker can give you the options.

Second, if there’s anything in your credit history that needs correcting or repair, the earlier to know the better.

And third, if you find something you like no offer will be accepted without a pre-approval letter.

3. And if I don’t know any Mortgage Brokers?

All good real estate agents have a list of people they trust to do the best for their clients, especially knowing a bad broker can be a nightmare to a transaction. Ask for two or three names.

Then go through the same process as in finding a REALTOR®. Interview, look for honesty, knowledge and dedication.

Incidentally, do not be drawn only by price. Just as with a REALTOR®, competence is critical.

4. OK. Good information. Not to change the subject, but I’ve been meaning to ask: what’s that circle R thingy?

By REALTOR? That’s a registered trademark. The term REALTOR® can only be used by members of the National Association of Realtors.

5. Is that good?

Yep.

Here Comes the Sun…It’s All Right!

In the fashion business it’s axiomatic: have the seasonal goods marked down and gone before the first shift or weather, or plan on holding them until the next year. That day, buying habits change.

It’s true in Northwest real estate as well. In late fall, with shortening days and grey, miserable skies – around mid-November – buyers begin a hibernation. Open houses by and large present a great time for realtors to do paperwork, and by mid-December many sellers have rested their listings in favor of spring and are hibernating as well.

Then…Sun! All it takes are a couple days strung together, and it’s not even necessary to be warm sun. This Sunday I hosted an open house. Scheduled from 1-3, I left just before 5:00. I stopped counting people at thirty-two – ten is a good day in winter. It was like the first day of a Nordstrom Anniversary Sale!

The phone is ringing, buyers are back actively looking and sellers are preparing their homes to list. Love the sun, love the spring!

Welcome back, Buyers; welcome back, Sellers; great to see you again!!

Home Buying Process (2): Finding a Realtor®

1. Why do I need an agent? I can find listings on the internet. And can’t I save money by dealing just with the listing agent?

With so many internet search engines yes, you could probably find a home, though a Realtor can help you find it faster and avoid finding the wrong one.

But finding a home is only the first part of a long process where the benefits of representation really pay off. (To follow.) Note Buyer Agency wasn’t codified into Oregon law until 1994, and was done so then because so much of a transaction leaned to the side of the seller. Get representation!

As to saving money: not likely. Yes, some listing agents will drop their commission if they represent both the buyer and seller, but there are three parties who want part of that savings: The buyer (you), the seller and the agent. The agent is usually the big winner, especially because any savings a buyer may glean could possibly have been negotiated by someone representing only the buyer’s interest.

Incidentally, most good agents I know will represent both buyer and seller (dual agency) only in perfect circumstances, say a mother selling to her son. There are just too many legal pitfalls in representing one party in whose interest it is to get the highest possible price and another whose interest is paying the lowest.

Can’t say it often enough: Get representation!

[Side bar: A number of internet based companies have introduced models which, in return for using their services, part of the buyer’s agent commission is rebated to the buyer. That’s illegal under Oregon law.]

2. OK, ok, ok! How?

Interview. Remember an agent is being paid for his or her services, and in a very real sense it’s the buyer that does the paying because it’s built into the price of the property. You deserve the best.

Now I suppose I should offer a litany of appropriate questions – here are some good ones (ht Rain City Guide) – but that misses what should the point of the interview: Connect.

I’m a big believer in intuition. If you trust it, you can tell more about a person in ten minutes face-to-face than you can from a hundred emailed well rehearsed answers to standard questions. If you have to be talked into liking someone, it’s probably the wrong person.

You’re looking for three things: Honesty, knowledge, and dedication.

Honesty: Agents are bound by law and ethics to customer loyalty, which broadly means your needs supersede any needs of the agent. Most agents are intensely faithful to that; some, though, will walk you through home with higher commissions and bonuses first. You must be able to trust!

Knowledge is more than just knowing the market and the idiosyncrasies of a transaction; it’s knowing people. Believe it or not, you may not know exactly what you want. Just by watching, a good agent can narrow the focus after no more than a dozen homes, and often can tell you’ve found the right home even before you do! So concentrate not just on the answers you’re getting to questions, but the questions being asked of you.

Dedication. A good buyer’s agent rarely works with more than four or five active (i.e. ready to buy) buyers at a time; more than that stretches the ability to properly serve each. Make sure the agent will be there throughout the process: a great deal of the work comes after the sale agreement is signed!

3. Anything else?

Yes. Loyalty works both ways. Find a good agent and stick with that agent. Many will ask you to sign a Buyer’s Agent Agreement, as much a guarantee to you that you’ll be given full attention as any agent benefit. Good agents will always ask “Are you already working with an agent?” in the first thirty seconds of a conversation, and the absolutely most certain way of diluting the quality of your representation is to work with several agents simultaneously. Loyalty pays!

It IS for the Children!

Before we go on to serious stuff: aren't these the absolutely most adorable kids ever??

This is what I love about the real estate business. My own two girls, for whom I live, are too busy with their careers - Shannon's an executive assistant at Microsoft, Kelly's a third year med student at the University of Washington - to do the unselfish thing and present their father with grandchildren.

But in this business I meet wonderful people, customers become friends, and - voila! - I'm a grandfather on loan! I'm blessed...

The Home Buying Process

Whenever I first meet with a buyer or a seller, I put together a “What’s going to happen next” list and we spend an hour or so discussing it. It’s particularly helpful for first time buyers, but even those seasoned in real estate like to be reminded so there are no surprises. Knowing what’s coming is a good first way to ease anxiety in what can be a stressful process.

Someone suggested putting it all in writing, available for reference. (Who am I to argue?) While others have tackled the issue (see here, for instance), Oregon has its own set of rules and I have my own set of biases. So I’ll spend the next few days, first for buyers then the differences for sellers, elaborating on each of these:

1. Choosing a Realtor; Consultation.

2. Pre-qualification with Lender.

3. Selecting/Viewing Homes. Decision.

4. Writing the Earnest Money Agreement.

5. Satisfying Contract Conditions (Escrow).

6. Signing/Closing.

7. Possession!!

As always, comments welcome!

December Update: Good News!

When discussing market stats, this caveat:

The value of a home is exactly that price a seller will accept and a buyer will pay.

National stats aren’t Portland Metro stats, which aren’t neighborhood stats, which aren’t an absolute predictor of what a home you’re selling or buying is worth. Consult your realtor!

That said, hot off the press: Much better than I’d predicted. These are all for the Portland Metro area:

1. Closed sales (units) down 16.4%, new listings up 8.3%.

2. Inventory 4.5 months, down from 5.6 in November, a standard seasonal drop. Up from December a year ago, 2.2 months.

3. As noted, average price up for the year 14.1%, median price up 13.9%

4. But the best news: Pending sales, which compress the market closer to real-time, were UP, 0.2%. That’s a small number, yes, but it’s the first year over year increase since October, 2005.

It looks every bit that what we anticipated is in fact happening: Sellers’ prices are falling into line with buyers’ expectations. Homes continue healthy appreciation, but not at the insane rate of 2005. We have a relatively stable market.

Good time to sell, good time to buy!

Tiiiiiiiime, is on my side (Yes it is...)

I went to a time management seminar not long after I changed my career to real estate (now beginning my third year). Excellent speaker, good suggestions, except: “Successful agents spend 90% of their time prospecting for new clients.”

Waidaminute. If I’m spending 90% of my time selling myself to new clients, what, exactly, am I selling?? Granted the value of marketing, differentiation, and contacts, if I include the time I’m spending typing this and all other posts I still wouldn’t hit 50%. 90%????? Would I go to a surgeon who spends 10% of his time practicing his specialty?

[I’ve met a few who take this to heart. Enormous effort is spent on perfecting listing presentations, overcoming objections, learning to say what people want to hear. But they’re like the car-chasing dog: excellent at the chase, but no idea what to do with the catch. Listing in hand, they move on to the next presentation.]

My approach has always been simple: Take very, very, very good care of the customer. All else follows.

So how do I take good care of customers if I’m busy looking for new customers?

The answer is in the form of a Phil Knight quote:

“Yes, of course Nike is a marketing company, but our product is our number one marketing tool.”

A realtor’s product – and it’s a valuable product – is service. If it’s possible to put the time providing that service into the prospecting column, voila! 90% seems reasonable!

For the record, that’s exactly what good agents do.

I feel so much better…

Global cooling! Global cooling!

The best laid plans…

Tuesday is realtor tour day, usually preceded by an office meeting, ours this morning was – is? – on condo conversions. In any event, four wheel drive notwithstanding, I won’t be there since I live on a hill in West Linn, the access road to which tracks at roughly 90º and closes when it rains. Open houses will be tough with the kids home, Portland Public Schools this time wisely waiting to close until after the students were already in class.

And I’m thinking: there are agents out there so precise on their scheduling that they leave voicemail messages like “Your call is very important to me. Please leave a message. I’ll be returning calls between 4:00pm and 5:00pm on the Tuesday following the spring equinox.” Would not want to be them today.

I’ll just stay here and write about the value of time management.

After another cup of coffee…