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Month: October 2006 (page 3 of 7)

October 20, 2006

Realty Reality: Service above and beyond mere real estate with Katie and Bob . . .

by

Realtor, Staging Consultant

Author website

I’ve been trading email this week with a client whose house I listed and sold last week. She’s been under the weather, and I’ve been checking up on her via email and text messaging.

Katie was 19 years old, just barely old enough to sign a contract when she asked Greg to help her find a home two summers ago. I wasn’t a Realtor yet, but remembered her from the stories Greg would tell about how impressed he was with the financial finesse for one so young. He helped her find her house, a charming condo in Scottsdale. He helped her write the offer, so that she was able to buy that house with nothing down and even walk away from the closing with a few hundred dollars left over from her earnest deposit. And after she owned her new home, he accompanied her to meet the head of the self-governed HOA at a meeting they called to greet their newest member and to make sure she understood the “rules.” One of those rules, believe it or not, was that she not get pregnant! Greg introduced the HOA to the Fair Housing Act, so they backed off, but I think the whole experience tarnished Katie’s first home ownership experience.

She never came to feel a part of her community. But inside her own horizontal airspace, Katie made a lovely home for herself and her beautiful new kitten, Bob.

Bob was just about two years old this past summer, when Greg heard from Katie, asking for help selling her house. She had waited patiently as she saw the amazing housing market of last summer, then watched the prices flatten out and even go down a little from what houses were getting last summer, before she was able to sell her house without paying taxes on the capital gain. She had one figure in mind that she thought she could sell her house for and be happy with the profit. But Greg and I encouraged her to ask for more, and about a month later she accepted an offer for that higher amount plus $100 :).

Katie Read more

October 20, 2006

Arizona ranks fourth for new jobs totals . . .

by

Suburban Phoenix Real Estate Broker

Author website

From The Business Journal of Phoenix:

Arizona added 119,200 jobs between over the last 12 months and 5,500 new jobs between August and September of this year, according to new numbers from the U.S. Bureau of Labor Statistics.

Those year-over-year jobs numbers rank fourth in the U.S. behind only Florida, Texas and California. Those states have far larger populations than Arizona.

Arizona posted larger September 2005 to September 2006 job gains than more populous states such as New York and Massachusetts.

Arizona also had the third-highest percentage job growth over the last two years, behind only Nevada and Utah. Arizona had held one of the top two spots for some time.

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October 20, 2006

The Divorced Commission and the MLS: Building a much better home search tool . . .

by

Suburban Phoenix Real Estate Broker

Author website

Okay, carrying on from the idea of the Divorced Commission — a condition whereby, by some means, the buyer’s broker’s compensation has been divorced from the listing agreement — what are the implications for the Multiple Listings Service model of propagating real estate listings?

As we are seeing, divorcing the buyer’s agent’s compensation from the listings agent’s compensation has salutary consequences with respect to the agency relationships of both sellers and buyers and with the cooperation of agents. By getting rid of the doctrine of procuring cause, we eliminate the need for high secrecy among agents.

The practice the NAR calls “cooperation” is actually a metaphor for a graduated hostility. Because there are two “sides” built into the listing commission, the short-term pecuniary self-interest of the listing broker is to keep both “sides” to himself. The idea of procuring cause is a way of inducing “cooperation” by delimiting and circumscribing what we might describe as the leonine avarice of the listing broker.

But in a condition of Divorced Commissions, the listing agent never has access to more than one side of the transaction (except in a disclosed dual agency). The buyer chooses his own representation, and compensates his agent from his own side of the ledger. The issue of procuring cause has become moot.

Moreover, an unrepresented seller has no need to worry about compensating the agent of a represented buyer. In the same way, an unrepresented buyer isn’t compelled to compensate the listing agent for advice and counsel he does not receive.

These benefits carry over to the MLS as well.

Consider this excellent harangue by Jay Thompson:

Pardon my rant…ARMLS (Arizona Regional Multiple Listing Service) drives me insane! There are “rules and policies” that every ARMLS member must follow. Failure to do so can (and should) result in a fine for each infraction. Here’s the thing that just drives me batty:

Real estate agent contact info in the public remarks section. It SHOULD be a flagrant violation. Why? Because I share a consumer version of the MLS listing with buyer clients and prospects. So I send a client/prospect an MLS listing, and right there plain as day Read more

October 20, 2006

Online searches fun but offer too few details

by

Suburban Phoenix Real Estate Broker

Author website

This is me from today’s Arizona Republic (permanent link). This is the every-other-week softer-side-of-Greg column. The fireworks will resume next week.

Online searches fun but offer too few details

Have you played with any of the national real estate search engines? You’ve probably been to Realtor.com, but you may not have made time for RealEstate.Yahoo.com.

Two new entrants can be fun to play with: Trulia.com and PropSmart.com. Because these systems don’t have access to MLS systems, they depend on voluntarily submitted listings.

Ultimately, though, national real estate sites throw away too much detail to offer more than an exploratory glimpse into the homes they list.

What do I mean? Is the roof shingle, tile or slate? Is that pool I can see dimly in the gee-whiz satellite photo in-ground or above-ground?

I don’t even like locally available consumer-level MLS access. Some systems provide more detail than others, but there is nothing like the kind of control that comes from having full access to hundreds of unique data fields. If you can’t search to a very short list of high-probability candidates, one of which is the home you will end up buying, what you have is not a home search but a wish book.

If you’re doing a transcontinental relocation, you need more search power than you currently have available. At a minimum, you need a Realtor to feed you more rigorous results than you can get on your own. Moreover, you probably wouldn’t know how to do the search you want done anyway. The idea that Realtors have lost control of the MLS is absurd. If you want to make that data dance the way I do, you have to do it as much as I do.

The other end of this is that for a local search, a buyer doesn’t need much from the MLS to pick out her next house. She might have picked it out years ago and is just waiting for it to come onto the market. This is why an $800,000 house may actually entail less labor for the Realtor than a $200,000 house, because the home search doesn’t have very much to Read more

October 19, 2006

Defining the Divorced Commission: A short-hand term for understanding alternative real estate compensation models . . .

by

Suburban Phoenix Real Estate Broker

Author website

I just spent a very informative hour on the phone with Jeff Brown, and I want to summarize what I took away from our conversation.

First, Jeff has a very different understanding of the term “co-broke” compared to the way it is used in Arizona. When we went to essentially 100% buyer-brokerage for residential real estate, we kept the term “co-broke” to mean the compensation that would be paid to the buyer’s broker — even though the buyer’s broker is never a sub-agent of the listing broker or the seller and represents only the buyer.

Jeff writes explicit contract language to make pellucid his exclusive buyer’s agency and is also taking his compensation from the buyer. What the listing agent chooses to do about the portion of the sales commission set aside for any cooperating broker is between the listing agent and the seller.

I would describe that as an instance of what I want to call Divorced Commissions. The lingering idea of subordination — seller oversees listing broker who oversees cooperating broker — is completely eliminated, at least from the buyer’s side of the ledger. The buyer contracts for and compensates his own representative.

Similarly, writing the listing agreement to concede any shared sales commission directly to the buyer effects the same sort of divorce. We are doing this with one listing right now, and I gather that Ardell has just done something similar.

This again is a form of Divorced Commissions. Even though in this instance any buyer’s agent’s commission is originating in the listing agreement, neither the lister nor the seller are attempting to use these funds to advance the seller’s interests at the expense of the buyer’s.

Nota bene: The original purpose of encapsulating the cooperating broker’s commission within the listing broker’s commission was to align everyone’s interests with the seller’s interests and against the buyer’s interests. The cooperating broker working with the buyer was compensated for introducing the buyer to the seller and for actively working against the buyer’s interests in the seller’s behalf.

You might argue that, at least in Arizona, where sub-agency is no longer practiced for residential real estate, the Read more

October 19, 2006

Ahem! How disaffected Californians find gold in Arizona . . .

by

Suburban Phoenix Real Estate Broker

Author website

From Retail Traffic Magazine, a reverse goldrush of Californians:

With cheaper housing and job growth to be found through the rest of the Southwest, Californians are conducting a reverse gold rush to Arizona, Nevada and Texas. And California-based retail developers and investors are following suit. That’s part of what’s behind projections that populations in Nevada and Arizona will double in the next 25 years, growing from 2.3 million and 5.7 million to 4.3 million and 10.7 million. In fact, three out of five new residents moving to Las Vegas and Phoenix each year come from California.

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October 19, 2006

Ask the Broker: How do I figure out if this deal makes sense . . . ?

by

Suburban Phoenix Real Estate Broker

Author website

Here’s a question that encompasses all of my favorite real estate homilies: Every real estate problem is essentially financial. Definitive answers require calculation. Competent adults can agree to anything. And: When buying or selling real estate as a principal, it’s good to have a real estate license.

I am currently selling my house and have been talking to realtors.

We have seen the comps and our house should probably go for about $290,000. We have a friend that we asked if she wanted to buy our house. She looked at it and told her sister (who is a real estate agent) that it was for sale. Her sister called us and wants to buy our house as an investment. So we essentially found the buyer ourselves. She is offering us an immediate buy with a selling price of $280,000. The question is… She wants us to pay a 5% realtor commission and all the closing costs. She said it’s a good deal because we won’t have to worry about open houses and then maybe the house won’t sell for months. We could sell right now and rent back until we are ready to move in Jan. I would think that since we are theoretically selling the house ourselves (we found the buyer) then why should we pay her a fee? Any help would be greatly appreciated.

This is ultimately a net proceeds problem, but we’ll come back to that.

First, the fact that your buyer is a licensee matters. She can take compensation for the transfer of real property and then apply that to the costs of transferring that property, a very sweet advantage. When I buy an MLS listed property, I go in with a 3% advantage over an unlicensed buyer. Commission income is taxable whether taken in cash or in kind, but my entry (or exit) costs are essentially reduced by the amount of the commission.

Second, whether or not you pay commission in this circumstance is a matter of mutual agreement. Your buyer wants to structure the deal with a commission for her in order to have that money available in the escrow Read more

October 18, 2006

Casual Friday on Wednesday night…

by

Suburban Phoenix Real Estate Broker

Author website

Twelfth Night, set in the fifties. Ick. I love the drama as an art form, and I almost always hate to see it performed. Nothing ruins a great play like a gaggle of clucking actors.

While we’re out, I commend your attention to this. Wrap your mind around the change Mark Nadel is proposing, and consider the real estate world after such a revolution. This is history unfolding before our eyes.

Time enough for a large drink and Cathy can drive. Double Scotch at intermission (double ick, but it’s what they have). Properly lubricated, I’ll have a great time…

October 18, 2006

Arizonans too dumb to come in from the rain . . .

by

Suburban Phoenix Real Estate Broker

Author website

Oh, wait. That can’t be right. There’s no rain. But people in Arizona are much too dumb to appreciate a really good load of slush on a pot-holed freeway — except they don’t call them freeways in the lands where the slush flows. Here’s one thing that’s certain: Those sun-fried Zonies don’t have the sense it takes to live where taxes are high and birth rates are low. What could they be thinking…?

I’m always happy to trumpet the news when Arizona turns up first on lists for in-migration, business formation, job creation, etc., so — fair is fair — today comes news of a study that claims that Arizona is the dumbest state in the Union.

The top five? Vermont, Massachusetts, Connecticut, New Jersey and Maine.

Are you sensing a trend here? You might think that it’s amazingly bad weather that makes a state smart, but then why New Jersey and not New Hampshire. Could it be that low taxes makes even an otherwise ideal state stupid?

Not to worry. The standard that determines how smart or dumb a state is is how friendly or unfriendly that state is to unionized school-teachers. And by that standard, Arizona is not the “dumbest” state in the Union — more’s the pity . . .

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October 17, 2006

Smashing the idols: Understanding market value in full context . . .

by

Suburban Phoenix Real Estate Broker

Author website

Nominate me Ikonoklastes, for I am come to raze this temple of half-baked ideas. I want to come back to the MLS later in the week, and I have a deep need to expose the motivations of brokers, as these are distinguished from the motivations of lesser licensees. But for now I want to take on the idea of market value.

Jeff Brown, whom I admire without limit, asks of me:

I’m still wondering though about the apparent premise underlying your argument that says the buyer pays everything.

That premise is this: That somehow the market value of the home is controlled by something other than supply/demand, and the other factors of which we’re all aware. Would you please clear this up for me?

There are actually two different issues on the surface there, and there is still a third issue buried in the underlying premises.

First things first: In every economic transaction, unless the seller is taking a loss — or unless the seller pays for something outside of the transaction — the buyer pays for everything. This is true of anything that can be bought, and it is why — in every business except real estate — the buyer is given the red-carpet treatment. The seller (of anything) brings the value to be sold, but the buyer brings every dollar of the money, and every dollar that is disbursed to the seller and to any other involved parties is disbursed from the buyer’s pile of dollars.

In real estate, we make believe that the money is first transferred to the seller and then instantaneously distributed to the other parties, but this is a sleight of hand we effect in order to get the sales commissions past the lender. It might once, historically, have described a sequence of events, but even then the activity was a pantomime.

The seller does not cause the sale by claiming to pay for it. The buyer causes the sale, and no uncoerced sale ever happened until the buyer caused it.

Moreover, nothing in the laws of god or man ever prevented a seller from paying sales commissions out-of-pocket, in advance, instead of Read more

October 17, 2006

Contra Freakonmetrics: The Big Picture in real estate negotiations . . .

by

Suburban Phoenix Real Estate Broker

Author website

Taking on Mark Nadel’s white paper on real estate commissions, Kevin Boer at Three Oceans Real Estate points out that there is more at stake than any one particular negotiation:

Successful agents, however, know that a solid business is built on long-term relationships with satisfied clients. If a past client indeed thought his Realtor had left $10,000 on the table, that would be the end of that relationship. No more future deals, and no more future referrals.

For agents who think long-term, however, the math goes something like this:

20 extra hours of work =

75% greater chance of doing another transaction with that same client in 5 years

+

75% greater chance of getting 1 referral a year for the next 10 years from that client.

No matter how you slice that one, that’s a lot of money the Realtor is leaving on the table by being shortsighted.

This is a reasonable argument, and a one-off transactional analysis is common in economics, where entrepreneurs succeed by taking account of The Big Picture.

To be fair to Nadel, he suggests short-term incentives to offset what he views as short-term disincentives. His suggestion comes pretty close to a net listing, though, a type of listing contract that is frowned on by regulators in Arizona.

Here’s why: I convince Mrs. Newlywidowed that her long-time family home, now an empty nest, is only worth $90,000. I offer to sell it “for free” unless I can get more than $90,000, in which case I will take $.50 on the dollar for every dollar over $90,000. I sell the home for $300,000, taking $105,000 in commission, leaving $195,000 for Mrs. Newlywidowed, where she could have netted $282,000 or more.

That notwithstanding, Kevin has a fun take on this idea.

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October 17, 2006

Drinks with Todd Tarson . . .

by

Suburban Phoenix Real Estate Broker

Author website

Todd Tarson from MOCO Real Estate News stopped by the house last night for beer and chips before rushing off to a WARDEX dinner, this in advance of an AAR conference.

I’d like to tell you that we cut through every knotty problem facing the real estate industry, but that would be an exaggeration. However, we did sap all resistance from a twelve-pack of Corona…

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October 16, 2006

PropSmart and Trulia, you’re cuddly and cool, but you don’t know a thing about searching for homes . . .

by

Suburban Phoenix Real Estate Broker

Author website

Here’s what I mean. This is a search I’m doing right now for a client:

Active listings only
MLS grids l32, k32 and j32 only (3 x 9 miles)
Minimum of 3, maximum of 4 bedrooms
Single-family detached homes only
Minimum of $350,000, maximum of $450,000 list price
Single-level homes only
3- or 4-car garage only
Only homes with formal dining rooms
Only homes with all tile roofs
Only neighborhoods with homeowner’s associations
Only homes where the land is owned in fee simple

There are two desired criteria that I’m omitting because they’re not reliably entered into the MLS system:

North/south exposure only
Only homes with pantries

But even with all those highly exclusive criteria, I’m still getting 25 possible candidates, way too many to work with. Probably we’ll end up isolating by particular subdivisions.

There is nothing in any computer system other than the Arizona Regional Multiple Listings Service that can search at this level of detail. But this is the only appropriate level of detail for a true home search. We campaign constantly for more power.

If you have visions of replacing MLS systems, please enlarge you vision to at least this size…

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