Alternatives to the MLS

If the MLS goes away, then what?

It probably won’t go away, at least not until it runs out of dues-paying members.

Buyers, sellers, and agents will just choose other more-effective options instead.

Check out this one that provides an investment platform with several choices.  You can invest in cheaper houses in the midwest, throw money into their investment vehicle, or even sell your house:

www.roofstock.com

Who’s going to mind the ease of this purchase?

The ibuyers and other new-age alternatives could keep us at a permanently-high pricing plateau because they will tell you what it’s worth, and make you forget all about getting good help!

Class-Action Lawsuit vs. Realtors

I haven’t seen an article yet where the reporter gets the other side of the story, so I’ll address these fallacies below at green paragraphs. Hat tip to all who have sent in this story!

Why should a home seller have to pay for the buyer’s side of the transaction, especially when the buyer’s expenses include negotiating against the seller?

That apparent conflict of interest is at the heart of an escalating legal battle that pits the National Association of Realtors (NAR) against a group of law firms that filed a class-action lawsuit on behalf of home sellers against the NAR and four large national real estate brokers: Realogy, HomeServices of America, RE/MAX and Keller Williams Realty. As of May 22, the Department of Justice joined the fray when it demanded information about residential estate commissions from CoreLogic, a California-based data analysis firm.

JtR – Why? Because it is in the seller’s best interest to offer a bounty/bribe to the buyer agents.

The fight is forcing into the open many of the hidden factors that dictate how realty agents are paid and common practices that make it difficult for home sellers to effectively negotiate the commissions they pay.

It is standard for multiple listing services — data bases owned by realty agents — to require that the entire commission be paid by the home seller. Typically, the commission is 5% to 6% of the sale price of the property. Then, the commission usually is evenly split between the broker representing the seller and the broker representing the buyer.

That means that the seller directly pays for the transaction costs for the other side — even when, as is common, the other side negotiates for a better deal. The net result is that the seller is forced to pay for those working against him or her. The core of the lawsuit is that “the rules are, in effect, anti-competitive,” said Brown. “It’s a very strange way to run a market.”

JtR – The MLS does not require that the entire commission be paid by the home seller. They require that the listing broker offers compensation to the buyer’s agent, and it can be any amount.

The NAR filed to dismiss the lawsuit, partly based on the fact that it supports many types of business models for its members, said Rene Galicia, director of MLS engagement for the NAR. “The MLS doesn’t set commission rates. That’s left up to individual brokers and consumers, depending on the transaction,” he said. “Consumers should look at their level of comfort with real estate and what they want to accomplish. It’s highly competitive right now. Lay out your goals and find which broker will meet your needs.”

The actual commission structure has not been tackled head-on until now, say real estate experts.

JtR – The commission structure gets tackled every day on the street – without pads and helmets!  We should do a better job of disclosing how much commission, and why, to all parties.

The split-commission structure causes confusion when sellers try to negotiate how much they will pay, because any reduction must be negotiated with everybody involved, explained Gary Lucido, president of Lucid Realty Inc., a Chicago broker that offers rebates on commissions. For instance, if the seller’s agent agrees to take less money, the buyer’s agent might not agree to a discount.

JtR – The commission isn’t negotiated with everyone involved.  The listing agents decide how much they are willing to pay buyer-agents, and then present the commission package to the seller for approval or negotiation.  The buyer-side cut comes out of the total commission negotiated between listing agent and seller – the only choice the buyer-agent has is whether they will show the house.

Also, the baseline costs of selling are not always obvious to consumers, said Lucido, which means that home sellers often don’t have the information they need to effectively negotiate. The cost of listing a house in the MLS, which feeds national listing sites such as Trulia and Zillow, is the same regardless of the asking price. A higher-end property might require additional marketing services and associated costs, such as a drone video or a fancy broker’s open house.

But usually, said Lucido, the additional cost of marketing does not justify the richer commission on a higher-end property. That is why, he said, agents are more willing to reduce their commissions on more expensive properties than on those under $200,000: Once the fixed costs are covered, it doesn’t take that much more work to sell an expensive property than a moderately priced property.

JtR – This is the common ploy by discount agents – that it doesn’t cost that much more to sell the higher-end properties. It suggests that all agents offer the same skill set, which is the true issue that needs to be examined – and maybe in court.  Because the supply-and-demand of higher-priced homes is in the buyers’ favor, the sellers should hire agents with advanced sales skills and resources.

The class-action lawsuit and DOJ involvement might be enough to bring Americans in line with the rest of the world in terms of how real estate fees are calculated and paid for, said Timothy S. Becker, director of the Kelley A. Bergstrom Real Estate Center at the University of Florida in Gainesville. “The 6% model is ridiculous compared to how real estate is bought and sold in the rest of the world,” said Becker. “The agencies are set up to work for the transaction and for the agents’ own interests, not for consumers.” Real estate commissions around the world vary, but often are as low as 1.5%.

JtR – The media insists on quoting outsiders incessantly on this topic, but never explores further. You pay peanuts, you get monkeys.

It is significant that the class-action lawsuit is brought on behalf of property sellers, because they are the ones who pay the entire cost of the transaction. “The buyers currently don’t pay anything,” said Becker, “There should be a correlation between what you get and what you pay for.”

JtR – If buyers don’t pay anything and, as a result, can choose any agent to represent them, you’d think they would search out the very best. Why don’t they? The internet has made the homes for sale more available to consumers, but has it educated them on the nuances? No, and the industry is to blame.  This lawsuit won’t change it, either.

Link to Article

Carlsbad/Olivenhain

The camera was rolling today – here are a couple of short home tours with commentary along the way:

We lost a pillar of our industry this week when Mike Evans, broker/owner of Sea Coast Exclusive Properties passed away.  He began his brokerage in 1985, and it grew into three offices with 150 agents before he sold it to First Team in January. RIP

Ten Reasons Why You Want A Great Agent

It looks easy, doesn’t it?  With the internet, how hard can it be to buy or sell a home?

There are no shortage of options. Buyers see thousands of homes for sale, and sellers find thousands of agents happy to list a home for fees ranging from $100 to 6%.

Yet the perception remains that the process is stressful and costly.  Why, when it looks so easy from the outside looking in?

Here are ten reasons why buyers and sellers should Get Good Help:

Friends and family – Buyers and sellers have friends and family who are happy to critique every move.  Most of all, they remind sellers not to give it away, and possible deals get crushed regularly over 1% to 2%.

HGTV – Where consumers learn how the home-selling game works.  The fact that HGTV is scripted entertainment doesn’t phase the viewer – the content seems plausible enough that it could be real, and the industry doesn’t provide anything better so by default HGTV has influence.

Inexperienced and unethical agents – Agent blunders can cost you a sale. But whether they were accidental (inexperienced) or on-purpose (unethical), they also cast a pall over the industry that causes participants to be frustrated and leery.  You need to get good help to endure and triumph over these agents.

Escrow, title, and lenders – These folks have been over-worked since the beginning of time, and they make mistakes.  Consumers need good help on their side just to minimize the impact.

Appraisals – A bottle of scotch doesn’t work any more – appraisers are independent and untouchable now, which means they can kill any deal.  They are like baseball umpires – they can strike you out, even if the pitch was a ball, because it’s just their opinion.

Shoddy Repairs – Whether it’s to fix any historical work or corrections done to satisfy today’s repair requests, the house needs to be in decent shape to close escrow – or the sellers need to be willing to take a sizable discount.  Having vendors who can quickly make impressive repairs for a reasonable fee is critical.

Packing and Moving – A great agent has ways to prevent your move from turning into an evacuation.

Gimmicks – This business has always been notorious for its deceitful gimmickry, and these days you need a supercharged BS-detector to get the truth.

Correctly Interpreting Market Conditions – Get the right answers to: Are we in a bubble?  Should I wait? How much is this home really worth? Are there two birds in the bush?

Consumer Inexperience – This might be the biggest hurdle of all, and what causes buyers and sellers to rush a decision before doing enough investigation. Having proper guidance throughout the process is what relieves the stress and costly experiences you hear about!

Get Good Help – it’s never been so important.  These are the highest home prices ever!

Why Commissions Are High

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:

https://www.cnn.com/2019/05/15/economy/real-estate-commissions/index.html

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:

  1. 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.
  2. A real auction removes the agent shenanigans – no tilting the table in favor of anyone.
  3. Sellers get a little more than retail value, and know the close date in advance.
  4. Buyers know exactly what to expect, and have a fair shot of buying any home.
  5. 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:

Respond to Offers Promptly

What can a home seller do to help make a sale?

I wrote this article two years ago, with the following tip:

Respond to an offer in less than 24 hours.

I offered a couple of examples in the original article, and I just had another one happen.

The listing agent, who is new in the business, didn’t like my offer that was 9% under his list price, but told me that the sellers said they would take a specific price that was 5% under list.  I asked if he was going to counter with that price, and he said no, because they didn’t want to go back and forth.  But if I wrote a new offer with that price, they’d sign it.

I discussed it with my buyer, and then submitted a new offer with the sellers’ price with a 24-hour expiration.  The listing agent acknowledged receipt, and said he’d get back to me first thing the next day.

When noon rolled around with no response, I sent him a text.  He said he presented the offer and the sellers would be getting back to him.

The expiration time came and went.

My buyer said, ‘Screw them, there are plenty of other houses out there’.

GET GOOD HELP!

Sexy Realtor Video?

Here’s a steamy new real estate video that isn’t as sexy as the previous ones we’ve seen, yet the reaction was so strong that the brokerage took it down and cancelled the open house.

The big complaint was that the woman featured wasn’t the woman in the photo, but the guy was visiting her, not the other way around.

The original video was copied before it was taken down, and now this version has over 1M views and 300+ comments:

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