Has the housing market reached a tipping point, even in grossly overheated Cambridge, MA? Too early to answer that question, but our Bidding War Scorecard keeps revealing interesting data points about conflicts of interest in real estate. For example, during August 2014, four of five bidding wars selling $200K+ over asking price involved in-house sales, adding more fodder to our goal of repealing or neutralizing Designated Agency in 2015, the 10th anniversary of this flawed counterfeit buyer agency.
But as the Wall Street Journal reported earlier this year, designated agency can turn against sellers, too. Designated agency and dual agency can have a bipolar impact on the housing market, because, “Having an agent represent both buyer and seller can either raise or reduce the final selling price, depending on the timing of the transaction.”
So what’s happening now in Cambridge? Overall, MLS data reveals that sales in Cambridge have dropped a stunning 42%, falling from 122 in July to just 71 in September. One in 4 to 5 MLS listings continue to sell in-house, but during September one third of in-house sales resulted in savings of $50K or more off the listings price. In fact, half of the 10 listing selling $50K or more under the original asking price were in-house sales — all listings that had been on the market at least 40 days up to 146 days.
Our Dual Agency Detective says sometimes in-house sales result in buyers overpaying in bidding wars, other times sellers are shortchanged on stale listings. The only thing that is certain is the brokerage practicing designated agency collects both sides of the commission.
Beyond the costs and opportunity costs to individual buyers, are complex questions with widespread public policy implications: “What impacts are conflicts of interest having on the housing market?” The question extends beyond individual budgets, to the composition of communities, and potential cost to tax payers who are insuring 90% of mortgages; even beyond the legal obligation of real estate brokerages, to the games agents play and the potential for a bidding war backlash, regulatory reforms, or worse, lawsuits.
What’s your take, homebuyers and new homeowners? If you felt “forced” to bid way over asking price in a bidding war during the first half of 2014, are you beginning to second guess that decision? What role did “your” real estate agent play encouraging to pay over asking price, or including an escalator clause? If you’re one of the four new homeowners who suffers from buyer’s remorse, you may want to read how buyers responded in the past: