Random Real Estate Thoughts

When is the best time to sell your house?

by John Rice

I’m seeing a lot of buzz lately saying right around now is the best time of year to sell your house. Many realtors post these articles. I can’t blame them. We are always saying “Now” is a good time to do anything, lol.

I am in now way doubting the statistics. Numbers don’t like. The problem though is knowing what they mean.

Fact: There are more buyers out in the market in the spring. It’s always been this way so I don’t see the newsworthiness of it.

Fact: The likelihood of your house selling for top dollar is less dependent on when you list than it is on the condition of your house and how it fits in the market…..meaning, how do buyers rank your house compared to what is currently available to them in terms of condition, price, floor plan, lot and location.

I have sold plenty of houses in multiple offers the very first day on the market back in 2008-2010. That was when it was an extreme Buyer’s Market.

It is a simple formula really.

You do some prep work. Fix anything that is going to keep a buyer from saying yes to your house. You want them to leave their showing with a positive emotional response. If there is work to be done on your house, they leave with a logical response. They are thinking about what they need to do to your house and how much it is going to cost. If they even make an offer, it will be less since they are deducting the cost of those repairs. So, leave them with nothing to do but fall in love.

Price it right. I don’t mean use what zillow, a recent appraisal or an AVM says the house is worth. Do some real research. See what has recently sold in your neighborhood. See what is pending in your neighborhood. Pending sales, while you don’t know the actually sale price until it closes, can tell you what buyers are doing in real time.

The last step is the most important one. You see what other choices a buyer has maybe 15% below and 15% higher than the value of your house. Then you price your house so it is clearly one of their top choices. Why? Because after 19 years in this business, the one biggest thing I have learned is that every buyer wants the best house they can get for their budget. As long as you have one of those houses, it will sell quickly for top dollar in any market and in any time of the year.

Winners & Losers of the NAR Settlement (Plus what I think about it)

by John Rice

Let’s get this out of the way first thing. Contrary to what the media and even President Biden has said after waking up from what looked like a great nap, real estate commissions have ALWAYS been negotiable.

Don’t believe the things you are reading in the media. Remember, their goal is to sensationalize news so you will read their article. The journalists assigned the task of telling you about changes in the real estate industry know little about it. They are only experts on the english language and shouldn’t postulate on much beyond that.

Okay, let’s begin with a brief history of how we coupled the commission for both the Listing Realtor and the Buyer’s Realtor.

Back in the olden days, you as a seller would hire a real estate agent to sell your house. They were tasked with finding you a buyer. They didn’t just put it on the market and wait for a buyer’s agent to show it like today. They had to literally procure a buyer for you. I don’t know who is responsible for this revelation, but somebody along the way figured out that some real estate agents had people wanting to buy a house. Just like the old Reese Cup commercials where somebody eating peanut butter crashed into somebody eating chocolate, it was discovered that the process of selling a house went faster if the agent with the house split the commission they charged with the agent who had the buyer. Voila! (Did you see what I said there? The entire commission was paid from the seller to the listing agent. It was the listing agent who agreed to split the commission THEY CHARGED with the buyer’s agent. It was NEVER the seller paying the buyer’s agent commission. It was the listing agent paying the buyer’s agent.)

Over time, this stuck. Early on, BOTH realtors worked for the seller. Even though the agent working with the buyer was helping the buyer, they owed loyalty and a fiduciary duty to the seller. Eventually that changed where we had laws to protect buyers which meant the buyer’s agent only represented the interests of the buyer. To make things easy for all, the MLS (Multi-listing Service) came into existence. We created policies and procedures to create transparency and order to the business of selling houses. One of which was to offer a commission to ANY realtor who produced the buyer for a listing. This was great because it meant the buyer’s agent knew what commission amount the listing agent was willing to offer should their buyer end up purchasing the place. While 3% in my market was the most common offered, there has always been offerings of 2%, 2.5% and even some fixed amounts.

Like all things, nothing last forever. This NAR Settlement is separating the buyer’s agent commission from that of the listing agent’s commission. We will no longer be able to post the commission amount on the MLS. That is really all that has changed.

I will point out that this is not a market driven decision. I don’t think anybody was really complaining about how the process worked. The public didn’t really understand the old way of doing things and I don’t think they will take the time to figure the new method out either. All they know is that it cost money to sell their house just as it costs money to do anything. If you are remodeling your kitchen, do you care that you are only paying your contractor who has separate deals worked out for each of the subcontractors? Why do you pay your contractor this way? Because it is easier for you and you are paying the only person you actually hired. Imagine if instead of paying just the contractor the whole amount, you paid him less but also then had to write checks to the plumber, electrician, cabinet contractor, and countertop person who worked on your house. Do you think it would be cheaper? No, it would be the same total, only you’d be writing more checks.

While I think the next year or so may be choatic, I do not think this will change all that much. We will see if I am wrong. Right now, there is a lack of organization because large brokerages, the NAR and local realtor associations are too afraid to say anything. I think they will try to leave it up to us to figure out. Currently, everybody is trying to figure out a way to benefit from the settlement. Zillow sent out an email saying they are here for us realtors. It wouldn’t surprise me if they are working on a way of creating what is effectively their own MLS. Many agents who expect a mass exodus of agents are working on setting up referrals so departing agents can still make a little money by sending their clients to active agents.

While I am sure average commission amounts might drop slightly, I don’t see that much of a change. Just like that kitchen remodel I mentioned above. In a great economy where there is a lot of work, prices are at the highest. When the economy is bad, your kitchen contractor isn’t going to work for half price. Sure, they will give you their best price. but they won’t take on the job if they can’t make a living.

One of the biggest reasons why I feel it won’t change much is because in every email I have gotten from NAR and my MLS, we have been reminded that while we cannot post an offered commission on the MLS soon, we can post a seller concession. I suspect that the commission will become similar to the way the Master Bedroom became the Primary Bedroom. It’s just a name change. The seller concession will be offered to allow buyer’s to pay their own agent. The amounts may change but the end result is unfazed. So what this might look like is that the listing agent charges a certain commission percentage and the seller offers a certain percentage as a concession to the buyer.

I am sure there will be lots of sellers who will offer no commission to the buyer’s. I am sure there will be agents who will work with these sellers. I also am sure that given enough time, both will realize that it is good to offer a commission/concession to the buyer so their agent gets paid. Why? The goal is to sell the house. How much money did you save if your house didn’t sell? Buyers want their own agent to help them make decisions and navigate the process. If no buyer’s agent can make even a penny from the sale, they simply won’t do it. Then who does the buyer’s agent tasks fall upon? The listing agent. I think in time, the listing agent will want more than their usual commission to do twice the work, which isn’t saving the seller anything.

So, let’s look at who are the Winners and Losers of the settlement:

Biggest winner: The lawyers of Cohen Milstein. Guessing they will get the usual 25-33% of the settlement. I wonder why nobody has ever filed a class action lawsuit against lawyers? They all seem to take the same percentage of a settlement or judgement. Sounds like collusion to me?????

Biggest loser: The National Association of Realtors. I don’t mean loser in the sense of they lost. I meant it more as a pronoun. They let us down. Regardless of whether anybody thinks real estate commissions are too high or not, the fact is that commissions have always been negotiable. They did a poor job of proving that and they are currently doing a pathetic job of helping realtors figure out how to help our sellers and buyers during this crazy time.

Let me add that if the NAR and local realtor associations are not going to help us right now, I see no need for their existence. I can post my listings on zillow, I can get documents from the Kentucky Real Estate Commission and I am sure I can figure out how to keep my lockboxes working. Provide leadership or you become as useful to us as Conferderate era coins.

Winner: Sellers. Not because of anything having to do with the settlement. Sellers have been winning the real estate game for years due to a shortage of houses for sale. Do remember though that nothing lasts forever. I have been in this business for so long that I remember sellers offering bonuses and even as much as 4% commission to the buyer’s agent. See, commissions have always been negotiable…..not everybody realizes that in a bad market the commission could go higher!

Loser: Buyers. You have been thrown under the bus. If you think you might be able to get a house for cheaper now, you will be surprised. You will not. If a seller has a $400k house, they are not going to list it for 97% of that because they want you to benefit. No, they will still sell it for $400k. How do I know? I have worked with several For Sale By Owners over the years. None have offered to sell for less since there is only one realtor to pay.

Loser: Realtors. We now have to figure out how to work for our clients without any organization or direction. We can’t discuss anything in a group or it is considered collusion.

I am anxious to see how all this goes. My predictions may be right. They may be wrong. I am sure I will be blogging about this in the near future as it develops.

Know this though. Regardless of what, it anything, changes. I am still here for my friends and clients. I only work with 3 group of people: Those who are past clients, those who have been referred to me by past clients and friends, and those who find this blog. I’m not really worried how I get paid or how much. If I really wanted to, I could liquidate a few assets and comfortably retire. This month marks my 19th year as a realtor. I plan to keep doing it as long as you all need me.

Well Played Sir, Well Played….Sort of

by John Rice

After nearly 19 years in this business, you sure learn to read the signs. Watching what people do (or don’t do) can often tell you a different story than the one they are telling you with their lips.

I had a buyer interested in a property. We made a formal offer. It was verbally countered. Verbal counters happen. They can be a way of making the negotiations move along faster. They can also be used to “Not” formally counter. See, if a Seller formally counters an offer, they can’t accept another offer without withdrawing their counter. Sometimes a verbal counter is made to keep the other parties options open.

My Buyer decided not to budge from their original offer. I assumed the deal was dead.

A couple of hours later the Seller’s realtor texted saying the Seller maaaaay accept my Buyer’s offer amount if we could close in 3 days. I immediately told the other realtor exactly what my Buyer would do in response. We could not close in 3 days but could within 10 days.

Then I hear nothing.

This is when I start getting suspicious because normally, when a Seller and Buyer agree on a price, everybody usually get really motivated to make a deal work out.

Then I ask again for a reply.

I still get radio silence.

Then out of the blue, exactly what I suspected was happening came to light. There was another offer. The other realtor said another offer had been made which was better than the one my Buyer had made.

So here is what really happened:

  1. By verbally countering our offer, this agent kept our offer alive and could legitimately tell the other Buyer’s realtor that there was another offer on the table. This used our offer as leverage to get the best terms for the Seller from the other Buyer.
  2. By not replying to us in a timely fashion, it hedged the Seller’s bets because if the other offer didn’t work out, they had us as a backup plan.

Was there anything wrong in doing this? Yes and no.

I am not at all upset about the other agent trying to get the best results for his client. I do the same for mine. Kudos to him for this part of his actions.

The only thing I am salty about is that he made a counter and then ghosted me for almost two full days. I think he should have told me in a reasonable amount of time that there was another offer, or that his Seller was either accepting/rejecting/countering the revised terms I had proposed.

I’ll pick choice #2

by John Rice

I’m sort of in the market for a car to replace one I’ve got. Truth be told, I’m always “Sort of” in the market for a car. I am always wanting to get a new one or get rid of one I have.

I test drove a car a few weeks ago in Cincinnati.

It was one of the worst experiences ever. It was extremely clear that the sales person had no interest in anything beyond getting me to do exactly whatever he wanted. Wouldn’t answer any of my questions. Just wanted to get whatever information out of me that would serve his purposes. He would say one thing and contradict himself minutes later. I left feeling more like a victim. (I’ve worked with a few sales people often enough that I have become friends with them. I really wish one of them had the car I am looking for. Two of them are still in the business and one of them is a teacher now. These guys were great to work with and made car shopping fun!)

This experience got me thinking about how I operate compared to the sales person at that dealership in Northern Cincinnati. I work for my clients. I am their advocate. I have a fiduciary duty to look out for their best interests. I should know enough about houses, neighborhoods, construction, market conditions, values of homes and pretty much anything that could help a client of mine make a wise, informed decision for one of the largest purchases they will ever make……even if this means doing so doesn’t serve my own best interest. I don’t want my clients to buy any house. I want them to buy the right house for them.

I showed a house early this morning to some first time buyers. Having lived in Lexington since 1986 and being a realtor since 2005, I was able to give them a lot of information they needed.

I’ve sold several houses in this neighborhood so I was able to tell them what my clients liked and disliked about it. Having listed several there, I was also able to tell them what feedback prospective buyers have given after showings.

There is an elementary school just down the road from this house. I was able to tell them exactly how far the pick up line will be from the house we were in. I have been on this street many times when school is dismissing.

I was able to tell them about a large annual event that a church up the street has and how it would impact the neighborhood one week a year.

The house we saw was one that is being flipped. I always look for signs of hidden issues. This house had cracking in the brick veneer. I didn’t see any signs of damage or repairs on the inside of the house so my hunch is that a home inspector would consider it on the moderate end of normal. While I am no home inspector, I’ve owned about 20 houses and of course, have been on hundreds of home inspections. The last thing I want to happen is for my people to buy a house, then have it fall apart after a home inspection (The sale fall apart, lol, not the house!) It is heartbreaking and expensive for them when that happens. I try to help them out by doing as much of an amateur home inspection as I can.

I wish that sales person I endured would realize that you have two choices when working in commissioned sales:

  1. Be selfish. Get what you want. Take, take, take. Make it all about you. Get your check.
  2. Put others first. Find out what others want. Give, give, give. Make it all about them. Then get your check.

By picking choice #2, you still make the same living, only you go to bed at night with a deep satisfaction from knowing you really helped somebody.

I can’t think of a good title but it’s still worth reading

by John Rice

It’s been a good week.

As most of you know, I only work with people who find me in one of 3 ways: I have to know you. You have to have been referred to me by somebody I know. You have to have told me you found this blog. I don’t advertise. I don’t offer my services to anybody else.

That means that my “Job” feels more like I am just getting to see cool people and helping them make good choices.

This past week, I have been working with a buyer and a seller that I know well.

I am listing a really amazing ranch in Versailles for a couple I have known for over 20 years. I think it will sell fast, even this time of the year which is historically slow. It has a great floor plan, great location, a large and flat backyard, a sunroom and great outdoor space.

This couple has recommended me to several people over the years. I will miss them. They knew me before I became The LEXpert. Back then I was just a goofy guy who wore sandals and always had on my favorite yellow shirt.

The buyers I am working with is one of those situations where I have worked with multiple generations of the same family. This one is especially unique because I have worked with the family of both the husband and the wife before they married…..so they are the overlapping part of a Venn Diagram. I have know the husband since he was a little kid. We once went on a vacation with his family back in the same yellow shirt guy days I mentioned above.

The best thing about working with people who find me in one of those three ways is that I already have their trust. That sure makes it much less stressful for my clients.