Profiling the "Longest 50" List
My last blog made me think about factors which influence the local market where I live and work. In doing so, I found some disturbing information.
As a matter of record, my business is in Chino Hills, CA, a small community in Southern California with a population approaching 80,000. As of March 17, 2009, there were a total of 281 single family homes listed at an average list price of $593,000. The analysis focused on the 50 properties representing the longest listings (Longest 50) in the community and sought to find reasons the property had not sold. On the market for more than 4 months many of the properties had been for sale 6 or 8 months, the longest 576 days. Although most had been reduced multiple times none of the properties were in foreclosure; however, the vast majority was handled by Realtors who lived and worked outside the immediate community, a condition I have labeled "Absentee Agent."
The "Absentee Agent" - Why are results different?
Given the market conditions, most might assume these results are somewhat normal. The analysis, however, indicates a property handled by a local agent and priced correctly in this upscale community (where million and multi-million dollar homes are not uncommon) routinely sells in 90 days or less. By contrast, the "Longest 50" suffer a very different fate. These listings were managed by agents and brokers who were distance workers operating from an office or home which averaged more than 25 miles (the longest was 55) from the property. A closer look at the "Absentee Agent" problem indicates the Seller must take a much closer look at how they select the listing agent. Below I propose a few possible reasons the "Absentee Agent" cannot deliver a successful solution for the Seller:
1. No familiarity with the surrounding area;
2. Information specific to the community is absent;
3. Marketing - volume does not allow local marketing;
4. Distance - makes other property on the agent's book easier to service. Even the occasional open house becomes a burden;
5. Pricing - behind the local curve;
6. And on and on....
Familiarity with surrounding area
My office is within 25 miles of millions of homes. The fact is, I know very little about most of these areas and certainly not enough to call myself an expert. For the most part, what I know is the area’s reputation, high level Real Estate trends, and perhaps some limited marketing information pertinent to the city. Clearly I do not spend a lot of time in any community more than 5 miles from where I live and work so my knowledge is limited to what I can somehow gather from the web or by casual conversation with associates working in the area.
So, I must ask, if the seller is to pay a 3% (that’s $11,500 on the average list price in this area) transaction fee to the agent, what exactly does the owner get in exchange? Sure, let’s assume personality, excellent negotiation skills, and name recognition – is it enough? If that agent can’t bring traffic to the property or if they depend entirely upon the buyer’s agent to deliver the eyeballs, all of those skills are of limited or no value. By contrast, the key to a seller’s success can be summarized in two words; knowledge and traffic. If the listing agent cannot deliver – the seller’s cost is significant – ask any of those owners whose propert remains on the “Longest 50” list 4 months or more.
Information Specific to the community
Knowing the detail affecting the surrounding area is one thing, but having an intimate knowledge of activities in a good community is arguably one of the most powerful factors a seller’s agent can bring to the table. Intimate knowledge of the infrastructure, government, school system, traffic, shopping and restaurants can make a huge difference. Living in the area and being a neighbor provides instant credibility and substance to your comments. Factors the seller should definitely consider.
Marketing
When I purchase services from a professional, I want them to know everything about the subject – I want a Subject Matter Expert (SME). In the local Real Estate market this relationship is essential especially when the seller will pay thousands for the services. Knowing the market, having a presence in the community, and knowing how to find and generate traffic to the property is critical.
In my area there are two primary news papers (neither of which have I read for the purpose of buying a product or service in years) and of course the MLS both of which deliver the opportunity to a broad audience. However, alone or combined, the two marketing sources do not represent an effective strategy. “Absentee Agents” who deploy only this broad, but largely ineffective marketing strategy almost always have property on the "Longest 50" list.
Although the internet has changed the way effective advertising is accomplished local ads targeted to the communities they serve will reach two types of people – those looking to buy and those looking to sell in that community. Exactly what is required to quickly move a property off the MLS listing page.
Distance from the property
Today everyone is busy and we always have options. To bring the Distance point home, if the agent can travel 5 miles and 5 minutes vs 25 miles and 1 or 2 hours to market, show, or otherwise attend to a listing that's exactly what they will do. I guarantee, all things being equal, two properties one 5 minutes away and the other an hour or more, the closer property will sell first. Not only does it get the most attention the agent has it all (knowledge of the area, community, marketing, and pricing). This is exactly what you should be paying for.
Pricing – ahead or on the curve
Everyone knows prices have been changing rapidly. An agent that is not on top of the trends in the area is not serving the customer, period. Our analysis clearly shows that homes suffering from the “Longest 50” syndrome have almost universally over time seen reduction after reduction in pricing. Although there may be several causes for this, I am hard pressed to imagine the property was (for reasons explained above) fairly priced. Pricing is yet another service the agent provides - but there is only so much that can be drawn from area comparables. At some point, just knowing the area, the community, and often even the street can make a huge difference in the pricing strategy. Agents who are behind the pricing curve most definitely offer no help to the seller but they do virtually assure in today's market that the property will be found on the “Longest 50” list – hardly an effective service.
Conclusion – Avoid the “Longest 50” list
For some things we buy, the importance of knowing the area, community, and the market is of little consequence. I can purchase all kinds of services over the net from companies and individuals hundreds or thousands miles away without any clue as to their knowledge - for those products pricing and to a limited degree servicing is key. But Real Estate is a local business that must be managed by an expert who knows and ideally lives in the market they serve. If you want results, and if for one reason or another you chose an agent who lives or works more than 5 minutes from your home, you’re not receiving the full package – worse without every tool available, you might find your home on the “Longest 50” list.
Monday, March 09, 2009
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