Ibuyers offer “Convenience”, but at what cost?

We’ve all seen or heard the ads, because they’re everywhere. 

 

Opendoor, Offerpad. Zillow — all “iBuyer” companies that want potential home sellers to bypass the traditional sales process and accept their cash offer in the name of “convenience.”

 

My first thought about all these ads is that a lot of money is being spent to get all that attention. Think about some of the other categories of goods and services that blanket the airwaves with advertising: Automobile manufacturers and insurance companies come to mind — two products that are very expensive for consumers at least partly because of these corporations’ big marketing costs. 

 

These iBuyer services purport to be the quickest, most convenient way for a person to sell a home. According to a representative from one of these companies who spoke at a recent local real estate continuing education session, a prospective seller can contact the company, send them some photos, and they will respond promptly with a cash offer based on what they say is a proprietary formula — which includes a look at what similar houses have sold for recently.

 

If you, as a seller, want to accept that offer, the company sends a member of its staff (not an appraiser, not an independent inspector) to assess the value of the home first-hand.

 

Any repairs or other issues that need mitigation will be reported back to you, along with a choice: Let the companies’ contractors come in and, for example, fix a leak in the roof or the toilet — at a deduction to your offer price — or have contractors of your choosing make the repairs and show proof of satisfactory completion.

 

As for convenience, this particular company charges all home sellers a 1 percent “convenience charge.” Yes, that’s exactly what they call it. 

 

That’s on top of a buying agent commission ranging from 2.5 to 3 percent; 0.1 to 0.2 percent “listing costs,” and a range from 2 to 6 percent for “holding cost and risk.” The company’s “cap” on the total fees charged to a seller, it was noted, is 14 percent.

 

Fourteen percent. Compare that to the typical and negotiable 6 percent commission a Maricopa County home seller will pay to have his or her property actively marketed and listed by a Realtor. So, for example, on a home sold for $280,000 — the current median home price in the Metro Phoenix market — the 6 percent commission would be $16,800. If a homeowner’s fees to sell to one of the iBuyers reached 14 percent, the cost would be $39,200. That’s a $22,400 premium for a “quick” sale in a market that has rarely seen quicker turnaround than exists today.

 

The reason the market is currently seeing quick sales transactions in general is that the Phoenix real estate market has a very low supply of homes available, as well as heavy demand — Arizona’s population growth is the fastest in the nation, up 2.21 percent to climb to over 7.1 million residents last year. 

 

That high demand means homes are sold more quickly — current average days on the market, according to the Cromford Report, is 56.48 days — the fastest since August 2013 (58.73 days on average). More proof: On Oct. 1, 2019, there were 17,535 active listings on the MLS. On the same date a year ago: 20,292 listings. In 2017: 21,804 active listings.

 

What does this mean to prospective home sellers who are trying to decide between contacting an “iBuyer” program or reaching out to a Realtor with a fiduciary responsibility to work diligently on clients’ behalf to market and promptly sell their home at the best possible price? 

 

It means looking up a local Realtor before contacting one of the “iBuyer” companies would be a very wise move.

Is Selling a home through Offerpad or Opendoor better than hiring a Realtor?

For many months in the Phoenix metro area, alternative services to real estate agencies and Realtors  like OfferPad and Opendoor have been aggressively advertising and promoting their alleged advantages to selling a home “a different way.”

I recently visited  one of these websites to find out how much they would offer to purchase my own house.  As a Realtor, I have a strong sense of where my house should be priced at to sell. The resulting offer was a price about $10,000 lower than what I would sell my house for in today’s market.

However, that wasn’t the end of the story. On top of the $10,000-below-market-value offer, the service deducted 9 percent from its offer price to be applied towards their holding costs (utilities, HOA fees, and maintenance) until they sold the house to another buyer, and also covering their sales commission to sell the house, plus other miscellaneous administrative costs.

Finally, in addition to the holding costs, the service noted that it would deduct repairs or replacement costs after an inspection. These items included, but were not limited to, the air conditioning unit, roof, water heater, appliances or structural flaws.

Will customers receive more money for the sale of their house if they go with one of these services instead of selling the home the traditional way by hiring a Realtor? Below is an example that shows the comparisons:

                                                         Alternative Home Buying Service            Realtor

Sale Price                                             $360 ,000                                                              $370,000

 

Commission/holding cost/           -$32,400 (9%)                                                     -$25,900 (7%)*

Closing cost deductions

Repair/Replacement cost             -$2,000 (estimate)                                           -$1,000 (estimate)

Net Profit                                            $325,600                                                              $343,100

Difference in Gain                           – $17,500                                                              +$17,500

In summary, hiring a Realtor to sell a home in my area would result with the homeowner pocketing well over $15,000 more than using the alternative service.

However, for some sellers, the convenience of selling their house “as-is,” not having to show the house to buyers or waiting for a buyer to make an offer, plus the sometimes lengthy closing process may be enough reasons to justify the a more than $15,000 reduction in profit.

Like any investor, OfferPad or Opendoor will give you less money in exchange for convenience.  The choice is yours.

 

Lennar Homes at Layton Lakes Review

by: Maria Hass – I had the opportunity to place three clients with Lennar Homes at Layton Lakes in Gilbert, AZ, and I’m delighted to say that all three experiences my
clients and I had with Lennar Homes were extremely positive. Here are some reasons why:

1. Communication: The Builder’s representatives Kristi Rae and Jessica work well together. Their communication
with the field supervisor, clients, myself, mortgage and title companies were streamlined from start
to finish. And everyone involved in the correspondence was copied so that everyone was on the same page and
aware of what was taking place every step of the way. They kept me involved in the whole process from contract signing, inspection, walkthrough and closing. This is different from my experience as a Realtor with other builders. Many Builders only keep me involved in contract signing but cease to update me moving forward. I would like to act as counsel to my clients and guide them every step of the way. It is difficult to do this, when the Builder’s employees don’t include you in their correspondence with your client.

2. Efficient: The builder’s representatives were on top of things. They sent notices and reminders ahead of schedule
and prepared my clients to know when to expect important events to happen.

3. Construction Supervisor: Kyle Wolf went out of his way to accommodate my client’s request to move the fence in front of their living room window instead of behind the window for privacy. In order to do this, the outside faucet had to be replumbed and the wall had to be retextured. Lennar Homes redesigned their plan to ensure my client was happy. Most builders would not make any changes to their original plan because it requires more work, time and communication. Instead, Lennar Homes listened and accommodated my client’s request without hesitation
and for that my client is grateful.

4. Title company and Mortgage Company: Nicolette of Universal American Mortgage Company and Michelle Musgrove of North American Title were efficient and closed escrow on time in all of my transactions.

Lastly, the turnover of staff seemed low. I’ve been working with the same people for more than two years. If a company is able to keep great workers, they are doing something right. So the next time you search for a new home, consider checking out Lennar Homes at Layton Lakes in Gilbert. Not only do they have excellent
customer service but they also have a big inventory of move-in ready homes than any other builder in the East Valley at any price range for any size family. Select from over 18 floor plans in four different communities – Horizon, Signature, Destiny and Vision. If a family oriented community with lots of greenbelt, walking paths, basketball court, splash pads, tennis court and a community elementary school interest you, stop by the Lennar Homes Model Center by Lindsay and Queen Creek.
Plus, they give the Buyer 4% towards payment of their closing cost on spec homes.
And remember to bring a qualified buyer’s agent like myself to ensure your best interests are represented.

http://www.lennar.com/new-homes/arizona/phoenix/gilbert/layton-lakes

Real Estate Story 3 – Why Didn’t You Tell Me the House was Haunted?

By: Maria Hass-

I tuned my car radio to 104.7 FM one recent morning when the “Machaca” segment of the Johnjay and Rich radio show came on. This is the portion of the show where the show hosts help a caller solve a puzzling question by tricking another person to confess his or her darkest secrets on the show.

A caller wanted to find out if there was a homicide that happened in the house she currently rents. The caller said she had seen ghostly images appear in the bathroom and felt a presence lying in bed next to her. She hadn’t slept for three months because she was wondering about the story behind this house.

Johnjay and Rich called the woman’s landlord pretending to be from a movie production crew and scouting for a haunted house to film a scary movie for $10,000.

During the course of the conversation, the landlord, owner and Realtor admitted that there was a double homicide and suicide that occurred when the mistress of the husband came to the wife’s bedroom and shot the wife while asleep. The husband came up to the room and saw the wife dead and shot the mistress and later shot himself.

The caller wanted to know if she could break the lease and if the landlord was wrong in not disclosing to her as the tenant that the house was “haunted,” or a site of homicide.

Is Landlord obligated to disclose that house is haunted or a site of a homicide?

The answer is found in lines 25 to 29 of the Arizona Real Estate Agency form provided by the Arizona Association of Realtors.

Pursuant to A.R.S. §32-2156, Sellers, Lessors and Brokers are not obligated to disclose that a property is or has been: (1) the site of a natural death, suicide, homicide, or any crime classified as a felony; (2) owned or occupied by a person exposed to HIV, or diagnosed as having AIDS or any other disease not known to be transmitted through common occupancy of real estate; or (3) located in the vicinity of a sex offender. Sellers or Sellers’ representatives may not treat the existence, terms, or conditions of offers as confidential unless there is a confidentiality agreement between the parties.

Although the action of the landlord may be construed by the tenant as morally wrong, it was legally fine. The tenant can break the lease anytime with penalty, or as described in the lease agreement. If tenant wishes to break the lease without penalty, she could hire a lawyer to stand in her behalf. There are volunteer lawyers that advocate for tenants’ rights, or check with the Arizona Department of Real Estate for resources pertaining to this complaints.

*Maria Hass is a full time Realtor with HomeSmart, the no. 1 Real Estate company in Arizona. She has 5 star reviews from past clients and operates majority of his business by referral only. Contact her at (480) 650-0075.

I Have Multiple Offers on My House – What Should I do?

by: Maria Hass

 

I recently received multiple offers on a couple of properties I listed. One of the homes received multiple offers after only one day of showing.

It is flattering to receive multiple offers back-to-back. It is similar to receiving more than one proposal for your heart at one time.

The problem is — who will you pick?

It requires a knowledgeable and experienced Realtor with strong negotiation skills to achieve the best results for the seller. In a multiple offer scenario, the seller has several options:

1. Counter one offer at a time.
2. Counter all the offers at the same time.
3. Accept one of the offers.

Finding the best option will depend on the type of buyers you have. By answering the following questions, the listing agent will have a better understanding about which buyer has most to gain or lose in purchasing the property:

 

1. Why are the buyers buying the house (determine motivation)?
2. Which buyer is most qualified?
3. Who needs the house sooner?
4. Which buyer’s Realtor is easier to work with?
5. Which buyer has the lender that is reliable and can close on time?

 

Finding more information about the loan officer and lender is a critical choice. In many cases, a lender can make or break the deal. The listing agent should know if the lender can close on time; the lender’s requirements; the structure of the loan officer’s business; the ability of the loan officer and his or her team to communicate with you; level of experience; track record, and so on.

 

Big banks like Wells Fargo, Chase Bank and Bank of America, based on my experience, do not provide good training and supervision for their newer loan officers. This can result in many failed transactions. Big banks have a multiple layers of bureaucracy and restrictions that can prevent the Realtors and all parties involved from knowing what is really going on with the buyer’s loan application.

I had a file handled by a Wells Fargo loan officer which did not close because the loan officer could not get the buyer’s salary disclosed in the loan documentation to match up with the buyer’s salary as reported by their employer’s a few days before closing. The buyer did not get the house and I earned zero commission on a transaction that was near its conclusion.

The listing Realtor’s art of disclosing or not disclosing information on other bids is dependent on seller instruction and is crucial in influencing the final price for the house.

 

On the other hand, it is possible for some buyers to lose interest in a property if placed in a multiple-offer situation. These type of buyers are not interested in competing and raising their price; they would rather go look for other properties than watch the prices go up. It is important for the listing agent to keep the buyers updated about the process and to keep the buyer’s Realtors engaged in these exchanges. Otherwise, you can lose ALL your buyers.

If you are fortunate enough to get multiple offers when selling your house, if you aren’t working with me, be hopeful your Realtor follows the rules I do: Think smart, know your buyers, and engage with them to compete with each other’s bids.

Good luck!

 

How Much House Can You Get for Your Money in Arizona?

by: Maria Hass-

Compared to other U.S. cities, Metro Phoenix is one of the most affordable places to live.

In fact, website Realtor.com recently named Phoenix as one of the top 10 fastest-growing real estate markets in the nation for 2015.

Cost of living, quality of life, employment opportunities, infrastructure, disaster-free climate, ethnic diversity, and opportunities for myriad types of outdoor recreation are among the reasons people from diverse backgrounds and income levels choose Arizona for their primary or second home.

The same size and quality of home you might purchase in Los Angeles for $3 million will typically be priced at an average of $1 million in the Phoenix area. The added benefit is that homes in Arizona are likely to be newer.

Different types of homes can be built in Arizona. You can find high-end homes built in the hills surrounding Mesa, Scottsdale and the Tucson area. Horse property homes are available on the east and west sides of town. Custom homes, semi-custom homes, winter homes, active adult communities for 55 years and older and young family communities are also good choices for home buyers looking in Arizona.

Is it cheaper to own a house or rent?

In many parts of Arizona, the money needed to pay the mortgage is often much less than renting. The low mortgage interest rates and still-affordable home prices make mortgage payments a better deal. The rental market has also remained strong. The demand for rental homes by people who are not qualified to buy a home — or are simply not ready —  has continued to push rental prices upward.

 

What’s the future of home prices in Arizona?
We are seeing much stronger upward movement in pending listing counts and under contract counts than existed last month or last year. We therefore expect good demand during the spring selling season and no significant downward pressure on pricing unless a substantial amount of new supply is introduced.

At the moment, supply numbers remain weaker than last year, so we could see prices increase over the next three months. Almost every year, we see a little price weakness during the summer followed by renewed strength during the last four months of the year.

“I Hope I find a Great House” (Not a Great Realtor)

by: Maria Hass

One recent Sunday afternoon, a married couple came to an open house I was hosting in Chandler. They were looking for a new house because they were not happy with their current home in Gilbert – which they had only purchased three months earlier.

Apparently, they decided that their current house was too small, among other issues. I asked them if they were working with another Realtor to find them a new house and they answered, “Yes, we’re using our old Realtor.”

It sounds funny, but why would you do business with the same Realtor who just found you a house you didn’t like? Obviously, the couple that visited my open house didn’t want to deal with a Realtor. They just came to look at the house.
This brings me to a page I was reading in a book titled “Super Agent” by Joanne and Joseph Calloway. The book mentions that seasoned Realtor Russell Shaw once commented, “Buyers wake up in the morning thinking, ‘I hope I find a great house (not a great Realtor)’.”

This sentiment is accurate. I know many buyers think that way. This statement is however, FALSE, because you find a great house the majority of the time through the efforts of a great Realtor who understands your needs.

Unfortunately, Realtors in general have been a target of negative public opinion, owing to part-time Realtors who are not properly trained or who are unprofessional “discount” Realtors providing below-average service.

Every Realtor is different depending on level of expertise, knowledge, communication style, professionalism, work ethics, etc. Yes, there are lazy and unmotivated Realtors too, and also those who overpromise to get your business but never deliver.

In reality, there are many Realtors who are well-trained, knowledgeable and educated, committed to looking after the best interests of their clients.

These Realtors exist and are dedicated to finding you a home that you like – if you stay committed to them. After all, having more than one Realtor is the same as having none. Professional Realtors don’t like working with buyers who don’t value their time and are not loyal.

Great Realtors can get you the house you want just by listening to you. In some cases, you only need to look at a few houses to find the one house you like. Great Realtors can find you the one house you like regardless of the market and create an action plan to get you into your dream home.

The market changes and as a buyer you should know how to adapt to these changes if you want to buy a house soon. Without a great Realtor, you will be looking longer and end up wasting more time and money. Great Realtors simplify the buying process and move the transaction to closing.

So, if you are a buyer looking for your next house, wake up one morning and say, “I hope I find a great Realtor today!”

Had the couple at my recent open house decided to take some time to talk with me, they may have learned some important things about the market and homes for sale that would help them in their new home buying journey.