My general rule-of-thumb is that if two people send me the same article, then I should blog it.
Not only did two people send this in, but Henry Fung also mentioned to the article’s author on twitter that she should read my blog, and as a result, she followed me.
Now I really need to comment!
Here is Lydia’s article, which is more coverage of the latest lawsuit that intends to bust up the realtor cartel:
The lawsuit alleges collusion between brokerages to make sellers pay 2.5% or more to the buyer’s agent.
The National Association of Realtors shrugged it off, and by the time the case gets to court, the current way we sell houses could be long gone anyway.
But let’s discuss being paid by commission.
The reason commissions are high is because of the home-selling process, and the amount of work involved just to have a shot of earning an actual paycheck.
Though I have a written listing contract with every seller, I can’t force you to sell your house.
I don’t do buyer-broker contracts with buyers, but if I did, you still don’t have to buy a house.
Whether I have a contract or not, there is no assurance that I will ever get paid, regardless of how much time I invest, and though I have a commission agreement with a seller, I have no control of the outcome – only the sellers decide if they can live with the resulting offers.
If an agent does get paid, it’s at the end – there’s no pay received along the way. Plus, the commission gets treated like a slush fund with many people trying to nibble away at it throughout the process. Then the brokerage and other parties take their cut, and the agent gets what’s left.
Given those conditions, shouldn’t there be a bonus, or reward attached?
Would you work for your current pay today if you knew you might not get paid anything? Or would you expect an additional bonus to live with that risk?
Just because buyers look at houses online doesn’t change the problem with being paid on commission. We’ve had these same issues before and after the internet.
Should we devise new pay structures for realtors?
The problem with a pay-as-you-go system is that you don’t know how long it could take. Consumers (both buyers and sellers) aren’t really sure what to expect in the beginning, and aren’t going to start writing checks unless, and until they get a good feeling that it would pay off. Flat-fee and salaried companies only provide transaction-processing services – which is only a small part of what I do.
There are two solutions:
A. Burn the business to the ground. This is the path we’re on, and the one-percenters will impose the systems they decide are good for you. They will also offer you their houses at prices they tell you are fair.
B. We convert to a free-market auction system.
The reason agents deserve big commissions is because of the all-encompassing nature of the service we provide. I handle every one of your real estate wants and needs all day, every day. I have skillfully navigate every possible issue/event that happens, because any one thing can kill the sale – and then you don’t get what you want, and I don’t get paid.
If the business was more predictable, less time-intensive, and had guaranteed pay, would I work for less? Absolutely, and the auction solution is the best answer.
It would take a major player like Google or Amazon to bring enough brand and reputation so consumers would consider the auction format. But if that were to happen, here are the benefits for everyone involved:
The selling process becomes structured – everyone knows how and when a house will sell. Post the auction date 30 days in advance so buyers can inspect the property – because the house is sold as-is, no repairs. On auction day, conduct the bidding out in the open where all have a fair shot at buying.
A real auction removes the agent shenanigans – no tilting the table in favor of anyone.
Sellers get a little more than retail value, and know the close date in advance.
Buyers know exactly what to expect, and have a fair shot of buying any home.
A streamlined, predictable process means less work for agents.
The hardest part? Convincing sellers that there aren’t two in the bush who will pay more.
P.S. If the current business does crash and burn, I’m thinking of being an artist:
Rob Dawg’s neighborhood! Hat tip to Eddie89 for sending this in:
Surf, sun and year-round moderate temperatures can sometimes come at a cost.
With a reputation as one of the most expensive states in the U.S., California (thankfully) still has some economically sound places to reside – if you know where to look.
Just to be clear: We didn’t just create this list based solely on the cheapest places to live. The cost of living was part of our methodology, but so was the quality of life, as well as the key components of transportation, housing, food and utilities.
Here are the 5 most affordable cities in California:
Oxnard
Ventura
Simi Valley
Vacaville
Camarillo
1. Oxnard
About an hour north of Los Angeles, Oxnard offers beachfront living at an affordable price.
The median household income here is $62,349 with median home value settling at $332,600, which is actually a great deal for California real estate.
Golf, winery visits and strolls on Mandalay Beach are all part of living in Oxnard.
With fertile agricultural land surrounding the city, many crops grow in the region. But Oxnard is most famous for its strawberries, with the popular California Strawberry Festival held here each year.
The city has the nickname of the “Gateway to the Channel Islands,” a nearby national park and marine sanctuary.
The legendary Johnny Marr is playing the House of Blues in San Diego on Monday, May 20th!
His solo career never matched the success he had with the Smiths, where they had four of their albums listed on Rolling Stone’s Greatest 500 Albums of All-Time.
Will the Smiths ever get back together?
In 2006, Morrissey declared, “I would rather eat my own testicles than reform the Smiths, and that’s saying something for a vegetarian.”
Thanks to reader Just Some Guy for sending in this article from last week – and who wondered why more people don’t live here and commute to the Bay Area?
Buyers like off-market listings because it lessens the competition. All agents have to do is convince sellers.
After five-plus years of aggressively putting money away in savings, Jason Baker and his wife recently accomplished the seemingly impossible and purchased a four-bedroom house in a high-performing school district in the Bay Area.
The process to find a home base for their growing family took three months. They considered both the East Bay and North Bay and quickly learned the competition is tough in communities with desirable schools such as Lafayette and Mill Valley.
The couple made offers on four houses that they didn’t get, before finally uncovering an unlisted home in Marin County and making an offer that was accepted.
“The three months when we were looking was the most stressful time of our life,” said Baker, 38, who works as an engineering manager. “It was more stressful than the wedding, more stressful than the first month at home with a newborn.”
Open houses at properties that were affordable by the Bay Area’s crazy standards were mob scenes.
“When you went to a house and there was a crowd, you just set your expectations to know you’re not going to get the house,” Baker said. “When there were a lot of people, you knew the odds were high someone is going to make a really high offer.”
Through this ordeal, Baker got an inside look at the buyer’s side of the Bay Area’s real estate market and below he shares what he learned.
1. Listing prices are just “marketing” prices. In a region where homes frequently sell for well over asking and agents often list homes with low prices to encourage bidding wars, you can’t trust that a listing price reflects a home’s value. Buyers can find the true value of a home by looking at recent comps, said Baker. “Redfin and Zillow do an OK job of estimating these,” he says. “One of the problems is there is so little turnover in good school districts that there may only be two or three comps in the last one or two years.”
2. Money wins over everything. Love letters to the sellers are nice, but moot within the Bay Area’s market of high price points. “Unless your bid is significantly higher than the second place bid (more than $50,000), expect the seller to ask you to go into a bidding war,” he shared.
3. Forget about contingencies. “We lost a bid on a house that had no inspection report in its disclosures packet, very rare for the Bay Area,” said Baker. “The seller was not willing to accept any offers with an inspection contingency, and there was water in the basement.”
4. All-cash offers win. If you want the slight edge of all-cash, and you don’t have it, Baker suggested a service called Flyhomes that makes all-cash offers on your behalf. “They buy the house, then sell it to you immediately after closing with a traditional mortgage,” he said. “Ultimately we did not end up buying with them, because they don’t have knowledge of Marin like they do San Francisco and the East Bay, but I would recommend them if you were looking there.” They act as the buyers agent, and their fee is paid by the seller.
6. The price point where the crowds thin out at open houses is about $1.5 million. Priced below that, hordes of people will go to the open house. Above that, it’s more like one or two dozen families.
7. Look for unlisted homes. Try to find a well-connected agent who has knowledge of upcoming listings, and use sites like aaltohomes.com to find unlisted properties, advised Baker. “Some sellers don’t want to deal with listing on the MLS or open houses,” he said. “The house we bought was unlisted, and there was only one family bidding against us instead of six.”
8. Get fully underwritten by your lender, not just pre-approved. “Many houses go on/off the market in a matter of days, so you’ll want a letter ready to go in your offer packet with the bank saying ‘Yes, we are prepared to loan them the money,'” Baker shared.
9. You will most likely lose your first offer, and it will crush you. “It will be sadness on the level of a pet dying,” he said. “Try to remember the family that just outbid you is no longer in the market, and you just moved up a spot.”
The disrupters can tinker around with whatever gadget they can think up next, but if sellers believe that selling their home off-market is the way to go, there won’t be any MLS/traditions to disrupt.
The private listing clubs are evolving as a natural defense mechanism and give agents a new advantage. Everyone is in it for themselves now as the industry gets picked apart by the one-percenters.
This sold for $318,000 in 2004, and I sold it for $140,000 in April, 2008. The same buyer still owns it.
I’ll never forget how the trash-out guy here was so cocky about having so much REO business that he said, “I make more money than you”. He probably did, but I never saw him on the front page of the L.A. Times!
A combination of mine and Leonard’s lists of sweeteners:
In an increasingly competitive environment – especially on the high end – it may be wise to sweeten the package you are selling by including some value or time-savings item.
Some mega-homes include expensive fancy cars or artwork and other gimmicks, but of course those items are factored into the purchase price and often appear as somewhat desperate. Some may want to increase the commission incentive for the buyer’s agent.
It may be wiser to include certain items that are more focused on time-savings…..and something that may have practical value to make a buyer feel there is less to be spent after closing. Here are 10 ideas:
1. A buydown of the mortgage rate probably has the best financial impact – it can last for 30 years!
2. Pre-paid real estate taxes for the first year could be appealing, or paying HOA/Mello-Roos fees.
3. How about $5-10,000 worth of new landscaping, or window coverings?
4. One year’s worth of weekly yard maintenance would be appreciated.
5. $1,000 worth of Home Depot, Amazon, or UBER dollars could be appealing.
6. If a home has gorgeous views and big windows, include a year’s worth of window cleaning.
7. Offer to have the interior painted to colors of the buyer’s choice at closing.
8. Pay for a maid service to come weekly for a year.
9. If the house is staged, offer a price list of all the furnishings that could be bought. The buyer may see great time-savings value in not having to furnish themselves.
10. Lower the price!
These are just some simple ideas that may make your listing more memorable and more appealing to some buyers…..and possibly sweeten the deal enough to make them choose your listing over another one!
Those who already own a home aren’t going to sell just because they have fewer deductions – where do you move?
Renters in high-priced areas are still motivated to buy so they get write-offs beyond the standard deduction.
Biggest impact? The sliver of the buy-up market who already has a mortgage between $750,000-$1,000,000 and now gets fewer write-offs while paying more for their next house. Besides, how can you measure the exact impact – there are too many other variables to consider.
More than a year after the 2017 Tax Cuts and Jobs Act reduced tax breaks for homeowners, only the wealthiest Americans are suffering, according to a new report.
The real estate industry was concerned about the impact of two items in the 186-page law: limiting the mortgage-interest deduction to $750,000, down from $1 million, and capping the deductibility of property taxes to $10,000. So far, the only casualty has been the priciest end of the luxury market in some of the wealthiest U.S. towns, according to a report Monday from First American.
“At a macro-level, the tax changes have had virtually no impact to the housing market,” Deputy Chief Economist Odeta Kushi wrote in the report. “What we know 16 months into the change is that the highest price points of some of the highest-priced housing markets may suffer as real estate is re-priced to reflect the change in the cost of owning.”
The cap on state and local taxes, known as SALT, has not impacted the housing market nationally because it’s high enough that most homeowners are not affected, the report said. Median house prices have increased by about 5% since the law was enacted, according to First American data.
Economists expected to see the biggest impact in states such as California, New York and Connecticut, where both house prices and property taxes are high. However, statewide measures “have yet to see the anticipated impacts of the tax law materialize,” the report said.
“We must zoom in further geographically to see any meaningful impact on housing from the change in the tax law,” the report said. “Only once we zoomed in to the town level did signs emerge of any impact from the tax law change.”
In Eastchester, New York, about 20 miles north of Manhattan, the list price of homes in the highest-priced third of the market declined 12% in the year following the tax cuts while homes in the town’s bottom third increased 30% in the same period. There was a similar pattern in house prices in the Hamptons, on the eastern tip of New York’s Long Island, and other wealthy towns, the report said.
“The tax law may have reduced demand at the highest price points of high-cost markets, causing prices to fall,” the report said.
"Jim and Donna Klinge are by far the most professional, personable and responsive realtors I have ever worked with. They provide VIP concierge level service in every area of the process of selling your home. My home was marketed so successfully that we received an offer the day after our first and only open house. Thanks to Jim's pricing and negotiating, our house is now the highest sold in our community... more "
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