Bruce W. McKinnon, MBA > Associate Broker, CRS, GRI, ABR, SRES, e-PRO, CLHMS

Seattle Home Buyer: I am constantly looking at my stock portfolio and asking the same question. How about you? Where is the bottom? How bad will this economic dip or recession last?

Real estate agents are in denial? I don't think so, Half the agents in many offices are GONE. Offices are closing or merging to reduce overhead. Agent incomes are in the tank. People are having trouble feeding their families. YET — for those who are hopeful for the future, we need more of them. My mother use to tell me as I was growing up to BE POSSITIVE, walk on the bright side. And we should. We owe it to our families and our self esteem.

WHAT DO WE KNOW for sure? Death and taxes — right? WE know that the economy of the US and the World flows in waves. Up and down. Always has. That is a fact. Yet, it seems so many people in the world are always waiting for things to improve so they can THEN make their fortune. We hear that all the time. How realistic is that? If the stock market is off 2000 points and homes are down 20% to 40% (after jumping the same percentages from July 2004 to July 2005) , is this a correction. Is NOW the bottom?

Yes, you do know the story. Most of us wait for the bottom until the bottom passes on to "going up" or the "all time high". That is when we have just got to jump in. Or, to say it another way, THAT certainly is the place for us to jump in -- RIGHT?

Maybe your friends in the real estate business are NOT in denial. Maybe just smart investors. They may be focused on that old AXIOM "buy low, sell high!" People with foresight maybe. If we listen close, isn’t everybody saying that it is a buyer's market. Maybe it is?

What if NOW was the time to buy? The perfect time? What is your strategy? - Sun Sep 14 2008, 04:04

Hi Elaine. Wow? Why do I sense there is more to this story than meets the eye or as stated in your question? Knowing all the facts might make answering this question accurately a better possibility. But, we will wing it anyway.

Let’s see. You had an agent. Your friend of 25 years. She went on vacation. YOU looked at other houses while she was gone. Now, so far, this happens all the time in this business. But, the plot thickens. You went to an open house. You liked it. Not unusual.

Stop. Now what was said at this open house by you to the other agent COULD be relevant to this question (of whether the other agent has a leg to stand on – grounds for a legal action). And THAT is missing from your question. Example: “I love this house. I want to buy it. No, I don’t have an agent. Yes, I will use you as my agent”. Let’s write up the contract”. Now if that was conveyed by you to the other agent, that MIGHT make a difference (depends what else was said, time spent, documents prepared, etc). Might not. But, we will go on.

So, your friend returns. You look at more homes together, but THIS HOME is the one. Your agent makes an offer on your behalf at your request. A contract is later consummated by your agent with the seller. The contract is closed. You are (at this moment) the owner. Is this what you are saying? OK, we will go on. After the sale closes and title is transferred to you , NOW you are saying the other agent wants the commission paid to your agent paid to him/her because …… WHAT? You promised to use them? Was this a new construction home or a re-sale property? Was the other agent the LISTING agent? I have Lots of questions. So would an attorney.

That said, my fist reaction is that the other agent (listing agent or another buyer’s agent) did NOT have a business relationship with you simply based upon the way you met. Then, because you ultimately chose to purchase the home you first saw when they were holding the home OPEN. Now, as Joan stated below, the fact that the OTHER agent claims they are going to sue your agent and that actually becoming a reality may be two different things. Everybody seems to make threats they never carry out these days. Keep this in mind. For a legal action to be taken and a judgment rendered against your agent, their has to be legal grounds to support the plaintiff’s position. Only you would know that answer.

In conclusion, ask you agent to set up a meeting between you, her and her Broker. Have them give you the lay of the land. That may help put things into perspective – for you, for all. Put your mind at rest. - Fri Sep 5 2008, 04:48

Hi Sherry. First, only GOD knows the perfect answer to your question. It DEPENDS. In other ways, it is common sense. We all know we are in a terrible market (if you are the seller). Or, to say it another way, we are in a "buyer's market" in the US today. But, you noted that.

So, a key would be how good the CMA you were provided was (agents assessment of the SOLD property prices in your neighborhood) . Or, if you dictated the listing price for your home based on what you thought your home was worth. If the listing price was really placed at market, then how long has the house been on the market? How many offers have you had? Does the market think your home is worth as much as you and your agent think it is worth? What is realistic (absent of all emotion).

Now, given the above, the LOW BALL answer may be a realistic offer – or crazy. But, it takes a lot of energy to get a buyer in this market to make a written offer. It is fair to say they must like the home. What do you think? So, playing verbal games on an offer is BAD BUSINESS. The SKILL of Negotiation is a matter of knowing how to keep a buyer engaged (easier said than done). How do you keep them at the table. So, this is NOT about insulting someone. Right? So I NEVER state that a buyer’s offer is a LOW BALL offer. I don’t have to nor do you. There is a more subtle way to do this if you are justified in your thinking. Respond with a counter offer that is (for lack of better English) a HIGH BALL offer. Example: Current price = $300,000 after $25,000 price drop. LOW BALL Offer = $250,000. Counter “nicely with class” at $ 295,000. Thank them repeatedly for their offer. The message is clear.

Now the above conversation is academic if the home is only worth $250,000. It may be YOU that needs to get REAL. Never know.

What about sticking with your price? Well, we are back to square one. Is the price justified by the numbers. How long can you wait? Do you have to move? Can your home stand becoming shop worn (too long on the market making people wonder what is wrong with it)? What is the sales picture TODAY for homes selling in your market? Are homes selling – moving? Are sales rates greater than, the same as, or below what they were last year at this time. What are sales volumes like in your area (up, down, stagnant)? How many homes are for sale within the price range of your home in your neighborhood? What is your competition? Lots of questions.

So to answer your question, all of these variables have to be weighed (to the degree possible) without emotion. Lean toward common sense to the degree that is possible. - Fri Sep 5 2008, 03:59

Sure Joshua. Here are my thoughts about your questions.
SIZE: If company size and market penetration are important to you, then you should determine market share by company in your specific California market. Usually, this information is tabulated by the larger brokerages for all other competitors. They use MLS data. Check with the MLS, the various brokerages, etc. What you get from each MIGHT be a little slanted in their behalf, but collectively, the info might tell a clearer story – to you.
COMMISSIONS, & EXPENSES: When I left the corporate world after 34 years and months later decide to give real estate a try, I frankly had no idea what the answers were to the question you now ask. But, I made a list of all the offices within a 15 mile radius of where I lived (close to 30). I called each (before I got my license) and arranged a meeting at the ones that seemed to have their act together (14). I called it “an interview”. And, I interviewed each office’s Brokers over a week’s period. I wanted to hear what they had to say about your questions and many more then what you have listed. THAT was an eye opener. So, I learned how commission’s formulas worked and the difference between a “desk fee” office and an “income distribution” office. What were charged expenses at each and which were included services? If you are running on a tight budget, a desk fee office could eat your lunch.
TRAINING and MARKETING SUPPORT: There is a direct relation between the availability of “higher level” office equipment (photo copiers, computers), staff to do the job, more education opportunities, and more support AND the word “OVERHEAD”. What it cost to do business. The higher the overhead, the more that the agents have to produce and pay the broker in order to cover their cost of operations. Think about it. Say it again. The higher the overhead (cost of running the operation), the more the agents have to earn and split with the broker for the broker to make a profit.
Ah, but there is another issue. Who is running the store? Who is the boss (Broker)? What is their experience in running a business? Are they respected? Do they have a good attitude? The BOSS can make a tremendous difference in how a specific office runs (its turnover of staff, quality of equipment, training, etc). A great real estate company can have some BAD brokers (in terms of management ability) at some branches that can make that specific office a bad decision. Oh, and do you bond with the BROKER? What do others say? It’s all about gathering knowledge -- to help you to make a better decision.
I work the LUXURY MARKET. Seems like the perfect place to focus your energies. But, sales volumes are less, time on the market is more, people are more opinionated, the level of property sophistication is higher—thus your knowledge of real estate must be great. AND the HIGH END moves slower during a down market then the low end. So some decisions or desires may have to be curbed until you gather the experience and knowledge of the issues that follow the industry. Real estate is NOT an easy business as it often appears. What you think today might be different than tomorrow.
To conclude, keep your eyes and ears open. Knowledge is power. You have no knowledge without engagement. Your initial impressions may turn out to be wrong or misguided, but some knowledge is better than none at all. Consider the source. - Fri Sep 5 2008, 03:18

Kat: The answer you have just received from Deep River is excellent. So good that I gave him a plus rating and I didn't even ask the question. - Mon Aug 25 2008, 11:20

Kat: Now. On October 1st, the requirements for being pre-approved for a mortgage will become more stringent (or opportunities to qualify today will be removed as of October 1st). But, that is a generalization. If a new homebuyer's credit score and financial status is excellent, then this becomes a moot point. - Sun Aug 24 2008, 21:29