Agency and the Ascending Market

The role of a Real Estate agent in a transaction is an ever-evolving one. Remember sub-agency? No? That is a testament to how quickly and totally the job description has changed over the past couple of decades, with every passing generation bringing more empowerment to consumers and choices in levels of service.

The relationship between consumer and agent has shifted from the “customer” model to a “client” model in which a fiduciary obligation is owed to each principal in a Real Estate transaction. Unless otherwise agreed, the professional shuttling a buyer around on weekends in the hunt for a new home is no longer an agent of the seller, but is retained by that buyer to represent his/her interests in full in that pursuit. This is the age of buyer agency in which most modern markets currently operate.

While the relationships and allegiances in a transaction are more clearly defined now than ever (aside from the still-murky waters of dual agency, which is another post entirely), the proper representation of a buyer by a buyer’s agent is not as cut and dry as one might think; rather, market forces dictate that said agent be malleable in tactics.

Take the buyer’s appraisal contingency, for instance. It is a widely conceived and unchallenged notion that an appraisal is performed for the benefit of the buyer (more on the appraisal fallacy). After all, if the property does not appraise for the purchase price during the escrow period, the buyer has the ability to walk from the contract or to use the cudgel of a low valuation to re-negotiate with the seller. As such, it follows that a buyer’s agent would do well to simply stand aside and hope for the appraisal to come in low as it provides an opportunity to secure a potentially better deal for the client.

One thing about conventional wisdom? It typically applies to conventional circumstances.

What of an ascending market in which values are on the uptick and competition for properties is fierce? I, for one, posit that the laissez faire approach to the appraisal by a buyer’s agent may actually run contrary to the client’s interest. You see, appraisers are beholden to concrete data rooted in the values of the recent past. That’s all well and good, but there will not be support for current value in an appreciating market in three month old sale comps. There is a very real likelihood that your (as the buyer) appraisal is going to come in low in such circumstances.

So what’s the problem, you ask? Why not use that happy eventuality to your advantage to secure a better price?

Because the seller has four backup offers.

In a market such as the one we are currently experiencing here in Scottsdale, with heavy buyer demand and a drastically reduced supply of homes (down to approximately 17,000 active listings across the greater Phoenix area), bidding wars tend to result. After fighting off ten other buyers for the home of your dreams, a bad appraisal is, in all reality, going to procure one of two outcomes: 1) You bringing additional cash to closing to offset the difference between appraised value and sales price, or 2) The sale tanking.

The seller is NOT going to reduce his price when he has ready and willing backup buyers waiting in the wings to give him his price.

The role of the agent changes in that rather than the listing agent sweating out the appraisal and the buyer’s agent kicking back with his feet up, the inverse is potentially true. In my current representation of buyers, I have taken to meeting appraisers at the property (with the buyer’s permission, of course) with a copy of the contract, tax record, sales comps, pending sales, active competition, market trend reports … blueberry muffins, candy hearts, etc.

Long story long, do not accept representational practices from your agent that line up more with conventional wisdom than current reality. As market dynamics are in constant flux, so too are the tactics employed to reach your goals. Don’t buy into the notion that “x” is “good” and “y” is “bad” in a Real Estate transaction. Most every facet of a purchase is merely a variable, made positive or negative by its interpretation against the broader context of an ever-shifting landscape.

The buying and selling of homes requires a nimble partnership between principal and agent to keep up with the high-paced game of musical chairs that is the Real Estate market.

Save the dogma for your momma.

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No, That Is Not My Listing. Yes, You’ve Come to the Right Place.

A disconnect that will sometimes occur when a Scottsdale Real Estate consumer lands here on the Scottsdale Property Shop site, not all of the properties you see listed for sale here fly under the banner of Realty Executives.  Matter of fact, of the forty some thousand home listings that you can trawl in our home search engine on a given day, only a handful are likely to boast a Ray and Paul Slaybaugh sign in the front yard.

So what gives?

When you land on an individual Realtor’s website, the home search results display the feed from what is referred to as an “IDX” solution.  Technical aspects aside, this is essentially a streamlined version of the local MLS for public consumption.  Brokers have the option of opting out of the IDX agreement, thus not allowing their listed properties to be displayed on the sites of competitors and aggregators (Zillow, Trulia, Realtor.com, etc).  As such posturing would be tantamount to internet marketing suicide for a brokerage on behalf of its seller clients, however, few and far between are the active brokers who do not participate in the open proliferation of their listing feed.  There are rules and prohibitions in regards to what information can be displayed, etc, but by and large, this allows the consumer to visit most any Real Estate site with a capable IDX solution to view inventory.

Where misunderstandings can crop up is at the intersection of convenience and marketing.  You go to Google.  Type in the street address of a property you saw (forgot the name or number on the sign) or some specific criteria such as “3 Bedroom Homes For Sale in McCormick Ranch.”  If an agent has a search engine friendly IDX solution (such as yours truly), you land on his/her site.  Plastered next to all of the property information you seek is the agent’s smiling mug and contact information.

This is not necessarily, and most likely not, the listing agent.

If you scroll way down to the bottom, you will find the slightest nod to the brokerage that has the home listed for sale, but all of the contact information will be directed to get you to pick up the phone and call the agent that owns the site upon which you just landed.

For some of you, this is neither here nor there.  You just want the property information and don’t give a fig who provides it.  If the property looks interesting, Bigfoot himself could show it to you for all you care.

Where it can become an issue is when the consumer has specific reason to approach the listing agent directly.  There is typically an awkward silence, followed by a mild rebuke at a perceived misrepresentation.  To this house hunter, I say you found me just in time.  Why?  Because if left to your own devices, you would have unwittingly blundered right into the lion’s den with no representation.

Perhaps you think the listing agent will be a more direct conduit to the seller.  Perhaps you think the listing agent will have more information to provide regarding the property.  Or perhaps you think the listing agent will willingly cede a portion of his commission with no other agent involved in the transaction, ultimately saving you money on the purchase.

Were I better at HTML coding, neon lights would illuminate this next sentence.

THE LISTING AGENT REPRESENTS THE SELLER.

I repeat.

THE LISTING AGENT REPRESENTS THE SELLER.

Whatever seemingly helpful information the agent provides, make no mistake that it is his fiduciary obligation to separate you from as much of your money as possible on the seller’s behalf.  And he does this for a living.

When shopping for a new home in Scottsdale, it is not possible to overstate the value of the internet.  In addition to the tools and resources that are more available to the consumer than ever before, it could just be the chance encounter with a local agent’s IDX search that proves most fortuitous.  Contacting the floating head next to the listing that interests you might be the thing that saves you from overpaying or getting embroiled in transactional hell on your purchase.

No, the listing you are looking at is most likely not mine.  For that you can thank your lucky stars.  I’m quite adept at squeezing money out of buyers for my sellers.  Since the shoe is on the other foot, let’s go get you that house for a price that will make the seller limp for a month.

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