Show - 04/06/24

Jay Day:

Good morning, WFMD listeners. I'm Jay Day.

Christina Day:

and Christina Day.

Jay Day:

And we're here with Real Talk Real Estate here to sort of help break out all of this news that's happening, give you updates on what's happening in our current market. So there's a lot of things that have come up and I'm going to let you start all that off.

Christina Day:

Well, I am going to start our show just like we always do. I want to start talking a little bit about what the market is looking like and the inventory, because the first thing anybody asks a real estate agent is how's the market?

Jay Day:

Yeah, that's true. And we're going to focus on Frederick County.

Christina Day:

Frederick County. Yes. Kind of the epicenter of all of the areas that we service. So this month and just FYI was spring break and Easter, all of our statistics were pooled as of March 29th, so kind of the tail end of the month as we were finishing out the month. But not all of the business had actually concluded when we were pulling our stats, but that was just because of having to accommodate for Easter. So when we were looking at numbers coming soon, we were at 64 with a median price of 475. Now the month before it had been about 60, so we had a massive change

Jay Day:

And normally we would start to see a bigger increase as we're getting into March. So I don't want to be negative, but that's not exciting news.

Christina Day:

Yeah. Well there, there's some excitement here. For actives, we had 171, median price was 529. Median days on market was 18. Month before it was 158. So a little bit bigger,

Jay Day:

A little bit

Christina Day:

Number there, which we do expect to see as we roll into spring. And then our contracts in pendings, we had 287 contract pendings. The morning of the 29th, median price was 475, 8 days on the market. Then the interesting thing was last month, the days on market for contracts and pendings was also 8. So the timing is looking pretty consistent, is pretty

Jay Day:

Consistent.

Christina Day:

But those numbers are definitely moving in, what I would think is kind of an upward direction with the activity that we're seeing with listings coming on, buyers buying and people going to closing. Solds as of the morning of the 29th, and I am positive on the 29th, there's going to be a whole lot of closings happening last business day of the month.

Jay Day:

And there's a lot of agents that use management companies, transaction management companies where they don't get all their data to even do the updates. So there's stuff that until

Christina Day:

The first or second.

Jay Day:

Yeah.

Christina Day:

Exactly. So the morning of the 29th, we were sitting at 215 sold, and the median price was 450. That was six days on the market. Now that is absolutely an increase because the month before, we were only at 172, so we definitely saw some momentum happening there. The price point came down just a little bit. We went from 460 median to 450 median, which it doesn't mean that the market's falling, it just means that lower priced homes were what we were seeing actually moving.

Jay Day:

And I mean, the interest rates have definitely had an impact.

Christina Day:

Oh yeah.

Jay Day:

We got a little bit of a tease that they came down a little, but they've been hovering just at that upper six, seven range with no points. And people, their affordability, affordability has changed dramatically. So some people are just realizing, hey, I'm just going to buy the home. It's a little less expensive, which is what you're seeing in your numbers.

Christina Day:

Yeah, absolutely. And we've definitely seen that with buyers who are looking and they're being mindful of their comfort payment, not what they're actually qualified for.

Jay Day:

And that used to be, I mean, I'll go back to the area that we saw that the most in was Carroll County. I just always remember super conservative, I'm approved for, and this is a long time ago, I'm approved for 500,000, but they're like, I'm comfortable with 375 with that monthly payment is. And it was pretty standard in Carroll County. And I said, wow, these people are much more conservative with their budgeting, not that it's a bad thing, other areas that they're approved for 500 and they're still trying to figure a way to get 505. So we are seeing people being a little more cognizant of that, and I think the buyers are realizing, okay, rates did go down a little bit. Nothing like what we had before, but am I comfortable with this payment? And just realize maybe if the rates get down to five and a half, I'll just refi in eight months, six months, two years, whoever knows what that timeframe will be.

Christina Day:

Right, exactly. And there's a lot of unknowns. I mean, we know that just like anything rates ebb and flow and right now it's flowing, not ebbing. So we have to be mindful of we can't predict the future wish we could, we would all be rich. But the reality is there's a natural order of things going up and down, and as things move, you just have to keep an eye on it. You have to have a good relationship with your realtor, you have to have a good relationship with your lender, and you have to stay aware so that you know when that time feels right to make a move.

Jay Day:

Well, and on my podcast I ended up talking in detail about, and we've talked about it multiple times, just the importance of a lot of people don't realize that the real estate market and interest rates, interest rates change multiple times a day. They fluctuate constantly. So if you got a preapproval a week ago, or maybe you got a preapproval on Monday. Tuesday, the rates could have went up a quarter of a point, a half a point. So it's really important that when you're working with your agent, that you sort of stay in the loop and your agent is working closely with the lender, like, okay, this house, your mortgage would've been $4,000 on Monday. Today it's Thursday, and now your mortgage is going to be $4175. And just because of the rates.

Christina Day:

And if you're tightly qualified and you are working at your maximum, that can make a big difference. That could be it happens or it doesn't happen moment.

Jay Day:

Yeah.

Christina Day:

Alright, so let's get into what I know. Everybody who has listened to any amount of news or read any amount of news is surely thinking we're going to talk about and we will not disappoint the NAR Department of Justice change to the commissions and how that's going to work.

Jay Day:

Wow. I'm surprised you're letting us talk about this. Well, probably because I talked about it on the podcast and just figured I wouldn't tell you about it.

Christina Day:

You were going to ask for forgiveness instead of permission

Jay Day:

Being married, I sort of learned how to handle things, and if I asked for approval, you would've told me no. So instead of getting disappointed that you would tell me no.

Christina Day:

Well, I think that it's important that we talk about what we do know, but I think it's really important to caveat that there's a lot that we don't know. There's a lot that the people who are actively participating in this don't know because the keys here are, a. we all know about fake news. We all know that the media, no matter what it is, is going to get their teeth into it and they're going to sensationalize it and try to make it real sexy and click baity, and they're going to put out pretty much anything they can to get you excited and talking.

Jay Day:

Yeah. So the first thing, and I thought about that when I was doing the podcast. I'm like, my wife is going to be proud of me. She's going to be mad that I didn't tell her, but when she listens, she's going to be like, oh my gosh. He actually was very, very poignant and very direct and did not get into wishy-washy.

Christina Day:

Good.

Jay Day:

So the first thing is it is a proposed settlement. Nothing is done. The two parties, NAR and the Government writing it, everybody's saying that, okay, we all agree on this, this is all good. However, the courts need to sign off on it. So the example that I gave in my podcast is you'll hear in the House and the Senate that there's this bill and there's all these conversations. There's an agreement, a meeting of the minds, an agreement. However, once it gets put into writing and signed off on, there's always lots of changes. So I'm like, that's probably the most simple way of explaining it. There are some things that are as far as you mentioned, what we know and what we don't know. So what I pointed out in the podcast was one of the things that we know as it is written right now is that offers of compensation are prohibited from the MLS, the National Association Realtors has agreed to put in place a new rule prohibiting offers of compensation on the MLS. And they're saying that that change will go into effect mid July. We just heard something yesterday that it may not happen until the end of the year. So the state, some states are trying to get things done in advance. So again, they're thinking maybe by July. And what Christina mentioned earlier was really important is until that happens, you can't try to make it happen beforehand because the National Association of Realtors has all of these, the code of ethics, they have all these rules and regulations, and one of them is that you can't ask for compensation as part of negotiating a contract.

Christina Day:

Which the irony in all of this is the way that things were set up. And I wanted to talk about how things are today, where we are today and why. So the issue is that when you have an agent who is going to sell your house, you are also engaging all of the other agents out there in the licensees area. If you are licensed in Maryland, you can sell the house in Maryland, you're engaging all of them to bring their buyer. So your agreement is with me and you say, I'm going to pay you, and we're not allowed to really talk about commissions, so we're going to call them apples. So you're going to pay me, let's call it 10 apples, right?

Jay Day:

Okay.

Christina Day:

This has nothing to do with actual commissions and things like that. So let's say just for easy math, you are going to pay 10 apples for me to sell your house.

Jay Day:

And remember, the one important thing is there is no set amount of apples to sell a house or commission. It's all a hundred percent negotiable.

Christina Day:

Exactly. And

Jay Day:

There's been no change for that.

Christina Day:

No, and a lot of that for us, and I know probably many other agents, what we charge in order to sell your house has a lot to do with the marketing services that we are going to include in your package. So when I have people who have an empty house and it needs no staging, or it needs very little hands-on from me, or we're not doing videos and we're not doing aerials and things like that, that gives me a lot more latitude with what we charge.

Jay Day:

Because for example,

Christina Day:

The cost associated or less,

Jay Day:

One of the appointments I was in was like a 0.14 acre lot. I said, drone and aerial is not needed. And by the way, we're a little pricier for some of that stuff because we believe in hiring professionals that have their license, they're pilot license, be able to fly those, especially in the DC and metro area where you're near all these airports and things change where you're allowed to shoot. We've had it where sometimes they can't go up and do things in Lake Linganore because there's stuff going on in the air that is associated with, hey, this is not, we could shoot your drone down if you go up. And we're not professionals on that. So we pay the professionals to do it.

Christina Day:

Yes and also you just get better quality work when you hire a professional. I mean, I can paint in the house, it's probably not a good idea.

Jay Day:

Well, I definitely can't paint in the house. You saw what that was.

Christina Day:

So the way that it is now, you pay me, and then I offered a share out of that via the multiple listing service, the MLS to all the other agents. I say, out of my bundle of apples, I'm going to pay you this amount of apples in order for you to bring me your buyer and for you to help me get this house sold. So that's how it's set up now. And the reason it's set up that way now is because as a buyer, you have to come in with your down payment. You have to come in with your closing costs and your prepaids. And we'll use Maryland as an example. Maryland is a high cost state.

Jay Day:

It is.

Christina Day:

And so if you are a buyer in Maryland, let's say you're not a veteran and you're buying in a more metropolitan area, not a rural place that would allow for certain types of loans that do 100% financing, your minimum possible down is going to be 3.5%, maybe 3 if you're credit criteria matches up and that sort of thing for a conventional. So let's assume 3% plus your closing costs, your prepaids.

Jay Day:

Yeah, I was going to say that doesn't count all of so.

Christina Day:

So then depending on the price range of the house, you might be looking at 6 to 9% of cash out of pocket, of what you're going to need to purchase that house. And in the competitive market that we're in, you're not really asking sellers for closing help right now.

Jay Day:

Yeah, we haven't seen, we are seeing a tiny bit of it.

Christina Day:

Small percentage of it, right. So likewise, you want to have as a buyer, an agent who's looking out for your best interest, who's guiding you along the way, who's pointing out things that might be a concern for you, who knows the market, who knows what you should be offering on this house to make sure that you're not overpaying, to make sure that you're protected by getting the appropriate inspections.

Jay Day:

Well, and just to cut in real quick, for those that are listening that may not know this, and I mean the agents should know this, but as real estate agents in Maryland, we have fiduciary duties to our clients. So just like if you have somebody managing your stocks or managing your investments,

Christina Day:

Or an attorney for a court case.

Jay Day:

They have fiduciary responsibilities. We have that too to our clients, not to our customers. And the difference between a customer and client, a client is someone who is engaged in our service, who has signed an agreement, someone who just reached out to us and wanted to see something. And if for some reason we didn't do an agreement, which isn't how we operate, that would be a customer only. So we're due honesty, we can't have to be honest and fair, but there's no fiduciary duties to that person.

Christina Day:

Correct.

Jay Day:

And the loyalty is to your client, not your customer.

Christina Day:

And no performance obligation either. Right? So for my clients, you can call me at nine o'clock at night and I'm answering the phone. My clients, if you want to go see a house at 9:00 AM on a Saturday or a Sunday or on Christmas Eve, I'm up at 10 o'clock at night negotiating a contract that actually happened this year. You're a client, you're getting all of my services, you're getting my time. I am at your disposal, and it is my job to look out for you.

Jay Day:

It's our commitment. Once you sign on, we're there to help.

Christina Day:

Exactly. So as a buyer, you're going to want that, right? But there is a cost associated with that. So let's say the cost associated with that is three apples. So if you were coming in with your down payment, your closing cost, and now you need to go fetch a bushel of apples, right?

Jay Day:

Well, I think three is less than a bushel, babe. I don't know what type of bushels you're looking at, but,

Christina Day:

You got to find some apples to pay me. Then you're really looking at a lot of out-of-pocket expense. So why the system was set up, how it was, was that the commissions were baked into the price, right? There is a cost associated with selling, and it was all baked into the price to make it financially manageable for a buyer to buy and for a seller to sell.

Jay Day:

Now, what started this, in my opinion, and there's agents have been guilty of it. I mean, we've had people on the team that we've seen say something, we're like, whoa, that's not how you do this. The challenge was, and what the Department of Justice and what they thought was unfair was there was agents saying that they would do their service for free, free and no cost to you or two totally different things. And free would mean in the DOJs eyes free would mean that if the listing agent was offering you three apples, those three apples would not go to you because you work for free. Those three apples should go to the buyer. And that's sort of what I'm seeing is because I actually went on the DOJs website and read through all of their thoughts, and that really was a sticking point. It was a constant marketing that people felt, well, they felt that. They were saying, oh, I don't make anything. It's free. And the public didn't realize or didn't associate them getting paid at all. And you will see, I mean you shouldn't see it now, but I mean, there's a lot of times people will put out there free, I work for free, or I'm only going to be X amount or Y amount, or I'm going to take whatever the listing agent pays. That is all going to be changing.

Christina Day:

Exactly.

Jay Day:

Which isn't a bad thing.

Christina Day:

No, so basically there's going to be change that we're all going to have to navigate through. We're not a hundred percent sure when that change is actually going to take place. And we're not exactly sure what that change is really going to look like. But what we do know is in the multiple listing service, we will not be able to say to the other agents in the licensing area, hey, I'm going to pay you three or four apples if you help me sell this house. That agent will have to have an agreement with their buyer, that their buyer is going to pay them a certain amount of money. And then that buyer, when they write their offer, is going to have to ask for whatever concessions, which we just said we don't see a lot of right now. Right? We see a lot of concessions. So I think we're going to see a resurgence of concessions. So all this news stuff saying the end of 6% commissions and

Jay Day:

Buyer agencies will be dead.

Christina Day:

So there's another piece, right?

Jay Day:

Yeah. We haven't gotten to that yet.

Christina Day:

Yeah, there's another piece of that. So the reality is that buyer is going to have to find a way to compensate their agent who they have engaged to look out for their best interest, which is really valuable. This is the biggest expense for some people, or it's a strategic expense for some people if you're an investor. But I wouldn't go to court without an attorney. I don't think I would buy a house without an agent.

Jay Day:

Well, and think about it. It's the same thing. I was explaining this to a, who was customer turn client by the time I left, they were a client. When I walked in, they were a customer and she had a lot of questions about what was going on. And when I was explaining it, I said, she mentioned that she had been divorced and then remarried, her spouse had passed away. The second one we were talking, I said, it's sort of like the way having an agent on the buyer side versus not, and trying to just say, I don't want any representation as if you were to go into do your divorce. And you're like, we're just going to work it out ourselves, and we're not going to have an attorney help out with this. We're going to save the money. Most people that do that, they end up realizing they're losing money later because there was a lot of things that they

Christina Day:

Didn't think of.

Jay Day:

I mean, we have somebody right now I've been talking with for a while. Her and her ex had split. They've been divorced for years. She moved out of state, he's still here. They did not use an attorney. They agreed that they would sell the house, but they never had a timeframe. And he's like, I'm not leaving. And I was like, now she has to pay an attorney to get involved. And I said, now you got a little bit of a bigger mess because you've got to go put the toothpaste back in the tooth.

Christina Day:

And that's with real estate we see in the fever of the market. We've seen a lot of people waving inspections. We've talked about this repeatedly on our show. And I cannot look at my buyer client and say, I think it's a good idea for you to waive inspections. Now, when I'm representing a seller and I'm looking at the seller, I'm going, man, it would be great if they didn't want to worry about inspections. So talk about a hassle free. You're done, right? It depends on what hat you're wearing. The next part of that though,

Jay Day:

Can I get into the next part?

Christina Day:

Oh, you can get into the next part. Let's do it.

Jay Day:

So the next part, this to me is, well, first of all, this part has already been sort of how things work in Maryland. We've learned there's lots of states that don't even have these

Christina Day:

Agency varies in different states.

Jay Day:

So now what has been agreed upon, there will be written agreements for MLS participants acting for buyers. So the settlement provides that MLS participants, basically any agent that is a member of an MLS that works with a buyer,

Christina Day:

Which side note we kind of have to be, or we don't have access to the information.

Jay Day:

I thought I wasn't allowed to say that.

Christina Day:

Well, but I mean, okay, so there's nobody saying you have to, but you can't get access to all of the listings. I was an agent before the MLS, back in my day. You literally had a book with listings, and you would have to manually share that information.

Jay Day:

And here's one thing that, because again, we're agents, we know how all this stuff works. When I was talking with that person last night, we went through things and she goes, well, what really is the MLS? I'm like, so when you go onto Homes.com, Zillow, Realtor.com, all of that data is coming from the multiple list. That's what shoots it out to all of these different sites. And she was like, oh, that could be a problem if it doesn't hit anywhere.

Christina Day:

So it's a central hub where all of the listing information goes so that us as licensees can know what is out there as a listing agent to help market your property via all these other licensees, and then as a buyer's agent to find property for my buyer. And then secondarily, it works as a hub that syndicates out to all of these other websites that are public marketing sites. So all of, like you were saying, Zillow, Redfin, Realtor, that kind of thing, right? It's all out there for everybody to see, only because it starts at this one place.

Jay Day:

So back to where I was going with that. Anyone who is an MLS participant, which is going to be the majority of agents, if they work with a buyer, they have to enter into a written agreement before showing them any properties. So the days of making a phone call and saying, I'm going to see this house, that is going to change dramatically. Because if that person is a member of the MLS, they technically are supposed to get a signed buyer agency agreement before they open that door.

Christina Day:

And keep in mind that buyer agency agreement says that that agent's job is to look out for you and your best interest from the minute you walk through that door until the time that you go to closing, should you decide to buy that house.

Jay Day:

And in that agreement, just so you guys know, and Maryland already has one, we're a little bit ahead of the curve. There are some states that they don't even have this agreement in place. Now, we all think that the forms are going to change because there is a required verbiage that they agreed that they were going to add in there, that commissions are a hundred percent negotiable. There's no set standard. There's some very strict language that they want in a lot of these. But in there, the whole point of it is the transparency that I'm going to represent you, and this is what you're going to have to pay me. There's no surprise of what is getting paid. No, I'm working for free. And some of the other caveats that are in there is if you sign this agreement and you say you're going to work for four apples, and the seller agrees to offer some type of compensation not to the agent, not in the MLS, but they're willing to do some type of concessions, and let's say they're willing to offer five apples. You can't take five apples, you can only take four what your agreement is. Now, one of the neat things is if you end up saying, I'll work for four apples, and all you can negotiate is two, and if you're willing to accept just two, then you can negotiate it down. You just can't take the extra money. And right now, that happens all the time. Builders will say, we're giving a bonus. They're giving this. They're giving that. Those days are a changing.

Christina Day:

Yes. So the key takeaways here with this whole NAR DOJ all over the news, right? It's changing things, but there is a. no clear direction on exactly when there is no clear direction on exactly how. And the bigger picture is, we don't know exactly how this is going to unfold from a tactical and practical standpoint in the marketplace and what it's going to actually do to the marketplace. Because we know once buyers become "truly responsible" for compensating their agent, that it is going to then put the pressure on the buyer who's then going to put the pressure on the seller. And then there's going to be this dialogue trying to figure this out.

Jay Day:

And there's, from we're hearing, there's going to be a time where the documents change. The state is creating documents. However, the rules may not have changed yet. We're going to have a murky area.

Christina Day:

And because every state has different agency rules and regulations, there's a lot of legalities that go along with the statute per state as to who represents who and how that all works, right? Because here in Maryland, we have the listing agent represents the seller, the buyer's agent represents the buyer. And then let's say you are a buyer who just called, which Jay was explaining, would be a customer, and you said, I would like to see X, Y, Z Main street. And that agent works for a different brokerage. That agent technically still represents the seller. It's called sub-agency, right? And then if you called our brokerage and you said, I would like to see X, Y, Z Main street, and you don't have a buyer agreement, that agent represents the seller. So there's a lot of gray area there that'll still need to get sifted through and figured out as to what's going to be allowable and how it will be allowable.

Jay Day:

And as of the timing of us doing this, we actually had a long zoom meeting with Maryland. And I mean, I asked specifically, is subagent to seller? Subagency gone? And we couldn't get an answer. And I think it's because they don't know. They really don't know. So the one thing I want to end this on, if you're an agent listening to this, obviously, and anyone who's listening, we're not attorneys, we are not your broker, you should always check with your broker. You should check with an attorney. Our job is to just try to explain this the best that we can. And again, there's a lot of things that we don't have answers for. The only things that we know are how they have it written. Now, the MLS is clearly saying they are working on removing certain fields and putting new fields in, but they can't even tell us what date that'll be and what the fields. Well, they are saying the compensation field will be removed, but they're not saying exactly what they're going to be replacing or adding in. So we will keep you posted on our show. I know it's a lot of information. If you decide you listen to this, you're like, I have no idea what they're talking about, you want to chat about it, you can reach us at 866-702-9038. Again, 866-702-9038 or visit our website dayhometeam.com. That's dayhometeam.com. I'm Jay Day.

Christina Day:

and Christina Day.

Jay Day:

Thanks for tuning into Real Talk Real Estate. We'll be with you next month. 

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