Intermediate Information: July 2007 Archives
One of the most important things for the buyer in any transaction is confidence that the seller has disclosed all known problems. One of the things most people don't realize, or act like they don't realize, is that it's at least as important to the seller.
The California Association of Realtors (CAR) has a program called Winforms that lets me ask all of the little niggling questions about the home. Very convenient, very nice, and I've done my duty when I fill it out with a listing client.
This does not mean that I or the seller can ignore any metaphorical elephant in the room not covered by the form. If there's something that's obvious, I have a duty to ask about it and record the answer, even if it isn't on the form. The seller has a legal duty to disclose anything they are aware of that might cause a reasonable buyer to change their minds or their offering price. A cracked light switch protector plate is not a big problem and you're going to either fix it or agree with the buyer that you won't. But past termite damage, whether someone has died in the home recently, soil subsidence (even on the far side of the property), and any number of other factors can be reasons why prudent buyers may no longer be interested, or may wish to re-evaluate their offer. The rule for smart people is "disclose everything and let the buyer decide if it's important." A certain percentage of sellers, however, just want to get through the transaction without the buyer changing their mind. For Sale By Owner (FSBO) sellers seem to be significantly worse about it, by the way, which is one of several major reasons I'm always leery of FSBO properties with my clients. These sellers either don't realize how strongly omissions can come back to bite them, or are hoping they will be gone by the time it comes to light.
First off, unless you're planning on dying, you can be found. I know a lawyer that makes a good living at it. Furthermore, failure to disclose frequently makes your liability worse, in that you had a duty to disclose and you did not. It is possible that failure to disclose means a judgment for punitive damages in addition to increased economic damages is in your future, whether you are seller or agent or even buyer's agent if it was bad enough. Furthermore, you can count on the damages being larger because the problem has had time to get worse, paying the costs incurred in order to find you, and so on, when if you had simply disclosed in the first place you would have been off the hook.
Now, your real estate agent is not (generally) a building inspector, tax records expert, or any of those kinds of specialist. I recommend an inspector for every purchase, because I'm certainly not qualified to do that job. But if I spot something that may not be right, I have a duty to disclose it to my principal, and find out if it really means anything from a real expert. Sometimes there's a tax assessment that has passed or pending that doesn't have numbers associated with it yet. If it's passed, the title report should have the information, but they've been known to miss one occasionally. If it's pending (e.g. bond measure on the next ballot), it's a good idea to tell the buyer, or at least tell the buyer about where to find out.
For an agent, failure to disclose may mean that your professional insurance won't cover it. The professional insurance is for errors (honest mistakes) and omissions (errors of ignorance), not intentionally hiding something. This liability can easily run to several times any commission you made, so it's a really bad idea to hide anything. Agent or seller, if they buyer can prove you knew, or that you should have known, you're basically up the creek.
Caveat Emptor (and Vendor).
Appraisers Petition Against "Make The Deal"
I've spoken about these issues before in this post.
I've certainly heard of plenty of abuse on both sides of this equation, and there is plenty of motivation for lenders to abuse the situation by requiring a higher than "real" appraisal value. Still, I think that by reading only the comments from various appraisers one would get a skewed vision of what is going on.
It is the appraiser's job to do their best to get a value that is useful. Theirs is a service occupation, just as mine is. I don't expect to be paid if I can't help the people with their situation. Sometimes I put in hundreds of dollars and dozens of hours of work and it all falls apart because of something beyond my control. Situations like this are part of being in business for yourself. I don't expect to get paid when I can't help the people. Why does the appraiser?
These houses are selling for these prices. If the last three similar houses in the neighborhood sold for $600,000, then this one is likely worth $600,000 also. When the appraiser tries to tell me a house that I've seen and is immaculate and further upgraded than than any of the last three is worth $150,000 less than those sold for, something is wrong, and it isn't with the house.
Basically, what's wrong is they don't want to work. They want to be able to drive over and pop the customer for the bill and let the chips fall where they may. And if the house is really only worth $450,000, the house is only really only worth $450,000. But most of the time, if they worked a little bit, and maybe chose a different sale to compare to, they could justify the higher appraisal, but they don't want to be bothered.
Let me ask you: Somebody bills you $400 or so for work that doesn't help you and in fact makes all of the work you put in worthless, it makes you feel all happy, right? They knew before they went over and asked for the check that they weren't going to be able to get the necessary value. You know something? I'd be more forgiving of him charging me $400 in those circumstances than charging my client $400. If the appraiser called first, and told me he couldn't get value, that gives me a chance to re-work the loan and save everybody's investment in this by talking to the client before the client has written a check for $400. If I can't get the client to accept the new loan, at least they're not telling people I screwed them out of $400 on the appraisal. That's right, it's the loan provider that gets the blame for this in the customer's mind. If I tell them about a change before they spent $400, they're not going to be as angry, and even if this loan falls apart they're likely to tell people I was honest and saved them from being out $400 rather than that I took their $400 and didn't deliver. As I think you might have gathered by now, I didn't get that $400 - the appraiser who screwed the loan up did. If I can't turn it into a new different loan, the appraiser is out a little bit of work. I've put ten times as much into making this happen. It's much easier to tell the client their house is only worth $450,000 before they've written that check for $400. The check gets written, and the whole thing is gone up in smoke.
The appraiser, understandably, wants to get paid for their work. So do I. All I ever ask is that they don't intentionally waste my client's money. If they can't get value, give me a chance to re-work the loan or find someone who can get value. In some situations on a sale, this allows me a chance to re-negotiate the price down so my client gets a better price on the house they want. If they just make the call that gives me a chance to fix it first, I will use them again. That's the kind of appraiser I want to work with. But do a "hop pop and drop" ("hop on over, pop the customer for the bill, and drop a useless appraisal on the bank") so that they get paid once while I'm stuck with a pissed off customer who is now going to tell all their friends and family what an awful person I am, and I think they've earned a spot on my personal blacklist of appraisers I will never do business with again. I'll forgive it once, maybe even twice, if this appraiser has a history of calling me first and this time it just happened that they couldn't get value when they thought they could. Treating your customers right is part of the requirements of being in business for yourself, and sometimes this means you did some work and didn't get paid. You want a job with a steady income where you don't take any risks, go find something with a w-2 involved, and the only risk you take is being fired. You won't make as much money, but you will get paid for all the work that you do. For as long as they put up with you.
UPDATE: Home values here locally have deflated significantly. Right now, the value the appraiser comes back with is not usually an issue unless there have been a lot of distress sales in the neighborhood. The appraisal is rarely a major issue when prices are deflating, because it works by historical sales. Yes, there could be five identical homes sitting on the market and not selling for $10,000 less; but the last one that actually did sell sold for $20,000 more, and the appraiser works off of actual sales.
It seems every week I get asked about some new or revived trick that loan providers are pulling. The one thing they all have in common is that they are methods to avoid competing on price. What the basic terms are and how much it will cost you.
First of the big weapons in most loan provider's arsenal is the tendency to most folks have to shop loans based upon payment. Payment has no intrinsic relationship to interest rate, which is what the money is really costing you. But if you do tell people "$510,000 loan for $1498 per month" most people assume that payment covers the loan charges even though it doesn't. People who can afford $1500 per month payments go buy $510,000 properties based upon these payments, and only after they've signed the papers do they figure out that the catch is their balance owed is increasing by $2500 per month! negative amortization loans are the obvious problem here, but less ethical loan providers also use this fact to push interest only loans and temporary buydowns and loans that cost so much in discount points that it would take fifteen years to recover the cost through lower payments - and that is based upon straight line computation, not taking into account the time value of money.
The second tool is the desire of most folks to get something for nothing, or at least appear to get something for nothing. This covers not only Mortgage Accelerators, but also Prepayment penalties and biweekly payment schemes and even debt consolidation. They show you an actual method whereby you might hypothetically have your mortgage or debts paid off in a fraction of the time and without apparent discomfort or compromising your lifestyle if you fit their profile and stick with their program. The slight of hand here is two-fold. First, these are distractions, and if you examined competitive products, you can tack these allegedly neat features onto just about any loan or do it yourself, while they're acting like their programs are somehow unique when they're not. Second, these programs see the lion's share of the benefits at least five years out - when for all practical purposes, nobody sticks with the program that long. I lumped pre-payment penalties in here, because they are an often hidden charge that brings the lender more money down the line when you refinance before it expires, or immediately when they sell your loan on the secondary market, but they don't show up anywhere on the loan paperwork as a figure in dollars you are being charged. at the time you agree to the loan. Nonetheless, most folks who accept pre-payment penalties end up paying them, and they are real dollars you end up paying.
The third tool in their arsenal is that if the cost of something isn't explicitly disclosed, most people will assume it's zero. If there's not an actual dollar figure associated with something, many people think it's somehow free. Many loan providers feel no need to disclose escrow charges, or lenders title insurance, among others. They'll mark it "PFC" as if they don't know how much it's going to be. The net result, as I've said before, is that you end up thinking that "$2495 plus third party charges and two of these points things" is cheaper than the provider who tells you they're going to deliver the exact same loan for $6000 all told (on a $300,000, loan, you're looking at over $10,000 worth of charges from the provider who didn't quote a total figure in dollars. People gripe about "junk fees" when the costs are real, but they've been deliberately lowballed. There never was a chance that they would end up not paying those fees - and they're high dollar value fees - but by not associating a dollar figure with these fees, less than ethical providers are causing people to think they're either free or something comparatively small, like the $2 per tire waste disposal fee.
All of these tricks feed upon ignorance. Ignorance of what they are really doing, ignorance of how financial markets work. The fact of the matter is that nobody is going to do a loan for free. There's a very hard line where it's not worth my while to do a loan - I'd rather spend the time doing something else. Same thing with every other provider in the known universe. For some providers it's more than others, while for other providers, it's less. Everyone wants to make more money for the same amount of work. Competing on price is not a way to get a high number of dollars per loan - so they will do everything in their power to avoid competing on price. But there really isn't any other reason to choose a loan, other than that it's offering the same terms at a better price. A loan is a loan is a loan, as long as it's on the same terms at the same price. It's not like one loan is a Jaguar while another is a Prius and a third is a Mustang, or one is a Craftsman while another is a Colonial and a third is a Cape Cod.
Loan providers that don't compete based upon price compete based upon hiding the gotcha!, or pretending it's not important. If you understand the gotcha! associated with a particular loan, and are fine with it, that's great. If you don't understand the gotcha! chances are that it's going to bite hard.
(This was originally written in July 2005, but still has a lot of relevance)
On someone's website:
"Besides once in California, which completely recovered in a short period of time, by the way, can someone please show me an example of a "Housing Bubble" that burst that did not completely recover within a few (i.e., 3-10) years?
"Housing Bubbles" were invented by stock brokers, and real estate remains, and will almost assuredly remain, your absolute best investment."
Actually, California pricing has reliably gone through cycles within my lifetime. We have hit the peak of the fifth one I remember (1991 was the last peak, which makes this the longest period between peaks ever. Previous peaks were mid 80s, about 1978, about 1970, and one when I was very young), and started a downslide. Right now it is primarily the higher end properties which have been hit, but it's starting to push the middle down as well. It is important to note that with the exception of the slide of 1929 to 1932 (when real estate prices fell, as well, and didn't come back to 1929 levels in most of the country until after the war), the stock market has not had a slump which it didn't come back from within ten years, either. Furthermore, when you consider returns uncorrected for leverage, the stock market reliably outperforms real estate over the long term.
In fact, nobody that I'm aware of has said that anyone who intends to buy and hold for years cannot make money - a lot of it - in the current market, even if prices do fall for a while. The problem is in the formerly large number of people looking to buy a property with the intent of "flipping" it for a quick profit. As the ability to buy your average property with the goal of selling it in six months for a substantial profit even after paying transaction costs is just about dead, so too are those deals that would have been made by those buyers. This has the effect of reducing marginal demand, and voila!, the prices are starting to slip. I (and every other bubble proponent out there that I have read) am confident that the prices will come back eventually. The question now, as in the stock market bubble that ended in 2000, will be how long it will take to come back and how far down it's going to go. Right now, lots of people are still down more than 50% from the stock market peak in March 2000. If they need to retire, or need the money for some other reason now, they are stuck. The same goes with housing, which due to the increased leverage of the investment can be much better when it's good to much worse when it's bad. There are at least three "short sales" (where proceeds will not cover obligations) in process in my office right now. If you can't hang on, it does not help you that prices will come back eventually. There's an awful lot of "Negative Amortization" loans out there that will be coming up on recast in the next 18 months, as well as "interest only" loans where the people just cannot afford the amortized payment. Be prepared for problems when they do, as this is going to significantly enlarge the supply (Inventory in many markets is over 200 percent of last years levels already, and mean time on market is even higher as number of transactions slips). The fact that prices have slipped will place many people temporarily upside down, and so unable to make their payments and unable to refinance when their loan adjusts or starts amortizing. Expect foreclosures to further increase the supply of available units.
If you are heavily leveraged on a short term loan (total loans against property total over 70% of current value, and most especially over 80%), I seriously suggest refinancing it into a longer term fixed rate loan now, while appraisers can still find justifiable comparables that use peak real estate values. It is entirely likely that any property which has changed hands in the last couple of years, at least here in urban or urban fringe California (and many other markets, as well), is going to end up upside down for an unknowable period of time.
I am a Loan Officer and Real Estate Agent, and still have current financial licenses which I have not yet abandoned. Real Estate Bubbles are not "invented" by stock brokers; the just ended bull market run in housing was the longest in recent memory partially due to peripheral psychological factors on behalf of investors "chasing returns" in what many will tell them is a "safe market", as well as things having to do with the financial aftermath of 9/11 as well as overcompetitiveness on the part of many pieces of the financial market, most particularly the subprime and Alt-A market. As a particular prediction, when the fall off from the current market is over and done with, I wouldn't expect there to be any lenders willing to go 100 percent on the value of a property for quite some time. There are many people out there too young to remember previous housing cycles, and partially for this reason and partially because the housing markets are more heavily leveraged than at any point since the Depression, I expect to be in for a couple of UGLY years.
I would be delighted to be wrong. Nobody will be happier than me if you can crow at me in a few years time "Told ya!" But I see what I see, and I won't lie about it to anyone (especially not clients) simply because it makes it easier to earn a commission. If you happen to be in the real estate business, be very careful what you tell your clients, or, at least in California, you'll likely wish you had.
Both real estate and the stock market go through periodic downturns. The question is not if, but "when" and "how much" and "how long." You always need a place to live, and you can make money if you invest prudently in any market, and the permitted leverage upon real estate together with favorable tax treatment gives it an advantage that's hard to beat. I had clients make double digit positive returns in each of 2000, 2001, and 2002 in the stock market, too. They were the ones who didn't get greedy (2003 was a rising tide that lifted all boats. It isn't genius when everybody makes 25%). Even in this market, you can make money on real estate, just like you could in the stock market when it was sliding.
In both cases, "time in" counts for more than "timing", but that's not the mentality you encounter in the average client. See my post Getting Rich Quick In Real Estate and Cold Hard Numbers for more information, but although real estate can be the best possible investment if you handle it correctly, it is not liquid. In fact, it is just about the least liquid investment you can make. You cannot go to your real estate person, as you can to a financial person, and say "liquidate it for cash" and expect to have a check for market value within a few days. You have to find a willing buyer. This is one reason for the existence of the "bigger fool theory," and sometimes that bigger fool doesn't come along when you need him to.
real estate investment mortgage
An e-mail I got from a single mother I spent two months working with before she found a special low income program for a property she wouldn't have been able to afford through me. The first paragraph is her addition to me on the front of a forwarded message. I've redacted information that might lead to specific identification of the culprits.
(I haven't been paid anything on this, nor did I expect to be, despite the fact that they told her that I would be to close the deal. She felt obligated to me, but who wants to stand in the way of a single mom finding and affording a better property?).
Dan - This is an FYI. I really wouldn't recommend this program for any of your other clients, or if you do get them involved that you warn them that things stand a good chance of not going as promised. Judging by what is happening to me, I doubt that you ever received your commission from these people.
Good Morning DELETED,
My name is DELETED and I've purchased a condo at DELETED. My close date was supposed to be June 28th. On June 28th I went to DELETED Title and signed off on all the final paperwork and had my bank wire them over $7,000.00. My first scheduled move-in date was on Friday, June 29th. I had to cancel (the move - DM) because it wasn't recorded yet. On Saturday, June 30th I drove over to the DELETED Sales office (my phone and internet has been shut off and transferred) and spoke with DELETED. My next scheduled move-in date was Monday, July 2nd from noon - 4 pm. I asked him if I had to change my plans again and he said "No - because you were supposed to close on the 28th of June and I can go online and see that you have wired your money and completed your paperwork I am going to make an exception and give you your key and let you move in on Monday."
Early Monday morning (we) started bringing all of our boxes and furniture downstairs. At 9 am I rented a U-haul. At 11:30 I went over to the Sales office for my key. I had scheduled someone to pickup and deliver the appliances I purchased for 12:30 pm. (The person who had promised the move in) was "in a meeting" and nobody seemed to know anything about my key. By 1 pm I was quite upset because I still had no answers and only 3 hours left to accomplish my move in.
DELETED sent someone down to try and make things right. I don't think a sobbing woman in their office was very good for business. They went over to the Uhaul place and had the truck reserved until Friday of this week and bought a lock for it. They told me that they would pay my rent and that I could get reimbursed for food if I kept the receipts. Hopefully they will really do this. (it occurred to me later that they also promised me a key and broke that promise) DELETED is calling DELETED (Title officer) twice a day for a status update and what they keep telling me is that the paperwork from the City has not yet been received.
Can you tell me if there is a reason for this and when I might expect this paperwork to be completed?
I'm in a bit of a panic now (to put it mildly) because I need to be out of the apartment so they can clean and paint it over the weekend. I have so little information, I don't know whether to put my things in storage, board my pets and get a hotel for my son and myself. This is also very stressful because most of my money is tied up in the condo and I'm bleeding what little money I have left....sleeping in an apartment on my couch and hoping that the truck on the street in front of my complex doesn't get ticketed or worse yet robbed. Hauling everything back up two flights of stairs was pretty much out of the question (For health reasons - DM).
I feel absolutely miserable. It would be quite ironic to wind up homeless after all this.
If you can shed any light on what is going on, or help me plan what to do next I would appreciate it. I'm really in the dark here.
My phone and internet are at the new place. I had been taking vacation time to move in, but I don't see the point now, so I'm back at work trying not to worry.
This is, unfortunately, not an atypical experience. Public program means you're on a bureaucratic schedule. It's not that bureaucrat's money that's getting spent. They don't get paid any different whether your loan funds and you get your property today, next week, or never.
Furthermore, it has been my experience that companies with the ability to use restricted provider public programs are often looking to boost their profit margin, and because the competition is restricted, they can often get it. That's one of the reason that FHA (among others) is looking to reduce their annual audit requirements, so that the small brokerages and those with thinner profit margins might be willing to sign up and endure the hassles. I've seen firms charge two points and over half a percent higher rate because the competition was mostly eliminated, and what was left was other high margin places. Special programs nobody else has are a license to print money, particularly if access to those programs is restricted by the government. The fewer providers who can do it, the less competition there is, and usually, the higher the mark up they want in order to for the privilege of being one of the selected beneficiaries.
This is not to say that all public housing programs are difficult, or delayed, or costly. There are individual providers who provide just as good a product at just as good a price. However, the statistics seem to be a much higher than usual incidence of delays, costly extras, and just plain gouging going on due to restricted competition.
This is also not to say in any way, shape, or form that public programs aren't worth it. The lady could never have afforded this unit, part of an income restricted program, without a municipal government stepping up to the line on her behalf. Those with a knowledge of economics may realize that this means the other units were made more expensive due to this, likely pricing out other potential buyers so that this particular person could have a better unit. Robbing Peter (and Penny and Porgy and Poppy and pretty much everyone else) to pay Paul and the bureaucrats helping Paul, but that's a matter of housing policy supported by the voters, and my choice is to help Paul or not to help Paul. Peter, etcetera have already been robbed and they're not getting the money back. The bureaucrats will be paid exactly the same whether I help Paul or not. The only question will be exactly who gets this benefit, and I think that under the circumstances I might as well help Paul get them. And if Paul doesn't take it, somebody else will. From an individual choice perspective, such programs definitely assist people in affording housing superior to what they could otherwise afford.
However, you need to realize that there are likely to be delays and unexpected extras in a program like this. One of the requirements of many of these programs is a certain maximum amount of total assets - but if that's all you can have and you have to use some of them for down payment and closing costs, this can mean you're cutting it really tight as far as other expenses go. Indeed, on this scale, paying for an extra few weeks rent at your old place can be a real hardship - but that's the cold hard fact of what happens quite often. If you put in your thirty days notice to the landlord, you're stuck when escrow doesn't close on time. If you don't put in your thirty days to the landlord, you're stuck paying rent for the extra month, costing (in this case) a minimum of about 15% of her total liquid assets, never mind what was left over after what she paid.
There is no universal guide to this situation, and what works in some situations may be totally inappropriate in others. One of the best things is an elected ally in the bureaucrat's chain of command. Another is the willingness of a family member to step in with a gift or extend an interest free loan if you require it, because pretty much all of these first time buyer programs have income and asset limits, and if your cash falls short, everything you paid is pretty much wasted. You won't get the property, and you're unlikely to get that money back.
Caveat Emptor (literally!)
Hi, my name is DELETED, I need help. I bought a house (a few months ago) because my boyfriend persuaded me to. This was supposed to be a real estate investment between us. I put the house in my name and i was supposed to get $9000 and he was gonna keep the rest to do the repairs. I never received my money and he never did the repairs on the house and we ended up breaking up (about a week later). I started getting suspicious, (a few days ago) I found out that the appraiser lied on the appraisal. He lied and changed the square footage of one of the comparable houses to make around the same square footage of my house showing that it sold for the same price I brought my house. There is more to make me think he lied. I found out that the mortgage person, the seller, my ex and the appraiser all know each other I think it was a set up. I have a lawyer, but what can happened after the loan is already in my name. This house is not worth what I bought it for he appraised it around $50,000 more. Will the mortgage company have to buy the house back because they are supposed to check it. When I looked up the appraisal company that he had on the appraisal, it doesn't even exist. Please give me some advise, will I be stuck with this house?
Based upon this information, I'd say you were most likely the victim of a scam.
Talk to your lawyer. It sounds like you've probably got a good case for a civil suit, and can make criminal complaints as well for fraud and conspiracy. However, you have title to the house and a Note that says, "I agree to pay..." and a Trust Deed securing said Note. Just because you are the victim of a scam does not relieve you of your obligations under said Note and Deed of Trust. Not living up to those obligations is one of the best ways I know to make a bad situation worse. It's going to take a while - probably years - before you recover anything of what you've been taken for, if you ever get it. The wheels of justice grind slowly, and require a lot of lubrication in the form of money. Just because you're the victim doesn't change the process. It's conceivable that your lawyer may even advise you to let it go, if in their judgment you're unlikely to recover enough to make it worth your while.
Before we get into the main issue, let me cover a special red flag that was ignored. When you are buying a house, you are not going to get cash back - not with the approval of the lender. As I went over in Real Estate Sellers Giving A Buyer Cash Back, this is fraud, in and of itself.
Lots of people get talked into cutting corners in their transaction or doing without an agent because "agents don't really do anything." However, there are so many scams out there that any time you cut corners you risk getting taken for the full amount of the transaction. Lots of folks discount the possibility - until it happens to them. And it does happen. Real estate is the largest dollar value most folks ever get involved in, and scamming a little extra is likely to be major money in and of itself. A certain percentage of all transactions have issues - and when someone tries to talk you into short-circuiting your protections, that's pretty much a red flag that this is one of those transactions to beware.
Not falling victim is worth a lot more than those protections cost you. As a buyer's agent, I tell people that my goal is to make at least a ten percent difference in the quality of property, the price, or some combination. That's in addition to preventing things like happened to you. Having an agent gives you someone responsible to you. Someone you can sue if something goes wrong, so they have incentive to guard your interests. Someone with insurance (deep pockets!) and a license and a broker supervisor who should have monitored the situation. Not to mention who should be able to prevent the situation happening in the first place.
Can you stop collusion between the appraiser, the loan officer, and the seller? No. Stopping collusion is difficult, as anyone who has ever studied accounting can tell you. A lot of the curriculum goes into the subject of controls, and separating functions so that it's only with multiple people cooperating that assets get embezzled. But with an agent who knows your market on your side and bound to you, it's a lot less likely they'll get away with it. How likely would you have been to buy the property for the price you did if an agent had said, "I can get you a better property for the same money" (or something like it for less)? Kind of likely to short-circuit the entire scam, eh?
When I'm doing my initial automated search for properties for my buyer clients, I always pay close attention to listings represented by agents out of the immediate area. Why? Because an agent from fifteen or twenty miles away probably has no understanding of that neighborhood.
There are exceptions, of course. Agents who habitually work Santee despite the fact that their office is in downtown or La Jolla. Agents who habitually work La Jolla despite the fact their office is in Penasquitos. And there are always agents, who have a prospect that motivates them to do the necessary work outside of their usual area. I just finished one set of clients I was looking for in Clairemont, and I'm working with another set even further away. I've been out working for these people most of the month of June, getting an understanding of what their market is really like in their price range, and I'm not showing them any property until next week.
Even a lot of agents don't understand how local markets really are. I just helped some folks buy a property right in the middle of my usual area. But they're looking to turn around and sell a property they have a partial interest twenty miles outside my usual area. I told them I would be happy to help them, of course, but that I'll need some time to do my research as to how to price the property, and while I'm doing that, I'll also have to figure out what the effective advertising venues are in the area. One of their siblings talked to an agent at the other end of San Diego County, and this clown told them, "no problem," and gave them a price - sight unseen - that was appropriate for the high cost area where that agent works, a place where everything is basically completely different. Lifestyle, demographics, commute. I couldn't say for certain yet, but my guess is that this agent missed an appropriate price by at least ten percent.
It took some time to sink through my head when I started acting as an agent, myself. But unlike mortgage information, where the information is good for the entire state of California with only minor changes from some lenders for differing counties, and I can stay abreast of the entire state's lender market for about the same effort it takes to stay current anywhere, real estate is hyper-local. If an agent wants to work outside of their usual area, they're going to have to do some serious extra work. Even within my usual stomping grounds, La Mesa is different from El Cajon is different from Santee is different from the adjacent areas of the City of San Diego. Each of them has neighborhoods and developments of different design and character and things going on, and there are only so many you can keep track of, because there are only so many hours in the day.
Now it is to be admitted that a lot of agents don't understand this. I've met a lot of them who won't do the work to stay current in their specialty areas, let alone outside. Prices move, neighborhoods become hot and cool off, and time of year is a variable as well. Major projects happen. The market you knew cold six months ago has changed.
My point is this: When you choose an agent who doesn't make a habit or working the neighborhood, if they're being honest with you, they'll tell you it's going to take some time for them to learn enough of the market. If you're a buyer, chances are that you've got plenty of time, but if you're a seller with a deadline, the time it takes that agent to figure out the market can take a large bite out of your sale time. The alternative is to take a chance on pricing from an agent who really doesn't know your market, and marketing from an agent who may not know how to get your property sold effectively here.
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