Reality Check: A Short, Sharp Analysis of the Local Real Estate Market
I like this picture. A nice juicy brain, suspended in a clear liquid cocoon. Safe, locked in time; unchanging. It’s emblematic of the obsolete mentality of both the Public and the Real Estate Industry: ”PUT YOUR BRAIN IN A JAR. THERE’S NO NEED TO THINK ABOUT THE PROCESS BECAUSE WE’VE ALWAYS DONE THINGS THE SAME WAY!” As a Realtor (c), I spend a lot of time pondering the market to discover the best way to solve my clients’ challenges. After taking a few moments to look at the current market in Kenmore (my home town) I’m convinced that the same old process of selling one’s home (e.g. hang a sign in the front yard, putting flyers out, doing open houses, running an ad in the local paper, etc.) with or without an agent is an inadequate strategy in the current market. Allow me to point out some facts about Kenmore today:
- There are currently 204 active, single-family-homes listed with the multiple service. This inventory number has not changed for months. By the way, this is a lot of houses for sale in a town the size of Kenmore.
- Only 18 homes sold in Kenmore in the month of September. 50% of these homes sold for 90% of their listed price. Most of these homes took upwards of 6 months to sell.
- BIG FACT: 53 of the active listings have entered the market in the last 30 days.
- LARGER FACT: Only 50% of these new homes are actually new listings. The other 50% have been listed more than once. In some instances they have been listed three or four times often with different real estate agents.
- UGLY FACT: Many of these homes have been on the market a long time (sometimes well over a year) and they’ve gone through numerous price reductions.
- SIMPLE FACT: THE OWNERS AND AGENTS NEED A NEW STRATEGY OR GET OUT OF THE MARKET. WE NEED TO MAKE REAL ESTATE A NO-DELUSION ZONE.
Dear reader, please pardon my candor but both the real estate agents and the sellers are at fault. Most of the homes now languishing on the market were overpriced when they first hit the market. The market has been in decline for a year now, so there was no excuse for the inflated prices. Sellers were living a delusion and the agents were still in a “listing-equals-an-easy-paycheck” mode. I think Ardell DellaLoggia, the gran dame of Rain City Guide hit the nail right on the head in her recent blogpost entitled “This is time for serious people“:
“It is not enough in this market to have “heart” or to “care about your clients”. Serious times call for serious leaders, and we are the leaders on the ground in the everyday real estate transaction.”
In upcoming posts I am going to deconstruct this real estate process so you can better understand why many of the criticisms of the real estate industry are true and how to look at the sale of real property in a way that fits our current circumstances.
Brain by Gaetan Lee
October 10th, 2008 at 5:10 pm
LOL! I LOVE your “no-delusion zone”. I will differ with you on one thing. You almost can’t price it right from the get go. You have to flog yourself publicly to some extent. If a buyer doesn’t see you make a price drop and then offer them the moon as an incentive later, they lose brag rights. If you give them everything from the getgo…you will end up giving more than you have to.
No one trusts an OLP…no matter how on target it is. There is no way to take this market to an average 18 days on market by “pricing it right in the first place”. That strategy will take everyone down even further as to prices as people will still want to see that price drop, and maybe more than once.
October 10th, 2008 at 7:07 pm
Oh, Ardell,I agree with you regarding the difficulty of selling a home quickly in this market. Also, I didn’t mean to overstate the notion that there is a perfect price…it’s tough out there; however,this inventory has been overpriced for over a year now. It makes me wonder how an agent can, IN GOOD FAITH, take an overpriced listing (buying the listing) in an extremely soft market? Let me put it this way: if the agent REALLY intended to spend resources on things such as proper marketing, pre-inspections, staging, etc., then the agent knew there would be a financial “investment” in selling the home. I bet most listing agents today are NOT properly marketing their listings; they aren’t spending the money AND they aren’t having the tough conversations with the sellers. Let me be blunt, agents are not serving their clients well. I think it takes courage to NOT take a listing. It also takes even more courage and integrity to be accountable to the sellers. We owe it to our clients to tell them the TRUTH…..a virtue in short supply these days.
Thanks for reading my blog. I’m flattered.
October 11th, 2008 at 8:10 am
I’ve never heard the term “buying a listing” from a consumer. Most times I hear it from the agent who didn’t get the listing.
Truth is, we help people do what they are trying to do. Letting them try a price that they believe in, is sometimes part of what we do. The breakdown happens when people want to hold on to that price for too long. When the agent doesn’t believe in the price or the possiblility that the price will work, they put less blood, sweat and tears into their efforts.
We’re all human. You don’t want the seller looking back thinking he could have gotten a higher price, but the agent wouldn’t even let him try. You also don’t want to spend your time, money and resources on something you think is never going to happen.
If every seller who said “my agent isn’t working hard enough” looked in the mirror at WHY their agent isn’t working hard…they’d probably see a price change in the making.
October 11th, 2008 at 11:35 am
You both bring up good points. I think it is incumbent on us as Real Estate Professionals in this marketplace to keep coming up with innovative options for Sellers so they don’t come to believe it is all one way or another. I don’t think sellers are served well when an agent isn’t totally square with them about what it costs to properly market and differentiate a home that is trying to push for top dollar in a crowded marketplace if that is what the seller wants to do. I don’t think agents should allow sellers to believe they are going to pay to “Market” their home aggressively if they don’t truly believe in the price, because of the things both of you have pointed out. I think a lot of agents let sellers believe what they want to believe about what is being done to market their home without a lot of accountability or the setting of proper expectations. Proper Internet Marketing for instance, is about more than just putting it on the multiple and having it ‘picked up’, as many Agents and By Owner services are suggesting. I also don’t think throwing Owner Direct Sellers into the deep end of the pool by putting them on the MLS without representation is a grand idea but plenty still take the bait of big savings on the commission. I think we need to do a better job of separating the marketing from the representation aspects of the services an agent can provide. A good agent gets paid for providing excellent represetation and strives to set proper expectations based on solid information and experience. The scope and expense of the marketing and who pays for it, should be a separate conversation entirely, because if a seller is picking an agent based largely on the notion that the agent is going to pay for the marketing the conversation is already off track. Perhaps if a Seller was paying for the marketing and instead negotiating the cost/benefit of expert representation; that look in the mirror would happen a little sooner.
October 31st, 2008 at 12:39 pm
affiliate marketing…
Interesting post. I’m going to setup your feed in my RSS reader….