I just read an interesting article by James Asbury, President of the Missouri Association of Realtors, that suggests the real reason behind the current slow market is overpriced homes and unrealistic sellers.
He notes that the average national appreciation for homes purchased between 1987 to 2000 was 4% per year. Then we hit a booming market, and the appreciation from 2000 to 2007 rose to 8% per year. Sellers are struggling with the concept that since 2006 their home has either stopped appreciating, or the value may have even declined from the peak prices seen in 2005.
Sellers that are pricing their homes as if the market hasn’t pulled back are finding that their homes are not selling. In St. Louis County, there were 25,389 listed single family homes that sold so far in 2006. But another 11,038 homes in St. Louis County during the same period were listed…and later expired or were taken off the market without selling. That means that 43% of all home listings did not result in a sale! Granted, some of these listings eventually sold when they relisted with another agent….AND they dropped their price.
One of the unique tools that I have available to me through The Kelsey Group, Realtors is a program to evaluate annual appreciation.
Let me give you an example of how this works. I was recently working with a buyer that wanted to purchase a home in University City. The street that he really liked had a number of homes on the market. Since this street has traditionally appreciated very well, many of the sellers seemed to be struggling with the reality of today’s market, and appeared to be very overpriced.
My buyer narrowed down his preferences to 2 homes. The first one was purchased in 2000. The owners made some improvements that weren’t really wise…such as $45,000 for a new driveway. Of course, they expected to recoup their entire investment plus make some money on the house, and they priced the home accordingly.
Not surprisingly, this house is still on the market after 281 days. They actually have dropped their price quite a bit already. When they started with a list price of $524,900, they were asking for 10.75% annual appreciation. My client passed on this one. We never even made an offer.
Instead, we moved on to a house down the street. It didn’t have all the features of the more expensive home and it was priced accordingly. Even better, these sellers seemed to understand that the market was slow and priced their home to reflect the market. We negotiated the price down about 2% from the list price. The buyer got the house at a fair price for the current market, and the seller got the home sold quickly.
Homes that are priced appropriately DO sell. When you are ready to sell your home, you need to know what the appreciation rate would be if you stick with your proposed list price. If you are thinking of selling, or even are wondering what appreciation rate you gave the sellers when you purchased your current home, feel free to contact me for a no-obligation home appreciation analysis of your home.
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What is Dual Agency?
Dual agency occurs when one agent represents both the seller and buyer in the same transaction. It is most likely to occur when an agent takes a buyer to see one of the agent’s own listings and the buyer wants to make an offer. Another scenario that will result in dual agency is when the agent holds an open house on a listing or receives a call from the yard sign or an ad, and the potential buyer doesn’t already have an agent.
Dual Agency is a Bad Idea
The most important point for you to know about dual agency is that if your agent is also representing the other side, your agent cannot advocate for you in negotiations or give you advice on pricing. This means that when you hit a stumbling block in the negotiations, your agent can’t fight for your needs.
Let’s say that a buyer and seller are negotiating and they are $5,000 apart on purchase price. As a buyer’s agent, my job is to convince the listing agent/seller that my buyer will not pay more and that they should take my buyer’s offer because our offer is a fair one. As a seller’s agent, my job is to convince the buyer’s agent/buyer that the house is worth more than they are offering, and my seller needs the higher price.
But a dual agent can’t take either of these positions. The most a dual agent can do is present to each client what the other side has responded, and ask if the offer on the table is acceptable or if they want to make a counteroffer.
Who Benefits from Dual Agency if it is such a Bad Idea?
Buyers and sellers don’t benefit from dual agency. The only person who benefits from dual agency is the agent. Many agents are eager to act as dual agents because they get to keep the entire commission. When an agent is a listing agent, and another agent is representing the buyer in the home sale, then the listing agent has to pay a portion of the commission (usually about half) to the buyer’s broker. If the agent represents both sides, then they get to keep the entire commission.
How do I handle Dual Agency?
I don’t do dual agency except in rare situations. I think it is a bad idea generally, and not in my clients best interests.
If I have a listing and am contacted by an unrepresented buyer, I will offer to show the buyer the property and will explain that I represent the seller. I’ll let them know that they have 3 choices if they like the property and want to make an offer:
- As a seller’s agent, I can assist them with the paperwork and the contract details just like a store salesperson can assist the people that are purchasing products from the store. I will be representing the seller and will encourage the buyer to accept the terms that the seller wants. By the way, this is exactly what new construction salespeople are doing when a buyer purchases a new home without a buyer’s agent.
- I can refer them to another agent that can act as their buyer’s agent…an agent that can represent just their interests.
- They can find a buyer’s agent on their own, and have that agent submit an offer on the house.
I had this situation come up just this week with a Central West End area condo that I have listed. An unrepresented buyer contacted me through a craigslist ad that I placed on the property. The buyer seems interested, and has decided to get his own agent and come back for another look later this week. If he makes an offer, my seller can be assured that I’ll be working in his best interests, and not trying to walk a tightrope by giving advice to the buyer too.The next time you are in a market to buy, make sure you have your own agent. If you discover a home through an ad or a yard sign, call an agent that will represent you and not try to sell you on dual agency. Rather than calling the agent working for the seller, contact me and I can arrange a private showing for properties anywhere in St. Louis, St. Charles or Jefferson County.
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