A Week In The Life Of A REALTOR® – Part One

Many wonder what a REALTOR® truly does. Finally the mystery is about to be revealed: real estate is about stories, people, and their lives.

We buy or sell properties at the most critical junctures of our lives. Marriages, divorces, new jobs, job losses, new babies, emptying the nest, moving, aging, dying, lottery wins, inheritances, investments, divestments, developments, business, bankruptcy, going to college, tired of renting: these are just but a few of the reasons that bring us to the decision to sell or acquire a property.

These events can be emotional, intense, and life-changing. Thus, a real estate agent becomes a client’s best friend. A caring and empathic friend who must fully embrace a client’s needs, and needs to understand the client’s available finances, timelines, and sometimes compelling issues. Clients open their lives to their agents as they would never dare with anyone else. Would we ever tell our friends how much money we have on our account and show them a bank statement to prove it? With how many friends would we share that our marriage is on the rocks and divorce might be nigh, with all the details that pertain to the property division? Our clients expect us to be caring, and to show empathy and consideration. Because it is through our service that people continue to pursue their dreams and their journey in life.

Yet, this week a curious story raised above others for its peculiarity. Events similar to the one below should not be considered the norm.

Thursday morning I was on a showing tour with a young couple. Among the properties we visited sat a vacant single-family unit that had been newly renovated. The listing card advertised all new stainless steel appliances, accompanied by a series of pictures. When I arrived on site – slightly ahead of my clients – there stood a colleague with his client in the front yard. Both were quite puzzled and wondering why, out of all the new appliances advertised, only the dishwasher was in place. In fact, when my clients and I accessed the property, no stove, refrigerator, or microwave could be found indeed! Undeterred, we carried our showing as planned, giving it thorough consideration, then left for the next property on our schedule. Although the lack of appliances did not seem a deal breaker, I felt that the showing was concluded below expectations, with the potential cost of new appliances looming on our mind. When… surprise! Later that afternoon GRAR sent an email to all agents. Apparently, the evening before someone with a van had parked in front of the property, entering undisturbed, and had loaded all the appliances onto the van leaving shortly thereafter. In full daylight. It was a theft!

Real estate is also a data-driven reality. Net to seller, property taxes, value, square footage, days on the market, HOA fees, are just a few of the elements involved in any transaction. Numbers are everywhere, numbers matter. Each address begins with a number. Parcel numbers, are in fact… numbers. Listings are defined by a MLS number and a listing price. Offers start with a date and a purchase price. Commissions, closing dates, EMD’s, possession: everything is quantified.

There are also numbers that do not appear in any deal or in any contract, but are still an essential part of it. If you ever wandered what a REALTOR®’s week looks like, this list below might help.

  • 434 miles driven
  • 130 significant incoming emails, countless the insignificant
  • 81 phone calls, to or from clients, lenders, agents, FSBO’s, and floor (the technical term to indicate the agent on duty who answers office calls)
  • 67 outgoing emails
  • 41 car drives
  • 33 separate text conversations with clients, agents, inspectors, office manager, FSBO’s, and unrepresented potential buyers
  • 18 scheduling of showings
  • 14 showings of in-town properties concluded
  • 10 clients served
  • 8 hours of floor
  • 7 new real estate articles read, including: FHA minimum standards, HUD, and property taxes
  • 5 comparative market analysis’ (CMA’s) completed and delivered to clients
  • 4 contacts with rental property manager due to tenant eviction
  • 4 new MLS automated searches set up
  • 2 meetings with new clients
  • 2 car drives with a colleague
  • 2 days of negotiations on a submitted offer
  • 2 meetings with current clients
  • 2 collecting and reading of condo association bylaws and meeting minutes
  • 2 real estate articles completed and published on blog
  • 1 showing of out-of-town property
  • 1 in-person meeting and negotiations with FSBO
  • 1 out-of-town in-person meeting with clients to write an offer
  • 1 cash offer submitted
  • 1 offer accepted
  • 1 referral from client
  • 1 inspection set up
  • 1 work with a client’s lender on VA loan paperwork for a pending property: termite inspection, invoice, addendum to purchase agreement (PA), and affidavit
  • 1 work with a client’s lender on estimated closing costs and monthly payments
  • 1 work with title company in preparation of a closing
  • 1 inspection of an investment property
  • 1 preparation for an upcoming open house: listing cards, business cards, signs, disclosures, and publicity
  • 1 prospecting activity
  • 1 contact with rental property manager for unit prep work
  • 1 real estate article draft prepared for publication on blog
  • 1 travel to inspector’s office to pick up an invoice
  • 1 travel to client’s house to pick up an EMD check
  • 1 travel to seller’s home to pick up Seller Disclosure and Lead-Based Paint forms
  • 1 garage door repair
  • 1 office business meeting
  • 1 accounting
  • 1 estate sale attended
  • 1 outgoing referral placed
  • 1 open house (almost 2)

These represent only some of the possible activities, which for example could include attending continuing education (CE) classes, taking pictures, closings, listing appointments, and offer presentations.

Pictures to follow in part two, for those curious… to see with their own eyes how fascinating and enticing this profession can be!

Happy summer everyone!

GL

Giuseppe Lupis REALTOR®

How To Win Multiple-Offer Situations

Great a number of buyers who have submitted an offer to purchase a property in the Grand Rapids, MI, area in the last couple of years have become acquainted with multiple-offer situations, accepting them almost as a unavoidable tenet of life. Often an insurmountable obstacle to some, a few grow discouraged and eventually throw in the towel (more below why this could be a fatal mistake.)

So, how do buyers emerge victorious in a bidding war? Agents who carry out their duties with diligence will win an offer through attention to details, perseverance, and patience.

Attention to details. An offer should never be construed as a one-item contract, namely the purchase price. Rather, because it comprises many movable parts, each of them surges to equal importance in the equation. In bare terms, the purchase price always stands out as an initial statement. Especially, going above asking price carries enormous appeal, but it comes with drawbacks, which listing agents are quick to point out to their sellers. For example, unless cash, a financed offer is contingent to an appraisal ordered by the lender. Offers that seem too good to be true risk not appraising. Among the possible consequences are a renegotiation of the deal in terms which are more favorable to the buyers; or deals not closing at all: both situations are not in the best interest of the seller.

Sellers who receive multiple offers are looking for their net-to-seller, a speedy and smooth transaction with fewer contingencies, and above all the reassurance that the sale will close.

Typically sellers are responsible for outstanding loans; broker’s fees; the Michigan Transfer Tax; the County Revenue Stamps; title insurance; recording fees; unpaid taxes, assessments, or liens; some inspection costs – i.e. termite inspection in case of a VA loan; and perhaps home warranty costs when warranted by the situation. Some of these costs cannot be negotiated: for example VA loans do not allow buyers to pay for termite inspection. Others however can, and will be negotiated.

Thus, offering to cover some or all of seller’s closing costs will increase the net-to-seller without increasing the risk of under appraising.

Let’s consider a property listed for sale at $150,000. An offer at $165,000 and an offer at $160,000 with buyer covering $5,000 of seller’s closing costs are equivalent in what they will net to the owner. However the latter has better chances to appraise than the former. If the risk of property appraising below purchase price is still present, this can be minimized by adding a provision to bring extra cash, if available, at close.

On the other hand, asking for seller’s concessions will reduce the net-to-seller. Yet, it is still possible to win over other offers with such provision.

It’s no mystery that sellers prefer cash offers. Typically there is no appraisal contingency, unless buyer makes it contingent to buyer’s appraisal, and the deal can close fairly quickly. On the other hand buyers making a cash offer are aware of the strength and advantages of their bid, and tend to be more conservative on the purchase price.

When a lender is involved, its reputation will go a long way. A well-know local lender with a history of closing all deals timely could potentially be seen more favorably than an unknown lender from out of state with no history on record. When multiple offers are on the table every detail matters.

The downpayment size should not be overlooked. A mortgage in the amount of 75% of purchase price versus one in the amount of 97% speaks to the greater strength of the former to close the deal.

Similarly, the type of mortgage in a multiple-offer situation may be viewed differently by sellers: a conventional mortgage for example carries fewer requirements than an FHA or a VA one.

Offers that are not contingent on the sale or exchange of another property have a higher chance to close and/or close sooner. If possible, it is preferable to sell first, then buy. The discomfort of a housing hiatus is easily compensated by the increased strength of one’s offer.

When speaking of contingencies, inspection and investigation is probably the most consequential. Any offer waiving inspection is by far a seller’s favorite. It speaks to the absolute commitment of the buyer, who no longer relies on the ten-day exit-window protection, and accepts the property as-is.

Asking for appliances, light fixtures, and window treatment is customarily accepted and acceptable. But if the seller has specifically excluded some or all appliances, or has reserved that beautiful chandelier gifted by her late grandmother, then the offer might be moot. A chandelier too many could be all it takes to lose a property with another twenty offers on it.

Before writing an offer, it might be a good idea to verify taxes and assessments. These can be negotiated, for example by offering to cover all outstanding assessments: yet another way to increase the net-to-seller without incurring in appraisal issues later on. I recall writing an offer in which my client proposed to cover these figures. They were less than $300, a relevant amount, but quite insignificant when compared to the purchase price. In the end, it is not the amount that can make a noteworthy difference, as it is the kind gesture to take a burden away from the seller.

It is always recommended to verify property boundaries. Even when… a garage looks solidly in the backyard of a property, it could be in fact comfortably sitting on the property line – yes, I heard of a similar situation once. Ordering a land survey will immediately dispel any doubts, as long as its cost does not burden the seller – who can choose among… twenty seven different offers! Asking for an existing survey could be an acceptable compromise, making sure that the seller does have an existing survey and she would be willing to share it before submitting the offer.

In a seller’s market it is not unusual for sellers to ask for possession to be delivered to buyer a week, a month, or sometimes two months after the closing of the sale. In a financed offer a seller cannot ask for more than 60 days of possession, because of lender’s rules. In fact, at close seller becomes buyer’s tenant, and lenders would consider the property an investment property beyond 60 days of tenancy. As tenant, seller can be asked to pay an occupancy fee. Minimizing or waiving that fee allows seller to live in the property saving on rent. Yet another way to increase the net-to-seller without having to touch the purchase price.

And now the final touches. Sellers want to sell, now. They want to close, now. They want to cash that check, now. Understandably so. Keeping a house clean, with a perfect yard, ready to show, requires work. And while the house sits on the market unsold, sometimes already vacant, utilities and mortgage must be paid. Even for a property that is owned free and clear, taxes, insurance, and maintenance, are still the owner’s responsibility.

Hence, proposing to close two weeks sooner than the competition can make a significant difference. On a property that pays $1,500 per month in mortgage, taxes, and insurance, and $400 per month in utilities, such closing date places an astounding $950 in the seller’s pocket.

If not enough, adding an earnest money deposit (EMD) that is substantial, and partly or completely non-refundable, in the very least will make the seller seriously consider one’s offer.

Perseverance. Losing on an offer pinned against many others can be discouraging, especially in a low-inventory market – which in turn is one of the causes of multiple offers. However a loss can become the opportunity to foster problem solving skills, to remain focused, and to allow for more flexibility in crafting the next bid. Managing client’s expectations should be one of the agent’s areas of expertise. If you know that properties in the $150,000 – $170,000 range are selling in two days and for an average of $20,000 above asking price, you should have a conversation with your buyers about what might reasonably be within their reach and what might not. For example, buyers who qualify for a $175,000 conventional loan with 5% down repeatedly losing bids on $170,000’s properties, would be better served by considering just-listed properties in the $150,000’s, or properties at the top of their borrowing abilities, which have been sitting on the market for a while.

Moving away from a difficult market because of a few losses might not always be the best idea. If a market analysis reveals a strong market tendency, waiting or abandoning the search will make all but impossible to secure a property in the near or far future. This is because while prices and interest rates continue to increase, buyer’s borrowing power remains unchanged. It might be better for buyers to secure anyway a more affordable house not at the top of their list, build some equity, then resell a few years later: property value follows the market.

Patience. Purchasing a home requires time, thus a good amount of patience. Losing a bid does not mean that the deal is necessarily lost. In fact, not all deals close, due to various circumstances. In these cases, back-up offers can be the ultimate key to success!

This is the perfect time to hone and test those skills. I am always reachable for comments or advice, and… happy purchases!

GL

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Understanding the market: should I buy or sell?

“Should I buy or should I sell in the Grand Rapids area these days?”

This is a question I hear often, to which I try to answer with a combination of knowledge, experience, and data. Especially data. Because, unlike the formers, it is objective. In fact, nothing like numbers can offer a clearer picture of how the real estate market is behaving these days.

For starters, did you know that GRAR provides free monthly statistics, divided by county? For example, if we wish to learn what is happening in May 2018 in Kent County we’ll discover that residential listings are up by 1.8% compared to a year ago, while multi-family and vacant land listings are down by more that 20%.

When we look at pending or closed sales, statistics show that the number of transactions is below last year’s levels, but volume is increasing. Hence, here is one piece of information that will make all homeowners happy, no matter how we look at: values are increasing, significantly.

In details, based on closed sales the average home value rose from $219,063 in May 2017 to $240,557 in May 2018. That’s a gain of 9.8%! The year-to-date also rose from $206,723 to $221,408, with a gain of 7.1%. When we take in consideration pending sales, the gain appears even stronger: from $213,602 in May 2017 to $243,700 in May 2018, for a gain of 14.1% – and a 9.5% for the year-to-date (ok, I’ll spare you a few extra numbers.)

REALTORS® regularly receive bulletins and updates. Therefore, to complete the picture with more data from the GRAR weekly newsletter (specifically the June 18, 2018, issue) in the Greater Grand Rapids Metropolitan Area – which includes “Kent County; Georgetown and Jamestown Townships in South East Ottawa County; Ionia County; the six Townships in North East Allegan County; and the North half of Barry County, including all of Gun Lake” – the average sale price of a single family home is now up 7% compared to last year, at $217,175.  Also, based on pending sales, the average number of days on the market is 44 for multi-family homes, and 22 for single-family units.

The data seems to point to a strong market in which the trend is steady and home values are increasing. My personal local knowledge and experience align with the data. For example, we are still observing multi-offer situations. For fun fact lovers, I have direct knowledge of listings which received 8, 13, 17, 23 and comparable number of offers. I heard from a colleague of a listing with 45, which seemed a record, and then just six days ago of one case of… 58 (yes, you read correctly, fifty-eight) offers for a property in Grandville, MI. But wait: the same day I spoke to an agent who had planned to write the 59th!

To corroborate these findings, Freddie Mac’s analysis forecasts a 3% home sales growth in 2018 and a 2% in 2019, notwithstanding the increasing mortgage rates. Alongside, home prices are expected to grow by 7% in 2018 and a more moderate 3.1% in 2019.

Finally, the general answer to our initial question, the one we have been waiting for while reading this entire post is: yes! You should be able to confidently buy and sell. No one can predict the future with absolute certainty. However, given all the data, if you are planning to sell there could be no better time. In the GRAR area inventory is at a mere 1.2 months, and properties are still receiving multiple offers – we’ll touch on this specific topic in a later post.

If you are a buyer, the market might seem intimidating right now, but postponing your purchase may not be the best approach. Prices are going up steadily, interest rates are also increasing, while borrowing limits typically do not. The good news is that if you buy today you’ll have secured a better interest rate, and by next year your investment will have yielded an average 7%.

Happy sales everyone! And yes, I am extremely contactable if needed be.

GL

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Open Houses – Why. You. Should. Absolutely. Go!

This post will be colloquial. It has to be. Just like during an open house, where interaction with its host becomes key to a fulfilling experience, and possibly to achieving your dream: your perfect home is only a few steps away. When you walk through, you should engage in a conversation with the agent at hand. And this is why.

So, you have been scouting for your new house with your agent. Or perhaps you just decided to buy your first home, you do not have an agent and you do not know exactly where to start. Or you are visiting town from out of state, caressing the idea to move (Grand Rapids is a perfect place to be, by the way!) In any caGreenridge Open House Signse, open houses seem a perfect way to spend a few hours during the weekend to acquire further knowledge and experience.

Before you walk through that door, please know that you are the guest(s) and all of the agent’s attention is geared towards your needs. Agents holding open houses are there to help you, and to answer all questions you may have.

Different agents have different styles and ways of hosting the event. Personally, whether a host of my own listing or that of a colleague, I typically welcome you, introduce myself, ask for your name(s), and offer some materials, such as the listing card, and my business card. If extra information is available (i.e. a land survey, an addendum, or the seller’s disclosure,) I point it out. Then I leave you free to visit the property – thoroughly as you please – and to make your own comments and evaluations. You’ll find all lights on for best appreciation, and intrinsically to reveal that the electrical is in perfect shape; and sometimes you’ll hear music in the background, when a sound system is available. Do you like jazz? 😊 At the end of your tour, or anytime during it if you so wish, I listen to you, talk to you, and share the ins-and-outs.

Interacting with the agent is one of the best ways to learn more about the house you are visiting, and other similar available opportunities, such as properties not yet on the market. It is alright to clarify that you are already working with an agent if you have one. If so, share the name of your agent. Why? It will facilitate communications in the future. For example… you may love the property but perhaps you feel afraid that a multiple-offer situation would drive the price up. But what if the property goes unsold, for whatever reason, and the seller decides to lower its price? In this case, a diligent listing agent will immediately call your agent and share the news. In short, you will have first dibs, and a chance to buy your dream home at the right price. Simply because you left your agent’s name at the open house.

In case you are not represented by an agent, you will have the opportunity to interact with one, and possibly vet him/her if you later decide to use some help. Case in point. In 2017 I was hosting an open house for one of my listi12ngs (pictured here) in the Baxter neighborhood of Grand Rapids, when a young couple came through. They were qualified, unrepresented buyers – in other words, pre-approved and without an agent. They engaged in a friendly conversation on a variety of topics. It was so pleasant that we connected instantaneously. The following day we went out for a slice pizza and a chat on their real estate needs and dreams, I started working for them, and a week later we had an accepted offer. Market conditions then were overwhelmingly favoring sellers, thus making multiple offers above asking price the norm. Yet, with some attention to details, persistence, and a back-up offer, we were able to secure their dream home, at the right price, and especially within their budget! Recently, I visited these clients – I was privileged to be invited for dinner – and witnessed first-hand what a paradise is now their new home, furnished with exquisite taste and touches of their love and enthusiasm everywhere. Just because of an open house and a chat.

For those who love statistics: This weekend – June 9-10, 2018 – in Kent County there are 231 Open Houses (GRAR, June 9, 2018.) Of these, 89 are in the City of Grand Rapids, 14 in the City of Kentwood, 13 in the City of Wyoming, 11 in Caledonia Township, 7 in the City of East Grand Rapids, and 3 in the City of Grandville.

Time to give Open Houses a try.

Happy House Hunting!

GL

For Sale By Owner – Is it always the best option?

West Michigan is a much sought after area due to its beauty, services, and vibrant life (I will cover the advantages of living here in my future blogs.) Not surprisingly, these days in Grand Rapids and surrounding areas there are fewer properties for sale than usual and high demand for housing; in other words inventory is extremely low and we are experiencing what we call a seller’s market.

In market conditions such as these, in order to help my buyers I regularly scout for properties not yet on the market, properties not at all on the market 😊, and properties not listed through the MLS, such as For Sale By Owner, or FSBO’s

Why my interest in FSBO’s? My very first closing was originally a FSBO – before I was asked to list it. It ended up being a cash deal closed in just eleven days, with the bonus of netting my client a little more than expected. With great satisfaction for both parties.

Here in Kent County, the number of FSBO’s currently available totals 130 (Zillow –  May 24, 2018.) As comparison, the number of properties currently listed through a broker equals 1022 (MLS – May 24, 2018.) In other words, if we assume that almost every FSBO is also advertised on Zillow, at this time for sale by owner properties constitute about 12.7% of all properties on the market. A significant number. But do all the FSBO’s eventually close without the help of an agent? As per my experience, the answer is no.

Often sellers choose to market their own property without an agent in an attempt to save some broker’s fees. This seems a logical approach. However the reality speaks differently. Many sources are available to provide data. Among them I find this study quite revealing: on average, FSBO’s net less than properties listed by an agent. And here are some points for reflection.

  • Fees. Selling as FSBO seems a good way of saving commissions, both listing and selling sides. While notable – a few thousand dollars – these commissions are however insignificant when compared to the several hundred thousand or million of dollars a property is worth. As percentage, these fees can be more or less what we customarily accept to pay – with no objections – for wire transfers, ATM withdrawals, credit cards, or online payment vendors. But there is more, below.
  • Offer. Buyers are aware that FSBO’s are not paying broker’s fees. Therefore they will try to make an offer just a few thousand dollars below asking price. Additionally, any agent bringing their buyers to the table will protect their clients from having to pay their commission by adding a provision to the Purchase Agreement, making it the seller’s responsibility anyway. In short, the only potential benefit of selling FSBO – saving on commissions – is neutralized.
  • Experience. In the negotiation process, the experience of any agent vastly surpasses that of a do-it-yourself seller. No wonder a represented buyer will enjoy the best end of the deal! This advantage alone could be worth thousands of dollars, possibly more than the listing broker’s fee alone, and should put FSBO’s on notice.
  • Knowledge. Markets move, often quickly. Agents who operate daily in these markets possess the experience to properly price a property. Why is pricing crucial? A property hitting the market will generate the most interest within the first three weeks. One that is incorrectly priced will not attract the right pool of buyers or not attract buyers at all during this critical window of time. Chasing down these buyers with multiple price reductions while the property sits unsold can be very costly!
  • Marketing. Visibility is key. Agents enjoy a variety of marketing tools at their disposal. The most powerful is the Multiple Listing Service, or MLS. When a property is listed through an agent, it is immediately placed on the MLS, where it becomes visible to all agents and the general public. For example, this is where all current listings in the GRAR area can be found. FSBO’s do not have access to this tool. Sometimes, after unsuccessful attempts at selling, in order to be listed on the MLS a few FSBO’s will resort to entering into a limited service agreement, which carries a cost, further eroding their net profit.
  • Showings. Listing your own property means making yourself available to all buyers. Anything between 8 am and 9 pm is typically a go. Phone calls, emails, scheduling, key arrangements, walk-ins (isn’t that “For Sale By Owner” red sign in your yard?), answering questions, and similar tasks  can be time-consuming, and time is precious.
  • Closing. The good news is that in the end a FSBO will receive an offer. It might take some time, a few price adjustments, a few open houses, a limited service agreement, or even the help of… a listing agent 😉! But there is still work to be done to close. Deals fall apart sometimes. And when that happens properties could lose value due to the stigma that something could be wrong – whether true or not.

In the end selling as FSBO can be a wonderful experience, rewarding sellers with great satisfaction. Or could become a time of frustration. Whether you are planning to sell your property as FSBO or with an agent, do not hesitate to contact me, even if just for some advice.

Happy sales everyone!

GL

Giuseppe Lupis REALTOR®