Dennis and Scott

If you’ve got your finger on the economic pulse, particularly as it relates to the housing market, you’ve undoubtedly noticed that interest rates are on the rise.

Why? Well, unemployment sits at a low 3.7% (as of October 2018, according to the Bureau of Labor Statistics most recent report) which often comes with higher wages, which leads to inflation, which yields an upward trend in mortgage rates.

The graph below illustrates that correlation pretty well: As unemployment jumped in 2008 and 2009 (the top line), wages dropped significantly (bottom line), followed by a subtle yet steady increase in wages as unemployment slowly falls again.

But you didn’t come here for a lesson on economics, so let’s get to what that means for the housing market.

The Impact on Real Estate

Anyone who pays attention to these types of statistics will gladly give you their opinion on the health and stability of today’s real estate market. And while we’re about to join that club, we don’t suggest that you take our words as gospel. That said, we do believe that the housing market is still incredibly stable and is poised to continue to see continued growth moving forward, particularly in Richmond. Here’s why:

Rising interest rates are caused by and coupled with increased employment, so the increased cost of borrowing is unlikely to cause a collapse. As demonstrated by the low unemployment rate, the public as a whole is seeing their income increase, and provided mortgage credit standards remain consistent (the lack of which was arguably the biggest cause of the 2008 fiasco), these changes are all normal and healthy developments that ebb and flow over time.

Particularly in Richmond, home values are continuing to rise, making real estate an investment that is likely to produce returns that compensate for higher rates. With houses selling as quickly as they have been, pricing continues to trend upward. This is especially exaggerated in urban markets, where low inventory can’t be easily compensated for by increased building (you can’t build where there aren’t empty lots!). The suburban markets are seeing these trends as well, though pricing is slowly starting to plateau as builders add to the inventory stock.

We may see a shift in mortgage product trends, as buyers try to protect themselves from what might be even higher rates down the line. The 3, 5, and 7 year Adjustable Rate Mortgages provide buyers with options a percentage point or two below fixed or long term rates, which helps offset the potential risk of rising rates in the short to mid term. However, with so many questions about rate trajectory – How high will they go? When does it stop? Will they come back down in 5 years? 10? – it’s even more important to discuss your options with a trusted mortgage professional before locking anything in.

Summary

All this said, we see moderately increased rates as a reflection of a strong economy and a booming real estate market. And while low rates were fun while they lasted (that 30 year fixed mortgage at 3.5% was a no brainer), mildly costlier borrowing is ultimately a small price to pay for a healthy, stable market whose upward equity potential is likely to benefit the savvy, informed shopper.

As the saying goes: “A rising tide lifts all boats.”

If you’ve been paying attention to Richmond’s real estate market over the last year or two, you’re no stranger to the concept of a bidding war. With low inventory and high competition, this is something we have become very familiar with. Whether you’re buying or selling – or both – it’s important to understand how bidding wars are created and the best ways to navigate these sometimes rocky waters.

“Suggested” Price

In the price-fixed world we live in, real estate transactions can feel confusing. While the prices we see on clothing, groceries, and restaurant menu items aren’t up for negotiation, real estate pricing is always subject to debate. Both buyers and sellers need to realize that, in most cases, the listing price won’t be the price at which the home actually sells.

Our job is to help you make sure that any potential variability swings to your advantage.

Accurate Pricing

Sometimes sellers want to hike up the price of their home, even when they know it’s worth less. Their thinking is to aim high and then, even if they have to compromise a bit, they still make what they’re hoping to make. The problem with this strategy, as a seller, is that the right audience never sees the home: the people who can afford it generally want something with better or more features and the people who have a smaller budget are discouraged by the price and cross it off their list.

If you’re a seller looking to create the environment for a bidding war, it’s in your best interest to price your home as accurately as possible, with a clear understanding that asking price isn’t necessarily the final transaction price. That way, budget and features match the expectations of those who come to look at the home and qualified, highly interested competition can generate demand which may end up leading to a bidding war.

As a buyer, lean into your agent to let you know if something is overpriced. He or she (or hopefully we) will know if there’s some wiggle room to bid at a lower price. Plus, if a home is overpriced, it likely hasn’t gotten much engagement or has been sitting on the market for quite some time, so even a low offer might be enticing when sellers are getting antsy.

Don’t forget about Terms…

Whether you’re making the offers or considering them, keep in mind that while price is just a couple paragraphs of the equation, the ‘terms’ of the contract can be pages and pages long. Financing and inspection terms, contingencies, settlement dates, possession dates, closing costs, and post-occupancy conditions (to name a few…) all comprise this “terms” section, which can collectively either compel a seller to take your offer seriously, or allow a buyer some wiggle room on price.

Maybe the buyer is willing to absorb some of the inspection item costs, if any issues are found. Maybe the seller has a time constraint that the buyer is willing to work around. Maybe a “rent back” agreement can be offered in a situation where the seller doesn’t have other living arrangements prepared for after closing. The possibilities are endless and can really create a win-win situation for both parties, when price isn’t negotiable for one of the parties involved.

Summary

The idea of a bidding war is daunting for a lot of people: Sellers want to do anything they can to create one, and buyers tend to run away from them in fear that there’s no hope of winning and staying in budget. Ultimately, whichever side of the equation you find yourself on, there are always ways to think critically and reach a solution that meets everyone’s needs.

If you’re a buyer with a tight budget, don’t stray away from a home in high demand! Your agent can help you leverage circumstances and/or desires to design a contract that checks as many boxes as possible for the seller, even if price isn’t one of them.

And as a seller, demand generated through accurate pricing and aggressive marketing can create the competitive environment that has made bidding wars so common here in RVA.

Either way, there’s no need to be intimidated. Let us be your advocate.

We’ve been at this real estate gig for a while now, and we can’t seem to recall a time when the seasonality of the market was so pronounced. Granted, we spend a lot more time digging into the data than we used to, but we think it’s more than that.

Real estate has always ebbed and flowed. If you didn’t know that home sales shoot up in the summer and down in the winter, you might live under a rock (or at least, you’re new to this whole thing). But the industry’s seasonality isn’t quite that basic anymore. It is both more nuanced and more exaggerated.

Let’s break it down:

The “off” season

If the housing market has an off season, it begins around the first of November as people start preparing for the holidays and ends around mid-January when people are finally done recovering from said holidays. The turkey and eggnog hangovers are gone and everyone starts counting down to warmer and sunnier days.

The chart below highlights this lull in market activity:

That said, buying during this time frame can be a strategic move. Interest rates tend to go down with lower demand and sellers are often under a lot of pressure to sell before Christmas or the New Year, so good deals can be found, especially if you’re strategic about it. Patience would definitely be key in this scenario though, as there’s just not much inventory to go around!

The spring rush

Beginning at the end of January or early February and stretching through the month of June, the market picks up pretty quickly. With 30-40% of annual transactions occurring during this time frame, both buyers and sellers are out and ready to go.

Recently, this period of time has been getting increasingly chaotic, as low inventory has resulted in bidding wars and multiple offer situations on most homes, particularly in popular neighborhoods where density is high. This past spring, it wasn’t uncommon for houses to sell within a day or two, sometimes even hours! And while the market usually slows down come July, this year we saw it maintain steady demand until right about now. It is early August and we’re just now taking our first deep breath in months!

Slowing back down

Come September, as kids head back to school and the weather starts to cool off (at least at night!), the market finally calms back down. While some transactions may occur, many of them are actually contracts that were created in the spring and summer months that are finally coming to close.

And, as seasonal spikes become stronger and more exaggerated over the years, the fall months are seeing less traffic than before. Whether or not this is a permanent shift won’t be clear until inventory levels finally come back up to a normal level (One day, maybe?).

The following graph shows a spike in days on market during the late fall and early winter months, not to mention that steep drop off come spring!

Summary

All of this is good information to keep in mind, particularly if you have the freedom to decide when you want to buy or sell (or both!). But we usually find that family, career, and/or financial factors end up dictating when our clients are able to enter the market, and honestly, there’s no good or bad time, per se.

There are benefits and drawbacks to any part of the seasonal roller coaster you may find yourself on, and a good Realtor will help you leverage whatever you can to secure a contract that feels like a win.

Working among other realtors all day every day, we sometimes hear complaints of clients with whom they’ve been working with that just won’t pull the trigger and actually make a purchase. There are agents out there that are in a rush to get a deal wrapped up as swiftly as possible so they can set their sights on the next quick kill…

And while it’s nice to have a quick, easy transaction when the situation allows, that’s not what this career is about. We deal with guiding and assisting people as they pursue their life goals, needs, and transitions; not simply opening doors and writing contracts. Instead, we like to be an ongoing resource, not just through the sometimes tedious buying/selling process (these things take time, after all), but before you even know for certain if you actually want to buy or sell!

Seriously. We are happy to serve as a trusted resource in the months or years before you’re ready to take the plunge.

Why? Because your realtor should be good for more than just running comparable sales when it’s time to make a change. We’ve got a lot of experience that you can take advantage of, regardless of where you are in the planning, buying or selling process.

Here are some scenarios to consider:

Looking to make some big improvements? It’s important know how much, if at all, any major renovation or construction project will affect the value of your home. Spending $10,000 to renovate your kitchen doesn’t necessarily mean your home’s value will go up by $10,000. It may go up by less, more, or not at all depending on a number of factors that the average homeowner might not even think about.

From our knowledge of market caps, neighborhood trends or expectations, experience through countless appraisals – you name it – we can help you get the most bang for your buck when it comes to making sure investments made in your home will pay off down the road.

And speaking of renovations…

Need a contractor? We know more than a few. And we know who’s worth their weight and who might leave you underwhelmed by the final product in either aesthetics or functionality. Your friend that can recommend a good contractor usually comes from their singular experience using them. We recommend contractors whose work we have observed and experienced on many occasions, and know each one’s strengths and weaknesses.

Sure, there’s also Google or Angie’s List, but when it comes hiring a local pro, you want to make darn sure you are hiring the right person for the right project. So call us up, and we’ll give you our two cents!

Want to be in the know? Come on, who doesn’t?

When construction crews invade, buildings start coming down, or you see zoning signage pop up out of nowhere, we can be a resource to figure out what’s happening, where it’s happening, and just what that might mean for your community.

We don’t claim to know everything, but it’s our job to keep up on industry developments, so chances are we’ve at least heard whisperings of whatever it is that’s popping up or disappearing in your neighborhood.

Let us be your resource.

Sure, we’d love to help you buy or sell tomorrow if that’s what your goal is. But if not, we’re happy to remain a resource in other ways. The more you know, the more confident you will be when the time comes to make that next move, even if it’s a few years down the line.

The internet has transformed almost every single industry on the planet, and real estate is no different. Our clients have more access to property information, data, sales numbers, comparable transactions – you name it – than ever before, and we think that’s a good thing!

Working with a real estate agent, a buyer or seller has access to records at the city or county, assessments, past sales or other searches. We can dump all this information into a cloud-based spreadsheet and share it with the client. And there are hundreds of statistical services that will gladly cook up all that data into some sweet charts and graphs.

Beyond MLS, there’s Zillow and all the other sites that will give you estimates of value. There’s buckets of research from Case Shiller or the NAR. And that’s all before you even Google whatever property you’re looking at to see what kinds of ancillary information might be out there.

Makes you wonder how people bought houses in the past with so little information, doesn’t it??

Easy as 1, 2, 3 … 4, 9, 37, 142, 359 … Wait, this is Hard!

Access to this level of information is truly revolutionary when it comes to the buying and selling of property. But has it made anyone’s job easier?

We don’t think so.

Now, it’s an agent’s job to figure out which data to pay attention to, and how to put it all together into an analysis that will mean something to the client and—most importantly—help them. Yes, as clients, you have access to way more housing information than ever before. But it’s our job to make sure you understand what you’re looking at and how to interpret it.

In our experience, our clients have more information, yet are more confused than ever before.

The proof is in the pudding:

A recent study showed that over the past five years more people are using agents. The role of the agent, and impact, has grown larger with so much data to sort through. The public trusts their transactions to Realtors because they have the experience to clarify things. This is incredibly interesting…and gratifying.

At the end of the day, it’s not enough to simply have more information. You’ve got to know what to do with it. A good agent brings that home and makes this potentially complicated process much simpler.

This is what we do—make sense of it all. We’re here to help you.

We’re offered warranties all the time – on our plane tickets, on our appliances, on our cars – you name it. And often, we pass them up. Sometimes the cost is just too high and we think “no thanks, it probably won’t break anyway. Besides, it’s brand new!”

But if you’re building a new home in Virginia, every new home is required to be warranted by the builder. And for good reason! Poor workmanship is a lot bigger of a deal than a glitchy iPhone or a car that prematurely breaks down.

The tricky thing about home warranties is that, when you really read down into the fine print, you see that each component of the warranty is a bit different, so it’s important to do your homework (and let a professional take a look) so you know what exactly you can expect if something cracks, leaks, or breaks down the road.

Here are the cliff notes:

Materials: This is probably the first thing that comes to mind when you imagine what might happen that would require you to whip out that warranty and go knocking on your builder’s door. Virginia law requires at least a year long warranty for the materials used to build your home.

In the case of material claims, there’s often question as to whether the material or product itself is the issue or whether poor installation is to blame. In cases where the builder warranty has run out but the product itself is still under warranty, there’s often a bit of “not me!” that goes back and forth as to who is responsible for replacing or repairing the item.

Structure: Your home’s foundation is warranted for five years at least, though many builders elect to provide a 10 year warranty option on structural components like framing, roofing, or floors. Often though, these 10 year warranties decrease in value over time, so read carefully!

That said, a 10 year warranty is still better than the Virginia mandated 5 year warranty, and most builders that feel confident in their product will offer this option, feeling confident that their homes will last way beyond the life of the warranty.

Systems: HVAC, electrical, garage doors, etc are usually warranted through the individual manufacturer. Often, these warranties cover individual components or parts of each system, rather than the system as a whole.

Generally, these warranties need to be registered, and in the case that a repair is needed, there are certain qualified contractors who must be used in order for the warranty to cover the costs. When you take ownership of your new home, ensure that your builder has provider all of the manufacturer warranty cards for your systems and appliances, then fill them out immediately and mail them in.

Summary

This is one of the big perks of a buying a brand new home, as resale homes are generally old enough to have outgrown their warrantability. But in order to truly capitalize on those perks, you have to know what your warranty (or warranties) dictate!

Most builders will walk you through it all before you actually close on a home, but make sure you do your homework before that meeting, and then again after when you’ve been provided some context. The final key here is to keep that warranty in mind! We can’t tell you the number of times we’ve had clients forget that certain products or systems are still under warranty and then end up paying out of pocket. Don’t let that be you!

Rather than paying for an independent home inspector to check out your house when it is completed we advise that you wait to get that inspection about 10 months after you have owned it instead. Now you can easily go back to your builder with a list and request any necessary repairs to be done before your 1 year warranty is up.

For more on new home warranties, what to expect, or what red flags to look for, reach out to us, we will be glad to advise.

“Should we use a realtor?”

I get asked this question occasionally, especially in a strong seller’s market like we have right now. The hard data out there is clear: when you try the ‘do-it-yourself’ approach, you put yourself at a clear statistical disadvantage and have a much higher chance of not selling. And, those that do sell often end up selling at a discount more costly than hiring a realtor. But that’s not what I want to focus on here.

Coming from someone who, many years ago, tried (and failed) to sell for sale by owner (FSBO) before ultimately hiring a realtor, then becoming one, I can now clearly see both sides of the issue. I ultimately misjudged my abilities in some arenas and had total blind spots in others. I was oh-so confident at first: It all seemed straightforward! But I made the vital mistake of assuming that 98% of selling your home is finding a buyer.

If successfully selling your home was just about finding a buyer then when Zillow stormed onto the scene years ago, FSBOs should have gone through the roof. But there are now fewer FSBO’s than before! As I write this in February of 2018, I’m looking at the data for the last 3 days in RVA, specifically ‘Sold’ vs ‘Sold Non-MLS’ (without realtor representation.) We can run this as 3 weeks, 3 months or 3 years, it always looks the same:

In a 3 day period, only 1 regional sale displayed as FSBO – that’s 0.65% of total sales.

My perspective changed drastically after I became a realtor, not because it was now my livelihood, but simply because of what I was witnessing day in and day out in the real estate world. Most of us know a police officer that is extra vigilant with the security of their own home, a doctor that is hyper vigilant when it comes to protecting themselves against germs and diseases, an EMT that would never< text and drive, or a firefighter that has coached their own children extensively on the dangers of fires. They have an inordinate amount of eyewitness experience in seeing how bad a situation can go when it does go wrong.

While I would not put us on the same level as these heroes in our community, the same goes for real estate. When I first started in the industry I was shocked to see how common it was for a transaction to turn into a costly and even deal-killing mess. Even when the buyer and seller both operate efficiently and on time, you can end up with major problems.

It can be something as simple as a foundation problem, or…

• a broken septic tank that needs to be replaced,
• an unknown underground oil tank,
• a leaking underground oil tank (hello EPA!),
• a substantial amount of moisture under the house,
• toxic black mold in the air ducts,
• zoning issues,
• structural issues,
• title issues,
• HOA violations,
• discovery of a previously undisclosed attic fire,
• dangerously high levels of radon,
• termite damage,
• the buyer’s lender majorly dropping the ball,
• pipes bursting days before closing,
• an improperly repaired roof that begins collapsing,
• appraised value coming in short,
• a combination of a dozen relatively minor issues that appear as a giant issue,

…and the list goes on and on.

And if you think this is an extreme example of rarely occurring problems, think again: These are all real examples from my first six months as a realtor!

Now enter those especially difficult buyers: Buyers trying to get you to fix every little nick and scratch in your house on the repair request addendum, even things that aren’t broken! Non-responsive buyers that are throwing off your timeline to close. Buyers who try to wiggle out of a contract so they can buy another house they love more than yours.

Think the buyer’s agent will help you out along the way? They are contractually obligated to represent the best interest of their client. Just like a judge that strongly advises someone against representing themselves in a court case, they know if they see you making critical mistakes or not objecting to something you have the right to object to, they legally can’t advise you otherwise.

And all of this is after you find a buyer. To get a buyer in the first place you need to hire a photographer ($300-$500, normally paid for by the realtor, and no, you and your iphone do not make for good photography), create printed marketing material for your house, implement social media marketing (more $$), and advertise in every newspaper and website you can think of since you will not be in the MLS system that agents rely on to find homes for their buyers.

Then there is the value of your time. And the value of your sanity! Buying and putting up signs, advertising for and holding open houses, follow-ups on those that showed interest, answering calls at work inquiring about your house, answering 100 other calls that waste your time (no, it is not for rent!)<, updating pictures and info on a dozen different websites, setting up and managing showing requests, getting feedback from showings, evaluating if a potential buyer’s pre-qualification letter is worth the paper it is written on, writing up and and negotiating contracts, handling deposits and escrow, finding and scheduling termite inspector, finding contractors to fix issues you didn’t know you had until inspection, sending a bajillion pieces of paperwork and emails back and forth to the buyer’s agent and to the attorneys, ordering HOA documents, scheduling appraisals, the final walk-through, the closing disclosures, the bank payoffs, ordering home warranties, scheduling closing dates and times.

And then continually adjusting your schedule through every hiccup in the process. Are you exhausted yet??

Here is my take:

A relatively competent and conciliatory seller with a decent property who accurately prices his or her home and is able to find a relatively competent buyer with reasonable expectations should be able to successfully sell their own house in a good market without representation as long there are little-to-no issues with the condition of the house or any other outside forces that would derail the process.

But how many transactions actually happen that smoothly? Conservatively, I would say 20%.

Your home is probably the most valuable asset you own, and you will spend at least one to two months hammering out the details of the most complicated legal transaction you will likely ever undertake.

Feel like rolling the dice?

One of Webster’s definitions for evolution includes: “the process by which different kinds of living organisms are thought to have developed and diversified from earlier forms during the history of the earth.”

Everything evolves over time — from the finches in the Galapagos, to the technology we hold in our hands. And with evolution comes a change in behaviors to help us adapt to the ever changing environment that surrounds us.

Buyer Evolution

If you are considering buying (or selling) a home, and you have not been in the market in 3, 5, or even 10 years, the environment has evolved substantially from what you experienced the last time you were in it.

Phase One – 2009-10: The inexpensive listings sell out

When the economy began a full-fledged crash in 2008, around two million new homes were being built. Unfortunately, there weren’t two million buyers to buy them and as a result, the real estate market was left floating belly up in inventory.

In order to get this ‘overhang’ of inventory absorbed, builders (and their banks) had to cure prices by as much as 50%.

So if you are expecting to see these types of deals still available, they aren’t. By and large, the excess new home inventory was absorbed by 2011 or so.

Phase Two: Now you see it, now you don’t

Though it couldn’t come soon enough, I think every Realtor expected that when the market did return, it would about-face rapidly.

By about 2012, with much of the excess inventory absorbed, prices stabilized and even began to inch up slightly as buyers started to return to the market. And what began as a slow drip of buyers in 2012, became a full-blown gully washer by 2014 as the buyers returned in droves.

More buyers combined with a limited supply of new housing meant multiple offers, competitive bids, and accelerating pricing. Those who were quick to adapt were rewarded by some of the most aggressive price growth of any time in our nation’s history (excluding the housing bubble). Those who still expected the same deals as in 2011 were left to wonder what might have been.

Looking Backwards is Not Always the Best Strategy

Looking into the past provides good clues, but isn’t a great predictor of what is to come. The entire valuation model is based on past ‘comparable’ sales. But when pricing is going up, looking backwards is not a great strategy.

Appraisers, tax assessors, sites like Trulia and Zillow— they all rely on past sales in order to determine their estimates of value. Unless you’re in a market that’s on cruise control, this isn’t a good way to establish value. The best answer includes using not just past sales data, but also combining that information with the intuition of an experienced Realtor—one who knows their market in and out and has the ability to sense which way home prices are trending and at what rate.

Evolutionary end phases

Now here we are, in 2018. And while the market is always in flux, the best way to assess how you should act as a homebuyer in any real estate climate comes down to understanding not just where the market has been, but where it’s heading. You must evolve with the latest conditions, which includes looking forward, and it includes involving an expert (that’s us!) who has seen the twists and turns and can advise you based on data, community trends, experience, intuition, and all the other intangible inputs that determine what a home will sell for.

Every real estate transaction is different, for obvious reasons. And yet, every real estate transaction is also kinda the same… There’s a lot of emotion involved. And there’s a lot of money involved.

So it’s not always easy to understand when it’s the right time to push hard or when it’s best to ease off the pedal.

When to Push Back

One thing that can help you get closer to an answer: information. That’s the only way to know how your situation stands relative to the local market, which is key to maximizing your economics.
The chart below is one of our favorites, because we think it really provides some great guidelines in analyzing your personal market. What you see below is the percentage of the asking price that sellers got in a variety of zip codes/markets over a period of time. You can see that these are not straight lines, reflecting the changes in real estate demand. The Days on Market numbers correlates to the movement on those graphs as well, which makes sense: Buyers are going to be more aggressive in their bids if homes are staying on the market for shorter periods of time.

You can toggle on or off the individual zip codes (click the dots below the chart) to see how one area is moving versus the other.

Numbers Never Lie, Right?

“So the above chart is all we need to navigate a market, right?” I’m afraid not.

Even the best statistics include what we call “noise,” which in simple terms is something that can skew results. Every MLS customizes their data packages, and that’s fine. But all MLS’s should offer agents, as well as buyers and sellers, some tools to help them sort through all the data.

A few things to think about when you’re considering the charts above:

You’re more likely to find statistical packages using zip codes, as opposed to MLS zones. And a zip code does not represent one consistent real estate market. There can be some serious changes in the quality of inventory within a zip code, especially in the city.

In a zip code where there’s a lot of building, you’re going to find higher percentages against the ask because new homes are usually entered into the MLS at 100% or more of the asking price. On the flip side, resale homes in new home neighborhoods are likely to be at lower percentages because they are a little less competitive against all the new stock.

23220/23221/23226 have a smaller data size so the percentages will bounce around more. And when you have a small data size, it’s much easier for the averages to be skewed by an aberration.

Dig in, Move On, or Accept?

So what do you do when push comes to shove? Do you dig your feet in and fight for those last few thousand bucks? There’s no easy answer. The biggest takeaway we can give you though, is to make sure you utilize data, and be smart in how you interpret it.

There are more than a few surveys that say 90 percent of all real estate transactions involve at least one agent. You can also find more figures suggesting that 90 percent of all real estate transactions involve at least two agents, one for the buyer and one for the seller.

Now I want to set this up by pointing out that Zillow carries just 10% of all of the real estate portal traffic (again, depending on which of the many statistics you choose to believe.) And keep in mind that there are a lot of people coming through that site that aren’t really looking to use it as a tool to buy a house, such as researchers, ‘looky-loos,’ serial shoppers, and renters. Zillow will keep touting its traffic, but it’s simply not quality traffic. But, we digress.

Zillow’s ‘Coming Soon’

It an attempt to drive traffic, Zillow created a place on their site where sellers can announce they intend to sell their home. In theory, buyers get to take a look at these homes and make an offer before they hit the market.

Wait, what? I mean, aren’t they putting their house on some sort of market when it’s on a website, advertised as for sale, in front of the entire nation? So it’s a nonmarket market. And sellers hope they can avoid a commission by carving out the agent.

But is this really a good idea? Or, are the real buyers seeing this property? Is the seller really getting the full attention of the entire market? And are they likely to get the market value of the property when few people know about it?

Soft opens may work for restaurants and bars, but a soft sell? You’re eliminating one of the best resources you have: competition. This is especially true in high demand areas. Competition helps maximize the number of potential buyers by ensuring the widest exposure. It is, without a doubt, the best way to get your strongest offer.

(“Coming soon” could be a better tool for Realtors, who can scout for underpriced properties and make their pitch. But again, another post for another day…)

Getting Your Best Offer

I once heard an auctioneer say that any time two people are in the same room at the same time trying to buy the same thing, the seller gets market value. Put a third into the mix, and the seller is likely to get above market.

If these things are true, why on earth would anyone willingly reduce competition when selling their home?

Here’s the problem: Most people think only in terms of price. But offers include both price and terms. You cannot forget terms. Price is absolutely crucial, but the terms play a lot into overall satisfaction for a transaction.

So when you have maximum competition, you’re going to get better price and you’ll also be able to choose better terms. The ‘Coming Soon’ section of Zillow truly undermines a seller’s leverage by absolutely ensuring that the seller won’t be talking with the total population for that property. What are the chances that everyone who is interested in your property will find it if it is listed on only one message board? We call those chances slim…

But What About the Commissions?

There are a ton of intangible benefits that come with the commission paid. People tend to view commissions as expenses, but when you hire a good Realtor, you’re investing in a good outcome from your sale. If you feel your agent is an expense rather than an investment, find a new one.

Good agents:

• create competition and consequently drive prices up
• know how to negotiate effectively and put more money in your pocket
• evaluate the market and help your decision making
• bring expertise to lending, title work, appraisals, inspections and closing issues
• recommend other experts for the help you need to smooth the transaction

The most motivated buyers are riding around in a car with their skilled buyer’s agent, looking for their new home. Shouldn’t you want someone to represent you when they show up?

One other thing: the commission paid to an effective agent buys you time, and that always has value. The time required to successfully pull off a transaction is too often underestimated and, in many cases, the time savings alone can make the commission worth it.

Summary

Now, I’m not telling you you can’t sell your house without an agent. Nor am I saying that “Coming Soon” doesn’t have some intrinsic value. This article simply suggests that a good agent combined with the most powerful real estate network (MLS) will typically lead to more value from the transaction than the commission you pay. “Coming Soon” may carve out a commission, but I bet it’s going to cost you somewhere else.

There are exceptions, such as if you are selling to a friend (or friend of a friend) or are not necessarily worried about getting every penny out of your property. But if you want to sell and take home maximum value and with the most favorable terms, exposing it to the most qualified buyers in a finite time period with guidance from an experienced agent will always yield the best results.