The Future of Real Estate? It Arrived Today

This is what the future of real estate will look like - no MLS number

This is what the future of real estate will look like – no MLS number

I could not be prouder today. Quill’s first Single Broker Listing is live and looks great! On the Quill Blog, on Zillow, on Redfin – heck, it looks great EVERYWHERE!! By my estimation, this is what the future of real estate will look like: One broker marketing a property directly to buyers via multiple channels, without offering to pay the buyer’s agent’s commission (so no MLS number). Exciting times here at Quill!!

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Seller Will Review Offers on Monday…

cc4d542f-3346-4b02-930c-2b5b443d80edA seller setting a time in the future when they will review all offers at the same time has become common enough to warrant a blog post explaining the general pros and cons and procedure for this type of listing instruction. I just did a spot check of new listings in Kirkland 98033 and a full 2/3rds have this instruction, including both single family homes and condos. If you look only at the single family homes, the percentage is even higher. There is very little written on this topic that can be googled, so I will try to explain the ins and outs of this process best I can. Everyone does it a little differently, so this is by no means a full explanation or an absolute description that pertains to all listings with this instruction. But it should serve well as a guide to those who have not run into this yet, such as first time buyers just starting to look at homes to purchase.

First it should be noted that the SELLER, and not the Agent, must direct this instruction. Usually as a result of a conversation with the seller regarding whether or not they “have to” respond to the first offer quickly. In fact while I noted 2/3rds of the listings have the direct wording “…will look at-review offers on…” At least half of those who didn’t show that restriction, throw in vague language insinuating that the seller will not be responding quickly because they are out of town for a few days. A roundabout way of saying “…will look at offers on…” loosely.

Let’s lay out the mechanics of how this works before discussing the pros and cons from both the Seller and Buyer side of things. To that end I will describe how I do it.

Usually I list a property on Wednesday night after midnight, which is actually Thursday morning. I do this because the public sites don’t always pull the photos in the same data pull as the listing information, causing the listing to appear in mobile instant alerts with no photos. By listing a property in the middle of the night, the photos have time to catch up with the listing by the time people wake up and view the new listing on their phones or laptops. So I do this whether there is a “…will look at offers on…” instruction or not. Most often the “…will look at offers…” day and time will be Monday in the evening with a deadline for receipt of offers in the afternoon. This gives the agent for the seller time to print out and review the offers, call agents if needed for explanations or changes, and often summarize the offers in advance of meeting with the seller to review them.

It really is as simple as that without going into the particulars of how, when and why to apply this instruction or not. So we’ll move quickly into what this means for Buyer and Sellers with some of the pros and cons.

BUYERS:

When you first see a listing come on market that you want to see, you usually contact your agent. These days the first thing the agent looks for is this instruction, because it almost never shows in the public remarks and only in the Agent Only remarks. I don’t have a good “why” for that except that the public remarks has a limit as to number of characters, and most if not all of that is used to advertise the property with no room left to go into other topics. The agent only remarks area is even more limited, but there is usually room to very briefly describe this agent instruction.

The main reason the Agent for the Buyer first looks for this instruction noting how FIRM…or not…the instruction is, is to determine how quickly the agent needs to meet the buyer at the property.

If you see a property come on market on Wednesday or Thursday and they are not looking at offers until Monday, you still want to see it as early as possible to have time to consider the property before writing an offer. But if this instruction appears, you might not have to jump up from work with no notice or leave the children standing in front of school waiting for you to pick them up or interfere with the baby’s normal nap time. ALSO not all agents can jump up “right now” to run over to the property the minute it hits the market.

So the primary benefit to buyers and their buyer’s agent is it gives them a bit of time to schedule a convenient and mutually agreeable showing time.

That does not mean you wait until a Sunday Open House if the property comes on Market on Thursday and they are looking at offers on Monday. In fact most of the time I do not do an Open House during that 4 to 5 day period which encourages the buyer and their agent to view the property privately, which is usually better for the buyer. The more time you have after seeing the property to investigate further, collect your thoughts, make a good and firm decision before writing an offer…the better. The time frame is short enough from list to review date. Use that time wisely.

The second and possibly only other benefit to the buyer is it gives them some time to fully consider both the property and their offer before needing to submit that offer.

Some people are very quick decision makers and others are not. From what I have seen, buyers who have competed in multiple offers without success respond much more quickly than those for whom this is their first offer. This is not a “how to win in multiple offers” post, and in fact my next post may be “how to LOSE in multiple offers”.

This is just a basic outline of a common practice that most all buyers need to be aware of if they are looking for homes in some of the most popular neighborhoods in the Seattle Area.

Cons to the buyer of course are that they have to wait until Monday for an answer from the Seller and they are more likely to have to deal with multiple offers than if they could write an offer within an hour of the home coming on market and put a response time of same day. However this “con” from the buyer side will be addressed more as a “pro” from the seller side.

SELLERS:

Whether it is a strong or a weak market, over the 25 years I have been helping sellers sell their homes and buyers buy them, most every seller likes the property to get past the weekend before responding to offers. Given the best buyers often work for a living, unless they are cash buyers, the seller would like the people who are working for a living to have a chance to see their home before the seller responds to offers. They like their home to be listed before the weekend and they like to look at offers after the weekend. This is nothing new. In fact I just saw a house that used a wishy-washy “…will look at offers on…” stated as “Seller would like to wait until after the Open House on Sunday to respond to any offers.” I’m not a big fan of wishy washy as it leads to confusion. Some buyers will read that as a hard and fast indicator that they have plenty of time, only to be very upset to find that the house was sold earlier and the Open House was cancelled.

It is very important for the Agent for the Seller to have a very LONG and detailed “What IF?” conversation with the seller, to pin this down very clearly as to the sellers’ wishes. If the seller is a couple, you need to have this conversation with BOTH sellers.

This is not to say that the Agent should guide the seller to a “…will look at offers…” instruction. But it is important for the agent to know the sellers intentions by asking questions such as:

“If you receive an offer on the first day the property is on market and the buyer wants a same day response, are you prepared to accommodate that offer as written?”

The answers to that question are many and varied and almost no one answers a clear YES. That surprises some buyers and even some agents that the seller wouldn’t be very happy to have a good offer on the first day and take it on the first day. But in my experience the answer is usually another question as in “Do I HAVE to?” Once the seller has indicated a reluctance to accept an offer, the Agent for the Seller needs to go through a whole series of what ifs to come to a full understanding of the Seller’s intentions as to how they plan to react to offers.

Historically the “reasonable” time frame for responding to offers has been 2 days, not counting the day the offer is submitted.

In the above noted scenario of listing by very early Thursday morning, the anticipated response date and time would be Saturday by 9 p.m. here in the Seattle Area where a day ends at 9 p.m., unless stated otherwise. HOWEVER the buyer is the one who types in the response date and time in the offer and what was previously reasonable and customary is not what all or even most buyers will do in a hot market.

Since control of that response date in the offer is on the buyer side…it is important for the seller to give an instruction if they do not intend to comply with whatever a buyer may write. It is not good for anyone to start off on the wrong foot by the seller being angry at the time given or the buyer being angry that the seller chose not to respond by the time given.

Most sellers whether they have an Open House or not would prefer the home be shown all weekend when most people are available to see it, than respond on Saturday night. So Sunday night would often be the earliest date the seller expects to respond and Monday night is not a stretch and gives those buyers who weren’t available until Sunday, or even very early Monday if they were out of town for the weekend, a chance to see the property.

You might ask why not longer, and the answer to that is buyers are often frustrated with waiting 4 days and so extending that to a week or 10 days is really pushing it and usually causes more harm than good. That is a conversation the Agent for the Seller and the Seller discuss in the “what ifs” discussion. Every Seller will have a different opinion and there are no hard and fast rules and every Agent for the Seller will have a different counsel on that subject. For the most part, since I can’t speak for every Agent in the Country, I am basing most of this on how I do it and on conversations I have had with actual sellers. But the options can be many and varied.

The obvious Elephant in the Room from the buyer side is “Aren’t you just trying to start a bidding war?” Or from the seller side “Do I HAVE TO take a full price offer?”

This is where the issue gets very controversial and it is not uncommon to get some very angry calls within the first hour the home is on market.

1) NO the purpose is NOT to instigate a bidding war. The purpose is to give the seller a reasonable time to market his/her property before having to accept an offer. By any definition and anyone’s perspective, 72 hours seems reasonable. So Thursday to list, Friday-Saturday and Sunday to view and prepare offers, and Monday to submit and respond, seems more than reasonable. Except to the person who wants to be “The Early Bird Who Catches the Worm”, and I don’t blame them. But that, in many if not most cases, does not give the Seller ample time to market his/her home.

For some sellers “ample time” could be much longer or possibly shorter. But the bottom line is the seller gets to decide what is and is not “ample time”.

2) Pretty much yes…you do “have to” as to the seller’s question of whether or not they have to accept a full price offer. At least this is the conversation BEFORE the home is listed for sale. Mainly because the Agent for the Seller needs to confirm that the seller is willing to take the price at which they list the home.

It’s OK to hope for multiple offers and a price higher than the list price. BUT it is NOT ok to list the home for less than you are willing to take.

To some extent the rules and practices of this particular topic have changed somewhat since Craig wrote a post with his concerns Titled “Offers to be Considered on a Future Date” Is this Really Fair to Buyers?” in that sellers have to attach the instruction before the home is listed and must note whether or not they intend to reserve the right to NOT wait until that date to respond. Still, reading his post via that link in conjunction with this one is advised.

I wish I had 10 or more links to others expounding on this topic, but the only other has been here on Rain City Guide that I can find. If you see any others on “…will look at offers on…” vs simply multiple offer situations which I will cover in my next post, please do put those links in the comments. Thank you.

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How to Buy a Home Stress-Free in a Seller’s Market

There is a lot of evidence out there, both statistical and anecdotal, that it’s a “seller’s market” in the Seattle area. And that is consistent with my own experience as well. The best example? (Or perhaps worst, since this post is from a buyer’s perspective…) I helped make an offer on a home in Mount Baker, the proverbial “tastefully updated bungalow” with lots of nice features. And it got quite a bit of interest. How much interest? Oh, only 13 pre-inspections, 10 offers, and a final sale price 20% over list. POW! Talk about getting punched in the mouth.

In other words, a bidding war. These situations are emotionally trying for any buyer, and are simply too stressful for some. So what to do if you’re a buyer who has no interest in a bidding war?

Tailor your strategy accordingly. First, don’t even look at a listing until it is at least 14 if not 30 days old. At that point, the odds of a bidding war drop dramatically. You are much more likely to have one-on-one negotiating that allows you to keep control over negotiations and gives you the ultimate ability to either buy the house or not.

But that leads to the next, and much tougher, question: How the heck do you find a good house in this market if you only look at old listings? Admittedly, it’s a challenge, but not impossible. First and foremost, don’t just rely on the pictures in the listing to determine if a house is worth a closer look. For whatever reasons, some agents don’t do the best job with the pictures. So don’t think that the pictures necessarily reflect the true condition, layout, and overall “gestalt” of the house. Instead, look for possible homes primarily by neighborhood, space/size, and price. Compile your list, and then go have a look in person regardless of what you might think from the pictures. Yes, you’ll end up touring more homes, but that’s the only way to find that “diamond in the rough” that will work for you but won’t give you a heart attack when making the offer.

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National Coming Out Day; We’ve come a long way in real estate and lending

October 11th is National Coming Out Day.  As an educator in the real estate and mortgage lending sector, I enjoy hearing stories from students about what it was like to sell real estate and originate loans in the 1950s and 1960s, before the Fair Housing Act of 1968 and the Equal Credit Opportunity Act of 1974.  The young-youngsters in the room are a bit taken aback to hear real-life stories about neighborhood segregation, discrimination against Jews or African Americans, and denying credit to women.  Blockbusting, redlining, and racial discrimination as well as mortgage lending discrimination happened to people who are still around to tell those stories because it really wasn’t that long ago.

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The CLUE Report: Is it Col. Mustard in the Library with the Rope?

I’ll admit, at this point I’m pretty much mystified by the frequently-discussed yet rarely-seen “CLUE Report.” For those of you even more in the dark than me, “CLUE” is an acronym for “Comprehensive Loss Underwriting Exchange.” Basically its a national database maintained cooperatively by insurers to track claims made on particular properties, as well as claims made by particular persons. Before an insurer will write a policy on a particular property, it will check this database to confirm that the risk assumed by the insurer is reasonable. The insurer will not write a policy for a property with an existing and extensive claim history because the property is a “lemon” on which the insurer will lose money.

To date, I have typically counseled my buyer clients to call their insurance agent to obtain a copy of the CLUE report for the property. Lately it seems that my clients are unable to do so. Some insurers (Geico) have indicated that they don’t even know what a CLUE report is, apparently because some insurers are not members of the Exchange (the “E” in CLUE). Some insurers (most recently Allstate) have told the client to purchase the report at LexisNexis, but apparently you can only purchase a report for the home you currently own.

So my question to the RCG community: How do other agents address this issue? Do you invest the time and energy speaking with the buyer’s selected insurer to eventually obtain a CLUE report? Do you not even tell your clients about CLUE reports because they are of little or no value? Something in between? And are any sellers taking the advice of LexisNexis (which of course sells the reports) and obtaining a CLUE report to be given to poential buyers? Thanks in advance for any insight you care to provide.

Ardell, I look forward to your insightful and informative response; David, I look forward to a tangential point that illuminates some as-yet-unappreciated aspect of the Real Estates; Ray, I look forward to more rank bashing of my brokerage business model.

How Brokers Protect Themselves at their Clients’ Expense

When you hire a professional to represent you, your interests should be paramount. If your interests conflict with the interests of that professional, you should be informed of that conflict. Before the representation continues notwithstanding the conflict, you should provide your informed consent to that continued representation. These are some of the hallmarks of “representation.” In at least one regard, real estate brokers — or at least those that use the NWMLS forms — fall far short of this standard.

How, exactly? When a contract fails for pretty much any reason, escrow will typically not disburse the earnest money to either party absent consistent written instructions from both parties. Similarly, before the seller signs another contract for the sale of the same property, it is prudent and proper for the seller to confirm that the first contract truly is dead — selling the same home twice is a sure-fire way to subject yourself to a breach of contract claim. For these and other reasons, it is a near universal practice for the parties to a contract to sign an NWMLS Form 51, a “Rescission of Purchase and Sale Agreement,” when terminating the deal.

NWMLS Form 51 is deeply flawed and totally inconsistent with the notion that the broker “represents” the client, at least in regards to a conflict between the broker and the client. Specifically, the “release” portion of the rescission not only releases the other party to the contract from further liability, it also releases the brokers from all liability. Moreover, it is not too hard to imagine a scenario where the rescission was necessitated by the broker’s own negligence, making inclusion of the release particularly distasteful.

For example, what if the broker failed to timely rescind the contract based on the inspection, and the property has a huge and costly defect? In that circumstance, the buyer might decide to simply walk away, but because the broker blew the inspection deadline the buyer will lose the earnest money. The buyer would then have a good claim against the broker for the loss of the earnest money. But if that buyer signs the Form 51, the buyer releases his broker from this claim.

The irony is that the terms are completely unrelated. There is simply no reason to include the release of the broker in the rescission — other than to protect that broker from a potential claim asserted by the client. In other words, the standard form document used by brokers includes an unrelated and irrelevant term that protects the broker from any adverse claim asserted by the client, even where the adverse claim arose out of the very same facts that led to use of the form document.

So if you’re going to hire a broker for “representation,” be aware that the representation is seriously limited by the broker’s own self-interest. For proof, look no further than the form used by a broker when the deal heads south….

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Research is a mandatory activity for virtually all students undertaking higher education in any professional field. This is at times a tedious evaluation exercise and it requires a combination of technical and authorship skills, because it entails different types of activities of both a physical and intellectual nature. Students are more often required to engage in research activities that may involve information gathering from both secondary and primary sources, analysis of the collected information and data as well as making inferential conclusions. Students usually encounter numerous challenges when it comes to research paper writing. The kind of challenges and difficulties encountered by these students are usually multi-faceted and they may include the actual gathering of information and data, the compilation of the gathered information and data, the analysis of the information, the making of inferences or the actual writing of the research papers. At times students may also lack enough time to engage in all these activities. The initial stages of initiating the actual research through the writing of the research proposal may also prove to be a challenge, because this section requires greater precision and focus based on the research goals and objectives.

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IRS and Homebuyer Tax Credit: obtaining a”signed” Final Settlement Statement

This is tax time.

Sometimes escrow offices wonder if we are CPA firms during tax time.   Our office has received numerous phone calls from clients that are in need of their “signed” Final Settlement Statements.   Lynlee wrote a quick post on our blog with an IRS link addressing what the IRS may need from borrowers to claim the tax credit.

As always, please contact your CPA or tax professional for specific details regarding claiming the homebuyer tax credit.

We contacted a CPA and they responded:

“we generally have found that the Final Settlement Statement (with NO signatures) are acceptable.”

Why?  Because in Washington State (and other escrow states) Final Settlement Statements do not have signatures from borrowers.   Final Settlement Statements are mailed to clients after a transaction is closed.  Estimated Settlement Statements are signed at escrow prior to your transactions being closed.

Getting Hired in 2010

Many small business owners in Washington State receive numerous resume’s over the last couple years and our office is no different.    With the economic issues surrounding us and the slow slog of the real estate market trying to find some equilibrium without “intervention,” scores of real estate related jobs have been shed over the last three  years.

Many former workers that have been laid off from mortgage, title and escrow related fields submit resume’s as a matter of protocol due to unemployment benefit requirements.   Employers understand this but once in a while a gem comes across you as it did us earlier this week.

Here is why the individual caught my attention.

I didn’t receive a resume via fax.  I didn’t receive a resume in the mail, again and again.  I didn’t receive the resume by e-mail.   The individual stared at us face to face by taking the time out of their day and shook my hand and introduced herself  to us in person.   Call me old fashioned, but the impression you leave by being professionally presented and having an authentic conversation, unscripted and raw, going in knowing you will be rejected 9 out of 10 times and still having the COURAGE  to look up a company and personally drive to the office not knowing how you will be received, will always receive high consideration of getting an interview at our office.

All the best to those who are looking for work in 2010.    Keep your chin up and remember this:  as Warren Buffett said in his interview this past November at Columbia University in New York, “betting against America and it’s economic engine is a bet I would never wager.”