Greg Lyles

First, let me state that I love this business. I wouldn’t have stayed in it for almost thirty years otherwise. But there are a few things about the real estate industry, and some of the practices employed by some firms, that really grind my gears. Number 47 on that list is managing brokers pressuring agents to get price reductions from their seller clients. Sure, if a home has languished on the market, a price reduction may be a necessary move. But if it’s all in the name of generating cash flow for the brokerage at the expense of the seller, that’s when it becomes an “Annoying Brokerage Practice”.

Years ago, I had a brief relationship with another Buckhead real estate firm. They were fairly new, had pretty fancy offices and were gaining market share.

At one sales meeting, the managing broker distributed a handout that included impressive charts and data. He stated that we should use this to convince prospective sellers that it was a great time to sell. There were lots of glassy-eyed agents staring at the colorful charts nodding their heads in agreement.

The next week, however, the same broker handed out a new chart. His story had changed. Now, he claimed, we had to tell our sellers that to get their home sold they had to lower their asking price. Looking at the numbers, something didn’t look quite right to me. I asked if these numbers represented the Buckhead market and my questions was met with “No, it’s all of Metro Atlanta. But you don’t have to tell your clients that because they won’t understand.” Not being one to leave well-enough alone, I asked him how this played with the whole idea of fiduciary duty. After the sales meeting, the broker called me aside and asked if they could count on me to be a team player. I responded, “No, not if it means misleading my clients so you can pay for these fancy offices.” I’m pretty sure that was my last day there. I re-opened Conrad Lyles the next day.

I was having coffee with my regular group of guys at Starbucks recently and thought about what each of them do for a living; all very successful investment managers, chemical brokers, management consultants and the like. None of them, however, work for a big company. They each own their own boutique business.

Maybe it was the caffeine, but my brain went into overdrive. Why is it, I thought, that so many successful service providers are small firms being run by highly-experienced people, yet real estate is dominated by large firms?

To find the answer, we have to look back a few decades. Back to when Welcome Back Kotter was still playing on the television. Big real estate firms often run on an outdated business model dating back to the 1970′s. Understand the model, and you’ll understand why the big brokerages do the things they do.

First, brokerage offices exist to make money. It is one of the functions of the managing broker to recruit agents to work in the office. Most agents start out splitting their commissions on a 50/50 basis with the office. The problem is that these agents usually don’t sell very much, so the office doesn’t realize much income from their efforts. The solution? Bring on lots more agents. Stack ‘em to the rafters. Now the managing broker has a new problem. Providing office space and support staff for these agents gets expensive. So now we have lots of inexperienced agents who don’t bring in much income and high overhead. I’m not saying it happens everywhere, but you can see how this situation could lead to standards being compromised in order to generate cash flow. As my friend, Michael McClure, the President & CEO of Professional One real estate, so aptly phrased it in an article he wrote about the subject, “Brokers have almost no clue what their agents are doing out in the field. Because of the hyper-transient nature of real estate, easily 95% of the job is done outside the walls of the brokerage.” He goes on to say that because of this, it is almost impossible for the typical broker to monitor whether the agents in his or her office are providing a level of service and expertise that is consistent with the standards of the company. In most cases, it becomes very difficult for brokers to change bad behavior because they don’t know about it until its too late.

So what does the big firm do next? Advertise. They spend lots of money to branding and promoting the company and very little promoting the agents who are their revenue source. They each claim to be the leader or to have the best people in hopes of gaining new listings or buyers. They join international networks with fancy names. But does this really help you, the buyer or seller? Does it sell your home faster or get you better terms on your next home purchase? In short, no. The only thing that matters about the sign hanging in front of your house is the name of the agent. Period. That agents’ knowledge, and what they are willing to do to market and sell your home, is all that matters.

The truth is, the real estate industry is changing. Thompson Realty in Phoenix, Arizona is a great example. Run by the charismatic Jay Thompson, the firm has no brick-and-mortar offices. Each agent works from their home – or wherever they feel they can work best. Some of the most innovative real estate firms in America that are getting lots media attention are small firms. Thomas Friedman illustrated in his best-selling book, The World is Flat, technology has been a tremendous enabler. Small, boutique real estate firms have the same, if not better, technology as the big firms. Cloud computing has made it even easier for agents to access and forward reams of data from the main “office” computer on an iPad. Programs like SureDocs allow agents to complete and sign contracts in the field without ever touching a piece of paper. Company-wide CRM (Customer Relationship Management) software enables agents to access clients’ records from a computer anywhere in the World. From my perspective – and many others – these tools add more value to the process of selling a clients house than fancy offices and layers of management do. And without the burden of high overhead, these smaller, more nimble firms can focus on placing their clients interests ahead of the siren call of cash flow.

March Highlights

· 14% increase in available inventory from February affecting every price level except over $3 million.

· Distress sales (foreclosures or short sales) continue to make up more than 50% of all pending sales.

· Average days on market (time required to sell) fell 15% from February.

· Volume of closed sales increased 40% from February.

Buckhead Real Estate Activity by Price Range

Under $500,000: The lowest price range in our report continues to be the most active with eight new contracts written. There were 21 new pending sales, 16 of which were foreclosures or short sales. The number of closings was up a meager 10% from February with 11 closings after an average of 130 days on the market and an average 13% reduction in price. With 176 active listings, there is currently a 10-month supply of available homes, based upon an average of 18 pending home sales each month in the past three months.

$500,000 to $750,000: With nine closings in March, activity was up 28% from February. Three new contracts were written and 10 existing contracts became pending sales. Four of those pending sales were foreclosures or short sales. The homes that sold required an average of 205 days on the market and sold at an average of 89% of the original list price. With 155 active listings in this price range, we have a 21-month supply based upon an average of 6 pending sales each month over the past three months. This represents a continued strong buyers market at this price point.

$750,000 to $1 Million: There were three new contracts written in March and 13 existing contracts became pending sales, including three foreclosures or short sales. Closing were up 40% from February with seven homes closed in March after an average of 148 days on the market. Those homes sold at an average discount from the original list price of 16%. With 88 homes remaining on the market at the end of March, there is a 9-month supply of homes in this price range, the same as at the end of February. This is based on an average of 10.33 pending sales per month for the last three months.

$1 Million to $1.5 Million: There was only one new contract written in March for this price range and seven existing contracts that became pending sales, including five foreclosures or short sales. Four homes sold during the month after an average of 122 days on the market and an average 10% reduction in price. With 99 available homes in this price range, there is a 20-month supply of homes. This is based upon an average of 5.0 pending contracts per month over the past three months.

$1.5 Million to $2 Million: Activity continues to remain very slow from this price point and above. There was only one new contract written, two new pending sales and one closed sale. The home that closed required an average of 477 days on the market and sold at a 54% discount, both of which are inexcusable from my viewpoint. With 58 available homes, there is a 35-month supply of homes based upon an average of 1.67 pending home sales per month over the past three months.

$2 Million to $3 Million: There were no new contracts written and only one new pending sales in March. One home closed after a very quick 16 days on the market, yet it sold at a 31% discount from the original list price. With 43 available homes, there is a 43-month supply of inventory, based upon an average of one pending home sales per month for the last three months.

Over $3 Million: There were no new contracts written in March and three new pending sales and a single closed sale. The home that sold required 132 days on the market and sold at a 36% discount from the original list price. With 45 available homes, there is currently a 23-month supply of homes on the market. This is based on an average of 2 pending home sales per month over the past three months. I give this price range an improving status based upon the reduction of the 4.7-year supply of homes in January to its current levels. This price range has continued to show steady improvement over the past few months primarily due to homes being taken off the market, creating less competition.

Recommendations

If you are planning to sell your home, there are several steps you can take to increase the likelihood of a successful sale in this market:

1. Hire a professional appraiser. This enables you to get a clear picture of the market value of your home and to recognize a market offer when one is made. Additionally, you avoid the likelihood of an agent attempting to “buy your listing” by suggesting a price that cannot be achieved. At Conrad Lyles, we pay for a professional appraisal when you list and close with us.

2. Have your home pre-inspected and make the required repairs. Buyers today have dozens of homes to select from. A home in great condition will sell faster and at a higher price. At Conrad Lyles, we pay for a pre-listing inspection and coordinate obtaining bids from contractors when you list and close with us.

3. Have your home professionally staged. Staged homes photograph better, show better and sell faster than non-staged homes. Conrad Lyles will coordinate the staging of your home at no cost to you.

4. Get great photography. With close to 90% of buyers using the internet to select, or reject, potential homes, professional photographs will capture and hold their attention. Conrad Lyles will coordinate the professional photography of your home at no cost to you. No other agents in Buckhead offer the quality of photography and video we provide!

5. Watch the competition. You are competing with homes in your area for the attention of potential buyers. It is imperative to know how you compare in terms of price, condition and marketing.

For more on positioning your home for a successful sale, please visit our web site at conradlyles.com.

Conrad Lyles is the only firm in Buckhead focused exclusively on seller representation.

Veteran broker, Greg Lyles, operates Conrad Lyles. Greg has 27 years experience in Buckhead real estate, selling more than $427 million in his career. He has sold 100% of his listings since 2007. By comparison, the two biggest name agents in Buckhead sold less than 10% of their listings in 2009. Greg sells his listings 40% faster than the market average and with less than a 10% reduction in price. In 2009, the two biggest name agents in Buckhead sold their listings at an average reduction of 32%. On a $1.5 million sale, Greg would have netted the seller $330,000 more. (Source: FMLS)

Conrad Lyles Realtors offers flexible commissions, a cancel-anytime policy and superior results.

Wildwood sellers are eagerly awaiting Spring and an increase in buying activity! With the exception of one foreclosure that closed in January there was no other activity to report. There are now 5 available homes, priced from $265,000 to $1.1 million.

If you are looking for a home in Wildwood, be sure to check out our Buckhead Real Estate Search.

If you are trying to sell your home, or planning to sell soon, check out the Resources for Selling Your Home section of our web site. There you’ll find lots of useful articles that might just help you sell faster!

And, as always, if you have any questions about real estate, feel free to call me at (404) 841-9634.