Tuesday, March 03, 2009

Realtor(tm) vs. Reality

Paul and I have had an eye on the real estate markets for a couple of years now, and like to visit houses for sale when we can. We are sort-of in the market, though not really at today's prices.

A couple of weekends ago, we visited one that reaffirmed my "reasons I never trust a real estate agent." Bells went off in my head when I read the ad anyway. Listed as a 3/3 (that's 3 bedrooms, 3 bathrooms) in a nearby neighborhood that I actually like. Sure, it, like all other listings around here, was waaaaaaayyyyyy overpriced for the local fundamentals, but that doesn't seem to matter to a lot of people.

But the ad, it read "one bedroom currently configured as loft." Which? Made no sense to me. There are rooms that are structural, and there are rooms that can be swapped out. Garages, kitchens, bathrooms, and lofts have structural qualities. Bonus rooms, dens, bedrooms, maybe an office, these I can see interchanging. But hey, I can be wrong, and we went to see it.

First, the 3 bathrooms were actually 2.5, a fine detail, but second, this was a two bedroom house. The third "bedroom currently configured as loft" was indeed a small loft, open on one side to the living room below (it really had two walls, and no door), not big enough for anything but maybe a twin bed and nothing else, had no closet, had to be walked through to get to the actual bedroom, and most importantly? WASN'T A GODDAMM BEDROOM AT ALL, AS ANY PERSON WHO'D EVER LIVED IN A HOUSE COULD TELL YOU. It was the landing at the top of the stairs. The landing at the top of the stairs of the house I grew up in was bigger, and had more walls, and closet space.

Who cares? I do. We've been looking at really dishonest listings for a long time now. All the relisting to hide price changes and days on market, the insulting abuse of fisheye lenses to try to make a kitchen look bigger (bigger, and spherical), and, the classic fake furniture to trick you into thinking full-sized furniture would fit in the room of the house they are trying to sell you for 40-50% too many dollars is totally out of hand. And I wonder how much longer people will take it.

At this particular house, for the first time since we've been visiting open homes (a few years) another party also snuck out in outrage at the overpricing. (there have been multiple occasions where Paul and I have snuck out the back exit of a property to avoid having to face the real estate agent on the way out) Too embarrassed to face the agent in the face of an inflated price for a not-up-to-the-listing house? Me too!

When we are ready to buy, I am not sure we'll want anything to do with a real estate agent. I've just been too fed up with the loose interpretation of reality and shady practices. Will Realtors(tm) go the way of the travel agent? I hope transparency will cut through the worst of them and put them out of business. For us, a little research and sunlight on the housing bubble a few years back kept us out of the market, even as we had a loan officer trying to convince us to "use more leverage" based on our qualifications. We are those fabled solid buyers that everyone is seeking right now, and hell no, we won't buy your overpriced 3/3 with "bedroom currently configured as loft." I suppose the attic is currently configured as sky, and the basement currently configured as dirt?

(ps, since visiting, this listing was updated to show 2.5 baths, and the price was dropped $50K. Which is still way too much)


James Bong said...

Have you looked at redfin.com? Tara and I have been doing the same thing as you and Paul. Redfin lists the MLS on a big google-like map, and you can arrange tours through them. The best part is that if you buy through them, they refund part of the realtor(tm) fee back to you! But seriously, Tara and I think the market is still shady and way over priced, but at least it's dropping!

shineyspikeything said...

I use ZipRealty, which is sort of similar. Redfin might better, though, I don't know. Same idea.

I like to save homes and track all the times it was relisted a a lower price to try to hide the days on market and price drops.

Charles said...

if you are serious, I will really really recommend my realtor, who is also a motorcyclist, and very very honest.

i trust him.

Mike Pulskamp said...

While I don’t know your market, in many areas the prices have dropped record amounts. If you aren’t seeing impressive price reductions in the places you are looking, people there might just think that the area is so great that it is immune to the macro-economic situation that we all are in.

“We are sort-of in the market, though not really at today's prices.”

So, you are not in the market. Don’t feel bad about it that is probably the “place” you belong right now. Many people don’t have faith in real estate right now, and that is one big factor in the dropping prices and the long DOM’s that some agents try to hide.

You guys are pretty smart cookies, but you will save yourself headaches, time, and money if you can break through the ridiculous idea that you should “…never trust a real estate agent.”

Many of us are honest and helpful, all of us have studied the laws and machinery of real estate, many from a different perspective than yours, and just having that perspective can make a big difference on the CYA aspect of what is most people’s biggest purchase of their lifetime.

Before you are in the market to buy, and only you will know that, do yourself a big favor and find an agent that you can trust. I highly recommend a real live agent, who can explain fiduciary duty to you (that might be one good litmus test). Being a member of the National Association of REALTORS® among other things means making the commitment to upholding the best and most in-depth set of ethical standards that I have seen in the industry. I know that not all Members (REALTORS®) do a great job of keeping to the standards, but many do.

As to the definition of a bedroom, believe it or not this is not quite nailed down. Most counties permit and collect taxes based on bedrooms as a room that is big enough (the county sets that) and has not been excluded from being a bedroom in the permit process. Some say it must have a closet, some a window, some give minimum sizes of door and window openings. Owners will sometimes dodge paying property tax and service fees by calling a room something other than a bedroom even when that is what you or I might call it. On the other hand, the same owner might call a walk-in closet or landing, a “bedroom” if they think that will sell the house. Make no mistake here, I said OWNER. The agent is just that an agent of the owner. And all to few are immune to the temptation to “puff” especially when the listing might depend on it. Each agent draws his or her own line, a point that having a pro working for you can counter.

On to you sneaking out on the agent, Do us all a favor, TELL THE AGENT WHAT YOU THINK. If you want to look at it in the cold hard light of day, If the price is to high, the agent would love to be able to convince his client that they should lower the price for a quick sale. Your statements could be just what that agent is waiting for. The pressure to price high rarely comes from the listing agent these days. Think about it. If the seller is looking at $1,000,000,000.00 and the agent is looking at 3% or $30,000.00 and a lets say 1/1000 chance of making a deal at that price. On the other hand, getting the seller to a reasonable $800,000.00 that will sell after only showing to say 20 people, the seller will be looking at a difference of $200,000.00 possible (but very unlikely) loss vs. the agent who will be cashing a check for $ 24,000.00. $6,000.00 less than the imaginary one that will not come before the listing expires.

Would you rather show a house to 1000 people one of whom might buy it for $30,000.00 or 20 people for a much surer bet of $24,000.00? Look at the ROI (return on investment) for that $6k the agent might need to show the house 980 more times to find a buyer willing to pay $1m (or in that agent’s wallet the extra $6k) but only show the house 20 times to find a buyer at the $800k price. (20 prospective buyers for $24k or 1000 for $30k?) Each of the 980 extra sowings has a value of about $6.12 while the 20 prospective buyers one of whom will actually buy the property can be valued at $1,200.00 each. If that agent were only looking out for herself, what would she push the price towards? If you think 1/1000 is crazy then what if it was $900k and 1/100? Those 80 other showings would value at $75.00 each. But that still can’t compare to $1,200.00

Now obviously I have cranked up the contrast to show how it works on this, but can you see it?

As for needing to sneak out, just build a relationship with a buyer’s agent that you can trust. That way when you are talking to a listing agent the first thing you tell them is that you are “Already in a agency relationship with a buyers agent,” and you will see that the salesy coating will drop right off of many of us. This is the open secret of open houses. They are not held to sell the house. They are held to gather leads on prospective buyers. If the agent can find a buyer for that actual house that is great, but almost as rare as finding gold in your shoe after a trip to the river.

If the agent wants your names or asks you to sign in, that serves two purposes. First if you are working with a buyer’s agent, the listing agent will want to show her client that the marketing is doing something. And second if you are not working with a buyers agent you might be a prospective client for the listing agent, after all you are out looking at houses… The darker side of this is that if you are not working with an agent, and the “open house” held by that showing agent is your introduction to the house, and you do end up buying it, that agent can show “procuring cause” for your purchase and legally go after the selling commission. Rare but who needs the headache? And dual agency is not always a bad way to go two, but you should feel comfortable with the way that the agent explains the relationship before getting into this.

Remember that you will almost always be paying for a buyer’s agent whether you have one or not. I won’t say that they are free, but their paycheck (usually) comes from the sellers agent’s commission, so having one costs you nothing extra but can really save you.

If you are interested in talking about this in more depth, or you want some ideas on finding a REALTOR® in your neck of the woods that will work FOR you, you know how to find me…

And for the rest of you out there in the blog-sphere, I’m one of Shineyspikeythig’s two REALTOR® uncles…

“…never trust a real estate agent.…”hmmmm.