October 08, 2008
WBUR/NPR debate: Do buyer agents really help consumers save money?
Having already posted one comment to WBUR's heated discussion about "what caused the housing crisis and how to fix it," I was content to watch the debate unfold yesterday until several posts began spreading misinformation about the role of buyer agents and whether they help clients save money.
First, there is some truth that the current two-sided real estate commission does not align buyer agent compensation with performance. That's why some in the industry offer rebates and others are calling for commissions to be divorced. If that single reform comes out of this crisis, conflicts of interest would be reduced, competitive options would increase, and consumers would save billions of dollars as argued in these blog posts written two to three years ago:
Contrary to assertions on WBUR's blog, some REAL buyer agents, not
counterfeit buyer agents or "designated agents," actually do save their
clients money by (1) rebating some or all of the buyer agency fee built
into sales prices, and (2) by helping their clients shop wisely, time
the market, and negotiating aggressively on their behalf. For tangible
evidence, see Wall Street Journal article on the 100% commission
rebate offered by The Real Estate Cafe, our menu of fees & rebates, and map of client savings
totaling over $1 million during a twelve month period.
At least one other buyer agent in Chicago has helped clients save more than $1 million during a twelve month period and there are probably others. More importantly, new referral sites like http://www.ProOffer.com and conversations like this could bring performance based compensation into the real estate industry. My guess is that millions of real estate consumers, both home buyers and sellers, would agree that reform is long overdue!
What's your opinion? Do buyer agents really help consumers save money?
08:21 AM in Change Agents, Commission Reform, Defensive Homebuying, Dual Agency Detective, Inside The Real Estate Cafe, Real Estate Bubble, RECALL: Real Estate Consumer Alliance, Savings & Rebates, Timing the market | Permalink | Comments (7) | TrackBack
October 03, 2008
How will the Bailout Bill impact home buyers & sellers? txt your answer
If you're unable to join us at the TweetUp tonight at TogetherInMotion, One Broadway in Arlington, text your response to our Wiffiti board so anyone online or at the TweetUp can read your perspective.
September 04, 2008
Flames of "irrational exuberance" burning Realtors, too
I've spend the morning deconstructing Realtors are not immune to foreclosure, an amazingly transparent blog post on a leading real estate web site. The author's concluding question -- Why did so many people, including Realtors, buy homes in 2005? -- has been and will continue to be the spring board for innumerable blog posts, talk show interviews, research by economists and parodies on YouTube. But now imagine what the authors of Freakonomics or Saturday Night Live could do with this admission that some real estate agents "helped people buy homes that they could not afford," and then repeated the same mistake themselves.
Personally, I'd love to see investigative reporters dig into the conflicts of interest in the real estate industry and expose how deceptive and manipulative business practices, like dual agency and blind bidding wars, fanned the flames of "irrational exuberance" and, as this highly respected blogger admits, ultimately burned Realtors themselves.
Perhaps industry regulators will create new disclosures to protect consumers and prevent another trillion dollar collapse of the housing market in the future. Were you aware that a Washington think tank estimated a "loss of almost $6 trillion in real housing wealth over the course of the year, an average of $85,000 per homeowner"? Historically, potential home buyers have been advised to ask agents about their sales volume, but now it's wiser to ask prospective buyer agents if any past clients are upside down on their mortgages or involved in foreclosure. What if a such a negative equity or "foreclosure disclosure" were required by law?
Outrageous some might scream, unrealistic others would argue but blogs have already created a decision-making tool for web-savvy home buyers to decide who will best protect their financial interest. Try this experiment, visit two real estate blogs and see what their authors have written about the housing bubble. Look at their posts during 2005 -- was your prospective buyer agent echoing NAR's "anti-bubble" spin or warning homebuyers about the coming meltdown?
My hope is this blogger's admission that Realtors are not immune to foreclosure will expand discussion about systemic flaws and conflicts of interest in the residential brokerage practices, and their cost not just to individual buyers and Realtors but to society. Who could imagine a better time and place for some "straight talk" about the need for real estate reforms than John McCain's speech tonight at the Republican Convention in this blogger's backyard?
02:03 PM in Defensive Homebuying, Dual Agency Detective, Foreclosures, Moblogging in Real Estate, Price trends, Real Estate Bubble, RECALL: Real Estate Consumer Alliance, Timing the market | Permalink | Comments (6) | TrackBack
July 29, 2008
BUBBLE HOUR: Slowest real estate sales since 1991 got you cheering or crying in your beer?
Sellers, does the same news have you crying in your beer, prepared to drop your price again, or tempted to drop your real estate agent (once your listing contract expires, of course) and try "for sale by owner" this Fall?
If you're one of the 15,000 sellers across Massachusetts who's listing has already expired, been canceled, or temporarily withdrawn from the MLS during the past two months, The Real Estate Cafe is eager to talk to you about selling for sale by owner, or help you evaluate and select your next listing agent.
We've just returned from LIVE BLOGGING the leading real estate technology conference in San Francisco, and are eager to demonstrate new money-saving tools and web sites. Do-it-yourself home buyers and sellers, would you like to see those demos in a small group or a personalized one-on-one presentation? We're eager to take advance reservations for a "FSBO Cruise" in Boston Harbor aboard the Yacht Starship: $99 includes a private, one-on-one presentation of our "FSBO on Steroids" seminar plus a lunch buffet with four-star cuisine.
Sellers: we don't see the housing bubble through rose-colored glasses, so if you are intimidated by selling "for sale by owner," The Real Estate Cafe can prepare a "Listing Agent Report Card" instead and try to negotiate a reduced commission. If you pay in advance for our analysis, we'll rebate one-third of our referral fee.
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?
July 17, 2008
If airlines have fare sales, should real estate agents? Part 2
Poking fun at the current cover story in Barron's Magazine, "Bottom's Up: This Real-Estate Rout May Be Short-Lived," Bill Apgar of the Harvard's Joint Center for Housing predicted, "There will be 10 articles a month [like that] until we hit the bottom, and the last one will be right."
When will it be the right time to buy? That's what all The Real Estate Cafe's clients are asking. Some of their house hunts began two years before the market peaked, and are now into the third year of falling prices. Nearly 50 of our active buyers have looked at more than 1,000 MLS page views. Twenty-one have looked at more than 1,000 MLS pages in the past year alone, but only four of them have paid any fees to The Real Estate Cafe.
Unlike listing agencies who represent sellers and charge 5% to 6% commissions, or dot.com start-ups that are venture funded, The Real Estate Cafe pays it's overhead almost entirely from hourly consulting fees paid by clients. With so many buyer waiting out the housing bubble, those fees have slowed to a trickle. Now, after 13 years, we need your financial support.
We constantly look for ways to help you save money, by learning more about the housing bubble and the latest technologies. Today, for example, we attended a seminar on State of the Nation's Housing and a Foreclosure Prevention Workshop. This weekend, we'll participate in PodCampBoston (for the third time.) Next week, we'd like to participate in two real estate technology conferences in San Francisco: REBarCamp and Real Estate Connect.
To do so, we need to raise $2,000 to $3,000 quickly. You can help us, help you save money by selecting one of the following special offers:
Money-saving offer #1: Fare sale
Repeat the Fare Sale we used successfully in 2007 to get two to three clients to prepay $500 to $1,000 in exchange for 1 to 3 hours additional work for FREE. Email for details.
Money-saving offer #2: Experiment with monthly fees
Introduce an optional monthly subscription fee. If you agree to pay $250 per month, we’ll slash our our consulting fees, normally $100 to $150 per hour, to $50 per hour for five hours—that’s a savings of 50% to nearly 70%! Like frequent flier miles, hours you prepay accumulate and you can use them any time you like. Email for details.
Money-saving offer #3. Attend educational seminars
Host a technology debriefing after our trip to San Francisco to share best money-saving tools and tips from the two real estate technology conferences. We would like to host two events, one for buyers and the other for FSBOs ("for sale by owner") within 10 days of the conferences at TogetherInMotion, One Broadway, Arlington, MA. $49 per household, per event. Email for details.
Finally, your best savings opportunity may already be part of our normal menu of fees & rebates. For example, one of our $3,000 flat fee options enables you to buy down our hourly consulting fee from $150 per hour (without retainer) to $75 for 40 hours - that's a 50% savings before payment of any performance bonus. (Contact us for more details on this option and others.)
We encourage buyers to wait for the housing prices to correct, but don't wait to take advantage of these savings opportunities. Once we raise $2,000 to $3,000, they'll be gone.
10:25 PM in "We" companies, Bubble Hour, Client Feedback, Fee-for-service, FSBO: Best Practices, Housing forecasts, Inside The Real Estate Cafe, Price trends, Real Estate Bubble, Savings & Rebates, Tech Trends, Timing the market | Permalink | Comments (0) | TrackBack
July 15, 2008
Part I: Housing slump hits Cambridge: 1 in 3 single family homes selling below assessed value
Part I: On Sunday, July 13, 2008, the Boston Globe published a lead story in City Weekly entitled, In real estate sales, not all cities are equal.
A blog post earlier today by Redfin stated that "several single-family houses sold for less than the assessed value" in Cambridge, but the magnitude of the price correction underway is far more substantial. As shown in the graph above, approximately one in three single family homes sold below their assessed value in Cambridge during the first six months of the past two years. (The Real Estate Cafe's analysis was limited to the first two quarters of each year because we assume that a higher percentage of homes sell below assessed value during the second half of each year.)
The Real Estate Cafe first began tracking sales below assessed value during the first quarter of 2006; and by September 7, 2006, our research was featured in a Boston Globe story entitled, "Priced below assessment." Contrary to Redfin's assertion that "a house would have to be ravaged by fire" to sell below assessed value, a map in the Globe story revealed that 37% of the single family homes sold in Brookline were below assessed value, compared to 22% of the single family homes sold in Cambridge at the time. (Click for sample of the homes selling below assessed value in Brookline in the past.)
Two years ago today, our first user added their own examples of falling house prices to our interactive real estate bubble map. Inman News also featured our map in a mini-series on Real Estate 2.0 innovations, and we need your financial support to attend their real estate technology conference next week to continue our 15 year tradition of helping real estate consumers save money.
Preview of Part II: Homes selling below assessed value has clearly become more commonplace, but what was newsworthy about the Globe's recent story is the magnitude of how far below assessed value: During the first six months of 2008, two homes in Cambridge sold for approximately $2 million below their original asking price; and more significantly, more than $1 million below their assessed value (based on our analysis of MLS data. Watch for more details this week.
July 08, 2008
Bubble Hour topic: Money magazine forecast 10.5% decline, SF home prices in Boston by May 2009
Glad to see the pundits agree with the people, again. Boston buyers - interested in a Bubble Hour to discuss this forecast in Money magazine's Real Estate Survival Guide, summarized today on Boston.com's real estate blog:
Boston is forecast to see a 10.5 percent decline in single-family home prices by May 2009. While that's slightly higher than the projected 9.7 percent decline for the nation overall, there are 35 metropolitan areas expected to see bigger declines. In the past five years, prices had increased slightly more than 13 percent in the Boston area, according to Money's calculations.
The other four areas included in the list are also expected to see price declines: Cambridge (8.5 percent); Peabody (8.8 percent); Springfield (9.5 percent); and Worcester (9.2).
Open to suggests on when and where to host this Bubble Hour, as well as future gatherings and topics. Follow http://twitter.com/RealEstateCafe for updates on time and place, as well as other BUBBLE BITES. Watch for link to upcoming story on slowdown in Cambridge housing market, too. Preview of market stats and custom research available "a la carte." Call The Real Estate Cafe at 617-661-4046 or email for details.
June 18, 2008
Economists mirror consumer survey: "Housing prices apt to fall much more"
An AP story hidden on page four of the Boston Globe business section, entitled "Housing prices apt to fall much more," reports that:
"A group of 10 economists says that home prices in the United States are only halfway through their fall."
"...and most of the further erosion should occur this year."
Those predictions are consistent with consumer surveys conducted by The Real Estate Cafe and Boston Bubble six months ago (December 2007 & January 2008), which revealed that consumers expected housing prices to bottom out sometime in 2009 or 2010.
When consumers in Greater Boston were asked to graph housing prices over the next 5 years (through 2012) in their local city or town, the composite pattern above emerged. A comparison of that table to the results of the same question asked two years ago (January 2006), reveals that consumer price expectations have taken a sharp downturn.
A recent report from the Federal Reserve Bank of Boston projecting that foreclosures may not peak in Massachusetts until the 2nd quarter of 2010, could send housing price expectations even lower. What's your prediction as we end the 3rd quarter of 2008?
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