It’s hard to
tell what is going up faster… home prices in Denver, or the agent count in the Denver
MLS.
As of this
morning, there are 15,682 agents in the Denver MLS, up over 8% in the past year
and more than 20% since the beginning of 2012.
In a strong market, newbies are attracted to real estate like moths to a
flame.
I see this
every day, as offers come pouring in on my listings. One of the first things I do when evaluating
any offer is that I figure who the players are inside the transaction.
Who is the
buyer’s agent, how long have they been selling, how many homes have they sold
in the past five years? Who is the
lender, are they locally or Internet-based, is there any disciplinary history
with them or their company that I should be aware of? And, of course, who is the buyer? How many offers have they written? Why is this home or neighborhood important to
them? And how did they get connected
with the agent and lender?
Increasingly,
as the market has been overrun with buyers, I am seeing more and more buyer
agents with 3 lifetime transactions, or 11 lifetime transactions, or quite
often, zero lifetime transactions.
With
sellers, my job is twofold. Get
the best price and terms possible, and mitigate risk.
You can look
at the other agent as the co-pilot in your transaction. If that agent has landed 100 flights safely,
I feel pretty good. If they have skidded
to a stop at the end of the runway twice (in who knows how many attempts?),
then that is a factor worthy of consideration.
Yes, I am
biased toward accomplished agents, because I know how difficult it is to hold transactions together in an emotionally-charged market.
One reason buyers under $300k are having such a difficult time is that
“it’s hard to compete with crazy.” Some
of the offers I have seen on my listings are just ridiculous…
- A $235,000
offer (FHA, asking for closing costs, with down payment assistance) for a home on
which they second highest offer was $215,000. Did you know you can find comps in the MLS?
- An “uncapped”
escalator clause that promised to beat any offer ($1 million? $20 million?) by
$1,000 and “pay $10,000 if the property doesn’t appraise”. Pay
$10,000 to whom? To me? To the sellers? To charity?
Sounds like a pretty good deal for somebody.
- And, of
course, amateur hour contracts that arrive with missing deadlines, no signatures
and a promissory note for the earnest money. (“My buyer has NO money!”)
As a listing
agent, I have the discipline to say “no” to crazy. But many less experienced agents do not.
I’ve said it
several times, and I’ll say it again here… often, the highest offer is not the
best offer, unless it speaks directly to the appraisal and it’s got an acceptable
buyer/agent/lender team. (Although that “crazy
offer” can often be used to jack up escalator clauses on better qualified
buyers… thank you very much)
In multiple
offer situations, I look at every offer, and then break them down into contenders and pretenders. In a market
where so many buyers are being nudged or pushed into taking homes “as is” or
waiving appraisal clauses, you know that many of these buyers are going to get
wobbly with the slightest bit of turbulence.
You have to account for this up front, and one way to mitigate the risk
is to make sure you have a competent co-pilot working the other side of the
deal.
To date,
there have been 13,651 closings this year in the Denver MLS. That equates to 27,302 transaction
sides. Spread among 15,682 agents, that
equates to 1.74 sides per agent so far this year.
But of
course, we all know that the world doesn’t work that way. If we simply apply the Pareto Principle,
which says 20% of the people get 80% of the results, what we really have are
12,546 agents fighting over 5,460 transaction sides (0.43 sides per agent). Feel your collar tightening at all? That’s not how it looked on HGTV, is it? Hard to pay the bills on half a sale every four months.
When it’s
all said and done, there is going to be a lot of roadkill in the agent world
over the next few years. A lot of buyers
will go down, too, working with agents who simply don’t have the skillset or
experience to succeed in such a competitive market.
I often say
that most things in life come down to odds and percentages. While no one can guarantee any one result,
the fact is there are levels of probability.
Some agents give you a 90% chance at success, some give you a 70%
chance, and some give you a 10% chance.
In baseball,
these are called batting averages. A
.350 hitter is much more coveted than a .180 hitter. Yet, remarkably, way too many people think
that everyone who owns a bat, or a real estate license, is a slugger. Check the numbers.
Information
is available to help consumers make better decisions. Go to ZillowReviews.com. Google someone’s name. Ask a friend for a referral. Whether buying or selling, it’s up to you to
get the right people on your team.
In real estate, the barrier to entry is low. But the barrier to success is high, and it requires a price most people won't pay. Choose wisely, or live with the consequences of hiring a batboy to do a cleanup hitter's job.
In real estate, the barrier to entry is low. But the barrier to success is high, and it requires a price most people won't pay. Choose wisely, or live with the consequences of hiring a batboy to do a cleanup hitter's job.
