Thursday, August 18, 2011

What the Single Family Home Sales Trend Since 2005 Actually Means

More than ever, home owners need an agent whose understanding of marketing can position their home and differentiate it from the competition if they hope to sell at the highest net in the shortest time. The underlying reason for this is not always in full perspective, not even for professionals. The reason for this is that the National Association of REALTORS® (NAR) data on existing home sales falls short of providing meaningful long term data.
The monthly trend reports from NAR may serve to show how today's market stacks up against market activity in the short term, but even the three year trend reports hardly reflect the state of affairs five years into the economic downturn. Just saying that inventories are at a given level hardly improves the perspective, especially when no standard is given by which they can be compared. Nor does the data on the decline in housing values provide meaningful context for how difficult it is to sell homes in the current market.

A somewhat clearer picture emerges from other news sources, but even they focus on short term trends. The most notable fact relevant to those selling their home is that a sharp uptick in investor activity, 18% of sales in July 2011, is what is what has been driving the nominal increases in sales since January 2011.

The following data was taken from the San Antonio MLS, 2010 census reports and other sources. It does not reflect the actual state of the market in other locations. It does however paint a shockingly gloomy look into a market in a location that was not as badly affected as most other large cities.
  • There is an eight month inventory of homes on the market, nearly double the inventory in 2005.
  • Only about 16,500 homes will have sold by the end of 2011—down from a high of 24,300 in 2006.
  • If the figures are adjusted for population growth over the same period, home sales will have dropped 36% since 2006.
  • Despite the First-time Buyer Tax Credit, there were about 800 fewer sales in 2009 than 2008, and 400 fewer sales in 2010 than 2009.
  • Only about 42% of the funds earmarked for the tax credit were ever claimed.
Single Family Home Sales Trend Since 2005 (San Antonio MLS)

Year Units Sold* Annual Decline Decline Since 2006 Sales as of 08/15 Sold after 08/15

2005 21947

Basis Date: 2006 24307 110.75% 1.11 15566 35.96%

2007 22339 91.90% 0.92 14593 34.67%

2008 18127 81.15% 0.75 12049 33.53%

2009 17417 96.08% 0.72 10519 39.60%

2010 17063 97.97% 0.70 11108 34.90%
As of: 08/16 2011 10877

Average** → 35.73%
Projected: 2011 16968 99.45% 0.70

15595 91.40% 0.64

* San Antonio MLS

** Average used for projected sales through 2011
*** Metro SA population grew an estimated 8.8% from 2005 to 2010

In addition to bone crunching personal debt and economic misfortune that has sent credit ratings into a downward spiral, consumer confidence is at an all time low. A new paradigm in personal finances is also emerging. People are paying off old debt in lieu of acquiring new debt.
Additionally, lenders have raised FICO scores for most buyers 60 points from the 2005 level to 740, and 780 for Jumbo loans.
A striking difference divides sales data for the high and low end of the market as well. While 8:10 homes priced below $300,000 sell at an average of 97% or more of their final list price in the initial listing period, only 2:3 homes priced above $350,000 sell within the same parameters. On the average, the remainder of the high-end homes remain on the market nearly a year, and sell at 93.2% of their final list price—after being discounted more than 10% below the initial list price

It is almost a mantra in the business that reducing the price will result in a quicker sale, and this all too typical article of faith among even the most experienced agents has resulted in an overall decline in luxury home values of 16% to 18%. Yet the bottom line is that there are fewer buyers in the market, and bargain basement prices on homes and historically low interest rates are not bringing them into the market. The competition for the individual buyer has never been more fierce, and success in attracting a buyer will require a remarkably comprehensive marketing plan that far exceeds the experience or understanding of even many of the most successful agents in the business.

Friday, August 12, 2011

FSBO Dot Com Founder Uses Agent to Sell Home

This is a total hoot!

It raises the question of whether the leader is the greater fool, or those who follow.

Follow the link to the whole story on

Wednesday, July 27, 2011

Follow the Fizzber Saga on YouTube

Despite the advent of FSBO dot coms, owners still face a daunting ordeal when selling a home by owner. The Fizzber Saga will track Fizzber through his experience. Will Fizzber succeed? Follow him and his friend, REALTOR Suzie, through the unpredictable events that are part and parcel of the real estate business.

 To keep up with all the episodes, go to my YouTube Channel, and subscribe to stay in the loop.

Thursday, July 21, 2011

How To Buy A Home For Sale By Owner

This topic has already been addressed in "How To Buy A Home For Sale By Owner" on There are however a few interesting stats that beg an update.

The most current Profile of Home Buyers and Sellers from the National Association of Realtors® found that fewer than 1:5 buyers search the FSBO dot com Web sites. Additionally, only 9% of the homes offered for sale in 2010 were FSBOs, and 88% of the homes that sold were Agent-assisted sales, 5% were sold to someone the seller knew and the remainder were sold to others.
Anecdotally, it's worth noting that FSBOs seem to reach the desperation phase somewhere between two and three months, and represent a virtually untapped resource for buyers. They are not easy prey though, at least not for most buyers. Reading the original article should help, but will not be a 1:1 substitute for a seasoned professional buyer's agent.

Wednesday, April 27, 2011

What Do You Save By Not Having A Buyer's Agent?

This ties nicely with each of the last three posts to this BLOG. It was a post to the Berkley Parents Network forum, and begs the question of why people begrudge the commission earned by real estate agents, when they know so little about even the most basic aspects of the business.

We could save $45,000 by not having an agent

May 2010 

My husband and I own a home in Oakland and we are moving to Lamorinda soon. We are looking at homes priced around $1.5m. My husband recently read an article on buying a home without an agent and is now very interested to do so (we would hire an attorney to represent our legal interests in this case). With commissions to the buying agent at 3%, we could potentially save $45,000 by not having an agent. 

We don't need many of the services that an agent can offer as we can find our own home, we can attend our own open houses, we don't need handholding, etc. Paying someone $45,000 simply to present our offer and negotiate the deal/paperwork seems ridiculous. Has anyone gone this route and how did it work out? Alternatively, are there any agents who work on a flat fee or who work for, say, a 1% commission (that's still $15,000 in our scenario)? We're open to paying an agent or attorney a reasonable fee, but would like to get away from the traditional compensation model. Any tips and advice would be greatly appreciated! Thank you! 

Just as an aside, we are planning to use an agent to sell our home in Oakland. I can see the benefit of using an agent on the sell side of the transaction more than the other way around. East Bay Mom 

The next question is how much more can East Bay Mom's (EBM) husband (H) be earning than he deserves if he is so unaware as to believe he will save money just to negotiate a sales price and shuffle a few papers.

First, the seller pays the commission. EBM & H would therefore have to look only at FSBOs to deny an agent the commission. How then would EBM & H know whether the asking price was in line with the property's value? It's not uncommon for FSBOs to price property 30% or more above their value. Then too, they would be limiting their search to 11% of the available properties on the market.

What if EBM & H do look at agency listed properties? The agent they contact will represent the seller, and get the whole $90,000 commission without doing more than making sure the seller gets the best end of the bargain and shuffling the paperwork—and without even holding her hand. Is that "fair?"

In the decade (plus) that I have been in the business, I have encountered numerous professionals with decades of experience who seem not to know what they are doing. Nonetheless, EBM & H would do well to follow the advice the respondents posted to her post, and find a buyer's agent—and find one who has earned the ABR® designation.

Tuesday, April 26, 2011

How To Sell Your Home Without a REALTOR®!

Our times, as Dickens put it, "was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness. . . ." Even in the best of times, it was difficult to fault a home owner for wanting to sell their home without a REALTOR®. Today, many home owners find it necessary to do so just to cut their losses. Few know what is in store for them though, and fewer still will succeed.

The reasons so few owners successfully sell their home are manifold. The reasons begin with owners not realizing that they are in the business of selling real estate, and that it is as competitive a business as any they can imagine. The next reason is that they go into business without a workable plan, which is to say that they plan to fail. There are also at least 15 pitfalls that they fall into, and even the difference between success and failure is not cut and dried. Even the 20% of sellers who succeed in selling their home by owner very often net less than they would had they used and agent.

Many believe that the Internet is the ultimate source for information, and place their faith in being able to learn how to sell their homes by owner by searching for information online. They will certainly find a lot of free information. As good as the advice they find may be, none of it will help, because none of it includes a marketing plan.

The available advice comes primarily from three sources, real estate professionals who hope to ingratiate sellers who will list with them when they fail, out-of-their-element journalists who seem to get their advice from the agents, and the FSBO dot coms—which have a laundry list of ulterior motives for wanting sellers to believe that their Web site is the silver bullet that will slay the werewolf of failure.

If you are interested in selling your home without a REALTOR®, does it make sense to go into the real estate business without a well thought out plan? Today's market is the most competitive in history, and especially so for the luxury home market.

Selling Your Home By Owner is a proven marketing plan that could well reverse the stats for owners who want to sell a home without a REALTOR®. This eBooklet provides everything you need to know about selling your home by owner, and the tools you need to do it:
  • Marketing advice to help you maximize exposure of your home to the market.
  • A marketing plan that can help overcome the odds against success.
  • A marketing strategy to help you maximize your net proceeds.
  • In-depth tips for successful selling.
  • Industry insight to the FSBO dot com marketplace.
  • A title Insurance rate chart.
  • The required legal disclosure forms.
  • Spreadsheets for calculating seller net proceeds and buyer closing costs.
Go for it—and good luck!

Monday, April 11, 2011

Internet Searches for Homes for Sale

The Internet is the ultimate source for information, right? Well, not if you heed the warnings. Whether you get your news, history or political information online, Internet experts all caution that the volume of information does not equate with quality, and searching for homes for sale online is no exception.

Useful though it may be, the Internet super highway just provides another street for buyers to cruise down, and some are dead end streets. I make contact with at least one buyer each week who found a property listed on Zillow, Trulia or some other popular Internet search site—and discovered that the property was sold, expired or withdrawn from the MLS. From time to time, I have also had to tell buyers that the home they found on was no longer available.

The reasons that the information is out of date is simple. MLS listings are syndicated to these various Web sites, or they are IDX feeds and each is updated only periodically. Even the San Antonio board of REALTORS® MLS Search is not updated in real time. It's updated only every three days, and the current status of listings that are new or have expired will not show in the search results.

There is however one online search for consumers that has real-time access to the most current information in the San Antonio MLS. That would of course be the search available to member agents. Our search also includes over 160 parameters for the search, which can whittle down that list of 60+ properties that may turn up in another search by finding only the properties that have precisely the features a buyer wants.

Internet searches give consumers a false sense of empowerment, and real time results is only one of the advantages of having an agent who is working to meet your wants and needs. In addition to freeing up the time spent searching on your own, not seeing those properties that went on the market two or more days ago, and following up on those that are no longer available, there is another advantage you may not have considered. When you contact the listing agent for a property, that agent represents the seller. Agents in states that allow buyer representation will be working for you, and representing you in the negotiations, not the seller.

Not only is a buyer's representative the best source for real time information, but also for other information that a seller's agent cannot provide. Critical information, like days on the market, an opinion of value, a negotiating strategy and insights to a seller's vulnerabilities that only an agent is likely to be aware of is available only through your buyer's agent.

Wednesday, April 6, 2011

How to Find a Good Buyer's Agent

Real estate agents come in all sizes, shapes and levels of competence, and a truly good agent is the most valuable resource a buyer has. Most answers to how to find a real estate agent can lead you far afield from what really matters. Little about real estate companies differentiates one agent from another, and there is no "department of real estate" that rates agents. Knowing what differentiates a truly good agent from the rest is something of a mystery, and there is no good advice online that will help, unless you found this.

The advice typically comes from two kinds of sources: Advice from agents whose advice addresses their strengths, and; Advice from well meaning "authorities" with little real understanding of the business. One of the later group is posted on the Freddie Mac (acronym for Federal Home Loan Mortgage Corporation (FHLMC), a secondary mortgage market participant) Web site. Let's deconstruct their advice to see just how comprehensive it is:

  • How long has the real estate agent been in the real estate business? —Most agents who cannot make a success of the real estate business spend less than two years in it. Most of the rest are at least successful enough to have stayed with it. Most real estate agents who make a success of the business are personable and have social networks that have sustained them, or work hard at prospecting. Neither of these makes their experience a measure of competence. In fact, many never learn more than the agents who got out of the business within their first two years. In example, in just the past year:
    • My buyer's were able to renegotiate a contract when the inspection revealed that the seller, a licensed agent with 7 years experience, neglected to reveal having made repairs to the roof, and treating the property for termite infestation. In addition to a hefty price reduction and buyer incentives, my buyers got a new roof, termite treatment and repair to the foundation (there had been some settlement.)
    • A listing agent for a short sale property with 14 years experience asked whether my client would like to purchase any of the furnishings in the home—after the seller had agreed to the offer, and the contract had been submitted to the lender for final approval. When my buyer expressed an interest in some of the items, the agent insisted on adding the furnishings to the contract. This position was potentially disastrous for both my buyer and her seller. The short sale period was to expire in under 30 days, and renegotiating the contract risked both my buyer's position and that of the seller. My buyer had the cash, but was buying up to her qualifying limit, and we risked having the loan disapproved. Also, adding the cost of the furnishings to the contract would likely have meant that the listing agent's seller would not receive any of the funds paid for the furnishings. The agent ignored my objections, and argued for a good five minutes—pointing out her vast experience several times.
    • Another buyer was able to renegotiate a contract and get a new roof in addition to a significant seller contribution to her closing costs when the listing broker (with over 30 years in the business) revealed that the seller had had an inspection on the roof at the time it was listed—but had failed to disclose the inspection.
Experience matters, but it is not always a good measure of competence—virtually everyone knows someone with years of experience who still does everything wrong.
  • Is this person a full-time agent? 
This may be some of the best advice Freddie has to offer, but the experienced agents mentioned in the preceding remarks were full-time agents.
  • Is the real estate agent familiar with your preferred community?
Agents who have been in the business will likely be familiar enough with the communities in their market area to serve buyer/clients well. It is far more important that the agent not be so complacent about their knowledge of a community that they not research a chosen community for each individual client.
  • How many homes has the real estate agent sold in the past year?
An agent who has sold 20 homes in the past year, but never quite got it right will not serve a buyer any better than an agent who sold five homes and got it right. Many agents also specialize in listing homes for sale, but also take on buyers. Assume that one such agent sold 15 of their listings, helped three sellers find their next home and served two more buyers who had come to an open house. Should their "sales" count? See the remarks for the question, "Does the real estate agent usually work with sellers or buyers? "
  • What's the average sale price of those homes?
This question is not likely to be helpful. Averages make interesting statistical measures, and can be useful for some applications, but not for selecting an agent. Consider the following scenario: An agent who sold 11 luxury homes priced over $500,000, and five investment properties priced between $35,000 and $80,000. How would  this agent's average sales price of $533,000 disqualify them from any price bracket?
  • Does the real estate agent specialize in homes in your price range?
This is a rephrasing of the last absurd question.
  • Does the real estate agent usually work with sellers or buyers?
There is something to be said for specialization, but not as specialization relates to an agent's suitability to serve a buyer. Good agents will have learned something from both sides of the transaction that will be useful to serving the needs of buyers very well. The relevant exception is a listing agent. Listing agents need a special set of marketing skills that the majority of agents lack, which likely makes them better buyer's agents as well.
  • How many buyers is the real estate agent presently working with?
This is another valid question, but, like the rest, needs context. The context would be the buyer's time-table. Out of town buyers shopping in advance or someone who has a lease expiring in a month or two would need an agent who can help them now.
  • Is the real estate agent acting as an exclusive "buyer's agent, meaning that they work exclusively with people like you who are interested in purchasing a home, as opposed to property owners who are selling a home.
Here's another question that just rephrases the preceding question about whether the agent usually works with sellers or buyers.
  • How many sellers is the real estate agent presently working with?
This question asks about the other side of a preceding question, and crosses over into two other questions. The author must really have been trying to compile an impressive list of questions. It also lacks context, and no valid context that would be helpful to a buyer comes to mind.
  • What are the real estate agent's strengths?
This question really needs context, but also needs guidance about how to determine what those strengths may be. Buyers need an agent who is detail oriented enough to identify anything that might provide them with an advantage in the negotiations, and who has well honed negotiating skills.
  • Will the real estate agent offer you 3 homebuyer references?
This question is not likely to be very helpful. Most of the testimonials an agent may receive from buyers address relatively superficial aspects of their relationship, and few buyers are qualified judges of an agent's expertise, or likely to be aware of any deficit in the agent's competence.
  • For how long will the agent's contract with you be valid?
This question needs context, badly. For how long a term should it be valid? I'd suggest that buyers negotiate the term if they are not comfortable with what the agent offers.

Some online advice stresses the importance of personality on the premise that a buyer will be spending significant time with the agent. This is not bad advice, but it has limited value. Buyers should of coourse not select an agent with whom they form an immediate dislike, but factors related to competence are much more important.

What Questions Should A Buyer Ask?

The following questions address my strengths, like the online advice of other agents, will likely be more helpful in determining an agent's competence.
  • Have you earned the Accredited Buyer Representative Designation (ABR®)?—The ABR® designation is among the most difficult to attain. It requires both coursework and proven performance, and is held by fewer than 10% of agents. The coursework includes procedural details and strategies not taught in other courses, and no other professional designation is a better indicator of competence as a buyer's agent.
  • Do you provide an initial counseling session?—Whether a first time buyer or an old hand at buying and selling real estate, this is important. Well informed buyer make better decisions. The market is in constant flux or may differ in significant ways from markets with which an old hand is familiar. buyers should look for agents who recommend earmarking at least two hours for this initial counseling session. The session should cover routine and legally required advice and warnings, the market, financing, the buying process, buyer expectations, post-contract process and time-table, and the closing. This is also the time for buyers to ask any questions they want answered before looking for a home.
  • Do you recommend a mortgage lender?—Most agents have a mortgage loan officer they like to work with. The lender is usually competitive, and the loan officer knows that any future referrals from the agent will hinge in the quality of service they provide for that agent's clients. The agent should however recommend that the buyer shop around for financing on their own.
  • How has your attention to detail benefited your clients?—Like the examples in the comments about experience (above), an agent should be able to relate how they were able to leverage the negotiations in their client's favor.
  • Do you specialize in serving buyers or sellers?—This is a trick question. If the agent answers, "buyers," without addressing how their experience with sellers has helped them become a better buyer agent, I'd hold the answer suspect. Specialization is generally more important to the agent's business development than to the interests of their clients.
  • How many years have you been a real estate agent?—You should want to find an agent with at least two years experience and who has earned their ABR®, but not dismiss an agent with less experience who has earned their ABR®.
Regardless of the size, shape, personality, experience or any referral by a friend or acquaintance, competence is the criteria a buyer should look for in an agent who will represent them. In the end, you may never know just how competent your agent was. Hopefully, it will be because everything went so well that nothing about the transaction seemed to go badly. Still, it will be unlikely that anyone, even a good agent, would know that anything could not have worked out better. Armed with the right questions, a buyer can at least expect things to go as well as possible.

Tuesday, March 29, 2011

Finding a Real Estate Agent

The Internet abounds with advice about how to find a real estate agent, and almost all of it is useless. The least helpful aspect of the advice is that it most often does not differentiate between a buyer's agent and a listing agent. These two sides of a transaction are so dissimilar, and require such uniquely different skill sets and talents that the one-size-fits-all advice just falls flat.

In example, the first "hit" in a Google search turns up the advice on Since this advice is fairly typical, let's deconstruct it:
  1. The first bit of advice touts the virtues of REALTORS®. Since 99.9% of all real estate agents are REALTORS®, this is not a criteria that buyers and sellers will find particularly helpful.
  2. "Ask the people around you who they have used" is not bad advice, but it will not necessarily help you find a real estate agent who is competent—especially if you are looking for a listing agent to sell your home. The old cliché that "it takes one to know one" should suggest the value of this advice.
  3. The confusion in the following advice should be pretty apparent: "Google the top real estate companies in your area, go to those Web sites and look up profiles of individual agents at offices near you. Agents who are experienced will tell you but newer agents might have more time to spend with you."
  4. Advising you next to go "to open houses" to "meet real estate agents in a non-threatening working environment and interact with them" should tell you something if it works out as suggested. If the agent did not sell you on the home, or you did not at least feel threatened, how good could the agent be? You should also know that open houses are something agents do to meet the seller's expectations, and "prospect" for buyers. They seldom help sell a home, but often provide the agent with new names and contact information of buyers.
  5. If you have the time to wait, the advice that you "Pay attention to the listing signs in your neighborhood. Make note of the day they go up and when the sold sign appears" may help if you expect to need a listing agent. Then again, it may not.
  6. The advice that you "Look in your local Sunday newspaper for ads" overlooks the fact that agents do this primarily to meet the expectations of their sellers. Print advertising is all but useless for most other purposes, since the majority (97%) of buyers use the Internet to find homes. Buyers do still look through the local paper for open house ads though.
  7. The last bit of advice brings us back to "it takes one to know one"—"Ask other real estate agents for referrals." If the agent being asked for a referral is not good enough, how would that agent know who is?
Some of the advice also recommends finding someone with a "good" personality, what ever that is. Subjective criteria and superficial indicators sum up the character of most advice. There is however good advice available that addresses concrete indicators of an agent's professionalism and expertise.

Any advice about how to find a real estate agent needs to address whether you are looking for a buyer's agent, or a listing agent to sell your home. The qualifications of a buyer's agent are no small matter, and the qualifications of a listing agent are huge—because a listing agent must have specialized expertise and talents in addition to those of a buyer's agent. See the Buyer Resources and Seller Resources pages of my Web site for advice on how to actually find a real estate agent with the knowledge and talents to serve your needs.