- Lockbox on the Door – This allows buyers the ability to see the home as soon as they are aware of the listing, or at their convenience.
- Providing a Key to the Home – Although the buyer’s agent may need to stop by an office to pick up the key, there is little delay in being able to show the home.
- Open Access with a Phone Call – The seller allows showing with just a phone call’s notice.
- By Appointment Only – Example: 48-hour notice. Many buyers who are relocating for a new career or promotion start working in that area prior to purchasing their home. They often like to take advantage of free time during business hours (such as their lunch break) to view potential homes. Because of this, they may not be able to plan their availability far in advance or may be unable to wait 48 hours to see the house.
- Limited Access – Example: the home is only available for a couple of hours a day. This is the most difficult way to be able to show your house to potential buyers.
“A company or investor that uses Automated Valuation Models (AVMs) to make instant offers on homes. It allows sellers to close on a property quickly. Once sold, the company then turns around and resells the home for a profit.”Today, there are many iBuyer companies such as OfferPad, Zillow Offers, Knock, Opendoor, and Perch. Even some more traditional companies offer the same or similar services (ex. Keller Williams, Redfin, Realogy). Ivy Zelman reported in her ‘Z’ Report that some traditional brokers are partnering with some of the larger iBuyers too:
“Keller Williams announced a partnership with Offerpad, aligning the largest franchise-based brokerage brand in the U.S. with the five-year-old iBuyer. The move follows Realogy’s partnership with Home Partners of America last year as an established brokerage player more directly providing an iBuyer alternative… Likewise, in early July, Redfin and Opendoor announced a partnership, starting in Phoenix and Atlanta – aligning interests of the 13-year old, tech-enabled and value-focused brokerage with the largest and longest-standing iBuyer. Outside of these larger scale alliances, Zillow’s strategy has been to work with local brokerages as partners on a market-by-market basis.”
Does it make sense to sell your home to an iBuyer?It depends. Collateral Analytics recently released a study which revealed the advantages and disadvantages of using an iBuyer. According to the study, if the homeowner is looking for the convenience of a quick sale with less uncertainty, using an iBuyer may make sense.
“iBuyers offer quicker closings for sellers who would like to avoid the uncertainty of knowing when and if their home will sell. For motivated sellers who want a predictable sale date and need to move, perhaps a long distance from the current location, there is no question that iBuyers have provided a welcome alternative to traditional brokerage.”The study, however, also showed there is a cost for that convenience. Collateral Analytics explained:
“Traditional brokers fees generally range from 5% to 7% of the sales price…In addition to this cost, buyers typically pay some closing costs including lender related charges in the range of 1% to 3%.”In contrast:
“iBuyers charge sellers a ‘convenience fee’ of 6% to 9.5%, some also charge the seller for fees typically paid by buyers at closing adding another 1% or more. Most iBuyers will inspect the home, assess a generous home repair allowance and negotiate a (an additional) credit to handle such repairs…Overall the total direct costs, ignoring repair credits, will run 7% to 10% for an iBuyer, versus the typical 5% to 9% combined seller and buyer costs with a traditional broker. Yet, that is not the end of the story or comparison.”The study went on to explain how iBuyers need to charge even more because they have additional expenses beyond that of the traditional broker. They include:
- Carrying costs involving significant amounts of capital – The iBuyer must pay the expenses of the house between the time they purchase it and the time they sell it to a new buyer.
- Safeguarding the home risks – A home with an iBuyer ‘For Sale Sign’ alerts anyone passing that the house is vacant. The study suggests that these homes could become targets for vagrants and criminals.
- Adverse selection risks – The study explains that since iBuyers use computer models to determine their offer, they may be unaware of certain challenges in the neighborhood that could adversely impact the value.
- Potential home price declines – As the survey states:
“A downturn in home prices, not forecast by the iBuyer market analysts could be devastating as they ramp up their business platforms, particularly if the cost of capital increases. At the same time, downturns are precisely when the most sellers would want this option.”
Bottom LineAfter taking a thorough look at the iBuyer platform, the study concludes that using an iBuyer is more expensive for the homeowner than the traditional brokerage model, but for some sellers, it may still make sense:
“These preliminary empirical results suggest that sellers are paying not just the difference in fees of 2% to 5% more than with traditional agencies, and a generous repair allowance, but another 3% to 5% or more to compensate the iBuyer for liquidity risks and carrying costs. In all, the typical cost to a seller appears to be in the range of 13% to 15% depending on the iBuyer vendor. For some sellers, needing to move or requiring quick extraction of equity, this is certainly worthwhile, but what percentage of the market will want this service remains to be seen.”
“On my honor, I promise to aid in man’s quest for shelter, to recognize I’m not just in the business of houses — I’m in the business of dreams in the shape of houses. To disclose all illegal additions, shoddy construction, murders, and ghosts. And to put my clients’ needs before my own.”While this might seem silly, as it was definitely written with humor in mind, the themes of helping someone achieve the American Dream and putting a client’s needs above his own are not to be taken lightly.
Bottom LineWhen you make the decision to enter the housing market, as either a buyer or a seller, make sure you look for an agent who exemplifies these values and will help you through every step of the process.
Bottom LineIf you are thinking of selling your home, don’t underestimate the role a real estate professional can play in the process.
“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.”Do your research. Ask your friends and family for recommendations of professionals they’ve worked with in the past and have had good experiences with. Look for members of your team who will be honest and trustworthy; after all, you will be trusting them to help you make one of the biggest financial decisions of your life. Whether this is your first or fifth time buying a home, you want to make sure that you have a Realtor® who is going to have the tough conversations with you, not just the easy ones. If your offer isn’t accepted by the seller, or they think that there may be something wrong with the home that you’ve fallen in love with, you would rather know what they think than make a costly mistake. According to the Home Buyer and Seller Generational Trends Report: “Buyers from all generations primarily wanted their agent’s help to find the right home to purchase. Buyers were also looking for help to negotiate the terms of sale and to help with price negotiations.” Additionally, “Help understanding the purchase process was most beneficial to buyers 37 years and younger at 75 percent.” Look for someone to invest in your family’s future with you. You want an agent who isn’t focused on the transaction but is instead focused on helping you understand the process while helping you find your dream home.
Bottom LineIn this world of Google searches, where it seems like all the answers are just a mouse-click away, you need a Realtor® who is going to educate you and share the information that you need to know before you even know you need it.
Glut of Million Dollar Homes
Being a research-oriented Realtor® for nearly 20 years, I’m always curious about how laws and trends affect housing prices. Getting a grasp on the direction prices are headed gives me an advantage over most of my competitors and has led to my success.
I’m sure you’ve heard, by now, the new Tax Bill has included legislation limiting the tax deduction for mortgage interest and further imposes limits on deductions from state and local taxes. These two changes alone will hurt home values in New York with high-end home values being hurt the most. Pete King said, “most economists I’ve spoken to believe prices will fall between 10% – 20%.”
Realizing homes are commodities, it stands to reason that when supply goes up, demand and prices come down. With that thought in mind, I was curious to see just how many high-end homes are coming to market in Nassau and Suffolk counties compared to past years. What I found was an eye-opener!
High end up 37%
Measuring Nassau and Suffolk Counties from Jan 1 to March 15 in 2018, there was a 37% increase of million dollar homes hitting the market when compared to the same timeframe in 2017!
I will be updating this post to compare year over year increases periodically. Make sure you bookmark this page and return to the updated information.
My best advice if you have a high-end home you’re contemplating selling – don’t wait! While it may already be too late to be early, don’t wait until the traditional selling season begins in April. The earlier you place your home on the market, the less competition you should face and the easier time you will find to sell.
Call or contact me if you would like to see statistics for your town.