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
A simple term like As Is can have many meanings. When used in the world of real estate, it goes to a different parallel. The ambiguity of the statement may not be what you want when selling your home, or maybe it is! Here are some things to consider when you sell your home as is.
The real estate business is always full of intrigue and surprise. Often I am presented with situations that, not just require but demand deep thinking. Sometimes that deep thinking finds it’s way into the articles I pen. This happens to be one of those times.
After negotiating a homes price and moving your stuff, the home inspection process may be next in line for things a home seller dreads the most. Not many home sales happen these days without a home inspection being part of the purchase process. The purpose of the home inspection is to find out if something is wrong with the home (Reminds me of a physical). You can’t wait for the doctor to say all is fine and you will live forever.
One way home sellers believe they can navigate by the whole home inspection thing is by offering the property As Is.
Firstly, let’s look at how our local multi-list, Trend MLS, categorizes the As-Is condition status. There are four property condition statuses for Realtors® to choose from; Average or Above, Fix-Up/Needs TLC, Shell, and As Is. Let me state for the record that while the first three can justifiably be considered property conditions, “As Is” is more a condition of the deal or sale.
The As Is status is defined by Trend as follows, The Property will Transfer in its Current Condition. Interestingly enough, most home sellers believe that is what should happen in the first place. If there were a known material defect or an issue that impacted the safety and well-being of an occupant the seller would remedy the condition before offering it to someone else or offer the home at a discount in consideration.
Will listing a home for sale using the “As Is” status stop a home buyer from asking for a home inspection? Not likely. Buyers and their agent may not even notice the “As Is” status of the property. Even if they did, it is unlikely that it would deter a would-be buyer from asking for inspections.
Know that if you sign an agreement of sale with inspections, the buyer has the right to void the deal if there is something that surfaces in the inspection report they do not like. The agreement you signed with inspections gives the buyer the right to void or ask for repairs and therefore overrules the “As Is” status. An agreement can also have a mortgage contingency which could lead to property condition investigations through the appraisal process. A true “As Is” sale contains NO home inspection conditions whether they are from the buyer or the process of lending money to purchase the home.
In my opinion, a seller would consider using the “As Is” status to convey that the home is in as sale-ready condition as they are willing to make it and will be transferred to the new owner that way. In some cases, I would advise the seller to have a pre-listing home inspection done by a certified home inspector. This way they would have a third-party professional opinion as to the condition of the home. If the pre-inspection uncovered an unknown adverse condition, it could be addressed immediately either in fixing the issue or adjusting the sale price to compensate. Now the “As Is” status, and likely the sale price would hold more gravity.
One of the perceived negatives to using the As Is status is that some home buyers will think the home is in disrepair. It is my opinion that not many people use the property condition status to search for homes. If a buyer were looking to purchase a home to fix up, they would search using the Fix-Up/Needs TLC or Shell statuses.
I, for one, like the As Is status. It clearly defines the position of a home seller. As long as all the laws are followed that adhere to State Property Disclosure Law, I see little downside to the practice.
Knowledge is Power!
Jeffrey C. Hogue
It is essential to have a solid home pricing strategy in any real estate market. A fast-paced real estate market presents some exceptional opportunities for home sellers that stretch beyond price alone.
The Old Way
For most of my twenty-five-year real estate career, there was one home pricing strategy that seemed exceptionally popular with home sellers; “Price it higher than what it is worth, so we have room to negotiate it lower.” This plan of action was often swiftly followed by the old venerable statement; “We can always come down in price but cannot go up.”
Pricing a home higher than what it is worth may never have been a good strategy but more of a hope, kind of like hitting the Powerball. The information age we presently live in has made the price-it-up strategy even more difficult. The internet has turned avid home shoppers into home valuation aficionados who are quick to recognize the difference between the right price and the wrong price.
The New Way
The internet has drastically changed the way buyers shop for homes. Back in the day, people looked at print ads that said GREAT HOME priced at $199,999. The accent was on the under $200,000 price tag. This type of display ad pricing worked for many products.
Along comes the internet and now people use price categories to find the homes they desire. Instead of seeing an ad with a house in their desired price range they are now able to choose the price range they wish. Most real estate websites use channel valuing to help buyers search for homes. In two clicks of a mouse, the buyer can search all homes in a given area between the $200,000 and $250,000 price channel. The house priced at $199,999 never shows up in this buyers home search at all.
What this means is that it is important your home’s price is in the right pricing channel, so the maximum number of buyers find it.
The Fast-Paced Real Estate Market Home Pricing Strategy in Action
In a nutshell, a fast real estate market consists of more home buyers than homes sellers. The more buyers that can find your home the better. If the house is priced too high (out of the channel) it stands to reason fewer people will be interested.
Let’s say your home is worth $200,000. If you price the house at $214,900 hoping to get $200,000 you are going to limit the pool of interested buyers. Pricing above $200,000 means your home will likely be competing with other houses up to $250,000 in a price channel that has fewer buyers than the $150,000 to $200,000 price channel. Even better, at $200,000 you will be in both price channels.
In a fast-paced real estate market, you can price your home at $200,000, and more buyers will compete for your home and may even bid it up past the $200,000 you are asking. You see, it is better that prospective buyers compete against each other to purchase your home than having your home compete against other houses that may be better. Buyers tend to get very emotional when they compete for a home, and that often benefits the seller.
Another advantage of having multiple offers is that you will likely get better terms and conditions in the deal. When you overprice your home, you’re fortunate to get one buyer who may call all the shots. When you have multiple offers, it is possible that the buyers will use terms and conditions to make their offer look better than the other buyers offer to mean they might waive home inspections and let the seller pick a settlement date that is more suitable for them. The best part may be that if for some reason the deal is not going well you have a list of other buyers who really wanted your home, lost out, but now have a second chance, a plan “B” of sorts.
In today’s fast-paced real estate market it is more important to pick the right price channel than overprice the home to get less. What is impressive is that you can actually underprice your home and get more. When pricing your home consider a ‘Smart Price” and not an”Over Price.” The real estate market of today has a way of sorting these things out.
Knowledge is Power!
Jeffrey C. Hogue
Emotions may have more of an influence on home sales than you think. Here is my story of how emotions can influence home sales…
Recently I received a call to list a home from a lady who asked me to meet with her to discuss, what she hoped would be, the sale of her home. Nothing out of the ordinary simply a business call to do what I love, home sales.
Upon arriving at the home I met the lady who made that call. She was charming, smart, a seasoned traveler and more. In my humble opinion, she was, and is, class, personified. She had an influence on me almost immediately. She told me stories and things about herself, both good and bad. When the tale was good I cheered inside, when it was bad I wanted to make it better. I wanted nothing but good things for her.
We talked about her home, about what she paid for it and what she did to make it special. As she showed me around a sense of proudness followed her every step. We then went outside to see the landscaping and talked about her time spent in the flower beds and backyard. We went back inside to warm up and talk business.
She asked me what I thought her home was worth. I shuffled around a bit and slightly altered the conversation. You see, I had done my homework (no pun intended) before arriving at the home. The value was nowhere near what she paid for the prized property. She might get upset if I don’t say it is worth more than all my experience and understanding tells me. There has been enough of that in her life. What should I do?
In case you are wondering this is not a love story. It is an everyday example of being a caring human being in the real estate business. Realtor’s® want to give good news to those we meet. Making people miserable is not our prime directive. Unfortunately, the Berks County real estate market has not been chipper for some time now. This means that good news is harder to come by.
I was about to share my information regarding her home when she stopped me and told another story. It was about the last real estate agent she listed with. “The home was excessively overpriced and did not sell,” she said. This made her sad and cost her valuable dollars in the process. Egad, she had seduced another professional with her charm and charisma and they succumbed to failure!
I knew what to tell her, the truth. She was not happy but not surprised. Her unhappiness was quickly turned by the conscious reality that her home would sell and the burden lifted. We have grown closer and I am proud to call her a friend.
Many a real estate agent, including myself, can get overwhelmed with happiness when meeting with a customer for the first time. The thrill of someone choosing me to help them make one of the biggest decisions of their life is euphoric. It can only be explained by being in that position. I want to be a superhero to them, a protector of their value, a friend. I have discovered that the only way I can be all those things is to be knowledgeable and truthful.
I understand home buyers and sellers hire real estate agents and expect honesty. They need to be careful of what they wish for. Unfortunately, the truth may not be what someone wants to hear. This is when equanimity needs to be displayed by the Realtor®
At the end of 2014, almost 250 homes expired. No, they did not die, they simply did not sell for the asking price during the period they were listed. I have spoken with many homeowners who have been unable to sell their property. Some tell me “the agent told me to list it at this price” or “the marketing was bad”, etc… I think that they were just too charming and unwittingly seduced the agent into telling them what they wanted to hear.
When a home does not sell what can be lost is more precious than money, time! Where trust and truth are needed they were replaced with kindness. Kindness for the wrong reason can do great harm.
Knowledge is power!
Jeffrey C. Hogue
Is it Necessary to Pay a Real Estate Transaction Fee?
If you are reading my info-article for the first time you will quickly understand that my goal is to educate home buyers and sellers about the nuances of the real estate business. If you are a consistent reader you know I tell it like it is (or how I believe it is).
This week I want to shed light on the infamous transaction fee (also known as an administrative or broker service fee). Whatever it is called by different real estate brokerages I will refer to it as the FEE.
Several years ago real estate brokers faced with higher costs of doing business look for ways to supplement their income. Many decided to charge ancillary fees in addition to the real estate commission. The fee is usually in the $200 to $500 range and purports to cover costs for increased overhead and costs incurred for complying with the myriad of federal and state laws affecting the sale of residential real estate. The fee is not limited to the home seller but is often charged to the buyer as well.
The Real Estate Settlement Procedures Act (“RESPA”) governs the conduct of real estate brokers on the federal level. Federal courts and district courts have not found these administrative fees to be in violation of RESPA, but the U.S. Department of Housing and Urban Development (“HUD”) has maintained that fees charged for nominal or duplicative work violate the Act. On October 18, 2001, HUD issued a Statement of Policy, adding unearned or excessive fees to the list of RESPA violations.
To further complicate matters In a decision that could have significant impacts on the fees that consumers pay in real estate transactions, in 2012 the U.S. Supreme Court ruled that “unearned” fees charged by lenders and other service providers do not violate federal law as long as they are not split with anyone else LOOPHOLE: (commission is customarily split with another broker, service fees are not). The court’s unanimous decision effectively reopens the door to controversial “administrative” fees levied by real estate brokers and could encourage the practice of “marking up” of fees by mortgage lenders, settlement agents and others that had been banned by federal regulators for the past decade.
The fees, if any, need to be disclosed to the parties that will be responsible for paying them up front. The Listing Contract and Business Relationship Agreement we use in Pennsylvania outline the additional fee to be charged right in the respective document. It is normally not something most agents go out of their way to explain to their prospective customers. Read the contracts!
Here is the rub between HUD and the Fee. Prior to 1999, the job of a real estate broker and the licensee was to find a ready, willing and able buyer and seller for a property. After November 25, 1999 Act 112 of the Real Estate Licensing and Registration Act (“RELRA”) was amended and signed into law by Governor Ridge. The Amendment to the Act expanded the duties of agents. The most important of these duties are the obligations: 1) to advise the consumer to seek expert advice beyond the licensee’s expertise, i.e., to seek the advice of an attorney, 2) to keep the consumer advised regarding the status of the transaction, i.e., beyond simply finding a buyer and seller, the agent must now continue to provide service until an agreement of sale is settled, and 3) to advise of the tasks to be completed to satisfy an agreement or condition for settlement, provide assistance with document preparation and advise the consumer regarding compliance with laws pertaining to real estate transactions. The duties mentioned have normally been implied (expected) as part of the agency relationship between the customer and agent, they are now statutory (mandatory under the Act).
No wonder many attorneys have a problem with their clients being charged an additional transaction fee for duties that are already the statutory responsibility of the agent. Sounds to me like the duties necessary to complete the transaction happen whether the customer pays the fee or not.
Cutting through the legal garble, the whole thing customarily works like this…The real estate agent is charged a transaction fee of around $200 to $300 by the broker they are licensed under. The agents turn around and pass the charge to the customer along with a healthy increase of $50 to $300. This elevated amount covers the broker cost to the agent and creates more income for them as well. Not all agents do this so be diligent and ask when you are shopping for an agent to represent you.
Weichert Realtors® Neighborhood One will NOT charge a transaction or administrative fee to any of our customers. But since so many real estate customers have paid, and continue to pay the additional fee to their brokerage and/or agent, our agents have come up with a better way to spend your money….If you list your home with us or have our company represent you as a buyer agent in a home purchase, we will give you the opportunity to pay an administrative fee of up to $125.00. This fee is not mandatory but if you do pay it Weichert Realtors® Neighborhood One will match the amount and send the funds to a charity known as the Wounded Warrior Project in your name. This seems like a better way of spending your money than charging you for a service we already do as part of the business relationship with our customers.
Knowledge is power!
Jeffrey C. Hogue
Pricing a home or property may be the most challenging thing a Realtor endeavors to do for an owner. Price it too high, and the home is destined to be mercilessly passed over by the masses searching homes online. Estimate the home’s value at something less than what the owner believes it is worth and you may not get the listing. Why?
Many homeowners converse with family, friends, and acquaintances when considering selling their home. These conversations produce well-meaning accolades such as, “your home is in a great neighborhood, and it will sell fast”; “Your home is nice! It is at least worth (Insert Large Number HERE)”; and my particular favorite, “If I were looking for a home I would buy it.”
Armed with the confidence offered by their well-meaning fan base, the owner enthusiastically goes online to get a better idea of what their home may be worth. They run aground on a website called Zillow.com. There they are confronted with this thing called a Zestimate®. What the heck is that?
To better understand what a Zestimate® is CLICK HERE.
The real estate agent has not yet been invited, and there are all kinds of home valuations swirling in the mind of the owner.
Welcome the Realtor®. It is important for a Realtor to establish themselves as both knowledgeable and engaging. Home sellers tend to list with people they trust, vis-à-vis like, more often than those that are good at their profession. It is a good thing to have an agent you like that is good at what they do because like alone may not get the job done.
In a single visit, the agent has to consider the location, content, and condition of the property. They should also understand the aspirations of the seller. Do they have to sell fast and if so, why? What is the story?
Having previewed the home and gained an understanding of the seller’s need and desire the real estate agent gets to work. Armed with a market analysis filled with the latest and most accurate information on home sales available, the agent arrives at an estimated sale price. It is lower than what people have told the seller but higher than the often misunderstood Zestimate®.
The job of pricing a home can be challenging as every home and situation are unique. An honest agent is not afraid to tell a home seller the truth when the value estimate is not at the level they expect. Fair value assessment gets more challenging when the seller has been fed information from less qualified sources that lead them to believe their home is worth more. Ultimately many homeowners can get confused and do not know where to turn for helpful and honest information.
Zillow had such success with offering Zestimates® they have taken the next step and are now predicting the future. They have added a valuation forecast looking out one or more years. If that were not enough, they added a rent estimate as well. The accuracy of this information is questionable at best. How can the internet utility see the new appliances, fresh paint and staging you just completed?
Many other real estate websites have followed suit after seeing the success Zillow had with offering a value guesstimate to its audience. The question we should consider is, do these home value estimates assess, predict or create the actual value? If you visit five websites and all say your home is worth within a couple of dollars, you may believe it true. Suppose everyone who is interested in your home does the same. Have these unprofessional unfounded value estimates influenced your home’s eventual selling price? Depending on any real estate website valuation model for anything more than curious entertainment may be dangerous.
Instead of giving weight to what everyone NOT in the real estate industry tells you, use the time to seek a top quality real estate professional who specializes in selling homes in your area. The butcher baker and candlestick maker have no skin in the game. It is all about courtesy. While that is nice, it often is misplaced. I would not have them tell me what medication to take for an ailment just the same. And for goodness sake, leave the Zestimate® where it belongs. All the prognosticators who give advice or read tea leaves do it for their benefit or favor, not yours.
Count on a real estate agent who does their homework and includes you in the pricing process. This often cannot be done in a 1-hour meeting at your home. It is much more important and complex process than that. Both you and the agent do have skin in the game. As partners, you succeed or fail together. Make sure you interview more than one agent. Ask for recommendations and references. Consider someone who will tell you the truth and not what you want to hear.
The butcher baker and candlestick maker mean well. They may ask how things are going. They may even offer advice. Let them know they are great at what they do, but you have found a partner you trust to help with the home sale.
Knowledge is Power!
Jeffrey C. Hogue