The Town Broker

Archive for the 'Real Estate 101' Category

Why “Exclusive Listings” Are A Sucker’s Bet!

(Yeah…I’m probably going to take some heat from a few of my colleagues over this post, but so be it.)

I’m seeing a trend in the Westfield area real estate market that really irks me. There are some brokers who routinely make new listings “exclusive” for a period of time, ranging from a few days to a few weeks. What is an EXCLUSIVE LISTING? It’s a listing that isn’t being fully exposed to the marketplace, in the hope that the broker can sell it to one of their “in-house buyers”.

Putting The Broker’s Interest First.

Now I understand that there are a few circumstances where clients don’t want to go “public” with their listing. Perhaps they have some celebrity status. Maybe their property is notorious for one reason or another and the seller simply doesn’t want to deal with curiosity seekers. Keeping the listing exclusive allows for more limits and better control. I get that. But is this really what’s happening in the majority of cases? I have my doubts…

Hey…I’ve managed a real estate sales office myself.  I know the impact to the bottom line if we can generate fees on both side of the transaction. But this rarely works out well for the seller, and requires the brokerage to engage in the controversial practice of dual agency (which is a post for a different day).  Simply put…when a seller limits the pool of potential buyers to those of a single brokerage company, there is by definition a reduced demand (regardless of what market share they claim). Reduced demand leads to less market urgency, and purchase offers that are not necessarily the best that the market could deliver. I don’t believe this is the best course of action for anyone acting as a  fiduciary. (Incidentally, some companies require that sellers sign a consent form acknowledging that they understand this, and are choosing to be an exclusive listing anyway.)   The sad part is that the seller never really knows how much money they could be leaving on the table.

Why Would A Seller Choose To Be Exclusive?

Being exclusive sound like you’re being treated special, doesn’t it?! But unfortunately, I have heard from numerous sellers who either don’t know that their listing was being withheld from the market in this way, or they didn’t fully understand the implications. That’s not special…that stinks! Our job is to fully expose our listings to the market. Full market exposure provides better outcomes for the seller. Anything less is a sucker’s bet!

Aren’t the sellers the ones we’re supposed to be looking out for anyway?

Tags: dual agency, exclusive listing, fiduciary duty, responsibilities to clients, Westfield real estate

Is Your Agent Following The Law?

When I was 18, I bought my first set of wheels. It was a 1969 Rambler Sedan. My friends and I called it “The Midnight Rambler” in deference to the Rolling Stones song that came out in the same year. It was an old car when I got it…having been in our family for over 10 years. (I think I bought it from a cousin for about $350).  I think about that car often…not only because it was the only car I’ve ever owned that had a manual 3-speed shift on the steering column…but because being an old car, it helps me remember my fiduciary duties to my clients.

Fiduciary Duties and the Acronym Old Car.

As a real estate agent, we have specific legal responsibilities to our clients. These are known as  fiduciary duties. The acronym Old Car can be used to represent the 6 fiduciary responsibilities that all real estate agents owe to their clients. I’d like to outline them here. (And please understand that a client is someone who has entered into an agreement for representation by the agent, either as a buyer or a seller. The agreement is typically written, although there are some instances where it can be created orally. A customer is someone Read the rest of this entry »

Tags: agency, fiduciary duty, responsibilities to clients

Why Mortgage Rates Will Rise…Soon!

We all know that there is a direct relationship between your mortgage interest rate and how much house you can afford. The cheaper it is to borrow money, the more house you can squeeze into your budget. Ok…Duh! And unless you’ve been living in a cave somewhere, you’ve been bombarded with the news that mortgage interest rates are near their lowest levels in years, and that NOW is the right time to buy or refinance your home.

Well…I don’t have a clue as to whether or not NOW is the right time for you to do anything. But let me tell you why it it’s going to become much more expensive to borrow money…if you wait much longer.

The Fed Has Kept Rates Artificially Low

Since the end of 2008, the Federal Government has been the largest buyer of mortgage backed securities, with $1.25 TRILLION spent to date. This has kept interest rates artificially low (or lower than they would have remained without intervention). On March 31, 2010…a little over 3 weeks from now…this will stop. And rates will start going up.

How much? Hey…If I knew that I’d be sitting on some mountain top somewhere dispensing Read the rest of this entry »

Tags: home affordability, interest rates, mortgage

Real Estate Statistics: What You Need To Understand. (Part 3)

Real estate statistics can be confusing, and real estate is FULL of statistics! In Part 1 of this 3-part series, I looked at market absorption, how it describes the “dynamics” of the real estate market, and how you can use it to your advantage! In Part 2, I reviewed how the days on market (DOM)  tells how much the market values a listing. In this post, I’ll cover the final of the big 3 statistics: Sale Price/ Original List Price Ratio.

Sale Price/ Original List Price Ratio. 

This number simply tells how close to the original asking price the seller got for their home. It is NOT the number most commonly reported by the major real estate websites, or even by agents and brokers when they tout their marketing success. As a consumer, you’re more likely to see Read the rest of this entry »

Tags: List to sale ratio, LP/SP, market report, real estate statistics

Real Estate Statistics: What You Need To Understand. (Part 2)

Real estate statistics can be confusing, and real estate is FULL of statistics! In Part 1 of this 3-part series, I looked at market absorption, how it describes the “dynamics” of the real estate market, and how you can use it to your advantage! In this post, I’ll look at another key market statistic: days on market (DOM).

Know The Key Real Estate Statistics To Achieve Success

Days on market measures just what it says…the number of days that a home has currently been on the market. Why is this number so important? Because it can tell what the market thinks about the value of the home.

When a new listing comes on the market, it becomes a little like “NFL draft day”. This is the day when the promising college football stars go on the “auction block” for the NFL teams to bid on.

If you’re a college player and the scouts & coaching staff think you’ve “got the goods”, you might be lucky enough to get drafted in one of the early rounds. You will have commanded a hefty pricetag, and will be well on your way to fulfilling your childhood dreams!! But if you slip to the later rounds, your fate Read the rest of this entry »

Tags: days on market, DOM, Real Estate, real estate statistics

Real Estate Statistics: What You Need To Understand. (Part 1)

Real estate statistics can be confusing. I once had a college professor who said that there were three kinds of lies: lies, damned lies, and statistics. (Actually, I think he stole this quote from Mark Twain. But the concept stuck with me, so I’ll give him credit.)  The phrase describes the idea that numbers can be used very persuasively in supporting an argument (especially a weak one). It also points out that people are often quick to disparage statistics that don’t support their point of view. 

Know The Key Real Estate Statistics To Achieve Success

Real estate is FULL of statistics! In this 3-part series, I’ll take a deeper look at the ones that I believe convey the most important information about any housing market: 1) market absorption, 2) days on market (DOM), and 3) sale price to original list price ratio.

Market Absorption

The market absorption rate is a statistic that describes the “dynamics” of the current market. If we can agree that all markets seek to find a balance between supply and demand, then the absorption rate tells us just how well it’s doing. The number is found by dividing the total number of available listings (those that are fully available to be shown and purchased) by the number of listings that have gone under contract in the past month. The answer to this simple math problem tells you just how many months it would take for Read the rest of this entry »

Tags: absorption rate, market absorption, real estate statistics