What makes Realtors® different from each other? Part 1
What differences make a difference when it comes to deciding on a Realtor® to list and sell your home? This question is maybe the single biggest question homeowners must tackle on their own when deciding upon a Realtor. The surprising part is that most homeowners don’t even consciously realize this is the proverbial $64,000 question but, make no mistake, it is. For many of you, you find the question so daunting that rather than tackle it head on, you look for the easiest way out and end up working with the first Realtor you meet. I know this to be true because according to the National Association of Realtors (NAR) 2018 Profile of Home Buyers and Sellers, “Seventy-five percent (75%) of recent sellers contacted only one agent …. to sell their home.”
With that being said, my first difference that makes a difference that I want to highlight isn’t the Realtor® at all, it’s you, the homeowner. As a Realtor®, I know that for many of you, the home is your single largest individual investment. Yet, to say such, doesn’t really go far enough to describe your home selling situation. You also have to include the fact that for many of you, the home is your only source of savings. According to a myriad of websites like, Forbes, CNBC, NYPost, USA Today, Marketwatch and others, in 2018, somewhere between 65-70% of Americans don’t have more than $1,000 in savings. However, once again, saying the home is your largest financial investment and your only savings isn’t truly an accurate picture of your home selling health because you still need to go a bit further. For the majority of you, we need to also say, the home is your only source for retirement income. According to those many websites I previously listed, 76% of you have less than $5,000 in retirement savings. Nowhere near where you need to be to actually retire. If all of this isn’t bad enough, finally we need to acknowledge the fact that on average, nearly 80% of Americans are holding somewhere between $30-$50,000.00 in debt. With all of this being said, for the majority of you, the home represents your…
#1: Largest financial investment,
#2: Your only real savings,
#3: Your only measurable retirement and,
#4: Your ability to pay off debt.
I’m making this point to highlight the fact that many of you considering selling your home are coming into the situation under remarkable stress. Needless to say, you are frantic and panicked and couple this with the overwhelming amount of information, laws, regulations and selling process, it’s no wonder 75% of you will simply work with the first agent you meet. It’s just easier that way. The truly scary part of all of this is, this knowledge is actively used against many of you by unethical, immoral agents.
Many homeowners want to believe their home is a small gold mine. This is because the home is the lion’s share of the economic health of the family. Many of you reading this article can relate because you find yourself in the very situation I’m describing. You don’t have any retirement to speak of and savings is just as meager, you’re living paycheck to paycheck and any disaster could put you and your family on the road to ruin. The only saving grace you have is that, you are sitting on equity in your home and as such, the home’s equity forms the only foundation you have to economic security. Essentially, all your nest eggs are in one basket and you not only want the home equity to be a small gold mine but, need it to be without exception. This is exactly where a self-serving immoral real estate agent wants to find you.
“Buying the Listing” involves winning your business by telling you that they can sell your home for more than anyone else can. Of course, such promises are all the bait this agent needs to reel you in for the previous reason we outlined in the above paragraphs. This deceitful agent has no real interest in selling your home because he knows it’s overpriced but, that’s not his goal. His goal is to use your listing to generate lead traffic from his sign, syndication, radius mailing and other marketing he may do. Having a presence in your neighborhood allows him to market his services to your neighbors by touting the fact, you trusted him to list your home and they should too. It’s called Social Proof Marketing Psychology and make no mistake, it works.
At the end of the day, he may end up burning his bridge with you but, in his mind, that’s the price for getting his foot in the neighborhood’s door. The fact is, he may never sell your home and that’s ok. Your home may end up on the market for longer than expected or, you constantly had to do price drop, after price drop however, as his sacrificial lamb that’s to be expected. He’s more than willing to overprice your home and never sell it for the multiple closed transactions and sales leads, he generated directly off your listing. He will play on your fears and economic situation and you will be just another victim of something we call, “Buying the Listing”.
What you can do to avoid working with one of these unethical agents is to interview more than 1 agent. By interviewing at least 3 agents, from 3 different brokerages, you can get a good idea of the true value of your home based on the average and median prices these 3 different agents suggested to you. At that point, you can easily tell, which agent is blowing smoke and which agents are truly interested in selling your home. I know it’s not the easiest thing to do but, make no mistake, you owe it to yourself and your families financial health to make the right decision on which Realtor to use.
“By-pass The Market”, “Guaranteed Offer”, “Streamline The Sale”, I say BEWARE!
Here lately, it seems I’m hearing more and more so called “Real Estate Professionals” touting home sales strategies that allow homeowners to “by-pass the market” or “streamline the sale”. When I hear these commercials or see these ads, I shake my head in disbelief. I’m skeptical of these “guaranteed offer” schemes because I know something about what’s happening that you as the homeowner may not be knowledge of. Let me explain.
First, a short lesson on the real estate market. As regulated as the real estate market is, we think of it as a free market or also known as a market economy. Your success selling your home for the most you can in the least amount of time is going to hinge on your understanding of the real estate market economy. You must know that in this type of market, self-interest and competition are the two most important forces that will directly impact your success. This has been true for over 200 years when an economist named Adam Smith described these two forces as foundational to the function of a free market.
Let’s first talk about self-interest. Why do you do what you do? Why do you go to the grocery store, why do you go to church, why do you go to school? You do all this because of self-interest. This isn’t a bad thing and in fact, it’s a good thing. Your self interest will hopefully lead to your personal gain. You go to the grocery store to get food and eat. You go to church for moral and spiritual guidance. You go to school to get a good job. You do all of these things to achieve the success you want out of life. Truth is, most everything in our society is a direct result of someone else’s or our own self-interest. Adam Smith sums it up really well in his book, The Wealth of Nations when he says..
“It is not from benevolence (generosity) of the butcher, the brewer, or the baker that we expect our dinner but, from their regard to their own interest.”
The point is, the butcher, brewer and baker do what they do to make the money to put food on their own table and in this way, they are acting in their own self-interest. While these three work for their own self-interest, they created a product that you find valuable and, in this way, we get the exchange of goods and services for money.
Secondly, we need to talk about competition. When two or more people compete for a product, like meat, beer or bread, the market keeps self interest that would lead to price gouging or corruption in check. This is directly because the competition for those products are also self-interested. To put a finer point on this, because here in Nashville we have a lot of local breweries, let’s talk beer. If I was a brewer, I would have to brew a beer that was better and cheaper than all the other brewers here in order to convince people to buy my beer over someone else’s. The lesson here is, in order to win your business, I would need to offer a better product at a reasonable price, in comparison to my competition. Granted, if I were the only brewer in 50 miles, I may be able to charge a higher price and care less about the quality of my beer but, I don’t think it would be long till someone else would spring up, offer a beer at a better price and better quality and drive me out of business.
Now that we have self-interest and competition well described, how does this impact you when considering one of these “streamline sales” or “guaranteed offer” schemes? Essentially, what these schemes are doing is keeping your home off the market. In fact, one Realtor here in Nashville advertises his scheme by saying, “Never put your home on the market…” When you do that, you remove self-interest and competition for your home. In other words, you aren’t getting what the market would give you for your home because the market doesn’t even know it’s for sale. Even worse, you are now giving a buyer exclusivity on your home or in other words, the buyer your working with is not competing and he knows it. Just like the example I gave about being the only brewer for 50 miles, he knows he’s the only buyer and his offer will reflect that accordingly. I assure you, 9 out of 10 times, an exclusive offer without market competition will be less in value and without desirable terms and conditions.
The next time you hear about some “Guaranteed Offer” or “Streamline Sales” or even worse “Never Put Your Home On The Market” scheme…..RUN! You will not get the most the market will bear, and you surely won’t receive desirable terms and conditions.
Real estate agents have some of the best stories and this one I’m about to share with you is true and happened to me. A few months into my career, many, many years ago, I listed my very first home for sale. I was so excited to have my first listing client, it was important to me to do everything right. I meticulously went through all my forms, explained all the details to my clients, answered all their questions and assured them, they made the right choice.
From the start, I must admit, everything seemed to be going really well. My clients loved my approach to selling their home, they loved the fact I was fresh and informed on all the latest updates and changes to the industry and the loved the fact, I was a go-getter proactively anticipating their needs and having answers before questions were even asked. The problem, as it is with most things I’ve learned, is the curve balls life throws at you that you can’t expect, and I was about to learn that lesson, the hard way.
After a couple weeks on the market, I had a un-represented buyer call in and want to see some homes. After getting my buyer representation agreement signed and getting them pre-approved, we went out, looked at some homes and nothing seemed to really tickle their fancy. A little discouraged, I suggested that we look in a different neighborhood they were thinking they had to live in, the neighborhood my listing I just took was in.
Driving through the neighborhood, they were impressed and decided to look at some homes so, I mentioned viewing the home I had listed. A day later, I met them at my listing, with their 7 kids….yes, 7 kids. The eldest was 13 years old and the youngest was a little girl, about 4.
Pulling up and seeing all these kids jump out of their mini-van caused my heart to palpitate to say the least. I was so nervous but, I didn’t want to offend them by telling them, all those kids couldn’t come in. So, I bit my tongue, opened the door and hoped for the best.
As you can imagine, kids went in every direction full throttle, running around like hooligans. I was just thankful the home was vacant. I went through the home with the parents, trying to explain the home’s features while trying to keep track of 7 kids, running around, screaming, crying, laughing, dear God, it was an insane asylum.
We round through the kitchen and the little girl comes up to her dad and says she needs to potty. Her dad tells her they will potty when they leave. I didn’t think anything of it and as we entered the dining room, the little girl again presses her father a little more insistently and stresses to her dad, she needs to potty. Well, at this point, I took charge and I said, “She can use the restroom here, I’m sure it’s not a problem.” He says to me, “She will be fine, she potty’d before we got here, she’s just being needy.” He then looks down at her and tells her, “go find your sister.”
At this point, I continued showing the home. I didn’t think twice about the interaction, believing that maybe her sister would take her to the restroom or that maybe dad was right, and she was just being “needy”. We get through the dining room, heading into the living room and out of the corner of my eye, I see a little 4 year old girl, squatting and taking a whiz right in the middle of the living room floor, carpeted floor.
In the matter of about 2 seconds, my entire world went white. I felt blood rush from my head and things started spinning as I was baffled, embarrassed, and bewildered. It was all a blur but, I remember pointing to the little girl, putting my hands on her father as I pulled him into the living room. He yelled as he came to realize what I was seeing but, it was too late, the little girl didn’t even clinch….it was full on and just no stopping it now. He screams for his wife, she comes rushing in, grabs the little girl and rushes her to the bathroom. The dad horrified looks at me and starts apologizing and my stunned response is, “It’s ok”….”IT’S OK?!?!” Yes, I couldn’t say anything else other than, “It’s ok.” The entire time, I’m thinking to myself, IT’S NOT OK!!!
I just knew this was going to end my relationship with my sellers and these buyers were embarrassed to the point that they would never speak to me again. I just saw approximately $15,000 in commission go down the drain, so to speak. Moments later, all the kids come in, see the mess, start laughing, hollering and going more insane than what they already were. Dad rushes them out the house and into the minivan while the mother comes out of the bathroom with a partially naked child, apologizing profusely.
The whole time, all I can say, “It’s ok…it will all be ok….”
Dad comes in, apologizing and says they are going to go down to HomeDepot, rent a carpet cleaner and come back to steam the carpet. Again, all I could say is, “Ok…Ok…” I have to be honest…..I was stunned.
I call my seller, tell them the situation and amazingly enough, they were “ok” as long as the carpet got steam cleaned. I’m slowly realizing, everything may be ok.
The Dad comes back, about an hour later, after dropping off the kids and begins steam cleaning the carpet. He was so embarrassed and so nice about taking care of the issue. We had a nice talk, got to know each other and when all was said and done, he looks over and says, I think this is the home for us, let’s write up an offer.
I was thrilled, wrote up the offer and eventually closed the transaction. Later on, we looked back at the issue and laugh realizing that they had to buy the home because their daughter marked it as her own.
Bad Realtor®? You Can File A Complaint, Let Me Explain.
I had a referral recently who told me a horror story about their prior experience working with a Realtor® from a competing brokerage here in Nashville. After two hours of listening to their litany of complaints, I asked them why they didn’t allege a Code of Ethics violation and file a complaint. With confused looks on their face, they replied with exasperation stating that they had no idea they could.
I explained to them that the agent they were working with was a Realtor® and as such, was held to a higher standard. I told them that based on their complaints, I felt like the Realtor could be in violation of at least 2 Articles of the Code. The husband explained that he thought being a Realtor® just meant that the person he was working with could list his home, he had no idea about the Code of Ethics or even that it was something he could use to file a complaint against this Realtor®.
I explained to Mr. and Mrs. Smith that the Code of Ethics has 17 Articles and that if a Realtor® is found to be in violation of those Articles that they can be penalized with fines, mandatory training and potentially suspension or expulsion from the National Association of Realtors. I explained that NAR (National Association of Realtors) had a reasonably good system in place for due diligence and that anyone can file a complaint, free of charge.
As a member of my local association’s Grievance and Professionals Standards Committee, the committee who hears these complaints, I had access to NAR’s “Before You File A Complaint” brochure which you can find by following this link: https://www.nar.realtor/about-nar/governing-documents/code-of-ethics/brochure-before-you-file-an-ethics-complaint. I printed out a copy for them to take while in my office and answered their questions about the process and how it works. At the end of the day, they decided to work out a resolution with the Realtor’s® Broker so, they didn’t file a complaint but, was glad to know they had options.
The lesson here is, as a consumer, you have options when working with a Realtor®. Of course, I would hope you could resolve any issues you have with the Realtor® themselves but, if you can’t, always ask to speak with the Broker in charge. If after that, you still can’t get satisfaction, contact the local Realtor® Association and ask to file a complaint. It’s free of charge and they will even help you file the complaint. You don’t have to be locked in working with a Realtor® you don’t feel is representing your best interest and if something does go askew, you can get satisfaction from the Association if nowhere else.
Considering most homeowners will sell no more than two homes in their lifetime, it’s no wonder why most homeowners seek out an experienced and knowledgeable real estate licensee to help and guide them through the complex process of laws and regulations. This real estate licensee is hired to act as the homeowner’s fiduciary agent through the process of listing, marketing, selling and closing the purchase transaction. Per the National Association of Realtors 2018 Profile of Home Buyers and Sellers, they report that 91% of homeowners used a Realtor to help sell their home. Sadly however, not all real estate agents or Realtors for that matter are the same and some are using unscrupulous and immoral techniques to win your business. This article is going to focus on one of those techniques to educate the consumer so that they can avoid falling victim to these less than reputable practices.
In the industry, the scam we are going to talk about is called “Buying the Listing” however, it has nothing to do with really “buying” anything. What it refers to is the illegal and immoral practice of convincing a homeowner their home is worth more than it is in order to win the listing agreement.
Many homeowners want to believe their home is a small gold mine. This is because for those same homeowners, the home is the lion’s share of the economic health of the family. Many of you reading this article can relate because you find yourself in the very situation I’m describing. You don’t have any retirement to speak of and savings is just as meager, you’re living paycheck to paycheck and any disaster could put you and your family on the road to ruin. The only saving grace you have is that, you are sitting on equity in your home and as such, the home’s equity forms the only foundation you have to economic security. Essentially, all your nest eggs are in one basket and you not only want the home equity to be a small gold mine but, need it to be without exception. This is exactly where a self-serving immoral real estate agent wants to find you.
The agent scam practice of “Buying the Listing” involves winning your business by telling you that they can sell your home for more than anyone else can. Of course, such promises are all the bait this agent needs to reel you in for the previous reason we outlined in the above paragraph. This deceitful agent has no real interest in selling your home because he knows it’s overpriced but, that’s not his goal. His goal is to use your listing to generate lead traffic from his sign, syndication, radius mailing and other marketing he may do. Having a presence in your neighborhood allows him to market his services to your neighbors by touting the fact, you trusted him to list your home and they should too. It’s called Social Proof Marketing Psychology and make no mistake, it works.
For 10 years now, Fannie Mae and Freddie Mac have been in government controlled forced conservatorship however, that could be ending soon, this month in fact.
As part of the Trump administrations proposed sweeping overhaul of the federal government, a plan to revolutionize the country’s housing finance system is on the table. Called the “Reform Federal Role in Mortgage Finance” the Trump administration is wanting to end the conservatorship of Fannie and Freddie, essentially privatizing the Quasi Government Supported Entities that are responsible for more than 90% of all mortgage debt in the country.
You see, for the past 10 years, the federal government has been the single largest stock holder and as the housing economy has turned around, they have been raking in the cash. In fact, some profit estimates have the fed making about 88 million dollars. With such huge profits, why would the government give up it’s stock holdings now?
The government answers that question by stating, “This proposal would transform the way the Federal Government delivers support of the U.S. housing finance system to ensure more transparency and accountability to taxpayers, and to MINIMIZE THE RISK TO TAXPAYER-FUNDED BAILOUTS, while maintaining responsible sustainable support for homeowners,” Reform Federal Role in Mortgage Finance Summary Section. My point is, anyone making 88 million in a stock doesn’t just up and sell it unless they know holding the stock isn’t going to be as profitable. Let me be clearer. When investing in property, it’s all about timing. We all want to buy low, sell high. A mantra of investing that’s almost become cliché. None the less, it’s true. With the federal government deciding to sell their stock on a 88 million dollar profitable return, I’m left wondering, are they timing the market and know it’s now time to get out? For goodness sake, they say as much in the summary that I quoted just above.
Make no mistake friends, the Federal Reserve and Treasury Departments have access to all sorts of information that you and I don’t. As such, many times we are left to reading the tea leaves or peering into crystal balls but, in my humble opinion, this actions by the Trump administration is the proverbial “writing on the wall”. Here locally, the housing market has been slowing since April 2017. We are all noticing it, homes are seeing more price reductions, longer days on market and sellers are offering more concessions. Looming tariff trade wars, Europe in the grips of a recession and now the Fed and Treasury want to jump out of a 88 million dollar cash cow…….it seems clear to me, I hope it’s clear to you.
The 2019 Nashville real estate market will prove its self a tale of two markets, pre-recession and post-recession.
Even the most optimistic housing economist is predicting a slowing of the market while others are predicting a sharper contrast from 2018. This sharper contrast is potentially the harbinger of the coming buyer’s market if it’s not already upon us.
Here locally, it’s a little more complicated. As of the last 6 years or so, our homeowners have truly strong-armed the purchase negotiations making demands of buyer’s that were unconscionable pre-recession. This “new norm” has altered the mindset of many homeowners who are going to find 2019’s turn toward buyers a reality they can’t resolve themselves to. Large portions of entire developments and in some cases whole developments are filled with buyer’s who paid upper-class premiums for middle-class housing. Potentially creating neighborhoods and communities filled with homeowners who are upside down in their mortgage with even the modest of downturns.
We started seeing this shift back in the market in April of 2017 however, it was on a micro scale and most didn’t really feel its effect. The shift didn’t really start hitting the Macro (or Nashville Metro and Surrounding Counties) as a whole till late Summer this year. We noticed the 2nd quarter of 2018 home prices were rising but, at the slowest pace since 2015. Personally, I’ve noticed more and more Realtor announcements about “Price Changes”, “New Prices” and “Buyer Incentives” this fall than I can remember in recent history.
With all that being said, we have to keep this in perspective, like I said, this is a tale of two markets. So, even though we are slowing in comparison to the last 6 years, compare it to pre-recession and we are still going gang busters. None the less, don’t forget, even a modest reversal of those post-recession gains will leave many up-side down in those mortgages because they simply over paid. For goodness sakes, some neighborhoods saw a 24% equity increase in 24 months, that is unsustainable, and those buyers may be in trouble.
Which neighborhoods will feel this pinch first? Nashville’s housing demand is squarely placed in the affordable housing arena. Therefore, homes at or above the area average will feel the pinch or recognize the buyer’s market first. Homes $250,000.00 or less may actually continue their price increase through the summer of 2019 while more expensive homes will begin noting price reductions, and increased days on market starting Fall / Winter of 2018.
All said and done, for the most part, the housing boom peeked Summer of 2017 and has measurably been plateauing ever since. With more new homes than ever before coming onto the market demand is starting to be met and home prices are growing at a slower rate than they have for the past three to five years. Homeowners can expect increased days on market, price reductions and paying buyer incentives as early as now. Spring of 2019 will be noticeably slower while the summer of 2019 may be the slowest growth post-recession we have seen. Those neighborhoods under 250,000 will hold their value well for now while more expensive homes bought in the last 5 years may see their mortgages become upside down. The days of seeing 12% growth per annum for most, if not all of us is over and selling a home in 24 months for profit will end by Summer / Fall of 2019.For more information on how I can help you list, market and sell your home for a flat fee of $999.00, call me today at 615-424-0961 or email JGonzalez@LHRLLC.com. You can always visit on-line at www.ListWithLiberty.com or our Flat Fee site, www.LHRLLC.info.