BloodhoundBlog

There’s always something to howl about.

Author: Greg Swann (page 178 of 209)

Suburban Phoenix Real Estate Broker

October 20, 2006

Online searches fun but offer too few details

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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 . . .

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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 . . .

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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 . . . ?

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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…

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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 . . .

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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 . . .

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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 . . .

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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 . . .

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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 . . .

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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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October 16, 2006

What replaces the MLS? Advertising is a given. Compensation/ cooperation can be addressed separately. But the quality and quantity of the data is irreplaceable…

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Tyler Sookochoff ask these questions in a comment to another post, but my reply is long enough that I think it warrants a post of its own.

Marketing of homes aside, do you rely solely on your local MLS to do CMAs and price homes you’re hired to sell? Or could you survive/thrive without the MLS?

Too many questions conflated as one. There are actually three justifications for the MLS: Advertising, the co-broke — and protection of the earned commissions of “procuring” agents. The latter is what is literally meant by “cooperation” — all member agents agree in advance to respect each other’s client relationships, with a dispute-resolution procedure if they don’t.

If the MLS were opened up or replaced, would sellers still want maximum exposure for their properties? Yes, certainly.

Would this entail an offer of broker cooperation/compensation? That depends on whether the buyer’s agent’s compensation continues to come through the seller/listing agent, or whether the RESPA/HUD-1 procedure can be interpreted or revised to permit buyers to finance the buyer’s agent’s compensation as part of the home loan. (This is what is happening now, it’s just being done by sleight of hand through the seller and listing agent.)

Will brokers use whatever price information they have at hand to prepare CMAs? You bet — but not exclusively. Their own on-the-ground knowledge of neighborhoods and the comp listings, plus a first-hand inspection of the subject property are at least as important as any information derived from a database.

So the question is not, will I be stuck working without an MLS (commercial brokers often do, as do land and business brokers)? The question is, what form might a future MLS take?

For what it’s worth, I’m a skeptic on MLS-replacement for now. First, it takes an incredible amount of data to make an MLS listing worthwhile — more work than FSBO sellers might be willing to do, in many cases entailing knowledge they do not have. Second, significant details vary from one locale to another.

Witness: My friend and colleague Richard Riccelli is selling a triplex right now. What’s a triplex? In Boston and New York City, it’s a Read more

October 16, 2006

“Hi! I’m a jackass. My name is Google Adwords.”

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Culled from my email this morning:

AD TEXT:

Relocating to Phoenix AZ?
Hit the ground running. Tour homes
by net with smart, hi-tech Realtors
www.BloodhoundRealty.com

Ad Status: Suspended – Pending Revision
Ad Issue(s): Trademark in Ad Content

SUGGESTIONS:
-> Ad Content: Please remove the following trademark from your ad: “hi”.

Adwords has been very good to us, for years now. There was a time when the ROI on our Google spend was incredible. But it’s a diminishing return. Other Realtors have discovered it, bidding up our keywords and thus bidding down our positions. And regular users have trained themselves to prefer organic over paid results.

So it’s doubly-smart for Adwords to tell me that “hi” is a trademark just when I’m turning the boat, as it were.

“Do no evil” but go right ahead and shoot yourself in the foot. It’s the American way of doing business…

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October 15, 2006

Something to howl about: BloodhoundBlog wins the Carnival of Real Estate . . .

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Inman Blog, this week’s host of the Carnival of Real Estate, sets the bar even higher than we did last week, cutting the list of entries down to a solid ten. Astoundingly enough, we took first place.

Why astounding? For one thing, we had come to fear that our urbanity was eclipsed by an overarching arcanity: We thought we might be too hard to read. Plus which, we cut all four of Inman Blog’s entries last week because we thought they were too short. We never for a moment thought they would be so petty as to exact revenge — but it would be hard to blame them if they did.

Todd Tarson is in town tomorrow for an AAR event, so we’ll save the celebratory drink until he stops by to say hello. In the mean time, we’re off to read all the other great entrants, and we commend you thither. (Who is hard to read?)

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