Saturday, November 24, 2012

Tim's Top 10 Rules of Real Estate in 2012

Rule 1. 
Experience is truly measured by the number of closed transactions during the past year--not measured by one's "Years in the business".
A Realtor's experience is only as good as the deals they have done during the past 6-12 months. Just because a Realtor has "been in the business for the past 25 years", does not mean that they have sold more than a few houses a year or that they know and understand this current market.

Rule 2.
You won't get a better deal by going directly to the listing agent.
If you are buying a home and hope that you can negotiate 3% off of the top by going directly to the listing agent--you should understand why this does not work in Texas. The commission for both Realtors has already been written into the listing agreement between the seller and listing agent and if you go into a transaction unprotected without a Buyer's Agent--the listing agent will actually be "paid twice"--their commission will potentially increase as much as double** when there is no other Realtor involved--regardless of how much is negotiated off of the price of the house.  Unfortunately, when you do this, you get ZERO representation and almost no information that you should be getting if you had a Realtor represent you. An experienced buyer is never as experienced as a Realtor who buys and sells houses all day, every day, 25-30 times a year. A good Buyer's Agent can tell you about things about a particular property--things that the listing agent can't tell, because the listing agent is representing the seller--exclusively. The Texas Real Estate Commission is very clear in explaining the roles of the Buyer's Agent and the Seller's Agent. A Realtor either represents the Buyer or the Seller--never both at the same time for the same property. Red Flags that a Buyer's Agent may see in a home, property or locations are often not what shows up on a Seller's Disclosure about the property. Because the Seller's Agent represents the seller, there are some things that he may believe to be true, but just can't tell you, like unverified potential problems with the foundation, roof or other features of the home. And there may be things about the area that the listing agent can't tell you, but you should know. If there is no certified or professional documentation for the potential concern, it is not something that the seller is likely going to disclose and the listing agent can't tell you what he does not know to be true about undisclosed potential issues like an old roof or AC system. This would not be in his client's best interest. And you are not his client.**

Rule 3. 
Every Market is different.
Every state, city, community and street are different in the business of Real Estate. Generalizations don't work and what is happening in one city or area has nothing to do with what is happening in another. This is true of appreciation, growth, foreclosures, short sales and virtually every aspect of the real estate process. 

Rule 4.
Living in a community does not make one the real estate expert.
The "business" of Real Estate is far more than knowing where the community pool is located and which neighbors are the ones that people talk about. Everyone can figure out the community map and local "gossip". Having an expert perspective on a community requires real-time experience and an understanding of the local real estate business.

Rule 5.
Building or buying new requires just as much experience.
New homes are a unique corner of the Real Estate Market and your Realtor should be well versed in all the normal aspects of Real Estate (community, comps, growth, schools, etc), and the Realtor should understand Time to Market appreciation of new communities, Construction, and when a new home builder is most likely to negotiate on a particular house and to what degree. It's a whole different ball game and the strategies are different out of necessity. 

Rule 6. 
Every deal is unique.
Having as much information as possible on the history of a home, the seller and what is going on around a specific property is critical to strategic negotiations. Since Texas is a "Non-Disclosure State", published public information is limited to the guesstimates that the county uses to determine tax value in a zip code, not actual sold sales data from the MLS. The county does not have access to MLS sold data and brokers are prohibited from publishing this data publicly.

Rule 7. 
Buyers determine Market Value for a home--not the Listing Agent. A Realtor that loves your home and is excited about your property will not affect either market value or the appraised value of the home. Buyers and their agents are smart. Pricing a home above market value only prolongs the inevitable re-pricing game.

Rule 8.
The Listing Agent does not sell your home.
A robust listing of a home is a function of Marketing and Online Advertising--not Salesmanship. Listing Agents almost never bring "the buyer" to your home and the Listing Agent and their brokerage will almost never be the one that sells your home--no matter how good they feel they are at "selling". The internet has changed this dimension of the business forever.

Rule 9.
An experienced Realtor should always know more.
More about the history of the house, community and area. More about what has sold during the past 6-12 months. More about what is selling in other areas of town and why. More about financial alternatives, reputable inspectors, the contract documents, title and all aspects of the end-to-end Real Estate contracting process. Your Realtor should be a business person who represents your best interests in a Real Estate transaction. Ask him lots of questions. Lean on him. Find out what he knows that you should know before you buy your next house.

Rule 10.
See Rule Number 9.


*I am not a real estate attorney and nothing written here should be construed as legal advise or legal counsel. If you have legal questions about any real estate transaction or property, you should seek the advise of a Texas real estate attorney.

**When speaking of commissions and fees, the actual commission rates that a listing agent has contractually negotiated with a seller to sell his/her property is negotiable at the time of the agreement to list the property for sale. There are no set amounts that sellers and listing agent must adhere to when a property is listed for sale.

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