I had a comment from a reader of the blog the other day that has stuck with me. I wouldn’t say I’ve been uncoupled by it, but the comment has definitely bothered me in the days since the reader left it for the world to see. The comment, to me, represents a bit of flawed thinking that is as pervasive in the Lake Geneva market as I fear it may be in your own home town market. The thought is symptomatic of a school of thought that has long since fallen by the wayside, a condition that has partly to do with the internet, and partly to do with information in general. Since I appear to be one of the few Realtors in the country who actively discuss the market on both good days and bad, and good years and worse, I’ll tackle the issue that seems to weigh quite heavily on many minds.
My father is an old school sort of guy. He’s not old in my mind, at 66 he hopefully has many decades of watching over the blue waters of Geneva left. When I was younger, I used to argue with my father quite a bit. I’d argue about anything, as those who read this blog regularly will find easy to understand. Now that we’re both older, we still argue. Quite a bit. He did kick me out of his house one afternoon last summer because my brother and I were making fun of a TV show he was watching, but I think that eviction was mostly theatrics. My father and I agree on most things real estate, but even in our chosen profession we find plenty of room for disagreement. It’s in the disagreement that I have with my father that makes the comment left on the blog last week appear less a fluke and more a consistent way of thinking by much of the population.
Real estate law essentially dictates that as an agent of a seller, or buyer, you must keep their fiduciary interests at the top of your loyalty list. In representing a seller, it’s best to get the most amount of money possible on behalf of that seller. This much is obvious. But the way that the number is arrived upon is the subject of much debate, possibly generational debate between an old school way of thinking, and the new school. Trust me on this, as I’ve been sitting at the back of the class disobeying the teacher and trying to make the girls laugh since the first day of the new school. My father, and the establishment will say that in all cases, the listing agent’s job is to get the highest price for his or her client, at all times. That is true, but that’s not where the representation ends. What if, as a way of representing your clients best interests, you encourage them to take a lower price now because you know they’re going to end up taking a similarly low price later? What if representing the seller has less to do with the price, and more to do with the terms as they relate to the market conditions? What if a house has been on the market for three years, and an offer is finally presented, but it’s a miserable embarrassment?
What if, instead of representing the seller in an old school manner and shelving the offer as “not good enough”, you go to the seller and explain that indeed the offer is gross, but in light of the market conditions and established poor reaction to your specific property, it might be best to take this number and run? What if instead of holding on to the theory that some generic opinion of price is all that matters, we look at the market conditions and candidly say, you know what? This market is slow. Your home is even slower. Chances are you either sell now for this price or sell a year from now for this price. What if that’s the best way to represent your seller in a troubled market? What if representing your seller in the new market has less to do with squeezing every penny that isn’t even on the table, and more to do with maximizing price and getting your seller onto their next phase in life?
I’ve personally owned and sold seven properties in the past 10 years. I honestly believe that I sold each and every one of those properties too cheap. If I were representing myself, and the judging criteria was based solely on price achieved, I’d give myself a solid D+. But each and every property I’ve sold has allowed me to move into the next one, and the next one beyond that, and so on. I’ve been able to move fluidly through real estate while others have been burdened with elongated, undesired ownership, not because I’m smarter than those people, but because I’ve been willing to react to the changing market and make the next real estate move, even if it involved leaving money on the table. If I were sticking true to my real estate training that preaches price is everything, I’d probably still be at the first house, holding open houses with Fiji water and cupcakes and balloons, wondering why no one wants to buy my property at my price.
The debate over how to best represent a seller aside, there’s another theory that came out in the comment from last week. The theory is that Realtors can manipulate buyers into paying higher prices. Yes, I used the word manipulate. Prior to Algore inventing the internet, buyers were held captive by unwieldy MLS books and newspaper ads. Their information had to be gathered by hand, over time, with less than reliable results. Buyers then were more at the mercy of Realtors than they are today. In this market, whether sellers understand it or not, buyers don’t have to read this blog to know what the market conditions are like (though they should). Buyers can search sale records online themselves, they can search available properties themselves- they can even research owners mortgage history and possible legal trouble, all with the touch of a button. All right, you’d have to touch a few buttons, but you get the idea.
If I explain on this blog that a property sold for $400k that was originally listed at $600k, am I damaging the market? Am I solely responsible for this sale that might hurt the chances of the neighbor getting his $600k for a similar property? Not in the least bit. I’m responsible for providing market updates with commentary that reflect the market as I see it. I might be wrong some times. Heck, there’s a property closing in the South Shore Club soon that will showcase how my opinion of value on that particular home was light by as much as 20%. I could be a reactionary agent, content to watch list prices and froth all over them with the intent of selling each property on the market for the sellers dream price, but will I be successful in convincing buyers that the market conditions exist at a different price level than those that they can plainly see with their own eyes? Am I so powerful in this market that I can assign a price to a property and will a buyer to ignore previous comps and over pay? In the eyes of the commenter and others, perhaps I am, even if I know I’m not.
While the thought of lording over a market with lightening coming from my hands sort of like Mickey Rourke in Iron Man 2 does sound sort of appealing, I’d rather tell you every day what the market is doing, and where I think it’s going. The unfortunate thing for sellers who would rather ignore my advice is that only one of those two conditions is subjective. Where I see the market is dependent entirely upon statistics, and statistics are not subjective unless you’re talking about a jobs “saved” number spewing from Washington. My opinion as to where the market is going is entirely subjective, and as a human being my opinions can be wrong. To recap- my opinions = wildly subjective, market statistics = not subjective. I’ll keep arguing with my father about the best way to represent a seller, and chances are I’ll continue to get comments that claim I’m a shill for buyers. The only thing that’s certain is that I’ll continue to provide opinions as to where the market is and where it might be going, even if I make a few enemies along the way.