Will Mortgage Credit Crunch and Impending Foreclosures Cause Increase in Homes For Sale by Owner?

Much of the recent news regarding the mortgage meltdown and waves of possible foreclosures due to individuals who can’t refinance and can’t sell due to lack of equity raises the question if more people will sell their homes “For Sale by Owner”.

We happen to think that the number of FSBO listings will increase over the next few years due to a few reasons. We think this increase will be fueled by a “need” not a “desire” to sell FSBO.

Here are some of the scenarios where homeowners will attempt to sell their homes for sale by owner.

- Homeowners with little or no equity will be facing foreclosure. They may need to ell FSBO because they don’t have at least 10% equity in their homes to pay the real estate agent commissions and they don’t want to incur the possible tax liability of a real estate short sale.

- Homeowners with adjusting sub-prime loans that don’t qualify for the new FHASecure refinance. After the first adjustment of their ARM mortgages these individuals realize they cannot afford the home and cannot refinance. They will tend to try and sell FSBO again due to a lack of equity.

- Tightening underwriting standards may cause sellers to sell by owner to protect net proceeds from sell. Appraisals will come in short or get cut by some lenders. Some of these sellers may try to sell FSBO after the initial transaction cancels, eliminating the real estate commission they can drop the price but maintain their net proceeds.

These are just some quick thoughts as to common scenarios that will cause home sellers to consider selling their homes for sale by owner. What do you think?

Record 103 Million Home Sold... FSBO

According to an article in USA Today, a 40 acre Hamptons, NY ocean view property has been sold "For Sale by Owner", saving the owners well over 5 million in real estate commissions*.

The buyer of the property was Mr. Ron Baron of the Baron Funds investments and the seller was Adelaide de Menil, heiress to the Schlumberger oil fortune.

Of course, this is not your typical home buyer & seller but it does show that "for sale by owner" sales happen in every price range, every day.

Last year, the NAR reported in its 2006 Home buyers & Home sellers Survey that 12% of all homes sold last year were "FSBO" while another 8% were sold as FSBO with an MLS-only (often called "flat-fee mls only" posting).

These "for sale by owner" transactions represents over 20% of all 6.478 million** homes or about 1.29 million homes with a median price of $221K*** for a estimated total equity savings of $17,105,540,000,000!

Real estate commissions are based on the sales price of a home but what most home sellers don't look at is the actual cost of the real estate commission based on their homes actual equity.

Since many homeowners have purchased or recently cashed-out refinanced their homes to high loan to values, they will often see that more of their equity is spent on real estate agent commissions then they will earn from actually owning and selling their home!

Here is a real estate commission calculator that can help determine your net cost of selling a home with a real estate agent or if you should be selling FSBO.


View USA Today article

* Assumes a reported average 5.1% real estate commission.
**Exisiting Home Sales Data
*** Median Price data

NAR Report shows that 46% of Successfull FSBO's would Sell Home by Owner Again

Many real estate agents would lead consumers to believe that they should attempt to sell a home FSBO and those that do will use a real estate agent the next time.

According to the 2006 NAR Profile of Home Buyers and Sellers, FSBO's where asked if they would sell by owner the next time. Here are the results if they did not know their buyer personally.

- Yes, will go FSBO again: 46%
- Not sure: 44%
- No, will use an agent next time: 10%

Surprised... 46% of for sale by owners, indicated they would do it again!

The other 44% was "not sure" but obiviously the experiance / savings were good enough for most to consider going FSBO again.

That is 90% of FSBO's will or may do it again.

Sure, only 10% indicated that they would use a real estate agent the next time but this does not support the horror stories that the real estate community shares regarding FSBO wishing they had used an agent.

What was interesting is that if the FSBO seller sold it to someone they knew, the stats reflected a total of 64% will or may sell FSBO again, while 35% would use an agent.

I would guess that if they did use an agent it would be at a discount, considering they did find the ready and willing buyer.

As techngology and websites like For Sale by Owner Center makes the FSBO transaction easier, we feel that the FSBO market will continue to grow in the future and that the FSBO / MLS only / Discount models will continue to build on their current 29% market share and probably reach critical mass of 50% within the next 4 years.

Especially since most successful FSBO home sellers are already willing to do it again and reap the rewards of significant real estate commissions savings and equity protection.

43% of Real Estate Agents Do Less Than 10 Transactions a Year and More Interesting Agent Statistics

Everyone is still talking about Redfin on 60 minutes, with many agents claiming how much more professional and experience a the "traditional agent" is.... really?

The NAR just released the 2007 REALTOR Technology Survey which has some interesting points but the most telling is probably this from page 7.

- 47% of agents did less than 10 transactions "sides" last year.
- 28% did less than 20 transactions last year.

So lets see, 75% of the NAR members who responded to the survey did less than 1.6 transactions a month with a majority of these doing less than one transaction per month.

This clearly represents the majority of real estate agents, the same ones who claim that they are significantly more professional and experienced than the redfin agents. I fairly certain that the redfin agent do more than 1.6 transactions a month. More transactions... equals more experience at handling problems.

Another interesting statistic was from page 20. If you read agent blogs you will hear that all agents say they deliver great service which gets them referral business but yet the report indicates the following:

- 43% of agents reported that less than 25% of their business came from referrals.

Again, if traditional agents do such a great job and deliver the exceptional service that most seem to claim, why are they only getting 25% referral business?

How about this. According to the 2006 the NAR reported that 71% of buyers searched for homes on the internet but look at these statistics from the report:

- 78% agents advertised on REALTOR.com
- 75% advertised on the local MLS - isn't that why you use / pay the agent?
Another common argument from agents is the amount of documents the agents need to review to close a transaction but on page: 40 of the report.

- 75% reported that there is less than 20 documents needed.

Thats not a whole lot of documents or work. In California, the purchase contract alone is 10 pages. Not a whole lot of time needed to sign and review 20 documents.

This is from page 45 of the report.

- Only 43% of agents enter and manage transaction information.
What kind of work are the agents actually doing?

With real statistics like this, consumers will really begin to question the value proposition of their agents and the cost of their services. This is the reason we created our real estate agent hourly rate calculator.

We also feel that due to information like this the adoption rate from the general public to sell FSBO or use a flat-fee MLS, or discount real estate model like redfin, Coldwell Banker blue edge or Century 21 clickit will only continue to raise from the 29% market share currently reported by the 2006 NAR Buyers & Sellers Report.

Download the 2007 NAR REALTORS & Technology Report.

60 Minutes Helps Redfin Surpass Big Three Real Estate Companies Traffic and Raise Eyebrows

According to Alexa, Redfin blew by the top three real estate franchises, Century 21, Coldwell Banker and Remax in terms of traffic to their websites due to the 60 Minutes video.

The real estate community was upset as well as the NAR who as disappointed and blogs blew up with many comments.

The item that I think had the most impact from the video was the Redfin agent Kelly Engel who stated... she made $12,000 in 5 hours.

This was because the buyers found the home themselves online (which happens 26% of the time according to the 2006 NAR Home Buyers & Sellers Report).

We created a calculator to help consumers understand and negotiate a real estate agents real estate commission into an hourly fee.

Here are some of the most active threads both pro & con...

CBS News Blog
Redfin Blog
Raincity Guide
TechCrunch
Matrix
RealtyBaron
Seattle Times
Scobleizer
ActiveRain

Housing Bubble Talk at CNN Money

A few days ago on Cnn Money there was a blog post on Generation Risk t that has exploded into opinions regarding the softening housing market is going to bring down the economy or not.


As of this morning there is 96 posts attached to it with opinions varying greatly. One of the post is mine which I give a theory why the market is still softening, which I have posted in it's entirety below...

When people say "Bubble" they visualize property values dropping overnight
or pop.. hence the reason REALTORS say there is no bubble because
it impossible for property values to drop 20-30% overnight. So housing
bubble is simply a misnomer and hence the talk of a soft landing vs. a crash... even while it's happening. What currently happens is housing data used to determine if things are slowing down is 2-4 months old from closing. When looking at current home price statistics... these are buyers that started the process maybe 8-12 months ago, not today. Therefore it difficult to correctly indicate what is going on because the intent of those recent closings was established so long ago. The real estate market is a really big ship and it takes a long time to turn it around because the data
is so slow to come in.

A good indicator as to what is happening is quite simple to arrive at. Look at the number of people searching REALTOR.com, the number one real estate site
(click here to view the Alexa chart on REALTOR.com)

... less people searching means less demand, less demand means drop in home prices.

As you can see, the search volume of real estate listings is at a 5-year low when last year 79% of home buyers
used the internet to search for homes and 5 years ago the figure was only about 25%.


So apply the basic economic rules of supply and demand and you already know
home prices can only go in one direction, down until buyers and re-enter the market, which would be easily track able by the number of searches on realtor.com, which
is not happening.Now, combine this with lot of the other reason stated above like a credit bubble happening on wall street. Take away the easy financing and thousands of buyers who were buying are no longer doing so. Again, a further drop in
demand.

Add in 2/28 adjustable rate mortgages which will adjust in record numbers
this year and you can see from this 2/28 mortgage calculator many home owners will be in for a bad surprise. Especially, since they will no longer be able to refinance out of the situation. This leads to foreclosures and short-sales.

Then combine that with the pay-option ARMS with ridiculously low start
rates that are now fully indexed at over 7.5% - 8.5% while clients are paying
minimum payments of 2.00%, there is about 5-6% of negative amortization being
added onto their mortgage loan balances. Many of these people don't understand the recast clause of the mortgages, which state that if the original loan balance increases to 110% - %125% of the original balance, their loans will automatically switch to a fully amortized, fully indexed rate based on the remaining amortization term. This pay option arm mortgage calculator explains the picture pretty well. Again, more foreclosures or short-sales.Foreclosures are "must sell" real estate listing
inventory. This means, sellers will continue to drop prices until someone buys.

Mortgage lenders cannot afford to wait-out the market like homeowners can.
Therefore as foreclosures raise in numbers they compete against each-other to
get sold, which leads to significant discounting by the mortgage lenders to off
load the inventory. These same distressed properties then become a comparable and traditional home sellers are forced to compete against them if they really need
to sell. The remaining buyers flock towards foreclosures and short sales looking
for good deals. That leaves no option for traditional home sellers but to drop
prices.

Then factor in the one thing that many don't seem to acknowledge is the age of the average home owner. Baby boomers have the highest ownership. These same 100 million baby boomers (a full 33% of the US population) will be of retirement age by 2009 or so according to Harry S. Dent.

They have been taught their whole life that your homes equity is your retirement
nest egg. Recently they have viewed their homes as great investments due to value
increases. As they approach retirement, thousands will watch their only real
nest egg disappear as home prices drop. Many will panic and sell to save the
equity they have left at the moment.

There is an argument that states if properties drop, people will wait it
out. From my conversations with boomers, they don't feel that they have 8-10 years to wait for values to come back especially if they are on a fixed income, they are not interested in scrapping by as they are going from their peak spending years immediately into the lowest spending "golden" years, in that transfer from older workers to retiree's.

The economy will slow since real estate has created hundreds of thousands
of high paying real estate jobs like lenders, underwriters, real estate agents,
escrow, title, appraisers and all of the related services like contractors,
decorators, home depot, movers, furniture stores, etc all feel the pinch and
downsize and stop spending. Additionally the home atm machines are gone so no more extra billions a year pumped into the economy of leveraged refinance money.

Remember that 2/3 of the US economy revolves around consumer spending... no
spending... no US economy.

Keep in mind, if we only have about a 4% unemployment rate and people are
already losing their homes what happens when it goes to 6%? Factor in all
the other items noted above and many people will have a few options like trying
to sell their homes FSBO in order to try and save the 6% real estate
commissions allowing them to discount their asking prices while not tapping into
the remaining equity and many of those who have no equity will simply walk-away
from the property they are upside down on.

There is lots of other excellent points made in the Cnn Money Generation Risk blog post, so go take a look or post you ideas regarding my comments here.

REALTORS Actually Losing Ground to FSBO and Alternative Real Estate Models

The NAR is often quoted as stating the FSBO's are going down and losing market share but the reality, is that they (we) are really gaining a huge market share.

Don't believe me?

I know many (REALTORS) will quote the 2006 National Association of REALTORS (NAR) Home Buyer and Seller Survey there is a downtrend in For Sale by Owner transactions but you must actually read the report to quote it properly.

Here are the favorite facts of the NAR report:

"We find that the level of for-sale-by-owners is on a sustained decline and is now at a record low..."

- 12% of real estate transactions were FSBO in 2006 (down 1% from previous year)

- 13% in 2005.

- The record high was 20% in 1987

- the cyclical peak of 18% in 1997.

What interesting about the NAR and the report is that unless your purchase it for $125 to read the entire report this important facts are left out. Unfortunately I cannot post the entire report I purchased for you to read as the NAR would come after me but here are these important additional facts:

- 12% sellers successfully completed FSBO transactions - (proudly made public)

- 8% sellers successfully used minimal "MLS only" listing (this is really just a FSBO who paid $300 to get it on the MLS) - not shown in press release.

- 9% of sellers used a "limited service agent" i.e. alternative, discount, ala carte... call it what you want, it's not a traditional agent and not a traditional commission. - not shown in press release.

So when you do the math, that is 29% of the estimated 6,180,000 real estate transactions where NOT completed by a full service 6% agent.

Lets see...

- 29% of 6,180,000 is 1,792,200 transactions.

Now to me that seems like a SIGNIFICANT increase alternative / fsbo real estate transactions from the often quoted 20% high of 1987 when only a total of 3,526,000 transactions were done.

- 20% "all time high" of 3,526,000 is 705,200 "FSBO / alternative" transactions.

Maybe it's just me but 1 million MORE transactions seem like an increase?

Will REALTORS be Extinct in Near Future?

There is a blog post at inman news that is getting lots of comments... mostly pro-REALTOR... never extinct kind of stuff. Very interesting reading for those who take the time to view all comments.

Overall, it seems that must think the REALTORS job will simply change since they don't control the information anymore and they will act more as interpreters of the information consumers find.

We believe that there will be a much larger push towards FSBO not necessarily out of desire but more do due to "need" with homeowners not having enough equity in their homes to sell using an agent.

What are your thoughts... are agents here to stay or go the way of a dinosaur?

Zillow Accepting Real Estate Listings, Friend or Foe?

Finally...…Zillow doing what I believed they were going to do all along (see my winning comment on the Inman News Blog What is Zillow competition from 10 months ago).

So what will the impact be? Is this the beginning of the end for the traditional real estate model? Do we have a new MLS on the horizon?

First, I think real estate agents will flock to the opportunity of posting their real estate listings on the site but only once they see how Zillow presents them... this is key. Zillow was down at time of this writing, so I can't give you my opinion.

If the real estate agent feels they get clear advertising "credit" (i.e. name and contact info displayed or linked back to original listing) they will put up their listings by the thousands. Sellsius may be disappointed but generally agents will be very excited at this opportunity, especially if the Zestimate is higher than the actual asking price.

Real estate agents who receive inquiries from this advertising will spread the word about its success and continue to post listing...…further increasing actual real-time real estate inventory listing.

Since agents are independent contractors and impossible to herd together (except on commissions possibly?) their independence will lead to the death of traditional real estate model because real estate listings are the best "bait" possible to attract buyers.

The Zillow Impact.

As Zillow gets this listing data, they will constantly work to purify it as indicated by early reports where each listing must be updated weekly. Imagine the data they will be collecting that can be used to further fine-tune Zestimates, improving accuracy. Eventually people will be able to truly trust Zillow property value estimates.

With a clear picture of comparable sales, market conditions, average marketing times, etc.…buyers will feel more confident in making offers on a property. They will be less dependant on REALTORS for this advice. Less dependence on advice creates less perceived value, less value equals less cost.

This will be the true beginning of the end of traditional real estate model especially Buyers Agents. Why buyers agents? Simple, consumers will begin to understand that the cost of using a real estate agent is very real and built into the sales price. Redfin, Zip, Buyside Realty will make sure of this and capitalize on Zillow and the continue negative press from the DOJ against the NAR.

What Happens Now?

In 6 to 12 months, Zillow could become the MLS alternative and Realtor.com killer...… sorry Dustin. Bloodhound also seems to agree but goes further to include trulia, propsmart and others. Zillow can be a real estate brokers best friend or worst foe. Why? Real estate listings. Inventory is the best eyeball "bait" possible.

Once Zillow has the majority of the real estate eyeballs, which is what they claim to desire as "media / advertising" company…they also get control. Control to change how real estate is done in the future.

Time will tell but lets go back to my original Zillow guessing game and the one played on Inman as noted above What Will Zillow Do…Next?

What is your guess... what will Zillow Do? Who will they impact the most? Share your thoughts.

2006 National Association of REALTORS Home Buyer and Seller Survey For Sale by Owner Data Misleading?

According to the new 2006 National Association of REALTORS (NAR) Home Buyer and Seller Survey there is a downtrend in For Sale by Owner transactions…. but is this an accurate statement?

It’s important to note that the NAR represents their paying REALTOR members not the general public. Much like a labor union fights for increases in the income and benefits the employee’s which costs their employers millions, the NAR looks to create a benefit for it’s REALTORS not the public.

The NAR’s primary goal is to try and protect the billions of dollars in real estate commissions it’s fee-paying members earn under current real estate practices.

First let’s look at some of the facts presented by the report that will be preached by hundreds of thousands of REALTORS all around the country to scare those thinking of selling for sale by owner.

For Sale by Owner Transactions Facts

- 12% of real estate transactions were FSBO in 2006
- 13% in 2005.
- The record high was 20% in 1987
- the cyclical peak of 18% in 1997.

The NAR survey stated the following: “A downtrend in the number of for-sale-by-owner transactions is clear”… but is it really? Lets look at these statements from another point of view.

Instead of looking at the percentage of FSBO transactions let’s look at the actual number of for sale by owner transactions:

1987 Total Existing Home Sales = 3,526,000 x 20% = 705,200
1997 Total Existing Home Sales = 4,382,000 x 18% = 788,760
2005 Total Existing Home Sales = 7,075,000 x 13% = 919,750
2006 Total Existing Home Sales = 6,180,000 x 12% = 741,600*

Interesting that the actual number of successful FSBO transactions has actually increased not decreased. What is not indicated within these statistics is how many people actually try to sell their home FSBO?

Traditional Real Estate Model Acutally Losing Ground... only 71% Market Share.

I suggest that the number of successful FSBO is actually up both as a percentage and in total transactions. Why? If you read the report it indicates that 8% used minimal “MLS only” listings. This “MLS” only option did not really exist just five years ago. This is actually a FSBO who is aggressively marketing his property and paying a small fee to an agent to list the property on the MLS but the NAR appears to be counting this as a REALTOR transaction… I don’t think so.

My guess as to the “real” number of FSBO’s for 2006 is 20%, which is the 12%, stated by NAR plus the 8% “MLS only” power FSBO. This would mean that the actual number of FSBO transactions is closer to: 1,236,000 or 20%.

Could it be higher?

Additionally, another 9% used a limited service agent, possibly an “ala carte” type service where they paid 2 or 3% commission or just a flat fee for a particular service like negotiation or anything that is beyond the flat fee mls entry only. There is a very good chance that the people that used these types of companies where originally FSBO.

If you consider the traditional FSBO and these alternative / power FSBO’s then means that FSBO type transactions actually amounted to 29% of total homes sold for 2006… which is: 1,792,220 and was probably higher in 2005.

Proof is in the report.

- 12% FSBO only
- 8% MLS only
- 9% Alternative / Discount

Total = 29% Market Share is alternative / discount / mls only and FSBO

Why is the NAR trying to scare For Sale by Owners?

Real estate commissions. Remember the NAR is the REALTORS union and they represent the real estate community NOT the consumer. They are fighting for the agents to make more money… just like the local labor unions try to get employers to pay employees more.

If we use current median home sale data from the NAR currently at $225,600 this means that the real estate agent community may have lost some significant money to the for sale by owner movement.

12% pure FSBO 741,600 x 225,600 median x 6% = $10,038,297,600
20% power FSBO 1,236,000 x 225,600 median x 6% = $16,718,136,000

… yes that’s billions.

No wonder the NAR spent 25 million in anti-FSBO commercials this year.

Keep in mind; this is not to beat up all REALTORS. Many REALTORS are true professionals at what they do and many home sellers who are not very prepared should use the services of a REALTOR vs. selling by owner. What I don’t like is the spin that is presented by the NAR to consumers to encourage the use of agents as the only viable option.

So the question is this. If we look at the NAR data regarding the number of for sale by owner transactions will they stay the same in the coming years?

Will they continue to go down as the general market slows down and it becomes harder to sell a home?

Will they rise in numbers because home sellers may have no other choice but to sell FSBO because they don’t have enough equity?

Interesting Paper on Current Real Estate Commission Models

Here is an excellent paper on real estate commission model. It's well worth downloading and reading. It's main point is that the inefficiency in real estate costs consumers 30 billion dollars a year.

Already it is raising issues within the real estate agent community such as Inman Blog, where this great post is located...

This is scary...

" Realtors probably practice more law than he has ever dreamed of."

and this goes directly against all NAR ethics...

Article 13
REALTORS® shall not engage in activities that constitute the unauthorized practice of law and shall recommend that legal counsel be obtained when the interest of any party to the transaction requires it.

Anyway the paper is a great wealth of information and contains lot's of references to studies and other papers written about the subject. If you are an agent or an alternative real estate model it's worth a read of the 77 pages.

Do NAR Statistics of “For Sale by Owner” Sales Mislead People?

You’ve heard it quoted hundreds of times…

"The median home price for sellers who use an agent is 16.0 percent higher than a home sold directly by an owner; $230,000 vs. $198,200;”

This figure comes from the NAR 2005 Buyer and Seller Profile. This figure is quoted religiously by the real estate and the media.

In fact the National Association of REALTORS even has a TV commercial about it.

"Don't Try This At Home", targets unrepresented sellers (the FSBO market). The commercial features a hard-hitting message: REALTORS® have the experience to price your home effectively, so it can sell for up to 16% more than selling it yourself.

This is a pretty bold claim. 16% is a big number so let’s analyze this a little more using different figures. Here is what a home buyer would be led to believe hearing this statistic.

FSBO $300,000 / REALTOR $348,000 – 16% would be $48,000 more
FSBO $400,000 / REALTOR $464,000 – 16% would be $64,000 more
FSBO $500,000 / REALTOR $575,000 – 16% would be $75,000 more

These numbers would make everyone consider selling with an agent… but how true are they?

Now I’m sure that this claim has caused thousands of FSBO’s to go out and hire a real estate agent to sell their home costing them millions in real estate commissions.

What is interesting to me is that the data set used to make this claim is not available anywhere. I have looked for it and cannot find it. If you have it great, let’s make it public so we can see how the NAR arrived at this statisic.

Everyone seems to believe this number and no one seems to want to question it? At the same time no one appears to understand what it really means. Could it be a fairly creative use of a statistic created to try to protect millions in real estate commissions?

Here is why. The report states that the “median” price is 16% higher not the “average” (or mean) price. Most people don’t understand the difference between a “median” and “mean”. Here it is:

Median - the middle number in a sorted list.

Mean - The value obtained by dividing the sum of a set of quantities by the number of quantities in the set. Also called average.

The difference between median and mean can be significant.

Here is two random data sets of 5 numbers to demonstrate the difference of median and mean why it’s important for the NAR to release the data set used to calculate this statistic. These are grouped by FSBO and REALTOR.

FSBO - 129,000, 156,000, 198,200, 297,000, 345,000
REALTOR – 121,000, 154,000, 230,000, 290,000, 330,000

So let’s view the “median” value of each of these data sets. Remember “median” is the middle number in a sorted list. Therefore the “median” numbers would be the third numbers in the above data sets.

FSBO median = $198,2000
REALTOR median = $230,000

(It’s no coincidence that there is a 16% difference between the two and these are the same numbers quoted by the NAR for display purposes)

So all the other numbers in the data set don’t matter, just whatever the “middle” number of the data list is. Does this seem to give an accurate estimate?

Now lets take the time to discover the “average / mean” of this same data list above.

Again, the average is dividing the sum of a set of quantities by the number of quantities in the set.

FSBO Total = $1,125,200 divided by 5 = $225,040 Average

Realtor Total = $1,125,000 total divided by 5 = $225,000 Average

Interesting that the FSBO average sales prices was actually $40 more and overall the customer would possibly save the 6% real estate commission or $13,500.

So in this example data set… the “median” for REALTOR properties was in fact 16% higher but yet the actual “Average” price was nearly identical.

So let’s play with this median / mean a little more.

FSBO data set: 100,000, 320,000, 350,000, 600,000, 800,000
REALTOR data set: 150,000, 300,000, 331,000, 600,000, 750,000

FSBO Median: $350,000 / REALTOR Median: $331,000 = FSBO Median is 6% higher
FSBO Average: $434,000 / REALTOR Average: $426,000 = FSBO Average is 2% higher

So as you can see, it’s fairly easy to skew the numbers. This statistic is so loosely quoted that the interpretation of the “median” is gone. Again look at the actual quote from the TV commercial…

“REALTORS® have the experience to price your home effectively, so it can sell for up to 16% more than selling it yourself.”

Does that statement paint a clear picture to the customer? Especially since the “median” statistic is provided by the NAR for NAR members.

The fact is most people (including agents) probably don’t understand the difference between “median” and “mean”. The median can be skewed easily because it entire number is basedd on a ONE number in a list. It’s not too difficult to pick a number that would make it favor the other direction.

Could this become a problem for the NAR?

Possibly, look at Federal Trade Commission Act, Section 5 that pertains to interest of all consumers to prevent deceptive and unfair acts or practices. The Commission has determined that a representation, omission or practice is deceptive if it is likely to:

- mislead consumers and
- affect consumers' behavior or decisions about the product or service.

In addition, an act or practice is unfair if the injury it causes, or is likely to cause, is:

- Substantial
- not outweighed by other benefits and
- not reasonably avoidable

Now you be the judge if this fits under the bill…

A) Does the 16% mislead consumers?
B) Does it affect the consumers decision to sell using an agent?
C) Is the cost substantial?

Let’s see how common this statistic really is. If you actually know of a property that sold FSBO for 16% less then other REALTOR listed properties, please send the address and date sold?

Home Sellers... Pricing Your Home Correctly and Selling Time-frames

Here is a good article on pricing your home correctly from the WSJ. The article basically states that pricing your home accurately is the single most important thing to getting it sold. They indicate to use round number prices as this makes the property appear on more search, i.e. a $275,000 price will appear on searches from $250,0000-$275,000 and $275,000-$300,000, which we found is true from our data.

Also, in another article from Inman news that indicates home buyers are in the drivers seat and that homes are taking longer to sell. Here are some highlights, according the survey provided by HouseHunt:

Time on the market: Only 26 percent reported homes were selling in less than 60 days as opposed to 74 percent reporting more than 60 days. The Midwest reported an 82-18 percent ratio.

Sales versus listing price: Fifty-one percent reported that sellers were getting 95 percent or more. The Northeast reported a 72-28 percent ratio of sellers getting 95 percent or more.

So to summarize, those of you selling your home for sale by owner need to pay special attention to your asking price and be patient and realistic as to the time-frame it will take to get it sold. Gone are the days of multiple offers and homes selling in 24 hrs.

Additionally, as "for sale by owner" you can price your property to create a win/win for you and the buyer.

Selling a Home For Sale by Owner in The News...

Here is a Washington Post article on selling your home for sale by owner. There is some good information which is all fairly basic. Probably the biggest take-away from the article is the time you will need to invest into selling your home for sale by owner.

We have created a FSBO savings calculator to help you understand the time (both weekday and weekend) and money involved and you can quantify your hourly rate of selling FSBO.

Real Estate Commission Secret... Out, Again

Those of you who read our blog know that we have covered the topic regarding the buyers agent real estate commission a few times and how many people don't realize there is a cost of using an buyers agent even if they tell you it's free. Since this is a FSBO / pro-consumer blog not many real estate agents wanted to give their point of view but that may have finally changed.

An Arizona real estate agent and great blogger name Greg Swann posted an article regarding the little lie that most real estate agents tell their buyers on his blog and it was also published in the local news paper, Arizona Republic. Of course the reaction was immediate as he describes here but not really surprising.

Additionally, Ardell a Seattle real estate agent and avid blogger also posted a counter-point to the post regarding buyers real estate commissions.

You will see that Greg tells consumers to ask this simple question: Mr. Realtor, what do you charge? and Ardell questions this by stating what if they provide an answer "nothing". The immediate comebacks are "scripted" responses to help protect the real estate commission. This is very popular in the real estate business... have a "script" to help with negotiations.

Knowning that many agents have these "scripts" we thought it would be nice to provide consumers with a script of their own to help negotiate real estate commissions. A while back ago, we created this downloadable real estate agent interview form and a real estate agent hourly rate calculator. As a consumer, if you use both you will be provided a customized "script" to help you negotiate the real estate commission down... saving yourself thousands of dollars.

It will be interesting to watch both of these and see what kind of comments come out of it. Especially considering that companies like, Zip Realty, Redfin and Buy Side Realty are offering buyers commission rebates and they have lot's of money to advertise this option. It also helps that it's now a buyers market.

If you are a consumer who was thinking of buying a home, were you aware that it was costing you thousands to use your real estate agent?

New Home Sales Up... Due to a 10% Secret?

Cnn reports that new home sales are actually up for the first time in 5 months while actual median price is down 1.3% over last year. I suspect part of that reason may be due to the builder aggressively courting real estate agents again... and I mean aggressively.

There are some projects where builders are offering up to 10% real estate commission to agents for their home buyers. I don't have to tell you that agents will "highly suggest" these properties to their buyers do I?

Let's see... sell three houses at 3% commission or sell one at 10%?

Do you think it's fair for a home buyer to pay a 10% premium on a new home to subsidize the cost using of their real estate agent?

Why are builders offering so much? Simple, to keep home prices up for as long as possible. It's easier for builders to offer 10% commission to agents and a $20,000 credit towards flooring than allowing prices to come back down.

Also, in many projects the builders are competing directly against investors who purchased a previous phase and now want out. These investors may have the properties listed with an agent and offering 3% commission, so to insure that the builder gets the buyers they are keeping the price the same and just pumping up the commission.

This is also the same reason why many real estate agents are saying real estate commissions are actually increasing.

If home buyers were aware of this, would they still purchase? Do you think there should be proper disclosure as to buyers agent commission back to the buyer?

For prospective home buyers reading this... I will be posting a "how to" guide on how you can save yourself thousands of dollars when purchasing a new home, so stay tuned.

Existing Home Sales Down 1.7% Nationally

Not surprising the NAR release it's existing home sales data which reported a 1.7% decrease in the median home price.

This is the first drop since 1995 and is the largest drop since 1993. This is pretty significant news especially for those currently in the market, buying or selling.

I have a feeling that in two months you will see an even more dramatic slowing as this will psychologically take it's toll on buyers. They will begin to submit lower offers based on this information and the media will jump all over it further decreasing buyer moral.

Combine this will 9 trillion in adjustable rate mortgages that will adjust in 06-07 and you can see additional downward price pressure as foreclosures may become a bigger issue. This may bode well for "for sale by owner" home sellers as they can price more aggressively offering a win/win with buyers.

There was a blog post on Trulia about what real estate professionals thought was going to happen. Looks like Jonathan Miller ( a real estate appraiser and great blogger) was the only one even close regarding the existing median price.

Will this downward trend continue?

More Homes For Sale by Owner Listed in Michigan than California Due to Emotional or Financial Reasons?

Homethinking, a great realtor rating site, posted an interesting article on why some states have higher concentration of FSBO's than others. According to the informal study, there were 3,031 people per FSBO in Michigan while California was 32,177.

The article continues on to ask why some states have such a high concentration while others are significantly lower?

Our thoughts are that it has to do with the fact that clients perception of amount of equity sacrificed for the convenience and comfort of using a REALTOR is much greater if you have had little price appreciation and little equity vs. alot of appreciation and equity. Also it may be due to need vs. desire and if the market softens up dramatically, there may be a much large percentage in "need" of selling FSBO.

We used our cost of home sale comparison calculator and ran a few scenario's to support this theory.

We will start off with someone who purchased the median priced home in Los Angeles and Detroit for 2004 and resold it currently. Assuming all things equal that both buyers put 10% down payment at 5.5%, fully amortized for 30 years. We will take 24-month amortization to show new loan balances. Will also assume that both properties where sold with a 6% total real estate commission and 1.5% for all other fee's including title, escrow, termite, etc. Here are the results of the test sample.

Detroit Median Price in 2004: $161,000
10% Down, Final Loan Amount: $144,900

Current Median Price, Q2: $155,700
24-month amortization, loan balance: $140,885

Total Gross Equity: $14,815

Minus 6% Real Estate Commissions: $9,342
Other Costs of Sale estimated at: $2,336

Selling with an Agent: 78.82% of the owners gross equity is spent in total cost of sale and owner nets: $3,137

Selling FSBO: 15.76% of the owners gross equity is spent and owner nets: $12,479

Now compare this to California, same assumptions:

Los Angeles Median Price in 2004: $446,400
10% Down, Final Loan Amount: $401,760

Current Median Price, Q2: $576,300
24-month amortization, loan balance: $390,630

Total Gross Equity: $174,540

Minus 6% Real Estate Commissions: $34,578
Other Costs of Sale estimated at: $8,645

Selling with an Agent: 24.76% of the owners gross equity is spent in total cost of sale and owner nets: $131,317.

Selling FSBO: 4.953% of the owners gross equity is spent and owner nets: $165,895

Again, we just selected random numbers to create a side by side comparison but it makes that financial and psychological /emotional aspects of the transaction come to light.

In Detroit, the seller probably “feels” that the real estate agents are making too much money because they are making more than the owner “netted” for his two year sacrifice of owning the home, making the payments and repairs. While the agent came in, worked for 60 days and “made” more money than they did.

While in Los Angeles, California, the seller probably “feels” great because he looks at the $131,317 net which is a significant amount. The fact agent made $34,578 does not seem that much compared to his substantial gains.

Does difference of $3,137 vs. $12,479 seems much more than difference between $131,317 vs. $165,895? Maybe it's the same emotion of .99 cents vs. $1.00 that advertisers use everywhere?

If you were selling your home, how would you “feel” if the agents make more money selling your home in 60-90 than you are netting from the sale of your home with 2-3 year sacrifice as indicated above?

Am I way off base on this?


Source of Median Prices, NAR Existing Home Sales Q2, Homethinking.com and Costs of Real Estate Sale Comparison Calculator

Even Bavarian-Style Castle Owner's Want to Sell For Sale by Owner

Just couldn't resist posting this castle for sale by owner... don't see to many of these and did not have a field for property type: Castle.

Will Spike in Foreclosures Lead to More People Selling Homes For Sale by Owner?

Cnn, reported that foreclosures are spiking dramatically with increases nationally of 53% and hot spots like California increasing 160% over last year. The article quotes a RealtyTrac executive saying that a large portion of these maybe due to adjustable rate mortgages reaching their first adjustments.

With the build up in inventory and dramatic flattening of home prices, remember the NAR's July Existing Home Sales report which indicated that nationally property values only increased 0.9% from July 2005 to July 2006, will more people attempt to sell their homes for sale by owner?

A home seller who is in trouble can create a win/win situation by decreasing their price by 4% in a flooded market, making their property more attractive due to the lower price.

California example: Traditional real estate listings in area are $500,000, a FSBO with powerful marketing can price property at $480,000, possibly causing a faster sale and reducing carrying costs.

Would home buyers rather pay less in a slow market or will the convenience and mental comfort of using a real estate agent prevail?

Huge Increase in People Selling FSBO in Cincinnati

Slowing real estate market causing more people to sell FSBO. According to this report from WKRC.com there has been a 90% growth in FSBO's.

Watch the video

People are trying to retain some equity and save the real estate commission, not really surprising. We feel that there will be an even bigger increase in the amount of homeowners selling FSBO.

What do you feel is the biggest draw-back to selling FSBO?

More Talk of Web Based Real Estate Companies

Today, Red Herring is putting up an article regarding alternate real estate models. Funny as the opening starts with "death treats have already started".

Which of the models have the best chance of success in a market like this?

What are Home Buyers Really Thinking about Real Estate Agents?

Raincity Guides is one of our favorite blogs has a great post and alot of comments regarding a "Home Buyers Perspective". There is some good information in the post but as a very pro-consumer service, we are intrigued about where and what home buyers think of agents and the service they provide.

What is it that makes buying a home so confusing that buyers feel they must us an agent? Could it be just emotionally difficult and the agent is really just a sounding board to insure the decision you are making is a good one? Do home buyers use agents just for encouragement or is there real value being provided. Home buyer let us know what you think and what would make things "perfect" from a buyers perspective.

California Real Estate Buyers Committed to Bigger Mortgage Payments... Scary

Not really surprising information from Dataquick today which reported that Southern California home sales hit a 9 year low. What was scary was Inman News article on the story which indicated the following...

The typical monthly mortgage payment that Southern California buyers committed themselves to paying was $2,437 last month, the same as the previous month, but up from $2,052 a year ago. Adjusted for inflation, current payments are about 6.2 percent above typical payments in the spring of 1989, the peak of the prior real estate cycle, DataQuick reported.

Some of you may remember what happened in Southern California in 1989-1990 with property values. Also, what is unknown is how many "interest only" loans where factored into this average to determine this monthly payment data. Interest-only mortgages where was practically non-existent in 1989.

What do you think... will common 2/28 interest-only adjustable rate mortgages cause bigger problems to real estate values than in 1989?

Zillow Home Values via Text Message

At the Inman Real Estate Connect Conference, Zillow annouced a new toy... Zillow Values via Text message. Here are instructions from their blog on how it works:

From your mobile device, send a text message to z@labs.zillow.com.
In the message field or subject line, enter an address for which you want a Zestimate, then send the message.
Examples:
2911 W Boston St Seattle WA
2911 W Boston St 98199
Tip: The format is not case sensitive and you do not need to use punctuation.

A text message from Zillow will be returned to your mobile device within a few seconds or slightly longer, depending on the network or your mobile phone provider.
The return message will contain the home's address, the Zestimate, number of bedrooms, number of bathrooms, square footage and year built.

Is this overkill or a really useful tool for home shoppers? Who will use it most... real estate agents or borrowers? Or are mobile phone users setting themselves up for text spam?

Fed pauses interest rate hike... will real estate pick up?

After 17 straight rate hikes and two years... the Fed has finally paused on increasing interest rates. Every one with home equity lines of credit and 2/28 adjustable rate mortgages can finally breath a sigh of relief.

The relationship between real estate prices and interest rates.

Here is an interesting quote from the Fed speech...

"Economic growth has moderated from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices,"

It's interesting to note that a main reason indicated is the "gradual cooling of the housing market" which tells you just how much our economy depends on the real estate machine.

Now that people are no longer pumping billions into the economy from their "home atm's" the impact is really felt. Just how much, time will tell.

Will real estate pick up?

So now the burning question. Since we have a pause in interest rates which should lead to some stability in mortgage rates... will that raise the general publics' outlook on real estate prices again?

Damage already done?

Consider that the majority of commercial real estate is financed by mortgages priced on the prime rate. So businesses have already felt a giant crunch in the bottom line with increased "site" costs and lease fee's. What do they do... stop hiring and raise prices... (as evidenced by missed job growth and inflation).

What do you think?

As a real estate professional or home buyer do you think it's too late and the real estate market will continue to cool or will it light up again?

Who REALLY pays for the REALTOR Commission… Are Real Estate Commissions Really 10% - 12% ?

The home seller? The home buyer? The wholesale lenders? If you ask the home seller he / she will say them because it’s paid out directly from their net proceeds on the HUD 1 statement as a deduction. This is why many are looking at alternative routes, like for sale by owner or ala carte / discount services.

Others argue that the home buyer is paying the real estate commissions (but they don’t know it)… by financing it into the sales price of the home which is often artificially raised by most home sellers to cover the cost of using an agent?

Are today’s real estate commission really 10-12%?

If the seller pays it and the buyer finances it… can they be 10 – 12%. Value is based on comparable sales and most comparable sales are based on homes sold with a REALTOR, are most property values based on comparable sales artificially pumped up to cover these costs?

Real changes in real estate coming?

Mortgage lenders regularly cut sales prices on transactions… but what if they cut them 5% - 7% (the typical real estate commission) as a way to hedge a slowing real estate market and troubled loans? As property value is not an exact science and any appraiser can selectively make the value come in 3% to 5% higher using creative adjustments. Mortgage lenders are the ones that can truly change the industry overnight.

What if the “buyers agent” real estate commission was indicated as a "closing cost" on the buyers closing HUD 1 statement as I suggested on a previous blog post? After all, real estate agents argue that it's important to pay for the best representation which justifies their costs, but in the current real estate system buyers don't view the buyers agent as a "cost"... why not? If they did, would buyers still use an agent?

REALTORS, Mortgage Lenders, Buyers and Sellers… what do you think?

Is anyone really surprised pending home sales index Up... Down?

The NAR released it's Pending Home Sales index and surprise... it's Up Down? Down from last year... really? But on the positive note, up from last month. Let's see what August will bring... since that was the probably the true top. How was my Pending Home Sales prediction from 6 months ago? Is this just good spin on bad news?

Real Estate Commission Limbo...

Here is interesting post at the Inman blog which I commented on. Agents still fighting over commission rates. Here is my post:

The problem is that most agents cannot seem to break-down what they do. Most just say it's going to be X% to list. Instead agents should try to truly explain what your services are and really provide a break-down and explain the most important facet, the emotional support you provide. Obviously I'm not an agent but here is a tool we use to show the hourly savings between FSBO vs. REALTOR transactions and I think that the more an agent can do to provide tools like this the better chance of holding onto your current pricing structure. Also, keep in mind that the traditional real estate industry has yet to feel the real effect of new alternative realty agencies. Buyside, Zip, Redfin, Expert, etc. which will capitalized on the marketing aspect that buyers can save a significant amount of money using their models in this new buyers market. Traditional agencies have only felt the attack from one side so far and look at the impact, the selling commission from the discount and flat fee brokers, which have only about a 3-5% market share. Now the buying commission is also coming under attack and let’s assume they too can pick up the same market share.

Where most of the companies will make true head-way in this battle is that they will capitalize on the inefficiencies of individual agents. Real estate is an individual business with each agent trying to out market each other spending lots of money in advertising, instead of focusing on the customer and pooling their resources into massive marketing power. When companies like expert and buyside have a 24/7 customer service centers, there is no way individual agent can compete with the service level provided and the marketing power they can provide just based on the discounts they receive on bulk buying. Just think about what NRT / Cendant / HomeServices do, buy a dominate local company which spent millions a year in advertising / branding budget. They reallocate this money back into the main franchise brand saving millions and increasing the bottom line without really changing a thing,. Individual agents can learn a lot by studying M&A.

The commission limbo is just starting and the bar is decreasing pretty quick, those that want to stay in the limbo better stretch your back and... Mind.


Am I way off base or what?

50 year mortgages – How much more mortgage loan can you afford using a 50 year mortgage?

Are 50-year mortgages a solution to affordability? The popular interest only mortgages and pay option arms loans are slowing losing momentum with home buyers as mortgage rates increase, so mortgage lenders are exploring other types of mortgages to fill in the affordability void.

50 year mortgages are making their debut but do they really help. A while back ago, we created numerous mortgage calculators and tools to help homebuyers determine the best mortgage loan options without having to contact a mortgage lender.

One of our mortgage calculators compares four mortgage loans side by side and here are the results of a sample $400,000 mortgage. We are assuming the same mortgage rate for all loans for an accurate, apple to apples comparison but be sure to check for mortgage rate differences as typically the 40 and 50 yr mortgages may come at a premium vs. a standard 30-year fixed. Note that this does not include property taxes, insurance or property taxes.

$400,000 at 6.5%

30 Years = $2,528
40 Years = $2,342
50 Years = $2,255

(Estimate your mortgage with the same mortgage calculator used for this example)

As you can see it makes for a fair amount of savings, in this case, $273 a month. This monthly savings can be used towards paying off other high rate liabilities or into a nice high yield savings or CD at 4-5%. (Remember - mortgage interest does not compound... so investing a 4-5% will grow faster than paying down the mortgage)

Obliviously the real purpose of this type of mortgage is how much more of a mortgage will you be able to qualify for using a 50 year loan vs. more traditional mortgages. For that answer we have created a mortgage pre-qualification calculator that allows you to qualify for 4 mortgages simultaneously.

Here is a sample mortgage pre-qualification scenario to determine the difference in mortgage qualifying using the same three mortgages indicated above. We will assuming a combined family income of $8,000 a month gross (before taxes as is normal when qualifying for a mortgage) with a $400 car payment and $100 in minimum credit card debt. This also assumes a good credit score of 680 or higher, which would be fairly typical to obtain these types of mortgages and using standard income to debt ratios:

Here are the results assuming the same 6.5% mortgage rate:

30 year maximum mortgage amount = $321,643
40 year maximum mortgage amount = $347,250
50 year maximum mortgage amount = $360,642

(Qualify yourself for a maximum mortgage using this mortgage calculator )

As you can see, using a 50 year mortgage will increase your mortgage qualifying by approximately $38,999, which can make the difference between purchasing a home or not. In this case about a 12% increase in purchase price.

So far, two upsides for using a 50-year mortgage, lower payments and higher qualifying. Now the one reported downside… slower building of equity.

Since this is a 50 year mortgage is a much longer amortization, you will builder equity slower. The reality is most homeowners refinance their mortgages every 3-8 years anyway, eating up any equity built up by the amortization schedule. So the slow equity build-up is no worse than using an interest only mortgage.

Will the 50 year mortgage catch on… I believe so. I think that it will replace the pay-option arm as the loan of choice for upcoming homebuyers looking to offset the affordability issues affecting both coasts.



View all of our mortgage calculators

Do Homebuyers Really Need Real Estate Agents… if 64% find the Home they Purchase without the Help of an Agent in the First Place?

On April 5, the NY Times real estate blog, The Walk-Through, did an article regarding a company doing new online tatics in the real estate space. The article quoted that 2/3 of homebuyers found their own home without the help of an agent.

In reading the comments to the blog post, many agents appeared surprised by this 2/3 statistic, asking to see the statistic, so I pulled the press release again (I had previously discussed this NAR report which was spun to show 86% of buyers using agents, more than ever before) from the NAR at: Realtor.org/publicaffairsweb.nsf/pages/hmbuyersellersurvey06 and reviewed the statement which is as follows:

"When asked where they first learned about the home purchased, 24 percent of buyers identified the Internet, up strongly from 15 percent in 2004 and only 2 percent in 1997. Although most buyers use an agent to complete the transaction, 36 first learn about the home they buy from a real estate agent and 15 percent from yard signs; five other categories were 7 percent or less."

So my initial math was as follows:

24% internet (Note: up a whopping 63% from just the year before) + 15% yard signs + 7% other = 46%… that’s a lot of homebuyers finding homes on their own… but…

If you interpret it the other way…. “36 first learn about the home they buy from a real estate agent” which leaves us to assume that really 64% of home buyers found the home they purchased without the help of a real estate agent. (100% - 36% = 64%). Like you, I’m not sure where the other 18% is but this is a NAR statistic and that’s another post.

A long time argument from real estate agents to justify their fee is the time and money they spend showing clients homes and their ability to find homes… these NAR statistics obviously put a big hole in that argument.

What is the Buyers Real Estate Agent Really Doing?

So, if 64% of homebuyers are finding the home they buy on their own, (which is supposedly where all the work is), what are the real estate agents really doing to earn the 2-4% buyers side commission? Here are some thoughts.

a) Letting them into the house – the obvious increase in agent use, is because the buyer has to be able to get into the property they found and since they can’t call the owner directly they MUST call a real estate agent. Are homebuyers willing to pay a fee to be let in to view a home? Can this service performed by someone else… like the home owner?

b) Writing the Offer – if a buyer found the house, calls an agent who let’s them into the home and the buyer likes the house, then the next step is the buyer to ask the agent, how to make an offer. The buyer does not view this innocent question as possibly costing them 2-4% of the sales price in fees for the real estate agents service, as buyers agent services appear “free” (See my previous post regarding this “Free Service” fake-out).

Statistics from the CAR indicate that 71% of homebuyers select their agent based on who calls them back first (and I assume the reason they call the agent in the first place is to show them the inside of a home they found… see reason A).

Can just writing the offer / negotiation be performed by some else for cheaper? I.e. actual listing agent (who is already receiving the other portion of the commission), escrow, title, closing attorney? Do homebuyers really depend on the buyers agent for their negotiation skills or is the agent just “supporting” the decision as indicated in the Century 21 commercials? (See interesting post regarding this commercial on Slate)

c) Refer Homebuyers to required Services – This appears to be a big one, since it represents reason # 1 according this the REALTOR.com marketing piece on “Why Use a REALTOR” after this beautiful PR piece… “REALTORS® subscribe to a strict code of ethics and are expected to maintain a higher level of knowledge of the process of buying and selling real estate.”

Higher level of knowledge than whom? The home buyer? The home seller?

Also, this “Referring of Services” is the broker / owners favorite reason as it allows the agent to guide the buyers into using “broker owned” services, like title, escrow, mortgage because it increases the profit potential of the transaction.

Can someone else perform this “referral” service for cheaper and with less strings attached? You bet, see social networking sites.

d) Guide the buyer through the real estate transaction – Yes, the agent helps manage the transaction but so does the $2,300 a month “real estate transaction coordinator”, who typically performs this for most agents. Also, keep in mind that the mortgage lender, escrow, title, home seller and buyer also want the transaction closed because they all get what they want (income / house) and this can only happen when the deal is done. Can someone else other than the agent do this for cheaper and better?

There may be more items completed by buyers real estate agents used to support their value-proposition... maybe some agents would like to comment or add to this list to get these points across.

Do homebuyers really need agents to perform these services?

When broken down into separate components it’s easy to see that the real estate model can be done more efficiently when it pertains to time and cost. Will there be full service agents... of course, will they still make 5-7%, of course but the standard of service will be much, much higher than currenty. Is there change coming...

I personally think any homebuyer in California who saw that it cost them $15,000 (3% of $500,000 average sales price) to use their “free” buyers agent, would seriously think twice. Personally, I don’t think that most real estate agents could provide a strong enough value proposition to justify the cost.

Imagine this…

What if the buyers agents real estate commission appeared as a “cost” on the homebuyers final closing statement…

Think homebuyers would also look for other home buying options… much like home sellers have with discount brokers, flat-fee services and For Sale by Owner services?

What are your thoughts?

Will Home Buyers Go After The Buyers Side Real Estate Commissions Like Home Sellers and Discount Real Estate Models Did?

In the previously hot sellers market, discount real estate services picked up market share from the traditional real estate model because home sellers did not want to pay a 6% which included both the listing agents and buyers agents commission (traditionally split 50/50 and one of the main reasons for the development of the MLS which discloses this compensation to agents).

Unfortunately, the NAR does not provide the exact figure of alternative / discount real estate company market share but it must be significant considering the 25 million advertising campaign against FSBO’s.

Many real estate agents state that these models will fail and their market share was only temporary due to the hot market. Many believe that the typical real estate commission will increase from an average of 5% back up to 6% - 7% once the real estate market cools down like it has now. Will they go back up or has the internet finally changed real estate forever?

Recent homebuyer studies from the National Association of REALTORS (NAR) and the California Association of REALTORS (CAR) indicate the buyer is doing more of the work of finding a home. Here are some important facts from these reports:

· 77% of home buyers used the internet to search for homes (which leaves us to assume that 23% of home buyers are “traditional” who do not use the internet) – 2005 NAR Home Buyers Report

· 24% of the homes purchased were found directly by the buyer on the internet vs. 36% found by the agent – NAR

· The average internet home buyer purchased a home within 1.9 weeks of first contacting a real estate agent vs. 7.1 weeks with a traditional home buyer – CAR

· Internet buyers looked at an average of 6.1 homes with an agent vs. traditional buyers (currently 23% of the market) who looked at 15.4 homes with agents before buying – 2005 NAR

· 71% of the time the home buyer selected their agent based on first agent who returned their phone call - NAR

“Let me Find You a Home… My Real Estate Services are Free”

Buyer’s agents have used this “Free Service” pitch forever; in fact, it’s even endorsed in the National Association of REALTORS Code of Ethics:

Standard of Practice 12-2

REALTORS® may represent their services as “free” or without cost even if they expect to receive compensation from a source other than their client provided that the potential for the REALTOR® to obtain a benefit from a third party is clearly disclosed at the same time. (Amended 1/97)

Are Buyers Agent Real Estate Services Really Free?

Here is where most homebuyers’ get confused and mislead. Their real estate agent tells them it’s “free” to use their services. The NAR say’s its o.k. to advertise “free services” even though agents expect compensation. At closing time, the homebuyer does not see their agent compensation, as a “charge” on their HUD 1 closing statement… so it must be free? Wrong.

It’s all about “Net”

Home sellers price their home based on “netting” a certain amount from the sale of their property. The buyers’ agent real estate commission is paid out directly from the home sellers equity. If there is a 3% real estate commission being paid to the buyers agent from the sellers equity but the seller did not have to pay a buyers agent, you can discount the sales price by 3% and the seller would still net the same amount from the sale even if the sales price is 3% less.

Here is a basic example of the home sellers net proceeds*:

· $400,000 Sales Price - 3% buyers agent commission ($12,000) = $388,000 Net to Seller

· $388,000 Sales Price - 0% buyers agent commission ($0) = $388,000 Net to Seller

Will a home seller care if the homebuyer uses a real estate agent if he / she still gets the same $388,000 either way? Probably not.

So the reality is when a buyer uses an agent to assist them in purchasing a home, they are in fact financing the buyers’ agent real estate commission into the purchase price of the home.

If homebuyers negotiated with home sellers or their real estate agents directly, they can possibly eliminate the buyers’ side real estate commission from the price as noted above in example.

Now Home Buyers are in Control… of Real Estate Commissions?

Yesterday, CNN had a front-page article A fresh attack on the 6% commission. This highlighted alternative real estate models, which rewarded with part of the buyers agent real estate commission when home buyers do some of the legwork when buying a home.

These companies offer a rebate of the buyers’ side real estate commission to homebuyers who do a portion of the work themselves. Typically models typically require the homebuyer to search the MLS listings directly, driving to and previewing homes themselves. Many homebuyers are ALREADY doing much of these tasks as indicated in the facts noted above.

Some of these rebates can amount to a lot of money dependant on the sale price of the home. We have created a calculator to help you calculate your buyers’ agent real estate commissions and view a real estate commission rebate chart.

· View Buyers Agent Real Estate Commission Calculator

Although these real estate commission rebates are nothing new, they were never really publicized but now that the real estate market has cooled and buyers are more in control, I have a feeling that this will be discussed heavily in the media.

Once the press and press highlight these available options... the traditional real estate agent community will try in vain to discredit these alternative real estate models (usually with some kind of “legal” ramification scare tactic) as they have with other alternative / discount or FSBO real estate models.

Here are some arguments I suspect traditional real estate agents will use:

“You may have to sue the seller / agent because they did not disclose everything properly”

“You are not represented because the listing agent represents the home seller not you”

“You are not protected in your negotiations”

“You may not receive all of the proper property disclosures from the seller”

“You may not get the lowest price because the listing agent represents the seller”

“You may over-pay for a property”

Maybe real estate agents reading this would like to comment on reasons why buyers should not negotiate directly with the home sellers real estate agent?

Cooling Real Estate Market Will Create More Alternative Home Buyers Models

One thing that is guaranteed, is that the normalized real estate market will be a breeding ground for alternative real estate models geared towards homebuyers. Once successful real estate agents and companies will seek out ways to get more market share of buyers to make up lost income from sellers.

The same thing that happened when home sellers where the hot ticket, many new models came out to compete against traditional agents and now the same will happen towards home buyers.

Homebuyers themselves may seek out other options where they can get a win / win for themselves, especially as the secret veil of the buyers side real estate commissions come off.

What do you think will happen? Are real estate commissions going to go up or down and will home buyers start demanding part of the real estate commission for the work they are doing?




*Net proceed example does not include other real estate costs associated in a real estate transaction. It is only an example of how the real estate commission affects their proceeds.

Trouble Around the Corner for the Real Estate Market?

Today, CNNMoney.com did an article called The Danger Years for Homeowners, which had some very interesting points to ponder.

According to Doug Duncan, the chief economist for the Mortgage Bankers Association, mortgage delinquencies have historically reached their highest points during the third and fourth years.

Here are some statistics that make the times ahead a little scary. According to the MBA:

- Half of all mortgages are three years old or less.

- 3 trillion in mortgages in 2002

- 4 trillion in 2003

- 3 trillion in 2004

Combine this with some of these other adjustable mortgage facts:

- Many were interest-only ARMS and the incredibly popular “pay-option ARM” loans which have negative amortization.

- In California, in Jan / Feb of 05’ 61% of mortgages where interest only…. This was only 2% in 2002 (Source: RealEstate Journal)

- Hybrid ARMS made up as much as 50% of all loans originated in 2004 / 2005. (this includes interest-only, two-steps, pay-options).

- In 2005 the median home new homebuyer only put down 2%.

- November of 2005, 70.9% of ALL mortgages in California were adjustable rate mortgages with a peak of 73.7% in May of 2005. (Dataquick)

- Use of Adjustable Rate Mortgages in 2002 was 28.9% in 2003 52.3% (Source: Dataquick)

- In 2006 there is approximately $330 billion in Adjustable Rate Mortgages are set to adjust.

- In 2007 approximately 1 trillion will adjust

Mortgages Rates at 40 Year Lows and Inverted Curves

On top of the increased use of adjustable rate mortgages, statistically the peak period for mortgage delinquencies, you also have the fact that we are coming off 40 year mortgage lows. Mortgage rates are increasing and short-term mortgage rates like Adjustable Mortgages are increasing even faster.

In 2003 the 1-Year T-Bill as approximately 1%, now we are close to 4.495%

Index + Margin = Interest Rate

This is a formula many people will become familiar with soon.

Index is the indicator used by the adjustable rate mortgage. This is the variable portion of the formula.
Margin is the spread of the mortgage bank, usually 2.25% - 6.5%.

Example Adjustable Rate Mortgage adjustments assuming a 3% margin.

1 Yr T-Bill = 4.495% + 3% = 7.495%
1 Yr. LIBOR = 5.152% + 3% = 8.152%
COFI = 3.347% + 3% = 6.347%
CODI = 3.837% + 3% = 6.837%
COSI = 3.460% + 3% = 6.460%

As you can see from this snap-shot, most adjustable rate mortgages will be equal to or higher than current 30 year fixed rate mortgages. For many homeowners, their mortgages will easily adjust the maximum capped 2% above the start rate.

The real issue to this is that not only is the mortgage rate going up, but you may also be going from an interest-only loan to a fully amortized loan and you are now financing the entire balance for a shorter term.

We have created some mortgage calculators to see the exact adjustments:

Pay Option ARM / Negative Amortization Mortgage Calculator
2 / 28 Adjustable Rate Mortgage Calculator
3 / 27 Adjustable Rate Mortgage Calculator
5 / 25 Adjustable Rate Mortgage Calculator

Doomsayers think that this may be the catalyst to the housing bubble… while optimist believe that the real estate market and consumers have enough strength and will escape unscathed.

One thing is certain, is that a significant increase in mortgage delinquencies, creates bank foreclosures and when there is enough bank foreclosures, this puts downward price pressures on all other properties. Homebuyers begin looking for deals in foreclosures and home sellers are competing directly against discounted foreclosure listings for the homebuyer’s attention.

Is the real estate market going to be affected? Only time will tell but we would like your thoughts and reason why or why not the real estate market will be affected?

Real Estate Commission Discussions... The Heated Debates Continue.

As seen from Inmans blog post which caused over 200 responses, there is some heated debates going on. Following up on this here are some other posts that are very interesting.

Are Real Estate Agents Overpaid?
Real Estate Commissions Under Pressure (NPR)
The 6% Solution
Antitrust versus Guilding: The Real Estate
Why real estate commissions will fall - Cnn Money
Commissions are crumbling... Businessweek

What are your thoughts... up / down / same?

Is Real Estate Finally Changing... Lively Blog Discussion at Inman

Here is a pretty lively real estate discussion on the Inman blog. The main question was if traditional real estate will change or will it stay the same... give them your two cents.

National Association of REALTORS Pissed... NAR & REALTORS Fire Back at Author's Comments

Here is some interesting reading. The authors of "FreakEconomics" where on the Today show a while back and brought up some research from their book that basically stated, real estate agents who sell their own properties net a higher amount and stay on the market longer then the properties they list for their clients. This pissed off the NAR, so they fired back. Here is a link to the FreakEconomics blog response to the NAR's response.

Then just a few days ago, the FreakEconomics guys where at it again on the NYTimes with this article "Endangered Species"... here are some comments from the article posted on their blog.

This has spawned a good conversation at the RainCity blog.

What are your thoughts, are REALTORS really in trouble? Do they provide "professional services" or simply "convenient services"?

Why is the National Association of REALTORS Pending Home Sales Index Data of 2005 Revised Since The Last Release?

Today, the NAR released its PHSI figures and not surprisingly we are now at the fifth straight month of a cooling trend. What did surprise me was when I was going to update my Pending Home Sales Index charts, I noticed after reviewing the data that the historical figures reported from last year have been revised on this new chart reflecting Jan 2006?

I reviewed the NAR press release and there was no explanation of the revision and why the figures would be different? Take a look and compare:

Feb. 06 - Download the current PHSI release.
Jan. 05 – Download the previous PHSI release

When I have more time I will chart the difference for the two sets of data.

Anyone have any thoughts why all of the figures for last year would be revised as it would seem that data from 5 months ago should not need a revision now?

Is the National Association of REALTORS Pending Home Sales Index a Leading Indicator of Existing Home Sales?

The National Association of REALTORS began releasing the Pending Home Sales Index (PHSI) back in December of 2004 as a leading real estate market indicator. I did a previous post to indicate the relationship between pending home sales and mortgage rates and thought it would be interesting to see if the PHSI really can be used as a leading indicator.

As you can see from the chart, it appears that the PHSI is fairly accurate. What is interesting is to see how at certain times like the May-July period the Pending Home Sales Index is relatively flat while the existing home sales data shows a significant jump and what appears to have been the peak. This may be due to a combination real estate listings selling so quick that they are never marketed as “pending” and MLS GIGO.

What I find more interesting in view this is the time since August the consistent gradual decline of the pending index vs the much steeper decline of existing home sales data. The extended decline of pending should point to even lower existing home sales the following month (which is what happened as Jan existing home sales data was down to 6,560,000 units but not charted as still missing Jan. PHSI data).

If the pending home sales data starts to flat line or even increase (possible in the coming peak sales months) than we should see a reversal in the existing home sales volume as well.

Will it happen? I am not sure… but your thoughts and theories are requested!

Data Sources: PHSI Data | Existing Home Sales

REALTOR.com vs. Zillow.com

As things are settling now since the Zillow launch it will be important to see who will win the consumer eye-ball fight. REALTOR.com recently received 100 million in funding to do something... but I don't know what yet but it better be good as Zillow is probably just getting started, considering some recent news.

Zillow seems to be holding it's own ground after the first few weeks. In fact according to Alexa (I'll let you be the judge on how accurate this is, we'll need to wait for com score and other research) Zillow currently seems to be ahead of REALTOR.com... not bad for a start up.

It still a little early to see what the real impact will be but I can say that For Sale by Owner Center has already seen Zillow data being used by both sellers / buyers in initial negotiations. As I mentioned before, I believe this empowering of the consumer will only give traction to the FSBO movement.

What do you think... can or will Zillow bump REALTOR.com from it's top spot our will Zillow willow?

Should You Trust Zillow Property Value Estimates?

As the entire world already knows, Zillow launched yesterday. The very first thing that I estimate over 500,000 people did (when the site was not down… maybe a great marketing ploy?) was enter their home address to see what it was worth. (BTW - nice IP to mailing address collection tool, but that’s another post). Most users were either pleasantly surprised or disturbed by their estimates.

The general public who knew nothing about Zillow until yesterday were impressed (unless their estimate was lower than anticipated), yet most who have been following Zillow appear to be initially under-whelmed, until you consider the long term possibilities… again another future post.

I spoke to a lot of friends who looked up their places and found estimates that seemed fairly accurate while others appeared to be dramatically off. This got me thinking about how accurate can it be and should people take the estimated value as gospel. So a few hours later, here are the results of my small test.

The Accuracy Test of Zillow Estimates.

First off, let me say that this is a very small random sample. In reviewing the Zillow site, they claimed they were best at the mid range properties on the West coast. So I based my random sample on the following:

25 Properties that were listed for sale by REALTORS on my local MLS and sold between 2/01/06 - 2/07/06. I took the mid-range (in California) of $500,000 - $700,000 for various cities in the San Gabriel Valley and western San Bernardino and Riverside Counties. I obtained the data via my MLS. I also removed the High and Low to give a more accurate average.

I then plotted the listing price, sold price and the Zillow estimated value data on a chart.

Here are some highlights of my test.

It appears that Zillow is in fact within its claimed margin of error. In fact it appears (from my small sample results) that they are typically off by 2%.

There was some major discrepancies where Zillow was either high or low by over 21%. I removed these anomalies from my sample data but here are the properties in question in case you’re curious. (Note I did not do further research to see why such a big swing and why both properties where in Monterey Park)

Property | Zillow Est. | Listed Price | Sold Price | Error Margin
438 Sefton Monterey Park, CA | $794,134 | $638,000 | $615,000 | 129%
3054 S. Addrienne MP CA | $397,137 | $539,000 | $505,000 | 79%

As you can see from the results, overall they were pretty good. Would I take this as gospel… not. I would not suggest clients to price their home exclusively on the data Zillow provides but a combination of Zillow results and active and current listings from both realtor.com and homepages.com where available.

A trend that I do see this creating is prospective home sellers ordering property appraisals before listing their homes for sale. This only makes senses and it’s incredible that it’s not more common place considering how many real estate transactions blow up for this very reason.

The biggest issues I see with Zillow (which is obvious) is that it does not factor in certain aspects of a property such as specific location, views, improvements, lot slope, etc. that will make a specific home more valuable than another… but this is expected. As for traditional track housing, it’s pretty good.

The real reality of this tool is that it does a better job than most real estate agents can do at presenting the information in a clear, concise manor that is easy to understand to the general public. This will lower the overall perception of the value of the REALTOR, which will most likely lead to long term decreases in real estate commissions. This appears to be what Zillow had in mind.

Real Estate “Super Consumers” will become the norm. They will spend months understanding the nuances of the community they are interested in buying or selling. They will know crime rates, property values, school district information, job rates, etc… better than most REALTORS in their own communities. This consumers will be able to demand lower real estate transaction fees.

I also think that it is one of the biggest advances in real estate in years (although AVM have been around for at least 5 years, it was not publicly available for free and on this scale) along with current mapping technologies such as Google Maps, Google Earth and what A9.com is doing. I think that it will be a boon to the “for sale by owner” community as they are now armed with both pricing tools and easy effective advertising for their real estate listings.

I believe that FSBO market will gain some serious traction over the next few years (easily reaching 20% market share like in Madison Wisconsin) because of these “super consumers”. I also predict that the national average real estate commission will come down to 3% total but hey, time will and I’ve been wrong before.

Download my PDF paper & chart of this test

If you have any real life data samples, please post them here. We are looking for recently "Sold" listings & the Zillow Estimate, to make a running list of how accurate or flawed Zillow is.

Are REALTORS afraid of the FSBO Market… scared enough to spend $25 million!

Yesterday, the NAR announced a new $25 million Public Awareness campaign with ads targeting the newly (politically correct)coined “unrepresented sellers” or commonly known as FSBO. I’m surprised that this did not get more attention… considering the other issues the NAR currently has with the DOJ.

Here is a quote from their press release…

“One of the new spots, called “Don’t Try This At Home,” explains how choosing a Realtor® to sell a home is a smart financial decision since home sellers make more money when they rely on the expertise of a real estate professional. Homes sold by a real estate agent sell for 16 percent higher on average than those sold by an unrepresented seller, according to NAR’s 2005 Profile of Home Buyers and Sellers.”

You can view this commercial from the NAR website which requires FLASH.

You don’t spend $25 million on a image problem… unless your concerned about it! What I gather from this NAR spend is that the 2005 Profile of Home Buyers and Sellers may have also shed other information that the NAR did not anticipate… maybe a growing trend towards FSBO?

I discussed this in detail from my previous homebuyer profile post but here are some of my general thoughts…

A) The FSBO market is much greater than the NAR wants to admit as most would consider the “$399.00 Flat fee for MLS listing” model… really is a FSBO… as they are “unrepresented” by the REALTOR from the negotiation point of view. The fact that these types of listings are most likely factored into the NAR figures, as “represented” by a realtor does not paint a clear picture of how big the FSBO market really is.

Do you think the NAR is using the new term “unrepresented” because they don’t want to reinforce the branding of the term “FSBO” or “For Sale by Owner”?

B) NAR touts the figure that.. “Homes sold by a real estate agent sell for 16 percent higher on average than those sold by an unrepresented seller” but as I indicated before, many of these FSBO transactions are inter family deals, which are purposely discounted… this was quoted from Inman News…

“13 percent of sellers conducted transactions without the assistance of a real estate professional in 2005. Of those, about 39 percent of the transactions were "closely held" between parties who knew each other in advance, up from 32 percent in 2004, the association reported.

Now if 40% of the sales are “Closely held” don’t you think that these figures should be left out of the figure “16% higher…”? This is an obvious spin of the facts.

C) Also, if you have 5 million more sales to factor into your average… there will be a lot more high-end properties included, which will artificially skew the average.

Here is what I’m fairly sure of… the NAR would not be spending this money if they did not feel threatened!

You would think that they would be focused on the general image building considering the issues with the DOJ. Maybe they know that they won’t win that fight, so might as well go after the FSBO market before it gains too much traction, especially as the real estate market cools and home sellers become much more concern at preserving their “equity” at time of sale.

What I also read into this, is there is more of a focus on “Selling” vs. “Buying”… which I assume they (the NAR) feel that the real estate market will be slowing and there will be significantly more homes for sale… with a fair portion trying “FSBO” before possibly listing with an agent.

So my theory regarding $25 million NAR spend is quite simple.

Real estate market cools off, sellers become much more aware of the “costs” of selling as they don’t have as much equity due to slowing appreciation and negatively amortized mortgages. They explore other home selling options such as selling by owner before immediately listing with an agent. As property inventory on FSBO sites build, homebuyers continue to explore these sites looking for real estate listings. Especially considering that sites like For Sale by Owner Center.com offers better search experiences like map searches, satellite views, date listed, rss feeds and provides the actual property addresses unlike Weichert and other real estate sites, which are designed to create leads for their agents.

As more and more successful real estate transactions occur and the FSBO market starts to gain traction nationally as it has in Madison Wisconsin, REALTORS will need to defend their value position (with something other than the current “scare tactics”).

Home buyers will realize that they are only being shown properties which offer a commission vs. the entire inventory of available homes as quoted by a REALTOR in Madison who does not show the 20% of available homes for sale in Madison because they are FSBO. This according to a quote on the NYTimes article on FSBO Madison. This will frustrate homebuyers and allow other real estate service companies and FSBO services to fill the service void left by agents.

Although, I may seem anti-REALTOR, I’m really not and I don't think people are either. I do believe that most people don't spending $35,000 in real estate commissions to get their home sold but everyone is willing to pay for the service.

I do think that a large majority of the real estate community has difficulty in changing a flawed business model. As proof with the all the bus benches advertising REALTOR’s and the lack of Internet advertising by local real estate companies in their area. Although the NAR reports that 77% of homebuyers are on the Internet… the agents are not there yet?

Until agents learn how to charge “home buyers” for their services… we are in for some big changes and the NAR will need to continue spending money advertising. This will make Madison Avenue happy and Madison Wisconsin FSBO’s even happier!

Is a Real Estate Housing Bubble coming to Your Neighborhood?

Yesterday, the NAR released it PHSI, which I believe is the best leading indicator we have of what the real estate market is actually doing. I created a chart, which I will continue to update on a monthly basis for you (subscribe to my RSS feed to receive automatically).

What is interesting is that the actual drop in Pending Home Sales Index should have been lower than the reported 5.5% national drop over last year but the South came to the rescue. As you can see from this chart, the area’s real estate markets that most people are concerned about – West & Northeast, have fairly sharp declines. I believe The South may be bucking the cooling trend due to the “Katrina” effect on housing, limited supply, high demand. I’m not sure why the Northeast had a slight increase (maybe someone can comment).

As mortgage rates continue to climb and mortgage underwriting standards tighten, I suspect you will see bigger drops in the pending home sales index, which lead to drops in the actual existing home sales, then finally leading to drops in actual home prices. Hence the reason why the NAR states that there is a “cooling” trend and not a “pop”. As time progresses you should see their statements change. The most important factor is mortgage rates, as is demonstrated for this chart I posted yesterday. You can clearly see the inverted dance between mortgage rates and home sales.

The main factor that could cause a sudden bursting of the real estate bubble is jump in mortgage rates of .5% or more (for the West and Northeast) in combination with the tightening of mortgage underwriting guidelines on the “stated income” and “interest only” loans.

Pending Home Sales Index... Continued Cooling Trend Visible

Today, the NAR released it's Pending Home Sales Index data, which is a good leading indicator of what the real estate market is doing. I reviewed the data and it cooling but I decided to chart it to give a real picture of the real estate market. As you can see... the real estate market has been slowing since a peak of mid August 05.

I indicated in my previous post regarding this data, there is a significant cooling trend of the housing market. Lower pending sales = lower actual closed sales next month. This does not take into effect home prices but lower sales volume will eventually point to lower home prices.

If you are thinking of selling your home in the near future, pricing your property correctly the first time, will become more important than ever as prospective buyers will have more inventory of homes for sale to select from, thereby increasing the competition between real estate listings.

Data Source: National Association of REALTORS Pending Home Sales Index

Chart by: Jessie Beaudoin, For Sale by Owner Center.com

Housing Supply Building Quickly... Will it Cause the Real Estate Bubble to Pop?

Today in BusinessWeek there is an excellent article regarding housing supply and a possible housing bubble. The article indicates... "During the second half of 2005, the supply of new single-family houses available for sale has been growing at the fastest pace since the mid-1980s" while "Making matters worse for homebuilders is a surge in the number of existing homes for sale, up 20.6% from a year ago. The rising inventory will suppress overall home price appreciation".

What is important to those thinking of selling your home FSBO is that you can be at a distinct advantage because as inventory expands there are more listings competing against each-other. Selling FSBO allows you to price your home (1-2%) less than the surround real estate listings for sale with REALTORS making your home more attractive and possibly selling faster, thereby saving you mortgage interest and time.

Inman News Starts it's Own Zillow Guessing Game

Last week, I was seeking guesses regarding what Zillow will be doing? It appears that now that Inman Blog is also looking for feedback... so keep on eye on both to see who will be the closest at guessing the business model.

24% of 2005 Home Buyers Bought Real Estate Found on the Internet According to 2005 National Association of Realtors Profile of Home Buyers and Sellers

Today the NAR released its 2005 National Association of Realtors® Profile of Home Buyers and Sellers and there some great underlying facts that seem support the FSBO movement.

Here are some highlights and some comments regarding the facts from the survey:

- 77% of home buyers used the internet during the home buying process. This means that advertising your home on the internet is probably the single best marketing you can do.

- 24% of buyers found the home they purchased via the internet. This would indicate that home buyers using the internet and making inquiries regarding your home for sale by owner are serious and willing to buy.
(Important Note: this is a 62.5% increase from just the year before - so this year, if using the same number it will be over 39%!)

- 15% of buyers indicated that a yard sign was who they found a home they purchased but 71% identified the yard sign as the second most important way to find homes behind the internet. This is important as it supports that fact that FSBO should put a yard sign up to help market the property.

As I previously noted in my NAR response post to the NYTimes / FSBOMadison article, my theory of was in fact, that a reason why some of the homes sold by owner sold for 16% less. As they stated that "39 percent of those FSBO transactions were "closely held" between parties who knew each other in advance".

What is also interesting is that the survey data regarding price differences was not explained by the survey. So instead of facts, the NAR offers "some context"... "Agents know best how to prepare a home and maximize value, agents provide broader exposure to the market and are more likely to generate multiple bids, and the portion of sales that are between private parties are likely to be at a lower price than those on the open market."

As always, the NAR indicates that the amount of FSBO transactions are at 13% or so percent of the all real estate transactions with the highest number of FSBO sales occuring in 1987 at 20% but I think that this figure may be a matter of preception as to what is a FSBO?

Lastly, the survey made it a point to indicated FSBO's as; "we believe that "unrepresented sellers" would be a much more accurate term to describe this segment,"... now if we could just get the figures for how many real estate transactions were flat-fee "fsbo" transactions that are being counted as "REALTOR represented" transactions. I'm sure if the NAR will not release this number as they do not want to give any credence to the discount model.

I also find it interesting in their survey the NAR indicates that 81% of home buyers on the internet used REALTOR. This is an easy number to believe considering that the use of a "buyers REALTOR" is free... but why does the report negelect to show what percentage of home sellers use a REALTOR and of those what percentage are using a discount real estate model?

So, will the FSBO market grow? We think so, especially if housing prices "normalize" and rates of appreciation come back down to a historical 6% level. We think the most sellers who purchased a home today and sold in two years from now, would explore the FSBO option before electing to sell with a REALTOR and net only 1-3% after costs.

Look's Like Zillow is Still Teasing the Real Estate Community

Well, it looks like I did not have any takers from my previous Zillow post but it appears that my gut feeling was correct. Nothing really new. Although an Inman Real Estate Connect attendee told me that Zillow was actively looking for “property” and “county recorder” information, again nothing new.

Today, BusinessWeek discussed the Zillow and what they heard at the Inman conference. Here are some highlights from their article:

--He's hoping brokers will be Zillow's customers, not its competitors. "If we succeed," he said, "brokers will use Zillow as a marketing vehicle."

--"We're not going to be like Expedia." That is, Zillow won't act as an agent by earning commissions from sales. One reason: It would require too much skilled staff. "I can't hire enough professionals. It doesn't scale."

--Zillow won't be some kind of national Multiple Listing Service of homes for sale. In fact, Barton said he thinks anyone trying to create such a list is wasting time. The reason: "The Web is the national MLS already. It's happened. You're arguing over yesterday's news."

--It will make its money from advertising on the site (presumably lots of it from brokers)

--Lots of its information will come from users of the site--a model that has been proven highly successful by real estate blogs like curbed.com.

Based on this little clues, I will continue to formulate my opinion of the Zillow business model and hopefully some of you readers can do the same and post them here.

One big clue is that when you have $32,000,000 million (so far) to throw at a problem; you can come up with some pretty good solutions and buy a whole lot of advertising, especially when saving a ton with free buzz like this.

Also, from the BusinessWeek article this was this quote from Barton…

"It's very easy to think, 'Great, he's done all the work and I can earn a big, fat commission on 1.94 weeks of work.' You have to rethink that."

I couldn’t resist commenting on the BusinessWeek blog, which I posted below just in case BusinessWeek does not let it fly…

REALTORS, read this carefully again... "It's very easy to think, 'Great, he's done all the work and I can earn a big, fat commission on 1.94 weeks of work.' You have to rethink that."

I think the most real estate agents need to really need to understand what is being stated here. Traditional "Buyers Agents", REALTORS who work with buyers almost exclusively (who also tend to be the newer agents because easier to sell a “free” service) are in big trouble. Homebuyers don’t expect to pay for the buyer’s’ agents’ services of showing houses and negotiation. Home sellers are tried of paying a big fat commission towards hiring the team that is negotiating against them.

Listing agents (usually more seasoned and experience) who basically drive the commission structure of a real estate deal are competing on price and this will continue to do so… especially if Zillow creates a reverse bidding auction format for real estate services. The commission this is being cut is the "buyers agent". These agents in turn will show only houses that are offering a bigger commission. Buyers on the internet will become frustrated at the fact that they are not being shown all homes by these buyers agents and will start contacting the listing agents directly, thus allowing listing agents to further discount their prices. As this downward pressure on the commission structure continues the weaker agents and real estate companies will be forced out of business. With this, you will see a continued growth in alternate business models, such as discount brokers, ala carte and the “for sale by owner”. Additionally, the major real estate franchises are too busy trying to keep their “franchisee's” happy, so they are not focusing on this growing threat. The NAR is pretty busy with the DOJ and the sheer financial resources of the companies working at addressing the opportunity (or problem dependant on your point of view) far exceeds the investments being made by the NAR & traditional brokers.

So as the story goes, the real estate community keeps on being teased and they don’t like it… while some of us continue to play along with the tease and build our own mental pictures of what’s behind the veil.

Oodle, a Real Estate Player

Today, Inman did a little piece on Oodle.com. If you have not used this service yet, you must try it. It searches multiple "Classified Ads" sites and consolidates the listings into local results. So if you are shopping for say a "Longboard Surfboard" (as I do all the time) or say a "3 bedroom 2 bath home in Upland,CA" you can have these listings sent to you via email with a link back to the exact ad. Oodle is indexes real estate agent advertising of listings and consolidates those results locally and according to Oodle they have 1.5 milliion homes listed currently, which now makes them a "real" real estate player in the space. On a side note, all of our FSBO listings appear in the Oodle results to help increase the exposure of our FSBO advertisers.

Madison REALTORS Very Unhappy with Mayor for FSBOMadison Comments

Madison, Wisconsin Mayor Dave Cieslewicz has gotten him self into some hot water with the local real estate community according to The Capital Times. This is not surprising and I'm sure that shortly the NAR will also apply it's power of persuasion on the situation also. So the Mayor will probably feel some tension for the comments he made, especially at election time.

Will the Zillow Veil of Secrecy Finally Come Off?

The highly secretive, well funded real estate start-up, Zillow may finally disclose their business model on Friday, as founder, Rich Barton is scheduled to speak at the Inman Real Estate Connect Conference in NYC starting tomorrow. This may be one of the most anticipated starts-up as it's fishing in a 60 billion dollar pond that can affect the lively hood of a million plus NAR members. The founders already have a successful track record when they changed the travel industry, so a lot of eyes (and pocket books) are following this one.

I can guarantee you that real estate blogs will blow up by 8:01 am as the Zillow CEO is speaking between 8:00am and 9:15am. We may get a nugget or two before then as I am sure that they will be pressed hard for details at the Inman real estate conference from the moment they walk in.

So, this may be the time to seriously discuss your final thoughts on what the business model will be? Will they take-over the For Sale by Owner market as previously mentioned? Will it be a real estate auction site? Maybe a customer / REALTOR / all other real estate services match-maker? National database of all parcels with Google satellite views? Online CMA lead machine? A local real estate business search directory? Are they starting their own national MLS? Post your theory now and the bonus is if your right, that you will go down in internet history as the one who knew first!

Or will we get nothing at all from them, like this quote from the CEO, "We haven't quite figured out how we are going to fit,"... and have to continue to wait until their official launch? If this is the case, (which I suspect) it will cause even more discussion on blogs and the real estate community, a brilliant buzz-marketing ploy on their end!

Here are some active blogs that follow Zillow and feel free to post your thoughts on what is Zillow's business model will be.

Your Seattle Neighborhood Specialist
Rain City Guide
Chase Market Velocity
The Real Estate Bloggers
Seattlepi.com
All things RSS
Zillow CFO personal Blog
RedHerring Article

FSBO / For Sale by Owner, Such a Hot Topic in The News That the National Association of REALTORS Comments

The original Jan. 3rd. NYTimes article on a for sale by owner website called FSBOMadison is still drawing lots of attention and appears to have added fuel to the fire. So much attention that it appears that even the NAR had to respond to the article. Here is the NAR's response.

Dear Editor:

Your article about a for-sale-by-owner web site in Madison, Wisconsin (January 3, 2006) failed to provide your readers an accurate picture of the advantages and disadvantages of going it alone when making the most important transaction of their lifetime.

The fact is that using a professional to sell your home more than makes up for the cost, not to mention the savings in time, effort and hassle. The average home sold with the help of a professional last year brought $230,000 while the average home sold by an owner went for only $198,200 a 16 percent difference. It's no wonder that the percentage of homes sold by owners actually declined last year despite the real estate boom in most areas of the country.

Sincerely,

Thomas M. Stevens
President
NATIONAL ASSOCIATION OF REALTORS®

So in reading the response of this letter there are some interesting items to take notice of. First Mr. Stevens states the advantages of selling using a REALTOR but fails to point out any specific benefits of actually using a agent, just the traditional canned response "makes up for the cost, not to mention the savings in time, effort and hassle" blah, blah, blah...

This would have been the perfect opportunity for the NAR to give a bullet point reasons as to why the public should use an agent and really drive home the benefits of using an agent since this has received so much attention. His quote "...failed to provide your readers an accurate picture of the advantages and disadvantages of going it alone", well from what I can tell his response fails on the same level.

The one fact that the NAR responds to with facts is the average sales fecthed by a FSBO is 16% less than homes sold by a REALTOR. A problem that I see with this fact is:

A) the stat is provided by the NAR itself, so it's rather difficult to know if this is true as Title companies (who record real estate transactions with the county recorders) cannot even provide an accurate number of these types of FSBO transactions.

B) Sure the number is going to be less... there is 5 million less transactions to factor into the average. Just a few multi-million dollar NYC condos will skew the number dramatically. Additionally, many FSBO's are family transactions so the family members are purposely discounting the price of their property for their son, daughter, mom, cousin, etc.

C) "...the percentage of homes sold by owners actually declined last year". Did it really? As far as I can tell a flat fee $299 listing is probably considered a FSBO by most (including the NAR who is pushing for miminum service laws to limit this practice) but yet the NAR will count these transactions as a "REALTOR transaction" because a member of the NAR had to place the listing on the MLS, so these "FSBO's" are probably being accounted for as a traditional real estate transaction. My guess (as no-one appears to have a real number of full service to flat fee transactions) is the number of "FSBO's" has actually increased and their average net proceeds is certainly higher that those using a full service traditional real estate agent at 6%.

As a top free nationwide For Sale by Owner listing site we are excited to see the FSBO movement in the news and for home sellers and buyers to begin understanding that there are more options available to them, be it FSBO, ala carte, flat fee or hourly rates.

I think it is important to understand that everyone is willing to pay for real estate services... maybe just not a full 6%. Additionally, a really good (experianced) agent can be worth every cent as they can help try to avoid problems before they arise. One thing is certain, the real estate model as we know it will change in the year to come.

Here are some active FSBO articles from today:

Baltimore Sun - Do-it-yourselfers, Web force Realtors to face a new reality
Channel 3000 - FSBO Madison Featured In New York Times
Herald Tribune - Listing isn't selling
CBS 11 - KTVA - FSBO: an option for homeowners looking to sell

Updated: Live Stats on Our FSBO Site

Due to user feedback we have now added live stats on each FSBO real estate listing posted on ForSalebyOwnerCenter.com. Home owners can now check their free fsbo listing to see exactly how many times their listing has been viewed. Users can now view daily totals of views and actual listing visits along with a grand total. This listing statistics helps home owners track the success of additional advertising in local papers on weekends and view the spikes. We offer all listings exposure on our home page, so that every seller gets maximum exposure for their home early in the selling process. These statistics can be viewed on the listing page at the contact owner section with the daily totals in by selecting the "Details" link.

Inman News Looking at Inman Dr, Brookfield MO FSBO

We received a new FSBO listing today in Mo, that was on Inman Dr. We are avid readers of Inman.com and mentioned it to them, so that put together a little post on their blog.

NY Times FSBO Coverage Creates Heated Debates

On Jan. 3 Jeff Bailey of the NY Times did an article on FSBOMadison a FSBO site in Madison, Wisconsin. The FSBO article became one of the most emailed stories for a few days and the blog community exploded. With even a comment or two on this FSBO blog comment.

Here are some links to some the most active blogs.

Curbed
Blogrunner
Rain City Guide
Craig Blakcmon, Seattle Attorney
Jersey Shore Real Estate Bubble
Behind The Mortgage
Property Grunt
Matrix from MillerSamuel

Pending Home Sales Index Point South Towards Cooling Real Estate Market

Today the NAR released the Pending Home Sales Index Charts and the leading indicator of the real estate market appears to point towards a cooling trend. This is the third month in a row that shows a cooling trend with some area's affected more than others. What's is interesting to me is the hottest markets (North East & West) appear to be affected the most while the Midwest is still climbing. Here are some highlights of the seasonally adjusted figures:

Northeast - Down 8.3%
West - Down 5.1%

It will be interesting to keep an eye out on this and watch the upcoming new home sales and existing home sales figures to see what the overall impact will be.

Download the Pending Home Sales Index chart

CNN's "The Situation Room" Did a Little Press Piece on ForSalebyOwnerCenter.com Today

We just want to say thanks to CNN's reporter, Jacki Schechner for mentioning (along with a nice screen shot) our site ForSalebyOwnerCenter.com today on the 5:00 pm "The Situation Room" show. They also discussed the drop in existing home sales and increased inventory that we discussed earlier in the day on this blog. Here is a link to today's show transcripts.

Existing Home Sales Charts Support Cooling Housing Market

The NAR released existing homes sale data today which supports a cooling trend in the market. Interest rates appear partly to blame with the slight increase to over 6% but still historically low.

Nationally the west suffered the biggest drop of 3.7% while the northeast dropped 2.7%. Currently there is a 5 month supply of existing homes for sale which may probably continue to build into the new year.

Biggest Drop in New Home Sales in Over 10 Years

Today the Census Bureau reported the annual pace of new home sales had dropped to 1.25 million from the record high of 1.4 million the month before. This represents an 11% drop which last occurred in February 1995.

Some other highlights:

Northeast new home sales were actually up from 82,000 to 93,000 up 13.4%
West was down 22.1% from 439,000 to 342,000.

The supply of new homes is also at the highest point of the year with 4.9 month supply.

Overall new home sales are still above last years November levels of 1,175.

This may be another sign of a cooling housing market or the figures from the month before are flawed as they were a surprise to most economist who did not expect such a large jump.

Download the latest new home sales data on xls.

Selling Your Home By Owner - Get on TLC's "Moving on UP" Casting Call

For those of you selling or buying a home for sale by owner, you could be on TV. TLC's show "Moving on Up". If you are interested all the details are below... please contact Jennifer and be sure to mention www.forsalebyownercenter.com!

---------------

*** TLC’s “Moving Up” ~ TELEVISION OPPORTUNITY ***

We’re looking for “MOVING” STORIES

TLC, the television network that brought you Trading Spaces and While You Were Out, is looking to cast 15 fresh new episodes of their home design TV show Moving Up – hosted by Trading Spaces star designer Doug Wilson.

We’re looking for people who are moving sometime between January 23 and March 30, 2006. We need people with outgoing personalities or unique, extreme taste in design - people who would love to be on TLC! Diversity is important to our show as well. We’re looking for people from a wide range of socio-economic and ethnic backgrounds.

All candidates should demonstrate a strong passion for design and should have plans to change the décor of their new home right away. TLC will step in to help make those projects happen faster and less expensively.

Please note: Interested candidates must still occupy their current home. First-time buyers moving into a home that is already vacant are unfortunately not eligible since we meet with a pair of buyers and sellers.

Please contact:

Jennifer Nascimento/ Rebecca Chaikin, Casting Associates

(212) 974 9050 x 130 or via email at: jnascimento - at - bbcnyproduction - dot - com

Charts of California Median Home Prices for November

For those of you in California thinking of selling your home "for sale by owner" here is the current November 2005 Median Home Prices for California.

Real Estate and the Fastest Growing States

As real estate revolves around basic economic principals of supply and demand a good idea to understand how stable a real estate market is (or will be in the future) is to look at the population growth rates. Today on CNN there is some stats to give you a nice view of this.

Strong Housing Starts for November Shows Builder Confidence in the Real Estate Market

The U.S Department of Housing and Urban Developement released its November 2005 housing starts figures today and they indicated a surprising increase of 5.3% over October and 17.5% higher than November 2004. Although interest rates have rising to the highest in 2 years at 6.3% average builders are showing that they still believe the real estate market has legs.

Additionally a building permits are also up 2.5% over October and 3.0% higher than November 2004. Also interesting is it seems that builders are building at a slower rate than just 5 years ago as in 2004 a large scale project of 20 or more homes took an average of 1.9 months to build vs. the 1.2 months in 1999. Maybe this is done on purpose to try and pre-sell more of the units and cause a bidding war?

NAR Fighting back on the DOJ anti-competitive lawsuit

As you may know, the NAR is under scrutiny from the DOJ which file a lawsuit for anti-competitive practices. The NAR just released a report to defend it position. In the opening pages of the report it states "Real estate brokerage is a $60 to $70 billion industry" (this may be part of the reason why FSBO is gaining momentum). In there report they indicate that "14% of home sales were "for-sale-by-owner", if you put that into a number it means that approximately 1,000,000 successful FSBO transactions, which means alot of people saved alot of money! If you are interested in reading this report to understand why REALTORS say they are needed, download it here (it's a .pdf)

For Sale by Owner Center - Update to Real Estate Search

We are continuing to improve For Sale by Owner Center real estate search functions. Now once you have performed a real estate search you can click on the link "Map Real Estate Listings" and you will be able to see the results of your FSBO search plotted on a real estate map.

Use Google Earth to Search Real Estate For Sale by Owner

We have been working our Google Earth real estate search product as a means of reaching more internet users and providing maximum exposure for their homes for sale. All home sellers whom use the correct legal address of the property will receive a free google earth kml file allowing users to fly over their home. So far the demand for this has been great. Home buyers love the fact that they can overlay school districts and fly over there new route to work.

Real Estate RSS Feeds Improvements on For Sale by Owner Center

We believe that RSS and real estate go hand in hand. It simplifies the often long process of shopping for a home. By subscribing to RSS feeds, you no longer have to visit various real estate websites to try and keep track of the market as now the newest real estate listings are sent directly to you.

A problem we found with RSS is that many people did not know how to use it, therefore we created a new instruction page that makes subscribing to a RSS feed simple. Take a look at our new real estate RSS feed pages and give use you feedback on how we can improve this further?

California real estate data from CAR - Affordability Down Again

Those of you from California. Here is today's CAR Housing Affordability report. Here is the big picture:

California

Oct-05 - 15
Sep-05 - 15
Oct-04 - 19

California – Condos

Oct-05 - 21
Sep-05 - 22
Oct-04 - 28

Statewide Median Prices:

Calif. (sf)

Oct-05 - $538,770
Sep-05 - $543,980
Oct-04 - $459,530

Calif. (condo)

Oct-05 - $429,090
Sep-05 - $424,580
Oct-04 - $372,600

View the entire report for your local real estate information.

For Sale by Owner Open Houses This Weekend.

Here is another list of this weekend's open houses in case your shopping for a home instead of Christmas. Have fun and be sure to view the homes on our new Google Maps / Earth mash-up maps!

$650,000 1695 Pinellas Bayway, Penthouse
Tierra Verde Island , FL 33715 1400 2 / 2 12/11/2005 9:00 AM

$214,900 1475 RAVENA STREET
Bethlehem , PA 18015 1869 3 / 2.5 12/11/2005 11:30 AM

$114,000 1215 S. 13th Ave. E.
Newton , IA 50208 1386 2 / 1 12/10/2005 11:30 AM

$25,000 2 lots on Alaska
Interlachen , FL 32148 0 1 / 1 12/10/2005 8:00 am

$142,500 406 Westcot Court
Greer , SC 29650 1700 3 / 2.5 12/11/2005 10:00 AM

$437,500 126 Viewpoint Terrace
Peekskill , NY 10566 1264 2 / 2.5 12/10/2005 1:00 pm

More Housing Data to Review... Lots of Good Data

Here is a little housing report I found today. This is an excellent read for those of you whom are thinking of selling your home and will help you price correctly. Excellent insight and data into local housing trends. Most overvalued area.. Naples, Florida. Also there is some indication of of some housing trends heading south. Download the report.

California Real Estate and Jobs.... Married Now Divorced in 6 Months?

Today, the UCLA Anderson forecast released a report taking about how a cooling California real estate market could affect as much as 800,000 thousands jobs! Here is a summary from the CNN article:

"a loss of 500,000 construction jobs and 300,000 jobs in the financial services sector from the housing slowdown, but noted that job losses would not spread across many industries, other than some limited pullbacks in manufacturing."

then followed up with...

"We actually think that we're being somewhat optimistic in saying we don't see it spreading beyond that," Edward Leamer, director of UCLA Anderson Forecast, told CNNMoney.com. "There will be weakness in retail, for sure, and in manufacturing. But not widespread losses."

There is a few things I would read in between the lines of these comments.... optimistic, for sure... everyday those 500,000 construction & 300,0000 people spend money on Starbucks, lunch, house payments, etc... so everyone downline will feel the pinch, especially in areas like Orange County which may be the mortgage company capital of the world.

View the UCLA Anderson Forecast report

Housing Cooling Off or Taken a Break... Good Insight from This Report

Everyday I get home sellers contacting me asking what are "real estate prices doing" going up, down, land softly, crash... all we can do is interpret data, so here is an excellent read for you, download the OFHEO House Price Index Report and study your local area.

For Sale by Owner Center.com Google Maps Mash-Up featured on Googlemaps Mania

Today, the unofficial Google Maps blog Googlemapsmania.Blogspot.com did a little write up on our real estate Google Maps / Google Earth mash-up that we released back on Sept 12.

Housing Migrations.... Sell High Buy Low

Here is an excellent article on CNN regarding recent trends of people moving due to housing affordability and taken their equity to move towards the mid-west. This is an excellent read and a trend that will most likely continue to pick up steam as baby boomers no longer need to leave close to work and approach retirement. Another book that elaborates on this trend is Roaring 2000's by Harry Dent which discussed this trend over three years ago. We believe that this trend will also cause an increase in owners selling homes FSBO.

Real Estate Open-Houses on For Sale by Owner Center

This weekend, if you are not putting up your Christmas lights or fighting the store... we have some real estate open houses coming to you.

Here is a list of the open house or you can visit our Open House listings page.

$550,000 18 Wildwood Dr
Adel, IA 50003 6400 6 / 3.75 12/4/2005 1:00 PM

$650,000 1695 Pinellas Bayway
Tierra Verde, FL 33715 1400 2 / 2 12/03/2005 9:00 AM

$379,900 581 Majestic View Lane
Oconomowoc , WI 53066 2515 4 / 2.5 12/4/2005 2:00 PM

$139,900 4747 Wheeler Rd.
Quitman , GA 31643 1800 3 / 2 12/03/2005 01:00 PM

$269,000 3315 Mayfield Ave.
Windsor Mill , MD 21244 1588 4 / 1.5 12/04/2005 01:00 PM

$214,900 1475 RAVENA STREET
Bethlehem , PA 18015 1869 3 / 2.5 12/11/2005 11:30 AM

$450,000 8172 NW 201 Terrace
Hialeah , FL 33015 2400 4 / 3 12/03/2005

$339,000 1821 SE 48th Avenue
Portland , OR 97215 1798 3 / 1 12/04/2005 12:00 PM

$379,900 355 Aster Ridge Trail
Peachtree City , GA 30269 4600 5 / 4 12/04/2005 2:00 PM

Click on the links for contact information, maps & directions etc!

If Real Estate Slows... the Impact on the Economy?

Reading CNN article on Housing this morning ran across this interesting little fact:

Mark Zandi, chief economist of Economy.com, said that real estate, home building, mortgage finance and other home-related industries together accounted for 9.7 percent of total domestic employment in the second quarter of 2005, up from 9.0 percent in the fourth quarter of 2001.

Combine this with California being one of the hottest areas for real estate, building, etc and the fact the California is something like 25% of the GDP... I'm curious to see what the impact could be. Just food for thought.

National Home Values Report of Appreciation

All the real estate bubble talk is hard to believe in when you see reports like this from the OFHEO (Office of Federal Housing Enterprise Oversight). Some highlights of the housing report:

Nevada home values down 10% in appreciation to 17.6% vs. 28.6% last year.

5 Year winners of the most appreciation:

DC: 118.87%
CA: 112.76%
HI: 102.75%
FL: 99.69%
NV: 99.00%

Boca Raton, FL Real Estate For Sale by Owner, $2,199,000

There is a common misconception about "for sale by owner" real estate listings are only the less expensive homes. Well, we have a few listings in Florida that are far from being less expensive. Here is one of our newest FSBO listing in beautiful Boca Raton, Fl for $2,199,000. The owner states that the waterfront home is 4200 sq ft, 4 bedrooms, 4 baths with a pool on 85ft of canal. If you interested be sure to contact the owner or you can view our other Florida real estate listings using our site:

View all current 138 Florida Real Estate Listings or if you want to search by "location, location, location" view our real estate map search function of Florida Real Estate listings

Mortgage Loan Limits Increased by Fannie Mae makes Home Buying Easier

Conforming mortgage loan limits have recently increased making buying a home a little more affordable. Now more home buyers will have access to conforming mortgages and Fannie Mae / Freddie Mac mortgage programs. Typically conforming mortgages offer a slightly lower mortgage rate than jumbo mortgages.

Here is the new conforming loan limits:

Single Family Home - $417,000
2 Units - $533,850
3 Units - $646,300
4 Units - $801,950

Remember that this applies to the loan amount not the sales price. Also, if you are currently in escrow to buy a home be sure to inquire about the new loan limits and make sure you get conforming mortgage rates not jumbo.

What kind of real estate does $489,000 buy in Tucson, AZ 85741

Tucson, Arizona real estate is quite different than southern California real estate were I'm located. For this same price you are getting maybe 1500 sqft in a decent area. Here is a new for sale by owner real estate listing from our FSBO site. The owner of this beautiful piece of real estate describes the property as:

Semi-Custom home with all known upgrades.

Italian ceramic tile on complete 1st floor and baths...Wood Laminate flooring on stairway and complete 2d floor..10 ft ceilings... custom garage to fit hi-top van or boat..custom lamps..16x34 ft custom pool with waterfall..10 solar panels to heat pool..french doors...solar sun screens...security grills all windows and 3 security screened doors..two 12 SEER air conditioners..large dog house with enclosed dog run...fruit trees and many many more upgrades.....

Take a look at this
Tucson, Arizona Real Estate For Sale By Owner

Google Base and Real Estate Listings, First Impressions

Today Google Base finally arrived. I took this for a test drive to test the functionality for our for sale by owner website. We uploaded some real estate listings from our site and them performed a search:

http://base.google.com/base/search?q=for+sale+by+owner&searchBase=Search+Base&hl=en

First impressions for Searching. From a user point of view. Nice simple, clean layout, typical Google. Easily searchable and relevant. Interestingly, when you search something like: "oconomowoc wi" (yes I posted a listing in this city) with no other tags you would think that a real estate listing with that address would appear first but it doesn't... a car dealer comes first? Overall very nice user experience.

First impressions for Posting. From a publisher point of view. We are working on the RSS bulk upload, so will tell you how that works once we cross that bridge. When uploading items manually, it would be nice it you could save a template of your attributes instead of having to retype each time.

Also, Google Base seems to be a little temperamental regarding the text case of the image extension (i.e. JPG vs jpg), especially when uploading from another website vs. your computer. Again, overall seems to work well but not as easy as craigslist.

My predication... I think craigslist and newspapers will feel some (maybe alot) of pain. Some publishers may feel like they are providing too much data to Google but I think that overall, especially from an exposure point of view, most will give in because of the gained traffic. Consumers will flock to it for it's ease of use and possibly for the fact that aesthetically, it looks nicer that craigslist.

New Real Estate Investment Listing in Kure Beach, North Carolina

Real estate investors may be interested in taking a look at this real estate investment in North Carolina. Owner states that the lot is zone for a duplex and is only 5 blocks from the Ocean. Take a look at this listing on For Sale by Owner Center

Finding a Home made easier with For Sale by Owner Center and Gmail

Home buyers often get frustrated having to visit so many different sites to search real estate listings, spending precious time sifting through all of those sites. I hated this problem too, hence the reason we created RSS feeds on "For Sale by Owner Center.

So here is a nice tip for you Gmail users. Go to settings on top right, then "web clips", then scroll to the bottom and click, Add more Clips. Now go to the far right window to "custom clips" and enter the RSS feed of the new listings in the area you wish to purchase. (as an example, here is our RSS feed of the newest real estate listings posted on For Sale by Owner Center, so copy this into the address bar;

>> http://www.forsalebyownercenter.com/rss/rss_newest25.xml <<

Now you have real estate listings appearing in real time on your email browser. You can use this trick for any site that provides their real estate listings via RSS. Now thats "Real Estate. Real Simple."

Permanent Honolulu Vacation, Nice Hawaii Real Estate Listing For Sale by Owner

Dreaming about Hawaii... how about a permanent vacation with this view every morning. For Sale by Owner Center has a new Hawaii real estate listing of a beatiful condo for sale by owner. Please take a look at this Hawaii condo or our other Hawaii real estate listings

For Sale by Owner Center Website Update

We have just completed another update to For Sale by Owner Center to make it easier for home buyers to find property for sale by owner. You will notice that we now have the search box at the top of every page of the site, which should help in the user experiance. Please be sure to give us some feedback about the new look and in case you find any bugs.

Thanks for Reading,
Jessie Beaudoin
For Sale by Owner Center

Real Estate Listings via RSS Feed

In our quest to continually improve our free For Sale by Owner site for our users, we are again on the cutting edge by offering additional exposure of their "homes for sale by owner" using RSS / XML feeds. This guarantees the most complete reach of the FSBO listings online. Get the newest real estate listings posted on For Sale by Owner Center automatically delivered to your personalized browser.

For Sale by Owner Center - Sell Your Home Free

For Sale by Owner Center.com allows you to sell your home by owner for free. Most companies charge home sellers up to $2,999 to sell their home for sale by owner. Post your home for sale by owner in 5 minutes and include up to 6 photos of your home at no cost, best of all, you will immediately appear as a featured home on our home page. Visit our site at: http://www.forsalebyownercenter.com