Identifying “Runners-Up” Buyers

If you’ve been reading real estate blogs lately — this one and others — no doubt you’ve seen more discussion of multiple offers.

That’s because, in a market with much lower inventory, we Realtors are seeing a lot more of them these days.

In that vein, this post is about the pros and cons of disclosing that a given property is in multiples.  (As discussed previously, Edina Realty’s default policy is to disclose the existence of multiple offers unless the Seller gives written instructions to the contrary.  See, “Real Estate Disclosure for Advanced Beginners.”)

Pros:  The chief reason to disclose multiple offers is that the more Buyers who are competing for a given property, the higher the price (usually, at least).

Cons:  The main reason not to disclose multiple offers is that at least some Buyers don’t want to get into a bidding war, and will drop out.

If you’re a Seller, which way do these arguments cut?

I’m with Edina Realty:  in general, it’s in Sellers’ interests to disclose that there are multiple offers (never mind that graphic above).

Yes, some Buyers will drop out when they hear that, but my presumption is that such Buyers were the least motivated and most price-conscious, and would have paid the least for the home.

So losing them isn’t the end of the world.

Other Considerations; “Runners-up Buyers”

There are three other factors that I think go into the decision to publicize multiples or keep quiet:

One.  How unique is the property?

If the home is one-of-kind that’s been off the market for decades, Buyers are less likely to drop out.

Conversely, if there are many close substitutes, the risk is greater.

Two.  Recent market activity.

One of the best scenarios for a Seller contemplating multiples is that another, nearby home just sold in multiples.

Lots of “runners-up” Buyers typically means strong competition for the next home.

Three.  Individual Buyer Motivation. 

It’s a given that Buyers only contemplate making offers on homes they like.

But how much do they like it?

How long have they been looking?

How broad or narrow are their search criteria, i.e., price range, geographic area, preferred home style, etc.?

Savvy Buyers know not to telegraph any of the above.  See, “Mum’s the Word on (Buyer) Motivation.”

However, sometimes relative Buyer motivation slips out, making it easier for the Seller (and their agent) to gauge whether a given Buyer’s threat to sit out multiples is genuine.

It Takes Two to Tango Do a Deal

What do you do in a Twin Cities housing market characterized by falling inventory, and frustrated Buyers who can’t find what they’re looking for?

Advertise Buyer needs.

Which is why, for the first time, Edina Realty is taking out local ads showcasing not just homes for sale, but specific Buyer needs.

Focus:  Seller Confidence

Not only does that get Sellers’ attention – vital to securing listings — but it helps ensure that Buyers working with Edina agents are the first to know about upcoming inventory.  

No doubt, such ads will also encourage wary Sellers that now is indeed a good time to sell — especially if they see a Buyer need that matches the description of their home!

P.S.:  In fact, networking “Buyer needs” is a key part of brokers’ weekly meetings, which set aside 15 minutes or so for agents to (also) plug their upcoming listings, new lists, and any price reductions.

“Wagner’s music is better than it sounds.”

–Critic (tongue in cheek)

“Ambulatory” is one of those words that sounds worse than it really is.

You’d think that a person who’s “ambulatory” would be on their way to the hospital in an ambulance.

In fact, it actually means that they’re up and walking around.

That would be me, today.

Except in my case, I feel worse than I (apparently) look.

Makes it hard to get sympathy that way . . .

Duty to Disclose, Duty to Update

If you’re not actively in the housing market, the following subject ain’t for you.

And even if you are, it’s technical (= dry = boring).

So, read on at your own peril.

Still with me?

Here goes:

One of the most important-yet-subtle obligations in residential real estate is the duty to disclose:  by whom, to whom, when, and what.

Step 2:  when must a disclosure be updated?

Continuum; Illustrative Examples

At one extreme is the Seller’s Property Disclosure.

Not only is the duty to disclose ongoing, but the Seller’s Realtor has an independent obligation to disclose anything that they know.  (Practice tip:  if the home has a major defect that the Seller won’t disclose, you’re better off resigning the listing — or never accepting it.)

So, at least in Minnesota, the Seller must sign the form twice:  first when they list their home, and again at the time the Purchase Agreement is signed, directly below this clause: 

“As of the date below, I/we, the Seller(s) of the property, state that the material facts are the same, except for changes as indicated below.”

–Minnesota Seller’s Property Disclosure Statement

In fact, the Seller’s duty to update their disclosure continues through closing.

Optional Disclosure

At the other extreme, Sellers who have received multiple offers have discretion about whether to tell prospective Buyers that that’s the case.

Edina Realty’s default position is that, unless the listing agent is given explicit instructions to the contrary, they will disclose that there are multiple offers on a property. 

That’s usually in Sellers’ best interests, because the more competition for a given property, the higher the price.

However . . . at least some Buyers do not want to participate in multiple offers, and will drop out — or at least wait on the sidelines — once they find out there is competition.

Agent Duty to Update

Which raises the rather interesting question:  if there were multiple offers, then one (or more) Buyers drop out, does the listing agent tell the remaining Buyers’ agents?

I know that my colleagues disagree on whether a listing agent has an affirmative duty to volunteer that info.

But I believe there’s at least a consensus that, if a Buyer’s agent asks point-blank if there are still multiple offers, you answer truthfully.

That’s the safe course not just because Realtor ethics proscribe lying, but because it’s the best way to do business.

Note, though, that that puts the onus on the Buyer’s agent to (re)ask the question.

“Special Situations”

Which leaves special situations like whether someone has died in the home.

Minnesota’s disclosure rules have repeatedly shifted on this (and no doubt will again), but they currently state that Sellers are obliged to tell prospective Buyers if there’s been a violent death in the home, but not one due to suicide or natural causes.

As a listing agent, I actually advise my selling clients to go beyond that standard; my rationale is, if the neighbors all know something, the Buyer will eventually know, too — in which case it’s better to hear it first, from the Seller.

But, how and when is a matter of tact and discretion.

It’s one thing to tell a serious Buyer privately, in the course of negotiations.

It’s something altogether different to put such information out there publicly and indiscriminately — for example, on a marketing flyer.

P.S.:  Here’s the “key” to the box at the top of this post:

(+, +):  duty to disclose, duty to update

(+, -):  duty to disclose, no duty to update

(-, -):  no duty to disclose, no duty to update

(-, +):  no duty to disclose, duty to update

Only that last category doesn’t apply to real estate disclosure:  if you don’t have to disclose something initially . . . you don’t have a duty to update it.

Potential Short Sale?  Not if it Sells for ≥ 10% Over Market

If you have been in a cave (or simply aren’t up on the housing market), a “short sale” is when a homeowner owes more on their mortgage than the home is worth (called “being underwater”), and to sell, must get the bank to accept a “haircut” (or an amputation) on the outstanding balance.

Up until now, that’s not something that banks have been eager to do.

And even if they are, the presence of multiple mortgages can make the logistics a nightmare.

For these reasons and more, short sales have a deserved reputation for being cumbersome, drawn-out affairs.

50-50 Odds

That’s when they succeed.

Something like 50% of the time, the bank(s) do not agree to reduce the mortgage(s), the owner defaults, and the banks foreclose.

At that point, the affected home typically comes off the market for 6-8 months while the title gets cleaned up, and the bank gets its selling ducks in a row.

As you might imagine, the condition of an abandoned, neglected (redundant?) home usually does not improve while all that happens. 

Worse For Wear

Because of the risks and headaches associated with short sales, Buyers understandably shy away.

And because it’s only fair to let prospective Buyers know what they can expect, about two years ago the local MLS added a new field asking if the home was a “potential short sale.” 

So, here’s the $64k question:  what percentage of the time do Sellers accurately check that box? (as far I know, compliance is on the honor system, and there are no consequences for not ’fessing up).

My guess?

Perhaps one-third of the time (or less).

Seller Intentions

That’s not just because no Seller wants to undermine their home’s market value.

It’s also because, at least in theory, the home really isn’t a potential short sale.

That can be the case where — to use some concrete numbers — a home has a fair market value of around $200k, and a mortgage on it for the same amount.

If the owner lists the home at $220k and happens to get that — Voila! — no short sale.

After subtracting selling costs of about 7%, the Seller in this situation can satisfy their mortgage and actually walk away with a nice chunk of change (almost $5k).

No Room to Negotiate

But what if the house doesn’t fetch $220k or anywhere close to it?

If instead the home sells for $200k, the owner has to bring $14k to closing — something that most owners, to preserve their credit, will somehow manage to do.

Still no short sale.

Which brings up scenario #3:  the best the owner can get turns out to be $185k, which means that to sell, they would have to bring about $28k to closing.

At that point, if they don’t have that in the bank but can still make the monthly payments, most Sellers will simply opt to take their home off the market and stay put.

Bottom line:  even though the homeowner was underwater (or extremely close to it) when they put their home on the market, they could legitimately say that at no point was the home a “potential short sale” — because they would simply choose not to sell below a certain price.

Whatever you call the foregoing — my term is ”short sale semantics” — my guess is that a lot of Sellers, unfortunately, are engaging in it now, and a lot of frustrated Buyers are encountering it.

2011 Flashback

Hard to believe, after a Twin Cities Winter with practically no snow and temp’s consistently above freezing, that Winter last year was the real thing (the photos of this St. Louis Park home would be Exhibit A).

Hardcore skiers and skaters are bummed, but most Minnesotans I know (myself included) feel like we’ve dodged the seasonal bullet.

P.S.:  I still think it’s incredibly stupid to walk on the ice when it’s been so mild.

However, if you know the lake (or pond) depth is only a few feet, I suppose it’s negligibly less so (“negligent” being the operative word). 

At least, that’s the logic I heard from one such risk-taker over the weekend.

Did Wronged Consumers Misbuy it?

Lloyds Banking Group PLC will reduce some of the bonuses awarded to top executives in 2010 following an insurance misselling scandal that resulted in the U.K bank handing hefty compensation to consumers, a person familiar with the matter said Monday.

Last year, Lloyds set aside £3.2 billion ($5.06 billion) to compensate consumers who were wrongly encouraged to buy payment protection insurance. PPI was often sold alongside loans to insure that the borrowers could continue repayments if they lost their jobs or fell ill. U.K consumer groups have alleged that this was missold to many consumers who didn’t qualify or weren’t even aware they had purchased the insurance.

–”Lloyds to Claw Back Bonuses”; The Wall Street Journal (2/20/12)

I think The Wall Street Journal is on to something.

Wall Street didn’t fraudulently package trillions in securitized mortgages; it “mis-securitized” them, while simultaneously inducing the credit rating agencies to “mis-rate” them to misled investors who mistakenly bought them — all against a backdrop of mis-regulation.

Channeling Orwell

Does the foregoing give you the feeling that you’re “mis”-ing something?

Or that somebody’s “mis-ing” with you?

It all leaves me feeling misgusted.

P.S.:  until about age 7, I thought the word “misled” was pronounced with a hard “i” (“my’-zuld“).

Also:  when someone does work for you, you pay them “compensation.” 

When you rip someone off, get sued, and agree to a multi-billion dollar settlement, it’s not called “handing consumers hefty compensation”; it’s called, “paying defrauded customers restitution.”

Just thought I’d clear that one up as well.

Miranda Warning — Real Estate Version

As required by the Miranda warning, police making an arrest must tell the person in custody, prior to interrogation, that they have the right to remain silent, and that anything they say will be used against them in court.

Minus the explicit warning (and the courtroom), the same thing applies in real estate.

That is, anything a Buyer or Seller divulges about their motivation, bottom (or top) line price, or desired terms can and will be used by the other side.

Which is why the Seller of the home my client just bought found out at closing — not when we were negotiating the Purchase Agreement two months before — that a big part of my client’s strong emotional attachment to the home was that it had once belonged to her grandparents.

Telling Sellers What They Want to Hear — At First

While my track record landing listings is very good — it’s not perfect.

The most common reason prospective Sellers choose another Realtor?

The other Realtor took the listing at a higher, unrealistic price — a practice that Realtors call “buying the listing.”

Exhibit A

Last June, I interviewed to list a Lake Calhoun home that I projected selling in the low-to-mid $900′s, and recommended a listing price of $1 million, plus or minus.

A couple days later, I received a polite call from the Sellers that they were ”going with another Realtor.”

Sure enough, the home debuted on MLS a few weeks later . . . for $1.3 million!

Barely six weeks later, the owner dropped the price a whopping $200k.

Six months after that, the home ultimately sold for $900k, a hefty 31% below original ask (the Twin Cities market average is 8% – 10% off).

Telltale Signs; or, Seller Beware

How can you tell if an agent is buying the listing?

The two most obvious signs:  1) their recommended list price is much higher than what the Comp’s — and any other agents — suggest; and 2) the agent wants an unusually long listing term, e.g., one year or more (if you’re going to overprice a home, you’d better be prepared to wait).

Why should home Sellers beware of such a Realtor?  (besides the *dubious ethics, that is.)

Because it hurts their bottom line.

Selling price correlates inversely with market time.

A home that debuts on the market signficantly overpriced will typically take longer to sell, and ultimately have to be discounted below market value to (re)attract skeptical Buyers.

*In my experience, there’s no such thing as just one ethical lapse (sort of like cockroaches that way).

Wall Street Allocating Capital  . . . to Itself

Once upon a time, Wall Street’s reason for being (“raison d’etre,” if you want a fancy term) was to efficiently allocate capital from suppliers of capital (aka “savers”) to those who could most productively use it — typically young, promising companies.

At least, that’s how I explained it to my 12 year-old son the other night.

Going on four years after The Crash of ’08, it seems obvious — at least to me — that what modern-day Wall Street really excels at is  . . . allocating capital to itself.

Witness the still-ginormous salaries and stock options handed out to the head honchos at top investment banks (as best I can tell, any cutbacks are being absorbed by these firms’ rank-and-file), juxtaposed with anemic corporate lending and still-high unemployment.

Revolt of the Savers

Against a backdrop of zero percent interest rates (“ZIRP”), public skepticism towards the stock market (and the High Frequency Trading-types who clearly control it), anemic bond yields, and still-accelerating gains in communication and technology (Moore’s Law lives!), where might retail investors more profitably put their money to work?

Institutional money is apparently flooding into private equity, but that’s not an option for Mom-and-Pop types.

Gold and other precious metals (still) feel a little too “fringy” to old-timers like me.

What does that leave (beside mattresses, that is)?

Instead of accepting “return-free risk” from bonds, I’m guessing that at least a slice of the gargantuan liquidity sitting out there migrates toward investments which actually promise a return for assuming risk.

A pretty good return, in fact.

What meets that description?

Venture capital.

Here’s hoping that more of that money gets raised and invested in the Twin Cities instead of traditional hotbeds like Silicon Valley and Boston.

P.S.:  want a quick primer on venture capital?

Watch “Something Ventured,” a terrific documentary on Silicon Valley’s history.

Weighing Comp’s and “Kind-of-Comp’s”

The cornerstone of establishing market value for a given property is the CMA, or “Comparative Market Analysis.”

As prepared by both Realtors and Appraisers, it consists of selecting a peer group of three homes (“Comparable Sold Properties”), then going through a compare-and-contrast process sizing up each of the Comp’s relative to the “subject” home (the one you’re trying to price).

The pro’s call this “bracketing, post-adjustment.”

Integral to this process is the presumption that there are three good Comp’s:  homes similar in style, size, condition, and location — that have sold within the last six months (preferably less).

Which Criteria to Relax

The art of valuing a given property comes in when the Comp “pickings,” so to speak, are slim.

Which criteria do you relax?

To take just one example, suppose you’re trying to price a rambler (Midwestern for “one-story,” called a “ranch” elsewhere).

Unfortunately, you have to go back 18 months to find a similar rambler that sold in the same neighborhood.

Some Realtors and Appraisers will widen their geographic scope, and look outside the neighborhood in adjacent ones to find a more recent sale.

Given how discrepant even adjacent neighborhoods can be, I find that less reliable than staying within the same neighborhood, and going back further in time for a similar sale.

Tweaking the Settings

If you go that route, though, Step #2 is figuring out what prices have done, overall, in that neighborhood, during that interval.

Fortunately, MLS statistics readily allow such statistical interpolation.

Alternatively, I will “jump” housing styles to find a good (or acceptable) Comp when necessary.

So, normally I’d prefer an “apples-to-apples,” rambler-to-rambler comparison.

However, if that’s not possible, I’ll use a 1 1/2 or two-story, then use ”above ground finished square feet” to compare the “Kind-of-Comp” to the subject property.

“Commission Impossible”

From this week’s episode:

“Commission impossible.”

–What Realtors say about a particularly trying Buyer.

“Commission accomplished.”

–When such a Buyer actually buys.

At least, that’s what Phil Dunphy, of TV’s “Modern Family” sitcom, claims Realtors  say.

Must be a Southern California — or Phil Dunphy – thing (personally, I’ve never heard either term).

How Many Showings?

Unlike Phil, I’ve also never had a mutual friend contact me to set up a fifth showing for a client who was too embarrassed to call me themselves (also from this week’s episode).

Trust me:  the kind of clients who want to see a home 5 times are not shy about asking (two showings is standard, three is pushing it unless the home is big and/or needs lots of work — and five is way over the top).

The client ends up buying when they overhear Phil talking about an old chair the Dunphy’s need to throw out, and mistakenly think he’s talking about the house that’s for sale (“Don’t worry, if the Jones’ don’t want it, I know lots of people who’ll snap it up in a heartbeat”).

Dealing With Ambivalent Buyers

While real estate “love-at-first sight” is real, just like the human kind, it’s relatively rare; in a decade selling real estate, I’ve probably witnessed it in less than 10% of my Buyers.

What’s much more common is “strong-like-at-first-sight.”

As my client does a second and possibly even a third showing, their interest level deepens, and they naturally progress to an offer.

When it takes 3 (or more) showings to decide, my usual advice to Buyers is, “something’s obviously missing for you in this home.  When you find the right one . . . you won’t feel so ambivalent.”

P.S.:  And yes, some clients are more deliberative, (in)decisive, etc. than others.

However, once a deliberative-type arrives at a decision, they generally stick with it.

One of the pitfalls of so-called “snap judgments” is that sometimes they “un-snap.”

How Many Before You Can Say “Perennial?”

It’s a given that lots of things you do in residential real estate go unnoticed, let alone appreciated.

So, it’s always nice to be recognized by the company you work for.

In that vein . . . I just received my fourth Edina Realty ”Leadership Circle” award for my sales production the last year.

Curious business, real estate.

If you take a 40 hour course, pass a not-that-difficult test, and write a check for $150, you too can be a licensed Realtor.

However, even after 10 years in real estate, and with my previous background as an entrepreneur, corporate attorney, and CPA, I can still honestly say that I learn something new each deal I’m involved with.

P.S.:  The best Realtors never forget that it’s not about them, it’s about their clients.

I was showing a home the other day where, hanging below the “For Sale” sign, was a sign rider the size of Rhode Island extolling all the listing agent’s awards and credentials.

My client’s comment:  ‘what an egomaniac; who’d want to work with them??”

Stealth Inflation & Rising (Dog) Food Costs

There are lots of indices that purport to measure inflation:  “the Producer Price Index,” “the Wholesale Price Index,” “the Consumer Price Index,” etc.

But the only yardstick that really matters to me is “the Kaplan Family Price Index.”

By that measure, inflation is galloping right now.

Overt and Covert Inflation

Under the “stealth” category, I put the $39 bag of dog food I just purchased — unchanged from a couple months ago.

So, what did change?

The weight:  33 pounds, down a whopping 28% from the old, 46 pound bag.

Item #2 was the more traditional kind of inflation.

If you buy the occasional hard copy of The New York Times to read at lunch as I do, you’ll notice (like I have) that the price just popped 20% a week ago, from $2 to $2.50.

Will Scathing Feedback Lower the Seller’s Price?

I’ve certainly taken my swipes at the seemingly ubiquitous showing feedback forms that Buyers’ agents receive after they show a home.

The main knocks:  they ask for information no good Buyer’s agent is going to provide — e.g., “what is the home worth?” — especially if they have a client with serious interest; the agent doesn’t know the area, so isn’t qualified to answer that question, anyways; it’s not the Buyer’s agent’s job to critique the listing agent’s staging and marketing; it can be transparently (and blatantly) self-serving, most commonly by a Buyer’s agent who thinks they can lower the price by dumping on the house*; and most agents spend about 3 seconds filling them out, rendering them useless.   See, “The My-Client-Didn’t-Like It-Stop-Bugging-Me Showing Feedback.”

So, what is the one instance where — at least in my opinion — Buyer feedback can be very useful?

When it alerts the Seller that prospective Buyers are overlooking something.

Exhibit A

I sold a home in Golden Valley last year where — not withstanding the “.25 acre” listed on MLS, no one seemed to realize that there was a big yard to the west of the house (the yard was located on the other side of the detached garage, and apparently Buyers thought it belonged to the neighbor).

So, I had a second sign put up in the middle of the yard, and also called attention to the yard’s location in the Agent and Public Remarks fields on MLS.

It sold 3 weeks later, after a total of six weeks on the market.

P.S.:  My listing clients regularly hear my favorite line about Buyer feedback:  ‘the only kind I really care about is a full-price offer (or close) from a well-qualified Buyer.’

*I actually received something very much like this feedback on one of my listings a couple years ago:

Curb appeal:  ‘Awful’
Floor plan:  ‘Atrocious’
Condition:  ‘Terrible’
Price:  ‘Ridiculously high.’
Comments:  ‘They’re very interested; please keep me updated.’

The upshot?

I sold the house — which was actually quite appealing and in good overall condition — to someone else shortly thereafter for 96% of the asking price.

Consider This a Little Big Sign

With the usual number of homes temporarily taken off the market over the holidays, plus “For Sale” homes that simply expire without selling (something like one-third of all listed homes), a home’s status this time of year can be a question mark.

So, here’s a BIG hint:  if there’s a large post in the front yard, minus the rider(s) . . . it’s coming back on the market!

P.S.:  a “rider” is a sign that hangs from the main post,  showing the name of the Broker, Realtor, etc.

My favorite (non-real estate) sign:  a billboard outside of Pittsburgh for a local synagogue, with this eye-catching message:  “Consider This a Sign From God!”

My Picks (vs. Most Popular)

When you post — on average — twice a day for a couple years, they can’t all be zingers.

But after some 3,000 or so posts and drafts (yes, I’ve got another couple hundred posts teed up), at least a few have been spot-on, as they say:  well-written, insightful, and full of original, compelling analysis.

And in the case of (still) needed Wall Street reform, all too topical today.

So, which ones am I proudest of?

Here’s a good start (note:  the “Top Ten” posts by popularity are on the right side of this page; you’ll note that there is a little overlap):

10.  “Freakonomics” Rebuttal.

9.  “The Bob Newhart Economy.”

8.  “A Financial Gettysburg Address.”

7.  “(Un)Employment in the Year 2112.”

6.  “Goldman Sachs:  ‘It’s Not My Dog.”

5.  “Real Estate Euphemisms.”

4.  “Warren Buffett Names 87 Year-Old to be Heir Apparent.”

3.  “Home Seller’s Golden Rule.”

2.  “Nurse, I Need a Price Reduction, Stat!!”

1.  “Realtor Prayer.”

Honorable Mention:  “Realtor Job Description“; “Groupon for Underwater Homeowners“; “Edina Realty Steals a Page from Southwest Airlines, the NFL, etc.”; “The Wall Street Journal Whiffs on Warren“; “Is Shiller Right About Trills, GDP?”

Thanks for watching reading!

“Go Northwest, Young Man”

I’ve written recently how, 500 miles to the southeast, the Twin Cities labor market and economy generally are starting to feel ripples from North Dakota’s booming oil fields.  See, $16 an Hour at McDonald’s; “Hanging Sheet Rock for $90k a Year.”

When the conference organizers get in on the act (see above) — not to mention developers, Realtors, etc. . . . you know the trend has legs.

P.S.:  If you live in the Twin Cities and have young kids –  especially boys — you know The Bakken as the mansion cum science museum just Southwest of Lake Calhoun.

Its namesake is Medtronic founder Earl Bakken.

“Powell Doctrine” vs. “Kaplan Doctrine”

Military action should be used only as a last resort.  However, when it is used, it should be overwhelming and disproportionate to the force used by the enemy.

–Powell Doctrine (my paraphrase)

Buyers who have serious interest in a home should stay off the listing agent’s radar until such time as they have completed their due diligence and are ready to make an offer.   Then, they should start negotiations by submitting a strong offer that they don’t telegraph in advance.

–Kaplan Real Estate Doctrine

In 10 years of selling real estate, I literally can’t recall how many times a Buyer’s agent has told me, as a listing agent representing the Seller, that the Buyer is interested, but isn’t ready to do anything at the moment, and wants to be “kept in the loop” regarding the home’s status.

Here’s what a good, experienced agent hears instead:

“Please feel free to use my client as leverage to elicit an offer from another Buyer, stir up multiple offers from other fence sitters, or otherwise use that info as you see fit to drive up the home’s eventual sales price.”

Dumb Statement #2

Invariably, the same Buyers’ agents — if their clients actually progress to making an offer — will call the listing agent to pre-announce their client’ s intentions, and tell them to expect something in 24 or 48 hours.

Want to guess what a good listing agent does with that information?

Contact any serious prospects and let them know something’s cooking.

So, what should the Buyer’s agent advise their client?

I don’t know about other agents, but here’s what my clients hear from me:

“Once you’ve learned the market and find a home you really like – it meets your needs, it’s well-priced, shows well, etc. — move as expeditiously as you can to buy it.

If instead you wait for one (or more) Buyers to show up, you risk:  a) having the property sell without your knowledge, notwithstanding anything the listing agent promised or didn’t promise to tell me; and/or b) having to pay more than you would have before competition for the home materialized — assuming, of course, the Seller decides to work with your offer rather another Buyer’s.

Obviously, once I engage with the listing agent in my capacity as the Buyer’s Realtor, I want to know what’s going on with the property, how fast the Seller can respond to my client’s offer, etc., etc.

But, that conversation happens just before I have my client’s offer in hand, or even after — not days in advance.

It’s funny how, if you leave the door open for other Buyers . . . they just may walk through it.

P.S.:  Show me a home where four or more Buyers are circling, and I’ll show you a home that’s headed for multiple offers (at least if the listing agent knows what they’re doing).

P.P.S.:  one of my favorite cartoons (New Yorker?) shows a couple vultures sitting in a tree, bored.

The caption:  one of the vultures says to the others, “to hell with all this waiting around . . . let’s go kill something!”

March February Madness

24.  31.  17.  28.

Football snap count?

Try, attendance at open houses hosted by myself and colleagues the last few weekends.

By way of comparison, a dozen people at an open house is considered to be a good turnout, and I’ve certainly had my share where I felt like the Maytag repairman.

Does all that traffic presage a change in market conditions?

We’ll know in 3-4 months, when “Pending” and “Closed” sales statistics for the Twin Cities are reported.

How to Go From Two (or More) Buyers to None

Multiple offers are popping up frequently enough in the Twin Cities these days that agents are dusting off their strategies, disclosure policies, etc. for dealing with same. 

Or at least, Realtors who haven’t been in one in awhile (or ever).

Personally, I’ve been in three in just the last 3 months — once as a Listing Agent, and twice as a Buyer’s Agent (interestingly, in one of those, I only found out after the fact).

“Match and Raise”

One strategy sometimes employed by Buyers in multiple offers is what agents call an “asterisk clause.” 

Instead of filling in a purchase price, the Buyer fills in an asterisk, with this phrase (or the equivalent) added in the margin:  ’Buyer will pay $5,000 (or $10,000, or $200) over next highest offer.’

So, why do reputable agents (including yours truly) frown on such a tactic?

Because as often as not, it can backfire on the Seller, just as quickly leaving them with no offers. 

Scenarios

That’s what can happen when one of the bidders greatly overshoots the other(s), and the Seller informs the ”asterisk” Buyer that they just agreed to pay $5,000 more than that.  

Rather than wildly overpay, such Buyers will typically find a way to walk — or renegotiate a much lower price after everyone else has.

Scenario #2:  everyone comes in with an “asterisk” offer.

Which leaves you . . . nowhere.

Because of these (and other) perils, most experienced listing agents handling multiple offers set ground rules that preclude asterisk offers.

Guilt By Association

When agents see a listing — on February 14, in Minnesota – with leafy trees and a bright, green lawn (like the one above), their knee-jerk response isn’t to say to themselves, “My, what gorgeous landscaping.”

It’s to click on “History” on MLS to see how long the home’s been on the market — and find out how many price reductions the Seller has taken since then.

The answers in this case?

Eight months; and two, each for $25k.

Which is why home sellers who are especially proud of their (flattering) landscaping should put Summer photos on their Dining Room table, where prospective Buyers will be sure to see them when they do a showing.  

But make sure that the photos on MLS are seasonal . . .

P.S.:  the other association Realtors have with unseasonal photos is that the house is a foreclosure.

When that’s the case, though, there are usually only a few (grainy) photos attached to the listing, not the full complement of 18 allowed by MLS.

Rorschach Tests for Communities

If you’ve never been to the Twin Cities, the two largest metro airports are named after the state’s most famous native sons, Charles Lindbergh and Hubert Humphrey (actually from South Dakota).

Less than a mile south, there is a “Harmon Killebrew Drive” next to the Mall of America.

But if you’re looking for “Bud Grant Boulevard,” “Fran Tarkenton Way,” or other local tributes to Minnesota sports heroes, you won’t find them (at least that I’m aware).

(In hockey-mad Minnesota, I suppose a better parallel would be “Herb Brooks Highway.”)

“Tom Landry Highway”

Now contrast that with Dallas, Texas (where I just visited).

Sure, the streets near Cowboys Stadium are named after football greats.

But the entire freeway grid appears to be an homage to football and war heroes (plus the occasional local-boy-made-good political giant).

The list includes “Tom Landry Highway,” “Westmoreland Road,” “LBJ Freeway,” “MacArthur Boulevard” — and on and on.

It must be tough to be a nerd growing up in Texas . . .

P.S.:  I’d be surprised if there are many (other) major roads nationally named for the most famous general of the Vietnam War (Westmoreland).

And to be fair, Tom Landry — unlike Bud Grant — actually won a couple Super Bowls.

“So, How’s the Market?”

People don’t say “How are you?” to Realtors; they say, “How’s the market?”

So, it was fun — kind of — to watch TV’s best-known Realtor, Phil Dunphy of sitcom “Modern Family,” field that question in his doctor’s office on a recent episode:

Doctor [making small talk while examining Phil]:  ‘So, how’s the market?’

Phil:  ‘Interest rates are incredibly low, so it’s a great time to buy.  But, if you’re selling now, you really have to . . .”

Doctor:  “Bend over.”

Phil:  “Not exactly, but you really do have to price well, market aggressively . . .”

Doctor:  “No, I meant, I need you to bend over.”

Phil (sheepishly):  ‘Oh.’

Hit . . . and a Miss

If the foregoing exchange is, umm . . . painfully close (sorry) to many Sellers’ predicament today, the other real estate anecdote later in the episode is wide of the mark (spoiler alert:  the plot isn’t exactly a Hitchcock-calibre mystery, but if you don’t want to know — stop reading here).

After detecting something suspicious, the doctor tells Phil that he’s going to run some tests, and will only call him if there’s a problem.

Sure enough, the doctor leaves a message – on a Saturday! — for Phil to call him.

Thinking that it must be dire news to hear from his doctor on a weekend, and temporarily unable to reach the doctor (who’s traveling), Phil immediately fears the worst.

Mistakenly, it turns out:  the doctor just wanted to discuss having Phil list his house.

What doesn’t ring true about the foregoing?

At least in my experience, existing clients will often call me on weekends, especially if we’re coordinating showings (Buyers), or there’s something brewing on their listing (Sellers).

However, first-time clients will almost always wait till Monday a.m. to call.

P.S.:  One of the most popular posts ever on this blog was ”Perils of Real Estate Marketing” — also courtesy of “Modern Family.”

See also, “Phil Dunphy, (TV) Realtor.”

Season Confusion

Once upon a time, Iowa and New Hampshire held their Presidential primaries in February — and the Twin Cities housing market kicked off after the Super Bowl (or whenever the weather cooperated, whichever came later).

Today?

Iowa and New Hampshire voters go to the polls in January — and at least some Twin Cities home sellers now put their homes on the market then as well.

In both cases, the motivation is to stay ahead of the competition.

Fortunately, I don’t see much more potential for these trends to continue, if only because if these events get moved up much further, they’ll collide with the end-of-year holiday season.

P.S.:  My other, working definition of when the Twin Cities Spring market officially kicks off:  when local Targets switch from selling mittens and gloves to swimsuits and suntan lotion — also in early February!