tag:blogger.com,1999:blog-13164186.post115289910289948417..comments2024-01-27T19:26:32.604-05:00Comments on Bubble Meter: Is There a Realtor Bubble?Davidhttp://www.blogger.com/profile/11169148764438565562noreply@blogger.comBlogger74125tag:blogger.com,1999:blog-13164186.post-1153276109978948692006-07-18T22:28:00.000-04:002006-07-18T22:28:00.000-04:00NC Realtor asked:"Lance,Are you a Real Estate agen...NC Realtor asked:<BR/>"Lance,<BR/><BR/>Are you a Real Estate agent?"<BR/><BR/>No, but I grew up around the business as my dad was a RE broker (30 - 40 years ago) and I at one time (1979?) had studied and gotten my license ... though I held it long enough just to sell one house and list another before deciding I wanted to go back to college! It's a tough business, I know. I remember very well all the interupted Thanksgivings and Christmases and the "feast or famine" income scenario ... with average earnings over the long haul being a lot less than those of other professionals which my dad worked with daily including the lawyers. <BR/><BR/>I sympathize with you, however I still think that in today's environment where everything is automated, there is no justification for keeping rates so high .. and that doing so in the end keeps you (i.e., your industry) from evolving as you otherwise would. When stocks were selling fast, brokers hired assistants to help them process transactions. Why? (1) Because the barriers to entry were high ... I've held a Series-7 and I can tell you it is much harder to get one of those than a real estate license ... and getting a real estate license is not exactly easy, and (2) they were thus able to cut their commission rates and capture more trades from the other brokers. It was a win-win for good brokers, their assistants who were paid in line with what they were bring to the table (and not the same percentage as the experience brokers as is the case in Real Estate), and the customers who saw lower transaction costs for buying and selling. However, from everything I have read, the NRA has done everything in its power to "fix" rates.Lancehttps://www.blogger.com/profile/12216089306021385355noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153256668612942592006-07-18T17:04:00.000-04:002006-07-18T17:04:00.000-04:00Hahahahahahahahaha! Takes one to know one?Hahahahahahahahaha! Takes one to know one?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153222366828299222006-07-18T07:32:00.000-04:002006-07-18T07:32:00.000-04:00NC,There is no doubt that real estate agents bear ...NC,<BR/><BR/>There is no doubt that real estate agents bear the brunt of the cyclical nature of the real estate market. It is "feast or famine" and those real estate agents that know how to save for the eventual rainy day are those that survive. And yes, you are correct that individual agents are justified in grabbing as much as possible when it is out there to be grabbed. HOWEVER, the issue of your salary over time is not the direct issue at hand here. It is the fact that over the short term, commission rates should theoretically lower in times of rapid price appreciation ... since over the shortterm it is not anymore expensive to market and sell a property at $300K when 12 months earlier it was valued at only $150K ... and half the commission if the commission rate remains the same. <BR/><BR/>Ironically, the lowering of rates charged to reflect actual costs of production during such times of price appreciation would also serve to lessen the very onslaught of parasitical new agents that find their way to your profession each and every time the market is booming ... and then disappear again shortly thereafter. The relatively extraordinary profits that agents can get on a per-sale basis during times of rapid price appreciation serve as a great incentive for these part timers and others with little investment in your profession to come in and share in what should be your business ... and your "savings" for a rainy day. I.e., yes, you should be storing your nuts when times are good so that you can make it through when times are bad ... but you shouldn't have to be fighting for these nuts with your fair-weather agent friends ... and more importantly, buyers and sellers shouldn't have to be paying for these inefficiencies casued by price fixing mechanisms that may not be readily apparant to you the Realtor but which are well documented as occuring on an industry level basis.Lancehttps://www.blogger.com/profile/12216089306021385355noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153194268932217742006-07-17T23:44:00.000-04:002006-07-17T23:44:00.000-04:00"Lots of words but no explanation of why you get t..."Lots of words but no explanation of why you get twice as much to sell a 500k home as a 250k home"<BR/><BR/>Similar syndrome to Exxon...as prices go up, margins go up, thus higher profits....$500k houses could sell at $250k in the future, and realtors will have more competitors for the same house, thus less income.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153185231173166782006-07-17T21:13:00.000-04:002006-07-17T21:13:00.000-04:00NC,Also note that you are talking to people in DC ...NC,<BR/><BR/>Also note that you are talking to people in DC who have seen average house prices go from something like $150K to close to $750 in the span of something like 7 years ...Lancehttps://www.blogger.com/profile/12216089306021385355noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153184876536426092006-07-17T21:07:00.000-04:002006-07-17T21:07:00.000-04:00nc,va_investor was the poster you originally repon...nc,<BR/><BR/>va_investor was the poster you originally reponded to with the long post and then followed up with a second post. so, i think she is still looking for you to justify such changes. i sympathize with the work you do, but i think you can't justify it because lacking the monopolistic practices that the Realtor's Assoc. has been engaging in, they wouldn't have doubled along with the price of homes. Your comparison to the other industries you list is not an accurate one because none of them engage in the same monopolistic rate setting policies that the Realtors ...with it's strong lobby ... has thus far managed to avoid being called to the carpet on. In all those other industries, when the revenues doubled, and the costs didn't, there was competition between the players to gain as much market share as possible ... and that competition was waged with price lowering. Look at Wal-Mart and how it beat K-Mart almost into the ground. That is what happens in a non-monopolistic industry. It brings in less overall revenues to the industry, but more to those with the lower rates and effectively passes on the savings of economy of scale partly to the consumer via lower prices. The Realtor's Assoc. mandates that all its members charge a 7% or 6% rate and enforces against serious deviations from this. This brings in more overall profits to the entire industry ... at the expense of consumers who would in a true free market share in the savings.Lancehttps://www.blogger.com/profile/12216089306021385355noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153184133125017392006-07-17T20:55:00.000-04:002006-07-17T20:55:00.000-04:00anon 4:08 said:"further, most of these costs are t...anon 4:08 said:<BR/>"further, most of these costs are tax deductible, which you conveniently left out."<BR/><BR/>no he didn't ... he told you what his gross taxable income was (i.e., revenues minus expenses = gross taxable income). He must still pay income taxes on the amount he gave you (AND pay the other 30% taxes he mentioned.) I.e., he didn't tell you how little he actually cleared. Why such a cynical and mean tone? Are you trying to blame someone else for your own bad housing decisions in life? Believe me, it's not flattering.Lancehttps://www.blogger.com/profile/12216089306021385355noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153178892265178012006-07-17T19:28:00.000-04:002006-07-17T19:28:00.000-04:00Lots of words but no explanation of why you get tw...Lots of words but no explanation of why you get twice as much to sell a 500k home as a 250k home.<BR/><BR/>Also, your comparisons to Gates, cars and diamonds are not germane to the issue of your pay doubling. Ads didn't double, taxes didn't double, cars didn't double, the value of your time didn't double.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153177727988554272006-07-17T19:08:00.000-04:002006-07-17T19:08:00.000-04:00"The agent is an independent contractor so they pa..."The agent is an independent contractor so they pay both sides of their taxes (in case you don't know this your employer pays half your state, federal/social security for you). So 30% is taken in taxes equaling 1350.00 so that leaves 3150.00 for each agent. Then a typical "package" for a listing is sign 45.00, directionals 8.00 a piece, virtual tour 90.00, lockbox 35.00 equalling 178.00 for each listing. Some signs get reused by a busy agent is always having to buy new ones. These fees vary from area to area. Then you have a newspaper ad (which is worthless only 5% of sales are from newspapers) a typical newspaper ad runs 250.00 a day for weekend or prime spots. Then each glossy book or homebook runs about 300.00 a month most agents run at least one or two a month and an ad a weekend equaling 1600.00 for a months run on ads. So now we are down to having 1372.00 left out of our pay and this does not count any time we spent which involves many many things. And the companies pay even more for larger scale advertising and for office costs. I can also break down further cost and go into an explanation of how time is used. Agents do not just work with you they work with multiple families at a time. They list and sale multiple properties at a time. They work on ads for muliple publications and newspapers all coming out on different schedules. Just setting up homes to show is way more involved than a layperson understands. When you want to go see a few houses on a weekend the agent has to call the owners or their agent (and both parties may be busy and have to call each other back and then you back) we make an appointment for each house, may have to pick up keys from different offices if they are not of lockboxes, pull the information about each house. Map between them depending on how big the area is and make arrangement to meet you the buyer at a location. All that is just for one buyer and agents do tons and I mean tons of other things."<BR/><BR/><BR/>we know what realtors do, thanks. <BR/>but you err in bundling all this with buyer's and seller's agents, 80% of the costs you mentioned are only incurred by a selling agent. further, most of these costs are tax deductible, which you conveniently left out. if the newspaper ads dont work, dont waste yours and the sellers $ doing it, you're only keeping newspaper companies alive and probably getting kickbacks from them anyway. so what you're saying is we're paying 4500 for you to map us to the property.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153177465444790752006-07-17T19:04:00.000-04:002006-07-17T19:04:00.000-04:00anon said:"so this is why I am cynical and not che...anon said:<BR/>"so this is why I am cynical and not cheery..because this has Focked up America's economy immensley and it is going to make the next 10 years very rreminiscent of the 1970's..and they kind of sucked....."<BR/><BR/>funny, I too think we'll be returning to the 70s ... but not for the reasons you state but rather because of the huge debts the government will have to incur to finance both Iraq and huge tax cuts ... and the resulting inflation ... I just pray and hope we don't have to watch Olivia Newton-John and John Travolta do that disco thing again!Lancehttps://www.blogger.com/profile/12216089306021385355noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153176925469726892006-07-17T18:55:00.000-04:002006-07-17T18:55:00.000-04:00Lance said...."any comments bubbleheads as to why ...Lance said....<BR/><BR/>"any comments bubbleheads as to why such cynicism and poor tone is exhibited over and over in bubblehead posts? "<BR/><BR/>my cynicism and poor tone based on my knowledge experience and reason..yes I actually developed my own opinion..and I am telling you how I see the world now..my own perception of reality...I think it is a huge bubble..I think it will casue a lot of pain for many Americans , directly (their home price drops) and indirectly (deep long recession jobs losses in mnay industries housing boom was major reason for post 2002 recovery , consumer tapped out, and the leveraging of America by greedy bastards, is going to make it especially rough)..I remember how the 2000-2002 Nasdaq fiasco went down..I remember how the japanses bubble burst in stocks and RE...I have read about other asset bubbles history...and they all end up bad...so this is why I am cynical and not cheery..because this has Focked up America's economy immensley and it is going to make the next 10 years very rreminiscent of the 1970's..and they kind of sucked.....Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153170303815044022006-07-17T17:05:00.000-04:002006-07-17T17:05:00.000-04:00NC,I am not talking about muti-million dollar esta...NC,<BR/><BR/>I am not talking about muti-million dollar estates. The example was 300k vs 150k. Please respond.<BR/><BR/>Also, please address why your "pay" doubled in the past 3 yrs simply due to price appreciation.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153166685994741952006-07-17T16:04:00.000-04:002006-07-17T16:04:00.000-04:00Please GIVE up the jealousy argument. Bubbleheads...Please GIVE up the jealousy argument. Bubbleheads believe that home buyers were foolish to have bought in the past two years (like you did). Why would they be jealous of people they believe are fools?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153164201469891852006-07-17T15:23:00.000-04:002006-07-17T15:23:00.000-04:00anon said:"Anonymous said... seems like some realt...anon said:<BR/>"Anonymous said... <BR/>seems like some realtors now being told to encourage clients to "hit any bid" this will generate more sales and more commissions, while also driving prices lower..so the RE agents will screw the fools coming and going.."<BR/><BR/>uh ... would you expect them to tell them to "hold firm for a price you can't get"? an if they had advised to do that, then you would have accused thme of propping up prices. the complete cynicism and bad "tone" being shown by bubbleheads such as this one are just astounding! <BR/><BR/>it's been my experience that it is unbridled jealousy that leads to this kind of cynicism. and i suspect that is the case here. any comments bubbleheads as to why such cynicism and poor tone is exhibited over and over in bubblehead posts?Lancehttps://www.blogger.com/profile/12216089306021385355noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153163838487696702006-07-17T15:17:00.000-04:002006-07-17T15:17:00.000-04:00Nc,This still does not justify a percentage paymen...Nc,<BR/><BR/>This still does not justify a percentage payment scale. How is it twice as much work to sell a 300K house vs. 150K townhouse. This is where the antitrust issues come into play.<BR/><BR/>Back in the day when I was a real estate lawyer, it was often much more work to close the low priced stuff because of title problems and the difficulty of purchasers to get loans (i.e. judgements, liens, divorces, bad credit, multiple co-signors, etc.)<BR/><BR/>The EASIEST smoothest deals were the high dollar sales. Please justify the percent.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153162667516515902006-07-17T14:57:00.000-04:002006-07-17T14:57:00.000-04:00seems like some realtors now being told to encoura...seems like some realtors now being told to encourage clients to "hit any bid" this will generate more sales and more commissions, while also driving prices lower..so the RE agents will screw the fools coming and going..http://www.boston.com/business/articles/2006/07/17/to_fight_the_glut_home_sellers_push_their_prices_down/Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153161831171761472006-07-17T14:43:00.000-04:002006-07-17T14:43:00.000-04:00Looks like 600,000+ soon to be unemployed total lo...Looks like 600,000+ soon to be unemployed total losers. Say hello to McDonalds as a burger flipper you tards.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153160228015100442006-07-17T14:17:00.000-04:002006-07-17T14:17:00.000-04:00anon 10:37,Your post shows a gross ignorance of wh...anon 10:37,<BR/><BR/>Your post shows a gross ignorance of what agents do. I'll leave it to NC to fill you in on the details, but as a clue I'll tell you that when I was looking my agents (like most agents in DC) gave me direct access to the MLS listing via his website since, as you accurately observed, serving as an intermediary for finding properties to search is not a real value add now that the information is out there on the web. This left him time to coordinate other activities such as helping me strategize for a successful bid in getting a house (which in my case never happened because I found one on my own, which was not on the market, after gone through 4 unsuccessful bids.) On the sale side of the equation, the agent is your marketer. Why do you think large companies go to marketers (e.g. adverizing agencies) rather than rely on their own selling skills? ... 'Cause marketers do this for a living and can do it far better than you can. For example, when I listed with my agent he prepared a pamplet on the house containing pictures, a floor plan, and a text desription ... He also arranged to have a broker's open house as well as getting it into MLS getting it well know. He sent out a postcard of the listing to zip codes he had targeted as potential buyers' areas, etc etc. He was a professional in all this. I am not. I wouldn't have depended on myself for this anymore than I would depend on myself for making a diagnosis on a foot problem. Yes, all the information for the foot problem (like house listings) is out there on the Internet, but it's interpreting that information and coming out with the right conclusions that is important. It is also dealing with all that information on a constant basis that is important ... i.e. "knowing the market". Lastly, there is objectivity and what the benefits of having an intermediary. Even doctors go to other doctors when they have problems. This is because when you are too close to a situation, it is impossible to be objective. As an example, we all think our homes are the best homes and thus worth the most. An agent can be more objective about what needs to be repaired/replaced before putting it on the market and as to setting the price. Likewise, it is much easier to negotiate when you have an intermediary. When buyer and seller aren't directly sitting across from each other negotiating a price and conditions, the final agreements made will not have been influenced by human factors such as one person being a better negotiator than another. Which as I recounted earlier is what happened to me when I sold my first condo myself and I found myself sitting across the table from a realtor and her just out of college buyer. How could I easily say "no I am sticking to my price" when the agent portrayed her client as this helpless young girl just looking for an affordable place ... with my being able to grant her wish ... if I lowered the price. Yes, I could have been heart harded ... but even that carries a price to it. Lastly, someone asked why it is the realor gets the bulk of the commission when all those other people like lenders are involved. That is because it is the realtor coordinating all these actors in the sale/purchase transactions. This is all stuff you have to do yourself if you are going with a discount agent or doing it yourself. And not doing this on a daily basis, you will probably do it wrong .. AND, in the end drive up costs for everyone because (a) you are bringing in-efficiencies into the system such as learning curve that get "paid for" by these other actors who would otherwise be dealing with a professional and not having to explain everything every step of the way and (b) these other professionals will by necessity have to take up some of these functions that your realtor would otherwise be doing because you as an untrained person will not be able to do them. <BR/>Now, do I think all that is worth 6% commission in this highpriced environment? Not in the least. Realtor association is acting like a monopoly and setting prices .. which is illegal, and the day will come when Congress or others will break that monopoly. Then we can expect prices (percentages) to drop to more reasonable levels in respect to sale prices. Perhaps we'll even see the concept of fixed price components being substituted for variable pricing as in when a fixed "Document Handling Fee" is charged. (It just has to be instead of one or more percentage points ... and not in addition to the full 6%!)Lancehttps://www.blogger.com/profile/12216089306021385355noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153157865108204322006-07-17T13:37:00.000-04:002006-07-17T13:37:00.000-04:00NC Realtor,“Two things set the price for a propert...NC Realtor,<BR/><BR/>“Two things set the price for a property, the seller and the market. Realtors are just like Doctors or any other profession. If you go to a Dr. for a problem one might suggest surgery and one might suggest doing nothing. They come from differing schools of thought. Realtors are no different.”<BR/><BR/>Wow, no offense but you cannot compare what a doctor does to what a realtor does. And unbelievably, in the last few years many top real estate agents have made more than doctors. In addition, you your self point out that there are many intermediaries in a real estate transaction; escrow company, title company, appraisers, banks, etc. Yet why do the agents get the bulk of the commission? It seems that you have something to say about discount brokers so say it. I will tell you why they are a good thing and why the flow of information will drain the industry:<BR/><BR/>• Sites like www.zillow.com, www.ziprealty, and other online MLS information give would be buyers an advantage regarding pricing. In one or two years it will be easy to go online and get previous sales data for all homes in the country. How this affects the market is a seller cannot over price a home because a would be buyer can have access to the previous sales price. This thus forces the seller to justify the price more accordingly. Say a house was purchased last year for $400,000 and now is being sold for $500,000; this data is public and will become easier to find. This in my humble opinion is great for buyers and sellers. Definitely not good for realtors hence their attempt to block sites like www.zillow.com (in its infancy stage).<BR/>• Again, entry into the field is non-existent. The exam is a joke and not even a high school diploma is required for the exam! Figure that out for yourself. So discount brokers or facilitators of information provide a service of information gathering. I’ll use the example of travel agents. Once information became accessible, I can go online to www.expedia.com, the airlines website, maybe go on Craigslist to see if someone has a vacation package that they cannot use and decide what is my best option. This is available because the information is out there. It is a matter of making it flow better. Again, some people still use travel agents but the industry is a shadow of what it once was. Real estate agents use to have a monopoly on information such as sales history and comps but this will be gone in a few years. <BR/><BR/>Good agents will survive because they are good sales people, bottom line. Just like good used car sales people do extremely well because they can sell ice to Eskimos. Let me offer the example of the late 90s. With tech booming many people sought to chase the gravy train. Students with an AA in computer science or even basic tech courses were starting at $50,000 a year. A bachelors in the same field was commanding $65,000+ a year. But what happen? Ironically the industry that was built by these people brought them down. Why pay someone $10,000 for a website when you can have someone in India design it for you for $2,000. After all, you’re paying for the information. And now that the industry has purged itself, you are left with high quality educated tech workers here. The rest had to retool their skills. The same will occur with real estate on a much larger scale. Once information is easily accessible and at the public’s hands, they will realize “why am I paying this person $20,000 in a commission?” Is it worth your time to do a little research and protect yourself for $20,000? I’m sure a lot of people will say yes. Some would rather pay a real estate attorney $2,000 for a couple of hours of work to make sure the documentation is in line. <BR/><BR/>I have no doubt you are a good agent and obviously you have a vested personal interest on how the market reacts. Hate to be the bearer of bad news but this is how the future looks. But like I said a good agent will always have buyers and sellers. Yet there will be a major purge in the industry in the next few years.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153154401269079912006-07-17T12:40:00.000-04:002006-07-17T12:40:00.000-04:00I don't know if anyone has discussed this before b...I don't know if anyone has discussed this before but does the flood of infomercials on how to get rich through real estate on TV (like the Carlton's "No Money Down" scheme) drive many people into investing in real estate in the last couple years? I know the low interest rate and other factors contribute mainly to the boom but those infomercials sure make investing in RE sound like easy money and I'm sure some people were suckered into it.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153153497255909802006-07-17T12:24:00.000-04:002006-07-17T12:24:00.000-04:00NC Realtor,The problem with the perception of your...NC Realtor,<BR/><BR/>The problem with the perception of your profession is that the barrier to entry is very low, the issues can be very complex and a high proportion of the practitioners are part time. <BR/><BR/>In the DC area there is a growing practice of real estate firms presenting the buyer with a "document prep" fee of about $300. I have had this presented to me when I have made offers on prperties and I have had it show up on settlement statements without any notice. Of course, every time I refuse. The selling agent is not performing any services for me, it's a blantant money grab. <BR/><BR/>Is this completely dishonest practice used by your firm?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153152140255836112006-07-17T12:02:00.000-04:002006-07-17T12:02:00.000-04:00NC Agent,Why are commissions a percent of sale's p...NC Agent,<BR/><BR/>Why are commissions a percent of sale's price vs. based upon work performed?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153151242330356992006-07-17T11:47:00.000-04:002006-07-17T11:47:00.000-04:00are other discount agencies like ZipRealty include...are other discount agencies like ZipRealty included? I dont think they are considered Realtors and would only further escalate these numbers...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153135654520143182006-07-17T07:27:00.000-04:002006-07-17T07:27:00.000-04:00anon 11:36 said:"NC Realtor,You know the stats, do...anon 11:36 said:<BR/>"NC Realtor,<BR/>You know the stats, don't play the I don't know game...Please!"<BR/><BR/>Albermarle County and Charlotte are hundreds of miles apart. Why would NC Realtor know if lake-front properties in a place hundreds of miles from where he does business are going up in price faster than non-lake front properties in that same area. Again, bad "tone" from a bubblehead. It is a "tone" embodying unwarranted suspicion of all those individuals involved in a process which they really don't understand very well at all. It's a "kill the messenger if you don't like the message" tone. It's childish and sophomoric as NC Realtor said in his first post.Lancehttps://www.blogger.com/profile/12216089306021385355noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153135479655331132006-07-17T07:24:00.000-04:002006-07-17T07:24:00.000-04:00This comment has been removed by a blog administrator.Lancehttps://www.blogger.com/profile/12216089306021385355noreply@blogger.com