The term “Change is Inevitable” is a common theme among many of the worlds foremost thinkers. Physicist William Pollard said “Without change, there is no innovation, creativity, or incentive for improvement. My offering of change is in the form of a home listing program I call Real Estate 1.9.
Many times the desire for change is borne from adverse circumstances which ignite our passion for overcoming obstacles and doing better. It is the ideas of change brought on by trial that make us stronger.
Okay, I think you get the point. Change is inevitable and healthy even when we go into it kicking and screaming, but is it always healthy?
Change for the Sake of Manipulation
One of the constants in the real estate business for what seems like 100+ years is the commission fee structure. The real estate industry is hard pressed to consider many if any, actual changes to their core compensation model. I still hear the term “Discount Commission” tossed around for any listing fee below 6%. How can there be such a thing as a “Discount Commission” if all commissions are negotiable which is stated right in the Listing Contract? Maybe they mean “Discount Service?”
To mask over the coveted commission structure some real estate companies employ change which is little more than sleight of hand. Often these changes are more of the same services and fees wrapped in a different color bag — lower sales commission but more substantial transaction fees, fewer fees but fewer services, the dreaded “Hidden Costs,” etc. In the end, these changes lead to more of the same.
Enter the Program ~ Real Estate 1.9
How the program works; Your home listing commission is 1.9%. An additional rate of 2.5% is suggested to place the home in the Multi-List service to pay the buyer agent commission. The total commission charged if a buyer purchases your home using a buyer agent is 4.4% (1.9% + 2.5% = 4.4%). If the buyer of your home does not use a buyer agent and does not want agent representation, your total commission is 1.9%. No transaction fees!
Real Estate 1.9 is NOT a discount service program, it is a FULL-SERVICE home listing program. For more details call me direct at 484-325-0111, and I will explain the program in greater detail.
I have been practicing real estate since 1993 and understand how to manage home selling services utilizing the marketing strength of the internet. I am asking for your business and in return offer you greater overall value by lowering your home selling costs without reducing service. If you are planning to sell your home or know someone who is I invite you to embrace positive change and call me to see how Real Estate 1.9 can work for you.
Knowledge is Power!
Jeffrey C. Hogue
Real estate contract documents are created to serve as a neutral starting point in a real estate deal. Why the Pennsylvania Association of Realtors Standard Forms Committee would want to make changes that may upset the balance is beyond me.
Back in October 2014, I wrote an article entitled “Don’t Get Caught in the Home Inspection Trap.” The article explained the process and practices undertaken relative to home inspections associated with a residential real estate transaction. The article focused on a condition of the sales agreement that requires the buyer to provide inspection reports to the seller if requested or with a written corrective proposal.
The practice, or the trap, as I put it, is once the seller receives the inspection reports they are obligated to disclose findings or, what could be considered, material defects as stated in the report. If the seller declines to abide by all buyer corrective proposal requests that buyer could terminate the agreement of sale and the seller would have to sell the home to someone else and disclose all material defects if any, listed in the report or amend the Seller Property Disclosure Statement to include any like findings. The unwitting seller is left in a kind of trap and either has to give in to the buyer’s requests or deal with the contents of inspection report, no matter how vague, and figure out what a material defect may or may not be and how to handle all that before selling the home to someone else. One could see how the inspection report could be used as a weapon of negotiation.
The Trap Gets Tighter
Recently the Pennsylvania Association of Realtors Standard Forms Committee decided to make some changes to how inspection reports are handled. As stated by the Standard Forms Manager for the Pennsylvania Association of Realtors, “The buyer must provide all inspection reports to the seller following inspections. The contract will now specify that inspections reports must be provided in their entirety and all circumstances following inspections. Whether the buyer accepts the property, terminates the agreement or wishes to negotiate a change to the agreement, all inspection reports must be provided to the seller.”
In my opinion, the whole idea behind mandating that the buyers purchased home inspection reports MUST be submitted to a seller and the seller MUST accept them is a bit far-reaching. The entire practice of forced information wreaks as a mistrust of all sellers. It has a “What are you trying to hide” feeling and, I believe, creates an imbalance in the standard agreement. Remember, perception matters!
Consider this; sometimes a home seller does a pre-listing home inspection using an inspector they hire and pay. Buyers often do not accept the inspections performed on behalf of the seller. Why? Many home buyers do not trust the “Seller Hired Inspector” and choose to have their home inspection done by someone they hire to work for them. They are often present at these inspections and can influence the outcome. I understand how a buyer may feel and how they would want someone they hired to evaluate the home on their behalf. That said, why would we force the buyer’s home inspections on the unwitting seller who did not pay for, choose, or hire the buyer’s inspector(s)? Do we not afford the seller the same discretion?
To further complicate matters home inspectors are not licensed by the state of Pennsylvania. In 2017 PA House Bill 1001 was passed. The bill would establish statewide standards for the profession and the home inspection report. That bill has stalled. Why would we put such a high handling priority on reports from home inspectors that are not licensed with the state but make delivery of the reports they create for their buyer clients a mandatory part of the state agreement? I believe in home inspectors and think they provide a tremendous service and hope the state offers them licensure. Licensing could create a more uniform way of reporting on a property.
Further Reading ~ Opinions, and Options
Pennsylvania Property Disclosure law states that every residential sale must include a Seller Property Disclosure, excepting bank sales (wonder how they got around that, lobbyists). In the case of an executor, administrator or the like, who may have no relevant knowledge of a property they are selling, they have the option to leave all answers blank but still have to sign and submit. A pre-list home inspection would go a long way in this scenario. With no property disclosure information, it is even more likely the buyer will do their own inspection and, as the contract states, dump all inspection reports on the executor no matter what the outcome of the transaction. Instead of the report being from the inspector representing the seller, it will be from the inspector representing the buyer.
Licensed home inspectors would be a good thing. I believe that having home buyers and sellers work directly with state licensed home inspectors who understand the state disclosures and supporting documentation would go a long way in keeping real estate agents out of the inspection advice business. In my humble opinion, agents get too far down the liability rabbit hole when dealing with the home inspection and contracting advice stuff. You would not want your chiropractor negotiating a liver transplant even though they are both in the medical field. Just the same, you may not want your real estate sales agent navigating what to ask for relating to home repairs that involve major contracting components of the home.
The buyer and their representing inspector can deliver a clear and concise reply stating clearly what the buyer desires the seller to do, no reports needed at all. Of course, the seller would still have the option to receive any reports related to any requested work, in writing, as an option ONLY! If a licensed home inspector also represented the seller, that inspector could navigate that part of the deal much the same as a mortgage broker deals with the financing part of the transaction.
No complaint should go without a solution. What if…
The Listing Contract could have a section where the seller could opt to have a pre-list home inspection completed prior to the home being offered for sale or waive that right. If the seller opted to do the inspection, the home inspection company could work with the seller in preparing the Seller Property Disclosure as a service. If the seller chooses not to have the inspection completed they would submit their Disclosure Statement much the way it is presently done. This practice may lead to many more pre-list home inspections which I think is a good thing for the industry at large.
My temporary solution would be to advise the seller of the potential issue of the home inspection as I outline in this article. The seller could consider a purchase contract that has the understanding that; the buyer or buyer’s agent shall not deliver ant inspection reports to the seller or seller’s agent at any time unless formally requested by the seller, in writing. Failure of the buyer to comply with this condition will be considered a default of the terms of the Agreement. This paragraph supersedes the agreement language outlined in paragraph 13 of the Agreement.
Please note, I am not an attorney, and the previously suggested language should be considered an example only. Consider consulting an attorney when adding any language to an Agreement for the sale of real estate.
In the end, most people simply want to be treated fairly and honestly. The perception that sellers are looking to deceive homebuyers relative to the condition of their home is often nonsense. The Pennsylvania Association of Realtors Standard Forms Committee, in their infinite wisdom, somehow feels they must try to put an end to any seller disclosure deception by making everyone swap home inspections. I think the new language could lead to more sellers not allowing the would-be buyer to perform any inspections of their home. The sellers may fear the buyer’s report and that their home may be forever stigmatized and its value negatively affected. Unfortunately, the sellers not allowing home inspections would likely be an injustice to all involved and result in fewer home sales overall.
I always contend that no matter what the real estate industry throws at us having an educated, well-trained Realtor, with plenty of experience is the best remedy for any real estate situation.
Knowledge is Power!
Jeffrey C. Hogue
The internet is good at many things. Manipulation and misdirection are sometimes part of that skill set. Understanding the goal of online real estate sites may shed light on what information is useful and which is not.
I am often amazed at how influential real estate websites are and what power they hold over the general public. Rarely a day goes by that someone doesn’t ask me about something they saw on Zillow. I do my best to field the question and educate the questioner on the role many websites like Zillow play in the grand scheme of our industry.
Most sites like Trulia and Zillow are advertising sites for Realtors and Brokerages. I advertise there because home buyers and sellers go there; the same reason I advertise in local real estate publications and, of course, in the Reading Eagle. Let me repeat; these sites do not sell houses, they sell advertising.
Websites are not required to play by the same rules as licensed realtors. The low home inventory environment that presently exists is not beneficial to real estate websites. The more homes for sale the more consumers visit the site. In an effort to manufacture more listings, these sites may spread misinformation or bend the truth to gain more lookers. One way to beef up inventory is to display homes that are pending sale as still for sale. They will also display homes that are in pre-foreclosure status which are not for sale. I have seen the same house listed as for sale and not for sale on these sites at the same time. By delivering more leads by whatever means necessary the website can validate their existence as a lead provider to the paying agent. It is then up to the agent to convert the would-be misled customer and turn them to another available property.
If a particular home seller does not want to use the internet sites to sell their home, known as opting out, for privacy or personal reasons the online real estate websites list the home as off-market or not for sale. To me, this practice is overreaching and should be considered misleading by consumer advocacy groups.
I do not suggest depending on any single source of information for all your real estate wisdom. You would never have only one tool in your toolbox you would use for every task. Even sites like Zillow and the rest depend on the real estate industry to do the heavy lifting. Unfortunately, that heavy lifting may someday lead to agents becoming little more than real estate uber drivers, but that’s another story.
Again, real estate websites like Zillow do not sell real estate; they sell advertising to real estate agents. They often do not compile their data and information but acquire it from third-party resources. The accuracy of data is not a prerequisite.
It has taken me years to learn the dynamics of how to value real estate and just as long to understand the metrics of the Reading and Berks Housing market which I have served for over 25 years. How can Zillow do that with a mathematical algorithm called a Zestimate? As far as I know, Zillow has never been to Reading and Berks County.
Using real estate sites is the now and future of our business. I hope it becomes responsibly regulated to provide the same ethic, and honesty, we as realtors uphold. The lesson I teach is that no real estate website can outperform any real estate agent who understands their community and is educated at their craft, at least not yet!
Knowledge is Power!
Jeffrey C. Hogue
Let’s take a look at the year that was 2018 and see if it offers insight into what’s in store for 2019 as it relates to real estate here in Reading and Berks County.
Yes, it is that time again! Time to reflect on the year that was and time to dust off the crystal ball and see if it can foretell what the future holds. It is my humble opinion that the big real estate story here in Reading and Berks for 2019 was the low home inventory. Yes, I believe it is even a bigger story than the ever-rising property taxes that plague our area year in and year out.
Home Inventory ~ Supply and Demand
With just four calendar days left in 2018, there have been 6,344 residential homes listed for sale. A total of 6,833 homes were listed in 2017, a year-over-year decrease of 7.1%.
Home sales for 2018 are at 5,055 units compared to 5,325 units in 2017, a decrease of 5.1%. Even though there were fewer sales in 2018, the ratio of sales to listings is better. The result of an improved listing to sales ratio is often climbing home prices and fewer days on the market. In 2017 the time a house was on the market until it sold was 99 days. That number dropped to 76 days on market in 2018. Here is where things start to make less sense. The median sales price of a residential home here in Reading and Berks County in 2017 was $164,900. Even with the low inventory, good listing to sales ratio, and lower days on market, the median price only climbed to $164,990. Yes, a slim $90!
Mortgage Interest Rates
There was a lot of noise this year regarding rising interest rates. The year started with 30-year mortgage rate around 4%. Presently rates are around 4.625%, down from 5% in November. For comparison sake, 2017 began with mortgage rates around 4.3% and ended at 4 % as mentioned earlier.
I believe when it comes to mortgage rates it is more about consumer perception. Rates dipped to below 3.5% in 2016 and have since rebounded approximately 1%. Most interest rate prognosticators believe that mortgage rates will top out around 5.5% in 2019. If that happens, it will be a rise of 57% since their lows in 2016. That is the kind of number that makes news and sells papers. In real dollars, the difference between a $100,000 mortgage payment at 4% and 4.625% is approximately $37 per month. In any case, rising interest rates, perception or not, is never really good for property values.
Thoughts and Predictions
As I have stated in the past, home values here in Reading and Berks are more a product of policy and law than statistics. Until we get a grip on out of control property taxes, all other sales metrics remain a distant second. High property taxes are hurting the new home market which aids in keeping home inventory absurdly low. Improving what is fast becoming an aging population of homes can be a problem if they are reassessed due to existing tax policies. Owning a home above $400,000 often comes with property taxes that have an aggressive negative impact on the homes true value. Without upside leadership from the new house and upscale market, our area may continue to be value capped.
We are about to finish a year which saw low home inventory, good sale to listing ratios, rising but handleable interest rates, and a rising national economy and yet our median home prices barely moved. How many years will these good housing statistics prevail? What will happen if interest rates start to rise, the national housing market cools, and the economy waivers?
I believe the Reading and Berks County real estate market is likely to be a carbon copy of 2017 and 2018. The low inventory will likely continue and our strongest sales months will be June through August. Watch out if interest rates start to move faster than expected, the national housing market cools too quickly and the media jumps on a “Sky is Falling” mantra. These events would likely lead to increased inventory due to lack of buying and then all bets are off.
Listen to me on WEEU in January for much more on this subject, and remember. Knowledge is Power!
Happy New Year!
Jeffrey C. Hogue
Homesellaphobia is my self-proclaimed way of labeling the fears some homeowners’ experience when it’s time to list their home. Following is a list of those fears and ways to combat them.
Over the many years, I have served home buyers and sellers here in Reading and Berks County, I have observed various emotions. Needless to say, there is a lot of emotion in the buying and selling of homes. The one emotion I am contracted to diffuse is fear.
Most of us have heard the term “Cold Feet” and know it relates to a buyer changing their mind about a purchase. The closest phrase we have for a seller who changes their mind is “Seller’s Remorse.” In either case, the emotion that best describes the conditions is fear which causes indecision.
Causes of Homesellaphobia
The first and most obvious concern is value, “What’s my Home Worth?” Some national housing statistics say that In 2018, 62% of all listings undersold and predicted that number to climb to 75% in 2019.
Condition and Cleanliness
Many sellers express concerns about the general condition and cleanliness of their home. They think that buyers and agents coming to see the house will think less of them and the home if it is not in tip-top condition.
Real Qualified Buyers
Home sellers often ask me if every buyer seeing their home has been financially qualified to purchase it. The concern here is one of practicality and safety. No one wants to ready their home for someone who has no business being there or is up to no good.
Inspections come from the buyer, appraiser, and in some cases, the municipality where the home resides. Most of the anticipation relating to these inspections is detrimental to the homeowner.
All the Paperwork
Understanding the listing contract, Agreement of Sale, and the sea off associated documentation can be daunting.
I have yet to meet a home seller who was excited about gathering up all their things and moving. Moving can be a daunting task and often takes considerable planning and effort.
Solutions to Homesellaphobia
Your agent can help you establish a value for your home that will be acceptable to the home buying market. Once a value has been established the agent will furnish a net sheet showing the costs and proceeds from the eventual sale based on the asking price. This practice can take much of the ambiguity regarding dollars out of the equation, so the home seller better knows what to expect.
I am often asked what can be done to a home to enhance its value. In my opinion, home sellers are better served by an agent who will tell them what they need to hear and not what they want to hear as it relates to the condition and cleanliness of the home. In my experience, most homes are in better shape and cleaner than the seller realizes.
Agents are professionally licensed and should bring ready, willing, and able buyers to preview homes for sale. That said, I am sure that some agents show homes to people who are not qualified. Unfortunately, the solution to this issue would be worse than the problem as fewer homes may sell if showing restrictions were too tight. For the most part, the system of home showings works rather well.
Home inspections have become a standard part of almost every home sale. I take the time to counsel home sellers on what they can expect and how to avoid the pitfalls of these inspections by being proactive and, in some cases, considering pre-sale inspections.
A full explanation of all the paperwork involved in a real estate transaction is prudent. Many agents will counsel with their clients several times during the transaction to update the seller on the status of the performance and other important dates and conditions of the agreements.
As you can see, an experienced real estate agent can be worth their weight in gold. Your agent can be the medicine that cures any homesellaphobia!
Knowledge is Power!
Jeffrey C. Hogue