I almost wish all sellers would agree to over price homes so we can feel like we got a win getting them down in price.
The MINDSET of the entire market is nuts; very emotional with a sense of desperation. As of now there are 11k realtors in our market and about 2,200 homes. So why are there so many realtors? Well when the market is hot people jump in because they think it is easy money. (Which is why 95% of agents fail within the first 2 years, cause its not). Because of this we are seeing more and more problems; deals are falling out of contract, boards are seeing more ethics complaints, and arbitration/binder disputes are occurring more and more.
Today more than ever the agent relationships are very important. Regardless of what side of the table you are on, buyer or seller. Agents like working with other agents who they know, like and trust. Agents that have a good track record for getting to the closing table are doing the most deals today. This may factor in heavily when a seller asks the agents opinion on the differing offers.
Some of the issues we have seen in our market
– Commission Squeeze for agents: whether it is more people deciding to sell their homes for sale by owner, or it is builders offering less commission. Our hot market has caused commissions to be negotiated unlike anytime before. People who consider themselves savy sellers think they can save on the money on realtor fees by listing the home themselves. They know the most about the property so why shouldnt they when homes are selling in days?
Builders are bringing the inventory to our market currently. In a buyers market builders need to have realtors bring them buyers. In todays market homes on the market sell quickly. Builders make almost no concessions to the buyers like they used to do years ago. There was a time when you would get 5% commission and a flat screen TV. Today 3% is considered doing well.
– Esclatory Addendum: Something that most people dont even know exist. You can add an addendum to your offer stating, “offer of $425,000 and Buyer will pay $1,000 more than any other buyer up to a total purchase price of 450,000”. This as itself is not an ussue but we have seen people putting escalatory addendums with no Maximum. So the buyer will beat any other offer by $1,000. This is not valid if used and could lead to some serious arbitration.
-Appraisal Issues: With an appreciating market you are bound to see some appraisal issues. (It happens). Our market has appreciated 24% since this time last year. Appraisers are bound by certain standards; Appraisals are coming in low. This is something that is becoming more and more common in an appreciating market.
Also. Writing the contract on a $380,000 home. “buyer will pay $30,000 over appraised value”. Lets throw this scenario out there. We are expecting the appraisal to come in low because of our market. The appraiser assigned to you is savvy and understands the heat in todays market. The home appraises above 400,000. The buyer is expecting it to appraise for 380,000. In this situation the buyer has to come out of pocket 50k in order to close.
-Abundance of Cash: 1/4 offers is cash and that is probably a conservative number. Its probably closer to 1/3. People are cashing out up north and out west and moving that money here, buying straight cash. People moving from NY, NJ, CA, PA, DC are all selling their properties up north, where it is more expensive, and relocating to our area and buying homes.
-Shopping Offers: Multiple offers out on different properties. Not acting in good faith. It is a weird gray area because of how our contracts are written. Because people are getting beat out on multiple offers they are getting desperate. Agents included. They want to put offers out on more than one property in the hopes of getting one into contract.
– Deals are falling apart at a high rate: Sight unseen offers, appraisal issues, cold feet.
– Pocket Listings: Because of our limited inventory some agents are not being ethical. Enter pocket listings. These are homes that are not on the market but the Agent knows the sellers wants to sell. They bring a buyer and double end the deal. Representing the buyer as well as the seller. Technically this allowed. But what is the chance that the agent knows the best buyer for the property? Unlikely.