Are We Getting Ripped Off Down Here?

123 Riding Ridge Road, Monroe, #@$%-ing CT, asked $649K, now has deal.

123 Riding Ridge Road, Monroe, #@$%-ing CT, asked $649K, now has deal.

Ok, I get it that it’s Monroe, Connecticut, and that’s not an easy commute to most places we work, but still, $649,000?? The land appears to have sold for $155,000, which down here in Greenwich is pretty much the price of a decent summer rental, but how does the builder make money with an ask of $649,000?

The house is listed at 2,889 square feet (1,200 unfinished, walk-out basement), land is 2.88 acres and, well, take a look at the photos…is it so bad? Even a snob like me must admit the house appears livable…nice, even!

And the cost to build was what, $150 per foot? No, that’s too much, there would be zero profit at that cost, so… Ok, I’m stumped, either we’re all getting ripped off down here, what with $400-$1,000/foot building costs, or the Monrovians have figured out how to build houses at $100/ft and they’re keeping it a secret.

Here’s what it looked like as a land listing: 123 Riding Ridge building lot.

Now THIS Is More Like It…

200 Guards Road, Conyers Farm: as good as it gets. last ask $17.5M. List: BK Bates

200 Guards Road, Fabulous house on 31 acres in Conyers Farm: as good as it gets. Last ask $17.5M.
List: BK Bates and Michelle Tesei

Was it only last Tuesday that the Connecticut Post was telling us about the latest Hartford plan to drive out the last remaining profitable business in Connecticut? I believe so, but perhaps because this particular tax plan is actually opposed by the Governor (is that possible?) maybe we can limp along for another year, by golly.

Anyway, today’s big news is that a deal has been struck for a spectacular Conyers Farm property which was asking $17,500,000. A previous broker started it at $27,895,000, carried it through two price reductions over the next year and nine months, but ultimately was shown the door.

I’ve heard it a hundred times, from brokers like Julianne Ward and others, it’s better to just say no to a listing that you know is grossly overpriced. Instead of taking the listing at a crazy price, what you do is this: Make an impressive presentation to the sellers, and include in that presentation a skillful defense of your recommended price.

You will (likely) then be rejected by the sellers, who will instead give the listing to the broker with the crazy price, BUT, a year or two down the road, the sellers, realizing you were right all along, will call you up and appoint you as the second listing broker. That’s where you want to be, that’s how this game is played.

On the other hand, it can be hard to resist one of these big “trophy listings”. After all, your firm gets lots and lots of advertising value from it, you get the prestige boost, which can lead to other big listings, and hey, there’s always the possibility you’ll persuade the sellers to g-r-a-a-d-u-a-l-l-y lower the price, who knows?

I have no idea how things went down with this particular listing, it’s entirely possible that first asking price was the owner’s idea to begin with. In any case, this is a very significant and useful sale. It shows continuing life in the high-end, and in particular, the backcountry high-end.

List: BK Bates & Michelle Tesei

Time For A New Career!

Sorry agents, your career is over, you'll soon be replaced by algorithms!

Sorry agents, your career is over, you’ll soon be replaced by algorithms!

Has there ever been a year in the last thirty that some genius didn’t predict the end of real estate agents? Yet, here we all still are, plying our trade, apparently oblivious to our imminent disappearance.

Why do you suppose that is? Why, in the year 2017, twenty years into the Internet Age, do we still have this old-fashioned profession?

As some fellow brilliantly posted in 2012, it is because we are needed; buying and selling real estate is complicated and difficult and, most importantly, it can be emotional. Almost every deal contains multiple points along the way where the whole thing falls apart without skillful handling.

Can people do it without us? Absolutely. Each year, a small number of “direct” deals are recorded at Town Hall, although, every time I look into one of them, I find that there was broker involvement, uncompensated perhaps, but present nevertheless.

Anyway, so the latest prognosticator of broker doom is this chap, “Brad Inman“. Judging by his website, Mr. Inman does lots of thinking on the subject of real estate, but I disagree with his conclusion that hundreds of millions of venture-capital dollars pouring into entities like “DealPad” or “DealPal”, “OfferPal” or one of those names, means that brokers’ days are numbered.

The concept behind these house-selling websites is that you sellers are going to accept a (likely) below-market price in order to spare yourself the trouble of selling your property in the usual way. Oh, and the sites are using fancy algorithms to determine your “correct” sales price. Wow, now that’s impressive.

But hey, what do I know? I happen to be  skeptical of any business that requires a change in basic human nature, but these venture capital guys are geniuses! We’re told we must think of success stories like Google, Amazon, Uber!, Don’t you see how those models relate perfectly to the complex nature of a residential real estate transaction? You don’t see that? Me, neither.

Below is the long, long, long! article from Mr. Inman’s site. I plowed through the whole thing, but feel free not to (you can also read it on Inman.com, but he requires you to subscribe).

Why home selling will never be the same

Data scientists are charging into the real estate village — what’s that mean for you?

In the movie Jack and the Giant Slayer, the towering giants descend from the beanstalks, provoking fear as they try to conquer the Kingdom of Cloister.

With a sudden ferociousness, data scientists are charging into the real estate village, rattling the industry by changing how people sell their homes.

Consider the well-funded techno house flippers — OpendoorKnock and OfferPad — who together have raised a staggering $1 billion in funding. These are not mom and pops who staple signs on utility poles offering to buy your house, “call 1-800-Pay-Cash”.

Yes, whale-sized investments are pouring into flipping houses. But they are also funding smartypants data scientists and their algorithms for pricing houses and for finding homesellers. And these new companies are testing on- demand showings, instant offers, smart contracts and quicky closings.

This technology & flipping combo is compressing the transaction from the traditional timeline of 30 to 90 days to as little as 72 hours, rejiggering how homes will be sold in the future.

And it paints a sexy portrait for high-profile Wall Street and Silicon Valley investors, who are hankering to get into the $100 billion transaction side of the real estate business — commissions + mortgages fees + title costs.

Why do these new models represent such an opportunity?

First, new and improved home valuation algorithms are more exact in determining a house’s value. Early generations of Zestimates, as we knew them, were like flip phones — so yesterday.

Now, after 10 years of tweaking and improving its valuation tool, Zillow claims its median error rate is only 4 percent, and that is in heterogeneous markets. The techno flippers are operating in more homogeneous markets, where the Zestimate’s error rate is closer to 3 percent.

With more data sources, photos and user input, these new pricing models give sufficient confidence to some homesellers to unload their homes quickly (in a few days) without the uncertainty of a long, drawn-out process of listing their houses. Sellers receive all-cash offers in a few minutes from the techno flippers who are capitalized to do an endless number of deals.

It reminds me of Google when it not only came up with a better search engine than Yahoo but also introduced a scaleable and transformative business model that eventually trumped its competitors.

These polished pricing engines might be less compelling if homesellers had confidence in the current system, which many do not.

Not only is the sales process strung out over a painfully long period of time, but agent home pricing motives are sometimes suspect. We all know the criticisms: “some agents suggest an inflated price to get the listing,” or alternatively, “some agents lowball the listing price to get a quick sale.”

This is not how good agents behave, but consumer perceptions are skewed by the hucksters.

Another edge: These new companies are using data science to understand exactly when a homeowner is going to sell.

Copious data sets triangulate the homeseller — search behavior, demographics, social insights, consumer habits and purchase decisions. Sophisticated algorithms then seize the prey.

If Google knows my daughter is pregnant before she does, then these new tools will soon predict with a 99-percent accuracy rate when someone is ready to sell their house.

What does this mean for the real estate industry? Lots, but let’s focus on a few important things.

The home listing market suddenly faces a fierce new competitor (or partner) that some in the old guard underestimate.

And this time around — unlike the discounters, the portals, the IDX papier-mâché brokers, the Compasses and the Redfins — the sacrosanct home selling process is being turned on its head.

The techno flippers are not slashing commissions, not generating leads for others, not trying to control the data and not building an online consumer brand (for now). Instead, they promise convenience and pain relief for homesellers. An instant home transaction = nirvana.

Compressed transaction timelines are common in other sectors of our instant economy: we buy a car in an hour, receive an Amazon package in a day and book flights, hotels and auto services in minutes.

OfferPad co-founder and top producing agent Brian Bair’s  goal is to make the homeselling “process as simple as possible.”  He just landed $260 million in new funding to do so.

With the old model, there are “things I couldn’t do. I couldn’t tell [homesellers] exactly when their home was going to close and I couldn’t prevent the property from falling out of escrow 10 days before closing because the buyer’s financing fell through,” said Bair.

Critics argue that when it comes to homes, consumers do not place a premium on speed — but, actually, many might if acceleration is coupled with certainty.

Think about it — knowing you will close in a few days for a set price resolves the unknowns with the current process. For some, risking a lower price is worth the certainty. And this works best when you feel like you are dealing with a sophisticated service.

Uber charged the consumer more when it began, but the certainty and convenience outweighed the cost. Plus, the app seemed to know what it was doing.

These new models are all a bit different, and they are far from perfect. Stories are surfacing about sellers who are getting less than market value and paying hefty transaction costs — commissions as high as 13 percent, though the average is purportedly 6 percent to 8 percent.

On an Inman story last week, Arizona Realtor Jerry Murphy commented, “I tried OfferPad to get an offer on one of my listings. They offered $15,000 less than the offer we accepted on the property. That coupled with the exorbitant fees leave me asking what seller in their right mind would leave so much money on the table. You either really have to hate Realtors or be really desperate to do so.”

And for now, these startups can’t possibly do better than an ethical and qualified agent. Today, the dumbest pigeon is smarter than the smartest robot.

But their capitalization allows these razzle-dazzle companies to make mistakes and get better and better. Plus, with machine learning, their tools will soon be as precise as the time displayed on your iPhone.

And expect new products, like mortgages that close in minutes, prompting buyers to participate in these new models. A marketplace?

We will soon know if this is an Uber-like tipping point for the real estate industry. I think it could be. But it’s only threatening if the industry crosses its arms smugly, puts on a grumpy face and does nothing.

Broker-owners can choose to behave like cab companies — ignoring the trend altogether or casting the new models as some sort of evil Slenderman. That approach stalls innovation and puts broker-owners further behind.

Consider the history with the portals, when the industry made Zillow the bogeyman. Now, many brokers have no other choice than to cozy up with the giant portal to keep up with technology that is being built by a new generation of disrupters. The once boring back-end is suddenly sexy, if transaction compression is the name of the game, which it is. Zillow and Dotloop together can connect the dots from lead to close better than anyone.

Brokers must quickly invest in data science to understand when homesellers are going to sell and in tools that compress the transaction — wiping out weeks of wasted time for their agents and their customers. Brokers can also partner with the new fintech companies that are making the loan process quicker than watching a segment of The Big Bang Theory.

Soon, it will be “time” that brokers are competing with — not portals, bots and geeky entrepreneurs.

I hold out hope that this time around brokers will act more like Jack in the Beanstalk, showing leadership, courage and bravery to overcome and even befriend the giants.

What about agents?

Do I think these new models will wipe them out? No. They are like smart Uber drivers, once cabbies and chauffeurs, who made the switch successfully  The best drivers have multiple cars and are building businesses around car-share services.

Smart real estate agents are already changing how they manage their transactions, and they are forming teams to deliver better and faster service. They are survivors and thrivers; they will adapt, adopt and partner where needed. They are as agile as the best entrepreneurs and have leverage if they use it.

Those who don’t will suffer the consequences.

Have you stood in a grocery store line lately when someone ahead of you is writing a paper check? I try not to get impatient, but I wish I could show the person how to use Apple Pay to make their life easier.

Technology is not perfect, but some of it just makes too much sense to ignore.

Email Brad Inman

 

 

Biggest Sale Of The Year?

60 Oneida Drive (within the Indian Harbor Association neighborhood), asked $21.9M, sells for $19.250M.

60 Oneida Drive (within the Indian Harbor Association neighborhood), asked $21.9M, sells for $19.250M. List: Shelly Tretter Lynch  Sell: Anne Ward

What? It’s January, for heaven’s sake, yer telling me someone can’t top a lousy $19,250,000 sale before December 31, 2017?? Yes, that’s what I’m saying and I base this prediction on my recent conversations with high-end buyers and fellow brokers.

Bloomberg estimates “equities’ global market value has jumped $2 TRILLION since the election”., so our high-end buyers are feeling confident of the future, right? The answer is yes and no. They are confident of the national economy’s continued improvement, but they are uniformly concerned about Connecticut’s economy and its tax picture. Not one buyer or broker I spoke to expects (those idiots in) Hartford to do anything but more harm to Fairfield County.

General Electric’s recent departure is certainly the biggest “canary in the coal mine” so far, but plenty of lower profile financial services companies and hedge-funds have also cleared out, not to mention a gun company or two.

So, as Connecticut’s Governor Malloy and his legislative allies proudly maintain our fair state’s “business unfriendly” atmosphere, most expect it to get worse this year. And let’s not forget our big, fat estate tax, which chases away older zillionaires on a regular basis.

So yeah, it’s great to see such a big land sale, it’s encouraging, by golly. I just wish it was the beginning of a trend.

Note: that address-link for 60 Oneida Drive works better on your desktop than your mobile device.

Greenwich’s “Drought” Continues

"Rockwood Lake", one of Greenwich's reservoirs, looking pretty full this afternoon (Seen in foreground, Canada geese which have been fitted with disposable diapers to prevent water contamination)

“Rockwood Lake”, one of Greenwich’s reservoirs, looking pretty full this afternoon (seen in foreground, Canada geese, which have been fitted with disposable diapers to prevent water contamination)

Every time we have yet another torrential, all-day rain like the one seen yesterday, I look forward to the Town announcing the “End of the drought”. Sadly, that announcement has been postponed again, and it’s starting to look like NO AMOUNT OF RAIN will ever solve this problem.

Here’s the latest Greenwich Time story on this bizarre “drought that won’t go away”:

http://m.greenwichtime.com/local/article/Greenwich-s-reservoirs-still-below-normal-10880986.php#photo-12248768

Since massive rainfall has no effect, has anyone considered the possibility that one of our reservoirs may have a hole somewhere?

Or, how about this idea: let’s dig a deeper reservoir!

As usual, Fountain puts the great brain to work, and out pop two great ideas!

Can You Predict The Future?

11 Round Hill Club Road, quite spectacular, and you can drive home in your little golf cart! Priced at $16.950M, it is Greenwich's most expensive spec house. List: Chris Finlay

11 Round Hill Club Road, quite spectacular, and you can go from the course to your home without getting out of your little golf cart! Priced at $16.950M, it is Greenwich’s most expensive spec house. List: Chris Finlay

Sorry, nope, you can’t predict the future. Sometimes people think they can, and they bet a certain way and get rewarded, only to lose it all on the next bet.  I’m reminded of financier John Paulson, who correctly predicted the future in 2008 (by buying credit-default insurance against billions of dollars of subprime mortgages) but has since been far less prescient.

On the other hand, there was the late, great Bill Ziff, billionaire publisher. He was so good at guessing what people were going to want to read, people would ask him if he could predict the future. He explained it this way:

 “I just saw things as they were in the present, while others only looked at the past”.

Bill Ziff was very, very successful, so let’s think about that quote for a moment. A child puts its hand on a hot stove once, and learns not to do it again, that’s an example of the teaching value of past experiences. But for your investment decisions, are you really looking at things as they are right now, or are you focused on the past? (Or, worse still, trying to predict the future.)

Anyway, I had a point to make about real estate, dammit, and here it is: There are presently 50, yes, FIFTY unsold spec houses sitting around on the Greenwich market, and each one of them was built by someone who had to at least try and predict the future. The question they answered yes to was, will Greenwich continue to be desirable to the wealthy?

Last year, the spec builders got it right, particularly in the $3M-$5M range, where we had 14 sales. Over all, 33 new-construction spec sales occurred, so that is a healthy market. But what about 2017? Will the rich folks be there for us, or will Hartford continue its quest to drive them away?

I want you to look at things as they are right now…got it? Ok, so what’s your prediction?

Here are additional samples of those 50 on the market…

9 Oakley Lane, $11.995M. List: Steve Archino.

9 Oakley Lane, $11.995M. List: Steve Archino.


French Road, $9.395M. List: Joanne Mancuso.

French Road, $9.395M. List: Joanne Mancuso.


72 Meadow Road, $6.450M. List: Tracey Koorbusch.

72 Meadow Road, $6.450M. List: Tracey Koorbusch.


14 Dawn Harbor Lane, $5.995M. List: JoAnn McCarthy

14 Dawn Harbor Lane, $5.995M. List: JoAnn McCarthy


22 Welwyn Lane, $4.595M. List: Linda Collins.

22 Welwyn Lane, $4.595M. List: Linda Collins.


9 Byram Dock Street, $3.995M. List: Bryan Tunney.

9 Byram Dock Street, $3.995M. List: Bryan Tunney.


8 Chapel Lane, $3.975M. List: Barbara Wells.

8 Chapel Lane, $3.975M. List: Barbara Wells.


15 Cottontail, $3.995M. List: Jacqueline Hammock.

15 Cottontail, $3.995M. List: Jacqueline Hammock.


34 Miltiades Avenue, $2.995M. List: Michele Nygaard.

34 Miltiades Avenue, $2.995M. List: Michele Nygaard.