The 3 Truths About Your Home Search
First, the traditional concept is the market is made up of homes that are listed for sale, under contract, and recently sold. However, the truth is there's a large segment of the market that is not actively listed for sale, but is Coming Soon to the market, or listed in Private Placement. Coming Soon, and Private Placement homes are not visible on consumer facing website. In addition, there are homes whose owners are not currently considering a sale, but would if the right offer were made to them.
Second, the traditional concept is that you can go to any real estate website and see all the homes listed for sale. However, the truth is that no web site has the entire inventory of homes for sale. The reality is you, and your agent, have to monitor multiple brokerage web sites, real estate portals, and other databases to see the entire market.
Third, online search is not the only way to search for homes. The truth is online search is a great way to search, but if you rely solely on this method, you will miss a large chunk of the market. You have to deploy multiple strategies like direct mail, monitoring multiple sites, and networking to find as much of the inventory as possible.
For years buyers could rely upon a unified database that would contain 90%, or more, of all the available homes for sale. This system was based on the local real estate board's Multiple Listing Service (MLS). Any website with access to this data feed would be able to show 90%, or more, of the homes for sale. The only properties missing from this database were homes listed For Sale By Owner (FSBO). However, the market evolves, and more and more sellers are choosing a new way to sell their home. This way involves hiring a real estate broker to market and list their home for sale, but chooses to right to opt-out of the MLS, or delay entry into it, to take advantage of what's called Private Placement.
Private Placement allows for a home to be listed, shown, and negotiate offers without being in the MLS. This is possible due to technology, and marketing advances. Homes sold via Private Placement are usually in premium condition, in a high demand location, and are offered at a fair price for which the home would likely sell, if placed in the MLS.
As a result, more and more homes are selling BEFORE they enter the MLS. Therefore, buyers have to change the way they approach searching for a home. If they don't adapt then they will miss out on their perfect house.
Bring All Your Decision Makers Together
Even if you are buying a home on your own, you will likely have trusted advisors helping you along the way. Your social network has vast experience and insight to share with you to help you make the best decision possible. Unfortunately, until now, there's never been a way to easily collaborate with your network during your home search.
In order to collaborate you need a workspace tool that will help you organize data, communicate, and monitor the market as it changes. Trying to do that with email, text messages, and phone calls will take too long and fail to connect everyone with the same data.
That's why the tech team at Compass developed "Collections." Collections is a digital workspace that allows you, or your Compass agent, to create curated content of listings. Think Pinterest. From these Collections of listings you can invite your friends, spouse, or other advisors such as legal and financial professionals to interact with your Collection. In addition, your Collections will receive updated listings, at a time interval you specify, to make sure your team is up to date with the latest market information. And, Collections works with off market properties, and Coming Soon inventory!
Big Data Meets Local Expertise
Before investing hundreds of thousands of dollars, or even millions of dollars, it's prudent to analyze the market. Traditionally, this would include a comparable market analysis of the most recent homes available for sale within a specific area and time period. Adjustments are made to the value of each sale comparing them to a subject property. If a property had a feature of greater value to the subject property, then its value was adjusted down. If a property had feature of lesser value compared to the subject property, then its value was adjusted higher. The goal was to establish a comparable price to the subject and was based on the economic theory of substitution. This analysis was done by an individual real estate agent who was experienced with the local real estate market.
Since it was a manual process, the report relied heavily on the agents personal knowledge and ability to infer market trends based upon the raw data. However, since it was done manually, the process was often inconsistent and due to time constraints, the data was limited to only a few homes.
However, with technology advances, and the introduction of big data, it is now possible to take analysis much deeper. The result is a more thorough market analysis that looks deeper into the past, and predicts further into the future. At Compass our team of industry-leading software engineers and data scientists are building analytical tools to help answer real estate’s toughest question, "what's this house worth?" We're also combining the tech with years of hyper-local sales experience of the Compass real estate agents. We want to bring you the best of both worlds; comprehensive data built on big data and machine learning, and intuitive explanation by experienced agents to contextualize it for your own unique situation.
Understand You Are Not Just Negotiating With the Seller
In real estate, the stakes are high. You want to reach an agreement that achieves your long term goals. You want to buy a great house, and pay a fair price. You've finally found the home you want, and now it's time to negotiate a contract. At this point, most buyers make a fundamental mistake. They think they are negotiating with the seller. They are wrong. They are not only negotiating with the seller, but also any other potential buyers of the home. Some negotiations may have 20 parties, or more actively involved. Others may have only two active parties, but many more passively involved parties. You are negotiating with the market, not just the seller.
There's also more to a negotiation than just price. The terms of the agreement represent risk to one party, or the other. Sellers would like to avoid as much risk as possible, and so would buyers. Therefore, how your offer is constructed will impact the seller's desire to accept it. With this in mind you need to understand the various contract terms and how different contingencies work. Determine which terms and contingencies are essential for you, and which terms are not. To obtain the best price, you need the most attractive offer, which means eliminating as much risk as possible to the seller.
Now that your offer has been accepted it's time to perform. That means you need to comply with the terms and conditions contained in the agreement. There are certain things you will need to do, and you will have deadlines to complete them. Failing to complete items by the deadline will either mean you've lost the protection of a contingency, or you are in default of the agreement.