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Buyer’s Leverage is Increasing in Current Real Estate Market
Negotiating is one of the less glamorous parts of real estate but it is essential to a fair and successful transaction. Humans seem to have it in their genetic code to avoid hard conversations. In fact, according to this NBC News article, we are avoiding them more than ever. Mix that with the hot seller’s market of the last few years and buyer’s have been getting beat up by high prices, waived contingencies, and a general lack of power in the market. But, it looks like that is finally changing. Here are the stats from my last three sales when representing the buyer:
- $14k off asking price, $19k in seller concessions. Half of the chickens and ducks 🙂.
- $19k off listing price
- $15k off listing price. Over $100k in repairs to the property including a new metal roof, crawlspace mitigation and beam repair, and new ($65k) septic system for the cottage.
The last one is a bit of an outlier as a metal roof and completely new septic are pretty rare, but it shows that buyers are gaining some momentum. There was competition on two of them and plenty of showings and other agents talking about possible offers, but we were able to get under contract and use our leverage to get better terms on the final sale. Those leverages points are critical and I get into the details in the list below. But, before I get into those there are still some negotiating rules that remain true:
-Cash is king and is even more so today. If a client can pay in cash and close quickly that is a best case scenario.
-The price will always be the focus on the seller. Make sure an offer will satisfy a seller enough to get under contract and then work on other items like concessions or repairs.
-Inspections: Many buyer’s agents weaponize inspections and ask for a price reduction or seller concession no matter what. That is not a great way to keep up professional relationships. Reduce the number of days for the inspection period and connect with the listing agent. Setting expectations with them can go a long way.
-Finally, it does matter that this is election year in unstable economic times. Buyers and sellers will both be wary.
Leverage points to consider:
- Client education: Most buyers are savvy these days, but there are still a lot of unknown details until clients are deeper into the process. I try to utilize my teacher background to help clients feel as prepared as possible. One of my favorite tools is a deep dive market analysis. On the first home above, we actually offered on another property at a price that our analysis supported. But, the owner wanted to go for a higher starting price and then the market rejected the price and the house sold for much less than we offered initially.
My client was a first time homebuyer, but he was smart and we did the work beforehand. We worked through potential scenarios, reviewed the critical parts of the contract, did multiple analyses of comparable properties, and we talked about what it will FEEL like to be in the negotiating process. That is what YouTube videos and articles cannot help you with. To me, one of our best points of leverage was my clients patience and resilience. A big part of that is their personality, but a good agent also helps build that up at the beginning of the process.
- Days on Market: This is an interesting one. Using days on market is as much emotional as it is mathematical. Sellers and listing agents seem to have a threshold where they start to worry and become more willing to negotiate. Much of that feeling is dictated by the local market and what other homes have been doing, but if a buyer’s agent is paying attention and sees a change happening they can work with their clients to stay patient and let those days tick up to their advantage.
- Perceived projects and costs: The market is big on “turn key” right now because of the affordability crisis. Buyers can only afford to buy the home, not put big money into it right after they purchase it. So, if a buyer is willing to take on a property that is perceived as unique or needing work they will often face less competition and more favorable negotiating conditions.
- Inspection: This is worth mentioning again. Many buyer’s do not understand that there is a second negotiation that happens even after the offer is initially accepted. And this is why inspections are so important! Seller’s have all of the leverage when a property first goes on the market. But, if a buyer can get under contract then there is a second negotiation that can only happen if an inspection was accepted as part of the agreement. Having a professional look through the the structure of the home is important enough. But, getting another chance to reduce the price or get repairs done is also valuable. This is where some of the most nuanced negotiations take place.
Reach out and let me know if you have any questions about using leverage during negotiations. The big part of this is to remember that there are humans on the other end of the transactions. So it pays to be kind but strong. Even the toughest people seem to melt a little under the pressure of dealing with such large sums of money and complicated contracts. As a former Seahawks quarterback (who shall not be named because he left for Denver) once said “The separation is in the preparation!” 🙂
Thoughts on Zillow and Redfin Estimates (Homes.com, too)
Zillow and Redfin have successfully engrained themselves into American culture. I know folks who browse these sites for hours a day, often just for the fun of shopping! They do bring value with the ease of searching and by centralizing all of the various public data connected to a home. But! Their estimate calculators are often greeted with derision by folks in the real estate industry. And there is good reason.
Here are two articles from Investopedia and The Close that are worth reading. I am hearing this conversation from both sides right now as I help seller’s and buyer’s negotiate offers and work through the art and science of pricing.
For example, the south end of Whidbey is averaging around $400 per square foot on the sale of homes and nice, large vacant lots of land are averaging around $35,000 an acre depending on location. But, many homes in the south end are owned for decades and have few homes that sell in a given year so Zillow really struggles to get a good comparison.
Here is my favorite part from The Close article, “Some savvy agents (and clients) have noticed that the Zestimate often changes once a property is listed to become much closer to, if not exactly, the new listing price. This means an on-market Zestimate benefits from the local, on-the-ground expertise of real estate agents (the ones who are actually pricing the properties) and has a much better chance of being on-target. It could be argued, therefore, that the on-market accuracy rate of Zillow’s Zestimate makes us look good—or maybe I should say agents are making Zestimates look good?”
So while agents are taking hits left and right in the press right now Zillow and Redfin are leaning harder than ever into local expertise and boots on the ground.
Keep these things in mind as you consider a Zestimate:
- How long has the home been owned? The longer the harder it is for an accurate estimate.
- How much turnover has there been in the neighborhood? Good neighborhoods, with valuable property are often generational. Comps can be really hard in these areas.
- What are the averages for square footage and other important data points over the last 6-12 months? The market moves incredibly fast now and even technology has trouble keeping up.
Trend Watch: Modular homes bringing affordability to market
On Whidbey Island, both buying a home and building one will cost you around $400 a square foot right now. Remodeling can be even more than that. So, as we navigate this affordability crisis in the United States the government and the private sector are trying to find the next innovation that may help bring down those costs. It looks like modular homes might be the answer.
Converting office buildings into apartments is complex and expensive. Allowing ADUs (additional dwelling units) on lots is gaining momentum but people are still struggling with giving up privacy and space. The trend of having roommates again is catching on but mostly with the younger generations.
Modular homes, not to be confused with manufactured homes, are built in factories with a high-quality standard using modern engineering techniques. And the best part is that costs have quickly come down into the $100-$200 a sq ft range.
Those of us who regularly take the Port Townsend ferry drive right by one of the cooler, local examples of a small modular home built by GreenPod Development. I have been eyeing it for years and even took a tour of it as I consider what to put on the lot next to our cabin. It is incredible what can be done with small spaces now.
The government is supporting modular building for a variety of reasons including the fact that modular homes are often more efficient and environmentally friendly. The “On The Markeet Podcast” discussed modular homes recently and they all agreed that the factory assembly is a good antidote for the soaring costs of lumber and construction labor. They also talked about the fact that you still need land and somewhere for all of the waste to go so septics and sewer hook-ups remain critical.
There are a lot of business trying to establish market share in this growing sector. Here are some of the builders setting the trends with modular homes:
- Boxabl: Elon Musk made this company famous when he lived in one while working in Austin, TX.
- Dvele: Using more sustainable materials and AI to create smarter, efficient homes.
- Clayton Homes: Advertised as affordable and accessible
- 23 more companies that are creating and innovating
Should I post words from ChatGPT without telling you?
Artificial intelligence is suddenly woven into the fabric of our daily lives. In real estate, I am seeing it used for everything from content creation to financial analysis of deals. As a former journalist and journalism teacher, I am trying to figure out the new ethics of having a machine write words that I use to represent my brand.
Everything below this paragraph was written by ChatGPT based on the prompt “write a blog post about whether or not people should cite ChatGPT for writing their articles”. In microseconds, it wrote an insightful, grammatically accurate post that conveyed much of what I was hoping to say myself. So, my question is, do we care if business professionals, students, and humans in general post words that they didn’t write without giving credit to the author? Or are our ethics about plagiarism and copyright evolving just as fast as ChatGPT can write a college entrance essay for us? Please email me or message me on social media with your thoughts!
***Beginning of ChatGPT post with no edits from myself or any other human***
In the ever-evolving landscape of content creation, artificial intelligence has become an invaluable tool for writers seeking efficiency and inspiration. Among the notable AI language models, ChatGPT, developed by OpenAI, stands out as a powerful resource. However, a pertinent question arises: should writers cite ChatGPT when incorporating its generated content into their articles? This blog post aims to explore the ethical considerations surrounding the use of AI in writing and whether proper citation is necessary.
Understanding ChatGPT:
ChatGPT is an advanced language model powered by GPT-3.5 architecture, capable of generating coherent and contextually relevant text based on the input it receives. Users can input prompts or queries, and ChatGPT responds with human-like language, making it a versatile tool for a wide range of applications, including content creation.
Ethical Considerations:
Authorship and Contribution:
One key consideration is the extent to which ChatGPT contributes to the final article. While the AI model generates content, the writer plays a crucial role in framing prompts, selecting responses, and curating the output. The question arises: does ChatGPT deserve formal acknowledgment for its role in content creation?
Transparency with Readers:
Citing ChatGPT may also be seen as a matter of transparency with readers. Disclosing the use of AI in the writing process can provide insights into the methodology behind the content, fostering trust between the writer and the audience. This transparency is especially important in journalistic and academic contexts.
Legal Implications:
Consideration must be given to potential legal implications. While OpenAI has provided access to ChatGPT for public use, users should be aware of the terms of service and any licensing agreements. Some platforms and publications may have specific guidelines regarding the citation of AI-generated content.
Evolution of AI Models:
The rapid evolution of AI language models is another factor to consider. As technology advances, newer models may emerge, rendering the older ones obsolete. Citing the specific version of ChatGPT used in the writing process can help maintain accuracy and relevance.
Conclusion:
In conclusion, the decision to cite ChatGPT in articles depends on various factors, including the degree of AI's contribution, transparency with readers, legal considerations, and the evolving nature of AI models. While some argue that citation is essential as a form of acknowledgment, others may view it as unnecessary due to the collaborative nature of human-AI interactions.
Ultimately, a balanced approach that considers both ethical and practical aspects is crucial. Writers should strive to maintain transparency, giving credit where it is due, while also recognizing their unique role in shaping the final narrative. As the field of AI continues to progress, open discussions on these ethical considerations will play a pivotal role in establishing norms and guidelines for responsible AI use in content creation.
What to make of school rankings on sites like Zillow
Public schools are quite the commodity in real estate these days. Scroll down on any Zillow listing and you will find the GreatSchools rankings for elementary through high school in a given area. Those numbers matter to people in a society driven by five star systems, grades, lists, and all of the other ways complex information is broken down into digestible chunks for the consumer. But, can we really rely on this data to know if our children will receive the love, care, and learning we all want for them?
This recent article form Parents.com is one of the better breakdowns I have seen about the complications of creating a school hierarchy. Yes, there is enough data with test scores, suspensions, demographics, etc to give a school a number. But, the big question is how much do those items truly affect the individual experience?
After 12 years as a teacher, dean of students, and assistant principal around the state I can definitively tell you that none of it is definite 😁. One good teacher can change a students life. One bad experience with bullying or public embrassment can feel like the end of the world. And now, more than ever, schools are under pressure to be childcare centers, counselors, parents, mentors, healthcare systems, food disrtibutors, and learning institutions all wrapped up into one. The task is monumental. And the disparity in funding exacerbates all of this depending on the income level of any given neighborhood.
So, Andrew, what the heck are we supposed to do!? First of all, do your own research beyond the rankings. The article suggests that “Parents should also get out and see a school for themselves. Both Wallin and Dr. Schneider recommend visiting the school to see how it actually operates on a day-to-day basis. How engaged are the students in the curriculum, and how supported are they in their individual interests? Is there artwork hanging on the walls? Do the teachers seem happy, or is there a high staff turnover? How diverse is the student body? How caring and compassionate are the student-to-student and teacher-to-student relationships?”
I will add that you can also look for dynamic partnerships with the school that go beyond the classroom. Anacortes High School is a great example with its marine tech program that students can participate in. The curriculum allows students to explore an interesting trade while doing hands on works outside of the classroom. Core school activities are important, but many schools are working hard to enrich students beyond just history and math now.
Overall, public schools are not perfect and there is no ranking system that will ensure a positive experience for your child. Try to talk with local families and connect with teachers, admin, or counselors at the school to see if your students needs will be supported. It all comes down to the individual.
I can attest to the fact that the large majority of people working in public schools are there for the right reasons. Just like any industry, there can be bad apples, but most will do what they can to help a student grow and learn.
It is also worth it to check out alternative schooling in the area including online schools, home school programs, and other opportunities. There are more options than ever with today’s technology and flexible school environments.
If you want to connect directly with me about my experience with schools in Washington State I am happy to chat.
And for what it’s worth, here is the article ChatGPT wrote for me when I prompted it with “Blog post about public school ranking sites like GreatSchools.” I am not sure if GreatSchools is a sponsor but they certainly came from a positive angle with it!
