I had the good fortune in the last few weeks to have a couple of very popular listings here in Foster City, 1121 Catamaran and 18 Dory Ln, and one thing became very clear to me while chatting with folks at each of the open houses…there’s a whole lot of buyers out there either not working with local real estate agents, or not working with agents at all. Dory had about 90 people at it’s open house, Catamaran at least 200. I’m sure of that on Catamaran because I printed 90 flyers and I had 4 left at the end of the day…people mostly come in groups and, almost always, one person takes a flyer.

In the case of Dory, I handed out 14 disclosure packets to interested parties prior to looking at offers…and I received 7 of them. On Catamaran I handed out 11 disclosure packets and received 3 offers. Of those 25 packets only 9 of them were given to local agents and 5 of the 10 offers came from local agents. Interestingly…of the 10 offers 6 of them were truly outstanding (price and terms) and 5 out of 6 were from local agents. Both winning bids came from local agents.

Why, you ask? It seems so obvious to me. These local agents know the Foster City market inside and out. They know what constitutes a good offer in a multiple offer environment and they know what will be important to a seller. One of the big reasons they know that is because they have sold listings here too. They also routinely see good offers from bad ones and thus they know what they’re doing.

Just so were clear, when I say a local agent I mean an agent who actually does a fair amount of business in Foster City. There’s real good agents in San Francisco, San Jose, Fremont…etc that would be lost in the Mid Peninsula and have no clue about Foster City. Honestly, I have no clue about San Francisco as a residential market. I’ve been a realtor for 20 years, sold hundreds of homes, but I’ve never sold a property in San Francisco. I would not provide a client the kind of service they deserve working with them in San Francisco.

Especially if you’re out there trying to do this thing on your own, consider working with a local agent…it will be more than worth it to you. That also applies to sellers.

About a week ago I showed a house in Foster City to some folks who expressed some interest in the place. I called the listing agent, who I’ve known for a long time, and asked some questions. I found out two important things…1) the home was getting plenty of interest and there was a possibility of multiple offers, and 2) the listing agent was willing to look at an offer that I would write immediately. No waiting…and no competition for the buyer. Why, you ask, would that happen? Because the relationship that’s been established with that agent insures her/him that our potential transaction will be smooth.

This isn’t all about me of course, this is the story of the value to the consumer of working with an experienced agent. It’s become sort of common in the last few years for buyers to ask me if I’m willing to kick back commission the way rebating online real estate companies or other discount brokers do. These brokers have created a fantasy world where they’re selling the notion that a real estate agent’s job is a commodity. That we’re simply interchangeable parts, order takers and secretaries who merely know how to fill out forms and present them. Sometimes it works out and it’s true too! Lot’s of the rest of the time it’s not true. I think most of the time it’s not true.

There’s probably 100 reasons why experience is beneficial to a buyer or seller, yet I know that the Internet allows people to study and gain knowledge that wasn’t available to them just a few years ago. There’s certainly one way that the Internet or the rebaters can never touch and that’s in the area mentioned above…relationships. I can’t tell you how many times a client of mine has landed on a home in a multiple offer environment because of the relationship I’ve had with a listing agent. It’s also been enormously important for me as a listing agent to be able to identify an experienced agent that my seller can trust to close escrow on time. Relationships are also important in connection to lenders, title people, and inspectors as well.

Lots of this is simple human nature. You spend 20 years in one community and you get to know your coworkers and other agents. Naturally, you’re going to feel comfortable working with them. Working with somebody like this sure beats having an offer faxed by an “agent” who wasn’t in real estate just a year ago.

Have you ever watched the HGTV show “Real Estate Intervention”? Here’s an episode above…I find this show to be really interesting and true to life. The show uses an agent, by the name of Mike Aubrey, who “intervenes” with sellers that are seemingly in denial about either the value of their home or what it’s going to take to get that home sold.

The clip above is a classic scenario. The sellers here need to move a family member in with them…and hope to sell their existing place and buy a bigger one. They have an offer on another house contingent upon the  sale of their own…and their house is overpriced. HGTV has a nifty advantage that the rest of us don’t. They call up the new owners of recently sold homes and take the subject sellers over to these homes so that everyone can see the comparison/contrasts. As you can guess, the sold comp is bigger, nicer, better than the seller’s place…and sold for significantly less than the seller’s place is listed for. These small facts leave the seller unmoved. The psychology of it all is fascinating…and very true to life!

Rule number 1 for sellers…you have to be objective!! Great show!!

Does this wonderful and descriptive picture look familiar to anyone? I’ll bet plenty of you have seen it alot! This is what happens when a real estate agent neglects to take any photos of his or her listing…the MLS puts this charming image there. Right now in Foster City there are 5 active listings with this picture on them, or in other words, no pictures at all. In San Mateo there are 15 single family homes alone that have no photo. One of them also has no public comments at all either. I’ve seen other listings currently in the MLS that have verbage like “no showing until first tour” or “disclosures coming soon” on listings that have been on the market for 60 days or more.

(Here comes a rant!) This is…oh, how shall I put it? Unconsionable? The MLS is without question the number 1 way to advertise a property for sale. Not only that, multiple feeds pick up MLS data for their sites (Realtor.com, Trulia, Movoto…ad nauseum). A seller is paying to have their listing marketed around the world on the internet and the listing has this? What’s particularly amazing to me is the fact that it’s really not hard at all to do. What’s more…this market is totally unforgiving of this stuff.

I honestly believe that much of this goes back to that post from last week “How Important Is Experience?” ,when SO many agents are doing so little business I’ve got to believe that many of them are just bummed out and are just going through the motions. It’s sure not very hard to go buy a digital camera and take some shots of your listing, is it? Many sellers are having a hard enough time of it as it is. Take a small additional step, please!

Coming fast on the heals of Tuesday’s post…I started thinking of some real life stories that I’ve either heard or experienced in the last month or so. Would anyone argue that an experienced real estate agent would have a distinct advantage when negotiating for a buyer or seller in these situations?

* An agent I know told me a story about  a deal she was involved with on an REO property in Redwood City where the lender required the buyer be approved by them prior to ratifying. The buyers decided to use this lender for their loan and right before closing this same lender required that an illegal element of the house be removed prior to funding. Since it took some time for the buyers to comply, the deal closed a week late…and the lender charged a $350.00 a day fine to these buyers for closing late! If the buyers backed out the lender threatened to keep their deposit. Remember, this lender was on both sides of this transaction…they own the house and they’re doing the buyers loan! They made all of the rules the whole time.

* I have a client who has an interest in a property in South San Francisco that’s sort of the Winchester Mystery House. It’s garage was converted into a family room and an addition was placed on the back that features an illegal second kitchen and a second story that includes 2 bedrooms and a bath. The additions were all done with permits(except the second kitchen). A large trellis and awning covers a concrete patio in the back of the house and behind that are 3 small storage buildings and a driveway that opens onto an alley. Turns out the back yard, including the patio, the storage and the driveway actually don’t belong to the seller! It’s property owned by the City of South City. In spite of that all these permits were approved 30 some years ago by the City. Imagine buying a house and discovering that the back yard isn’t really yours. I’m actually not sure how this will eventually play out but I have no doubt we’ll be spending plenty of time with building and planning should this client decide to move forward.

What does all of this say about real estate? It’s always something!! I’m really serious about that…there is always something that seems to present itself in transactions that come out of left field.  The truth is that nobody has all of the answers in every situation. A good agent will have the awareness of how to find the answers, or at the very least, be able to ask the right questions. Many of the waters we find ourselves are treacherous right now and finding the right navigator is critical…maybe more now than it’s ever been.

The San Mateo County Association of Realtors released their 2008 numbers regarding production statistics this week and I’ve got to tell you that I was astonished. Maybe the most astonishing thing to me was just how clearly I saw the value of experience for the public when it comes to selecting an agent to work with. Here’s what it showed:

* In 2008, 60% of the Realtors in San Mateo County sold one house or less. 60%!

* 86% did 5 or less transactions.

* Only 5% did 11 or more transactions (Yes, I was one of those). There’s 3142 Real Estate agents in Samcar.

2007’s numbers were pretty similar too. What this says to me is that, whether you’re a buyer or a seller, the odds are pretty darn high that the agent you’re talking to or maybe even working with has very little experience at all in selling houses. I have to say in all honesty that the market right now bares no resemblance at all to the market of just a few years ago and I find myself in an almost constant learning curve when it comes to keeping myself current on what’s happening. Working with banks on REO’s and short sales is a completely different experience than it was handling multiple offers while working with regular old sellers just a few years ago.

If 60% of the realtors around here only sold one house last year (and maybe the last 2 years) your odds are awfully great that you’re working with someone very inexperienced. The simple fact is that there are an awful lot of agents with very little experience right now in this marketplace and I’m pretty darn certain that could cost a buyer or seller money.

Here’s a link to a samcar pdf on this topic:

ProductionData

Sorry, I ranted…again!

OK, it’s time again for a small rant. I signed up for a web based leads system whereby potential buyers and sellers request services from local Realtors. The vast majority of these leads aren’t worth the time to respond to. Prospective buyers wanting 5 bedroom houses in Hillsborough for under $100,000, that kind of thing. Well, one lead came up from a seller looking for a listing agent the other day that I thought would be worth commenting on here simply because it goes to the heart of the thinking of plenty of sellers who really don’t understand the unintended consequences that are headed their way via this thought process. Here’s the post:

“Need agent who is an excellent negotiator and has sold homes in my area. Agent needs to come in with a very competitive commission quote, as this home will take very little effort and time to sell. Quoted commission rates will receive preference over “negotiable” quotes.”

The property in question is a 3 bedroom, 2 bath house in San Mateo and the seller is stating that he wants $1,500,000 for the place. Here’s a few small, but relevant facts:

* The most money ever spent for a 3 bedroom house on the sellers street was $1,275,000

* In San Mateo right now there are exactly 2 pending sales on homes priced at $1,400,000 or over while there’s 15 active listings whose average days on the market are 64.

Somehow the claim that “this home will take very little effort and time to sell” seems unlikely to me…and I don’t care how nice the home is.

The obvious, most important factor for this seller is a low commission structure yet is asking for an “excellent negotiator”. If an agent caves in immediately, via an e-mail, while negotiating his or her own money…how ‘excellent” do you suppose they’ll be negotiating with the sellers money?

I guess what bugs me the most is the perception here, not an uncommon one either, that all real estate agents are the same…and since they’re all the same all that really matters is how much commission they’ll charge. If you needed surgery how comfortable would you be finding a surgeon through and an online search and then demanded that they compete for your surgical business for the lowest fee. Would you be comfortable with the discount surgeon? OK, allright…we’re not surgeons, but we’re not mowing your lawn either. There are outstanding Realtors and lousy Realtors just like there are outstanding (and lousy) painters, plumbers, contractors, babysitters, hairstylists, chefs, lawyers, accountants, acupuncturists, gardeners and coffee shops and I’m not going to any of them just because they might respond to an online query with the lowest fee. I’d simply be too worried about their competence! The unintended consequence here could easily be that the seller hires an agent willing to take an overpriced listing that will be on for too long and ultimately cost the seller significantly more money in a declining market. Make the right choice the first time…and please don’t make the commission the primary focus. It’ll cost you in the long run.

It’s a tad bit different for sellers in Foster City than it was just a few short months ago. Inventory is up (32 single family and 42 condo/townhouse) and the number of pending sales is down (9 single family and 8 condo/townhouse). In this era when the average number of days on the market has increased…and may continue to increase, sellers will need to be prepared when negotiating an offer when it comes in. Buyers in this current market feel like they have plenty of leverage when it comes to negotiating, particularly in the range over $1.3mil, and selecting the right real estate agent is more important than ever.

Already in Foster City we’ve seen a few examples of listings that go into escrow only to have their deals fall apart…and sometimes that’s happened after a painfully long time in the process. In this market it’s not uncommon anymore to hear stories of buyers re-negotiating 2 and 3 times after the contract has been ratified over issues involving credits or repairs and in some cases buyers have asked for price reductions prior to removing contingencies 10 days to 2 weeks into an escrow. It’s also more common to see offers accepted contingent upon the sale of a buyers property…something that was virtually unheard of in years past.

So, what should you do? Here’s a couple of important suggestions: 1) Make sure that the buyers are not only qualified, but approved for their loan. It wouldn’t hurt at all to ask that the buyers be approved by two separate banks. If you as a seller are comfortable early on in the process that your buyer will get their loan, you’re certainly going to sleep better…and the chances of chiseling on price later in an escrow will be reduced.

2) Have a solid contract going in. The fact is that the buyer is most likely going to have some leverage in negotiating the price right now. Having a contract that gives you favorable terms should help you to eliminate arguments over repairs and other problems that could come up later. I also think it’s important to be aware of any and all problems that the property has going in…so that your not surprised by an inspection done by a buyer in escrow and fall victim to a bid given by a contractor of the buyers choice.

Gone are the days when sellers held all of the cards and every sale was “As Is” with no contingencies and sellers just relaxed all the way to the bank. It’s really is a new world out there.

There’s a real estate agent in Bristol, Connecticut by the Name of Athol Kay who has a great blog. Among other things, he has this little schtick called the Bad MLS Photo of the Day where he’ll show photos like the one above. He’s gained quite a bit of notoriety as a result, including some press in national publications  as well as the likes of the Los Angeles Times. It’s absolutely hysterical stuff, folks! I love going to Athol’s blog…I can’t believe what some realtors and sellers do with some of these photos. I guess I’ve always had the opinion that photographs are taken to try and promote a listing, to put a property in it’s best possible light. What do I know?

Seriously, I think taking good photos of a house may be the most important thing (outside of pricing it right) that a seller and their agent can do to market their home. 85% of home buyers begin their search on the internet looking at listings, the home needs to show well online first. My office has a full time, on staff, photographer for just this purpose and, although I’m not 100% sure of this, I think most of the other offices around here provide the same kind of service. I’m sure there are plenty of agents who do it themselves too…some of them are even good at it. Professional photographers really do have a knack for this though. I’ve seen photos in the local MLS featuring only an open toilet, kitchens with dishes stacked in the sink, beds with laundry on them, pictures of the sellers pets and backyards that were completely brown…all the vegetation was dead. My favorite recently had 9 separate still shots of the front exterior of a house in San Mateo taken from slightly different angles…like maybe 6 inches to a foot at a time. I was completely unclear of the concept but I did get a progressivly better view of the wheels on the little Toyota in the driveway via that technique.

There’s a bank owned foreclosure in Foster City right now, that actually sold because it was priced right, that offered this picture.

We’re not immune, huh. Maybe the only thing worse are no pictures at all. I can’t tell you how often buyers ask me why a house they’ve seen online has no pictures. There are several right now in Foster City, go figure! Some listings are on the market for weeks before the photos show up too. Folks, people are shopping online. They’re looking at photos of homes in their price range to determine if that home is worth actually going out to see in person. If there’s no photographs at all there and all of your competition has photos, why should they be interested in your place?

How to pick a Realtor…now that IS the question. Here’s my perspective that comes from being a Realtor for almost 20 years in this area and seeing many, many changes along the way. At the end of 2007 there were over 21,000 Realtors in the Bay Area. I have no doubt that we’ll see that number drop significantly in 2008 but the fact remains that there are lots of us running around out there. Here’s an important fact: Realtors are not a commodity. One is not just as good as another.  There are several factors to cover when considering listing your home, below are six.

1. Experience  Real Estate is an incredibly competitive, some would say “cut throat”, business and the value an agent with years of experience is critical. Our culture gets more and more litigious with each passing year and as that happens the value of an experienced agent is paramount. Almost anything can happen inside a Real Estate transaction and emotions are commonly frayed. An experienced agent will not panic in the face of an unforseen problem and in many cases has experienced that problem before and knows what to do about it. An experienced agent most likely has seen or sold a property just like yours before and that kind of familiarity helps you. It’s also an important fact to determine how many transactions an agent has done in the last 12 months, since the “Mortgage Meltdown” for sure. The numbers came out recently from the San Mateo County Board of Realtors and I was shocked to learn that 42% of the agents in this Board didn’t sell a home in 2007 and 58% sold 3 or less. Maybe just as amazing is the fact that only 7% sold 12 or more. Let’s be liberal and say that the agent selling 3 properties closed all of them at $1,000,000 each. They grossed $75,000 assuming a 2.5% split. Now take into consideration they have to give their office a cut, typically at least 40% and you have that agent making $45,000 last year. Remember, 58% of the agents in the Board made less than that in 2007. Heck, most of the Real Estate agents writing Blogs right now don’t have much experience either! They just know how to type well. Isn’t it reasonable that the experienced and successful 7% are going to be far more comfortable negotiating with YOUR money than an agent worrying about whether they’ll still be a realtor in 6 months?

2. Go Local Try to make sure that all of the agents you talk to are doing the majority of their business locally: ie Mid-Peninsula and naturally it helps to have plenty of experience in Foster City. I would never use an agent who wasn’t local. Local Realtors know the market better, have better connections and are much more likely to sell your house at a price and with terms that you are most likely to agree too. When prospective buyers agents see a phone number starting with 916 or 510 or 831, for example, it’s often a red flag. Agents from out of the area are very often unfamiliar with our local forms and disclosure requirements. In addition they obviously have no relationships built in the local area and thus run the risk of losing traffic. It’s going to be a VERY rare agent that holds the house open consistantly or meets the inspectors or potential buyers, or replaces the flyers in the attached sign box when their office is located in Sacramento or Rohnert Park. Often, the out of area agent is a family member or a close friend who’s services come at a reduced cost. Unfortunately the seller often get’s what they paid for. In 2007 in Foster City this scenario played out on the sale of a house in Neighborhood #2 where a listing agent from out of the area and a relative of the seller took an offer almost $70,000 under asking on the first day of the listing and the house, in my opinion, was priced pretty well to begin with. I had a similar listing on Lurline in Foster City in 2007 that followed the proper gameplan and we ended up with 11 offers…and it went over asking by $129,000.

3. A Gameplan A top agent will come to see you with a detailed CMA, (Competitive Market Analysis) a list of references and a gameplan for how to sell your house for the most money possible. In all honesty, I’ve got a really nice and professional looking CMA but unless somebody asks about something that’s specifically in there it’s usually something I leave behind as I exit. 25 years ago I was in the Grocery business and I represented Clorox to a large Independent grocery distributor. The Clorox regional manager and I were presenting some new product to them and, of course, the regional guy had a detailed 45 minute presentation planned for the buyer that included all kinds of graphs and visuals. Right before he began his pitch the buyer said: “I’ll take all of these items in all sizes if you stop right now” The Clorox guy said he thought it was important that the buyer learn about their big television advertising schedule and when the commercials would run. I had to drag him out of the office before we lost the sale! I, too, hate hearing long “dog and pony shows” so I tend to not show graphs comparing cost per square feet or show you pie charts comparing Re/Max Today’s market share vs. Coldwell Bankers Burlingame office. I believe it’s important for an agent to listen to what a sellers needs are and formulate strategy around that. A game plan is going to be different if you just got transferred to Boston than it would be if you wanted to move to a single family house in Foster City from your condo there. Obviously the game plan has as it’s goal achieving top dollar for a seller and that’s where it’s focus should be. An agent should always spell out all of the services they will provide, particularly those that will be paid for out of their own pocket (like inspections, staging, photography, flyers…etc). You’re paying alot of money for this service, you need to feel that it was worth it!

4. Savvy Kind of hard to quantify that one, huh! Ultimately it comes down to how technologically proficient is the listing agent and how can that proficiency translate into an advantage for you. Buyers often ask me why a given listing that they’ve seen online doesn’t have photos attached. Usually they assume that the MLS is experiencing a glitch with that listing. In truth it’s because the listing agent didn’t take pictures! Not having a listing broadly distributed via virtual tours and still photos on the Internet is the kiss of death in this current age…yet it happens all the time. All of the disclosures should be available for viewing online at any time. It’s more important to have an Open House ad online now than in the newspaper! We live in probably the most technologically savvy area in the World and it’s really important that a listing agent reflect that savvy.

5. Uniqueness It’s another intangible but there are other factors that cause people to choose the right agent. There will always be something that sets a given agent apart from others and when it’s right you know it. In my case I’m extremely relational. I build strong relationships with my clients as well as service providers and other Real Estate agents and those relationships have consistantly paid off for both me and my clients for years. How, you ask? Would it help if we had a problem escrow that a Title company could help with and because of the volume I’ve done I have great relationships with most of the senior Escrow officers in this area? I’ve actually had that scenario play out many times. There’s plenty of similar examples out there just like that. Some agents have superior backgrounds in finance, lending, construction practices or marketing but the point is that Average won’t due anymore. The market’s tougher and the stakes are much higher.

6. Commissions  Notice I left this one until last! Most of the commissions on property in Foster City last year were 5 to 6%, of which that is split in half to the buyer’s agent. 108 Single family homes sold in Foster City in 2007 and 8 of them offered commissions lower than 2.5% to the buyers agent. Of those 8, three were sold by their own listing agents who brought their own buyers in and two others were on the market for 349 days and 102 days respectively. One of those came off of their original price $550,000 from start to finish. All commission are, of course, negotiable by law but you really do get what you pay for. Some agents take less commission…and they should! No seller should take the chance of disincentivizing a buyers agent from showing their place. Yes, we can all agree that it’s patently unethical for an agent to avoid showing a house because the seller is paying less commission but in the real world, remember, 58% of the San Mateo county agents sold 3 houses or less last year. It’s too much of a risk for what amounts to peanuts in the long run. I’m sure I’ll have many more posts in the future about commissions, discount brokers…etc.