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Month: November 2006 (page 7 of 8)

November 8, 2006

How much commission should an agent charge?

by

Mega-Producing Realtor

Author website

Theoretically any company could “take over” almost any market by offering their services at a lower price than any of the competition. And sometimes economic theorists like to calculate just how long it is going to be until it happens in various industries. Usually those calculations are just exercises with a financial calculator or spreadsheet – they don’t tend to reflect much in the real world.

Specifically, I remember when Sears bought Merrill Lynch Real Estate and then Merrill Lynch went on a buying spree of real estate companies – one large local firm they purchased was Tom Fannin Realty (this was in the early 80’s). The buzz coming down the pike at that time was that only the VERY largest firms and small (really efficient boutique type operations) would survive. All of the “regular” real estate companies were going to go out of business. The big-money-wall-street-people were going to dominate the real estate industry.

As luck would have it, just doing number crunching (completely skipping the whole “people thing”) made almost everything they (along with all the robot reporters) predicted to be pretty much complete crap. A few short years later Sears was selling (after enormous losses) Merrill Lynch Realty and surprise surprise – the real estate business rolled on, almost like it had all along.

In any industry there are those consumers who believe that “the lowest price” is the most important issue. They constitute about 15% of the home selling public. About 5% fall into the status conscious arena and actually want to pay a higher price. The vast majority of the public (80%) are more “Value Shoppers”. Don’t confuse that for wanting the lowest price all the time. They want the “best deal” – which may or may not be the lowest price. Show them that something is a “good deal” and it doesn’t have to be the lowest price.

One of the more idiotic assumptions made by the howler monkeys at the FTC and the DOJ in their pursuit of “lower commissions for the public” is that “commissions should have come down because of the internet”. The mere fact that Read more

November 7, 2006

It’s the big blue one, third spot in from the middle . . .

by

Suburban Phoenix Real Estate Broker

Author website

Oh, good grief. Having returned from an extended drive-time radio stunt, Sellsius blog spreads a trail of Zillow crumbs. I don’t have time to bother with it, but this came in with a trackback:

We say: You can’t shakedown the innocent. If you pay-off, you’re guilty.

So a large gentleman shows up at your retail store. He’s tossing a baseball as he talks to you about the benefit of supplemental plate-glass insurance. It is by preying on the innocent that many, many large gentlemen in New York City — where Sellsius is located, incidentally — make their living.

Who can’t figure out why Zillow.com would pay not to be smeared as being racist…?

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November 7, 2006

A horrifying thought experiment: Elaborating on a brokerage business model that could completely disintermediate buyer’s agents . . .

by

Suburban Phoenix Real Estate Broker

Author website

I wrote this this morning, and it’s been bugging me all day:

Here’s a thought: The $99 divorce. It only works where the split is unclouded by children or property. But imagine a $999 FSBO package: The usual MLS-only marketing package with a buy-back guarantee for the buyer. Quoting me:

“From the buyer’s point of view, the buyer’s agent’s compensation can be thought of as a risk premium. An important benefit the agent brings to the transaction is a reduction in the risks the buyer takes on in purchasing a home. There is certainly a value to this, but that value cannot possibly be infinite — nor even terribly elastic.”

If, by using something akin to insurance, a Realty.bot can drive the risk of limited service buyer’s agency to something approaching zero — then what?

This is a business model. I’m not saying anyone will — or should — do it, but it is a workable answer to marketing objections.

Consider: Nu-Way Realty is a low-ball lister in the Phoenix market. They’re very big on promoting their listings — big newspaper ads and flyers distributed door-to-door. Taking account that MLS search is ubiquitous by now, they have that as promotion of their listings, too.

Do you see why this matters? Buyer’s agents don’t control what houses their buyers know about. As long as buyers can log onto an IDX system, they can say, “What about this one?”

A brokerage like Nu-Way could leverage all of this.

First, let’s do a limited-service listing — but with stipulations. Part of the listing contract is a full inspection of the property, with the seller agreeing to correct any identified defects prior to the MLS listing.

The listing brokerage now has a listed home in which it has a high degree of confidence. This is why it can offer a Money Back Guarantee — because it will never be in a position where it will have to honor it.

The MLS listing carries a $1 co-broke, which is the ultimate joke on all the NAR posturing about price-fixing. Probably, most buyer’s agents won’t show these homes voluntarily, but there is nothing to prevent buyers from Read more

November 7, 2006

Overall October real estate market results for MLS listed homes in the Phoenix area — average prices up 1.77%

by

Suburban Phoenix Real Estate Broker

Author website

In the Arizona Regional Multiple Listings Service at large, 5,590 homes sold in October against an inventory of 47,069, an implied absorption rate of 8.42 months. There are 6,059 properties listed as “Sale Pending.” All of these numbers are very close to September’s results.

Number of Homes Sold (with Days on Market)

March 2003   6471    67
          2004   8678    60
          2005   9959    36
          2006   7469    58

April    2003   7429    67
          2004   8889    61
          2005   9567    32
          2006   6725    60

May   2003   7428    67
          2004   8932    56
          2005   9853    27
          2006   7582    63

June   2003     7409    67
          2004    9969    55
          2005   10225    26
          2006    7209    67

July   2003     7643    64
          2004    8974    51
          2005    9326    25
          2006    6101    70

August 2003     7648    63
          2004    8968    47
          2005    9996    25
          2006    6170    76

Sept. 2003      6802    62
          2004    8648    45
          2005    9152    28
          2006    5607    80

Oct.  2003      6501    62
          2004    8127    37
          2005    7970    31
          2006    5590    87

Average prices are up from September, from 324,370 in September to $330,210 in October, a net gain of about 1.77%.

Note that this may not accurately reflect the Phoenix-area real estate market as a whole. All private sales and most new-home builder sales are excluded from MLS statistics.

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November 7, 2006

Election Day Links: The essence of liberty, now, is out-running those who would enslave us . . .

by

Suburban Phoenix Real Estate Broker

Author website

I know a lot of people who don’t vote. Not because they’re lazy, but because they’re philosophically opposed to the whole business. For my own part, I vote for just about the same reason I go to Mass, and about as often. Since 1848 or so, the main objective of government seems to me to have been universal penury. But as huge a drag as the state has been on wealth creation, it is failing nevertheless. By the quality of our ideas do we “out-run” those who would enslave us. This is hardly ideal — there is no justice to being a slave, and there is no justice to living as a fugitive from slavery. Even so, I could make a Dawkins-like argument that eluding the pandemic wealth-destruction of government is an evolutionary goad — “How much intelligence does it take to sneak up on a leaf?” In any case, here is my celebration of some ideas that caught my eye today:

Phil Hoover from Boise Real Estate Blog is one up on all your shaggy-dog stories. Phil (blogrolled) had a great take on “Real Estate’s Broken Business Model” that I had noted but failed to mention when it appeared.

Christine Forgione at NY Houses 4 Sale tells an inspiring story with a $66 million happy ending. (Also blogrolled — boneheaded oversight; I live out of my feed reader.)

Lee Ovington, the Illinois-based appraiser from Valuation 411 tell us what he likes about Eppraisal.com.

Kevin Boer at Three Oceans Real Estate argues that Realtors will never be disintermediated, but Pat Kitano at TransparentRE.com offers some possible caveats. Here’s a thought: The $99 divorce. It only works where the split is unclouded by children or property. But imagine a $999 FSBO package: The usual MLS-only marketing package with a buy-back guarantee for the buyer. Quoting me:

From the buyer’s point of view, the buyer’s agent’s compensation can be thought of as a risk premium. An important benefit the agent brings to the transaction is a reduction in the risks the buyer takes on in purchasing a home. There is certainly a value to this, but that value Read more

November 6, 2006

Saying, “No” the Metternich way . . .

by

Real estate web programmer

Author website

So, I get to vote, even though I’m only fourteen! Earlier today my father, Greg Swann, gave me the pamphlet that contains information on all the propositions for this year’s general elections, which are taking place tomorrow. He told me that, if I told him how I would vote for each proposition, and he agreed with my opinions, he would vote that way tomorrow.

In a nutshell, here are this year’s propositions:

  • Prop 100: Removing bail for illegal immigrants
  • Prop 101: Modifies property taxes
  • Prop 102: Denies the award of punitive damages to illegal immigrants
  • Prop 103: Makes English the official state language
  • Prop 104: Allows ‘communities’ to control neighborhood development
  • Prop 105: Allows Legislature to seize up to 400,000 acres of land, without any compensation, and designate it as conserved land
  • Prop 106: Allows Legislature to seize up to 694,000 acres of land, without any compensation, and designate it as land only to be used for educational purposes.
  • Prop 107: Amends the State Constitution to make marriage a union between one man and one woman and abolish the creation of legal status similiar to marriage for unmarried people
  • Prop 200: Creates a ‘voter reward system’
  • Prop 201: Bans smoking in public areas
  • Prop 202: Raises minumum wage
  • Prop 203: Creates an early childhood health monitoring program, while taxing smokers to pay for the program
  • Prop 204: Introduces fines for animal cruelty pertaining to pigs and calves
  • Prop 205: Requires all elections to be mail-in only
  • Prop 206: Another ban on smoking
  • Prop 207: Restricts eminent domain
  • Prop 300: Restricts eligibility for public programs to legal citizens of America
  • Prop 301: Denies bail for those caught under the influence or in possesion of methamphetamine
  • Prop 302: Raises State Legislator’s salaries by $12,000

After much reading and reflection, I voted “No” across the board, in a Metternichian style of acting. In my opinion, every proposition either was useless or gave the government more power.

Here are some more in-depth explanations for why I voted “No”:

  • Prop 100: Causes overcrowded jails
  • Prop 101: If it ain’t broken, don’t fix it
  • Prop 102: Creates the need for more government jobs, to check the status of every person in a civil lawsuit
  • Prop 103: Creates the need for more government jobs, Read more
November 6, 2006

Raking for muck in Phoenix . . .

by

Suburban Phoenix Real Estate Broker

Author website

Anthony Barba tips us that the Phoenix real estate market is going to get Drudged tonight. I’ll link to it when it happens…

Further notice: The article is up. The New York Times and it’s full of condescending errors: Hunt Highway is in Queen Creek, 45 minutes south and east of Tempe. A four-bedroom home is not a McMansion. I’ve always read Brewer-Caldwell as a scam operation. You cannot get $1,400 from a responsible tenant in the Phoenix. In any case, like much of Drudge, it more hat than cattle.

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November 6, 2006

The Carnival of Real Estate . . .

by

Suburban Phoenix Real Estate Broker

Author website

…is up at Landlord Shmanlord. Seeds of Growth took first prize — amazingly enough with a pumpkin delivered by a Realtor. The difference in perception — warm gift versus cheesy gimmick — is enlightening.

Jim Cronin at The Real Estate Tomato is host to The Carnival of Business this week, so there is good reading all over the RE.net.

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November 5, 2006

More on taking listings

by

Mega-Producing Realtor

Author website

Greg,

The issues in your post that really caught my attention were trying to become a lister as a new agent and finding much more early success working with buyers.

As many real estate instructors are failed agents, even the very best of intentions – trying to give new agents the best advice possible, winds up with some “almost useful” info.

Yes, listers last. But if a new agent starts off as a lister (non friends or family appointment) they have just stepped into the ring against a possible heavy weight champion. They then can get the idea that the only way to compete is with a lower commission. (I promise to cover the subject of defending commissions in much more detail in a later post).

But far more important is the prelisting package (EVERY lister MUST have one) and the listing presentation itself.

There is a big difference between working with buyers than in working with sellers: buyers are usually not looking for an agent, they are looking for a house. For example, most people who are going out to buy a car probably wouldn’t be thinking, “gosh, I hope I meet a really nice car salesman today” – they want information and are possibly willing to talk to the salesperson to get it. Initially, buyers for houses aren’t much different. It is the relationship building skills of the agent that makes them successful when working with buyers.

The ability to get and keep customers is the senior skill with both buyers and sellers but the specific skill set is a bit different with each group. Working with buyers is basically relationship-based selling. It is for this reason that a relatively new agent can be perceived by a buyer as being just as desirable to work with as a highly successful veteran agent. What the buyer wants most of all is someone who will be totally honest with them – so getting them to like you and trust you is THE primary thing.

Unlike most buyers, the typical seller IS looking for an agent. However some of them don’t want to have to pay Read more

November 5, 2006

Listing adventurously the Bloodhound way . . .

by

Suburban Phoenix Real Estate Broker

Author website

“If you list, you last,” runs the Realtor’s mantra. This is true to a degree: It assumes you will last long enough to get a listing and for that listing to sell. It’s no accident that most agents start out working with buyers. It’s harder work — from the traditional point of view — but buyers will be more forgiving of a lack of experience, and working with buyers can require a smaller up-front, out-of-pocket investment.

In any case, I didn’t list very much in my early years as a Realtor. I crashed and burned on an early listing, and I didn’t race back to the wreckage until I had learned a lot more about what I wanted to do. Even on that listing, we were doing a lot of radically-innovative things, but I had made the classic new agent’s mistake: I was drawing huge traffic to a home that was over-priced.

After that bad first experience, I listed when I couldn’t avoid it: For pre-existing clients. Listing, lock-box, sign, flyer — but also price, preparation and presentation. We weren’t gun-shy, but we wanted to perfect the idea of our kind of listing before we rolled it out in any major way.

As it happens, we hit our stride as listers just as the Phoenix real estate market oscillated to an absurd frenzy. We did a lot more work last Summer than we actually needed to do: Web sites, open houses, neighborhood canvassing, etc. — when all we actually needed to do was go down to the Safeway and whisper that we had a house for sale.

But we got really good results really quickly, and we learned a lot about the things we do now — when selling any house, even a perfect house at a perfect price, is a major undertaking.

This is from our seller’s web page:

Take a look at this web site.

This is the site we built for a house we recently listed in the F.Q. Story historic district of Phoenix. It happens that the home was owned by one our favorite clients, but that’s beside the point: This is the work Read more

November 5, 2006

Ardell DellaLoggia didn’t write this!

by

Mega-Producing Realtor

Author website

She did, however, write this post on raincityguide. Nice person that she is, she also took the time to write and welcome me to the blogosphere. And after reading her post, Real Estate 101 – Improving on “the basics”, I have several things I want (need?) to say.

Observations:

1. Ardell finds it quite easy to bond with her clients and for them to immediately recognize her as a nice, honest and professional person.

2. She – like all top successful agents is quite good at establishing someone’s level of motivation to buy or sell. Further, she has developed a workable system (she probably thinks of it as a “knack she has”) for detecting and routing nuts (crazy people).

3. Her “care factor” is quite high. She likes and truly enjoys helping others and making sure things “go right” for herself and others is quite important to her. Her ability to actually make things go right is very very good.

Why am I writing all of this about her, you ask? She and I have never met.

Because everything she wrote is completely workable and valid for agents everywhere, just so long as they are – each and every one of them – just as nice, as intelligent and as caring about others as Ardell. But if any of those agents don’t have each of the above qualities and virtues she obviously has – I see failure in their future.

On point number 1. above, I don’t believe that the average buyer or seller thinks of the average Realtor the way I described Ardell. NAR publishes our “improved rankings” in the Gallup Poll every time we get a slight improvement. Set aside the “we are up 3% in the polls” crap and you could just as easily say that the average buyer or seller is hoping to find the agent who will lie to them the least. So, unlimited credibility isn’t in the new agent’s arsenal. Most sellers (who aren’t family or friends of the new agent) may not instantly be moved by the agent’s opinion of value. I believe it is possible for the new listing agent Read more

November 4, 2006

Ask the Broker: Who is responsible for the mortgage . . . ?

by

Suburban Phoenix Real Estate Broker

Author website

Holy smokes! I get questions for appraisers, for inspectors, for real estate attorneys, for everyone involved in a real estate transaction except the ding-dong Realtor. Here comes a question for mortgage lenders, who are entreated to chime in with better answers:

Generally speaking, are homeowners personally liable for their mortgage? If yes, is it possible to structure a home loan that doesn’t require a personal guarantee?

Generally speaking, yes, a mortgage is secured both by the real property and by the borrower’s personal promise to repay the note. If the down payment is 10% or 20%, the personal promise may not be as significant, but if the down payment is very low or if real estate is declining in value (as it is right now in many markets), the lender will depend on the borrower to bring any short-fall to the closing table, should the home sell for less money than is owed on it.

But: There are many types of loans that are not secured by the borrower’s personal promise to repay. The loan will be secured by the real property borrowed against or by other assets, but a foreclosure won’t affect the borrower’s personal credit rating.

Here is an example that can be used for residential loans: The Non-Recourse Loan. The loan is secured by the real property only, with no “recourse” to the borrower on default. Obviously, the lender is going to make sure the amount lent is substantially less than the value of the property, that the property produces income sufficient to pay its own expenses, etc.

This is an investment product, but the interesting thing about non-recourse loan is that they can be used by self-directed retirement accounts, to permit them to own real estate. Your self-directed IRA, as an example, would have to make a hefty down payment on a piece of real property, and there are rules about what your IRA can own and to whose benefit. But by means of the non-recourse loan, your IRA can own (and leverage) real estate to build your retirement nest egg tax free…

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November 4, 2006

October 2006 BloodhoundRealty.com Market Basket of Homes: Values down 4.07% on normal sales . . .

by

Suburban Phoenix Real Estate Broker

Author website

The Phoenix-area real estate market’s three-month experiment with stasis came to an abrupt end in October: Although sales levels were normal, as compared with October 2003, the most-recent October before the real estate boom, both asking and selling prices dropped precipitously among the homes tracked in the October 2006 edition of the BloodhoundRealty.com Market-Basket of Homes.

Average prices for Market Basket homes in October were down 4.07%, compared to September, a difference of $10,327. Year-over-year, prices are down 7.97%, and down 9.88% from the December 2005 high. Prices in October were strongly affected by deep discounting by new home builders. Even so, two-year appreciation on an average Market Basket home is 38.21%. Three-year appreciation is 63.15%.

A total of 162 sales were recorded, down from September’s total of 183. Market-Basket homes spent an average of 103 days on market, 3 days more than in September. For comparison purposes, 149 Market Basket homes sold in October of 2003, the last relatively normal year, in an average of 54 days.

As has been the case in recent months, many Market-Basket homes are selling at or above list price. A few deeply-discounted properties pulled down the average – most notably deeply discounted builder’s spec homes. Average discounting netted out to 1.96%, down from 2.03% in September.

Inventories of available Market Basket homes continue their decline. There are now 1,229 homes available for sale in the Market-Basket, where there were 1,337 in September, 1,406 in August and 1,506 in July. With sales of 162 homes, the implied absorption rate is 7.58 months, up from 7.31 months in September, but down significantly from almost 10 months in July. A six-month absorption rate is considered normal. The number of homes listed as “Sale Pending” is 191, up from 165 in September.

Based on the idea of the Consumer Price Index market-basket of goods and services, the Market-Basket of Homes uses average sales prices for a small subset of all Valley home sales to get a clearer idea of what is happening in the middle of the bell curve. The alternative method, striking a median among all closed transactions, introduces too many extraneous Read more

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