Realtors

The repair list shouldn’t be like playing Marco Polo

by John Rice

Most people think all a realtor does is open doors, fill in the blanks on the paperwork and cash checks. Sad thing is that there are a lot of realtors who think this too.

Not me.

The ultimate goal is the get the best terms for my clients and make the process as smooth and drama-free as possible.

I recently had a situation where my drama radar was going off so I made some moves to prevent it.

I got a repair list on one of my listings. The issue was the wording on the repair request for an air conditioner. The other realtor stated what the inspector found and pretty much just said fix it. The inspector stated that the air conditioner was only producing a temperature difference of 9 degrees. Now, I knew what the intent of the buyer’s request was. They wanted a normal working air conditioner. But at what point would they find a repair acceptable? If my buyer fixed it and it was only 10 degrees, would that be okay? Who knows? I never liked playing Marco Polo when I was a kid. I don’t like finding Waldo. I also don’t like the “I see something you don’t see and the color of it is” game. I am definitely not going to play those games with a repair list.

My Dad is retired now from being an attorney, but he is still a brilliant man. Back in 2005 when I was writing my first ever repair list, I consulted him on the wording. I think I did what most realtors do, which is to state the problem and just say fix it. He told me two things which I have never forgotten and try to share as often as I can with other realtors so our industry improves:

  1. Write a repair to be done to achieve a goal rather than for a task to be performed. Why? You can sometimes do a task which doesn’t achieve the goal. When that happens, you have no recourse because you asked for a task to be performed and it was done as you requested.
  2. Write EVERYTHING so clearly that a third party could read the contract, addenda or repair list and know exactly who was to do what and what the agreed upon outcome should be. That third party could be a judge or mediator.

So, when I read this one repair item, I knew there was no specific outcome requested. There was no verbiage saying that “If the seller does this with the air conditioner, the buyer will accept it.” The effort to get this right at this point may have saved some last minute drama right before the closing. When my seller has packed up and moved out, and the buyer has packed up and made moving plans is NOT the time to discover that we had a difference of opinion on what was expected.

Ultimately we agreed upon wording that said the air conditioner had to cool within industry standards, which is a minimum temperature difference of 15 degrees.

What’s the #1 thing you need from a Realtor?

by John Rice

Most people think what a realtor does is open doors for buyers until they find the house they want, make the offer, then wait until the closing to get their check. (Truthfully, some realtors think this too!)

It is really about protecting people as you lead them through the process of buying or selling.

You’ve gotta know what a house is worth to make sure your client doesn’t pay too much if they are the buyer or sell too low if they are the seller.

You’ve gotta know enough about houses to help them decide what to do after a home inspection.

You’ve gotta make sure they don’t agree to anything that would be bad for them or come back later and bite them in their rear end.

I am in a deal right now where I am really, REALLY working hard at doing all this.

The home of my Seller’s was just inspected. Their Buyer asked for over $13,000 in repairs. There were issues with mold, plumbing, hvac and the roof. Doesn’t all that sound terrible? I asked the Buyer’s agent to send me pictures from the inspection report. As I read over clips from the report that pertained to the requested items, it became clear to me that most of these issues were very minor. We either had a skiddish first time buyer or somebody who viewed this as an opportunity to squeeze some money out of my people. I remembered that the contract the Buyer’s realtor used had their address on it. I looked them up on the PVA. Our Buyers have owned their current home for a long time. That told me they were not skiddish first time buyers.

My Sellers told me the most they would credit the Buyers for repairs. I said let’s offer a little less so that if they come back for more, we can go to your max and then they will feel like they won. As I often say, the person who won the last battle feels like they won the entire war. We reached an agreement for a fraction of what they requested.

But wait! This is not over yet. Normally for realtors in my area, the repairs are requested on a specific form. That form is a binding document between the Buyer and Seller. We write whatever agreement is struck on that form. Then if there is a price change that the Buyer’s lender needs to know about, we write an addendum reflecting the change.

This out-of-area agent used a somewhat generic contract that does not have a supporting document for the repair list. She simply emailed me the request and we negotiated it. Now we need to write an addendum for the Buyer’s lender. No big deal right? Well, we don’t have anything documented that says that this price concession is in exchange for performing the repairs. While it is implied in my communication with the Buyer’s agent, I really want it to be crystal clear so I am going to have to make something that states that. My dad is retired now but he was a brilliant lawyer. He always told me when I started in this business to write things so that a 3rd party (like a judge or mediator) can clearly see what was agreed upon and what each party needed to do.

Can’t verses Won’t

by John Rice

I’m in the middle of the worst part of all real estate deals…………Negotiating repairs after the inspection. 

The seller’s realtor told me, in great length, why the seller WON’T do a couple of repairs we asked for.  I don’t know about you, but when I hear WON’T, it makes me want to dig in my heals and push back. 

One of the repairs was over an issue in the backyard.  They had a major landscape company come in and do a koi pond and patio.  I think the reason for the WON’T was because they just couldn’t emotionally bring themselves to “Undo” the work they have done.  That being the case, if their realtor had just said something like “I’m really sorry, but after putting so much of themselves into creating that wonderful space, the seller’s simply CAN’T bring themselves to makes the changes your client wants.”  Isn’t that much better than hearing WON’T??  I mean, the bottom line is that they aren’t going to budge on that one, but getting it in a pill that is a little easier to swallow leaves us not wanting to push back. 

So, CAN’T is sooo much better than WON’T, even if the results are the same.  WON’T always comes across as aggressive.  CAN’T at least has a chance of getting some sympathy from the other party.  I don’t remember if it was my dad that told me about CAN’T and WON’T or if it was my old mentor Susan Webb.  Both of them are pretty fantastic, so I guess all that matters is that I learned it.

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.

Time for the Santa Suit, Shorts & Sandals

by John Rice

I forget how many years it’s been since I accidentally started this tradition.

I had been doing Christmas cards for a few years. I really enjoyed them. I remember going to stores and trying to find funny ones.

Being known as the realtor that wore shorts and sandals year round had sort of become my trademark. I thought it would be fun to dress up as Santa since I was a pretty round shaped guy back then. Of course I had to have the shorts and sandals.

That first year it was just a picture of me dressed as such with a studio background. Everybody LOVED it.

I remember renting the costume from a place off of Southland Drive. When I picked it up, the store was very messy inside and smelled like a cat box. I was so happy to get out of there. My friend Shaun took the picture at his studio. I did not expect the costume to also smell like a cat box. Once we took the picture and I returned the costume, I rushed home to take a shower. I also smelled like a cat box.

Since the first year was such a success, I thought we would expand the concept a little. My friend Shaun and I went out in the country looking for just the right spot. The concept was me as Santa again, but this time I would be sitting on the back of the blue Mazda Miata I had back then. It had antlers and a nose on it just like Rudolph the Red Nosed Reindeer.

While we had the car parked and Shaun was getting his gear ready, an older man in a truck stopped to ask if we needed help. He though the car was broken down. He seems totally unfazed that I was wearing a Santa Suit, shorts and sandals and that my car looked like a reindeer. We said we were fine, thanked him, and he drove off.

After that one, my son Stuart started taking the pictures. Most were car themed after everybody loved the Miata one. Once we ran out of cool cars in the garage, we did one with my Dad’s motorcycle sidecar. My other son and dog were elves in that one.

My son Stuart was majoring in Digital Media at the time. He was really becoming a great photographer and learning a lot of skills in school. He had the idea to photoshop me into backgrounds. That’s the way we have done it ever since. Probably his most famous card was one where I was trapped in a snow globe. Ever since then, I have just told him to do whatever he wanted.

We always say we are going to start working on these sooner so we don’t have the pressure to get them done in time to hit the mailboxes. However we always wait until around the beginning of December. I usually put on the outfit, pose how he tells me to pose, then wait for the finished product.

Each year, we find it is getting harder and harder to come up with something better than the previous year. I think the one this year with the picture of Big Blue in downtown Lexington may be the peak. All I know is that I’ve only got 11 months to come up with something at least equally as good…….wait a minute, I mean my son only has 11 months to do that.

I hope everybody enjoys their Holiday!