Blog Archives

InventoryGate: Fact checking “tight inventory” & “the rest of the story”

The headline, “Home buyers face tight inventories, rising prices this spring” followed a predictable script for the past two years, but the level of sensationalized reporting in the Boston Globe’s recent story may have crossed a line.  First a cash bidding

Posted in Bubble Hour, Buyer agent, Counterintelligence, Crowdsourcing, Defensive Homebuying, DIY Homebuyers, In the News, Intention Inventory, Proactive househunting, Tipping Policy

Housing “iCovery” driven by Interest rates, Investors, Illusion & near Insanity in DC?

Pointing to a wobbling economy made more vulnerable by political gamesmanship in Washington, today’s Boston.com real estate blog asks, Low interest rates today, tomorrow, forever? “This is big news for home buyers – today’s low interest rates, hovering now at

Posted in Bubble Hour, Buyer agent, Consumer protection, Defensive Homebuying, Housing bubble, Housing forecasts, iCovery, In the News, Real Estate Bubble

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

Posted in Change Agents, commission rebate, Commission Reform, Fee-for-service, In the News, Luxury homes, M$M, Market trends, Million Dollar Markdowns, Price reductions, Savings & Rebates, Seasonality, Sweetest Deals, Timing the market

Market snapshot: Do condos in East Cambridge reveal market weakness?

A quick analysis of condominiums currently under agreement in East Cambridge could reveal a remarkable weakness in the housing market.  The Real Estate Cafe prepared the market snapshot below to substantiate a comment we made earlier in the week in

Tagged with: ,
Posted in Defensive Homebuying, Fee-for-service, In the News, Market trends, Pending sales, Price reductions, Price trends, Real Estate Bubble, Savings & Rebates, Timing the market

Another proposal to inflate housing prices & reward counterfeit buyer agents?

Real Estate Cafe comment on proposal to stop the downward slide in home prices by “insuring” homebuyers losses up to $100,000 with tax dollars: Listing agents used blind bidding wars to manipulate competing home buyers into overpaying before the end of

Posted in Bidding wars, Bubble Hour, Defensive Homebuying, Dual Agency Detective, In the News, Market trends, Real Estate Bubble, Timing the market

Would-be home buyers waiting for sellers to reduce prices further

Real Estate Cafe client, who Andy Foland, was quoted in a cover story of the Boston Globe today entitled, Consumers who could lift market not read to buy.  Andy “estimates prices in Greater Boston have been falling about 1 percent

Posted in Consumer surveys, Defensive Homebuying, In the News, Market trends, Price trends, Real Estate Bubble, Savings & Rebates

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

Posted in In the News, Million Dollar Markdowns, Price trends, Real Estate Bubble, Savings & Rebates, Timing the market

Alternative fees for home buyers: Still the “Unfinished [r]Evolution”?

Four years ago, June 7, 2004, Banker & Tradesman quoted The Real Estate Cafe in a page one story entitled, "MLS Policy Statement Fuels Commission War."  The skip page read:

Unfinished Evolution

During the last decade or so, alternative services — such as flat-fee, listing-only or fee-for-service models — have been offered to home sellers, but there haven’t been a tremendous amount of choice for buyers, according to Wendel. 

This is one of the untold and unfinished pieces of this [real estate r]evolution," he said.  Wendel, who charges $100 an hour rather than charging a commission, has been offering a full menu of services to both buyers and sellers for the last 10 years.

Do you think the residential brokerage community now offers enough alternatives to the traditional real estate commission?  What kind of money-saving options would you like The Real Estate Cafe to add to it’s Menu of Fees & Rebates?  Should we bring back our $3,000 and $5,000 flat fees, first offered when we opened in 1995, or continue to focus on hourly fees?

Would you like to see the traditional, two-sided real estate brokerage commission uncoupled so home buyers and sellers can BOTH maximize savings in an open, competitive market place?  If you are not familiar with the issue, watch this 90 second video.  Why hasn’t this happened already, and what will it take to get there?  Your ideas are welcome on the "divorcing" commissions section of our wiki, or in the comments section below. 

See what we mean about the "Unfinished [r]Evolution" in real estate brokerage fees?

Posted in Commission Reform, Fee-for-service, In the News, Inside The Real Estate Cafe, Savings & Rebates

Misleading home buyers: Conflict of Interest? What conflict of interest?

Sameoffice1
Thankfully, a recent NYTimes article, Feeling Misled on Home Price, Buyers Sue Agent and an interview hours ago on Today on MSNBC, are beginning to shed light on deceptive real estate practices.  However, the
article doesn’t expose widespread conflicts of interest that contributed to
the real estate bubble and their growing cost to society. 

1.  For starters, look more closely at this misleading statement:

"As prices spiked, buyer’s agents and
brokers became popular as sounding boards, advisers and negotiators.
The National Association of Realtors estimates they are now involved in
two-thirds of all residential purchases."

That makes this the first housing collapse in which large numbers of
buyers had a real estate professional explicitly looking after their
interests."

My guess is that one in five * transactions or about a
million sales of existing homes during 2006 involved
"designated agents" or some other name that papers over the conflict of interest that occurs when buyer and
seller are represented by the same brokerage firm. (* In some markets, the ratio could be considerably higher.)

2.  The means that home buyers do not
receive proper advice and protection, or as a partner in a real estate agency told the
NYTimes:

"We have seen so much misrepresentation over the last five years," he said. "So I appreciate where these buyers might be coming
from: ‘I’m a lowly consumer, you’re certified by the state of
California, you didn’t do X, you didn’t do Y, and I got hurt.’ "

3.
The NYTimes speculates that consumers, angry that their counterfeit
buyer agents did not provide adequate advice and protection, will
increasingly take legal action. Will their collection actions rise, at
some point in some overvalued market, to a class action lawsuit? 

"The Ummels may be on the leading edge of the law, but they are unlikely to be alone for long. With the market falling, many homeowners owe more on their mortgages than their houses are worth. And
many of those deals involved brokers who are required to carry
professional liability insurance, presenting a tempting target for
angry buyers.

‘If you put someone into a property at the top of the market, you
look really bad if it goes down,’ said K. P. Dean Harper, a real estate
lawyer in Walnut Creek, Calif. ‘There are a lot of letters going out
from lawyers to real estate agents saying, ‘My client would never have
purchased if you had properly evaluated the market conditions and the
value of the property.’ "

 

Represent_3
4.  A series of "Dual Agency Detective" blog posts dating back three years predicted "a new era of heart break for real estate consumers."  Although it’s easy to poked fun at designated agency with political
cartoons, the cost to individual home buyers and society, as this
prophetic case attests, is no laughing matter:

My so-called buyer’s agent (who promptly switched roles at contract
signing without explanation), initially advised me to bid $750,000 for
my house of choice, which was listed at $699,900. When I told her that
such an offer was beyond my price range, she was quite adamant that I
not offer anything under the list price. When I finally backed out the
deal because of her bait and switch scam, I later heard that the house
in question sold shortly afterwards for $682,000–in other words,
nearly $70,000 less than the bid suggested by my so-called buyer agent.

This type of price inflation (caused by seller’s agents masquerading
as buyer’s representatives) must have a very distorting impact on
housing costs.  The economic fallout is enormous
: ordinary citizens are
forced to move out farther in search of decent, affordable places to
live, which  leads to a host of problems connected with traffic
congrestion, suburban sprawl, etc.

As I perceive it, the real estate cartel’s use of dual agency
[a.k.a. "designated agency"], which works to the detriment of the
average consumer while enriching dishonest agents through the practice
of double-dipping, contributes significantly to the manifold problems
we see in the residential housing market and therefore should be fully
exposed.

Yourfanniemaybenext_2
5.  Who will end up paying the cost?  Commenting on the mortgage package included in the tax rebate agreement announced by Congress and the President, a link on BostonBubble reads: "Profits privatized, risks socialized – Economic stimulus a
wealth transfer from the middle class to the rich and the reckless."
See Paper Money’s blog post for call to action.

Conflict of interest, what conflict of interest?

PS.  The NYTimes may not have gone far enough, but the story (once, the most forwarded story in the NYTimes) is echoing around the blogosphere.  Some in the industry are worried this may be "the tip of the iceberg," and the buyers told MSNBC’s Today show they want to change the industry.  Sounds like the Consumer Revolution we’ve sought over the past 15 years.

Posted in Defensive Homebuying, Dual Agency Detective, In the News, Real Estate Bubble, Real Estate Consumer Bill of Rights, RECALL: Real Estate Consumer Alliance

Rebate Wish List: Home buyers, what would you do with a tax rebate PLUS a real estate rebate?

Wishsign Pull quotes from: Bush backs $145 billion economic plan

The president and Congress are scrambling to take action as fears mount that a severe housing slump and painful credit crisis could cause people to close their wallets and businesses to put a lid on hiring, throwing the nation into its first recession since 2001.

Economists said a reasonable range for tax cuts in the new package might be $500 to $1,000. Congressional aides said the White House plan is looking at rebates of up to $800 for individuals and $1,600 for married couples…"

"Americans can spend this money as they see fit: to help meet their monthly bills, cover higher costs at the gas pump, pay for other basic necessities," he said."

General discussion on Boston.com: Would you spend a tax rebate? Specific questions for home buyers:

1. What would you do with the proposed tax rebate? Would the rebate, plus declining interest rates, make any difference in your home buying plans for 2008?

2. If you added a 100% commission rebate from The Real Estate Cafe, typically 2.5% of a home’s sales price, would that influence your home buying plans for 2008? What would be on your Rebate Wish List?

3. If you received a rebate over $10,000, would you be willing to donate part of your rebate to a cause or charity? If so, please add your favorite to The Real Estate Cafe’s "Rebate-It-Forward" list.

RebateWishList.com currently forwards to a twin discussion on The Real Estate Cafe’s experimental new social networking site.  Comments are welcome on either site, and home buyers are invited to introduce themselves via our interactive map.

Posted in In the News, Real Estate Bubble, Savings & Rebates, Timing the market
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