Agent Dust Up

If you've been reading this blog lately you know that I've been writing reviews of homes and adding photographs at FranklyMLS.com.

It's been a great experience and it's been educational. I've never noticed exactly how much differently I look at a house when I put on my buyer's agent hat. But I'm very aware of that now.

Earlier this week, however, an issue came up and I think it's worth talking about. I reviewed a house that's been listed for sale. It had no interior photos and so I took those, as well as additional exterior photos.

These photos got me in trouble:

In my comments I said there appears to be a mold issue here.

The agent strenuously (VERY STRENUOUSLY) objected to both my mention of the world mold and my taking photographs and posting them.

One of her arguments was that I am not an expert on mold. That is entirely true. I'm also not a doctor, but if I see a bone sticking through your skin I'm going to tell you it's broken, even if I'm not allowed to diagnose!

She had someone interested in the house and they saw the photos and the comments and changed their mind. (Again, what are they doing calling the listing agent?!)

What I'd tell a potential buyer is that there appears there may be a mold issue here. We'll need to get the home inspector to take a closer look at this. From what we see here we can't tell what kind of mold, whether it's dead or alive, active or inactive. There are many, many kinds of mold, many of them not harmful to humans. If you truly love a house, this shouldn't be enough of a reason to make you automatically walk away.

As with pretty much any problem in a house, there's a fix. The question in each instance is: is the fix worth the time and/or money involved.

By the way, the offensive photos and comments have been removed. I have mixed feelings about that and I'll take that up in a future post.

Meanwhile, I'm off on vacation! This space will be quiet for the next week and a half. I hope you'll have having as much fun as I am!

Who's Protecting Who?

I had an interesting incident with another agent recently. I wrote about that in another post. When I wrote it I promised to reflect in a later post on some of the larger industry issues involved.

In many professions there's a tension between the desire to protect the public and the desire to protect the members of that profession. And so, while the Hippocratic oath has doctors promising to "First do no harm" there is also a very strong taboo against criticism of other doctors.

It's really no different in real estate. (Although the stakes are a lot lower!) Part of our code of ethics says that we'll speak no ill of another agent. And, most agents are careful to adhere to that. I have no problem with not indulging in idle gossip about my peers. And, it's certainly much too easy in a very competitive industry to decide it's your job to cast aspersions at those you deem less "professional" than yourself.

But you can carry this too far. It's a thin line you walk and I think we've leaned too far towards protecting our colleagues at the expense of protecting the public. When another agent thinks I have a greater responsibility to protect her and her business than to be honest with the consumer, I think it's a problem.

The thinking in the industry is that my responsibility is to clients who have hired me. The agency relationship with them obligates me to put their interests first. However, even to a customer (otherwise known as the general public) I still owe the duty of honesty.

You can ask whether "honesty" is defined by answering direct questions with honest information or whether it obligates volunteering information for which we weren't directly asked. I'm going to suggest that splitting such hairs is the kind of behavior that makes real estate agents rank very poorly in polls that gauge trust by profession.

As I said, the line is thin. But I think it's time to start leaning the other way!

Amissville/Jeffersonton Price Per Square Foot

A recent lunch with a banker friend got me curious about current prices per square foot in specific local subdivisions. Apparently a builder had recently told my friend that he couldn't build a house (including land acquisition costs) for as little as the current price per square foot on existing homes. If you're a builder, that's trouble!

So, I'm going to do a series of posts, not necessarily sequential, looking at several subdivisions in a local area and what the average sale price per square foot looks like.

First I should define a few things. I'm looking at specific subdivisions because they are more uniform. It's easier to make comparisons without having to factor out the amount of land. They are usually built at about the same time. All in all, they are more likely to result in more accurate comparisons.

The sale price that I'm using is the sold price as taken from the Multiple Listing Service (MLS) minus any money paid by the seller to help with closing costs. So, it's a net sales price.

The square footage information is taken from the tax records. That means that occasionally the square footage is going to be inaccurate if, say, a homeowner finished the basement without getting the proper permits.

All that said, let's take a look at three subdivisions in the Amissville and Jeffersonton area.

South Wales had the largest volume of sales of the subdivisions I looked at with five sales since 1/1/2008. The average price per square foot of the homes sold is $118.89.

Quail Ridge had four homes sold. The average price per square foot there is $110.50.

Wildwood Forest showed only two homes. That makes the data more suspect here as the two homes had enough differences that I don't view this number as very useful. But, for what it's worth, the price per square foot, on average, was $125.91.

I wanted to look at two additional subdivisions in this area, Deerfield and Erinbrook, but there weren't even two sales in either of these (at least per the MLS).

If you live in the Amissville or Jeffersonton area and have a home for sale, you might consider taking a look at how your home compares with these numbers. Is it time for a price reduction?

If your a buyer, keep these numbers in mind as you look for the house you want, then compare the listing price to these numbers.

Selling Agent Bonus

A client of mine who is selling his house has decided to offer a bonus to the selling agent. These are becoming quite common in the Virginia real estate market as sellers look for a way to sell their homes quickly without giving up too much money.

I strongly dislike these bonuses. Here's why:

1. It's not about the agent! Buying a house is supposed to be about what's best for the buyer. At least if you're an agent representing the buyer. It's never supposed to be about what's best for you!

2. In too many cases, they're not disclosed. Agents must tell the buyers about these bonuses. To not disclose this information is unethical!

3. If it is disclosed, it's surely evident to the buyer that this is money that could instead have been taken off of the listing price and that, therefore, the house is overpriced. It's like the "buy the house, get a car" gimick. Any savvy buyer figures our immediately that this means the house is overpriced by at least the value of the car. (Usually more!) As a buyer's agent I'd tell my clients to knock the amount of the bonus off of the price when we make an offer.

3. If it works, what does that say about the ethics and professionalism of the agents? Would they really show a house that's unsuitable for their client, in hopes of getting the cash? Would they try to influence their buyer's decision in order to cash in?

4. Many of these bonuses come with deadlines. "Good for offer before July 1st" for example. Really?! So, if the house isn't sold by July 1st you're going to be less desperate to sell than you are now? I'm betting I can get that money out of you after that date, one way or another!

5. I don't believe it works. Bottom line, it's another gimick and these almost never work. Sellers are dealing with the savviest, best informed buyers ever, thanks to the internet. Very few are going to be taken in by this kind of thing. Let's be honest, you're offering the bonus because your house is overpriced and you don't want to lower the price. You're not fooling anyone!

Behind the Numbers

Every month in this space I give you the statistics on what the market is doing in Culpeper, Fauquier, Rappahannock and Prince William counties. (With Warren thrown in occasionally!)

What I haven't really talked about is where this data comes from and what inherent flaws there might be in this data. It now seems like I'm overdue for that discussion.

Each month the data I use as the basis for my analysis comes from the Multiple Listing Service (MLS). The MLS that serves our area is called MRIS. The data in this system comes from what the agents input. They input their listings and they input the information when it gets sold.

So, here's the first weakness in the system, the human factor. People forget, get lazy, get busy, etc. It's the same problem with every system, anywhere, run by people!

There are brokerages that still don't list properties in the MLS. They are few and far between, but a few of them still exist. (By the way, if you really don't want your house to get sold, just keep it out of the MLS!)

Builders generally don't list every house they have for sale in the MLS. They'll list, perhaps, one of each model they have. So the MLS always understates the total inventory and seriously understates new construction inventory.

While many For Sale By Owner (FSBO) properties are now in the MLS, many more are still not, relying on the handwritten sign in the yard. Again, this understates inventory.

But for whatever flaws there are, the MLS is the best system we've got. It's as close as I can get to getting a total snapshot of the market at any given time.

Too Much Inventory - May Numbers

There's a constant refrain here. And, I know I sound like a record stuck in a groove. But May numbers continue to reinforce that we've still got too much inventory.

Culpeper County shows we're only eight units off where we were last year at this time. The good news is that sales jumped substantially this month. And, I'm not using month over month comparisons, but year over year. Both new contracts and closed sales took a big jump. But that pace is going to need to continue for months in order to start to see the reduction in inventory we need in order to stabilize prices.

In Fauquier County last year at this point in time we hit our highest number ever for inventory. Unlike Culpeper, we've come down substantially. A year ago there were 867 homes for sale and now it's only 764. The contracts written and the sales closed are both also up, if not quite as much as in Culpeper.

Prince William County actually has a large increase in inventory. While contracts and sales are up, the increase in inventory means no firming up of prices there any time soon. Since Prince William County is one of the hardest hit counties in Virginia for foreclosures, this will likely take some time to resolve itself. But bargain hunters are out there.

Rappahannock County remains a place apart. The market is almost exactly where it was a year ago. Days on market are longer there as well, inventory is higher than it was several years ago. But it's a very different market than what we're seeing in the other three counties.

Our numbers reflect the national numbers pretty well. New contracts are up across the nation. The numbers you hear from NAR and from most of the national media are primarily comparing May, 2008 to April, 2008 and of course the numbers are going to go up. The more meaningful number is always year over year.

We've got some good signs out there. There are buyers out there. They're looking for bargains. They've got the right market for it.

Termites

Termites are one of those issues that can really throw a wrench in an otherwise beautiful contract! No one wants to see the termite report come back with bad news.

Here are some of the signs there might be a termite problem with a home:

Mud tubes: These are about the size of a pencil and are connected to infested wood. They may be visible on concrete foundations or hidden under floor boards or behind siding.

Swarms: Winged termites are attracted to lights and may be found around windows or exterior light fixtures.

Wood damage: Tap wood every few inches and listen for a telltale hollow sound or see if a tool easily penetrates the wood you're tapping. Dark areas or blisters in wood flooring may also be a sign of infestation.

However, don't assume that any of these are proof of an infestation. A professional will be able to tell you for sure. Most contracts in our area are written requiring the sellers to pay for a termite inspection. Most lenders will insist on seeing proof that the home is termite free.

If you're a seller, here are some of the ways termites can be drawn to your home:

• Cracks in foundation walls, even small ones, can provide entry for insects.
• Leaking pipes or faucets create an enivronment conducive to termites.
• Wood debris or firewood touching the structure provide a breeding ground for insects.
• Sprinkler systems that hit outside walls encourage insects and wash away treatments.
• Planters or wood trellises attached to exterior walls provide an access point for insects.

The Buyer's MLS

Let's face it, the MLS is not always the buyers' friend. On short sales and foreclosures especially, but even on a substantial number of other listings, there are often no photos. Sometimes there will be one or you'll get the property with photos of only the exterior and the land.

That's a shame in many ways. Buyers want to see photos. With gas prices what they are, it's very helpful to be able to screen properties without having to drive to every one.

It's also a shame for the sellers, in all honesty. Buyers in most cases will simply bypass listings without photos. Photos of a place that doesn't look all that great are still almost always better than none. That's because buyers will usually assume even worse things in their imaginations if there are no photos. And, if what they'll see when they get there is likely to cause them not to buy it, why not eliminate them up front. Do you really want people tromping through your home who won't be interested in buying it?

So, a local real estate broker, Frank Borges Llosa, has taken matters into his own hands. There's a new MLS, that looks at the world from the buyer's point of view. The idea is to ask agents to photograph and comment on vacant homes. These comments and photos will be added to the MLS data that's already available.

It's a terrific idea and I've already begun contributing. I'll be selecting homes to work on based on several criteria. First, I'm interested in the property! Secondly, input from clients, customers and blog readers that they'd like me to check out a specific property. And, third, I'll start closer to home and work my way outwards. That means I'll start with listings in Culpeper, Fauquier and Rappahannock counties.

Let me know if you've got a property you'd like me to take a look at! And, continue to watch http://www.FranklyMLS.com for more updates.

A New Kind of Affordable

There are interesting things happening all over the country with green/sustainable building. But here's one I especially like!

Why not marry sustainability and affordability? Here's an article on what one guy is doing.

I can't think of any reason something similar couldn't be done in Fauquier, Culpeper or Rappahannock counties!

It's a Great Time to Buy

I know! You think I drank the kool-aid, finally! Or, you're worried that my brain has finally shorted out! (Or, maybe THEY got to me!)

I assure you none of the above is true!

Ignore all the hype from the real estate industry about now being a great time to buy. That's not what this is about. It may or may not be a great time for any specific individual or family to buy any specific house!

But, historically, a buyer has never had more power than they do today! And, I believe that's news. That's a good news story that we should all be able to get behind.

With the internet-based tools available to buyers today, they've never had the opportunity to be more well-informed. They have access to tax records and GIS from localities. They have access to maps from Google that make map fanatics like me drool! There are places like Zillow where you can get a "Zestimate" which, although flawed, is still a pretty amazing development. There are new sites such as FranklyMLS.com that are marrying Wiki functionality with MLS capabilities.

There's even more information available to help you choose an agent, whether that's reading their blog or checking out their ratings on sites such as QSC.

In fact, the buyer has so many tools these days that I suspect a lot of them are suffering from data overload. Data without thoughtful analysis can be more of a burden than a help!

Still, the tools are amazing! Regardless what prices do in the local market, a real estate buyer anywhere in Virginia has never before had the opportunity to negotiate from a stronger position!

Amissville House

It's time to tell another story about a specific local house!

This house is located in Amissville in Culpeper county on a quiet country road. As with many local properties, it was once part of a larger farm. And, in fact, one of the things I love about this house is the old farmhouse that is at its core.

It's been nicely renovated in ways that allow you to still see the original and it's special character. The second floor is all hardwood floors, a very rare thing these days, but fairly common in 1940 when this house was originally built. It sits on just under 2 acres with some nice fencing.

There are 4 bedrooms and 2 full baths. The kitchen is modern and large with lots of light. It's got that great front porch and some beautiful mature trees. In short, there's lots to love about this house.

For horse people, there's adjoining pasture that rents pretty cheaply. ($200/mo.)

The house sold in December, 2004 for $314,000 with a $9000 subsidy to the buyers to help with closing costs. It was on the market for 127 days before selling. In 2004, that was actually a long time. And, at that point in time the $9000 help for the buyers was also unusual.

It next sold in May of 2007. This time it was on the market for 292 days before being sold for $360,000.

It's back up for sale now. It's been for sale for 86 days. It was originally listed at $349,900 and is currently listed at $299,900. It's a short sale this time around, meaning that the owners owe more to the bank than the home will sell for. The possibility of foreclosure looms if the property does not sell.

If the home sells for full price (unlikely in this market) it will be 17% off the highest sales price. That's a little less than the price declines we've seen overall in Culpeper County.

I believe, overall, this home is a pretty good value in this market. Part of why it's lingering at this price is the fact that it's a short sale. Real estate agents are reluctant to show short sale properties. There are a number of reasons for this, including a lengthy/complex process that frustrates their clients and usually produces a smaller paycheck for them.

It may also be sitting because of the new home that's being built nearby. While there's enough distance between them that it's not intrusive if you're a city person; people moving out here often want no sign that neighbors even exist!

Still, for someone with horses and not a big house hunting budget, I think this has a lot of appeal.

Surrounding sellers will no doubt be unhappy with the low price on this. If this sells for under $300K, and it ultimately will, many surrounding properties are clearly overpriced. Or, at least, that's what potential buyers and appraisers are likely to think!