Home Buying Philosophy in Santa Cruz
August 07, 2008
Yesterday, I popped on down to Keller Williams Real Estate in Santa Cruz for another of their freebie, and generally excellent, training sessions. To my delight, I found that one of my former colleagues from Thunderbird, Kari Kelly, had joined Keller Williams (after a multi-year stint at Vanguard Realtors). Kari’s a great lady, and it was nice to chat with with and catch up. She’s only been at Keller Williams for three weeks, but seems to be enjoying it tremendously.
The topic of the day’s training was “Creating Urgency to Buy.” I personally don’t have a problem with creating urgency to buy - I think that by now, most people can see the writing on the wall - if you want to buy some real estate in Santa Cruz, now is a fine time. Yes, prices may continue to fall over the next year, but there are plenty of opportunities to buy “below full market value” that you can insulate yourself against the coming price declines. The thing is, you’ll never know when, exactly, we’re at the bottom, and by the time we do hit bottom and start coming up on the other side, it’ll be more of a seller’s market and the deals won’t be so easy to come across.
Over at Keller Williams, they teach you that really, you should only show a buyer three properties. That’s incredible. The idea is that you do such a good job interviewing the client and finding out what they really want, you can save everyone a lot of time by only showing them properties that they have a good chance of actually buying.
Interesting idea. My question is, with that philosophy: do you ever show a short sale? I mean, let’s face it - most short sales are a waste of time. More than half (probably about 75%) of short sales go nowhere. The reality is, you don’t have a good chance of actually buying a short sale - not the average one, anyway. Yes, I know, some short sale listing agents are very good and have a “high” success rate - but most do not.
Personally, I hate showing short sales, because most of the time, it’s a waste of precious time, time that I will never get back, no matter what. But I’ll show ‘em anyway. After all, many a nice house is listed at an attractive price as a short sale, and some of them do pan out. And I’ll also show my clients more than three properties. I do encourage folks to drive by on their own, because most of these “well priced” properties turn out to be not so well priced when you discover there’s high tension power lines, or the neighbor has his front yard littered with broken down cars, or the odor from the sewage treatment plant is just a tad too ripe.
Don’t get me wrong, I’d like to show each buyer no more than three properties, because the Keller Williams people do have a point - there’s little point in showing property that you are fairly certain the client will not buy. The thing is though - this is a customer service business. If the client wants to see the inside of the property, and you are their agent - what do you do, just refuse? “Remember, Mr. Client, I will only show you three houses. So choose wisely.” I have a hard time with that. It’s saying, “I know what’s better for you than you do.”
Part of this strategy employs the use of Buyer Broker agreements - where you get the client to sign a contract saying you are their exclusive agent for buying a property in such-and-such a region between such-and-such dates. It’s kind of like forced loyalty - you have to stick with the agent, even if they don’t want to show you a property, because the plan is to show you no more than three.
I have tried getting people to sign Buyer Broker agreements - with no success. I didn’t try too hard, more of a trial balloon a few times, more than anything else, I suppose. Again, the Keller Williams folks make a good point: would you agree to sell someone’s house without a contract? No, of course not. So why would you agree to help someone buy a house without a contract with them?
Food for thought.
Posted by SantaCruzBroker at 5:55am
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That Keller Williams Kool-Aid
May 13, 2008
I recently completed a transaction as the buyer’s agent with an agent for Keller Williams. It was a short sale, and yes, it dragged on for months - we got into contract in January, and closed in late April. After all was said and done, the seller’s agent and I agreed to meet for coffee and to exchange some final documents and so I could get the key to pass on to my buyers.
You may not be aware of this, but Keller Williams agents are kind of messianic about their company. They love it over there. A few months back during the Watsonville REO tour that we had, I had met another KW agent, and she spoke in glowing terms of her company, and in particular about this training that they had, which was open to agents from any brokerage, not just Keller Williams.
So when I was sitting down for coffee with the seller’s agent, I started talking to her about Keller Williams and the training that they provide. Not surprisingly, she was very enthusiastic and encouraged me to come on down for the next training session they were putting on. I agreed to do so, and so yesterday I sat through 2.5 hours of training on getting listings, put on by a very able and passionate trainer.
As promised, the training was excellent. Honestly, probably better than any real estate training I have been to. There’s one thing in particular I took away from that training, which I want to share with you. If you are a seller, please sit down, pour yourself a nice tall glass of kool-aid, and listen to this.
Keller Williams has a pretty good pricing strategy. It’s simple, and it goes like this: price your home below “market price.” A good bit below. Like, 10% below. Then, market the heck out of it and wait 21 days before taking offers. The buyers will beat a path to your door so quick it will make the neighbors upset because obviously, you’re having one heck of a party and they didn’t get invited.
A home which is priced clearly below market value will attract multiple offers. There is good example of this every day, with these REO properties. The banks price these things low. They price them to sell. And they do, quickly, and usually with multiple offers. It is very common for these properties to sell for over asking price, often by 10%.
This pricing strategy is an excellent one, especially in a market like today’s. In an appreciating seller’s market, it’s not such a bad thing to over-price your property by 10% - sooner or later, the market will catch up to you, and you’ll probably end up getting that extra 10% if you wait long enough. However, when you are in a declining market, if you do not sell your home quickly, the market will probably pass you right on by.
In a declining market, people don’t want to buy for fair market price, because the market price is dropping, and next month, it’s going to be worth less than it was the month before. You need to list your property under fair market price, attract multiple offers, and sell it for the most the market is willing to pay for at the moment.
That’s a winning strategy, and it’s working spectacularly for the banks selling their foreclosure properties, and it is also working for sellers who price their homes to sell.
I’m going back to Keller Williams on Wednesday for another training. Not sure what it’s about. And yes, I know, it’s all a trap. They want to seduce you into signing up with them by providing world-class training gratis and showing you that there’s a better way to sell Real Estate. I have no intention of leaving Thunderbird Real Estate at the moment - I’ve long thought that my next step after Thunderbird would be to open my own brokerage (I’m a licensed real estate broker, after all). But if one day you see me sportin’ a mustache and talking feverishly about how great KW is, you’ll know how it all began.
Posted by SantaCruzBroker at 8:28am
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