Melissa Savenko's Richmond Real Estate Review

FSBOs - They're B-A-C-K! Why Real Estate Agents Hate Working with FSBOs

It’s happening again.  The market is super-hot in almost all areas of the City of Richmond, where I do most of my work.  Bellevue, Church Hill, the Fan, the Museum District – all en fuego.  Houses are flying off the market in just a day, sometimes hours.  Bidding wars.  Escalation provisions.  And what happens when the market is super-hot, when people hear how quickly these properties in these desirable neighborhoods are selling?  Yup.  The hated, dreaded Fizz Bo.  The For Sale By Owner (“FSBO”).  I’ve seen several in my neighborhood lately.  I’m going to explain to you why real estate agents can’t stand dealing with FSBOs.

There are a few reasons people decide to sell their house themselves.

• Category One:  They don’t believe that real estate agents add value to the transaction.  Frankly, they often believe real estate agents are unprofessional idiots;
• Category Two:  If they do concede that real estate agents have some value, they believe they are grossly overpaid; or
• Category Three:  They are in some kind of financial straits, and are selling by owner because they can’t afford to pay an agent’s commission.

So either you think I am an idiot, or a shyster, or you are completely stressed out over money and the transaction is going to be emotionally difficult for everyone involved.  Lovely.

Now don’t get me wrong.  If you want to sell your own house, that’s your business.  FSBO your little heart out.  Just so long as I don’t have to represent the buyer who wants to buy your house, I’m fine with you doing whatever you want with your time and money.  But I don’t want to be on the other side of the FSBO transaction, representing the buyer.  If a buyer I have been working with wants to see a FSBO, I shudder.

Why, you ask?  Well, first of all, see the above-outlined reasons why people sell their own homes.  Why would I want to work with someone who thinks I am an idiot at worst, or not worth their fee, at best?

Second, I am going to end up doing twice the work.  To be completely blunt, the FSBO seller doesn’t know what they are doing.  They don’t know about required disclosures.  They don’t know what terms are standard in the market.  They have no experience negotiating a contract, then negotiating an inspection provision, and possibly negotiating over an inadequate appraisal.  They don’t know how and when they need to be communicating with the lender.  They have no experience managing a complicated transaction from contract to closing.  So I am going to end up doing my work representing the buyer, and I am also going to end up doing the seller’s work, so he or she doesn’t screw up the deal.

And please, FSBO advocates, don’t say you are going to work through a lawyer, like that’s going to make it okay.  Take it from someone who IS a lawyer, and practiced corporate law at a large downtown law firm:  Lawyers, even real estate lawyers, aren’t experienced at the process of buying and selling homes.  Maybe it is different in other markets.  But here in Richmond, Virginia, in the standard residential real estate transaction, lawyers are not involved in negotiating the initial contract terms, or the inspection addendum terms, or any other provisions which come up frequently.  Lawyers in the deal just make it more complicated, because they typically overlawyer to death everything.  So you, FSBO seller, are going to spend a lot of money on a lawyer who costs more and has less experience negotiating deals to sell a home than any halfway competent real estate agent.  But the FSBO seller who uses a lawyer typically falls into Categories 1 and 2, and thinks agents are idiots and/or overpaid.  Guess paying $300/hour to someone with a law degree just sits better for those folks.

Third, working with a FSBO seller is just plain uncomfortable.  One of the often overlooked roles of the agent is to put a buffer between a buyer and a seller.  The agents communicate with their respective clients, and then with each other.  This is a way to take (some of) the emotion out of the transaction.  Selling a personal residence is not like selling widgets.  As much as we tell them not to, people get emotionally involved.  The space represents them.  It’s home, it’s a safe space they have created, it’s designed and decorated to the seller’s personal taste.  It’s hard to hear someone criticize something in which you feel so personally invested.  And for the prospective buyer and their agent, having to tippy-toe around a seller’s feelings makes a challenging situation even more difficult.  My client should be able to say “what the hell was he THINKING when he painted the kitchen lime green with that pee pee yellow accent wall?”  In a normal transaction, I could tell the listing agent what my client said, and he or she would pass it on to the seller in a more palatable manner.  For example, “Well, the buyer thought the paint choices in the kitchen were a bit bold for her taste.”  But if you are lurking about during the showing, and the inspection, and the appraisal, and any other time we have to get into the house, my client likely isn’t going to feel comfortable speaking freely to me in front of you.  And it makes it harder for me to tell you what you may need to hear, because you will take it personally.

Lastly, FSBOs often pay LESS than the standard 3% buyer agent commission.  Just looked up a neighborhood FSBO, who has paid a flat fee to be in the MLS, and sure enough, he's offering 2.5% in buyer's agent compensation.  Why in the world would I want to sell a house when I am going to do at least double the work, for less money?  The short answer:  I don’t want to.

So, that’s the quick and dirty on why real estate agents don’t like working with FSBOs.  There are some agents who just won’t show FSBOs, period.  I do, but I hate doing it.  It’s just all around uncomfortable and unpleasant.  I hope this insight into why is helpful.  And here’s my favorite FSBO story, saw it in a recent blog, even though it was years ago, I still think it’s hysterical.  Short version:  Founder and CEO of ForSaleBy Owner tried and failed to sell his own home, and then hired an agent who sold it right away for more money.  Classic.

My Return to Blogging and Some VERY General Thoughts on Richmond Real Estate

WHOA.  I knew I hadn't blogged in ages, but I didn't know it was almost a year and a half.  That's crazy. Time flies when you're having fun.  Or when you are busy.

And that's the biggest news in the last 18 months.  The market, at least in the old and historic neighborhoods of the City where I do most of my work, has picked up significantly. In some submarkets, such as the Fan and the Museum District, we're currently in a STRONG seller's market.  This rapid shift has been hard for some buyers to understand.  Many still seem to have the mentality that this is a buyer's market, and they can offer substantial discounts off list price, or ask for concessions like closing costs, and the sellers should be glad to have their offer.  Nope.  Not the case for some submarkets.

And I think that's the most interesting thing about this current Richmond real estate market.  Is this a bubble?  Why are prices rising so rapidly?  Should we be concerned about Real Estate Crash 2.0?

My take:  No.  A crash is not coming.  This is the result of a significant structural and demographic shift in the market.  You are not seeing this white hot market across all of the Greater Richmond Metropolitan area.  You are seeing it in the City.  Almost exclusively.  And some Henrico County submarkets, like Lakeside, that are immediately adjacent to the City.

What's going on?  What is the big change?  Downsizing Baby Boomers are a BIG driver.  I am seeing more and more 50-60-somethings, coming from Short Pump or Midlothian or other points north, south, east and west, who are looking for a lifestyle change.  They don't want the huge suburban house.  They definitely don't want the huge suburban yard.  The kids are grown and in college, so schools are no longer an issue.  And they want to be able to walk to restaurants, museums, shops, art galleries.  This is a group that I don't feel like you saw much of back in 2006 when I started in real estate.  But what was a trickle has become a flood.

I do most of my work in the City, and much of that in the Fan District and the Museum District.  The typical buyers in those areas in the past have been (i) folks affiliated with VCU, as professors, administrators, etc., who wanted to be close to work; (ii) young professionals, who wanted an urban walkable lifestyle; and (iii) young families, who moved to the Fan for William Fox Elementary. 

[NOTE:  Until fairly recently the Museum District was districted for John B. Cary Elementary, which was not perceived to be as good a school as Fox.  That difference used to account, in my opinion, for the price differential between the Fan and the Museum District.  The Museum District is now districted to Fox, so much of that price differential is disappearing.]

You're now adding these downsizers, many of whom are selling a large and expensive house somewhere in one of the counties, and can afford to buy in the upper end of the City property price range.  Often with cash.  And then there are the folks who are relocating to Richmond from somewhere urban - Washington D.C., New York, Boston, just to name a few localities recent clients of mine have come from - and want the same urban lifestyle that they are coming from.

So why the rapid escalation in values and the extraordinarily fast switch from a buyer's, or at least a balanced, market to a clear seller's market?  Limited supply, ever increasing demand.  There is only so much urban core real estate, and more and more people want it.

Certainly, there are other factors coming into play.  Housing values are coming back to the point that people who have been underwater since 2007 are able to consider a move.  Interest rates may rise, and that concern is getting people off the fence.  First time buyers, who have not been as large a part of the market as they have been traditionally, something like 25% vs. the "typical" 33%, are getting off the fence and are finally ready to buy, after living through the 2007-2012 recession.  It's 2015, and they are tired of paying rent.

I think 2015 is going to be a really interesting year.  So far, all signs are pointing to it being a barn burner. [NOTE:  I am knocking on wood as I say that, because I don't want to jinx myself].  I consider myself very lucky that I grew up in Bellevue and Ginter Park, lived at Libbie and Grove during law school, and currently live and work in the Fan, all super-white-hot neighborhoods.  My prediction:  All of those neighborhoods, as well as Battery Park, Byrd Park, Church Hill, and Lakeside, will continue to blow up.

We'll see. Hopefully it won't take me 18 months to follow up on this post.

Turning Over a New Leaf, a/k/a Removing My Head from My Rear

Well, it's been over six months since I published a post, although there are two half-written posts from November 2012 and December 2012, respectively. 

[ASIDE:  Interestingly, the November 2012 post I never finished is about the School Board punting on the recommended elementary school closure of John B. Cary Elementary, and what a failure of leadership that was.  The topic is big in the news today, as the Richmond School Board voted 5-4 to close several schools, although Clark Springs Elementary got the axe, not John B. Cary.  That's a topic I may revisit myself.]

I've been navel-gazing for a lot of different reasons that I won't bore you with, but I've finally shaken off the funk and decided I want to write, I miss writing, and gosh darnit, I'm going to do it.  I have decided to be kinder to myself and lower my expectations.  So expect to see shorter posts, on more timely topics, and more focused on real estate.  I'll still talk about things going on in the realestate development community, such as the Redskins Training Facility, but I'm going to try to focus generally on local real estate issues and trends that affect the average buyer or seller.

So, next up:  My overview of the insane market that is the Historic Fan District right now.  Or perhaps something on the prevalence of pocket listings and the ethical issues they raise.  Or what to do in a rapidly appreciating market, for both buyers and sellers.  I don't really know.  I'm going to write about whatever tickles my fancy.  Although I am always open to suggestions.

Best,

Melissa

 

Notorious R.O.B. on Magical Thinking OR How Realtors Get Marketing Wrong

I wrote this post back on July 24, 2012 and never posted it.  It's still relevant, but the good news - knock on wood! - is the market appears to be picking up, at least in the urban Richmond neighborhoods where I work.  AND on a purely personal note, I have hired an assistant, which has been AWESOME.  Should have done it ages ago.

But, it is still the case that deals are stupid hard to get closed, leaving anyone with several active transactions going on at one time, way less time to market.  The main culprits, in my opinion?  The large banks.  The underwriting criteria are ridiculous.  The appraisal requirements are ridiculous. They suck.  No ifs, ands, or buts about it.   Something has to change.

********

I just read Rob Hahne's newest blog posting, "Magical Thinking vs. Boring Reality."  His point:  real estate agents quite often get it wrong when it comes to marketing, focusing on the hot, the new, the cutting edge, rather than just doing the boring old stuff that has proven results, like...oh...staying in touch with your past clients?  Returning phone calls within a reasonable amount of time?

You know what?  He is exactly right.  And I resemble those remarks.  But in defense of myself, and of real estate agents everywhere, let me provide a little insight into that behavior.  And let me link some of my, at least, personal failings in this area to the vagaries and realties of the current market.

And might I say, this current market has been dragging on, and on, and on, since 2007.  I got into real estate sales full time in February 2006, so almost my entire real estate career has been during the worst overall economic conditions since the Great Depression.  So all of us that do this as our sole source of financial support have been hampsters in a wheel for a very long time now,  And I personally am just overwhelmed and exhausted by it.  Can it PLEASE end?

So, here are my defenses.  Most of them come down to the simple combination of needing time and/or money.  Here goes:

1.  Every Deal Is Harder.  Every deal requires twice as much effort to keep it all together.  Getting the client under contract is not, in my opinion, the difficult piece.  The difficult piece is getting a transaction from contract to closing.  There are inspection issues.  OR appraisal issues.  OR financing issues.  None of these things are our fault.  These are just the realities of the market.  But if you are spending twice as much time on a single deal to keep the wheels on the bus, then the available time that might be spent on marketing is substantially less.

2.  You Have to Work Harder to Get Buyers and Sellers, Who Are Fewer and Father Between.  Every working agent, except for those lucky enough to have established brands and stable books of business that are more than adequate to support them and their loved ones, is having to work harder to generate enough business.  

3.  There Is Less Time and Money to Invest in the Business.  Client appreciation programs take time.  And money.  If all my time is spent keeping the active transactions I have moving forward, and if I have to count on a substantially higher percentage of deals falling apart for stupid, unreasonable reasons, I don't have that extra time.  So my solution would be to get some help.  Having additional help has been, for me, the chicken and the egg scenario.  You need an assistant to make more money, BUT you need more money to hire an assistant. 

 So, not a comprehensive explication of all the reasons agents may not be marketing the time tested and proven ways - keeping in touch with past clients, actively seeking referrals from those past clients, maintaining and actively working a client appreciation program.  But hopefully a glimmer of insight into the rationale of at least one full-time working agent. 

 

A Rant About Agents with "Expertise" in Expensive Neighborhoods - A Pitfall of Real Estate + Internet

I am going to be venting a bit in this blog, so just bear with me. But consumers, particularly first time buyers, please think about these points. This was triggered by a few recent incidents that have really, really irked me.

A bit of background: I live and work in Richmond's Historic Fan District. It is a very specifically designated area, the entire neighborhood is listed on the National Register of Historic Places. It also happens to be adjacent to VCU's Monroe Park Campus. The Fan is one of the City's most expensive neighborhoods, for a number of reasons, including :

1. Beautiful Victorian architecture;

2. One of the best, if not THE best, public elementary schools in the City of Richmond in William Fox Elementary;

3. An established walkable urban neighborhood filled with shops, restaurants, art galleries and more;

4. The VCU connection, which creates high demand from both the students and faculty associated with the University.

Certainly since the 1990s, the Fan has traditionally attracted old home lovers, VCU students and faculty, young families with elementary school children, and the urban hipster and young professional population. Increasingly, it is attracting another demographic, the down-sizing Baby Boomers relocating from the suburbs. Some of these folks previously lived in the City, and moved out to one of the Counties for the public schools when their children were old enough. But more and more we are seeing people relocating into the City who have never lived in an old house. This creates issues in and of itself. These issues are further complicated when either of the agents involved in the transaction, buyer's agent or listing agent, is unfamiliar with the issues that can come up with old houses. To name some "biggies": asbestos, lead-based paint, oil tanks.

So, what is my problem? Working in the Fan - and for that matter the Museum District, Carytown, Bellevue, Ginter Park, Westover Hills, I could go on and on naming historic City neighborhoods - requires a certain level of expertise. I would think a buyer or a seller would want an agent who has listed and sold properties in the area. However, over and over again I see people using agents that have no or next to no experience with historic properties.

I really don't understand it. People will do more research to buy a TV or a computer than they will to find the agent that is going to help them buy or sell a home. And that home is for most people the biggest single investment they will make in their life.

Now, part of the problem is some agents represent themselves as expert in a particular area when they are no such thing. This is mainly on the Internet, through websites and Facebook pages. From what I've seen, the representation of "expertise" is typically passive, meaning the agent has sections on their website that discuss the Fan and buying and selling in the Fan. They are using search engine optimization ("SEO") to show up high in search results. But here's what I don't understand: Why don't you, Mr. or Ms. Buyer or Seller, ask the agent how many houses they have listed or sold in the [relevant historic neighborhood]? Or if they have some other nexxus for knowledge of the neighborhood?

I will certainly agree that part of this rant is self-serving, because I do almost all my work in historic City neighborhoods, I live in the Fan, my office is in the Fan, I grew up in Bellevue and Ginter Park, and almost all my business has been in City neighborhoods. It is frustrating when you have spent a lot of time to develop specific expertise, and other agents are using the Internet and SEO to capture leads without putting in the time and developing the expertise. It is especially frustrating when you have to do a deal with one of these agents and end up doing their work, because they don't even know what issues to spot. Or, worse yet, you have a deal fall apart because the inexperienced agent missed an issue that is typical with an old house, didn't advise their client, and their client flipped out over an inspection item that we see all. the. time.

Look, it is no surprise that agents and brokerages would like to get a toe-hold in these City neighborhoods, which are often some of the most expensive real estate in the Greater Richmond Metropolitan area. There have been a number of brokerages that have established offices in the Fan and Museum District over the last several years, in an attempt to capture market share. Many, if not most, of those offices eventually closed.

What is my "solution?" Well, besides having all those buyers and sellers calling me up to represent them? [:)]? I think agents have to earn their stripes the old fashioned way, by putting in the time. I tagged along behind my broker for two years, learning as much as I could about a real estate market that I already knew intimately, because I lived in it and had for 15+ years. But I needed to learn the ins and outs of representing buyers and sellers, how to manage a transaction, what the pitfalls are that can come up in inspection, how to solve those issues, and much, much more. I am a licensed attorney that had done major corporate transactions, so I knew my way around contracts and negotiation better than the typical new real estate agent. But I still had to learn how to buy and sell real estate. My real estate training was like law school, where the teach you how to "think like a lawyer," but nothing about how to actually practice law.

The situation of the buyer or seller calling on the inexperienced agent based on that agent's SEO skills is yet another example of the pitfalls of internet access to data in the real estate world. Information is not knowledge. Consumers, do your homework. Interview multiple agents. Find someone with expertise. Find someone that you feel comfortable with too. After all, this is a professional service relationship, so you need to like the person you are working with. Agents and consumers who want to flame me for this position, I'd love to get some comments back. Meanwhile, I'm off to host an Open House. In the Fan. [;)].

Ginter Place Condominiums and Other Similar Projects - How Do You Solve the Problem If You Have "Live," But Not "Work, Play?"

There was an article in the Richmond Times-Dispatch the other day about things looking up on the sales front at Ginter Place Condominiums.  For those of you not familiar with the project, it was a historic tax credit conversion - state credits only - of the old Richmond Memorial Hospital into sixty nine (69) luxury condominiums, marketed towards downsizing Baby Boomers who loved the Ginter Park and Bellevue neighborhoods but didn't want the huge house any more.

Well, for reasons that are not the developers' fault at all, the Ginter Place project has been languishing.  Only fifteen (15) units have been sold to date.  Reasons for that:

1.  It hit the market in October 2008.  The housing market was in the process of meltdown.  It was a scary, scary time.  No one was moving anywhere.

2.  Meanwhile, credit markets contracted, if not completely froze.  AND, in an almost death-blow to larger condominium projects, the FHA changed its financing rules for condominiums and would no longer provide FHA financing unless and until 51% of the units in a project had been sold.  So, if you've got 69 units to sell, you have to sell 35 units to buyers with cash or conventional financing (20% down or more) before later purchasers in the project are eligible for the most favorable financing product out there.  Well, most folks were conserving all the cash they could, because the general economic situation was so daggone scary.  And many folks didn't want to put 20% down for the exact same reason.

[BRIEF ASIDE ON WHY FHA FINANCING IS SO GOOD:  First, it has the lowest down payment requirement, only 3.5% of the purchase price of the property.  Second, it accepts the lowest credit score, 580-620 scores are eligible.  Lastly, it provides close to market rate interest rates for these buyers, almost as good conventional buyers with the best credit scores.  On the down side, you do have to pay for private mortgage insurance ("PMI") for five (5) years.]

3.  Even if you could find a cash or conventional buyer, a lot of them had a house to sell.  And they couldn't sell their house.

4.  Lots of people are reluctant to be the earliest adopters in a large-scale condominium project.  What happens if the other units don't sell?  This concern is magnified in a down market.

5.  With respect to Ginter Place, the neighborhood association had extracted a DEED RESTRICTION from the developers, prohibiting the use of the units as apartments.  That really tied the developers' hands when the market went south.  In the normal world, the developers would have rented out the unsold units to keep the project afloat, then sold the units when the market turned.  I find it pretty incredible that they didn't just let the bank take the entire thing back. 

So there are the market-based and project-based reasons Ginter Place has suffered in a completely awful real estate market.  But IMHO there has always been another issue with this project and several others - Monument Square at Willow Lawn Drive, Rockett's Landing right across the City line in Henrico on the river - that has made the sales even slower going in this market.  Here's my theory:  Baby Boomers buy condominiums for the "urban" experience.  They want to be able to walk places.  Or they at least don't want to have to get into a car for everything.  They want proximate access to products and services that take care of most, if not all, of their needs.

So I actually have a proposed solution.  Maybe folks will think it's goofy as all get out.  But this is my proposal for Ginter Place.  You aren't quite close enough to shops and restaurants and activities to achieve that walkability that makes the Fan/Museum District/Carytown so desirable.  Yes, you could walk to MacArthur and even Bellevue and the few shops and restaurants there, although it's not a short walk.  And you can hop across that wacky intersection of Hermitage and Westwood to make it to Kitchen 64.  But a walk to the Boulevard corridor isn't easy to do because there aren't any sidewalks, and you have to get past the No Mans Land under the interstate overpass on Boulevard. 

So.....how about running a trolley service for your residents?  It could run up and down the Boulevard corridor, from Ginter Place south to the Byrd Park tennis courts, with stops all along the Boulevard.  It would run north all the way down Lakeside, to the Lewis Ginter Botanical Garden.  People could hop off to go to a ball game, or to go to the Virginia Museum, or to walk through Carytown and shop and have dinner.  They could go to the Lakeside Farmers Market or have tea at Feathernesters.  Start slow, and run it at set times on the weekends.  See how it goes.  Maybe the City of Richmond could help subsidize it, if it's successful, and it could be opened up to anyone.  And you don't even have to rely on the City to make it happen.  Just call Buck Ward at Richmond Trolley Company.  Maybe two private enterprises could make this a win-win for both sides.

Maybe this is the worst idea in the world.  But as I look at the condominium projects over the last several years that have succeeded, and those that have had a difficult time, the idea of flipping the model comes back to me over and over.  If you don't have the work and play right there, figure out a way to make it there.  In other words, if it won't come to you, bring your people to it.   The idea was "if we build it, they will come," even without an additional retail and commercial component.  In a booming economy, with the hyperinflated buyers' market, maybe that made sense.  But in this world, it has turned out the buyers come if the promised new urbanist ideal - the "work, play" of the "live, work, play" mantra - exists in some form or can be seen coming in the not-too-distant future.  Cf. West Broad Village as a good example of that.

So, if you don't have "work, play" as part of your project, and it's not realistically close, make it realistically close.  Just a theory.  Thoughts and discussion would be greatly appreciated.

Zillow Zucks AGAIN! - They Win, Consumers and Agents Lose

OK, this post will probably be of interest only to agents, and maybe I'll get feedback that I'm way off base, but I've got to vent.  AND I am really curious as to the opinion of other real estate professionals, and consumers too, for that matter.

Since 2010, I have been paying for Zillow's "Premier Agent" program.  What it means is I pay for the privilege of having my mug pop up on the right hand side of the screen when a consumer is looking at a property in the particular zip code I "own."  I pay for X% of ____ zip code, which means my contact information will be included one of the three agents in that list X% of the time. 

When I first purchased the Premier Agent program in 2010, it was a big deal for me, because the market was still slow and money, especially money spent on anything not absolutely required, was extremely tight.  But I know how many consumers start their home search on the Internet - over 85%, last statistics I heard - so I bit the bullet and paid some amount for 25% of 23220.  I think it was about $115/month, but I got a decent discount if I paid for a full year.  I told myself if I got ONE sale out of it, the Premiere Agent program would pay for itself.

The program has been extremely successful for me.  It has recently become MORE successful, because Zillow has added a Customer Review section, which allows clients to review you and hopefully say very nice things about you.  Presumably a consumer will chose to contact the agent with the highest rating to get additional information about the listing.  The benefit to the Premiere Agent:  You get the opportunity to capture that customer and hopefully convert them into a buyer client.  Because I have had success with Zillow's program, because it has been a good investment with positive return, I have purchased more coverage for the zip codes where I practice.  So I have coverage in 23220 (Area 10 - City), 23221 (Museum District, Near West End), 23223 (Church Hill, Montrose), and 23227 (Northside, mainly Bellevue). 

Here's the problem, in my opinion:  ANY AGENT can purchase ANY Zip Code.  So the agent the consumer sees in the right hand column, the agent the consumer contacts, might have absolutely zero experience in the geographic area where the property of interest is.  So what does that do for Zillow?  As agents figure out the power of Zillow's program to generate buyer leads, agents buy profitable zip codes.  Demand for profitable zip codes - areas where the real estate is expensive - increases.  The PRICE of those zip codes increases exponentially. 

I just got a call from my Zillow representative letting me know my 50% share of 23220 and 50% share of 23227  is "out of contract," meaning I am paying on month-to-month basis my "legacy pricing rate," which was $137/month.  Because of the "high demand" for this zip code and the LENGTHY waiting list of agents frothing at the mouth to buy it, my monthly payment will now be $576/month.  And, oh yes, by the way, we will no longer do one year contracts, only six (6) month contracts.  So of course they can jack up the rate yet again in six (6) months.

Needless to say, I'm p*ssed.  I've been a good customer, was one of the first to buy into the program when it was brand new, and I feel like I should be able to keep my legacy pricing, or at least get some sort of more graduated increase.  It's like now that the investment is FINALLY paying off, they increase the price 400%.  I'm stamping my foot and hollerin' "It's not FAIR!"  [To which my Dad would reply, "Who ever told you life was fair?"  But I digress.]

So I'm getting screwed, but you probably don't care about that.  But here's how this program screws consumers, which you should care about.  Agents with no experience in an area, but with deep pockets, will get in line for zip codes with the priciest real estate.  In Richmond, Virginia, 23220 is one of those zip codes, because of the Historic Fan District.  Rather than the about $170,000 median home price for a home in the Greater Richmond area, the median price for a home in the Fan is in the neighborhood of $625,000.  [NOTE:  That figure comes from an article in Style Weekly about the battle over the Fan House's downstairs bar].  It's a lot easier to make a living selling $600,000+ homes than it is selling $170,000+ homes.  Agents line up for that zip code, increasing the demand, increasing the price.  Very good for Zillow.

But how about the consumer who clicks on the agent who pops up 100% of the time when that consumer is reviewing  Fan listings?  Isn't it reasonable for that guy or gal potential buyer to expect the agent is an expert in that area in which the property of interest is located?  What if they are a suburban agent in Chesterfield County who doesn't know the first thing about historic property?  Or better yet, what if they are an agent in WILLIAMSBURG,  that doesn't even belong to the local MLS?  Both things have happened with me and my listings, and are going to happen more and more, as agents catch on to the power of the Premier Agent program.

So, what's the ultimate effect?

• Zillow gets richer;
• Agents pay more for access to zip codes and those buyer leads;
• Agents without any experience in a particular area, but with deep pockets, can and will buy the priciest zip codes; and
• Consumers end up with agents that have little to no experience in a particular area.

[NOTE:  Consumers should be doing their own due diligence on the agents they choose to work with, particularly when looking at an area or property type that requires specialized knowledge, like historic property, resort property, farms, to name a few.  But I am constantly surprised at how little research people do on the agents they choose.  Consumers should be asking how many listings in the area that agent has had, how many sales, how long they have worked there, etc.  But that is a topic for another day]. 

What do I think is the solution to the problem?  Well, it's not one Zillow will adopt, I will tell you that.  I think there should be some nexxus between the agent purchasing a zip code and the zip code.  What do I mean by that?  The agent should have sold a property there, listed a property there, have his or her office there, live there...I am sure there are other means to establish nexxus.  My poor account rep, Gus, who has graciously and patiently listened to me vent about how much Zillow SUCKS, said this would be "way too difficult" for Zillow to do.  Horse hockey.  They are running so many algorhithms with all the Zillow data they collect now, I am sure the agent zip code nexxus would be a piece o'cake.

What would the result be, in my opinion?

• Consumers would be better served by Zillow, which already has a host of data accuracy issues, by getting appropriately experienced agents;
• The artificially high demand for pricey zip codes would drop; and
• Agents in an area wouldn't have to pay such exorbitant pricing for the privilege of getting buyer leads off what was originally our own d*mn data [NOTE:  Again, topic for another day].

Yes, I know this is somewhat self-serving.  I want my zip codes, and I don't want to have to pay $576/month to have them!  But this goes to a more core issue for me.  I am continually frustrated with agents practicing in areas they have no d*mn business practicing.   I know what I know, and I know what I don't.  In the 6+ years I have been in real estate I have learned the hard way to stick to my knitting, to practice in the areas where I am knowledgeable and value-added, and to refer any other business outside of my comfort zone.  There are not many people, except possibly my broker and some other of his contemporaries, who can really truly claim to have expertise in ALL of the Greater Richmond metropolitan area these days.   But agents will tell you all day long they can sell anywhere.

Zillow is selling its data to the highest bidder, without regard to any link between that zip code, that agent and that agent's experience.  I'm sure my complaints aren't going to change that.   Free market, right?  But to sell a Richmond zip code to an agent that is not even in the same MLS is, I think, outrageous.  If Zillow really is a product for the consumer, don't they want the consumer to get the best possible service from a true local expert? 

All this and $0.25 still won't get you a cup of coffee.

 

www.rvaopenhouses.com - FREE Open House Advertising for the Central Virginia Region!

Holy snikey pants.  It's been over a month since I've blogged.  Can't believe it.  Trust me, it's not that there aren't super hot topics in real estate and local development to cover.  There are.  The Justin French saga alone could sustain full-time blogging.  I'm just that busy, working 4x as hard for 1/2 the money.  Almost all the deals are difficult.  If it's not financing, it's inspection.  If it's not inspection, it's appraisal.  But I shouldn't complain.  At least I'm doing deals.  [:p].

But this post is a shameless plug for www.rvaopenhouses.com.  It's a FREE website - free to the agents for posting their listings, and free to consumers for searching for open houses.  It's intended to be another channel to advertise open houses, one-stop-shopping to find any open house in the Central Virginia Regional Multiple Listing Service ("CVRMLS") area, any time. 

So, agents, please try it.  www.rvaopenhouses.com.  No tricks, no gimmicks, no secret collecting of information.  For home buyers, it's free, it's easy, it's immediate.

www.rvaopenhouses.com.  Try it.  Let us know what you think, at [email protected].  We want to make this work, so we welcome your feedback.  Happy house hunting! 

Attention Sellers: Newspaper Advertising Does NOT Sell Houses!

Here's a great article from Steve Harney, real estate guru extraordinaire, about where buyers START the home buying process.  Sellers, take note:  Less than 2% of buyers start their search in the newspapers or other print media.

Where are buyers starting their search?  Mainly on the Internet (47%) or by contacting a real estate professional, either a real estate agent or a lender (27%). 

Print advertising is EXPENSIVE, not to mention short-lived.  My broker has reminded me many times that a newspaper ad is effective from about 7:00 a.m. to 6:00 p.m. on the day of publication.  At about $100 an ad (minimum) in our local paper, that's a lot of money that could be otherwise allocated somewhere more effective.

So, what does this mean for a seller trying to sell their home in this very challenging market?  Forget real estate guides, newspaper ads, and those uber-expensive specialty magazines.  Make sure your agent has a strong Internet marketing plan.  Get it in writing.  And please, make sure they take great pictures and post the maximum number permitted by the local Multiple Listing Service ("MLS").  I'm constantly amazed at how many listings have only one or two exterior photos, and often terrible ones at that.  Good luck!

Selling Your Home - Staging Works! - Some Simple Tips

Here's a great article titled "Stage to Sell Your Home Fast" with 9 simple - and cheap! - staging tips.  More on the wonders of staging later, I've gotta pick up the Small Person.  Very short version of my opinion = when staging a home, think "Pottery Barn," even if you'd rather claw your eyes out than actually live that way.