Does the real estate agent you use matter??

So it’s been a recent trend lately, it goes in spurts, that I find out a personal relationship hires another real estate agent to give their business to.  While I don’t take this personal and understand all the scenarios about personal relationships, family members etc. it occasionally throws me for a loop…and here’s why.

The irony behind people wanting to use their brother’s friends, neighbor’s uncle who just got their real estate license to do them a favor is that the new agent is doing YOU a disservice by allowing you to be sacrificed at the expense of their learning curve.  Now this is not true in all cases but don’t kid yourself, the other agent smells the fresh license and you will likely take the brunt of rookie mistakes without ever knowing.

When I first started almost a decade ago it still astounds me I was legally allowed to do business.  Real Estate school is completely irrelevant to the real world and only consistent transactions, good mentors and time will combine to make a quality real estate agent.

So this sounds great in theory but let’s put some teeth to it.  In my recent real world example I had a past client who decided to use a family member in their late 50’s who was “trying a new career path”.  This was a big mistake to which I will never reveal to them.  Here is the break down.

The new agent undervalued my ex-clients house by $10,000 minimum.  They had multiple offers on the first day, sight unseen and cash in a market and area in which this is no longer common.  Now fast forward to the purchase of their new home.  They offered list price on a house that was on the market for 4 months, needed work, was a rental property and had been listed as a rental but not filled in over 9 months.  Needless to say they needed to sell.  The cherry on top was that I knew the selling agent from a previous transaction.  They could have purchased this house for $11,500 less and all they had to do was ask.  The seller didn't even want to negotiate, just wanted it gone.

I know this because my past client called me half way through the purchase and had a ton of questions that his “new” agent could not answer.  I politely answered while listening to the above story.

So what did this mean to my past client…

$21,000 in money left on the table (probably more). Over a 30 year mortgage at 4.75% this will cost them almost $40,000 out of pocket….and they’ll never  know the difference.

I’m not here suggesting I know everything or that you should even use me.  Whatever you do stop and think about the decision you're make and handle it with the care it deserves.  It will likely be the most important financial investment of your lifetime.

Here is why sellers are often aggravated with selling their home.  A lack of education and knowledge about the realities of the market.  I dork out on this research to better serve my fellow agents and clients.  Where is your house??

We often look in the newspapers and see an overall annual appreciation AVERAGE and think we are all seeing the advertised 8% appreciation.  That couldn't be farther from the truth.  Remember how the average is calculated...it is not indicative of your house.  Below is a quick breakdown by price range to better gauge your home's actual appreciation.

We can all thank the few luxury homes that are selling for the recent jump in the overall market but certainly the majority is not seeing the same result.  

September 17 - If we examine the pricing as recorded in Maricopa and Pinal County Recorder offices for May through July in 2013 and 2014, we see the following changes in the average price per square foot:

Price Range	Change in Average $/SF
Below $100K	6.8%
$100K-$125K	6.9%
$125K-$150K	7.1%
$150K-$175K	4.8%
$175K-$200K	3.9%
$200K-$225K	4.6%
$225K-$250K	4.3%
$250K-$275K	4.2%
$275K-$300K	2.8%
$300K-$350K	6.4%
$350K-$400K	3.4%
$400K-$500K	2.6%
$500K-$600K	3.8%
$600K-$800K	3.4%
$800K-$1M	-2.5%
$1M-$1.5M	4.3%
$1.5M-$2M	9.7%
$2M-$3M	17.6%
$3M & Over	2.9%

Note that the strongest price advances were for:

1. $2M-$3M 17.6%
2. $1.5M -$2M 9.7%
3. $125K-$150K 7.1%

The overall change was 8.0%. However only two price ranges exceeded the overall percentage and most were well below that figure. Two effects are driving the overall number to be high:

• fewer distressed transactions
• low end price ranges have far lower volumes than last year

If we excluded distressed transactions the table looks like this:

Price Range	Change in Average $/SF
Below $100K	6.4%
$100K-$125K	4.9%
$125K-$150K	5.7%
$150K-$175K	2.8%
$175K-$200K	2.6%
$200K-$225K	3.4%
$225K-$250K	3.4%
$250K-$275K	3.1%
$275K-$300K	1.4%
$300K-$350K	5.3%
$350K-$400K	2.5%
$400K-$500K	2.4%
$500K-$600K	3.9%
$600K-$800K	3.3%
$800K-$1M	-3.5%
$1M-$1.5M	4.1%
$1.5M-$2M	10.0%
$2M-$3M	17.4%
$3M & Over	2.9%

Between $150K and $1.5M the increases in average $/SF are fairly small over the year, averaging 3.3%. Below $150K the average change in price per sq. ft. was 6.5%. Above $1.5M the average change was 10.2%.

So although the headline change is 8%, for most homes between $150K and $1.5M, the actual increase was just 3.3%

Interestingly, the range $300K-$350K showed strength while $800K-$1M showed weakness. We might have expected the $300-350K range to be weak because of the reduction in the FHA loan limit, but this turned out not to be the case.

September 14 - If we divide the average sales price by the average final list price we get a useful guide to how strong the market is. Expressing the result as a percentage is most common, but we must remember that the range is not great. In the last 14 years the minimum has been 93.82% (Feb 5, 2009) and the peak was 99.55% (Jun 5, 2005). The long term average is 96.88% and we have just dropped below that average in the last 3 days. This is a sign that the market is starting to cool slightly again at it approaches a balance between supply and demand. The highest reading in 2014 was on September 2, just 2 weeks ago, so the cooling trend is fresh and yet to prove its significance. However it is running counter to the direction of the Cromford® Market Index so we need to keep a close watch on it.

Arizona Real Estate Market Update...

I get this questions quite a bit.  "How's the market"?  I'm sure you've asked this or heard it many times as well.  My response remains the same.

It depends.

Most people aren't actually asking how the overall market is since it's rare to have a house that fits into the median of the market trends.  It's like someone asking if your family is "normal".  Of course not, everyone's family is crazy.  Try to define normal.

So, from a real estate perspective your answer will depend on various factors i.e. location, price range, condition, upgrades, lot location, school district etc.  While your situation may be in an appreciating market others may be in a slow down period.

This is why it's important to have someone who understands how to analyze the statistics of your niche.  Unfortunately either bad experiences or a lack in education leaves many people in the dark as to what their real estate agent is supposed to do.  Anyone can pull comps from the last few months and give you a quick range estimate of a homes value.  Shoot, this is Zillow's business model.  However, your agent should be going deeper than this.

Analyzing each house and sale independently for common characteristics is a must.  For example; open floor plans work in some areas and not others,  garage vs. carport, pool, local eateries etc.  These will all help paint a picture about not just when houses are selling but what houses are selling and most importantly WHY.  Zillow can't tell you this and unfortunately most agents won't either.

Now, I will still answer the standard question with a link to my market pulse website.  It's a macro snap shot that I still follow to assist in narrowing trends.  However, if you have any questions about your specific market please don't leave it to chance, or worst to Zillow.  I'm here to help anytime.

Market Update

Chris Tiller, MBA

Russ Lyon Sotheby's International Realty

17207 N. Perimeter Dr. Suite 120

Scottsdale, AZ 85255
Office: 480.502.3500
Cell: 602.561.1346
Fax: 480.624.3795

Market Slowing

No Big Gains Through the End of the Year : (

The monthly average sales price per square foot for all ARMLS areas & types is $126.41 today, once cent higher than it was on the first Saturday of January. After peaking in early April at $131.37, a gentle drift downwards has been the overall trend in this measure. In the short term we see some weakness in the pending $/SF so we anticipate the monthly sales $/SF entering the $120 to $125 range during the last 4 months of 2014. Our guess is that $/SF pricing will be a little lower in January 2015 than it was in January 2014. Not enough to cause significant appraisal problems, but enough to confirm we are no longer in a market with rising prices.

The Cromford® Market Index started to move downwards in July last year. It generally takes about 12-15 months for sales pricing to follow its lead, which is now starting to occur. The Cromford® Market Index is specifically designed to be a leading indicator while monthly average sales price per sq. ft. is very much a lagging indicator. Since the Cromford® Market Index started to rise again in March this year, the price weakness we see ahead is likely to be brief and relatively inconsequential over the longer term. Based on current trends we would expect sales pricing to start to firm up again during the spring of 2015, since that will be about 12 months after the Cromford® Market Index hit its low point and changed direction.

___________________________________________

If you're reading the above and wondering what the index is indicating for your particular city of interest, go to the City Snapshots posted here: http://RLSIRMarketing.com/stats

Keep in mind, an index score of under 100 favors buyers; over 100 favors sellers; 90 - 110 equals relative balance in supply and demand, which is where we are now.

Example: Snapshot of Scottsdale below (see arrow @ bottom of page pointing to the CMI):

BTW - This a pretty good improvement in the CMI for Scottsdale over the last 30 days. However, that's because, as you see below, month-over-month, we see more Active Listings than either Pending or Sales.

Ps. Green button trend good for sellers; red button trend good for buyers.

Quick Real Estate Update...

Despite there being very little sign of an improvement in demand, the market continues to swing slowly but surely back towards a more neutral and balanced state thanks to the weakest arrival rate of new listings in 14 years. This pushes the Cromford® Supply Index down and hence the Cromford® Market Index moves up. When we look at the single family market in the major and secondary cities over the last week we see:

​

Here we see 22 cities with an improved market for sellers and only 7 deteriorating. The largest percentage improvements were seen in:

1. Gold Canyon
2. Litchfield Park
3. Sun Lakes
4. Sun City West
5. Fountain Hills
6. Tempe
7. Chandler
8. Goodyear

Deterioration of more than 1% was seen only in:

1. Casa Grande
2. Laveen

The overall Cromford® Market Index has risen from 92.0 to 92.5 over the last week, certainly not a spectacular move but we are now well inside the balanced zone between 90 and 110.

The improvements in the cities that have become more favorable for sellers are mostly due to reduced supply. For example, active listings in Gold Canyon are down from 185 on June 26 to 118 today (excluding UCB). However Litchfield Park is unusual in seeing a short term uptick in demand.

Demand from investors has now dropped below normal and the market is once again dominated by regular MLS sales. Most agents who work only normal re-sale listings are experiencing pretty reasonable market conditions. However, the new home market remains in the doldrums and much weaker than expected. The REO and short sale sectors are much quieter than they used to be and this is not just due to lower numbers. Ordinary buyers are much less interested in rehabilitating a property. It is noticeable that most well-priced homes in great condition are moving more quickly than those that need a lot of work.

Market Update - July 2014....

I was on vacation so sorry for the delay but good things on the horizon...here is your real estate market update : )

 

July 6 - It's all in the mix. If we examine the monthly median sales price for all areas & types we get $196,200 today, which is up 7.2% from this time last year. However the majority of that price improvement is due to a change in the mix, not an increase in home sales prices between July 2013 and now. This is revealed if we look at the individual monthly median sales prices for the 3 major types of transactions across Greater Phoenix:

• Normal sales - $205,000 - up 2.5% from $200,000 last year
• REO sales - $134,045 - down 1.5% from $136,050 last year
• Short sales & pre-foreclosures - $138,000 - down 1.4% from $140,000 last year

Two of the categories are down from last year while the third (and most important) is up a mere 2.5%, not much more than inflation.

The big change is in the share of the market that each transaction type has taken:

• Normal sales - 89.7% - up from 79.5% last year
• REO sales - 6.5% - down from 8.7% last year
• Short sales & pre-foreclosures - 3.8% - down from 11.8% last year

The swing away from distressed sales (which have much lower prices) towards normal sales (which have slightly increased prices) accounts for a much larger increase in the overall median sales price than for any of the 3 individual transaction types.

July 5 - Looking at the Affidavits of Value filed in Maricopa County during June we can see that investor purchases have dropped again - down to 13.2% of sales from 14.9% last month and 24.3% in June 2013. We have to go back to October 2008 to find a month with as low a percentage of investor purchasing. However there were still 1,038 investor purchases while in October 2010 there were only 792. During 2008 most investors were on the sidelines waiting for prices to show some signs of stabilization. That happened at the end of March 2009 and the investor percentage immediately shot up to 20%.

The peak month for investors was July 2012 when they purchased 2,698 homes or 33.5% of the total.

Because they do not generate Affidavits of Value, these numbers excluded trustee sales and HUD sales.

July 4 - I don't want to sound repetitive but the current low volume of new listings is quite remarkable. The decline started in earnest in June and we can see that for Greater Phoenix there were 8,465 new listings in that month. This is by far the lowest number of new listings for any June since we started measuring in 2001. June 2013 was the previous low at 9,247. June 2006 was the highest at 15,995. It is all the more remarkable because during the first 4 months of 2014 the new listings were arriving significantly faster than in 2013. May saw roughly the same number as last year. If we look only at normal listings then there were roughly the same number of new listings in June 2014 as in June 2013. There were only 694 distressed listings in June 2014 while there were 1,469 in June last year. So this is where the decline is really taking place.

July 3 - A distinct improving trend has set in though we still have a little way to go until we recover to a fully balanced market. We can see the improvement from the Cromford® Market Index for the single family market in the major and secondary cities:

​

This is the best looking table for sellers than we have seen this year.

We now see 24 cities showing improvement and only 5 showing deterioration from a seller's perspective. Many of the improvements are substantial including those for:

1. Sun City
2. Anthem
3. Fountain Hills
4. Paradise Valley
5. Tolleson
6. Sun Lakes
7. Scottsdale
8. Casa Grande
9. Gilbert
10. Surprise
11. Glendale

However the following cities are still deteriorating:

1. Litchfield Park
2. Avondale
3. Goodyear
4. Chandler
5. Buckeye

The vast majority of areas are also seeing a fall in active listings over the last month. The notable exceptions are :

1. Avondale (up 6.4%)
2. Litchfield Park (up 5.7%)
3. Laveen (up 4.4%)
4. Tempe (up 3.6%)
5. Chandler (up 2.2%)
6. Goodyear (up 1.5%)
7. Buckeye (up 1.1%)

We can see a strong correlation between more active listings and a deteriorating market index.

April Update: Pocket Listings Taking Over?!? Short answer, No.

April Update:

There has been some very questionable commentary in certain media about the percentage of home sales that take place outside the MLS. It appears that some consultants are suggesting that almost half of transactions occur independently of the MLS or sell within a few days of listing. The phrase "pocket listing" is being banded about as if it is some new phenomenon that is rocking the market and causing the MLS to lose market share.

None of these things is true here in Greater Phoenix. Pocket listings blossomed during the hot market of 2012 and early 2013 but never reached epidemic proportions and are quite rare now.

If we examine all the residential transactions in Maricopa County during March 2014 for single family and condo/townhouse homes, we find that 76.4% of arms length transactions went through the MLS. For the 24.6% which did not touch the MLS, very few were "pocket listings".

Here are the percentages of transaction types that occurred outside the MLS in March:

• new homes - 73% of new homes did not get listed on the MLS - there were 555 unlisted new home sales
• trustee sales - 100% of trustee sales did not get listed on the MLS - there were 184 of those (excluding those that reverted to the beneficiary)
• bank sales - 12% of bank REOs did not get listed on the MLS - there were 25 of those sold without a listing
• GSE REOs - less than 0.5% of Fannie Mae and Freddie Mac sales are sold outside the MLS - just 1 in March
• investor flips - 28% of investor flips were sold outside the MLS - there were 130 of these unlisted - often sold to other investors without any fixing (wholesale)
• pre-foreclosures - 17% of these were sold outside the MLS - there were 14 of these unlisted, often because it was the buyer who initiated the conversation
• short sales - none of these were sold outside the MLS (unless already counted among the pre foreclosures) - lenders like to see homes marketed before agreeing to a short sale offer
• sheriff's sales - 100% of these took place outside the MLS - 16 in all
• HUD sales - 3% of these take place outside the MLS - amounting to just 1 home
• normal sales - 15% of these took place outside the MLS accounting for 837 sales

Among the 837 normal sales which took place outside of MLS, they break down as follows:

• 43% involved an investor buying from an owner-occupier - the seller rarely initiates these transactions, so the question of a listing doesn't come up.
• 17% involved a private sale from investor to investor - these are usually negotiated outside MLS with no agents involved. Indeed the investors often hold real estate licenses themselves.
• 17% involved an investor selling to an owner-occupier - sometimes with seller financing or a sale agreement, sometimes a sale to an existing tenant, requiring no marketing
• 24% were owner occupiers selling to owner occupiers. These are either FSBOs or "pocket listings". We cannot distinguish between the two because the agent does not get a mention on the deed and there is no MLS data

If we focus on owner occupiers who wanted to sell and didn't go through the MLS, they either tried to sell their home themselves (FSBO) or used an agent who did not use the MLS (pocket listing).

A remarkably small number of sales could classified as FSBOs or pocket listings. In March the total was 202, or just 2.6% of all sales.

Of the sales that took place through the MLS, 290 or less than 5% had cumulative days on market of 3 days or less. The remaining 95% took at least 4 days to go under contract.

There is no sign of the MLS losing market share. In fact it has gained significant market share over the last 12 months.

In 2005 at the height of the bubble, pocket listings were rampant, as well as FSBOs. But we are not at all like 2005 in 2014.