Blog: R.E. Tales
Hey, not every place is pretty.
With over 40 years (and counting) in the business, you might expect I have witnessed many changes. When I started, around the change of the year from 1980 to ’81, I was part of a going business with a number of other agents. We were active in quite a few counties and I had over 100 listings to work with. And did I ever work! By the end of the year, I had driven 40000 miles and probably averaged 40 hours a week in real estate. Farming took up the time that could have been called “spare”. I had well over 100 acres to crop and we were getting ready to start milking again. “Getting ready” means I was feeding heifers and not getting a milk check; the money as flowing out pretty fast. My real estate earnings for that year? $1364, one pitiful sale. The sensible thing to do would have been to give up and do something that paid better. But I remained stubborn - as I discovered I really liked working with people once again, finding them a compromise between what they wanted and what they needed or could afford.
So I sold my best hay to make ends meet and, later on, when those heifers calved and began milking, I paid again. Although big enough and heavy enough to do better, the poorer feed I had kept meant they were only milking 50 pounds. But at least cash was flowing and by the time the second group of heifers calved, I typically got 70 pounds - and most of the first group had been culled.
The largest portion of my customers were dairymen then. They’d meet me at my farm sometime after chores were over and we’d take long rides in beautiful countryside, looking at farms. Having them meet me at my farm instantly established my credentials as someone who was not only a real estate agent, but someone who knew farms, cows, crops and machinery. It worked out well: when I was busiest with my crops, so were they, so there was not the conflict there’d be if I were trying to do the same thing today.
Subsequent years went up and down in my income, but at least I found enough to live on. And I had milk checks coming so, between the two, I managed to have better machinery than would be expected for a farm of my size, which meant I could get crops harvested quicker and help more people with the time I’d saved. It worked out.
We’d take off at l say, 10AM, visit several farms and I‘d be home for chores. Once a couple came out from Wisconsin and wanted to see as many places as I could cram in. We saw 15 dairy farms that day and by noon, their eyes were starting to glaze over as their minds went into overload and began to shut down. It’s not like looking at houses; there so much more to take in and absorb. After that day, I imposed a 5 farm limit as Id discovered most buyers could handle up to that amount and manage to keep things fairly straight in their heads.
Typically, they‘d arrive and pile in my car and off we’d go to look at a number of places. Sometimes, I’d ride with them. I like doing this as we get to know each other better. The better I know you, the better job I can do for you. And it gave the buyers hours to ask questions of me and pick my mind to get a good sense of what their life here might be like for them. And it would build up their trust of me.
Many of my buyers were from Connecticut. I’d come to New York from Connecticut where I’d worked 5 years as a Dairy Herd Association Supervisor. The title was far more imposing than the job was, but I often knew some of the same people that they did, which helped to establish a better rapport. We also got quite a few dairymen from Massachusetts and the lower Hudson Valley as well as a smaller spattering from other places. Today, any southern New Englander is surprisingly rare and I go months and months without a call from an actual dairyman. I still see Hudson Valley folks and now quite more of the New Yorkers hail from the Big City and Long Island as well as from Pennsylvania, which was surprisingly uncommon back in the early ’80’s.
Today, we also see more from all over the rest of the US, thanks to the internet. Ethnic buyers comprise a much greater share than they used to. I think they are becoming more successful as time goes on, and are better able to take the kind of steps many have always hoped to take. They were something of a rarity back then. Things are different today in so many ways. The Internet has allowed us to reach anyone who searches for us, anywhere in the world. Back then, you could not afford to advertise everywhere. We had to confine ourselves to agriculture newspapers and Pennysaver type periodicals in the right suburbs. Today many of those sources are gone, caput, and I have finally mostly abandoned print ads in favor of internet ones.
Another manifestation of the changes in the kind of buyers I see has come from the increased ability to work remotely. Now you can live where you want but still have a good job. You can have city wages and live in the country where things are cheaper. That’s a huge benefit to those that want it.
So I see few dairymen anymore - who then do I see? I see many hobby farmers, folks interested in alternative agriculture, either for part of full-time. When I started, people such as this didn't come along often. I see early retirees, people embarking in new directions with a second marriage, ethnic folks, even some blacks, which is a bit surprising as the ones living closest to us did not spring from a heritage of share-cropping. They are middle class folks with the same aspirations for a quieter, less-hurried life that other middle class people have.
One group I see FAR more of now are Amish. The first Amish moved in our area about the same time I did. They were all very conservative Old Order families and did not like to deal with real estate agents if it could be avoided. Though they were too polite to come out and say it, I sensed they did not believe working for a commission was a thing they could ever approve of. Today, I enjoy a great relationship with these good people. They call me for advice as well as to find or sell properties. Things have changed for them too.
In recent years we have seen a great influx of less conservative Amish, along with Mennonites. These groups do not go out of their way to mix and interact with the original Amish and they do not inhabit the same space, meaning they are not neighbors. So far. The less-conservative ones are more aggressive in their life-styles and are rapidly filling in the areas the Old Order do not already inhabit. Since both groups have large families by our standards, their need for additional land grows rather fast with each generation and I can predict eventually they will need to live side by side and take their livelihoods in directions never contemplated a generation ago. The new arrivals do a lot of that now, living on smaller acreages, often not working farms, and taking non-farming jobs. But still working with their hands. And using cell phones and, occasionally, computers.
The sellers have changed too. Originally, a large part of my business was working for retiring dairymen. I’d see these older folks who’d farmed all their lives and now needed to liquidate their business in order to retire. (They get no pensions - that much still has not changed.) Couples who’d been married for decades, often scrupulously honest. What they said was the way it was. Period. Now their children are retiring and I don’t witness quite the same kind of honesty. That does not mean dishonest, no, no, no. But they are able to assess more complex situations than their folks did. They tend to be better businessmen, less loyal to those who have earned their trust.
When I started, our little county had 420 farms shipping milk. 40 cow farms were common and anything with 100 cows was considered large. Now large is probably 200 cows and up and 70 and 80 is considered small by many. We even have several 1000+ cow farms among the 155 that are left. The amount of milk shipped is probably equivalent as while the number of farms has decreased, the number of cows per farm and their individual production has climbed. Were it not for the Amish, these figures would be far different as their scale of operation is much smaller than average. During this time, the number of small alternative farms has climbed steadily and at an increasing rate of gain, spurred by wider spread interest in organic and unusual and niche foods and beverages.
What has happened is while the average farm has increased dramatically in size and scope of business, the size of the average farm on the market has dropped just as dramatically. When I began, a third of my farms were over 200 acres in size, a small few over 300 acres and once in a while we’d have one or two at 500 acres and up. Most buyers then wouldn’t even consider anything less than 100 acres - even if they didn’t intend to farm it themselves. Today, I don’t have a single one over 100 acres at the moment. The last 200 acre one we had was a year ago. I barely remember the last one at 300 acres. We would have 10 or 20 operating dairies when I started. There were always a certain number of buyers for stocked and equipped farms. Now I am lucky to find one that, with work, could be even operated again. Finding one with cattle and equipment still there, you can basically forget that. And so have the buyers; they’ve forgotten that.
There are at least two things which I think are behind this. The large farms got large by taking on debt. Extension agents preached that debt was just another tool to use, and folks listened. Now with large debt loads, they can’t afford to call it quits; they have to stay in it for the long run. The many farms that were not well run are mostly long gone now, especially on the more marginal land. Farm children are exposed to more and more new things, in school, at college, on the internet, and they more fully understand than the generation before them did just how hard it is to make a dollar farming. Many want more than that out of their lives and the ones that stick with it or start new are doing so for lifestyle reasons, not economic ones. I have always said that of a family who can make money farming, and many do, they are the sort of people who can make money doing other things as well. The opposite is not necessarily true.
When I started, there were several large firms who make their livings as cattle auctioneers. These are all but gone now and the couple that are left depend upon machinery auctions to keep their business afloat. Forty years ago, on any given Spring weekend, there would be several dairy dispersals and there were always a few scattered around the State each week during the rest of the year. No more. I can’t even recall the last local dairy dispersal auction. Too bad; they were fun to attend and you got to learn a lot. And they were a time to visit with farming friends you saw all too infrequently.
As might be expected, prices have changed, just like everything else. When I started, upstate New York had bargain land prices, say $400/acre for prime tillable land, while other states were far higher. Now, we are probably $2000/acre for the same land - if you can find it. Woodland went from $100/acre to, now, nearly the same price as good tillable land. (We are talking about land in quantity, wholesale figures so to speak, large chunks. Smaller pieces always sell more dearly, like in retail.) What hasn’t changed is that we are still a bargain compared to other states. They went up too. Maybe there are a couple of states that we’ve crept up on, but it won’t be many.
Which is good as our commission rates have not changed upwards. Actually they are probably lower now. Since a rising tide floats all boats, our ability to earn a viable livelihood has remained mostly unchanged. If you are good at what you do and work hard at it, you can earn a reasonable living. But you won’t get rich.
When I mention our rates are lower now, there are two things at play. One, I have a policy of asking 5% to anyone who has bought their place though us, reasoning that I made a profit before and do not need so much for a second helping. And I offer the same rate to Amish and Mennonites, figuring that they are probably going to try to bargain me down anyhow and that since they all talk among themselves, I want them to be saying that Vinyard gave them a good deal. The other thing is that 40 years ago, most of our listings were “Open” listings, ones shared by another firm or two, with a winner take all. Since we ran the risk of spending our money and time and getting nothing if another firm should make the sale, we asked for 10% and usually got it. I still offer these kind of terms, but find sellers now expect to select only one company to represent them. Partly, this is due to the competition’s nearly complete refusal to work on anything other than an exclusive listing, the one I do for 6%. Sellers have never heard of open listings and always seem to prefer the cheaper alternative. Which is fine with me.
This nearly exclusive use of Exclusives today means there are less properties to go around to the various firms since now none of us work on the same place a competitor does. The only way a competitor can work with one of my places is to co-broke (and vice versa) and a lot more of that is done by us now than when I started. That 100 farm figure that I started with 40 years ago slowly dged down to 30 during the last 10-15 years, partly because there is greater competition now, but mostly due to the near total lack of Opens. I should interject a bit about competition here. I have stated my commission policies, which is fine. But, please realize that each firm is free to establish their own rates, higher or lower, however they wish. The State does not regulate what any of us charge, but they sure watch to make sure none of us collaborate to fix rates among ourselves. It’s a topic I make sure to not discuss with other agents.
There are two big and comparatively recent changes that have had pronounced effects upon the country real estate market. The net effect was to raise prices in ways we’d not seen before and also to lower the supply - also in ways we could not have foreseen 10 years earlier. This put additional upwards pressure on prices.
1) Alternative Energy. Mostly solar, I have worked with perhaps 30 different firms now and think a big shakeout and consolidation is overdue. Their representative are everywhere, like flies on summer cow patties. They contact many owners directly (no commission !!!) but are happy to work with us as well. While they all differ on exactly what they want, there are similarities. Most prefer to rent, but will buy if need be. Renting means their cash can be conserved and the high rental payments they promise can be made from cash flow, not from the kitty. My concern is what happens to the owner if they go belly up. And what are you supposed to do with the panels if they are not going to be used? There may be big time environmental concerns left in the owners lap, along with a significant cost to remove them and make the land agriculturally productive again. One similarity is these firms all use the carrot and stick approach, offering huge potential returns to the landowner…. just not right now. They have many hoops to jump through, expensive ones, some of them, and they are not about to give you big money only to find the State or some local agency will not allow their project. After they run the regulatory gauntlet, usually a three year process, then you get the big money. IF they decide to actually do the project. In most cases, they decide against it and while you did get some return from them, it was not nearly what you’d envisioned. The active presence of these firms has caused prices to edge comparatively steeply upwards.
2) COVID. None of us saw this coming. It precipitated big changes in the farm real estate market just as it did elsewhere. All at once, nobody came. Phones were quiet at first. We couldn’t go out looking for listings. There was greater dependency on phone, websites, and email. And it was much harder to establish rapport with those we worked with. No more formal closings, and less personal interaction made the job less rewarding to me. It’s not only money that keeps me at it. In general, we found that suddenly it was a Hell of a way to try to do business.
But more people were working from home. The cork was out of that bottle and will never go all the way back in. Fewer persons have to live near their job, so that increased business in less populated and less expensive areas. Interest rates were way down, making better property more affordable to everyone. There was every reason to make the move you’d dreamed of. So demand jumped.
This led to higher prices, lower supply. We sold a lot of property that we’d had listed for too long without much action and our inventory lowered. Right now I am at 20% of what has been normal in the past. The percentage of inventory that is in contract is up. What do I do when they are all sold? Retire? My wife would like that. Now, with country-wide inflation that we have not witnessed in decades, the market remains hot, despite what you may see in the news. Remember, what always makes the news is about the housing market, not the comparatively minuscule farm market. What you read may pertain to us - or it may not. There is much handwringing in the papers about our 7% interest rates now. I am happy enough about this. Why? Well, for one thing, it gives the banks an incentive to loan, which they sure did not enjoy when the rates were half of that. Credit should loosen some. And, think about it: 7% is about average for the past 30 years. Those low rates were easy and fast to get used to, but actually were a fairly recent and comparatively short-lived phenomena. You go back 40 years when I bought my second farm and what were the rates then? 12-18%. And you think 7% is high? Hah!
Lastly, interest rates don’t matter much if you are paying cash. Cash customers, always more common in my business than with those that sell homes, have the same incentive to buy now that they did at the onset of COVID. What banks charge for interest means little to them and until the figure that banks and companies that issue stock pay goes up seriously, real estate remains a more attractive investment, one that you can use and enjoy and not just look up on the computer to worry about what it is doing today.
After more than 40 years, you might think I have seen it all. No, I haven’t. That’s one of the things that fascinates me about this business.
Inspections, a two-edged sword. It used to be buyers relied upon their judgement and observations as well as their due diligence (if they did any). I do not normally go out of my way to mention a physical failing on the home or property, but then my buyers are not quite representative of the public; they tend to be more knowledgeable about building. If for instance there is a marginal good roof on a home, I do not feel an obligation to point this out. Not unless I felt the buyer really was unable to tell the difference between worn-out and newer shingles. Then I call it to their attention. An exception to my rule of thumb would be a defect that no one could see. I encountered, for the first time, lead pipes in a property that we currently have for sale. But the pipes were not in the home, but instead in the line from the well to the home, buried, where no one could ever see them until they dug them up. Fortunately, the owner is scrupulously honest and mentioned this to me; otherwise I’d have never known. If I can't tell, the buyers can’t either. So I made sure to mention this in every ad and any information given to prospective buyers.
As we get further and further “advanced” in our civilization, buyers are less and less likely to know so much about building, less able to detect for themselves defects that might have been obvious to their grandfathers. So third party inspections have increasing importance. Banks have long recognized this and began requiring inspections to satisfy themselves that the property they were asked to mortgage did not have unforeseen structural or other difficulties. That’s for homes.
On farms it is different and the buyer is sort of assumed to have a higher level of awareness of these kind of problems. If you are going to run a farm, you had better know enough to tell when a roof is nearing the end of its life. An example that is not well-known in the industry - farm buyers are not required by the State to sign the ubiquitous agency disclosure as they are assumed to know enough to understand these things. Lenders who specialize in farm lending will look at the total package and concentrate less on this kind of minutia. But for house buyers, these things assume greater importance so inspection clauses have now become normal and expected.
What are inspection clauses? Basically, they are a contingency which allows the buyer to have someone (usually hired by the buyer and licensed by the State) who supposedly knows and understands the problems that buildings can have. This person, working within a limited time frame, gives their assessment of a variety of potential issues: water quality and quantify, the function of waste disposal systems, the structural integrity of the home, electrical, heat and plumbing systems. They may inspect for insect damage and take samples to determine if radon gas is present. The buyer gets to choose which things they wish to have inspected or tested and the seller is permitted to refuse to accept any of these, which probably will mean his sale just grew wings to quickly fly away, Or the buyer will assume he is trying to hide something. If you think that of someone, it is best to back away from the sale. While I hate to have to deal with inspections as they just complicate the sale and lessen the chance that there will be a closing, I never deny such requests. The buyer has every right to determine the condition of what he is buying. If the buyer is unusually naive about such things or is trying to buy sight-unseen (always a dumb idea), I will probably suggest third party inspection.
The wording on such contingencies can never be specific enough as in real like, they are fire with gray areas, but generally it is stated that if certain standards are not met, the buyer has the right to withdraw from the contract without penalty. Usually there is a dollar figure used: if the expected cost of remediation is less than, say $1500, the sale can go on as planned. If over this figure, the buyer can back out. Or the seller can take care of the problem on his dollar, not the buyer’s. Since the closing date is looming nearer and nearer when these issues from to the front, most often the seller is willing to take a hit to keep the sale moving forward. And since his family is living there and did not notice problems or feel a need to make corrections, they may be initially hostile to the idea of taking a lower price than agreed-upon. But cooler heads usually prevail and they usually decide to just do with less money rather than to lose their buyer and start the process of selling all over again, only to run into the same problem with the next buyer.
I am into process of selling a 200 year old home, one I own, to a buyer who has never seen it. The home is as nice as I can make it without going crazy and rendering it overpriced for the area. They hired an inspector on their own rather than use one suggested by me or their own agent, then based upon his observations, then hired a contractor to look at a dip in the roof (one which I can document has been there, unchanged, for decades). The contractor gave a green light on this but mentioned the age of the roof (now approaching in 5 or so years the end of its expected life), hoping to get that business in the near future. OK, fair enough. Too often contractors, in my experience, give an alarming report, thinking an out-of-the-area buyer will hire them at an inflated price to make the correction. But what happens when they do this, is the buyer gives up on the sale and you now have a pissed-off homeowner who’ll remember and won’t deal with him in the future. So nobody gets what they initially wanted.
This buyer then called an electrician to examine something the inspector noted. That was an interesting experience. This time, the electrician happened to be someone I know and have dealt with before, and he pulled no punches, coming right out and saying that if he knew he was just inspecting something for a buyer, not a home owner, he would not have come. Too often he has done this, told the buyer what he felt, only to have the buyer use that as leverage on the seller to lower the price - only to find that once they move in they never have the work done anyhow. So, in these situations he charges extra for his inspection service, telling them they can get back the extra money by hiring him to correct it. In my case, he also said if it were his home, he’d leave it alone as it would never cause difficulties.
A day or two later, they had a mason look at the laid stones walls of the basement to examine “cracks” the inspector had noted. Of course there are cracks, there was a crack between every single stone when they were laid in the 1820s and each one is still there today. The mason basically said while there was nothing structural to get worried about, he could parge the walls (cover with cement, forcing it into cracks as he is able) and it would look nice and smooth, more attractive. They would gain a small structural advantage as well as the obviously aesthetic one.
We have not heard from the buyer what their reaction to these 3 extra inspections is. Maybe they will be honest and direct us to go ahead. Or maybe they will try to use this as a wedge to end up with a lower price. However, they may end up disappointed if they try that tact. I don’t play that game. If I feel something he spotted actually needs correction, I’ll do it on my dime and not ask for more, but I won’t drop the price we’d agreed-upon. If they initially liked it enough to pay my price, that’s what I expect them to pay. If they wish to nickel and dime me to gain a few thousand, they had better start to search for another property.
This nickel and diming after buyer and seller had agreed on one figure is increasingly common. When a buyer begins playing this game, the seller has little recourse other than to lose the sale and hope the next buyer is actually OK with the home as it is. Every old home has problems, just like old people do - only they last a lot longer than we do. Any inspector can find something to complain about and they do, if only to show the buyer that they are working for them. They are also usually aware that if they are not reasonable in their recommendations, they won’t get referrals from agents.
We once had the “Inspector from Hell” out, a man from out of the area who was famous among agents as he did not like any home more than a few years old. The one he looked at this time had a steel roof. That was completely unacceptable to him. Shingles are the only thing he liked. (Me, I prefer steel as it far outlasts shingles.) He went on and on, one thing after another. By the time he was done, the homeowner was nearly in tears and the buyer was so frightened she immediately withdrew from the contract and returned to California. Two weeks later, for another buyer, we had a different inspector there, one who acknowledged that, yes, it was an old home, but went right on to say it was in better than normal condition for one of that age, an assessment I agreed with. And that sale went through.
Sometimes, not often, it is the attorney who causes the problem. There was a Long Island attorney named MacNamara who examined the inspection document (usually they don’t bother to even look at them) and, as attorneys do, started finding fault after fault, getting increasingly agitated. He did not beat around the bush, but told me right out that when he was done, the owner would have $20000 less money than agreed upon in the contract and I’d have half of the commission I expected. Then he started swearing. I’d been doing a lot of listening, not saying much, but that’s when I hung up. Needless to say there was no sale. MacNamara knew the buyers were in financial difficulty, though they’d never missed any payments (yet) and he knew their equity was slightly above $20000; he clearly intended the sellers to walk away without a cent, with just their good name intact, all they’d worked for lost.
Fortunately, most buyers are not like this. I found it interesting that during the COVID-induced flurry of sales, a rare (for us) “sellers market”, that suddenly buyers were not asking for inspection contingencies like they used to. When both parties remain reasonable in their exceptions, we can then broker sales, bring about a “meeting of the minds”. It takes two to tango and when we have them, we can dance.
Some blogs are designed to amuse; others can be an immense help. All are interesting.
After 40 years, I've learned a lot, & acquired unforgettable experiences. Follow these long enough and you'll eventually get the whole book. (Names probably changed, for obvious reasons.)