I was working on my lawn one Sunday. A few houses down, there was an open house. It was the neighborhood fix and flip. I wasn’t the listing agent on the property, and that’s OK. If you are unfamiliar with the term, it’s where an investor buys a home, makes repairs and stylish updates, and attempts to sell it for as much as they can. I don’t have an opinion on fix and flips. Some people think it’s a terrible thing, and other people think it’s great. All I know is that I tend to not get listings that are fix and flips because usually the one flipping the house is either a real estate agent working for a broker or a broker themselves.
The Odd Exchanges
A lot of people in the neighborhood know that I am a real estate broker. The weirdest thing happened during that Sunday. Nosy neighbors would walk by my house on their way to the open house, and then on the way back tell me that the price the flipper was asking was crazy. It was like they were surprised that was what a flipper does. I’ve written about nosy neighbors before. I think neighbor interest in the value of their homes is a great thing. I’m also quite surprised when neighbors think that I have anything to do with a pricing decision on a house I haven’t listed and don’t have anything to do with.
The Questions Continued
“Who is going to buy that house at that price, John?” I was asked repeatedly. I told people that it was going to be someone who just had to have it. Now, will they get full ask? I have no idea. The asking price is close to 40 thousand dollars more than anything else that has sold in the neighborhood. But I do understand how home buyers usually think. Let me try to explain that.
The Long Search Comes To An End
Some of these home buyers have been looking at houses for many months. They’ve lost out on previous purchase offers. They’ve spent every Sunday between 1 and 3 going to no show till open houses where they fight to get through a home and make some silly offer before someone else does. These home buyers are tired. Now, they see this house, and the style is absolutely perfect. Do you think that the price is going to hold them back from making an offer? It’s not likely. Out of the 100’s of people walking through the house, if they overpay, they can have the house and be done with the search. Pay no attention to the fact that this same house was available for $100,000 less just one year ago. It was ugly. It needed paint, a kitchen, and a bathroom update.
Is The Buyer’s Agent Complicit In This?
What kind of buyer’s agent would allow their client to buy a home so obviously overpriced? Well, for one, if they can get it to appraise, is the house really overpriced? And two, when home buyers feel strongly about making an offer, the buyer wins the discussion about offer strategy. A conscientious buyer’s agent can show a home buyer the previous sales, but at the end of the day, it’s the buyer’s decision to go forward and make a silly offer on a property.
My Concern For The General Home Buying Public
For as long as I’ve been in real estate sales, I’ve heard that real estate agents are overpaid. They aren’t worth anything, and technology is going to finally bring down the real estate business. I look at situations like this fix and flip and I am generally concerned for the public. The professional home flipper is light years ahead of the general public in terms of real estate knowledge. These people know what they are doing. It isn’t an accident that the house is staged perfectly, down to the right colors of stain on the hardwood floors. Every detail of the home and pricing strategy is set up to benefit the professional in this case. If the home buyer isn’t at least cautioned by their real estate agent about the price of the home, what’s to stop more buyers from over paying for homes? Nothing. Many of my home buyers have praised me when I tell them that “yes, this house is gorgeous, and it’s also way overpriced. We can and will find a home that is a better value.” The average home buyer has no chance of getting a good deal without a professional working for them.
The idea is that there will be some sort of algorithm that gives the exact price of a home without any human inspection or interaction is pretty bizarre. It’s like the people that come up with this stuff have never even been to multiple houses at the same asking price to see why some houses are more expensive than others. And yet, we are to believe that these same people, who know nothing about real estate, are going to design programs that will be of more benefit to the home buyer than a professional real estate agent? Zillow’s estimate for homes has been shown to be wildly inaccurate. Yet, oftentimes the first thing I get asked when working with a home seller is, “Why so low, the Zillow estimate is much higher?” This in a house that hasn’t been updated in 60 years versus a house next door that was completely remodeled next door. I don’t see an algorithm ever figuring that out.