Fredericksburg Texas

Those of you familiar with this blog on Fredericksburg Texas Real Estate know that I often use this forum to vent my frustration about various aspects of my chosen profession.  Well, here we go again.

Buyers of real estate often take advantage of a concept know as leverage.  I won’t bore you with the pros and cons of using other people’s money to make yourself rich, rather I want to take a moment to describe how the act of borrowing money to pay for property in a market where property is rapidly appreciating can be problematic.

When a buyer contracts to buy property and decides to (or has to) go to a lender for a portion of the funds, the lender inevitably requires that the property be appraised to determine its “market value”.

“Market value” is defined as follows (prepare to be bored):

A famous speech from Shakespeare’s Julius Caesar begins “Friends, Romans, countrymen, lend me your ears; I come to bury Caesar, not to praise him.”  If you know the story, you know that the speaker goes on to praise Brutus (one of the conspirators who killed Caesar) as being an ambitious and noble man, but not ambitious to the point of wanting to rule in the stead of the corrupt and brutal Caesar.

Where am I going with this?  What does this have to do with real estate in Fredericksburg Texas?  Look at the current number of marginal agents in our market as Caesar to my Brutus.   I am about to “murder” them with facts, figures and a plea to the real performers to assert our ambition with sterner stuff.

Before anyone goes postal on my “marginal agents” wording, know that by “marginal” I simply mean that in terms of earnings.  This is not personal!  Sales statistics show that since 1/1/2004 only 46 agents have sold in excess of $5,000,000, 22 have sold in excess of $7,000,000 and 13 have sold in excess of $10,000,000.  Remember we are talking about a board membership of 200+ agents.

Applying previous lessons of what these figures mean in terms of “take home”, this translates to the fact that 46 agents are taking home a minimum of $30,000 per year before expenses (based on an average 3% fee, split 50/50 with a broker over 2 ½ years).  The reality is that these 46 probably made more than the $30K minimum (commissions for both sides, variable brokerage splits, off MLS sales, etc.) but we have to have a place to start, right?

What the heck are the other 150 agents doing? They’re taking market share (to the tune of over $130,000,000 in sales over this period) from those of us who are dedicated to making a living in this trade, that’s what.  Then we have the “other broker” category in our sales stats.  These guys have pirated over $54,000,000 in sales from the local experts over this same time period!  We’re letting this happen!

How do the real performers (you know who you are) deal with over $180,000,000 in “lost sales”?  (1) Fight to raise the entry standards for new agents and impose performance standards on those that want to remain.  (2) Our listing agreements provide us the tools to deal with the “other brokers”.  Paragraph 8 allows us (with the agreement, understanding and approval of our sellers) to institute “variable rates” for non-MLS participants for whom we invariably end up doing all the work.  Those “other brokers” who have been prescient enough to join our board to circumvent paragraph 8 can also be challenged via the subagent provisions in the listings.  Make them obtain and show you their BA agreements to get the full split!

A very interesting article recently appeared in MSN’s MoneyCentral.  It discusses the pros, cons and accuracy of Automated Valuation Models (AVM’s) such as Zillow, RealtyTrac, Domania, etc.  It makes for an interesting read Putting home-value tools to the test.

For background, refer to my post titled “Zillow Schmillow” in the archives…I love being right!  Visit Fredericksburg Texas Real Estate

A previous post wherein I attempted to explain/justify the commissions we, as Realtors, earn was met with a few comments along the lines of “if you have to justify it you’ve already lost the battle”.  While this may be true, I remain committed to getting the word out that we deserve what we earn (and probably more).  The best way I can think of to do that is to continue to clarify the role we play in very large financial transactions and the cost we incur to do so for YOUR BENEFIT!  Granted, we benefit also, but certainly less so than do buyers and sellers of real estate in Fredericksburg Texas.

Before I start, I’d like to refer you to an earlier post in July of 2005, titled “200 Reason” and ask that you click on this link to refresh yourself on Agency Information.  These two resources capture the essence of what we do and illustrate the liability we expose ourselves to on behalf of our clients.

As buyers in Fredericksburg Texas become more sophisticated, we have seen a few folks attempt to buy property directly through the listing agent, specifically stating that “they don’t want representation”.  The next thought they convey is that they expect an “automatic” price discount equal to the amount an agent representing them might be expected to earn.

If you’ve followed my thoughts on these pages, you’ll know that I believe that everyone should have representation in a transaction as large and as complicated as buying real estate.  Remember, the listing agent is contractually obligated to work for the best interests of the seller.  When you buy from the listing agent (or a subagent) you are on your own.  It may not feel like that, but trust me, you are.

A buyer expecting a price reduction based on lack of representation has a gross misunderstanding of both agency law and listing contracts.  Remember my comments above about who works for who (also see previous posts).  A seller is contractually obligated to pay a specific percentage to their agent.  Asking the sellers agent to “automatically” discount a home based on lack of representation is certainly not something that is in the sellers best interest and, if agreed to, exposes the listing agent to untold liability.

This kind of uninformed garbage will not fly with an experienced agent.  If you find yourself making progress with this kind of ploy, I feel sorry for both you and the agent you are suckering.  Do you really want to gamble that you know the market better than an experienced agent does?  Do you want to gamble that you’re getting the best deal you can?  Don’t try the argument that the more the property costs they more we make, so where’s our incentive to get a lower price.  The bottom line is if we don’t get you the best deal we can, you don’t have to sign the contract.  If you don’t sign, we don’t get paid! Visit Fredericksburg Texas

As I am one to maintain that we are still in a “seller’s market” in Fredericksburg, Texas, I’d like to address whether nor not offers received from a potential buyer should be considered and then “countered”.

Recall, that a “seller’s market” is loosely defined as one where a seller has a perceived advantage over potential buyers.  This advantage usually takes the shape of a lack of inventory from which the buyers can choose or in the fact that prices are rising rapidly, forcing buyers to act more quickly than they otherwise might.

Regardless of market conditions, some buyers are “lowballers” who adopt the strategy of making offers well below the asking (market) price in the hopes of obtaining a good deal.  In a “seller’s market” this almost never works.  In fact, it often backfires in that “lowballers” risk offending sellers to the point that sellers won’t even consider a more reasonable offer from the same buyer at a later date.

Rather than be offended by (and therefore not reply to) a lowball offer, I counsel my clients to respond with terms that would be acceptable.  I don’t believe it is good business to ignore any offer, no matter how silly.  I have seen many instances where a “lowball” offer has been made by buyers more than qualified and more than willing to pay a higher price.  This being the case why alienate them (and possibly lose a sale) by ignoring their offer.

I try to remind all parties that we are dealing with perception and negotiating strategies, not emotions.  It’s easy for buyers and sellers to get emotional about the process of buying or selling real estate in Fredericksburg, Texas and it’s the job of their representatives (agents) to counsel sound business practice.  What the parties do with that advice is anyone’s guess.  Visit Fredericksburg Texas

Ah, the power of the Blog!  In two past articles (“Market Update”, May 2006, and “Inventory Blues”, January of 2005) I’ve bemoaned the lack of quality inventory currently available in Fredericksburg, Texas.  The last two weeks has seen a burst of listing activity that is a direct result of my complaints in the blogosphere.  O.K., maybe not but it’s fun to think so.

While inventory is still what I consider to be “light”, it’s getting better.  The backlog of buyers; however, will buy up these new listings and return the inventory to a weaker level.  Bottom line, keep ‘em coming Sellers!

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And now for a brief market update…Things continue to pop here in Fredericksburg Texas.  No, not “the bubble” but sales.  Sales are finally hitting their stride as evidenced by the number of closings over the past several weeks.  While most agents and offices agree that inventory is still lacking, buyer are apparently beginning to accept that what is “out there” is the best that can be had (at the moment).

Most of the folks I talk to in the biz are still lamenting the sorry state of our current inventory.  This is still a SELLER”S MARKET.  If you are reading this and considering selling your home in Fredericksburg, Texas (to borrow a phrase), just do it!  We (meaning myself as lots of other agents) have buyers circling the market ready to pounce.

As of the end of March, sales totaled nearly $39,500,000, an increase of over 50% from the same time last year while the total number of transactions has increased by 33% over the same period.  Interestingly, the number of licensed agents has increased by 16% also.

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