Much has been written across real estate blogs and mainstream media outlets about unrealistic home sellers. It seems much less common though to talk about unrealistic home buyers.

Naturally everyone wants to get the most home they can for the least amount of money. Which is, of course, in opposition to the home seller, who wants the most money for their home. This inherent conflict is one of the things that makes real estate sales… challenging at times.

It has been my experience of late that home sellers in Phoenix are becoming much more realistic. While it used to be quite common to hear sellers say things like, “But my neighbors house sold for x dollars last year!”, sellers seem to be getting more realistic when it comes to their home’s value, as depressing as that may be.

Home buyers on the other hand almost seem to be losing their grip on reality.

Here are some examples of communication we have received lately:

• We’d like to offer $30K under list price…
• I want a single-family detached house in Scottsdale, on a golf course. I can spend up to $150K…
• I need a home less than three years old, NOT in a HOA…
• We just foreclosed last month and are looking to buy. I think our credit is horrible, and we don’t have any down payment money…
• I need a smoking deal on a bank owned home or short sale. I’m willing to pay 50% of list on multiple properties…
• I refuse to pay a dime over list price on a short sale or bank owned home…

I could go on and on.

The answer for all of those comments above is “you can’t do/get/buy that”.

Here’s the deal. Much of this type of thing comes from simply not understanding what is happening in the real estate market. And by “the real estate market” I am not talking about what you hear on CNN or even your local evening news / newspaper. You need to understand what the market is doing in the specific area you are interested in. “The market” is just too broad and real estate is hyper local.

As a home buyer, you can’t be expected to truly understand your local real estate market. Most people buy a home every 7 – 10 years. We are up to our necks in this stuff every single day. That doesn’t make real estate sales people better than you, or smarter. It’s just what we do for a living (and sometimes I ask myself why in the world I’m doing it…). Helping people determine the nuances of their local real estate market is what we get paid for (and why, to be brutally honest, it is very frustrating to have our data, attempts at education, and advice questioned repeatedly – or ignored).

An example:

At this moment in time, the average price of a home in the Phoenix Multiple Listing Service is $175,509. That number is for the entire Phoenix MLS area, which includes all of Maricopa County and a significant swath of Pinal county. That is a HUGE area – almost the size of the state of Massachusetts.

Listen to the mainstream media and you’ll often hear the average priced batted about – it’s rising, it’s falling, it’s hopeless, it’s recovering.

So what does an average home price in the Phoenix area of $175K mean?

Absolutely nothing.

You want a home in Phoenix proper? Average price is $132K

Scottsdale? Average price is $639K

Gilbert? Average price is $221K

El Mirage? Average price is $79K

You see, when you lump every type of home in a 10,000 square mile area into one number, it swiftly begins to become meaningless.

So let’s drill down a little bit. . .

$639K average home price in Scottsdale? What does that mean?

Only slightly more than absolutely nothing.

Right now I could sell you a condo in Scottsdale for $32,000 (but it’s not on a golf course). Or a (really) nice home for $15,000,000. About all the average price tells you is that generally, homes in Scottsdale cost more than say… homes in Gilbert, which are more, generally, than homes in El Mirage.

Here is where being a “realistic buyer” comes in to play

It is a waste of your time and your agent’s time to try to find homes that simply do not exist. That part is relatively easy to educate, and provide hard data to back up that education. Want a golf-course lot single-family home in Scottsdale? A quick trip to the MLS shows you have 323 options, and the five lowest priced ones are: $295K; $350K; $394K; $410K; and $424K. You simply can’t get one for $150K — it does not exist. Don’t waste your, mine and our time looking for one.

You want to “steal” a bank-owned home for 50% of list price? Consider this… In Feb 2010, there were 2,822 lender owned properties sold, at an average of 98.48% of list price. How many do you think were sold at 50% of list price? While I have not looked at all 2,822 sales, I’m quite confident in saying that number is zero. You can’t buy REO properties in Phoenix at 50% off list price. That’s not a realistic expectation.

That’s all hard data – you can’t argue with it (though many do).

Were it gets tough is on some of the more nebulous requests from buyers. You don’t want to offer a dime over list price on a short sale? Well, here is where you may have to rely on your agent’s expertise. I can tell you (and show you) that there are oodles of short sale listings in the Phoenix market priced woefully under market value. We could spend hours pouring over current listings and past sales to demonstrate this. But that’s not an effective use of your time (or mine). And it is still a difficult thing to prove. The problem is, there are listing agents out there with the nasty habit of grossly under pricing a short sale in an effort to generate an offer and/or bidding frenzy. Offer below list price on a home already priced lower than the bank will accept and you are looking at an exercise in futility.

When you are buying a home, you have to be realistic. You aren’t going to get everything a $500K home has to offer for $250K – it just doesn’t work that way. You’re not going to steal a home from a bank, no matter how much the banks annoy you or how much they got in bailout money. You aren’t going to live a Scottsdale lifestyle on an El Mirage budget.

Please please please, for the love of all things good and the little fluffy bunnies, don’t think for a moment that I’m saying all buyers are unrealistic, or that no one listens. Buyers are smart. Smarter than a lot of people, including many listing agents and sellers, give them credit for. Yes, it is frustrating when a buyer won’t listen, or doesn’t believe what we say. Given the general mistrust of real estate agents in the public’s eye, I understand that reluctance to believe. I understand we have to prove we know what we’re talking about. We have to earn your trust. Once that trust is earned however; take advantage of it! Believe what your agent is telling you. I can assure you that they want to sell you a home as badly as you want to buy one.

Think about what your expectations are, and work with your agent to see if they are realistic. It’s OK to ask for as much proof as your agent can provide. Realize though that some things are difficult to prove with hard factual / statistical data. Sometimes empirical data (based on observation and experience) is all you have to work with. Combine the two, work closely with your agent, build that trust and get out there and find that perfect home! 

Just be realistic. It will greatly reduce your stress level. And your agents. Remember, real estate agents are people too. (At least most are most of the time…)

Longtime readers of Phoenix Real Estate Guy will know there are some things that annoy me about the real estate industry. No, seriously!

Bad listing photos, (most) Realtor designations, the bureaucracy of Realtor Associations, the requirement to write REALTOR® in ALL CAPS, single-agent dual agency, and the “I’M A MILLION DOLLAR PRODUCER!” proclamation are just a few annoyances on my list.

Here’s another thing that bugs the hell out of me.

Claims of “We are #1!” for anything ranging from production, to agent count, to service, to web sites, to social media presence. And more.

A couple of years ago, some agent regularly slapped fliers on my door with “THE NUMBER ONE REAL ESTATE WEB SITE IN ARIZONA!!” in big giant red letters across the top. Interestingly, that #1 real estate website in Arizona is now returning “page not found” errors…

I regularly see agents advertising, “I’m a top producer!”

And a few days ago, @KWCareers on Twitter posted this:

For the record, I’ve got nothing against Keller Williams. I have good friends that are KW agents, I know many stellar KW agents,  and we’ve got some amazing former KW agents working at Thompson’s Realty.

What bugs me are these claims – by anyone – of being #1, or “the best” or “top” whatever.

When I see claims like the one Keller Williams made, four thoughts typically pop immediately into my head:

1. You are #1 based on what metrics?
2. Show me the data!
3. Who cares?
4. So what?

So in an effort to get the answer to Thought 1, I asked @KWCareers this on Twitter:

“Curious, #1 based on what metric?”

I was not alone in my curiosity, as Michael McClure ( @ProfessionalOne) asked:

“Congrats! By what metric(s) are U #1 on Twitter?”

The next day, here’s how the Twitter conversation progressed:

Well, given that on Twitter @KWCareers has 4,398 followers, and @KWRI (the KW “home” account) has 6,374 followers, yeah it is that hard to believe. Total number of followers? The aforementioned ProfessionalOne has 34,239 followers. Adding these two KW accounts together they don’t have one-third the followers that Professional One has…

So I replied:

Which garnered this response:

Ah! Now we are finally getting to the root of the question, “You are #1 based on what metric?”

Let’s set aside the ridiculous (and worthless) measure of “followers” on Twitter – it means absolutely nothing as Jeff Turner pointed out quite eloquently in his article, YEO – Why Twitter Follower Counts Mean Nothing. If you think follower counts mean anything, read Jeff’s article where he outlines how he set up two Twitter accounts for fictional people, automated their Twitter messages and replies, and collected almost 6,000 followers in one week.

But if Keller Williams wants to use that particular metric to claim they are, “The #1 real estate company on Twitter and Facebook”, who am I to stop them?

However, if you’re going to claim it, you darn well ought to be able to prove it.

My Thought 2 asks, “Show me the data!”

And we are waiting on said data:

This should be quite interesting. In order to prove this claim, what KW is going to have to do is:

Show that they’ve found every Keller Williams agent with a Twitter and Facebook account, and every agent with a Twitter and Facebook account that works for RE/MAX, Century 21, Coldwell-Banker, and Prudential. Since those are the largest five brokerages by agent count, that should be a sufficient sample set to prove they have the most agents with Twitter accounts and Facebook profiles. (Though to truly prove their claim, they really need the numbers for every agent in every company.)

Good luck getting that data. I can’t wait to see it. I wonder who #2 is? Keller Williams must already know as they have determined they are #1. You can’t claim you are #1 without knowing who is in position #2…

I don’t think they can prove this. Oh, they can assume they are #1 because they are the largest brokerage by agent count. They do tend to have more “tech savvy” agents than the other large brokerage houses, so maybe this assumption of the “#1 spot” is safe.

But they aren’t saying, “We think we are #1” or “We assume we are #1” or “We’re probably #1”. They said, “KW is the #1 real estate company on Twitter and Facebook”. Is, not might, should or could be. Is.

So prove it.

Here’s where things like this bug me beyond belief

No one ever bothers to prove these wild (and usually meaningless) claims. They just shout them out and expect people to believe it.

Here’s a claim for you:

Thompson’s Realty is the number one real estate brokerage in the world!

Want proof?

We have never had a single agent leave our brokerage to go work for another real estate brokerage. Ever. That is a documentable fact. Since no one has ever left to work somewhere else, we are by definition #1 with regard to agent retention (Yes, there could be other brokerages with the same claim – but no one can do better than zero agents leaving for other brokerages).

Maybe I should blaze Thompson’s Realty is the number one real estate brokerage in the world! across my websites. Or send out a Tweet or Facebook status update. It is a true statement after all.

A true statement as long as I leave out how we are measuring this. Of course there is more that should go into claiming you are the #1 brokerage in the world than just agent retention. But hey, everyone else makes #1 claims without bothering to mention what metric that claim is based on. Why shouldn’t I?

Why. Shouldn’t. I.

Because it is wrong to make claims of position or grandeur without the data to back it up. Because It’s wrong to puff out your chest with pride and say things like you have “the best website in Arizona”, or you run “the #1 brokerage in the world” or “the #1 real estate company on Twitter and Facebook” without clearly indentifying what you are basing that claim on – and having the data to back it up.

Not only is it wrong, but honestly, who cares and so what? Does being the #1 real estate company on Twitter mean a damn thing to the most important people for your brokerage — your clients? Last I checked, our sellers have one fundamental goal – to sell their home. Our buyers have one fundamental goal – to purchase a home that meets their needs. I don’t think they give a hoot how many Twitter followers our agents have, how many have a Facebook page, how many RSS subscribers or how many visitors their sites get. Yes, maybe those things contribute to the success of an agent, and ultimately to the clients need. Maybe. But prancing around making basically unprovable claims is a pointless exercise.

So please, make it stop.

UPDATE:

Seems prudent to document the conversation that occurred on Twitter after this post was published:

@KWCareers: Just got a message from KWRI that they did their own survey of other RE Co’s on Twitter/Facebk & compared follower/fan #’s to KW’s

@KWCareers: @ProfessionalOne @phxreguy Wish I had an independent source to refer to….but had to take our research dept’s findings as fact

@PhxREGuy: @KWCareers Soooo… you can’t share the research dept’s findings? They must have had SOMETHING to base this claim on?

@KWCareers: @phxreguy Working on getting the specific data…stay tuned. Believe me….want to win this debate! Thanks for participating!

@PhxREGuy: @KWCareers Would be interesting to see. Assuming a sample, so things like sample size, statistical validity, margin of error are important

@PhxREGuy: @KWCareers WIthout at least that, it’s not worth the paper it’s printed on… especially w/o independent verification

@KWCareers: @phxreguy Understand…will work to get u info. In the meantime, maybe u should take a closer look at the KW model: http://bit.ly/cjJcOk [Editor's Note: thanks for the link, but I'm well aware of the KW model]

Approximately two hours later…

@KWCareers: @phxreguy The stat that KW is # 1 on facebook/twitter is based off the followers/fans of each company’s corporate identities on each site.

@PhxREGuy: @KWCareers So you are saying KW is #1 on Twitter because @kwri has more followers than any other RE company?

And no response yet from my last question to @KWCareers, though they’ve sent out nine unrelated Tweets since telling us they are “#1 on Twitter” based off followers of “each companies corporate identities”.

MY interpretation of that means that the “Keller Williams Research Department” looked up Twitter profiles for the main “corporate identity” account for…  every real estate company?

Hmmm. Apparently not. Here’s what the Thompson’s Realty Research Department has found regarding Twitter follower count for various real estate companies:

Kelsey Cottrell Realty (Independent real estate brokerage): 99,569 followers
Professional One (Real Estate Brokerage Franchisor): 34,261 followers
Austin Texas Homes (Independent real estate brokerage): 11,286 followers
Susie Blackmon LLC (Independent real estate brokerage): 10,337 followers
Buyers Choice Realty (Independent real estate brokerage): 7,267 followers
Keller Williams Realty: 6,470 followers
Thompson’s Realty (Independent real estate brokerage): 6,242 followers (dammit, I need another 228 followers to surpass KW as NUMBER ONE! Oh, wait…)
RE/MAX International: 6,077 followers
Century 21: 5,875 followers
Coldwell Banker: 4,261 followers

Please note this list is by no means comprehensive. The five real estate companies that, ahem, place higher than Keller Williams in follower count were found in, oh… call it 30 seconds, by the crack research department here at Thompson’s Realty.

I did have one local Phoenix area KW agent ask me on Twitter, “Aren’t there bigger causes/more productive things you could question or try to solve?”

My response was, “Personally, I think a major RE brand making an apparently baseless claim IS a big deal. Your mileage may vary.”

This post didn’t start out as a rant against Keller Williams. Sorry if I ruffled some KW agents feathers, that wasn’t the intent. The intent was to point out the lunacy of proclaiming yourself “#1″ when you’ve got nothing, or faulty “research”, to back up that claim.

UPDATE March 17, 2010: Keller Williams just issued a clarification on their “We are the #1 real estate company on Twitter and Facebook” statement. It’s posted on their Facebook fan page. In short, they are now saying they are #1 of the four major real estate franchise brokerages (which I assume are KW, RE/MAX, Century 21 and… Coldwell Banker? Prudential?).

*sigh*

Long time readers already know one of my pet peeves is poor photos of homes for sale in the Multiple Listing Service.

Dean Ouellette uncovered this little nugget today:

Yes, that is the actual size of the photo uploaded into the MLS.

Nothing like displaying your client’s property in a stunning 65 x 42 pixel masterpiece.

I don’t even know how to take a picture this small…

The MLS resizes one photo to display as a “primary” photo with the listing information, so here’s what you get when it does its resizing:

Well that’s better.

In case you were wondering, here’s what the kitchen looks like:

And there is this lovely shot of the parking space:

Just for comparative purposes, here’s a kitchen  shot from one of our current listings. Of note, I had to reduce the size of this MLS photo to get it to display properly here:

In addition to photos, agents and potential buyers like to see a description of the home. The MLS provides space for this as well. ANNOYINGLY, MANY AGENTS WRITE THESE DESCRIPTIONS IN ALL CAPS. But even that is better then the description that accompanied these teeny-tiny photos. It read:

Remarks:

Yep. Completely blank.

Home Sellers – Please, please check the photos your agent submits to the MLS. Photos are one of the main factors in home buyers deciding to take a look at your property. If they can’t see it in pictures, they won’t bother seeing it in real life. A description, any description, helps too.

This just in from Ask the Broker:

Question: I put in an offer on a home that is in short sale, but the owner refused to submit my offer to the bank which was the highest offer given. He wants to remain in the home, with investor purchase. My agent told him we submitted an offer and it was still active, so the sellers agent removed from market. House goes in foreclosure 3/9/10/ What can I do to advise bank of my offer that the seller is withholding?

The short answer: there isn’t anything you can do.

The owner is not under any obligation what-so-ever to submit ANY offer to the lender. It doesn’t matter that your offer was the highest offer, it doesn’t matter if he wants to stay in the home. It’s his home, and he controls what offer does and does not go to the bank.

A short sale is really no different than a traditional sale in this matter. No one who puts their home on the market is obligated to consider any offer. In the case of a short sale, yes the lender has to approve an offer, but it is still the seller’s home, and they are in complete control over which offer – if any – is sent on to the lender.

It sounds here like the seller is hoping an investor will purchase his home and lease it back to him. As such, they are only going to submit offers from investors. It is well within their rights to do exactly that.

As an aside, while I don’t think this applies in this particular situation, buyers submitting offers on homes for sale need to remember that price isn’t the only factor sellers consider. See Making an Offer on a Home. It’s not all about the Benjamin’s… for some thoughts on factors that go into a seller’s decision to accept an offer.

Photo Credit: Valerie Everett on Flickr

We are very excited to announce the latest agent to join the Thompson’s Realty brokerage – Dean Ouellette.

Dean comes to us from RE/MAX Diamond. He’s also one of the better real estate video bloggers out there, AND his blog has a nifty “Top 10 Real Estate Posts of the Day” feature where Dean collects the best from across the net, adding in a brief commentary. He contributes to the national Bigger Pockets real estate investing on-line magazine and is one of the founders of Real Estate Tech Tank – an open collaborative work space for people in the real estate industry.

He also works his butt off for his clients. I’ve know Dean for awhile, and can attest that he’s a driver who gets the job done, always keeping his clients best interests in mind.

He’s killing Tempe real estate, does a boatload of short sales, has a growing Facebook fan page for Tempe, AZ and is one smart guy.

We’re thrilled to have him, and know he will bring a lot to the brokerage – and to those fortunate enough to have him represent them in the purchase or sale of their real estate.

Follow Dean on Twitter, read his blog, watch his videos. You’ll learn something, guaranteed.

This article from the Charlotte Observer may just take front and center in my “What the Hell?” file. A big giant hat tip to Jim Duncan of the fabulous blog RealCentralVA for pointing it out on his Posterous blog.

N.C. Realtors protesting part of rule on disclosure

Fair warning, this is likely to be long and some will call it a rant. But often the real estate industry pisses me off to no end, and I have to get it off my chest. Writing here is the best therapy I’ve found for keeping my blood pressure down and eliminating (or at least reducing) the desire literally slap someone silly.

Let’s look at this lunacy step by step. . .

A group of leading N.C. Realtors hopes to change part of a rule that protects homebuyers from having their search guided by their real estate agent’s financial interests.

The presidents of the state’s three largest metro Realtor associations are protesting part of a 2008 rule that requires buyer’s agents to provide a written disclosure of compensation they might receive from sellers when a home is sold.

Change a rule that protects homebuyers? Are you freaking kidding me? First of all, it’s rather pathetic that we have to have RULES in place that protect homebuyers. Check me if I’m wrong, but isn’t a significant portion of our job ensuring that homebuyers are fully informed and making decisions that are in their best interest? Don’t we, uhm, REPRESENT THEM??

Sadly though, rules are needed because there are too many out there who will do anything for the almighty buck, ethics or what is in your clients best interest be damned. Yet here are the presidents of North Carolina’s three largest Realtor associations protesting a rule that helps homebuyers understand what is going on.

Changing such disclosure, said North Carolina Real Estate Commission director of legal services Tom Miller, could once again leave some homebuyers unaware that agents have extra financial motivation – such as a hidden bonus – in showing them a home.

But Tony Jarrett, regional vice president for the Triad for Allen Tate Realtors, said the rule requires burdensome disclosures for potential "in-house" transactions, in which one company employs both the buyer’s agent and the agent listing a property for the seller. In those cases, the homebuyer must be told not only what the buyer’s agent would receive if the property is sold, but the total compensation being paid to the real estate company.

"We don’t believe in-house compensation is a disclosure issue," said Jarrett, who will make a presentation to the commission at its monthly meeting today in Raleigh.

“Burdensome disclosures”?? Really?

Dear Homebuyer –

If you buy the home on 123 Main Street, the listing brokerage will receive a commission of X% of the sales price; the buyer’s brokerage will receive a commission of Y%. In addition, the seller is offering the buyer’s agent an incentive bonus of $X dollars.

Burdensome? Give me a freaking break. That took all of 15 seconds to type. Burdensome my ass.

Tony Jarrett, regional vice president for the Triad for Allen Tate Realtors, doesn’t believe in-house compensation is a disclosure issue. Why not? Why shouldn’t BOTH the buyer and seller be completely aware of all the costs in a real estate transaction? Why hide it???

Yet Mr. Jarrett is joined by others:

Jarrett is supported by the presidents of Realtor associations in Charlotte, Greensboro and Raleigh, each of whom wrote letters on the issue in the past month to the real estate commission.

I’d LOVE to see those letters because I simply can’t fathom why informing home buyers of the costs / compensation involved in a real estate transaction could remotely be considered a bad idea.

The Genesis of the disclosure rule, according to the Charlotte Observer:

Real estate brokers are typically paid a commission, or a percentage of the sales price. Some sellers, particularly homebuilders, also pay agencies a bonus for finding buyers. Such extra incentives, which come in the form of cash, trips and gifts, are legal. Before 2008, however, an agent didn’t have to acknowledge receiving those extra incentives until after the homebuyer had made a purchase offer on a home. Agents also were only required to tell the customer orally, making the rule hard to enforce.

The 2008 rule required that buyer’s agents inform homebuyers of bonuses in writing – and before that offer is made.

The rule was prompted by a 2007 Observer report that revealed millions of dollars in bonuses paid by homebuilders to Charlotte-area company Realty Place. The investigation found that Realty Place potentially violated state rules and federal law by not disclosing those bonuses to homebuyers they steered to those properties.

So here is a brokerage getting “millions of dollars” for sending homebuyers to certain homebuilders. Maybe those homes were the best choices for their clients. Or maybe the brokerage sent their clients there to earn millions of extra dollars. We don’t really know. But…

Realty Place owners agreed in 2008 to permanently close its doors in the face of an investigation by the real estate commission, which licenses and regulates real estate agents in the state.

So it would appear that not all was on the up-and-up. Greed is ugly. When a builder is dangling a boat load of money in front of you, it’s not all that difficult to convince someone to look toward that builder for their slice of the American Dream.

To address questions about what might be considered "extra incentive," the 2008 disclosure rule requires simply that brokers disclose all compensation they expect to receive from a transaction, including commissions and bonuses. In the case of an in-house transaction, that means the agency must disclose all of the compensation that both the buyer’s agent and selling agent will receive.

Good! The agency should disclose ALL of the compensation that both agencies in the transaction receive. ESPECIALLY if it is an “in-house” transaction.

Jarrett, who said that he supports the intent of the disclosure rule, argues that only the buyer’s agent should be required to reveal compensation for in-house transactions – and that a customer gains no benefit from knowing if a company is getting extra compensation by a third party, such as a relocation service.

Such information also can confuse consumers and burden agents with new disclosure requirements, Jarrett and others said.

Here’s this “in-house” issue again. What difference does it make that it is an in-house transaction? Dual agency once again rears its ugly head. This deception protecting hiding what a brokerage makes on an in-house transaction sure sounds to me like someone wants to protect their dual agency cash cow. If there is nothing wrong with a dual agency transaction (which is legal in many states, apparently including North Carolina) then why the move to attempt to hide the compensation from the buyer? (or anyone else for that matter).

A “customer gains no benefit from knowing if a company is getting extra compensation by a third party, such as a relocation service.” Really??

Dear homebuyer customer –

You need to see this home at 123 Main Street! It is AMAZING! It is EVERYTHING you’ve been looking for! There is simply no other home on the market that meets your needs. Trust me, I’m here for you and I know this. The fact that I’ll receive extra compensation from the builder or the relocation company has nothing to do with my steering you this way. Trust me.

“Such information also can confuse consumers and burden agents with new disclosure requirements, Jarrett and others said”

Burden agents? See the 15 second disclosure typed above.

Confuse consumers? I don’t think “Jarrett and others” are giving consumers much credit. Hell, that practically screams “YOU DON’T HAVE TWO BRAIN CELLS TO RUB TOGETHER”. Buyers (and sellers) are smart. They are completely able to understand a simple compensation disclosure.

"We do want to be able to disclose, but we want to do it in a practical way," said Lyn Kessie, president of the Charlotte Regional Realtor Association.

I. Don’t. Even. Know. What. To. Say.

Just disclose it for Pete’s sake! How difficult is it? You want practical? Here’s what you write in the law:

“Real estate brokerages – both on the selling and buying side – are required to disclose in writing all compensation, of any form, received in a real estate transaction.”

Period. Forget “in-house” contingencies. Forget trying to determine if you disclose the buyer-side commission or the seller-side. Forget trying to determine if a cash bonus, an increased commission rate based on multiple sales, or a non-cash incentive “counts”. Forget the lame-ass excuses that it’s a “burden” or it will “confuse” the consume. JUST DISCLOSE ALL FORMS OF COMPENSATION. Period.

(Tom) Miller of the real estate commission said the additional disclosures for in-house transactions protect homebuyers, because the agency involved employs the agents on both sides of the potential transaction. "The company is telling the agents what to do," Miller said, "and that company might be receiving incentives from another party."

An example: If a builder offers a real estate company a bonus for selling its homes, that company could theoretically direct its agents to show those homes first. If those companies were exempted from providing full disclosure of its compensation, those incentives could be hidden from consumers. "We would be back to where we were before the rule was adopted," Miller said.

Sadly, Mr. Miller is correct.

Phillip Fisher, the commission’s executive director, said the commission is unlikely to vote on any major changes in the rule today. Commissioners could appoint a task force to study "in house" transactions, or it could direct the legal department to do the same, before deciding on any changes in the rule.

Said Jarrett, who worked on a 2007 real estate commission task force that initially studied the disclosure issue: "We just need to figure out what the solution is."

Oh for the love of God. Now we need a “task force” at a state real estate commission, and let’s drag in the legal department while we’re at it. All this to “figure out what the solution is” to what seems so stunningly simple and obvious – tell people what the costs are in buying a home, which includes agent/broker compensation and incentives – before they purchase a home.

Why is this so difficult? Why is it even a topic of debate? What am I missing?

Photo credit: t-shirthumor.com

This arrived earlier today. I felt compelled to share (my emphasis in bold).

Hello Francy and Jay,

I’m looking for a house for my mother, who wants to retire in AZ

We are looking to buy now and I have found a property that might be a good place to begin

The listing is below

The marketing is woefully inadequate

I’ve seen 50 photos of a $4,000 car on eBay and those are excellent images

You guys in real estate have had it good for too long and your industry is lazy, inept and inefficient

The property is a mfg home with a possible mold problem, I am reading, and I understand that all risk is on the buyer, because sellers who are in the business of lending on real estate can’t afford to hire an inspector to give them a report or the sellers don’t have the expertise to know the condition of a property and they can’t find out, so they pass on all the risk to the buyer……………OK, that makes their properties worth less and my offer will reflect the position that we take all the risk……..I’ll hire a mycologist to inspect the property for mold problems

We only plan to use the property for a year, because my mother wants a nicer home and intends to pay cash for it, but we need a base so we can begin our search and this current listing of yours works fine for us at a price of about $25,000

We know that it’s a down market and we have read that those in default a year or two ago were all from the subprime debacle but today, those who are defaulting have conventional loans and had good credit

I don’t know anyone who is really doing well and it seems that everyone is on the verge of bankruptcy

One realtor told me that everyone he knows has left the real estate business and some are now delivering pizzas to make ends meet

When real estate prices are rising, you want to own, but when the elevator is going down, you don’t get on, unless you really need to buy

The mfg homes are nearly impossible to finance and so we feel it might be prudent to buy one with cash, but we don’t want to pay today’s value because we think that will fall to about half in the coming months, as the commercial real estate market collapses, the stock market crashes and the dollar becomes worthless

If you see a brighter future, please tell me how you arrived at your opium……..I mean optimistic view!  Ha!

We see yet another wave of foreclosures, because 48% of all homeowners owe more than the property is worth and that’s another $10 trillion in real estate, just waiting to be walked away from

If it’s wrong then why don’t you put in half and we will buy this one, together?

Anyway, $25,000…………all cash…………close in 10 days, after all my questions are answered……….and if you think the seller will entertain this, please send me some photos of the property

Proof of funds will follow, if you want to work with us

Here is what I’m thinking of for a reply….

Dear… sir;

Arizona is a great place for your mother to retire!

I feel I need to point out that this home you are inquiring about, and accusing me of being “lazy, inept and inefficient” in my “woefully inadequate” marketing, is in fact not our listing.

You see, you incorrectly assumed that all 41,000+ listings you are seeing when you search for homes on my web site are listed by our brokerage. While I will readily put our brokerage, and our agents, up against any in the Phoenix area, I can assure you that we do not carry 41,000 listings.

As you can see from the description you emailed me, this is a HUD home. That means the federal government owns it. So even if it was my listing, it would be difficult to contact the “seller” and see if they will “entertain” your offer of $25K on the $40K manufactured home. I’ll be honest, I don’t have a private line number for the Department of Housing and Urban Development, and given the general bureaucracy of the government, I suspect there is no one person that could say, “Sure, we’ll take an offer 38% below market value” even if they wanted to.

That’s why, as is mentioned in the listing information, they use a bid process.

We are a registered brokerage with HUD, and we could submit a bid for you. But I’m thinking we’ll pass.

While the Realtor you talked to that doesn’t know any agent who isn’t delivering pizzas to make ends meet, we’re doing OK. So we don’t need to submit your offer that will never be accepted. It would be a complete waste of time for us, and you.

You say you don’t want to pay today’s value because you think that value will fall 50% in the coming months for a variety of reasons.

Well then, I’d suggest waiting a few months. Why not rent a home in the coming months and then snatch one up a half of today’s value? I’m not sure how you define “coming months”, but let’s say for the sake of argument that’s six months. Why spend $25,000 now on a moldy manufactured home that as you correctly point out will be difficult to sell when the time comes. That comes out to over $4,000 per month. You could rent your mother a virtual palace for half that cost and apply the savings to a better home once you’re convinced the coming tsunami has passed.

Good luck!

That’s what I want to say. But instead I think I’ll just hit the delete key…

*Sigh*

Anyone that has read this blog for any length of time knows that lousy listing information on homes for sale is a pet peeve of mine.

Here is today’s winner. It covers pretty much every aspect of what makes a Multiple Listing Service (MLS) entry wrong.

First, there is only one photo. It’s of the front of the home and the most dominant aspect of the photo is the SUV parked in the driveway.

The directions field normally contains, shockingly, directions to the home. Typically something along the lines of “Go south on Main ST, east on 1ST, home is 0.2 miles on left (north) side.

The directions for this listing?

“See Map”

The “Remarks” section is where the listing agent can put descriptive info on the home. It’s the only place in the MLS where the listing agent can “sell” the house. Sure, you often see flowery fluff like “Honey stop the car!”, and “I’m gorgeous inside!”, but more often you see language that describes the home and neighborhood. Both agents and potential buyers find the remarks section especially helpful in determining if a home may meet their basic needs.

The remarks in this listing say only, “Fabulous 3 bedroom w/ a den. North/South exposure. Great floorplan. Enjoy the easy care desert landscaping. Must see”

Not exactly helpful.

Then we get to the room measurements. The MLS has a place for dimensions for all of a home’s rooms. Handy for knowing in advance the size of the bedrooms, if your 9 foot sofa can be placed far enough away from your 60” plasma TV, that sort of thing.

Room dimensions for this home?

Blank. Zip. Zero. Nada.

The MLS allows the listing agent to enter the type, style and details of things like the roof, fencing, home owners association rules and utilities. That information on this listing says “see remarks” and, naturally, there is nothing in the remarks…

A woefully incomplete listing entry like this would by definition require a call to the listing agent for more information and details. So we’re treated to this gem in the “Realtor remarks” section:

Listing agent office hours Mon-Fri 7-4. Contact via EMAIL is best for response. Do not call agent on Sunday.  Don’t request more info until you have shown the home and are ready to write an offer. (my emphasis in bold)

I understand having office hours. Many real estate agents work ridiculous hours. It comes with the job. As a service provider, we have to be available when our clients are available. Given that a significant portion of the home buying population works Mon – Fri 8 – 5, a significant portion of the home buying population needs to see homes outside those hours. You don’t want calls after 4pm or on Sunday, fine. Then put the necessary info in the MLS so I don’t HAVE to call you. Attach a file to the MLS with details, do SOMETHING akin to your job that meets your responsibility to your client and I won’t need to call you.

But instead you’re going to tell me not to request more info until I’ve shown the home and have a client ready to write an offer?

Seriously?

Well good luck with that.

You see, I’m not going to even show the home because you’ve given me NOTHING to indicate whether it meets my buyer’s criteria. N O T H I N G.

What is a seller to do?

You shouldn’t even have to ask your agent for this but…

Make sure you see the actual MLS listing. Ask them to show you both the public version and the agent version. Make sure there are plenty of photos that display your home in the best light possible. Descriptive text, room dimensions, all that needs to be included. Ask your agent how they handle inquiries on the property. Find out when they are available to field questions from potential buyers and buyer’s agents. A good agent will likely tell you all this, and more, up front.

What do you do if your home is already listed and you think the listing information isn’t complete?

Talk to your agent. Express your concerns. If they can’t address them, then speak to the agents broker. The broker is the agents “boss” (not technically as agents are independent contractors, but the broker is legally responsible for the agents actions and is your first step in resolving issues with your agent).

Sadly, in the case of this woefully lame listing, the listing agent IS a broker / owner of their own brokerage. If that’s the case and they won’t fix things to meet your needs, your only recourse is the broker’s Realtor association or the State Department of Real Estate. Good luck with that.

And some folks wonder why real estate agents rank below used car salesmen in the eyes of John Q. Public. . .

Often us real estate types tend to forget that the real estate vernacular (I’ve always wanted to use ‘vernacular’ in a blog post) we are so accustomed to might be unfamiliar to many who don’t deal with real estate on a daily basis.

I know I am guilty.

We throw around words and terms like REO, Option ARM, fixture, encumbrance, and short sale like everyone knows what those terms mean.

However, not everyone does. This isn’t said to slight anyone’s intelligence – far from it. It is simply a function of if you don’t use these terms regularly, why would you know (or care) what they mean?

Enter “short sale”. . .

I’ve gotten no less than three emails this week from folks asking me exactly what is a short sale.

The short answer, no pun intended, is that a short sale is the sale of real estate where the owner owes more to the bank than the property is worth.

In the Phoenix real estate market, this is not an uncommon scenario.

For example:

Let’s say Joe Homeowner bought a home in 2005 for $300,000. He put 20% down, which amounts to $60,000, and he got a mortgage for the other $240,000. So Joe owes the bank $240,000. (Yes, he’s paid down some of that $240K principal in the five years he’s owned the home, but not much. For the sake of simplicity, let’s just say he owes $240K).

Now Joe wants to sell his home. So he calls his trusty real estate professional who tells Joe that his home will probably sell for $200,000.

But wait, Joe owes the bank $240,000. How can he sell his home for $200,000?

Well, he could sell the home for $200K, and write the bank a check for the other $40K. This probably won’t sit well with Joe, but it is an option (assuming he has 40 grand lying around).

Or, he could sell his home short – sell it for less than he owes to the lender.

The lender however, won’t like this.

Selling a Home Short

Joe Homeowner can’t just up and decide that he’ll sell his home for less than he owes on it. Lenders, and investors in mortgages, don’t take kindly to getting stiffed for tens of thousands of dollars.

Joe is going to have to prove to the lender that he can no longer make the payments. Yep, he is going to have to submit financial statements that demonstrate he can not pay the mortgage. Not that he doesn’t like making payments on a house that isn’t worth what he paid for it – but that he can’t make the payments.

Let’s say for the sake of argument that Joe has a legitimate hardship – lost job, medical expenses out of control, something along those lines. Depending on his lender (or lenders), he may or may not have to actually get an offer on his home before the lender will take a serious look at approving him for a short sale. Unfortunately, there is no standardized short sale approval process – it varies from lender to lender and sometimes even within the same lending institution. Consult a real estate professional for help in listing your home for a short sale. And make it an agent experienced in short sales. It is also not a bad idea to consult a tax professional, and quite possibly an attorney. Trust me, you don’t even want to attempt to go “For Sale By Owner” on a short sale. There’s no point in that, given that you won’t pocket a nickel on a short sale.

Let’s say your lender has indicated they may be receptive to a short sale. Yes, it really is up to them. They are the ones after all that will be taking the loss. They will have to approve any short sale offer that comes across the table. So now you’ve got your home listed for sale. . .

Buying a Short Sale

Buying a short sale is like buying any other piece of real estate.

But different.

Here are some things to note if you are considering buying a short sale property:

1) Expect a long wait. In a “traditional” sale (not a foreclosure or short sale), you make an offer, and the seller reviews it. Maybe you go back and forth on the price a couple of times, but an agreement to sell the home typically happens in a couple of days. Not-so-much in a short sale. You make an offer just as in a traditional sale, the owner of the home agrees to sell it, and now the offer gets sent to the bank. Remember, it’s the lender/bank that has to approve the sale price.  And that can take WEEKS. Sometimes MONTHS. If you aren’t in a position to wait for months on an answer as to whether or not the bank will accept your offer, then you really shouldn’t play in the short sale sand box.

2) Don’t expect the seller to make any repairs to the home. In a traditional sale, repairs are negotiated between the buyer and seller. In a short sale, the owner will not make any money on the sale. Hence, they are going to be completely reluctant to spend money on repairs. Plus, the owners are typically in financial distress and simply have no money for repairs.

3) The banks don’t give a damn about your personal situation. Selling a home is a very emotional experience – for real people. Banks are not real people. They have zero emotional investment in a home. All they care about is their bottom line. It means nothing to them that you’re a Veteran, that you are having a baby, that you’ve found your dream home. Nothing. They don’t care. You may make an offer, wait weeks for a response, only to find out someone submitted an offer after you for a thousand more and *poof*, you are out of the picture.

Yes indeed, someone can submit an offer after you, and have it accepted over yours. From the Arizona Association of Realtors Short Sale Addendum, lines 13 – 15:

Nothing shall limit a seller from accepting subsequent offers from subsequent buyer(s) and submitting the back-up contract(s) to the seller’s creditor(s) for consideration. All parties understand and agree that seller’s creditor(s) may elect to allow the seller to sell the premises only to the holder of the contract with terms and conditions most acceptable to the creditor(s).

Generally speaking, the banks play by their own rules. They are in almost complete control of the short sale process. Scary isn’t it?

4) Unrealistic listing prices. There are agents out there that list short sales at ridiculously low prices. Some of this may be due to ignorance, some may be agents trying to generate an offer and/or bidding war. Any list price on a short sale needs to be taken with a grain of salt. If it sounds too good to be true, it is. While banks often pull bone headed moves, they aren’t completely stupid and they aren’t going to approve a short sale significantly under market value. Many people think they can “steal” a short sale. Banks don’t take kindly to being stolen from.

In Short (if you call 1,325 words short). . .

If you can’t make your mortgage payments, a short sale may be an option. If you’re considering buying a short sale, bring the patience of Job and be prepared for significant frustration.

Anecdotally, we are seeing some banks respond in somewhat timely fashion to both short sellers and buyers. Loss mitigation officers, the poor slobs assigned to handle short sales for lenders, are overwhelmed with work. A good short sale listing agent can make a huge difference in pushing through a sale, but in the end, the ball is in the bank’s court. 

More on short sales from this very blog, should you be so inclined:

• The Short Sale from Hell
• I want to short sell my home! The banks not being fair!
• Short Sales and Stupid Lenders
• Do It Yourself Short Sale
   

You have to love it when you find a perfect combination of personality, smarts and experience.

We’re thrilled to announce that Kristin LaVanway has joined Thompson’s Realty. Kristin, a former rocket scientist (no, I’m not kidding), brings 5 years of real estate sales experience and the exact client-oriented attitude we’re looking for. Anyone that can deal with four teenage boys can handle whatever real estate throws at them. Add in a degree in Mechanical Engineering from ASU and experience in the aerospace engineering field and you’ve got not only the patience and drive to succeed, but the smarts too.

Kristin has a wonderful blog at HereInPhoenix.com, and can be found on Twitter (@RL8RGal), FaceBook, LinkedIn and the like. You can read more about her in her own words on the Here in Phoenix About page.

Welcome aboard Kristin!!