ALL PHOENIX REAL ESTATE

This is what happens when you find yourself parsing sentences at well past 11 p.m. in the evening …

Continuing the line of thought from Tuesday’s post, here is the basic premise on which the argument against dual agency - the act of one real estate agent representing both buyer and seller in the same sale - is built:

“My job as the listing agent is to get the highest dollar amount possible for the home. My job as the buyers agent is to get the house for the lowest possible cost. Since these conflict, I can’t do both successfully.”

Except … if you’re job as a buyers’ agent is to help your buyers purchase a home for the lowest amount possible, you’re going to fail 99 times out of 100. And the flip side goes for the listing agent.

Follow my logic if you will:

A home is listed for $200,000. Your agent writes an offer for $180,000 and submits it to the listing agent. The seller counters back at $190,000. You gleefully move to the middle ground, accept the counter offer and everyone’s happy.

Did the agent who says her job is to help you purchase for the lowest possible amount do their job? Perhaps. Perhaps not. Let’s say this seller would have gone as low as $187,500 had then been pushed. Whether it was because your agent didn’t suggest countering back or because you decided $190,000 was fair, you didn’t purchase the home for the lowest possible price.

In short, your agent failed - at least if she positions her role as helping you purchase for the lowest possible price.

The truth is as a buyer you’re rarely going to purchase for the lowest possible price. And as a seller, you’re rarely going to sell for the most the market will bear. At some stage of the negotiations, the level just shy of the “highest/lowest” will become “good enough.”

Relating this back to dual agency, there is nothing in the process of one agent representing both buyer and seller that inhibits both buyer and seller from arriving at a price that’s “good enough.” In fact, it’s possible that by limiting the variables by having only one agent in the mix, the process goes more smoothly - both buyer and seller are staring at the same set of data, the same comps, the same interpretation of market condition.

How important can this be? Check recent answers on Trulia Voices and you’ll still see some agents proclaiming that the Phoenix real estate market is a buyers’ market when that hasn’t been the case for months. Not everyone has the same read on the market.

Of course, if an agent is out of touch with market reality, that theoretically disadvantages  both buyer and seller equally so at least both sides are equally blind as they negotiate.

Is there opportunity for unscrupulous behavior on a dual agency transaction? Absolutely. Does that reality doom everyone who dares practice dual agency to an eternity trapped in the charred walls of the damned? Absolutely not.

Technorati Tags: Phoenix real estate

Popularity: 3% [?]

Share This

Just when I thought I was out, they pull me back in …

Here is a little known fact about the great big world of real estate blogs - there only are 14 topics to discuss, 15 if you live in an area with that odd atmospheric phenomenon known as humidity. As such, real estate agents tend to gravitate toward the same topics on regular cycles because there only are 14 (or 15) topics total.

These flareups are about as predictable as the Santa Ana-blown wildfires of Southern California if not quite as easy to schedule as Halley’s Comet. (Brief aside … we’re only 53 years away from Halley’s Comet’s next pass … does this still get mentioned in books after the 1986 pass was as thrilling as Ishtar?)

In any event, there has been a spate of articles about something called dual agency - the scenario where a single agent or single brokerage represents both buyer and seller (since in Arizona representation is by the brokerage, not your friendly beagle-toleraring agent, it’s possible to have dual agency involving more than one agent.)

My remarks on the topic will be brief and will start with a confession. I am unclean, at least in the eyes of those who feel I’m headed for the charred walls of the damned. Earlier this year, I represented the buyer and the seller on the same transaction.

How did I find myself in this clearly horrifying position? I had been hired by a homeowner to market and sell his home. In the process of marketing, I sent information on this home to buyers who had hired me to help them find their home. And then I promptly locked them in the garage until they made a decision.

Okay, so I made the last part up. What I did, to recap, is perform the job asked of me by both my buyers and my seller. Clearly, I am the antichrist.

When it came time for my buyers to make an offer I showed them the comps but could not advise them as to what to offer, since dual agency prevents me from saying something that would disadvantage the other party. I didn’t even give hints like Nipsy Russell on the $100,000 Pyramid.

As the ink dried I drove the offer to my seller and showed him the same comps. Again, I couldn’t advise him what to do - all I could do was present the numbers and talk to him about his own personal motivation after trying for two years to sell this place. He called his daughter and promptly accepted.

So, to review …

Seller hires me to market and sell his home. Which I do.

Buyer hires me to help them find a home they love. Which I do.

Theoretically, I could have passed the buyer to another agent for the contract but if it’s in the same brokerage then it’s still a dual agency situation. Where it benefits the buyer to be shunted onto an agent they don’t know versus someone they have trusted for more than a year is beyond me.

It’s not that I don’t understand the academic aspect of the debate. I do. But I also know that when the transaction ended and the seller was able to move closer to family and the buyers collected their keys, both sides were happy.

And shouldn’t that be what this is about? It’s not about the commission - how much I did or did not receive (though I did receive less than I would have had I sold the home to a different buyer and found a different property for my buyers.) It’s about what met the clients’ needs and the clients’ perception of the transaction.

The argument that they didn’t know any better gives them no credit, nor I. Because at the end of the day, dual agency isn’t a particularly complicated concept. If you’re effective at marketing a home, the situation is going to arise. Sending buyers away as a matter of course doesn’t benefit the seller, who then is left to wonder whether the new agent will try to sell this house or something more expensive around the corner for more commission.

Now, if one side of the other isn’t comfortable with the entire situation then by all means I’ll get another agent involved. So far, I can count the number of times that request has been made of me on one hand.

As I said, this isn’t a really a complicated topic. And, mercifully, it’s one that hopefully will remain smoldering until the return of Halley’s Comet … or at least until the spring.

In the interim, what say you?

Technorati Tags: Phoenix real estate

Popularity: 2% [?]

Share This

There are moments in the process of helping buyers purchase Phoenix bank owned homes that I pity those trying to do this themselves. It’s difficult enough to do when you know the nuances of the contract and spend your time trying to explain them; I can’t even imagine what it’s like when you don’t know what you need to know because the other side either doesn’t know or doesn’t care.

Today’s example deals with what happens when a home being purchased “as is” isn’t in the same condition at the time of closing (or at the final walkthrough) that it was in when the home first went into escrow. Such as when the once intact arcadia door now is missing a panel that’s been broken by a rock.

The knee jerk reaction from the listing agent was that the bank’s not going to make any repairs. Except it’s not repairs that are being requested - all the buyers want is for the home to be the home they purchased.

It’s not an unreasonable request. And it’s even covered in the contract (and mercifully not overriden by this lender’s addendum):

 5a. Seller Warranties: Seller warrants and shall maintain and repair the Preimses so that, at the earlier of possession or COE: … (iii) the Premises, including all additional existing personal property included in the sale, will be in substantially the same condition as on the date of Contract acceptance;

Quick aside - here’s the fun part. Many listing agents add notations to the listing that this paragraph needs to be waived on Page 7 of the contract in the free-form section. My guess is many agents have done so without thinking about the consequences. Hopefully nothing happened to the home.

Lenders usually include a per diem charge if the escrow doesn’t close on time. There’s a way around this in a situation where the home’s condition has changed which I could share here … then again, maybe I’ll have you contact me rather than explain it to the agents who read this site who currently are scratching their heads.

Technorati Tags: Phoenix real estate

Popularity: 2% [?]

Share This

I pulled this comment out of a post on Redfin’s blog yesterday. The post was about an idea a friend of Glenn’s had for a web-based lockbox anyone could access with sufficient documentation … everything just short of DNA testing. The comment wasn’t.

“What really needs to be done is to force a seller’s agent to actually act as an agent solely interested in selling the property. It should be an ethical construct that a seller agent actually show (or delegate the showing) the property instead of the “you should use a buyer agent” rant or, in the Redfin areas, deter buyers from using Redfin (which is what happens everyday).”

Redfin’s not in the Phoenix market and the home prices here likely would make the margins so thin that it wouldn’t make sense to come here. But even without Redfin it’s not uncommon for a buyer to call a listing agent to see a house even if they’re working with their own agent.

Reasons vary … they can’t get hold of their agent. Their agent is out of town. They don’t want to bother their agent. Whatever.

If asked, I still will show one of my own listings to a buyer who wants to see it. I’m trying to sell a house. Just don’t ask me any questions. And I mean ANY questions outside of “how ya doin’ today?”

It’s not that I’m trying to be unhelpful. It’s that I can’t really answer any questions without creating an implied agency with the buyer. And that’s not what either the seller or the buyer is looking for in this situation.

Joe, who left the comment, apparently doesn’t want this - he even says he wants the “seller’s agent to actually act as an agent solely interested in selling the property.”

If you’ve got questions about the property, though, you need to ask your own agent. Otherwise, in the eyes of agency laws, I’m not going to be an “agent solely interested in selling” the home.

SIDE NOTE: As was leaked to the Bloodhound, Redfin now is offering four two-hour buyers’ tours with no upfront cost. It’s not quite the seven-hour tour many of us provide as a service to our buyers, but it’s another step toward the traditional real estate model.

In some ways, though, the more Redfin moves toward the more traditional model, the lone differentiating factor becomes the rebate. Cool software is a plus but won’t necessarily drive the business since buyers are shopping for homes, not agents (pr in this case brokerages.)

Technorati Tags: Redfin, buyers’ agency, real estate negotiating

Popularity: 7% [?]

Share This

In his vivisection of Redfin’s so-called Bill of Rights yesterday, Greg stated that many of the issues Redfin raised could be solved through the divorcing of the real estate commission from the transaction - in short, sellers pay their listing agent and buyers pay their buyers’ agent.

Under the current system, sellers pay both agents in a transaction. The listing agent negotiates the overall commission for the transaction and then offers a portion of the commission through the MLS’s cooperative agreement to other broker members. This is an off-shoot of the days of subagency, when all agents involved worked for the seller and buyers were on their own (whether they realized it or not.)

There’s a long-standing debate over who truly is paying the commission. Some will argue that it is the buyer since the cost is wrapped into their mortgage in a higher sales price. Others will argue that it is the seller because the money comes out of their proceeds.

The answer’s truly both - it’s two sides of the same pane of glass. But the debate on how best to handle compensation for buyers’ agents often is divided based on whom you feel is paying the commission.

In yet another of our almost continuous debates, Ardell suggested an unrepresented buyer ought to receive the portion of a commission set aside for a co-broke. After all, the seller already had mentally written that money off. Considering we’re in a market where the buyers already are asking for concessions, I find the idea of an automatic credit to be misguided at best.

The buyer has no God-given right to the co-broke fee. If the seller wishes to negotiate a credit then so be it. But to say the seller simply should hand the money over without the option of negotiation is ludicrous on its face.

I’m in favor of consumer protection, but not at the expense of half of the consumers on the market - the sellers. And that’s one of the many areas where Redfin’s co-called Bill of Rights falls woefully short.

Back to the idea of divorcing commissions from the transaction. On the surface it sounds like an ideal solution. The question is whether we want to force the buyers who likely need representation most into the ranks of the unrepresented - first-time buyers, for example, or others who can afford a home but not the cost of representation.

There’s always going to be a less expensive option on the market. But it’s also true that you get what you pay for. Before dismissing that as another cliche, think about it.

Those who are the best at what they do, regardless of the profession, demand premium payment. Agreed? So why would the most skilled in a given profession perform their craft for minimal compensation? Wouldn’t it seem likely that the least experienced and the least knowledgeable real estate professionals would gravitate toward a lower-cost alternative as a sort of entry position? What if these alternative brokerages offered a salary rather than commission-based compensation? Would they move then?

And at the end of the day, who is more motivated to work on behalf of their clients … the agent who is working for his check every day or someone guaranteed direct deposit every two weeks regardless of performance? (All closings are not alike - in complication or in the level of stress accrued by buyer and seller.)

Still, separating buyer and seller compensation would be a better solution than arbitrarily reducing the sellers’ net, just because a buyer elects to work without representation.

As I have said many, many, many times - until it can be proven unequivocably and repeatedly that a home purchased by an unrepresented buyer will be sold for x% less than the same house where a co-brokerage is being paid, you can’t say the commission is being paid by the buyer with no impact to the seller.

Again, it’s two sides of the same glass.

Change for the sake of change is worthless. Change for the sake of progress is priceless.

Technorati tags: buyer representation, buyer compensation, phoenix real estate, buyer agency

Popularity: 5% [?]

Share This