Following #My2K? Why not turn Mansion Cliff into #My$200K (or more)!

Black Friday and CyberMonday have come and gone, but a blog post before Thanksgiving asking why there isn’t a real estate equivalent got us thinking and analyzing data. Then when President Obama launched the #My2k campaign to raise awareness about the potential impact of the fiscal cliff on the middle class, our moment of inspiration came:

Why not create a #My$200K campaign to call attention to the Mansion Cliff approaching in luxury real estate?

Why $200K? The Real Estate Cafe’s analysis of MLS sales during the last 40 days of some past years — the traditional “Let’s make a Deal” season in real estate — reveals that 1% of sales across Massachusetts closed for approximately $200,000 or more off their last list price!

So as #My2K tweets stream across the internet, isn’t it fair to offer something to those upper income households – the 1% — who will most likely be paying higher taxes next year?

How about $200K? Not $200K off their taxes, but $200K off the asking prices of a luxury home? In July, 2012, CNBC warned that the luxury housing market was headed towards a “Mansion Cliff,” and there are early signs that some luxury homes in Greater Boston have already gone over the cliff.

We’ll save details of our research for clients, but here’s the deal:

To encourage luxury home buyers to make offers before the end of the year, the capital gains deadline some sellers are trying to meet, The Real Estate Cafe will suspend our normal Menu of Fees & Rebates and base our compensation on how much money we save clients.

Introducing Fee-for-Performance:  Basing our compensation on YOUR savings!

Our initial thought was establish a flat fee: If we saved a buyer $200,00 we’d get $40K. But savings that large won’t be possible often, so we’ll simply set our fee at 20% of the savings off the list price. Like a typical MLS transaction, we’ll get paid out of the buyer agency fee ALREADY built into the sales price. If there is any commission left over, we’ll rebate it to you; and GUARANTEE that you’ll never get pay more than the commission built into the sales price — with one exception!

Our experience is that it is actually possible to save more than $400K this time of year, and we’re eager to do it again.

If we go over that figure, we’ll ask for 20% of the savings to be paid whether the buyer agency fee covers our performance bonus or not. So, for example, if we help you save $400K, we’d collect an $80K cobroke check at the closing table; and you’d STILL save $400,000 off the last asking price. However, if the buyer agency fee built into the sales price does not cover our entire bonus — for example, a 2.5% commission on a $3M sale is $75.000, not $80K — then you’d pay the difference, a $5K performance bonus check, at closing, too.

How does that compare to your end of year bonus? A small price to pay is my guess; particularly if we help you save twice your #My$200K (or more) off the luxury home of your dreams!

Related Articles

MIT Professor: Housing prices could decline another 20%

Savings of $100,000 or more on individual home purchases were relatively common across the top 25 most expensive housing markets in Greater Boston in 2006, and according to one MIT professor, savings are likely to continue in 2007.  Professor William C. Wheaton predicts housing prices could decline another 20 percent in Greater Boston and other markets over the next two to three years.  Does that mean that homebuyers in the most expensive communities will see even more price reductions in each of these categories in 2007?

PARTIAL MAP of homes selling for more than $100,000 below their original asking price: (see technical note below)

As sales prices fall, well-informed sellers are could set more realistic prices so the gaps between the original asking price and final sales prices may not be as wide as those recorded in 2006.  We’ll continue to map the location of six figure savings, and invite you to do the same on The Real Estate Cafe’s award-winning interactive bubble map.  We’re so convinced that our clients will save money, we’re willing to base part of our compensation on it.  Contact us at 617-661-4046 or RECafe [at] Mac [dot] com for information on our experimental NEW fees and rebates options.

How can we improve our money-saving Menu of Fees & Rebates?

Menurebates_v1It’s been more than a year since we updated our Menu of Fees & Rebates, so we’d like to invite home buyers to meet in person to discuss possible improvements.  Our current options are shown above (click on arrowheads in outline for more detail) and on our wiki.

  • We offer three basic options:  traditional commissions with limited rebates, hourly fees with full rebates, and flat fees with performance bonuses
  • Our most popular options include a 100% rebate of the buyer agency commission included in the sales price. 
  • Our hourly fees range from $75 to $125 per hour depending on the size of retainer prepaid (or $150 per hour with no retainer or minimum fee).
  • Limited availability:  Flat fees start at $3,000 plus performance bonus.  Each performance bonus is negotiated individually to motivate us to help you maximize saving (see map of savings totaling over $1 million).
  • We’re also willing to work with a few buyers on a 1% fee option, some restrictions apply.
  • Finally, you can propose your own fee / rebate, particularly if you are selling "for sale by owner" and would like us to represent you as a buyer.  That way you can maximize savings both buying and selling.

Our ideal is a mix of fees — hourly, flat fees, and traditional.  If you select option 3.3 and prepaid $3,000 in the next few days, we’ll cut our hourly rate by 50% for the first 40 hours.  We’re pushing this special offer so we can attend the National Association of Realtors mid-year convention next week to identify the best new money-saving tools and trends for home buyers and sellers. 

Should we host a series of webinars or meetings off-line to discuss the benefits of each fee / rebate, and to help new clients decide which money-saving option best meets their
needs?  We can meet on short notice at a local cafe or in the privacy of your home.  We’re also eager to begin meeting at  TogetherInMotion in Arlington, MA so working parents can talk over food while their kids play.  Please contact us for additional information.

Part II: Million Dollar Markdowns coming to a neighborhood near you?

Follow-up to Part I: Housing slump hits Cambridge: 1 in 3 single family homes selling below assessed value

As graphed in the blog post above, homes selling below assessed value are increasingly common, but what was newsworthy about the
Boston Globe’s story last week is the magnitude of how far below.
During the first six months of 2008, two homes in Cambridge sold for
approximately $2 million below their original asking price.  More
significantly, both sold for more than $1 million below their assessed value based
on our analysis of MLS data shown below.

Can you guess the address of these two properties in Cambridge?  

Original asking price:  $5,300,000
List price before offer accepted:  $3,700,000
Price reduction Original vs list price:  $1,600,000
Final sales price:  $3,100,000
Price reduction below last asking price:  $600,000
$2,200,000 Savings vs original asking price
% Savings vs original asking price:  42%
Assessed value:  $4,122,100 (2007)
Saved vs assessed value:  $1,022,100
Sales price / town assessment:  75%
% below assessed value:  25%
Guess how many days on market?

Are you seeing Million Dollar Markdowns in your local housing, elsewhere in Massachusetts, the US (or world)?

Original asking price:  $5,500,000
List price before offer accepted:  $3,995,000
Price reduction Original vs list price:  $1,505,000
Final sales price:  $3,650,000
Price reduction below last asking price:  $345,000
Savings vs original asking price:  $1,850,000
% Savings vs original asking price:  34%
Assessed value:  $4,917,400 (2008)
Saved vs assessed value:  $1,267,400
Sales price / town assessment:  74%
% below assessed value:  26%
Guess how many days on market?

As reported by the Boston Globe, The Real Estate Cafe has monitored "Million Dollar
Markdowns
" — luxury homes which have sold at least $1 million below
their
original asking price — on and offer during the past. See links in
blog posts from 2007:  Sweetest Deals of 2006 and MIT Professor: Housing prices could decline another 20%.

As McMansions become less desirable and the housing market drags the economy in recession, do you think "Million Dollar Markdowns" will become more common in your local housing market?  Are owners already putting them on the market now to minimize their losses?  Will the expiration of estate tax cuts enacted in 2001 cause the luxury housing market to collapse, or will Congress and the new president extend the tax cuts permanently?

MicroPoll:  Would you like to attend a "Bubble Hour" to discuss homes selling for below assessed value in Greater Boston?  (See one click survey & results.)

Carpe Diem:  Hire The Real Estate Cafe to conduct original research like this, and save money on your next real estate transcation by taking advantage of these limited time offers

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