Guess the price of these houses

I had an interesting thing happen this past weekend.  I showed a For Sale by Owner listing in an area where few houses are listed with a realtor.  It’s a popular area and about the cheapest route to get in a super desirable elementary school district.

My buyer did some of my job for me.  They found pictures of the FSBO listings on zillow.  I try not to use zillow for a main source of information because their data is often incorrect and they do not list if the seller paid any of the Buyer’s closing costs or if there were any other concessions…..but pictures are helpful to see the differences in the houses.

There were four houses that were all roughly the same size…..so close that we don’t even need to make any adjustments in value for 3 of them.  All sold within a few months last summer.  The range was $280-$330k.  Everything is sounding pretty normal so far, but this is where it gets odd.

I’ll describe each house and let you pick the sale price:

  1.  Sale #1 was 2400 square feet.   It backs to a city park.  It is all original and even has a green kitchen counter top which doesn’t look that nice with original cabinets that have been painted white.  Did it sell for $302k, $280k, $330k or $310k?
  2. Sale #2 was 2300 square feet.  It recently had $45k in updates including new white shaker style cabinets, trendy lighting, subway tile in the kitchen and around the fireplace.  Did it sell for $280k, $330k, $310k or $302k?
  3. Sale #3 was a 2300 square foot house with different types of laminate flooring.  It looks like the only newer thing in this place other than maybe the furnace filter was granite counters in the kitchen and bath.  This one has an odd shaped lot.  It is sort of a triangle so your backyard comes to a point.  Did it sell for $330k, $280k, $302k or $310k?
  4.  Sale #4 was just over 2000 square feet so it was a little smaller than the others.  It might be worth $12-15k less just due to square footage differences.  The kitchen was just remodeled and was equally as impressive as the one in Sale #2.  This one had new flooring too.  Did it sell for $330k, $310k, $302k or $280k?

Okay, you ready for this?

Sale #1 sold for $330k.  It was equal to Sale #3, which sold for $302k.  That means somebody paid $28k for the nicer lot.  That is nearly a 10% premium.  That is higher than anywhere else in town.  This was a great deal for the seller and a bad deal for the buyer.

Sale #2 sold for $280k.  Yes, the one with $45k in recent updates sold for the least.  Bad deal for the seller and great deal for the buyer!!

Sale #3 sold for $302k.  This was the house that had more flooring types than Home Depot offers and the worst lot out of all of them.  This one was listed with a realtor.  This was a fair deal for both the buyer and seller.

Sale #4 sold for $310k.  A good deal for the buyer.

So, what is my point in all this?  That these people needed the help of a realtor.  As a buyer’s agent, I would have advised my client not to pay $28k more than an equal house just to get a better lot.  I would have told the seller of #2 that their price was waaaaay too low.  I would have told both the buyer and seller of #3 that they got a fair deal.  I would have told the seller of #4 to ask for more.

 

 

Will Realtors be replaced with an app?

Yes, they could.

The app would need to be able to tell a seller that their house has a pet odor and that is what is keeping it from selling.

The app would need to tell a seller to rearrange their furniture because it currently make the living room look very small compared to other houses for sale in it’s price range.

The app would need to tell a buyer the house they want is worth less than other houses in the neighborhood that are the same size due to an unusual floor plan.

The app would need to be able to tell a buyer when the home inspection repair list is big enough to walk away from the house.

All this app would need is a way to download all the experience that only comes from being out there, seeing houses, writing offers, knowing the current market, and dealing with people.

So no, Realtors are here to stay.

I sold a listing of mine that did not inspect so well.  Before we put it back on the market, we have to make some repairs.  I have spent a lot of time advising my client on which repairs we need to do so that the next buyer won’t want to walk away.  We don’t want to fix everything little thing because we don’t have to do so.  The goal is just to do the big things so the next buyer still wants the house after their inspection.

I recently had a standoff with a listing agent when their seller did not do a few repairs they agreed to do.  The listing agent drew a line in the sand and told me my people had to take it or leave it.  Knowing that the seller had moved out of the house and was closing on his new house the next morning, I called his bluff by saying we would postpone the closing and go to mediation since that is how the contract says disputes are to be settled.  A couple of hours later he was asking me what my buyer wanted to have done in order to close on time.

An app can’t do these things.  An app can open doors.  An app can provide paperwork to be filled out.  An app can’t solve these types of problems.  People are always going to want help from somebody who knows what to do, how to do it, and when to do it.

Will technology make Realtors obsolete?

Many people seem to think realtors are going to be replaced with a bunch of apps on a phone.  I don’t see it happening, but changes are bound to come.

I can see a day when, instead of touring several houses in person, buyers use virtual reality to narrow down the ones they want to see.  I am sure any buyer will still want to see whichever one they pick in person before signing a contract.

I can see sellers and technology doing more on the listing side of a sale.  I can see more for sale by owner listings and various businesses popping up to help sellers navigate the process alone, but I don’t see the same for buyers.  Buyers will always want help from a pro.  The seller is dealing with one house, their own.  The buyer is dealing with making a wise decision.  Artificial intelligence won’t ever replace the voice of a pro.

I can see a day when there are far fewer realtors than we have now.  The lame ones who don’t do more than open doors, fill in blanks and who just tag along to get their check will go first.  All that will be left are the really good ones.  We’ll make less per transaction, but each transaction will take less time.

I can see a day when a realtor hardly has to see their client in person, or actually go in many houses.

What I can’t see is there ever being a day when people don’t want a realtor.  People will always want a real live person to help them navigate through something they don’t understand, or when they have a problem they can’t solve.  Don’t believe me?  Then why does Apple have live people to help their customers when all the self guided trouble shooting tips don’t help?  Also, short of new construction, no two houses are alike.   People are always going to want to see a house before they buy it.  It is something most people do only a few times in their lives.  They are concerned about resale potential.  This isn’t like ordering a pair of shoes online where you will wear them and then dispose of them when they are worn or out of style.

I am sure there will be things I welcome as real estate evolves.  There will also be things I miss.  Until then, I will just keep doing my best for my clients and laughing every time I read an article that predicts I will be replaced with an app.

Bully sellers and what happens to them

I just got a call from an agent who I almost sold a house with several months ago.  This agent wanted to see if my client had bought anything yet.

My client had a contract to buy this agent’s listing.  My client had it inspected.  There were two pretty big things wrong that needed some attention.  We were told by this agent that my clients needed to take it like it is or walk away, because we were being crazy…..AND that we had to decide by 7:PM that night or the seller was walking away from us!

We walked away since the only other option was unacceptable.

The listing came back on the market.

Sold again.

Back on the market again.

Reduced.

Still hasn’t sold.

The funny thing is that I saw all this coming.  I knew that any buyer would have the same concerns that we did.  We used a good inspector.  My clients were reasonable.  I was being reasonable.  It should have worked out.  Problems with the seller’s house don’t disappear if the buyer moves on.  They just sit there until the next inspection.

The best thing this agent and the seller could have done is thrown us a bone-meaning offer us something to have stuck in the deal.  Negotiate.  Make a good faith effort.

Didn’t happen.

Must not have happened with the second buyer either.

Meanwhile, my clients are enjoying their new home that we closed last Friday and this agent and her seller are waiting for a third buyer.  It is a nice house with two solvable problems.  It just needs an agent and a seller who would rather solve problems than give ultimatums.

 

 

Do you need a realtor to sell in a hot market?

A seller-client of mine posted on Facebook that she was about to list her house.  We had two showings before it officially hit the market and sold it.

If you think all a realtor does is find a buyer, then I would be considered totally useless in this deal.  Getting paid for nothing.  Unfortunately, the public seems to think that the realtor’s work is done once we get to this point……heck, some realtors think their work is done at this point too!

All that was left to do on this deal is negotiate the offer, then negotiate the inspection repair list.  Coordinate the closing and be done with it.

But it didn’t go that smooth.  The appraisal came in very low.  In fact, it came in LESS than my people paid for it almost 3 years ago.

The deal was about to fall apart.

I tried to get the appraiser to up his value since one of the comparable sales he used was 11 months old and there was a non-listed sale that was only two weeks old.  He refused to budge or consider using the newer sale.

The buyer’s agent and I discussed alternatives.  I knew getting a new appraisal with the buyer’s same lender would not work.  Assuming the new appraisal would have come in higher, the underwriter for the loan would be forced to pick between a lower and higher appraisal.  Underwriting is all about minimizing risk and covering your own rear end.

The buyer had a big down payment.  I thought maybe she would be willing to pay the difference in cash.  Nope.

So, here I am in a hot market with a lousy appraisal.  I don’t want to lose this buyer, but the only chance we had of getting a higher appraised value would be to have a new lender.  Any other option was too risky.

I sent the release to void the contract.  The buyer decided to change lenders.  Bingo!  That was what we needed because the underwriter for the new loan would never know about the low appraisal.  (And I was sort of hoping sending the release might make the buyer realize that she was about to lose the house she wanted.  The release shows the other party that you have really done all you can do.)

My client was concerned about the appraisal.  She wondered if we should lower the price to make it more likely to appraise.  I said no, that I would rather have the appraiser shoot for the contract price.  If he could justify that value, then all would be well.  If it came in lower than the contract amount, we could renegotiate with the buyer at that time.

There was another listing up the street that was 100 square feet bigger.  I called that listing agent to see how it was going.  She told me that her seller had turned down two offers close to the list price (which was similar to my listing) because the seller wanted to move out after the end of the school year.

Armed with that information, I told the new appraiser about the other listing getting offers well above the first appraisal we had.  I told him that the market value of the neighborhood has outpaced the recent sales.  Keep in mind, that market value is right NOW.  Recent sales just tell you what the market was doing in the recent past.  That helped him out, and also told him nicely that I wasn’t going to be easy to deal with if the value came in light.

The value came in just fine.  Crisis diverted.

Not every deal has a big problem like this to navigate.   This deal would have fallen apart if it wasn’t for the right combination of experience, wisdom and luck.

So yeah, even in a hot market, it is good to have a realtor.