Jeff Jacobs - page 19

I saw a house today that is a pretty good deal. It was an Open House on my way home from church. The house has been on the market for a while judging by the stack of cards there on the entry table. It is an original owner home from the 1950s that is solidly built. It’s 3600 square feet, and priced at $399,950.

OK, it’s a good price, in a good location, in good shape, so why is it sitting there. I asked where the electrical box was, and the agent, who has had the listing for a month looked confused. I asked because the original Square D electrical box had been converted to a junction box.

Now I had already spent enough time in the house, and the agent was there talking with another guy. I seemed to be intruding even though the agent, and I know each other.

So I came home, and looked at the listing on the North West Multiple Listing Service. Holy Cow, it was one of those things that described the other flaky buyer who had backed out. The original listing was intact, but just an agent comment. The picture at least could have been changed.

I think an agent should know all about the house. The cards sitting in the hall way looked bad. It looked as though a whole stack of agents had given the property a pass, for no reason, and surely no explanation to a potential buyer. The house smelled, and an agent, and especially one in the business for as long as this one, would have an air freshener.

It’s a good listing, a good purchase for some one, and some one will buy it. I just think it could have been presented today with more feeling.

Multiple offers are something to avoid.

I was researching some properties today, mainly getting a sense of how much of the market is short sales, and bank owned properties. The below $350K price range is mostly short sales here in Seattle. In Everett, and Burien the price point of short sales is lower, and in the $200K range. Many of the out lying areas show short sales in the $100K range, but those are for properties that sold for $200k in 2007. That’s where the big price drop statistics come from.

My next search, in Seattle, was in the $350K to $500K range. To my surprise I was finding new listing with comments that offers would be reviewed at some later date. Some listings were to be viewed over this week end, with offers to be submitted on Sunday evening. We haven’t seen that in a while, but it is a standard trick to generate interest.

The same warning should be taken now, as it has been given in the past ten years. The buyer never wins in a multiple offer situation. No matter how good the property looks, there is something wrong with a tactic that creates hype. Make an offer if you want, there is no rush, and even make a low offer. Chances are that in a contrived hysteria the offer that gets accepted will be from some one who is responding to pressure. The chances are very good that the buyer will back out.

Just wait it out, there is something better out there.

While we are talking about Real Estate commissions let’s talk about value. Just because you pay a certain price for a property, or just because other properties sold in the area for a certain price, doesn’t translate into a value.

When an appraiser comes out there are things they look at that add, or subtract from the value of Comparable Properties. Comparable Properties is kind of a meaningless term. I use town homes as my best example. Comparable Town Homes can be just as worthless as the one that is being appraised. Adding value for a view doesn’t translate into a property value. The view has a value, but the property is questionable. I’m told I may need to adjust my prejudice against town homes as time goes on.

The same is true in a property with obsolescence. The interior may be gorgeous, but the systems may need updating. One classic example is when the appraiser, or home inspector notes there is low water pressure in a newly remodeled kitchen, or bathroom. It could be caused by a lot of things, but there is a good chance it’s the pipes. So the remodel is actually a liability to getting at those pipes.

A buyer’s agent should know property value. They should know the market place, but they should also know what has value, and what to avoid. You learn that by looking at houses, closing transactions, and getting feed back. It helps to have taken apart a few places.

People in the Real Estate business, lifers, are worth the time to find. All agents charge the same, but a few have value.

Real Estate Commissions

There has been a lot of discussion about how Real Estate agents get paid. The Real Estate commission is traditionally 6% under $700K and 5% over $700K. It used to be 7% when property prices were lower.

Now that property prices are falling again the commission is an even bigger topic of conversation. People are stuck, having less equity in a home makes it harder to sign up for a fee that takes away 6% of the purchase price.

In commercial Real Estate the commissions can be between 5% and 10%. It depends on the price, and difficulty, but all commissions are negotiable.

I used to charge 3% as a Buyer’s Agent, and if you bought through me it was 1% for me to list the property. In order to sell I could charge 1% if you did what I asked. If the property was in good condition, it photographed well, and it was priced well I had no problem listing for 1%.

In my opinion working with a buyer is harder because there are so many variables. The second part about that is that you have to buy well in order to have any value in a property. There have been times when a transaction was so easy that I only charged a fee to get the property closed, and pay my expenses. Some times I would refer the client to an attorney who could handle legal issues, and I was only paid a fee for the referral, usually about $200.

You can get a Real Estate transaction closed through an attorney for as low as about $1200, to $1600 including escrow fees. The agent is paid, we hope, based on the expertise they bring to the transaction.

There is a discussion about looking for properties online. For me my first experience was in about 2000. That seems like a long time ago.

The Multiple Listing Service stored data in a central location. The company that handled the data for the Northwest Multiple Listing Service was called Moore Data. I bought a software program from them to do Comparative Market Analysis. It worked great. It made a nice presentation at a time before it became a common tool.

With the program I was also able to share information with other people on line, through e-mails. The e-mail system quickly became a common Real Estate practice. The Real Estate agent would e-mail clients a list of properties. Soon after our Multiple Listing Service began offering an online version of the data base Real Estate agents use.

John L Scott was the first Brokerage that I recall who invested in the technology of online searches in conjunction with Microsoft. Windermere seemed to be dragging their feet. Coldwell banker made the most significant strides nationally.

Then a company called Zillow began the ambitious project of a national data base for Real Estate. Governments had converted sales data to an online system from microfiche. It opened up a whole new world of analysis of tax data.

The next question is, if all of this information was available how did Real Estate prices get so high?