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July 17, 2007

Redfin cops another $12 million, raising investors’ stake in the discount realty.bot to $40,000 per closed transaction

by

Suburban Phoenix Real Estate Broker

Author website

The indefatigable John Cook:

Redfin has raised an additional $12 million in venture funding, money that the Seattle discount real estate broker will use to enhance its Web site and expand into new markets.

First up for Redfin are the Washington D.C and Baltimore areas, which are being unveiled today. Next on the agenda are Sacramento and Chicago, which the company hopes to open later this year. Redfin, which refunds two thirds of its commission to home buyers and offers a flat listing fee of $3,000 to sellers, already operates in Seattle, San Francisco, Boston, San Diego, Orange County and Los Angeles. Since its launch 17 months ago, more than 500 homes — valued at more than $350 million — have been bought and sold through Redfin.

To put things into perspective, Russell Shaw’s team of around ten people sold approximately 600 houses in the same span of time. With a head-count of 75 people — so far — and a capital investment of $40,000 cash-American per closed transaction, Redfin.com is somewhat less efficient.

But: Pay no attention to the man behind the curtain! Redfin will be profitable any day now. Scout’s honor!

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July 17, 2007

Project Blogger: An objective post-mortem analysis — I hope

by

Suburban Phoenix Real Estate Broker

Author website

Project Blogger is over — I think. Truly the fun never starts, but the drama never stops. I mostly ignored everything except the work Teri Lussier and I did here, at TheBrickRanch.com and at RealEstateWeblogging101.com. The contest pretty much ignored me, too, an unexpected delight.

We didn’t win — as nearly as I can tell. We developed a full-blown viral marketing strategy for locally-focused real estate weblogs, then codified the frolicking thing in a blogbook — itself something new under the sun. Teri understood what we were aiming for, but she understood it in her bones before we got down to business. To my knowledge, none of the other contestants paid the slightest bit of attention to what we were doing, even though we did it all in public.

All that’s as may be. I personally have been less than enthralled by the writing on the contestants’ blogs, but I confess to not having much tolerance for local blogs. To write about things of small importance, you really have to be able to write. I picked Teri to suffer through this with me because she writes so engagingly.

Pat Kitano was the judge for the last week of the competition, and he got to bathe in all that Project Blogger drama. One of the things he did that I thought was very smart was running Technorati rankings on each of the contestant’s weblogs.

This just by itself elicited complaints, which I thought were kind of funny. We said for months that the important thing is viral networking, with SEO factors taking a back seat. So the folks who listened not a word when we were demonstrating how to make a family of your farm were quick to pump their fists and shout, “Linking doesn’t matter.”

That’s not quite true. I wrote this in email to Teri tonight:

Technorati Authority is not vital to your purposes, since the users you want will find you by other means — local blogrolls, comments you make on local blogs, face-to-face contact, your local advertising, etc. But significant linkage from other websites will help your Google PageRank, which will help potential clients Read more

July 17, 2007

How not to divorce the real estate commissions: L.A. buyer figures out who pays the commissions but seems not to grasp the nature of the listing agreement

by

Suburban Phoenix Real Estate Broker

Author website

Via Freakonomics, the L.A. Land weblog at the Los Angeles Times has a shaggy-dog story about a buyer who came up with a brand new way to shoot herself in the foot: Pay all the commissions herself, regardless of the terms of the listing agreement and the HUD-1 procedures currently in place:

I thought it would be Super Smart to restructure the traditional home purchase offer. Traditionally, when you buy a house you just give the purchase money to the seller and the seller pays the 5% commission out of that. But when you think about it, you are agreeing to pay 5% more for the house, and that translates to a bigger down payment, a bigger mortgage and bigger property taxes every year. So I figured it would be brilliant to subtract the 5% off the purchase price and pay the agents’ commissions separately myself. Seems like no big deal, right? Wrong.

She actually worked it out to honest math, which is more than lenders and title companies can do. But of course the sellers couldn’t go along with this, even if they had wanted to, without being released from the listing agreement.

Per the purchase contract, the buyer would pay 5% of the full purchase price outside of escrow (a RESPA violation?), and the seller would pay an additional 5% at the closing table, per the terms of the listing contract. The agents might well have hated this idea — it is stoopid, after all — but not for financial reasons. Double-dips all around! Who could object?

Even so, just because the buyer made a thoughtless mistake — no doubt against the better advice of her agent — this doesn’t mean she’s wrong. Except in a short sale, the buyer pays for everything that gets paid for at the closing table. It would be a boon to consumers to make our processes reflect this fact.

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July 17, 2007

For pure home search, Terabitz puts all the cards on the table and all the icons on the map

by

Suburban Phoenix Real Estate Broker

Author website

When first I read about Terabitz this morning, I was prepared to make fun of it. It looks and “plays” like an on-line video game. Instead of a simple check-box-based user-interface on top of a map, you drag out icons for the types of searches you want to run, then build a mashed-up map like the one shown above from the results. My guess is that the intent is artificially to limit the number of things you search for at one time, but the overall effect is at least as fun as an on-line video game.

From VentureBeat:

Terabitz is launching a comprehensive site for home buyers wanting to organizing and map information about their prospective homes.

Think of it as a cross between a personal homepage (like iGoogle or Netvibes, for example) and a real estate information site (like Trulia or Zillow).

You can drag and drop housing information from menu bars into a central dashboard with a set of data displays. With one click, you can map this data using the site’s Google Maps mashup.

Besides for-sale listings, there’s information like average local mortgage rates, average rental fees and other real estate information.

You can also find out all sorts of good things about a place that are harder to quantify, like nearby restaurants, libraries, schools, coffee shops. Even the FBI’s crime — and specifically sex offender — database gets included.

This non real estate data is what sets Terabitz, of Palo Alto, Calif. apart from sites like Zillow and Trulia, which also offer home profile pages that are limited mainly to real estate data.

You can customize your own page of data widgets about your prospective home. You can also make an image of your data collection and share it with other users or email to friends.

More from John Cook’s Venture Blog:

Yet another startup company is entering the online real estate category. Palo Alto, Calif.-based Terabitz — backed with $10 million in funding from Tudor Capital and originally conceived by 17-year-old Kamran Munshi — is attempting to create a site that will help home buyers or apartment hunters manage the process from beginning to end. Its Read more

July 16, 2007

The 800 pound gorilla in the corner – the meltdown of the Wall Street mortgage market

by

Mortgage Banker

Author website

As we go about our daily lives in the mortgage and real estate world; dutifully performing our job functions and taking the high road of customer enlightenment via blogs such as Bloodhound; we are faced with a very large gorilla looming in the corner of our workplace. That gorilla is the amazing meltdown of the Wall Street mortgage market and its subsequent impact on the future of housing. If you’ve been following the financial news lately you’ve noticed that the indexes that track the collateralized debt obligations (CDOs) – Wall Street’s favorite securitization method for subprime and other mortgage debt – have taken a severe beating.

The reasons are many and the events of the recent weeks impact everyone tied to the mortgage industry and economy at large. Some of the major recent events that have changed the rules of the game we are playing:

  • Wall Street rating agencies like Moody’s, Standard & Poors and Fitch have changed the way subprime debt is valued; essentially emasculating large portfolios of CDOs made up of subprime mortgages
  • The complete under-performance of these CDOs as mortgage delinquencies continue to rise resulting in a liquidity and credit crunch at the investor securitization and investment bank levels
  • The elimination of mortgage programs as securities become illiquid and unsellable to Wall Street
  • The escalation of foreclosure properties and borrowers attempting short sales that are degrading mortgage pools even further

Let’s take a look at today’s events just as an example. Option One announced that they are no longer offering the 2-year fixed adjustable rate mortgage. Commonly referred to as a 2/28 mortgage this product was wildly popular during the recent credit boom. It offers a low “teaser” rate for the first two years before adjusting to a much higher “fully-indexed” payment. These loans, issued in trillions of dollars during 2000-2006 are resetting in record numbers to ever-higher interest rates. Many point to the 2/28 reset as one of the primary causes of mortgage default, foreclosure and – ultimately for Wall Street – poor security performance.

Why did Option One eliminate the 2/28? Simple. Profitability. Read more

July 16, 2007

The divorced real estate commission file: An organic compendium of arguments, pro and con, on divorcing commissions

by

Suburban Phoenix Real Estate Broker

Author website

I had the idea of building this last night, cataloging the BloodhoundBlog posts on the subject. Lani had a better idea, so I appropriated it. Attached below is a fairly comprehensive list of posts, both for and against, on the idea of divorced commissions.

I think this is the most important idea we’ve addressed, here and on the RE.net at large, so I wanted to build something that could grow with the debate.

Grow how? Two ways.

First, you can add your own or other people’s posts or articles to the catalog by filling out the form at this link. I want for this to be as comprehensive as possible, so do please let me know what I’ve missed.

Second, you can append this list to any future (or past) posts on the subject by using this PHP code:

<?PHP
include ("https://www.bloodhoundrealty.com/BloodhoundBlog/DCFile.php");
?>

In WordPress, you’ll need to use the runPHP plug-in.

How does it work? Watch and see:

< ?PHP include ("https://www.bloodhoundrealty.com/BloodhoundBlog/DCFile.php"); ?>

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July 16, 2007

What would Seth Godin do? Probably not one-size-fits-all . . .

by

Suburban Phoenix Real Estate Broker

Author website

(I’m waiting for a phone call, which is how Realtors address that awful burden of time that befalls them between birth and death.)

Joel Burslem mentioned the What Would Seth Godin Do plug-in today, and Jim Duncan has also written about it recently.

I like the idea, I just don’t like the execution. Too much one-size-fits-all for my tastes, where CSS and a WordPress theme can make everything unique and perfect.

I have code that will make the “intro.php” behavior introduced in WordPress 2.0 cookie-dependent. In other words, if the cookie is not set, visitors will see intro.php (or any other “sticky” pseudo-post you prepare under any arbitrary filename). If it is, they won’t.

I have it set with the cookie expiring in 60 days, so if someone has been away for a while, I can remind him of what’s what. People who forbid cookies will get the introductory post every time, but this is the default behavior for intro.php anyway. And if I change the name of the stored variable, I can cause everyone to see my presumably-substantially-revised introduction the next time they visit the site.

(There is a lot more you could do with something like this: Show it the first three visits, for example, or show a special message to very-frequent visitors.)

I don’t use this in BloodhoundBlog, although I could easily enough; it doesn’t require WP 2+. It’s really nothing but bread and butter PHP, as is WordPress itself.

If you want the code, it’s yours, but you have to hold your own hand. You don’t need to know PHP, but you do need to know how to edit and FTP your WordPress theme files. Email me if you want the files.

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July 16, 2007

The Carnival of Real Estate . . .

by

Suburban Phoenix Real Estate Broker

Author website

…is up at Sadie’s Take on Delaware Ohio.

Host Toby Boyce does a truly amazingly phenomenal job as judge — and I’m not just saying that because our own Jeff Kempe won with The Imperative of Divorced Commissions, Part 2: The Inherent Value of Free.

Toby used the idea of a golf tournament as his theme, with the chart above illustrating the competition.

And the competition was fierce, with many first-quality contenders. Wheel you golf cart over to Toby’s place to see what I mean.

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July 15, 2007

Missed Fortune and the Wall Street Journal: The Value of a 50 Cent Financial Planner Is…About a Half a Buck

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

One of the tenets of financial advisory is the principle of fiduciary responsibility. Today, Wall Street Journal reporter, Jonathan Clements, openly criticizes the strategy Doug Andrew outlines in his best-selling book, Missed Fortune. Mr. Clements’ article, When the “Self” in Self-Interest Isn’t You, attacks the strategy as being completely self-serving for the financial advisers who recommend it.

The author is trapped in the mindset I call “Boomer Economics“: paying down the home and socking away as much as possible in employer-sponsored, qualified retirement plans. The problem with Boomer Economic Thinking is that it is becoming dangerous. The economy dramatically changed on September 12, 2001. We saw a shift of wealth from financial assets to hard assets, hyper-fueled by leverage.

Doug Andrew advises people to redirect monthly contributions for retirement. He advises that they fund a 401-k plan only to reap the benefit of employer matching. He advises that the remaining monthly contribution be earmarked for variable universal life insurance contracts so that the withdrawal from those assets is tax-free. Mr. Clements suggests that this advice comes from “unscrupulous advisers”.

Equity harvesting is another principle promoted in Missed Fortune. It is recommended because home equity fails the litmus test of sound investing. It is illiquid, volatile, and it has absolutely no return. Equity harvesting protects property owners from volatility. Kris Berg describes the challenges experienced Realtors face with panic selling, induced by illiquid property owners and inexperienced sellers’ agents. An equity harvesting strategy, invested in a side bucket to provide liquidity, can mitigate that risk. Mr. Clements directly attacks that principle as being a fee-driven recommendation and misapplies a disclosure offered by the NASD in 2004.

It is a brave new world with extraordinary challenges for the under-60 population. The World War Two generation was able to rely on the paternalistic retirement plans offered by the government and growing corporate America (Social Security and defined benefit pension plans). The Boomer generation presented the government with a distinct threat to those plans. The government answered with a tax-banking Read more

July 15, 2007

Greg Swann Joins Redfin – Kelman Rejoicing!

by

Mega-Producing Realtor

Author website

Greg Swann has joined Glen Kelman in the way they both think and talk about the amount of commission, the splits and how it can be divided and allocated.

There isn’t some “set commission amount” for groups and companies to “divide for the public”. This kind of thinking is one of the primary flaws with the Redfin business model. For example, we charge our sellers less commission if we handle the buyer side and are not paying an outside agent. Almost all listing agreements are signed by sellers who are agreeing to pay the listing agent. To suggest that the purchase price the buyer pays for the house has “the buyer really paying it” would
also be saying that the buyer has a right to tell the seller how they should spend any and all of the money they receive from the sale of the house. Why stop with the sales commission?

The idea and concept of the buyer pays the commission is absurd. It is flawed logic. What if some seller (or buyer?) came into my office and started ordering my staff around, explaining that “they paid them”? I pay my staff with MY money. I may have received that money from a commission paid to me by my seller but it is then MINE. The home seller is in the same position. It is their money that they have agreed to pay to an agent. Under the present system, the buyer has
made no such agreement.

I’ve commented elsewhere on why divorcing the commissions will never happen anyway – but just didn’t want to let this particular bit of poop sit. Damn, I haven’t posted anything in a while and right now have a plane to catch. This got me out of hibernation, so thank you! LOL.

Jeff, I will mentor you for the same fee I charge everyone else. The amount most buyer agents currently charge buyers. This is the same price I always charge. My goal all along has been to make charging Read more

July 15, 2007

Divorcing the real estate commissions is simply a matter of HUD-1 bookkeeping effected by the mortgage lender

by

Suburban Phoenix Real Estate Broker

Author website

In a charmingly romantic post this morning, Jonathan Dalton gets bogged down in the all-too-common idea that divorcing the Realtors’ commissions would impose some new financial burden upon buyers, resulting in their loss of representation.

This is false. Although we operate by the fiction that the seller pays the real estate commissions out of the proceeds of the sale, in fact, if the buyer’s lender is not willing to fund the transaction, no sale will occur and no one will get paid. It’s useful in the abstract to envision the transaction as being either all-cash or 100% financed. In both cases, all the money is brought to the closing table by the buyer or the buyer’s lender.

To effect the divorced commission in the overwhelming majority of transactions, all that is necessary is for lenders to change their underwriting guidelines, making corresponding changes in the way they illustrate the flow of funds on the HUD-1 settlement statement.

Right now, many lenders will allow up to 7% in sales commissions, to be charged against the seller’s side of the HUD-1, with up to 3% in closing costs, also charged against the seller’s side of the HUD-1.

If lenders changed their guidelines, such that no more than 3.5% could be charged against the seller for the compensation of the listing agent, with no more than 3.5% charged against the buyer for the compensation of the buyer’s agent, the commissions would be divorced.

So far, this is nothing more than a change in underwriting guidelines and HUD-1 accounting. Absolutely nothing has changed away from the paper-shuffling lender universe. The costs to the buyer and the proceeds to the seller are exactly the same.

Not to rock too many boats at once, but it would also be possible for lenders to make their internal procedures and the HUD-1 bookkeeping more honest, putting a little extra money in the pockets of both buyer and seller.

In the chart shown below, the first column illustrates the current procedure. The middle column shows how commissions can be divorced while retaining the psychotic style of accounting lenders currently deploy. The third column demonstrates how commissions can Read more

July 14, 2007

The Imperative of Divorced Commissions, Part 2: The Inherent Value of Free

by

Realtor, Associate Broker

Author website

By far the most entertaining marketing presentation I’ve ever suffered was in the mid-eighties. I was representing a small shoe manufacturer in Worcester, MA. It was early in the comfort revolution, and the company owner had come up with a way to put a donut in the insole for the heel to rest. He’d asked a local ad agency — his brother-in-law, actually — to come up with a bottom to top marketing plan: name, packaging, hook, advertising.

Cleverly focusing in on the donut, thinking waaaaaaaaay outside the box, this is what was unveiled:

Manistee presents: ZER0&174;s!!
with
ZER0&174; Styling!
ZER0&174; Affordability!
and
ZER0&174; COMFORT!!

We never made it to the packaging.

=====

Here’s Kendra Hogue, editor for the real estate section of the Sunday Oregonian, a couple months ago:

For those of you who haven’t purchased a home before, “hiring” a Realtor to help locate a house costs you nothing.

Well.

No matter how we try to twist statutes or the code of ethics, no matter how much we argue among ourselves as to who actually pays the buyer’s agent, the fact is the debit remains on the seller’s HUD-1 and the perception is that buyers’ agents come free. And the value of ‘free’?

Zero.

No? How many Buyer Presentations have you been on in the last year? Why is it buyers are much more willing to work with the first person they meet — or with Aunt Rose’s pedicurist’s live in girlfriend’s little brother — than a seller might? Why do they often drift, as if one warm body is the equivalent of another?

No matter how much we plead that buyer’s agents are as important to buyers as listing agents are to sellers — and they are — the market price tells buyers a different story, and the argument falls largely unheard. And note importantly that the price isn’t set by the market — the customer — but artificially by the industry. Price-by-fiat is almost always disastrous [Google ‘Nixon price controls’].

The consequences are both obvious and counter intuitive. The fact that buyers don’t scrutinize their hires is a boon to the inexperienced and inept. That keeps the people Kris just Read more

July 14, 2007

Fear Factor – Who Makes a Real Estate Market?

by

Realtor, Associate Broker

Author website

What factors contribute to price declines in a downward trending market? Interest rates, affordability, demand, and consumer confidence to name a few. Today, I have a new one: Crappy agents.

My beef of the week is the confidence crisis I see among agents, at least in my local market, and there are two camps cast in our realty reality version of Fear Factor.

“We fear things in proportion to our ignorance of them”. Titus Livius

First, there are the newer agents who haven’t experienced anything but a flying-off-the-shelf listing environment. Their training and mentoring has been focused entirely on getting the listing, the listing being the Holy Grail of real estate. Listings are King, they are told, and once that listing is secured, the check is in the bank. And the future checks are just around the corner. Use the listing to populate your marketing copy, snag those sign calls, and spawn new listings. Keep the car warmed up, because off to the bank you will again be – very, very soon.

“The greatest mistake you can make in life is to be continually fearing that you will make one”. Elbert Hubbard

Even veteran agents have seemingly forgotten that markets change, and with that, our approaches to the business need to adapt. Speedy-quick contracts, contracts proferred and negotiated without breaking a sweat, contracts which are all but guaranteed to make their way to the County Recorder’s office in 30 days with narry a hiccup, are a thing of the past. Unlike the new agent, they once lived a time when the hard part wasn’t “winning the listing”, but when the real work ensued once the contract was inked. Many seem to have forgotten.

Listings are becoming a dime a dozen, and it’s what you do with the listing and the trust the client has placed in you that now separates the men from the boys, the “salesmen” from the “professionals”. What does it take for an agent to successfully represent a seller today? Hard work, time (a lot), money (a boatload), and patience.

“Time is money”. Benjamin Franklin

I often tell sellers that I don’t make the market; Read more

July 14, 2007

Not all neighborhoods feeling a downturn

by

Suburban Phoenix Real Estate Broker

Author website

This is me in yesterday’s Arizona Republic (permanent link):

 
Not all neighborhoods feeling a downturn

There are neighborhoods in the Phoenix area where the housing downturn is barely discernible.

How can that be? News reports are full of doom and gloom stories. Defaults, foreclosures and interest rates are up, with mortgages resetting seemingly at whim. If the news is always bad, how can it be good at the same time?

In fact, in some parts of the Valley prices have not fallen, with some neighborhoods actually experiencing continued appreciation. Inventories are up all over, but, so far, we haven’t seen much in the way of desperation selling.

We track a slice of Valley real estate as an indicator of where the market might be headed. We look at newer mid-sized homes in freeway-accessible suburbs. These were the homes that led the market on the way up, and they’ve suffered more than others on the way down.

So how bad is it out there? The homes we track are down 13.41% from the peak in December of 2005. That’s not insignificant. If you bought (or refinanced) a home like this any time after May of 2005, you’ve probably lost money. On the other hand, if you bought your home in January of 2004, you’re still up by around 58%. If you put 20% down, that’s a 290% cash-on-cash return. Better yet, as bad as things have been, there is only about seven months of inventory on the market, suggesting that prices may not fall much farther.

On the other hand, MLS Area 323 in the West Valley runs from Northern to the I-10, from 43rd Avenue west to 115th Avenue, a large and very diverse housing stock. Available inventory is huge, more than a twelve months’ supply. But, interestingly, prices in that region have only dropped by about 2.75% since December of 2005.

Don’t run down the street in celebration. Interest rates are flighty, and sub-prime or even low-down-payment conforming mortgages may be a thing of the past. But, even so, acknowledging that things may get worse before they get better, they haven’t been that bad so far.

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Inventing Real Estate 2.0

Welcome to BloodhoundBlog, the national real estate industry marketing and technology weblog written by, for and about real estate professionals. Better yet, welcome to the wired world of real estate. We are busily inventing Real Estate 2.0 – technology, marketing, service and salesmanship. Like all Bloodhounds, we are smart, frisky and fiercely independent. We've built a spot on the earth – beloved over all – where each one of us can be who we are, no matter who that might be. We are committed to an idea of excellence that will flush the bums, the con-men and the crybabies out of the real estate industry. If you yearn to have your failures excused, your moral lapses absolved or your boo-boos kissed, seek elsewhere. But if you are sick to death of mediocrity – welcome home. Read all about us, subscribe to our feed and steel yourself for the hunt. We work hard, we play hard, we learn everything we can – and we bow to no one.

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