Monthly Archives: August 2020

REALTORS Who Respect Zillow Earn Public Trust

REALTORS, please stop resisting Zillow. They have the trust of the public. Zillow has the power they have because they figured out how to involve the consumer at the REALTOR expense.  Embrace Zillow the way the public does.

Embrace The Zestimate—It’s Your Opening

Given this choice as a customer, who are you more likely to trust and engage in a conversation: (1) The person who tells you you’re wrong, you’re making a mistake, and you’re in danger. (2) The person who compliments you in being proactive, smart, informed, and wise. Number 2 of course. When people recognize our intelligence and wisdom, our opinion of them goes up. Still, when allowed to engage in a real estate conversation when Zillow is the topic, agents tend to go straight to the party line with flawed criticism. Opportunity Lost! 

The wise REALTORs know everything Zillow wants them to know about Zestimates. And they want you to know: Zillow knows the Zestimate is not as accurate as you can be.  Here it is in their own words:  It is not an appraisal and it should be used as a starting point. We encourage buyers, sellers and homeowners to supplement the Zestimate with other research such as visiting the home, getting a professional appraisal of the home, or requesting a comparative market analysis (CMA) from a real estate agent.

https://www.zillow.com/zestimate/ This link takes you to Zillow’s stats for Zestimate accuracy by State. In Wisconsin, Zillow tells us up front, they are accurate within 5% of the sales price 82% of the time. Do you know what they call REALTORS who estimate a home’s value within 5% accuracy 82% of the time? Ex REALTORS. For those who point out Zillow reports that they are within 20% of the correct price, 99% of the time, consider what that means. Zillow will be wrong in every opinion. And the error could be up to 20% of the value. (A $400,000 home with a 20% error is off by $80,000.) 

Consumers Like Opinions that support theirs

Some consumers will look at an explanation of analytics after they see or hear an opinion. But that takes work. A typical consumer looks at their Zestimate and their City Assessment and decides if the number is right or wrong based on how they want the number to factor into a formula. Show me one homeowner who’s Zestimate is higher than their assessment to go into the City and demand their property tax bill to be increased. Should that Zestimate be lower than the assessment, I’m sure the assessor will soon be seeing the Zestimate as evidence. 

Never Right or Wrong…Just a Start

The Zestimate and the consumer are never necessarily right or wrong. The number is a product of analytics but the analytics still require your input. The consumer who begins with Zillow is smart. Being informed is always better than being at the mercy of someone who has an opinion. 

Attempting to undermine Zillow is futile. REALTORS who try only undermine their credibility and that of other real estate professionals. Those REALTORS who learn how Zillow works, why Zillow works, and align themselves on the public’s side with respect to Zillow will be the REALTOR of choice for people who like to be respected. It’s far easier to work with people who respect you, trust you, appreciate you for not criticizing them.   

The Home You Will Buy Will Have Radon.

Between five and ten percent of Wisconsin homes have radon levels above the US EPA guideline of 4 pCi/L for an annual average on the main floor. Every region of Wisconsin has some homes with elevated radon levels. radon testing central Racine County

Testing and scientific research are complete; the results are indisputable; radon gas is deadly and everywhere. The house you will buy will have a level of radon gas. The Environmental Protection Agency has not set a SAFE standard for gas we breathe. However, the EPA does advise we test our homes over an extended period (three months and longer) to determine a more accurate reading of our exposure. The residential real estate transaction process is not well suited for long term testing of anything. A short term radon test done in 48 hours is an alternative the Wisconsin Residential Offer to Purchase provides to the consumer. It’s not the false sense of danger that short-term testing results are likely to trigger that concerns me; it’s the false sense of security homeowners walk away with when the test shows a radon level below the EPA’s action level 4 picocuries per liter. 

Don’t Test For Radon. Budget to Mitigate.

Consider these facts and tell me what you gain by making your offer contingent on another radon test’s findings: radon is deadly.  The price of a radon test is $200.00. A mitigation system guaranteed to keep radon below the EPA Action Level is $800 – $1,000. Multimillion dollars spent on scientific testing proves radon gas is present where you live. 

Would it be smart to forego the test, save the $200, and apply the money to the price of a customized mitigation system for your home? I think it is. I also think it is unwise to decide you don’t need to mitigate based on a two-day test. The two-day test will not refute the facts determined by the expensive long-term testing and scientific research completed and ongoing across the world. 

The Contingency is All About Determining Who Pays The Bill

The purpose of the radon testing contingency, as written in the Wisconsin Offer to Purchase, is to decide who pays for installing a mitigation system if the two-day test reveals a radon level at or above the EPA Action Level. In a climate where buyers are promising they won’t object to defects that cost less than $1,000 to $2,000 to cure, it makes no sense to put the seller at risk of needing to contract and pay for a cheap mitigation system. Accepting the cost of adding a system of any kind that is not currently on the premises is smart negotiating. When the cost is minor and affordable, making the issue a concern for the Seller your Offer’s appeal takes a hit. Spending money to test to confirm what is already known is unnecessary.   Leave the unnecessary out. Protect your family. Plan to install a radon mitigation system after closing. That little change to your offer might be all that’s necessary to make you the most attractive buyer of all the buyers the seller has to choose from. Be safe. Be smart.

Four Elements Give The Full Advantage of a Seller’s Market To Our Seller Clients.

When combined, there are four elements in our control, giving our clients more advantages in this seller-favorable market. As far as I know, Essential Real Estate, LLC, is the only firm designed to use the resources of real estate agency rules and liberties to allow homeowners the full advantages of this Seller-Favorable-Market. 

There is a formula we believe to be effective in satisfying our seller clients well beyond the good feeling of a quick sale. The four factors of our method are (1) Net Equity. (2) Smart Pricing – Fair Fees. (3) Safe Terms. (4) Confidentiality. 

Net Equity

What would you rather have, the price that you think your home is worth, or more equity after paying fees and costs? It’s the equity you want. We achieve the equity goal by controlling price and expenses. 

Smart Pricing – Fair Fees

The right price for any property is open for debate. There is always someone who will offer more money. Whether or not that person can meet you at closing with the money in hand is essential. High prices and weak commitments are easy to spot when you’ve seen it all before and ask the right questions. Our home valuation process will show you if the price is likely to be verified by an appraisal or if we need to take precautions to avoid renegotiations later in the process. 

Fair Fees When time on the market is measured in hours, not days, and multiple offers are most likely regardless of who represents you; the real value is in the skill of the person representing you. We charge $499 plus 1.0% of the purchase price and our emphasis is negotiating the transaction. You don’t pay us to “market” your property. Homebuyers find homes listed on the MLS on the internet, Zillow.com, Realtor.com, etc.com. There is no real cost to be seen where people are looking for homes.  

Buyer Broker Compensation I looked at 53 recent sales. Fifty-two of the owners paid a brokerage fee of 3.0% of the sale price to the buyer’s agent. Owners of high demand homes can choose to negotiate the buyer broker fee that they will pay when they see the Offer. An offer with favorable prices and terms might we worth 3.0% to the seller if there are no better options. But in this market, we see buyer agents are happy to accept less than 3.0% to help their client get the accepted Offer in competition. Why our clients pay an average of 3.4% in total broker fees is your business. Ask us about our WHY.

Safe Terms

Contingencies exist to protect the buyer more often than the seller. In simple terms they say, Maybe I will buy your house. Maybe I won’t. When I know this or that, I’ll let you know.  Any contingency that puts the buyer in a position to renegotiate or walk away is dangerous for home sellers–and all contingencies give someone leverage. There is a provision written for everything that could arise regardless of how inconsequential it may be to the parties. Offers loaded with contingencies get that way because the buyer wants escape alleys, or because the agent who drafted the Offer didn’t give the buyer an informed choice.  

Confidentiality

Real estate disputes have a common element. Somewhere along the way, one licensee said something to another licensee, and that something was flawed or restated incorrectly. When agents take it upon themselves to work out details without the principals signing off, someone is likely to be disadvantaged. We don’t speak for our clients, and we don’t pass along requests. All communication in a transaction should be between the buyer and seller, and the proper communication methods are Amendments and Notices. Conversations between our clients and us are confidential, the same as conversations with real estate customers. 

Conclusion

A favorable seller market has a lot more opportunities for home sellers to profit and be safe. The Offer documents designed to balance the playing field or tip the buyer’s advantage can be crafted to be more advantageous to the seller when the agent knows what we know.

The diminishing value of real estate advertising.

In 1989 a prospective homeowner started their home search by scanning their local newspaper’s real estate section. A large real estate firm with multiple hundreds of listings presented maybe 20% of all listings in their newspaper ad. Achieving name awareness and making the phone ring was the purpose of the Sunday ad. Firms monitored the results by keeping track of incoming calls generated by the advertisement, appointments made from those calls, homes showed, offers written, and listings procured.  

Advertise to Sell Any House

The Sunday real estate page had a ready audience of home sellers looking to find their home in the limited ad space. New listings had priority. After week one, a home fell into the rotation schedule. Selling a particular house was not the objective of the firm. Making the phone ring was. Real estate advertising was more likely to attract buyers who might buy any house or a seller who might have a similar home to sell. The homebuyer had a slim chance of finding the home they would own in the newspaper. Connecting with a real estate agent with access to the secret Multiple Listing Service inventory of homes was necessary to get into the actual pool of homes for sale. And then you still might be force-fed the firm’s listings before you got to look at properties listed by other firms. 

Zillow.com – Realtor.com. – Homes.com – etc.com

As the World Wide Web grew, REALTORS had the opportunity to solidify their place as the first or early point of contact in the home buying and selling process. Associations and committees don’t move as quickly or deliberately as private businesses. If changing long-held beliefs is required to take advantage of an opportunity, the opportunity will go to someone else. The dot-coms were someone else. Hellow Zillow. 

Online Is The Go-to Place To Find a House

The National Association of REALTORS released its 2019 study of home buying trends. Fortyfour percent of homebuyers told the association that they started their search online. (Some other statistics put the number at 88-90%.)  Zillow has a study that might contradict or support the NAR results. 

The Cost Of Advertising/Marketing and Real Estate Commissions

Associations, slow to change, are likely to apply old ideas to new methods. Mass marketing was and is the type of marketing real estate firms are most familiar with. Marketing to make the phone ring is now purchased to find leads. Revenue minus expenses = profit. When a firm spend money on internet marketing or newspaper advertising they have an expense. To make a profit revenue has to exceed expenses by a considerable margin. The cost or real estate service is in the commission charged by the firm. A more efficient way to connect buyers and sellers could result in lower selling fees for home sellers and lower acquisition costs for the buyer.

It’s possible to match specific homes to people who are the best candidates to be the next owner. Consider this: a dozen REALTORS will know a dozen people who might like a home new to the market. Those 12 will be alerted to see the house. Maybe 4 of those folks will arrange a showing. The technology exists for a computer to identify those 12 and more, and then cut the pool of prospects down to the one or two people most motivated to buy that house right now. Analytics uncovering the buyer before the person knows they are the buyer is creepy. But it’s possible. Now.

If it’s true that home owners want to sell homes in the least amount of time, for the most amount of money, and least inconvenience, analytics are the means to the end. I believe Zillow has all the information they need to identify from their pool of registered home buyers, the next owner of your home. Is that worth paying for?

The New WB-11 Offer to Purchase

Publish with flaws or stop the presses? 

Admitting we errored and getting it right before releasing flawed work would be easy if making excuses wasn’t easier. Consequences compounded is the unpleasant outcome of choosing easy.  The Wisconsin Residential Offer to Purchase, WB-11 released in the fall of 2019 and made mandatory effective January 1, 2020, was known to be flawed before it was released. Resistance to requests to delay the release surprised me. Resistance to suggested changes frustrated me. I’m grateful that the people in charge came around and made the necessary changes. 

 Professionals who participated in the writing and review process caught the problems created by a solution to a problem that didn’t exist. The committees in charge of developing the forms received unsolicited suggestions for corrections. Requests to hold implementation until changes could be made found no support in the WRA legal department. I saved the email replies I received from WRA staff legal folks. I use them as examples to remind me of what condescension feels to the recipient. 

Garbage in, garbage out is as accurate as it is simple. When a committee’s purpose is to generate a product, the level of quality and precision is secondary. Standardization is the primary intent of the State produced real estate transaction forms. Around the committee tables, we hear people talk about adding provisions that could eliminate the need for individual companies crafting their version of ideas that look good at the moment. Some contingencies were explicitly added to reduce a variety of company authored contingencies. The FIRPTA contingency inserted into the January 1, 2020 version of the WB-11 required each company to make their unique modification to fix the committee’s problem. If the public was better served by leaving them exposed to the unnecessary risks that the brokers may or may not fix, it’s a mystery to me.

Problem solved

The new WB-11 we began using on August 1, 2020, corrects the errors. Because there are a variety of solutions still floating around that introduced into the offer process to fix the problem, we now have a compounded problem that will take time and expense to fix. By leaving the solution to the firms who each solved the problem in their unique ways, we will live with the stray voltage of so many addenda that do not match the terms of the Offer. And when addenda conditions don’t match the current version of the State approved offer documents, validity issues arise.   

Home sellers and buyers who prefer to have enforceable contracts will be wise to work with lawyers and licensees who know where the problems lurk and how to make them go away. You can find out what the agent who wants your business knows about the Offer documents by asking them to explain the different sections and quizzing them on their own company addenda. If the agent knows where the flaws are and have solutions, they probably know how to make the Offer work for you. If they don’t, they’re just checking boxes and filling in blanks.  

There is always another house and another buyer.

Real estate negotiations are ordinary in that they are not complicated. With exceptions, a typical transaction includes someone trying to pressure someone into fearing a loss. Either the buyer agent tells the seller the buyer has another property to consider. Or, the seller has other interested buyers. For this strategy to have any effect, the other side needs to participate. And by participate, I mean they have to be afraid of losing.   

Don’t participate, and the other side will stress.  Fear of loss is a great motivator. Being unafraid is a great equalizer. To be fearless, have a plan, and trust your knowledge. Overcoming the threat of loss is as simple as ignoring the suggestion of an impending loss. Trust what you see in the Offer. Buyers rarely write offers first on their second choice homes. They seldom walk away from one house at the sight of the first counter offer. And when they do, it’s reasonable to conclude that their commitment was weak. Getting into a contract with an uncommitted person is less desirable than no offer at all. If you’ve been there, you know. 

You have a plan, and you know what you know. You know what you want to accomplish, and you know what will or won’t work for you. As long as you have an offer in your hands, you are in control. The other party that made the Offer you are considering countering isn’t as committed to getting to closing as you are. If the only way they will get into a contract with you is if you accept their terms, they may be an inch away from dissolution.  

A secure contract with your preferred closing date and terms you can live with is worth trying to get. The Offer in your hand that comes with implications of not-so-committed is nothing to fear. Be committed to yourself. Say thank you for the Offer and let the agent know you appreciate the opportunity. Show no fear. Display no displeasure. You’re in control. Keep it that way. There is always the next buyer. 

You are the product or the client; sold or served. Which one do you want to be?

Businesses exist for a reason. If I asked 100 owners why their company exists, the most common response would be to make a profit.   All companies sell widgets or services. Customers or clients pay the money a firm uses to pay the bills to keep the remainder as profit. When the purpose is profit, the problem is too. Solving the problem requires a product to be sold. Customers must pay more or buy more when a profit-driven business has a problem. The customer is now the product.

What might happen if profit was not the reason-to-be, but only an outcome to expect? A business built to solve a problem for consumers remains in business as long as they are a solution to the problem. And as long as your solving problems, you generate revenue. Your profit is not dependent on the consumer; it depends on how well you manage your income and expenses. If you exist to make a profit, you are out of business when you don’t make a profit. 

Ask The Most Important Question

The price of a widget or a service is the business of the business owner. Why the price is what it is, well, that’s your business. If you are the product necessary to be sold for the company to achieve their reason for being, you should know. It’s OK to be in business to make a profit, and it’s perfectly fine to be the product the business needs to meet its objective. Your only choice should not be to concede to be the product instead of the customer or client. When you discuss the WHY behind a firm’s reason to exist and the reason their fee or price is what it is, you’ll know if you are the customer/client or the product. All firms see you as one or the other. What do you want to be?