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Information comes with experience

This is me from today’s Arizona Republic (permanent link):

Information comes with experience

Continuing from last week, let’s work together as Realtors and round out the purchase offer for our buyers.

What’s the best closing date? The buyers have never thought about it, but it’s our job to know. They’re in a lease until the end of January, and obviously they would want to limit the number of days they pay for two homes.

But mortgage interest is paid in arrears. If the buyers close very late in the month, they will pay a small amount for those few days of interest, and then their next payment will not come until March 1 — a nice breather.

Closing too late in the month is bad because things can spill over to the start of the month — which means almost a full month of interest payments in advance. Ideally, we want a Tuesday, seven to 10 days from the end of the month.

But wait: The buyers are taking 3 percent in closing costs. Who cares about pre-paid interest? The buyers might not know to care, but we get paid to care. Our costs are so low that we might be able to apply a big chunk of that 3 percent to buying down the interest rates, leaving the buyers with extra money in their pockets with every monthly payment.

How much in earnest? A thousand dollars, right now. It’s a buyer’s market.

Now this is not a hugely aggressive offer. Buyers are rarely willing to push things as hard as they might. But, the aggression in this offer was put there by us, not by the buyers. Most of the very subtle ideas the buyers will have known nothing about until we explained them.

That’s representation — real, not perceived. Truly, the buyers had no idea how to construct an offer for their home.

Every home is unique, and every real estate transaction is unique. There is no way that unrepresented buyers and sellers can do as well for themselves as they could with professional representation. The information that matters doesn’t come from the MLS, it comes from the accumulated experience of a Realtor.

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  • 12 comments

    12 Comments so far

    1. Brian Brady December 30th, 2006 12:12 am

      You say in 400 words what others are trying to articulate in 7-10 page white papers.

    2. Joe December 30th, 2006 4:20 pm

      I’m sorry, but I still don’t see how anything you’ve presented is much other than common sense. Anyone can find out that interest is paid in arrears and that you’re best off closing 7-10 days from month’s end. And putting less in earnest is again just common sense when you have the upper hand.

      Your buyers just sound uneducated. I don’t see how any “value” you provided was otherwise unattainable with a few hours’ research.

      There is no way that unrepresented buyers and sellers can do as well for themselves as they could with professional representation.

      I’ve purchased more than 10 properties with the help of nobody other than my trusted real estate attorney, and his main function was to watch my back with the contracts. Did you intend to include attorneys in that statement, or just realtors?

      The information that matters doesn’t come from the MLS, it comes from the accumulated experience of a Realtor.

      Then why not just open the MLS system? If experience is the real value, then why does MLS insist on remaining closed to everyone but licensed agents and brokers? Wouldn’t opening the system do away with unethical practices like manipulating the DOM numbers and such?

    3. Brian Brady December 31st, 2006 1:32 am

      Joe:

      Maybe you’re not the …err…usual property buyer? You’ve demonstrated a sense of investing savvy already with your comments.

      If your cousin, who was an “Average Joe” and looking to buy a home, approached you, would you tell him to do it himself?

    4. John December 31st, 2006 1:35 pm

      Joe: common sense is not so common. Someone famous said that, I forgot who. Most buyers are either dumb or they simply don’t have the experience (first time buyers). Sometimes a simple bit of advice at the right time can save someone thousands and a lot of headache.

    5. Joe December 31st, 2006 3:54 pm

      Brian: note that in my comment I didn’t say they should do it themselves. I almost always use an attorney in my transactions.

      My main point is that in Greg’s post I don’t see where Greg has indicated that he’s done something a buyer couldn’t do.

      * Offer on a Tuesday. (Uh… OK. Some RE Almanac says that, I guess?)
      * Put less in earnest because it’s a buyer’s market. I need to be savvy to know that without an agent?
      * Close toward the end of the month because interest is paid in arrears. You find that out one time, then you know it the rest of your life.

      I’m sure agents can provide value somewhere; I just don’t see it in that list. That’s just me, I guess.

    6. John December 31st, 2006 5:29 pm

      Joe, that’s a lame argument. Just about anything can be done by anyone with enough experience, learning and invested time. People can change their own oil, cut their own grass, and even represent themselves in court. By your logic, you could in theory learn everything your lawyer knows and do the whole thing yourself.

      It’s just not practical for most people to do all that. That’s why everyone does what they’re good at and pays money someone else to do the rest. It’s called outsourcing. Unfortunately, so many realtors do so little that folks get the impression that a good realtor can’t do anything important.

    7. Joe January 1st, 2007 2:07 pm

      John,

      Please go back and re-read my comment, because you obviously missed the point. Read it 3,4,5 times if you have to. I did not say that people should go it alone. I even said that I myself use an attorney in my transactions.

      I don’t see in Greg’s list where any additional value was provided beyond what a buyer could learn themselves. That still doesn’t mean you should close on your own, as I’ve indicated above, yet again.

    8. Joe January 1st, 2007 3:30 pm

      By the way, I’m still waiting for a response to my last question:

      The information that matters doesn’t come from the MLS, it comes from the accumulated experience of a Realtor.

      Again — then why not just open the MLS system?

    9. Joe January 2nd, 2007 10:56 am

      So, can I pretty much expect to not get an answer to that question?

    10. NYCJoe January 3rd, 2007 6:09 pm

      Since Greg has decided (for whatever reason) to not respond to me simply because I don’t tell him what my email address is, let me open the question to the rest of the bloggers here: why keep the MLS closed to non-agents if, as Greg states, the real value of an agent comes from the application of that agent’s experience and not the MLS data?

      Many realty sites let users search the MLS database to find houses for sale that fit some given criteria, such as price, size, bed/baths, etc. That information, of course, is useful, but the MLS has much more data available that is not opened to outside users: Days On Market (DOM), the ability to search for comps, the record of when the house was listed previously (and how that listing ended, such as sold, expired, etc), you get the idea.

      My contention is that keeping the MLS closed creates the conditions for abuse of the system. For example:

      * Agents can reset the Days On Month number by cancelling a listing and then re-listing under a new MLS#. This makes a house look like it is newer on the market than it actually is, and is against MLS rules. The rules say that the listing must be cancelled for a specific time period (30 days, I think) before it can be re-listed with a reset DOM.
      * Agents can cherry-pick the comps that they think best support the price of the house in question, and the buyer/seller has no easy way to do their own research to verify the comps. Yes, many town county clerk offices do provide on-line searches of previous sales data, but there’s no easy way to do a comp search like the MLS provides.
      * The MLS database contains a history of when the house was previously listed, regardless of whether the house sold or not. This information could be useful to a buyer to see if the seller has a history of trying to over-reach on price and set expectations accordingly.

      This is just a sampling of ways in which providing this data into addition to the current MLS public data could be valuable to buyers and sellers; I’m sure there are others.

      Note: I’m not suggesting that all of the MLS data be made public, like the seller’s phone number and showing instructions and the like. In fact, you don’t even need to open the entire MLS database itself – just the data that provides the most potential for manipulation, so that both the buyer and seller can feel confident that they are negotiating in good faith. A good start would be the data I’ve listed: DOM, listing history, comp search.

      I’m interested in hearing the opinions of others on this – are there any good reasons out there for not providing these additional data points?

    11. Cathleen Collins January 3rd, 2007 7:33 pm

      I can’t speak for Greg, and he has decided not to speak to you, but I’m sure no small part of his frustration with anonymous commenters comes from the pretense that you are introducing topics to this weblog.

      Greg has written at great length about opening up the MLS system:

      What replaces the MLS? Advertising is a given. Compensation/ cooperation can be addressed separately. But the quality and quantity of the data is irreplaceable…

      Defining the Divorced Commission: A short-hand term for understanding alternative real estate compensation models…

      The Divorced Commission and the MLS: Building a much better home search tool…

      There’s a lot more than that, all available through the search function.

    12. NYCJoe January 3rd, 2007 11:40 pm

      Thanks for the response. I don’t know what you mean by “pretense” of “introducing topics”, though – I was merely responding to Greg’s post. The last sentence, to be exact. I don’t understand how that’s “introducing a topic” – my post is relevant and a direct response to something that Greg wrote. If he doesn’t want to respond, fine, that’s his choice, but please don’t accuse me of having a “pretense” when there is none.

      By the way, I had already looked through the articles that you linked; they’re not really on point for the question I’m asking. The MLS doesn’t need to be “opened” in order to accomplish what I’m asking about, the fields available to the general public for searching just need to be expanded.