Saturday, June 25, 2011

Short Stories from the Front this Quarter

OK, I'm Cranky

My Home Is Unique

I always say "Your home is unique, and requires a unique marketing blueprint." And then I develop a unique marketing blueprint for each home I market. You've heard about the persimmon muffins and the rosehip tea bread (for homes with great gardens to hype), the Renovator's Open Houses lauded by the SF Chronicle (for "fixers" in Piedmont and Berkeley), the Highland Avenue home I had open during the CSL Home Tour this year and even marketed directly in the CSL Home Tour book, the postcards delivered to cyclists at Redwood Park (for a home high up in Montclair with a massive garage). In each case, it was the first time that strategy had been created in the local market, and others have gone on to copy these strategies.

But you should trust your agent when s/he says "your home is not unique-er than anyone else's." All homes benefit most from the widest exposure to the buying market possible (assuming highest price is more important than family privacy or some other factor). Whether it's a backyard pool, or a special architectural pedigree, or an incredibly tiny yard, the goal is to identify potential buyers, given the attributes, and make sure we reach those buyers through our marketing. We'd rather draw in 100 buyers interested in a backyard pool than 1000 buyers, none of whom can live with a pool.

Not Even a Phone Call?

I spent a few days six months ago working with a couple in the area who wanted to downsize. We spent hours discussing minor repairs needed for the house, whether to update the kitchen for sale, pricing, sample marketing strategies, handypeople who could take care of the work, transfer taxes and other seller costs, and so on. They said, "We've decided you'll sell our house, Maureen."

In the end, they decided to postpone their move-down purchase and the corresponding sale of their current home. Six months later, their home was on the market with an out of area agent (at more than 5% brokerage fee, I might add....). What's that about?

It could be that we realtors don't adequately explain proper etiquette in these circumstances, so here goes:

--We realtors work for a living: We do our work, and we get paid for it. We often (some of us more than others) invest our time and resources in advance, hoping and assuming that when the client goes to sell, we will get the phone call, and after more excellent work, we will get paid. On a million dollar sale, I will typically earn about $20,000, of which a large portion goes to taxes, benefits, and expenses. If I don't get the call, I don't get the $20,000.

--Hire whom you like, whether you think they will do the best job, or if you feel you "have to" for some reason. If possible, interview three agents, and just mention you are talking to others. We will be impressed.

--Change your plans if, over time, you become close to a different agent, or feel the first agent is not at the top of his or her game. If you go to market within a couple of years of asking for more than an hour of exclusive personal service from the first agent, drop him/her a note saying that you're now "heading in a different direction." Most will understand.

--If you buy a home in a different area (that is, outside Oakland/Berkeley/Piedmont), ask your agent for a referral to a great agent in that other area. We know we serve our clients best by not pretending we can be all things to all people in all areas.

--If the agent who helped you buy your home in Pleasanton or San Francisco suggests that s/he help you here, politely decline. They shouldn't have asked, and you shouldn't feel you have to say "yes." See the story below for more on why.

--If the agent who did all that preliminary work for you did and does great work, by all means don't say to yourself "these guys asked; let's go with them. Our first agent will understand." And definitely don't give his/her thoughtful work product to the new guys to use. It's just not fair. Instead, say, you know, so and so did that great work for us last year. S/he understands the house inside and out. We trust her. We owe it to her.

Why Not to Hire an Out-of-Area or Low-Cost/Low-Service Realtor or "Go Bare" with No Realtor

You've heard the story about my clients who made an offer on a house the tax record said had a garage, that in fact didn't have a garage.

Piedmont is very picky about its garages. They must be there, or there must be a permit for a prior demolition (at least since the '80s). You can't get a water heater installed in this town if your garage was demolished without a permit.

Knowing that, my clients had the sellers pay for their new $80,000 two-car garage. Because I know how Piedmont works. An out-of-area agent doesn't know that that's how Piedmont works, and buyers who make offers on their own have no idea.

More recently, I saw disclosures for a house with suspicious cracks in the stucco. The pest inspector noticed it too, and suggested test holes to determine whether there might be dry rot in the framing, under the stucco--often a $60,000 fix. No further inspection was done by the owner.

A buyer relying on a rebate realtor (one who rebates 80% of the brokerage fee back to the buyer) made an offer on the house and got it. The realtor did a little work and was paid his little fee. I recently drove by and saw that the stucco has been taken off the house. How would a realtor in Milpitas know there was dry rot under the stucco? Exactly.

But all of us local agents knew, and we never would have let a client buy that home without doing that test drill in the stucco .....

I'll Let You in on a Secret----

Actually, it's never been a secret to my clients, because I always walk them through the whole thing.

Realtors often mention that the "standard" brokerage fee is 6%. In Piedmont, it's actually 5%. Only 8 of the 56 transactions that have closed in Piedmont since 1/1 involved a brokerage fee above 5%. I always say to my clients that I feel 5% on a million-plus transaction is fair enough, that I work very hard and won't work any harder for an extra percent (only a small portion of would make its way to my pocket), and the last thing I want to do is start out our relationship by having a fight about brokerage fees.

By the way, the 5% flows through to the listing agent's brokerage, which in turn splits it with the buyer's agent's brokerage, and each brokerage, in turn, splits that fee with the agent who was involved. The percentage "split" between brokerage and agent varies based on sales volume, as you can expect, but with so many fewer transactions, many at an incrementally lower sales price, all our incomes have been hit in the last few years.

So don't ask your realtor to market your home at a super-low rate--you can't afford that strategy. On the other hand, know the facts before you negotiate the brokerage fee--

Tuesday, June 21, 2011

Head to Head Competition

Yes, I have a competitive streak. Tonight I took a few moments to examine how things have gone for the two top firms working in Piedmont since the beginning of the year.

We've had 52 successful transactions (or 104 "sides," as each has a buyer and a seller). Of the 52 homes, just over 70% were marketed by Pacific Union or Grubb--54% of these by Pacific Union, and 45% by Grubb.

Across the board, the Pacific Union-marketed homes garnered a higher price per square foot ($503/sf) than did the Grubb Co. listings ($488/sf)--this could be because the Pacific Union homes were nicer, larger, and so on.

A more interesting figure, however, is the final price relative to the original asking price: How appropriately was the home priced to begin with, how well did the listing agent gauge true market value, and/or how convincingly did s/he convey that true market to the seller prior to going to market?

About 60% of the Grubb listings sold below the original asking price, while 60% of the Pacific Union listings sold above the original asking price. Typically, homes that sell above the asking price garner competition, and go into contract promptly after the second open house, while those closing below the asking price stayed on the market for a longer time.

Which group would you prefer to be in?