July 20, 2008
Part II: Million Dollar Markdowns coming to a neighborhood near you?
Follow-up to Part I: Housing slump hits Cambridge: 1 in 3 single family homes selling below assessed value
As graphed in the blog post above, homes selling below assessed value are increasingly common, but what was newsworthy about the Boston Globe's story last week is the magnitude of how far below. During the first six months of 2008, two homes in Cambridge sold for approximately $2 million below their original asking price. More significantly, both sold for more than $1 million below their assessed value based on our analysis of MLS data shown below.
Can you guess the address of these two properties in Cambridge?
Original asking price: $5,300,000
List price before offer accepted: $3,700,000
Price reduction Original vs list price: $1,600,000
Final sales price: $3,100,000
Price reduction below last asking price: $600,000
$2,200,000 Savings vs original asking price
% Savings vs original asking price: 42%
Assessed value: $4,122,100 (2007)
Saved vs assessed value: $1,022,100
Sales price / town assessment: 75%
% below assessed value: 25%
Guess how many days on market?
Are you seeing Million Dollar Markdowns in your local housing, elsewhere in Massachusetts, the US (or world)?
Original asking price: $5,500,000
List price before offer accepted: $3,995,000
Price reduction Original vs list price: $1,505,000
Final sales price: $3,650,000
Price reduction below last asking price: $345,000
Savings vs original asking price: $1,850,000
% Savings vs original asking price: 34%
Assessed value: $4,917,400 (2008)
Saved vs assessed value: $1,267,400
Sales price / town assessment: 74%
% below assessed value: 26%
Guess how many days on market?
As reported by the Boston Globe, The Real Estate Cafe has monitored "Million Dollar Markdowns" -- luxury homes which have sold at least $1 million below their original asking price -- on and offer during the past. See links in blog posts from 2007: Sweetest Deals of 2006 and MIT Professor: Housing prices could decline another 20%.
As McMansions become less desirable and the housing market drags the economy in recession, do you think "Million Dollar Markdowns" will become more common in your local housing market? Are owners already putting them on the market now to minimize their losses? Will the expiration of estate tax cuts enacted in 2001 cause the luxury housing market to collapse, or will Congress and the new president extend the tax cuts permanently?
June 07, 2008
Alternative fees for home buyers: Still the "Unfinished [r]Evolution"?
Four years ago, June 7, 2004, Banker & Tradesman quoted The Real Estate Cafe in a page one story entitled, "MLS Policy Statement Fuels Commission War." The skip page read:
During the last decade or so, alternative services -- such as flat-fee, listing-only or fee-for-service models -- have been offered to home sellers, but there haven't been a tremendous amount of choice for buyers, according to Wendel.
This is one of the untold and unfinished pieces of this [real estate r]evolution," he said. Wendel, who charges $100 an hour rather than charging a commission, has been offering a full menu of services to both buyers and sellers for the last 10 years.
Do you think the residential brokerage community now offers enough alternatives to the traditional real estate commission? What kind of money-saving options would you like The Real Estate Cafe to add to it's Menu of Fees & Rebates? Should we bring back our $3,000 and $5,000 flat fees, first offered when we opened in 1995, or continue to focus on hourly fees?
Would you like to see the traditional, two-sided real estate brokerage commission uncoupled so home buyers and sellers can BOTH maximize savings in an open, competitive market place? If you are not familiar with the issue, watch this 90 second video. Why hasn't this happened already, and what will it take to get there? Your ideas are welcome on the "divorcing" commissions section of our wiki, or in the comments section below.
See what we mean about the "Unfinished [r]Evolution" in real estate brokerage fees?
January 25, 2008
Misleading home buyers: Conflict of Interest? What conflict of interest?
Thankfully, a recent NYTimes article, Feeling Misled on Home Price, Buyers Sue Agent and an interview hours ago on Today on MSNBC, are beginning to shed light on deceptive real estate practices. However, the article doesn't expose widespread conflicts of interest that contributed to the real estate bubble and their growing cost to society.
1. For starters, look more closely at this misleading statement:
That makes this the first housing collapse in which large numbers of buyers had a real estate professional explicitly looking after their interests."
My guess is that one in five * transactions or about a
million sales of existing homes during 2006 involved
"designated agents" or some other name that papers over the conflict of interest that occurs when buyer and
seller are represented by the same brokerage firm. (* In some markets, the ratio could be considerably higher.)
2. The means that home buyers do not receive proper advice and protection, or as a partner in a real estate agency told the NYTimes:
3. The NYTimes speculates that consumers, angry that their counterfeit buyer agents did not provide adequate advice and protection, will increasingly take legal action. Will their collection actions rise, at some point in some overvalued market, to a class action lawsuit?
'If you put someone into a property at the top of the market, you look really bad if it goes down,' said K. P. Dean Harper, a real estate lawyer in Walnut Creek, Calif. 'There are a lot of letters going out from lawyers to real estate agents saying, 'My client would never have purchased if you had properly evaluated the market conditions and the value of the property.' "
4. A series of "Dual Agency Detective" blog posts dating back three years predicted "a new era of heart break for real estate consumers." Although it's easy to poked fun at designated agency with political cartoons, the cost to individual home buyers and society, as this prophetic case attests, is no laughing matter:
My so-called buyer's agent (who promptly switched roles at contract signing without explanation), initially advised me to bid $750,000 for my house of choice, which was listed at $699,900. When I told her that such an offer was beyond my price range, she was quite adamant that I not offer anything under the list price. When I finally backed out the deal because of her bait and switch scam, I later heard that the house in question sold shortly afterwards for $682,000--in other words, nearly $70,000 less than the bid suggested by my so-called buyer agent.
This type of price inflation (caused by seller's agents masquerading as buyer's representatives) must have a very distorting impact on housing costs. The economic fallout is enormous: ordinary citizens are forced to move out farther in search of decent, affordable places to live, which leads to a host of problems connected with traffic congrestion, suburban sprawl, etc.
As I perceive it, the real estate cartel's use of dual agency [a.k.a. "designated agency"], which works to the detriment of the average consumer while enriching dishonest agents through the practice of double-dipping, contributes significantly to the manifold problems we see in the residential housing market and therefore should be fully exposed.
5. Who will end up paying the cost? Commenting on the mortgage package included in the tax rebate agreement announced by Congress and the President, a link on BostonBubble reads: "Profits privatized, risks socialized - Economic stimulus a wealth transfer from the middle class to the rich and the reckless." See Paper Money's blog post for call to action.
PS. The NYTimes may not have gone far enough, but the story (once, the most forwarded story in the NYTimes) is echoing around the blogosphere. Some in the industry are worried this may be "the tip of the iceberg," and the buyers told MSNBC's Today show they want to change the industry. Sounds like the Consumer Revolution we've sought over the past 15 years.
04:23 PM in Defensive Homebuying, Dual Agency Detective, In the News, Real Estate Bubble, Real Estate Consumer Bill of Rights, RECALL: Real Estate Consumer Alliance | Permalink | Comments (12) | TrackBack
January 18, 2008
Rebate Wish List: Home buyers, what would you do with a tax rebate PLUS a real estate rebate?
Pull quotes from: Bush backs $145 billion economic plan
The president and Congress are scrambling to take action as fears mount that a severe housing slump and painful credit crisis could cause people to close their wallets and businesses to put a lid on hiring, throwing the nation into its first recession since 2001.
Economists said a reasonable range for tax cuts in the new package might be $500 to $1,000. Congressional aides said the White House plan is looking at rebates of up to $800 for individuals and $1,600 for married couples..."
"Americans can spend this money as they see fit: to help meet their monthly bills, cover higher costs at the gas pump, pay for other basic necessities," he said."
General discussion on Boston.com: Would you spend a tax rebate? Specific questions for home buyers:
1. What would you do with the proposed tax rebate? Would the rebate, plus declining interest rates, make any difference in your home buying plans for 2008?
2. If you added a 100% commission rebate from The Real Estate Cafe, typically 2.5% of a home's sales price, would that influence your home buying plans for 2008? What would be on your Rebate Wish List?
3. If you received a rebate over $10,000, would you be willing to donate part of your rebate to a cause or charity? If so, please add your favorite to The Real Estate Cafe's "Rebate-It-Forward" list.
RebateWishList.com currently forwards to a twin discussion on The Real Estate Cafe's experimental new social networking site. Comments are welcome on either site, and home buyers are invited to introduce themselves via our interactive map.
January 11, 2008
NOW, what do you think will happen to housing prices in 2008 & beyond?
Please take a few minutes to update this survey of housing price expectations in Massachusetts after a week of negative housing headlines. This survey is being conducted independently by The Real Estate Cafe but we are eager to share the results with the press.
CLICK HERE, not photo below, to start survey: What do YOU think will happen to housing prices in 2008 & beyond?
December 27, 2007
Survey BLITZ for TV News: Boston housing prices in 2008 & beyond
A local TV news department is working on a story today about the housing market, so The Real Estate Cafe and BostonBubble.com have volunteered to conduct a quick consumer survey to inform their reporting. What do YOU think will happen to housing prices in 2008 & beyond, and if you are in the housing market, how will that influence your home buying plans for 2008?
The survey takes just a few minutes and we need your opinion AS SOON AS POSSIBLE to enrich tonight's TV news!
December 26, 2007
Billions in savings: Will real estate consumers extend a helping hand?
It's Christmas 2007, and I am visiting extended family in St. Louis, my beloved boyhood home. Missouri is the "Show Me" state, so it's a fitting setting to ask how much money have real estate consumers really saved since McKinsey & Company predicted that industry restructuring could deliver $30 billion in annual savings ten years ago?
Last week, BusinessWeek's real estate blog, Hot Property, reported that home buyers and sellers paid $55 billion in commissions in 2007, down $13 billion from the peak in 2005. They attributed the decline to falling sales and noted that consumers paid $19 Billion more than 2000 "largely because of the surge in home prices during the boom."
What caught my attention was an estimate that "‘for sale by owner’ sellers saved almost $9 billion in home value that they otherwise would have paid to real estate agents." That figure is just shy of the $10 billion in savings from real estate brokerage commissions predicted by McKinsey & Company in January 1998.
How much more money did home owners save by using a flat-fee MLS listings services in 2007, AND how much more money home buyers receive via real estate rebates?
My guess is that those savings also exceeded $1 billion in 2007, and will grow in the future. As a "Change Agent," my question is whether home buyers and sellers are willing to share some of those savings with charitable causes? (Think "pay-it-forward" meets real estate savings.)
ChangeAgents's goal is to create a voluntary coalition of money-saving real estate business models and to invite their clients to share fraction of their e-commerce savings with local, national, and international causes of their own choice. Here's one example of a "community commission."
If you're part of the new generation of real estate companies delivering billions in savings, or if you're hoping to sell "for sale by owner" or receive a real estate rebate check in 2008, would you like to join our conversation about ePhilanthropy & Cause Marketing in real estate?
Please let us know what about your own dreams for 2008 and a better world.
02:02 PM in "We" companies, ASAP: AIDS Shelter Alliance Partners, Change Agents, Commission Reform, Do-it-yourself, Fee-for-service, FSBO: Best Practices, FSBO: For Sale By Owner, In the News, Market trends, Savings & Rebates, Spiritual Home, Unbundling the Commission | Permalink | Comments (0) | TrackBack
December 14, 2007
Best site to identify commuting costs & hassles, in good weather & bad?
Earlier today, Bryan Person launched a wiki called Awful Commutes. Right now, it seems to be focused on collecting stories from yesterday's snow emergency in Boston which unexpectedly turned commuting into winter sport. No need to limit the wiki to accounts of those 5 and 6 hour marathons. Three years ago, I thought about moving to Lowell, MA but decided to stay in Cambridge because I could walk to so many important places in my life. My understanding is that Walkscore.com helps potential homebuyers identify the most "walkable communities."
Not everyone has the option to live in a walkable community, hence the need for a decision-making tool that helps home buyers evaluate communities -- and specific listings -- based on their household's commuting needs. Does such a tool or site already exist? If so, what's the best one to use to assess the cost of commuting in Greater Boston, and hassles factors on alternative routes? Do "best of breed" commuting sites already include wikis? If not, hope Awfulcommute.pbwiki.com becomes the commuting equivalent of RottenNeighbor.com, at least here in Boston. I'd certainly recommend that kind of interactive tool to The Real Estate Cafe's 'do-it-yourself" home buyers.
If Bryan's wiki continues to focus on winter commutes, wouldn't it be fun to ask readers who are old enough to contribute memories of the Blizzard of '78? Maybe some can offer first person (no pun intended Bryan) accounts of their commutes yesterday and 30 years ago. Is anyone already planning something to commemorate the 30th anniversary of the Blizzard of '78 in Boston next year? (I lived in Montreal at the time of the storm, but was amazed by the size of the snow drifts when I visited two weeks later. Nothing like today's relatively quick meltdown.)
November 01, 2007
All Saints' Day debate: Should sellers bury St. Joseph statues?
Earlier this week, a friend sent an article from the Wall Street Journal about burying St. Joseph statues entitled, "When It Takes a Miracle To Sell Your House." As show in the image above, the story was the MOST EMAILED link on the Wall Street Journal, five rankings ahead of Google's new G-Phone. Amazing, and amazingly misguided IMHO.
Over the past few years, I've blogged repeatedly about the practice (click on "Continue reading" below for links). In 1998, my initial objections were stated in a well-researched article, which journalists may find worth reading, entitled, "Beyond Superstition: Doing Justice to the 'Just Man'." Nearly a decade later, I created an interactive map called "St. Joe 2.0: Geography of Faith" where anyone who believed in the practice could document their prayer experiences to St. Joseph and others could propose alternative spiritual practices.
after a Catholic conference on Social Justice was canceled in Boston
for lack of interest, my blog posts became more pointed: "Social Justice for Real Estate Dummies."
Unlike NPR's Talk of the Nation which kicked off their program "Selling Your Soul to Sell Your House" with an interview about St. Joseph, the Wall Street Journal told their audience that some Catholics are offended by the practice of burying St. Joseph statues upside down because they believe it is superstitious. Some Catholic bookstores objective to selling the statues for the same reason.
For years, I've thought about offering a "St. Joseph Statue Buy-Back Program." An employee of one local religious book store expressed an interest in exchanging statues for coupons to buy books which would give real insight into Catholic teachings. My recommendation, on this celebration of All Saints' Day, would be The Saints' Guide to Happiness. (The author, Robert Ellsberg, was a classmate at Harvard and is the son of Daniel Ellsberg.)
Looks like the WSJ blog post is generating some heated discussion. I'd love to invite anyone who wants to take a more positive approach towards "reinventing" this misguided devotion to St. Joseph to consider
our fund raising campaign for AIDS orphans or to propose their own ideas to the honor patron saint of the Catholic church and Social
Justice. Isn't it time sellers, real estate agents, and the press do justice to the "just man"? Your comments are most welcome here or on our wiki.
Real Estate Cafe blog posts on practice of burying St. Joseph statues to sell real estate:
April 26, 2007
Housing market to weaken through summer
Yesterday, Economist Mark Zandi predicted that the housing market would continue to weaken through the summer. You can listen to WBUR audio clip online. Our weekly schedule is now online at 30Boxes.com. If you'd like us to discuss a topic you, in-person or online, you can post an educational event on our experimental wiki calendar, too.