This week, the Wall Street Journal ran a story entitled, ‘How Should Realtors Get Paid’.
The author is a general freelance writer who describes herself as ‘a versatile writer with experience covering a wide range of topics. As a freelancer I contribute regularly to the Wall Street Journal, writing about personal finance, healthcare, aging and technological innovation’. Because she isn’t a real estate expert, she relied on three college professors for content:
They went off on some crazy tangents and no realistic conclusions were found, other than to note that there are discount brokers if you want to pay less.
My thought:
Would you do your job for the same pay if these were part of your job description:
You invest your own time and money along the way.
You don’t know when/if you will get paid, and….
You don’t control the final decisions – the clients do.
There should be a hefty bonus for those factors.
That being said, I would agree that the majority of realtors are grossly overpaid, relative to the services provided.
I see it every day, and if you go to open houses, you’ll see it too. The standard agent knows how to identify each room (this is the kitchen, this is the family room, etc.) and then ask you if you have any questions. Most can complete the fill-in-the-blank contracts too.
But they aren’t professional salespeople who can deliver expert advice on the fly, recognize good and bad features and assign costs/values on the fly, and put the correct price on a home based on the complete package of home’s condition and location, market conditions, and buyer pool….on the fly. Those are the realtors that deserve full compensation because the piece of mind delivered is worth extra. It is a service that is more than just taking an order.
Unfortunately, the order-takers are prevailing though, because consumers don’t know the difference and we all get paid the same. The industry isn’t motivated to disclose this to consumers because they get paid more on the lousy/inexperienced agents, so it will be up to consumers to seek out the experts in a quickie, push-button world.
Eventually, companies like Zillow will determine the values, and consumers will decide if they can live with that. Most will – it is what they are being fed by the new-age disrupters who are advertising the most. It should be just a matter of time before they prevail, and the old guard packs it up.
There will be lower costs eventually, and virtually no good help.
When thinking about selling, homeowners (especially the long-timers) complain about paying the capital-gains tax on their net profit above the $250,000 exemption per person. With the rapid escalation in values lately, it has turned into a six-figure tax for many!
Here’s something to think about and I’ll give credit to Doug because it’s been one of the main reasons he has wanted to move. The problem is that people don’t move enough.
Want to avoid paying capital-gains tax?
You should move every time your equity approaches the exemption amount!
The last big frenzy in the early-2000s was fueled by people taking advantage of their tax-free profits by moving repeatedly, and getting rich in the process.
It’s when I came up with my favorite motto:
Don’t Unpack, I’ll Be Back!
Of course, I think everyone should move every 6-12 months – it’s exciting!
Will the Ukraine war have an impact the real estate frenzy?
It’s likely to have the same effect as rising mortgage rates – it will make buyers want to hurry up and buy something so they can hunker down.
But the less-motivated buyers have to be getting to the point where they are looking for any reason not to buy, so the number of lookers should thin out. But it shouldn’t change the outcome for sellers of well-located, well-conditioned, and well-priced homes.
Unless one of two things happens:
America gets in the fight.
There is a cyber-attack on us.
A cyber-attack would be devastating to the local real estate market.
Home buyers are utilizing the internet tools to help them with their decision-making. Without them, the buyers’ comfort levels will drop quickly. An extended cyber-attack would likely to bring the frenzy to a halt.
This isn’t Iraq or Afghanistan – Russia could create havoc around the world.
Hopefully, the peaceful solutions will prevail, and we won’t have to worry about it for long.
It is amazing how much faith the consumers put into their zestimates and Redfin estimates. In spite of them obviously being ginned up, people just want to believe!
As long as automated valuations are carrying so much weight, let’s include a few more!
There are three more estimates at the bottom of realtor.com listings.
Take the Average? Median? Highest? Lowest?
Sellers will find out what their home is worth when they put it on the open market, so any pricing error will be temporary, and easy to fix.
It’s the buyers who should be concerned about putting too much faith and confidence into the accuracy. Look how it turned out for Zillow’s ibuying venture – they lost between $500M and $800M!
When calculating how much your home has increased in value, you have to identify its COST BASIS – meaning anything and everything that you spent to pay for the product. The IRS defines a capital improvement as a home improvement that adds market value to the home, prolongs its useful life or adapts it to new uses. Minor repairs and maintenance jobs like changing door locks, repairing a leak or fixing a broken window do not qualify as capital improvements.
Capital improvements and things you can put in your COST BASIS include:
The price you paid for the property, including settlement costs, such as: title fees, legal fees, recording fees, survey fees, and any transfer taxes or fees you paid in connection with the purchase.
Additions: An added extra bedroom or bathroom, a deck on the back of the home, a new garage, an added porch or patio….anything that adds value to your home.
Lawn and grounds improvements: Value-adding landscaping projects, driveway or walkway construction, a new fence or retaining wall, adding a swimming pool, etc can qualify as property improvements.
Exterior improvements: New windows, a new roof, and new siding are examples. Any and all renovation costs including ANY and ALL costs related to that renovation work.
Insulation: This includes insulation in the attic, inside walls, under floors, or around pipes and ductwork.
Systems: Installing a new heating or air conditioning system, new ductwork, adding a central vacuuming system, wiring improvements, installing a security system, solar, geothermal, generators, batteries, and putting in lawn irrigation are improvements.
Plumbing: Installing a septic system, water heater, or soft water system adds value.
Interior improvements: New appliances, kitchen renovations, new flooring/carpeting, the installation of a fireplace, etc.
If you needed to make home improvements in order to sell your home, you can deduct those expenses as selling costs as long as they were made within 90 days of the closing. Your COST BASIS does NOT include hazard insurance premiums, moving expenses, or any mortgage-related charges (mortgage insurance, credit report fees, and appraisal costs are out) and general repairs that are essential to keep something working do not qualify. Yard maintenance, HOA fees, and real estate taxes don’t count. Always check with your accountant.
Keeping tabs of these costs throughout the lifetime of a house is wise.
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How do you calculate the capital-gains tax when selling?
Subtract your COST BASIS, commissions, and closing costs from your sales price to determine the taxable gain. Those who lived in the home for two out of the last five years can also subtract the $250,000 exemption if single (or $500,000 if two people), and then the rest is the taxable amount. Long-term capital gains — that is, gains on assets held for a at least a year – are generally taxed at a lower rate than earned income (money that you get from working).
In 2022, the IRS ranges are as follows:
0 Percent – $0-$41,675 Single/$0-$83,350 Married
15 Percent – $41,676-$459,750 Single/$83,351-$517,200 Married
20 percent – $459,751+ Single/$517,201 Married
The State of California will take their chunk too. Check with your tax adviser!
People have asked how I liked the article about Oceanside’s resurgence.
I loved it – they featured our own Michele Bolanos in the photo (above)!
The author noted that the purple palace got bulldozed last year (the last remaining strip club in town), and they are building upscale apartments there now. More gentrification is on-going too – an excerpt:
Marine Corps Base Camp Pendleton (population about 38,000) has been the northern next-door neighbor to Oceanside (population about 174,000) since it was established during World War II. Around downtown, you still see several military surplus stores, tattoo parlors and barber shops, where many Marines get their “high-and-tight” haircuts weekly.
With so many active and retired military on hand, the city has a more blue-collar, conservative feel than most other SoCal beach towns. It’s also more culturally diverse, according to the most recent U.S. Census numbers.
But, as new businesses multiply, Oceanside is looking a bit more like its civilian neighbors to the south (Carlsbad and Encinitas) and north (San Clemente).
“We liked it the way it was. But it’s got to move,” said Jonny Gomez, 84, owner of the Esquire barber shop since the early 1960s.
“I believe we’re now up to eight coffee shops in downtown,” said Gumaro Escarcega, chief operations officer of the civic nonprofit MainStreet Oceanside. With the cost of living rising fast — Zillow estimates that home values are up about 25% in the last year — “we have to be careful because of gentrification,” he added.
Beach houses west of the I-5 are selling for more than $1,000,000, so there are no real bargains to be had. But it is in the path of progress – here is my tour from last year:
San Diego had the fifth highest year-over-year gain in 2021, behind metros with much lower price points (Phoenix, Tampa, Miami, and Dallas).
Our month-over-month gain in December was #1 nationwide (tied with Miami).
San Diego Non-Seasonally-Adjusted CSI changes
Observation Month
SD CSI
M-o-M chg
Y-o-Y chg
Jan ’20
264.04
+0.2%
+5.1%
Feb
265.34
+0.5%
+4.6%
Mar
269.63
+1.6%
+5.2%
Apr
272.48
+1.1%
+5.8%
May
273.51
+0.4%
+5.2%
Jun
274.91
+0.5%
+5.0%
Jul
278.00
+1.1%
+5.4%
Aug
283.06
+1.8%
+7.6%
Sep
288.11
+1.8%
+9.4%
Oct
292.85
+1.6%
+11.5%
Nov
295.64
+1.0%
+12.3%
Dec
297.52
+0.6%
+13.0%
Jan ’21
301.72
+1.4%
+14.3%
Feb
310.62
+2.9%
+17.1%
Mar
320.81
+3.3%
+19.1%
Apr
331.47
+3.3%
+21.6%
May
341.05
+2.9%
+24.7%
Jun
349.78
+2.6%
+27.2%
Jul
355.33
+1.6%
+27.8%
Aug
357.11
+0.5%
+26.2%
Sep
359.88
+0.8%
+24.9%
Oct
363.80
+1.1%
+24.2%
Nov
367.62
+1.1%
+24.3%
Dec
374.48
+1.8%
+25.9%
The experts have run out of superlatives, and roll out the same old explanations to describe the uptick in December – which was really the third month of the ramp-up into 2022:
Home prices rose 18.8% in 2021, according to the S&P CoreLogic Case-Shiller US National Home Price Index, the biggest increase in 34 years of data and substantially ahead of 2020’s 10.4% gain.
All regions saw price gains last year, but were strongest in the South and the Southeast, each up over 25%. Phoenix, Tampa and Miami reported the highest annual gains among the 20 cities in the index in December. Phoenix led the way for the 31st consecutive month with prices in December 32.5% over the year before. It was followed by Tampa with a 29.4% increase, and Miami with a 27.3% increase.
“We continue to see very strong growth at the city level,” said Craig J. Lazzara, Managing Director at S&P DJI. “All 20 cities saw price increases in 2021, and prices in all 20 are at their all-time highs.”
Over the past several months home prices have been rising at very high, but decelerating rates, said Lazzara. But that deceleration paused in December.
Lazzara said that strength in the US housing market is being driven in part by a change in location preferences as households react to the pandemic.
A persistent low inventory of homes dropped to record low levels in December, according to the National Association of Realtors. In the face of continued strong demand, prices were pushed higher. Newly constructed homes are in the pipeline, but a long-running shortage in supply combined with the lingering effects of the pandemic mean it will take years to meet demand.
“More data will be required to understand whether this demand surge simply represents an acceleration of purchases that would have occurred over the next several years rather than a more permanent secular change,” Lazzara said. “In the short term, we should soon begin to see the impact of increasing mortgage rates on home prices.”
Mortgage rates, which had risen only gradually since August, began to abruptly climb in late December closing in on the 4% threshold for a 30-year fixed-rate mortgage.
“Home prices continued to surpass expectations in December, but a marked change may be ahead for growth as rising mortgage rates eat into homebuyer purchasing power,” said Danielle Hale, Realtor.com’s chief economist. “While typical asking prices continue to accelerate, the pace of median sales price growth has slowed, signaling a potential gap between what buyers are willing and able to pay and what sellers are hoping to net.
Higher mortgage rates have added more than $200 to the monthly cost of a typical for-sale home since December 2020 — when rates were at all-time lows — with more than half of that increase occurring over the past eight weeks, Hale said.
“With home prices expected to continue rising, even at a slower pace, affordability will increasingly challenge 2022 buyers as a decade-long underbuilding trend has left the housing market 5.8 million homes short of household growth,” said Hale. “At the same time, we expect pandemic trends like workplace flexibility and competitive labor market conditions to give workers the boost in income and wider search areas they need to navigate a still-challenging housing market successfully.”
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We sold a home with Jim and Donna and from beginning to end they were consummate professionals. Their initial walk through the property resulted in a list of items to be repaired or updated. They supplied a list of vendors and job quotes to do the repairs and updates. We originally wanted to sell ‘as is’ and just get it over with. They gave us a selling price for ‘as is’ and options for doing a few updates/repairs to doing it all with the selling price for each option. We agreed to do all they suggested and we sold for the exact price they predicted. For every dollar spent we got back more than $2 back in the selling price. And they got that price in a rising interest rate environment! Donna and Jim are extremely detailed and guide you through ever aspect of the sale. There were no surprises thanks to their guidance. We couldn’t be more pleased with their representation.
Thank you Donna and Jim,
Jerry and Mary
Heather Quejada
March 27, 2025
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We have known Jim & Donna Klinge for over a dozen years, having met them in Carlsbad where our children went to the same school. As long time North County residents, it was a no- brainer for us to have the Klinges be our eyes and ears for San Diego real estate in general and North County in particular. As my military career caused our family to move all over the country and overseas to Asia, Europe and the Pacific, we trusted Jim and Donna to help keep our house in Carlsbad rented with reliable and respectful tenants for over 10 years.
Naturally, when the time came to sell our beloved Carlsbad home to pursue a rural lifestyle in retirement out of California, we could think of no better team to represent us than Jim and Donna. They immediately went to work to update our house built in 2004 to current-day standards and trends — in 2 short months they transformed it into a literal modern-day masterpiece. We trusted their judgement implicitly and followed 100% of their recommended changes. When our house finally came on the market, there was a blizzard of serious interest, we had multiple offers by the third day and it sold in just 5 days after a frenzied bidding war for 20% above our asking price! The investment we made in upgrades recommended by Jim and Donna yielded a 4-fold return, in the process setting a new high water mark for a house sold in our community.
In our view, there are no better real estate professionals in all of San Diego than Jim and Donna Klinge. Buying or selling, you must run and beg Jim and Donna Klinge to represent you! Our family will never forget Jim, Donna, and their whole team at Compass — we are forever grateful to them.
Lou F
March 27, 2025
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WeI had the pleasure of working with Klinge Realty Group to sell our home in Carmel Valley, and I cannot recommend them highly enough!
Jim and Donna demonstrated exceptional professionalism, offering expert guidance on market conditions and pricing strategy, which resulted in a quick and successful sale.
Communication was prompt and we were well-informed throughout the entire process.
For anyone looking for a dedicated and knowledgeable real estate team, look no further!
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William Sams
March 25, 2025
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Donna and Jim Klinge of Klinge Realty Group have our highest possible recommendation. From Donna and Jim’s first visit to our house through closing their advice and counsel was candid and honest in all dealings. They kept us fully informed throughout the process. The house sold less than three days after listing with a two-week closing. My wife and I have sold several houses during our lives. This was by far the best experience. Klinge Reality is a premium service realtor. You can’t make a better choice for someone to sell your home fast and for top dollar.
Emily Hernandez
December 29, 2024
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Donna and Jim provided exceptional support and professionalism throughout the entire process. We couldn't have been happier with their efforts. They made our house shine, and thanks to their expertise, it sold above the listing price in the very first weekend! Truly a fantastic experience from start to finish.
Jesus Adrian Sahagun
November 11, 2024
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This year has been difficult on our family, mainly due to having to sell our home. Thankfully we knew God had a plan for us and working with the Klinge team was a key part of it. It was an obvious decision to work with them again after such an amazing experience when purchasing the same home we needed to sell. The challenge was, how will we do this in so little time with so much going on? Jim and Donna held our hand every step of the way. Whenever an unexpected issue arose they found and provided a solution. Never once did we feel pressured to make a decision and the Klinges were always reassuring after providing the information that the decision was ours to make. Despite the curve balls, they never panicked and exemplified the “can do” attitude, making us feel optimistic and taken care of. Their expertise and professionalism was superb. But of all the reasons to work with the Klinges, the most impactful and valuable is their compassion and genuine care for their clients. We pray that we can one day purchase our forever home and you better believe that Jim and Donna will be representing us - as long as they will have us of course. Thank you again Klinge team! Your execution, experience, and care are unmatched.
SABIHA PASHA
July 23, 2024
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Jim and Donna were fantastic! Jim understanding my needs, recommending potential places, pointing out the pros and cons of each property was invaluable. Then when the offer was accepted Donna’s organized guidance through the inspections, paperwork etc made the whole process seem effortless.
So grateful that I had them on my side!
Anu Koberg
July 13, 2024
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We first found Jim through his blog at bubbleinfo.com, which really showcased his knowledge of SoCal real estate. Since then we've done three transactions with Jim and Donna, and they are an incredible full service agency, with Jim's deep market insight and Donna's deft contract and project management. We trust them implicitly in their analysis and strategy, which is based on years of experience. They're always available and on top of things, and we strongly recommend them to anyone.
Bjorn Isachsen
July 10, 2024
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The Good
The Klinge Realty Group operates like a finely tuned machine, with a very personal touch. We contacted them on a Sunday and they were talking to us about our family and our needs on our living room couch the following day. They carefully listened to us and worked with us to identify the best and quickest path to listing within 2 weeks to take advantage of the low inventory conditions in our South Carlsbad neighborhood. They knew our tract specifically and had many previous sales there over the years - they came prepared with a thorough analysis of comparative sales and recommended a pricing strategy that they felt confident would yield offers the first weekend on the market.
The Great
Over the next two weeks Donna coordinated a range of vendors who she knew from experience could get the preparation to list work we needed done on time and with high quality. Our light tune-up involved excellent experiences with their stagers, landscapers, contractors, electricians, and plumbers. Throughout this period Donna's daily communication was clear, concise, and responsive. Any time we had questions Donna picked up the phone or texted immediately - but almost always, she answered our questions before we even knew we had them.
The Outstanding
We had a tricky situation with a shared fence that could have delayed our escrow. Donna used superb mediation skills to negotiate the terms of replacement and was personally on site with the fence contractor to make sure everything went smoothly. The fence looks great and escrow closed on time.
The Truly Exceptional
Our house came on the market on a Wednesday and between then and Monday morning Jim was personally at all three open houses. He was in constant communication explaining potential buyer reaction and strength. As he predicted offers began to come in on Saturday and each one was incrementally higher than the last. At the end we had 5 offers, 4 of which were over list, and the final accepted offer was $100,000 over list. In addition to being over list it included rent back terms that met our needs.
The Recommendation
For all of these reasons we would strongly recommend The Klinge Team to anyone wanting to sell in North County Coastal San Diego. I had been reading Jim's bubbleinfo.com blog for 15 years and knew when the time came to sell that he would be our first call. Jim Klinge is not your standard realtor. He is keenly aware of market conditions and sales strategies. And, works his tail off - though not as hard as Donna . At this point he's gone from realtor to friend and I plan to have him over to grill and chill at our new place to talk real estate, but also just about life and raising kids in San Diego. He's more interested in relationships than his sales numbers - and that's why his sales numbers are so high. We have already recommended the Klinge's to some close friends and another successful sale is on deck right around the corner...
Chris Shea
June 21, 2024
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We recently had the pleasure of working with Jim and Donna from Klinge Realty Group to sell our house, and we couldn't be more satisfied with the experience. From the initial meeting, they listened attentively to our needs and provided invaluable guidance on specific improvements to get our home market ready.
Their responsiveness throughout the entire process was truly impressive. Anytime we had questions or concerns, they were quick to address them, ensuring we felt comfortable and informed every step of the way. What stood out the most was their team and extensive network of tradespeople, which made addressing any necessary repairs or updates seamless and stress-free.
Thanks to their expertise and dedication, our house sold quickly and at a great price. We highly recommend Jim and Donna to anyone looking to buy or sell a home. They are a fantastic team who truly care about their clients and deliver exceptional results.
