Seattle Bubble

• Can we talk? Full disclosure. What does it mean to you?
• Follow The Money
• Industry Extreme Makeover
• Looking under the hood: How to save yourself aggravation and money when refinancing or purchasing.
• Link Roundup Trio: Condos, Lies, Lawsuits

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154 responses so far ↓

• 1 Rhonda Porter // Jan 24, 2008 at 9:01 pm

  Tim,
  isn’t this disclosed on the purchase and sale agreement:

  I want to know if my mortgage broker’s company or my agent’s brokerage firm has any financial interests in the referrals they give me for third party providers (mortgage, escrow, title, insurance, etc….). I want to know these disclosures at the start of our working relationship, not when I’m signing my loan or closing papers.

  I just had a consumer send me a GFE from a Mortgage Broker where no YSP is disclosed…it shows a range from 0-3%…guess this person is only going to make 0! Why are Loan Originators so afraid to explain how their paid? Mortgage brokers, Bankers and Correspondent Lenders included.

• 2 Rhonda Porter // Jan 24, 2008 at 9:01 pm

  PS: Great post!

• 3 laxtosnoco // Jan 24, 2008 at 9:54 pm

  How about adding: I want choices about the service level I would like to receive/purchase?

• 4 S-Crow // Jan 24, 2008 at 10:04 pm

  lastosnoco,

  done.

• 5 Jillayne Schlicke // Jan 24, 2008 at 10:28 pm

  HUD and state regulators will accept a reasonable range of YSP.

  RESPA (federal law) directs mortgage brokers to spell out a dollar amount and not just a percentage of YSP on the consumer’s Good Faith Estimate.

  Many, many mortgage loan originators that I meet have no problems at all explaining how they’re paid.

  It seems to me that the folks that are less than forthright about their fee chose to act this way because the amount that they are receiving is much higher than what they would like the consumer to know. Perhaps they have been coached to be less than honest. Maybe they are new and know that they are not worth that amount. Still others are not good negotiators.

  and MANY more were never trained on how to complete the Good Faith Estimate the way HUD intended.

  So the consumer is not given the opportunity to question the high fee because the form were not filled out correctly.

  0-3% YSP
  What’s that to an average consumer?

  When a consumer sees:
  $1,000 to $3,000
  Yield Spread Premium
  at least they see dollar signs in front of the numbers.

• 6 Ellie // Jan 25, 2008 at 3:10 am

  For me the most important of the requests above is to know how an agent gets paid and what other incentives are on the table. There’s so much misunderstanding of how buyer’s commissions work- anyone heard that buyers don’t pay anything to their agents lately?- that transparency has got to improve before the industry can regain the consumer’s trust.

  Last year Redfin published The Real Estate Consumer Bill of Rights that includes a lot of the points above: http://www.redfin.com/stingray/do/consumer_bill_of_rights. A lot of us who work here at Redfin do so because we believe that real estate can work better than it does. And I mean better for the consumer, not the agent.

• 7 ray // Jan 25, 2008 at 6:49 am

  Tim our company was built by consumers for consumers.

  Buyers have told us for many years they want to look for homes on their own but they need someone to let them in the property and represent them professionally with all the paperwork. They also want to be compensated for doing the work.

  We pound the table with education daily. We advise the consumer to go look for homes. Take your time. But, never call the name on the sign when you arrive at the home. Call us!. If you don’t YOU LOSE!

  When selling you need to be on the MLS. But, never and I repeat never pay a high fee to LIST your home. Pass the savings onto the Buyer. Our 500 Plan to list is the best in the industry. We assist with all the paperwork and have a REAL office with live Agents. We started with 1 office and 2 more are opening in 2008-9. We offer our 500 Plan to educate future Buyers on what we do. Once a client enters our data base. They NEVER leave. Why is this? Because they were educated!

  Thats it in a nut shell. Spin it, bash it but real estate is changing for the good of the consumer.

  As an RN for a decade I never even had to start 500 Realty. My wife and I have worked for years at many local hospitals. But, this message needed to get out there. As we grow weekly the praise from the public gets higher and higher.

  Now that we have arrived the customers that we have serviced in just our first 6 months give us the highest praise I ever heard of any company.

  I’m very happy to be part of the change. Were also very happy to have teamed up with ClearWire to bring our message for the 1st time to Seattle. See you at the Seattle Home Show!

  Choose who you desire Tim. If you don’t like 500 Realty then at the very least utilize Red Fin and MLS 4 Owners. Both with inferior models but passing on the same powerful message.

  Ray Pepper
  Broker
  http://www.500Realty.net

• 8 col // Jan 25, 2008 at 7:00 am

  How do you spell infomercial?

• 9 vboring // Jan 25, 2008 at 7:28 am

  S-crow,

  I like the list, but doubt it can be implemented within the current system. RE agents are incentivized to sell quickly. 3% of two deals each worth $400k is more than 3% of one deal worth $450k.

  so, seller’s agents will encourage their clients to accept lower prices and buyer’s agents will encourage their clients to pay higher prices.

  As long as their incentives are in direct contradiction with my incentives, I cannot trust them to represent me.

  this idea is covered in some detail in freakonomics. it goes on to show that when RE agents sell their own houses, they keep them on the market longer and get a higher price for it on average, demonstrating that they do a better job when their incentives are in line with their customer’s incentives (because they are the customer).

  come up with a new RE agent payment plan that isn’t a flat 3% and you might be able to improve their performance. otherwise, I expect little to change.

• 10 stephen // Jan 25, 2008 at 7:51 am

  And I would like world peace.

• 11 AndySeattle // Jan 25, 2008 at 8:06 am

  Ray-

  Just curious… What does the 500 in the 500realty mean?

• 12 Cougar // Jan 25, 2008 at 8:16 am

  If I took this list into a brokerage and made it a requirement for them to sign off on it before we started looking for a home I don’t think I would get an agent to work with me. Has anyone seen a full service gas station around anymore? I think RE will change dramatically in the near future and the for rent signs will be in old brokerage offices.

• 13 Garth // Jan 25, 2008 at 8:27 am

  There may be some changes going forward in the real estate / mortgage agent model, but I don’t buy redfin being the answer.

  If I had used redfin instead of my agent when I bought, with the number of houses we looked at redfin would have cost me the same amount as my agent did, and I would have spent my life on the internet and driving around checking out places before setting up a paid redfin visit. Open houses are just a showcase for the worst flips and renovations done by those watching too much HGTV in good times, I imagine there are more open houses now.

  If I was looking at another transaction I would be more likely to try and set up an arrangement with my agents that protected me against a huge windfall without much effort on their part (Lower rates if the property sells very quickly, or to someone I know) instead of using redfin.

  Second, very few people actually understand what redfin actually does, since Glenn Kelman has convinced himself he is a PR genius and muddled their story and alienated the industry he needs to be a part of to succeed. Ask a regular consumer about redfin, and if they have heard of it the probably think it is more like zillow then remax. Most of their traffic and costs are not related to their revenue.

  When dealing with salespeople, the consumer needs to filter out providers who don’t work with their personality. If you tend to totally depend on your service providers, and give in to high pressure sales tactics make sure you don’t get a high pressure real estate agent with a subprime loan provider for a real estate transaction.

  If you can say no each time they ask for the sale until you believe it is a good choice, aggressive agents can do a fantastic job for you.

• 14 S-Crow // Jan 25, 2008 at 8:34 am

  This post is about consumers for consumers, not business models.

  People will choose whatever agent/company or service provider they feel suits their situation whether it is Windermere, Redfin, Re/Max, Brio Realty, John L Scott or 500 Realty. I do wonder though, how may transactions/sales would take place if the transaction were less expensive. Perhaps it would not be such a hindrance to making a move if that were the case.

  What many people don’t read (I never see it) is that as much as the run up in the market frustrated homebuyers, it did the same for agents who were trying desperately to do the right thing for their clients.

  When John L Scott released their white paper, much of what they painted was accurate (as I quoted in the post above), but it also begged the question for people, “did this analysis and conversation ever take place with me and my agent? How was the market ‘framed?”

  I have always found the relationship of what HouseValues or any lead generation site provides for the real estate community to be terribly ironic. If the relationships with consumers, whether one is an agent or loan officer, were so solid, then why the existence of these businesses? There could be a variety of reasons for it.

• 15 S-Crow // Jan 25, 2008 at 8:37 am

  Stephen,

  me too!

• 16 ray // Jan 25, 2008 at 9:19 am

  Andy. The 500 name is simply the no frills name of our listing Plan. Its the best in the industry. No hidden costs nothing. Unless you need a lockbox. Then we collect a 100 refundable deposit. We need to get them back. They cost us a 100.00.

  Make no mistake. Our company was built for Buyers.

  The 500 listing educates our sellers who become buyers. The 500 listing is no source of revenue for the company. The Agent who takes it gets 400.00. The other 100.00 pays sign install and Pay Pal charges.

  http://www.500Realty.net

• 17 Marc // Jan 25, 2008 at 9:36 am

  “I want to trust you.”

  I think this sums it up. Trust is the most valuable thing the average real estate consumer needs from the professionals they choose to retain. Sadly, it is all too often the one thing the typical consumer fails to insist upon. Too many consumers hire the first real estate professional they meet that seems nice and reasonably competent. For such a large investment, consumers should insist upon and should work hard to find highly competent, motivated, trustworthy people to work with. They should also have a clear understanding of the level of service they can expect whether that be a full service provider or a la carte. Hiring an ethical, experienced professional is probably the best precautionary measure a consumer can take to help them make wise purchase or sell decisions, especially in a slowing market.

  In my real estate law practice I strive to provide prudent and timely advice to my clients and excellent customer service. My job is to provide quality counsel and to empower my buyer & seller clients to make good decisions given their individual circumstances. As an attorney, it is paramount that my clients are able to trust me and I take that responsibility very seriously. In the end, it is my clients who are selling their house or who will pay the mortgage and live in the house they’re buying, thus the decisions should be theirs. I serve to help make sure they have all of the information they need to make those decisions wisely.

• 18 david losh // Jan 25, 2008 at 9:45 am

  Very nice list. It’s true people want to trust the person who represents them. It’s unfortunate that so many people have entered the Real Estate business who have nothing to offer a consumer other than telling people to shop for yourself and I’ll write it up.
  Real Estate professionals make money by being involved in the Real Estate business. My first mentors told me we are not in the business to sell Real Estate, we are in the business to buy it.
  The guy who I recommend for mortgages makes loans. He’s financially conservative and has more money than he could spend in a life time. I trust him because he either does the loan or he doesn’t. He presents the very best loan packages available today. He’s in demand. Many clients of mine shop his loans, we wish them well.
  There’s no reason to be greedy in the Real Estate business. There is always plenty of money. If I need money I’ll buy something, or sell something. Anything is liquid at the right price. This is the Real Estate business.
  The almighty commission is a drop in the bucket. Most successful agents in the Real Estate business work because they themselves are involved.
  The internet is a beautiful thing. It gives you a window into the Real Estate world. The reality is much different. When I buy a place, I don’t sleep. Selling is worse. It’s hard to let go. Conservative long term growth is what drives the price of Real Estate.
  The trick of the trade is to know when, where, why, and how to buy. That consultation takes time. It is a partnership. We either work together or find another relationship that works. We wish you well.

• 19 Mack McCoy // Jan 25, 2008 at 9:48 am

  Dear Consumer.

  Most of these items, you can have with just about any good and experienced agent.

  I know, surprise, surprise.

  I would only quibble with a couple of usages - “partner,” for example, and “collaborator.” These do not accurately describe our relationships, in my opinion. I think the escrow agent, sworn to be a neutral third party, would prefer to not be considered a “collaborator,” for example.

  So far as trust goes, that’s truly completely up to you. We, as agents, can be completely trust-worthy while you doubt us throughout the relationship.

  When you’re feeling at wit’s end reading about the troubles that buyers and sellers have had with their real estate agents, remember: Dear Abby did not build her career taking questions from happy couples.

  With warm regards,
  – mack

• 20 squidier // Jan 25, 2008 at 9:52 am

  Change the “I want” terminology to “I demand” and I might be interested. :)

  It’s a good list though.

• 21 Owen Raun // Jan 25, 2008 at 9:52 am

  Rhonda, in response to:
  “I just had a consumer send me a GFE from a Mortgage Broker where no YSP is disclosed…it shows a range from 0-3%…guess this person is only going to make 0! Why are Loan Originators so afraid to explain how their paid? Mortgage brokers, Bankers and Correspondent Lenders included.”

  If the GFE was done for the client prior to locking in the rate then the broker didnt have a % to quote - however - the higher the rate, the higher the ysp so we’ve found that consumers understand the difference between a good offer and a “gotcha” offer. Also, correspondent lenders and banks are not required to disclose the YSP.. (thank the banking lobby for that)

• 22 biliruben // Jan 25, 2008 at 10:49 am

  “Most of these items, you can have with just about any good and experienced agent.” - Mack

  Which ones don’t we get?

  You seem to be saying that honesty, at least, is pretty much a universal trait among your RE comrades, and that you are certainly honest, right?

  But then I see you holler over at the PI:

  “Home values in Seattle are up.”

  That statement at worst dishonest Mack, and at best merely misleading and tricksee. I had thought you were above that. I would certainly want the agent I hire to be more honest than that.

• 23 patient // Jan 25, 2008 at 11:08 am

  One question would cover a lot for me at this point:
  Where do you see the market going the next two years? Anything less than down 10% and I would move on to the next agent since the agent is either not honest or I would not trust his/hers knowledge of the market.

• 24 old_B // Jan 25, 2008 at 11:18 am

  “I want you to unlock the door, step the !@#* out of the way, and let me and my redfin agent walk through the place so I can have a chuckle at the 90’s era granite countertops and stainless steel-veneer appliances.”

• 25 Greg Perry // Jan 25, 2008 at 11:19 am

  I like everything on the list.

• 26 Buceri // Jan 25, 2008 at 11:27 am

  Come on guys. It will always be about money, You are expecting this people to tell you “don’t buy now; wait another 2 yrs.” It’s honest but it does not put food on his table. A GM car salesman won’t tell you: “why are you buying this crap man??? Go across the street to Toyota.” Your doctor graduates swearing to put patients first. We all know he will take the insurance he wants and pays him the most; and sends you for testing to sites where he/she has financial interests. And so on…

• 27 Greg Perry // Jan 25, 2008 at 11:43 am

  “Come on guys. It will always be about money”

  Maybe for you….but don’t speak for everybody.

  In fact, many people value their time more than money. Some actually pay top dollar for everything in life….because they can.

  There are great doctors, great car salespeople, great insurance salespeople, great stockbrokers, great attorneys and great real estate agents. Trust in any service provider is a good blend of good character and high competence.

• 28 patient // Jan 25, 2008 at 11:49 am

  Buceri, I would not expect an agent to tell me when to buy. It’s not their job. I would require that they know the market conditions though.

• 29 david losh // Jan 25, 2008 at 11:59 am

  Inside of Real Estate there are maybe, maybe a couple of hundred Real Estate agents that work in any metropolitain area. In rural communities the pickings are slimmer. In order to get anything done, really, you have to be inside. The Northwest Multiple Listing Service is another window. What’s good today? What deals are there? As we would all say: by the time it’s on the Multiple it’s old news.
  If you want to shop for a house, get in your car, drive a neighborhood, and knock on doors. Write letters to houses you like or think are good. That’s how you find a deal. If I have a buyer that’s what I do. I shop. It helps my business and in many cases I find you what you want. If you don’t want it some one else might.
  That’s my job. You pay me to know. If you know better then we wish you well.

• 30 Nolaguy // Jan 25, 2008 at 12:22 pm

  Wow….

  http://youwalkaway.com/

• 31 Buceri // Jan 25, 2008 at 12:28 pm

  Greg - I am not saying that people don’t value their time or that there aren’t any good professionals. But financial interests will always be in the way.

  Patient - I agree; but again, in this market when the client asks “how are prices?” the honorable agent answers “going down by the second”, so the client asks “so should I wait?” and honorable agent says: “of course”. Client says I see you in a year honorable agent; and the agent replies: “in a year I will be greeting you at the front of your local WalMart; since with this attitude I won’t be involved in any transactions”. If the agent spins it or sugarcoats it; then he is being dishonest. And we are back to square one.
  I am with all of you in this blog - but let’s face it, we are expecting for every buying agent to tell their clients “buddy; in this market, if you wait 6 months that house will probably be down 10%”. Folks, I don’t think it’s going to happen.

• 32 patient // Jan 25, 2008 at 12:47 pm

  Buceri, sadly you are probably right and that’s the problem. Agents do not like, do not want and fear the price declines that a buyer is looking for. Conflict of interrest? You bet. However, if you need to ask your agent if it’s a good time to buy you shouldn’t be buying…A good answer on the market outlook from an agent would be: We are probably looking at a decline in prices of 20% the next two years but I’m pretty confident that I can find you a deal close to 15% off the comparable sales making your risk reasonable. At least that will be my strategy when working with you.

• 33 Mack McCoy // Jan 25, 2008 at 1:01 pm

  - One question would cover a lot for me at this point:

  If you shop for opinions, you will eventually find one you agree with.

  - But then I see you holler over at the PI:

  -“Home values in Seattle are up.”

  -That statement at worst dishonest Mack

  Sigh. For those who did not read my post, here it is:

  ————————————————

  Someone with a better math background than me (I feel like Paul Simon: where’s Art Garfunkel when you need him?) would be able to explain this better, but conceptually, I wondered how prices for your typical in-city Seattle Bungalow or mid-century modern or even seventies-split have been doing.

  So I just went to Locator, and did an Area Market Survey of solds, Seattle, houses (style 10-18) built before or in 1980.

  Date………Dec 2007…..Dec 2006
  Sales……….286………..411
  Avg Price….$542,330….$526,875
  $/sf………..$262……….$253
  Med Price….$447,475….$445,000
  $/sf………..$241………..$230

  A skeptic could accuse me of cherry-picking, but this subset reflects my client base - they want to know, has my house lost value over the past year?

  I think I have to tell them “No.”

  —————————————-

  Would it be honest to tell them that their house probably lost value last year? Do you prefer that I tell the truth, or agree with you?

• 34 Mack McCoy // Jan 25, 2008 at 1:23 pm

  It’s a funny thing. Not many of you appear to have ever been in an exclusive agency relationship with a Realtor, and by telling me you have (anonymously, of course), I must believe every word you say. Like Norm McDonald on SNL – “I was going to say that! I knew that!” “He knew that. Ten points for Norm.”

  The general tone here sounds to me like a bunch of singles who can’t find anyone to spend the weekend with, complaining about how the gender of their attraction is somehow dysfunctional – “they’re only into how much you make, man; they only care what clubs you can get them into … you can’t trust them, man.”

  If you’re rooting for prices to come down, say it. If you’re rooting for the market to crash, admit it. People who already own homes, probably not rooting for the market to crash. The real estate profession, agnostic – we make money whether the market goes up or down, just like stockbrokers.

  But do yourself a favor – act as if you still have something to learn. Because, it’s what you learn after you know it all that counts.

  Real estate agents might be more valuable than you think. And maybe it would be useful to look behind the stats, rather than take them at face value.

  Then, again, it might just be too much fun sitting at the bar with a buddy complaining about the scene.

• 35 b // Jan 25, 2008 at 1:42 pm

  Mack,

  Much like stockbrokers, the average person using a realtor is going the way of the dinosaur. Very few people pay a stockbroker a sales commission when they can use e-trade for $10. Realty is no different, the only thing you guys had going for you was a lockup on the MLS. With that gone, its going to be very few people using a salesman for 6% of several hundred grand to do the equivalent of a google search for them.

• 36 Buceri // Jan 25, 2008 at 2:01 pm

  Mack;
  A stockbroker makes money because in a bear market people are selling but volume is steady. In your bear market the number of transactions go down drastically, prices go down and your commission decrease with those prices.
  I bought 2 houses and both agents were too hot to work at WalMart.
  I am married, own my house, and want prices to come down (my house is my roof, for investments I use stocks).
  And by the way, all of you Real Estate agents, get out of your offices and sell!!! Stop blogging!!!

• 37 Ira Sacharoff // Jan 25, 2008 at 2:41 pm

  It seems to me that there is a certain amount of tooting one’s own horn here, and that’s okay, that’s what people do.
  I’ve heard from several experienced realtors how important it is to use an experienced realtor, while some folks who claim to be knowledgeable and educated about real estate claim that the real estate agent is an anachronism, a relic of the past that will wither and die. I’m not sure that either of these beliefs are true.
  While I am an agent, I’m just kind of obsessed with economics and how the housing market ties into that, and my being an agent is incidental to why I’m here. I never post things like ” you can only trust agents who have large noses and greying beards.”
  I’ve purchased a fair amount of property over the years using full service agents who were very experienced. I would not say that their experience meant that they were more trustworthy, in fact I’d say that they were simply more masterful and manipulating me. It doesn’t mean that there aren’t wonderful trustworthy experienced, low pressure agents, I’m sure every agent on this blog fits that description.
  By the same token, will agents become superfluous and wither away? Karl Marx said that would happen to capitalism…Not saying it won’t happen, but it looks like capitalism may be here for a little while longer, and I expect that real estate agents, like cockroaches, have pretty good survival skills.

• 38 NotaBull // Jan 25, 2008 at 2:53 pm

  Mack said

  “It’s a funny thing. Not many of you appear to have ever been in an exclusive agency relationship with a Realtor, and by telling me you have (anonymously, of course), I must believe every word you say. Like Norm McDonald on SNL – “I was going to say that! I knew that!” “He knew that. Ten points for Norm.””

  When are you going to shut up about this whole anonymous thing? Get over it. You’re just an anonymous to me as I am to you. You call yourself “Mack” and you write a bunch of stuff on a blog. If I told you my name was “Tom MacShutup” then I suppose my points are instantly more valid? Or are you going to look me up in some way in order to validate my credentials? Should I provide W2s, tax returns and certificates of professional qualification?

  FWIW, I’ve had good experience with real estate agents when I’ve both bought and sold houses. Not everyone shares that experience, however, and it seems to really burn you that most people trust real estate agents only slightly more than a used car sales dude who keeps jabbering on about the “payment”.

• 39 old_B // Jan 25, 2008 at 3:30 pm

  Dropping the “you’re bitter” argument doesn’t get you very far. Not too many people here living out of cardboard boxes or homeless shelters.

  The game is broken, and there are whole classes of people for whom the market structure isn’t working anymore. Expect it to change. In fact, you can bank on it.

• 40 Joel // Jan 25, 2008 at 3:46 pm

  If you’re rooting for prices to come down, say it.

  Absolutely I’m hoping for prices to come down. In my area they are far to high and way out of whack with fundamental valuations. I would love to buy a house someday, but I don’t want to have to commit financial suicide to do so. Is it really so bad to want prices to be at a more reasonable level?

• 41 biliruben // Jan 25, 2008 at 3:52 pm

  Hey Mack - I appreciate you coming over here and adding your two-cents, but jeez. Maybe read a post or 5 before layin’ all those lazy-man assumptions on us.

  I realize that your median and mean in your selling ‘hood is up in the last year, but I can pretty much guarantee it is down in the last 6 months. That’s what’s dishonest. It’s a half-truth, and the half that matters you happened to leave out. We are at an inflection-point as any good Realtor worth his salt should be acutely aware, and the peak was this summer. If you aren’t sharing that with your clients, they are going to be very, very angry down the line. Maybe suing-angry.

  To knock down your nonsense:

  Yes, I have had an exclusive agency relationship with an Agent. We were pain’s in the ass, put offers on 5 houses, took 6 months to close, and she earned her commission.

  Yes, I own a home.

  I wouldn’t say I’m rooting for it’s value to decline, but it has, it will some more, and Seattle will be better off for it. Who the heck wants to live in a rich-man’s enclave. Give me youth, vitality, diversity, kids. Those things go away when starter homes require 140K/yr salaries.

  The only one around here who appears reluctant to learn is you.

  And it would behoove you and your clients if you took a closer look behind the stats. Perhaps start with the trends over the last 6 months as well as similar cities around the country and move on from there.

• 42 Greg Perry // Jan 25, 2008 at 4:12 pm

  “I expect that real estate agents, like cockroaches, have pretty good survival skills.”

  I fully agree. (and got a good chuckle !).

  “Expect it to change. In fact, you can bank on it”

  Change is a constant. Of course there will be change.

  Another constant is that real estate is a complicated transaction and because of it’s litigeous nature will never be reduced to a commodity.

  Yet another constant is that there will always be a group of consumers that value their time more than their money. And…believe it or not, as life gets more programmed and technical, service and personal care are becoming extremely important to people. These people seek out agents and rarely haggle commissions.

  And how about those first time buyers? Well their biggest obsctacle to buying a house is fear. Fear of the process. Fear is a show stopper. They’ll use an agent who takes them under the wing to guide them.

  Yes, there will be changes, but I am not staying up at night worrying about my income.

• 43 Greg Perry // Jan 25, 2008 at 4:38 pm

  Bili
  You whacked Mack pretty good there. Perhaps the intensity of the whack didn’t fit the misdemeanor!

  As a general rule, almost every year in every market (UP and DOWN) the last 6 months are down in relation to the first 6 months of the year in every measurable category. Markets are layered with both yearly and seasonal trends. This is just one of the problems in micro analyzing statistics and markets.

  As we also know median prices can be all over the map….especially in small samplings…..but it’s one of the main measurements we use.

  I can you tell that …..on the Eastside anyway…..that market absorption rates were [i]slightly[/i] worse than the week before, and the week before that, so the at least on the Eastside, inventory (as rated by absorption) is building.

• 44 Alan // Jan 25, 2008 at 4:44 pm

  life gets more programmed and technical, service and personal care are becoming extremely important to people

  You know what the economy really is? It is people allowing other people to do things for them. If everyone was completely self sufficent then there would be no economy. Nor would there be a need for one. The willingness to receive is much more important than the willingness to provide. If 99% of the population is self sufficient then the remaining 1% are screwed unless they can band together to become self sufficient as a group.

  I have zero doubt that there will be people who need help in real estate transactions. And even through the miracles of automation there is not, there will be some need that former RE agents will be able to meet.

• 45 david losh // Jan 25, 2008 at 4:47 pm

  It’s hard to know who to trust. I’ve also used Real Estate agents over the years. It surprises me when I find out I was duped.
  I use agents to get more of an arms length perspective, especially for selling. Commission works both ways. I tell people right now to sell and bank the money. At the same time there are some really cheap properties on the market.
  The perspective is the important thing. The Real Estate business doesn’t change. People want to buy or people want to sell. Agents get paid either way.

• 46 biliruben // Jan 25, 2008 at 4:50 pm

  Perhaps I got carried away with the strength of my convictions, and perhaps I can allow that those stuck deep, deep within the trees, even apparently knowledgeable and intelligent RE agents, could find wiggle room to somehow miss the broad and sweeping view of the forest.

  Mack’s last post didn’t appear to be asking for quarter, and I’m sure he can more than defend himself. After casting broad aspersions on readers of this site, I assume he expected salty retort, and will give back in kind.

• 47 Greg Perry // Jan 25, 2008 at 4:54 pm

  Bili,
  Here’s another cut on my comments above. Here is the year end median price study on SFH for the Eastside areas 500-600. Median prices dropped quickly in Sept, then started to rebound. From these numbers it clearly appears like the market is quickly coming back.

  The market in reality is still softening, but at this point not quickly. Absorption rates prove it.

  My personal guage for market activity is market absorption rates. With absoprtion rates I help buyers and sellers with their positions within their market position and negotiation.

  Here’s a copy post from the PI blog:

  Eastside Real Estate Statistics — 2007 Median Price Review
  By Greg Perry
  Eastside Realtor

  NWMLS AREAS 500-600 (Seattle’s Eastside) experienced YOY (Year on Year) median price increases in 12 out of 12 months in 2007. (Single Family Homes - not condos).

  January: 11.7% ($659,280 vs. $590,463)
  February: 18.7% (695,037 vs. $585,376)
  March: 9.9% ($671,385 vs. $610,825)
  April: 5.5% ($655,946 vs. $621,554)
  May: 10.6% ($691,632 vs. $625,405)
  June: 10.8% ($691,922 vs. $624,687)
  July: 10.4% ($682,630 vs. $618,442)
  August: 4.6% ($651,982) vs. $623,474)
  September: 1.2% ($646,375 vs. $638,867)
  October: 2.9% ($641,611 vs. $623,697)
  November: 3.3% ($625,492 vs. $605,687)
  December: 4.8% ($668,222 vs. $637,619)

  Here’s a pop quiz: In which month did the mortgage crisis come to a head?

• 48 Goldeneye // Jan 25, 2008 at 5:10 pm

  I agree with Buceri. It is *always* about money. Greg, the whole aura about being a “good” realtor etc etc etc is also about money. Would you become a good realtor if dishonest realtors are making more money than you? Would you become a truthful doctor if other doctors across the street are making more money by making patients believe they have issues that they actually don’t and send them to other referrals who likewise do the same? If you are honest with yourself, you will find that the answer to both questions are “NO”. You would want to become a “good” realtor only when people are burnt by dishonest practices within the existing realty framework and you want more business (and hence more *money*) by convincing people that you are not like the dishonest folks in the RE industry. As long as people don’ t realize that they are being conned, no RE agent will worry about honesty.

  The buyer agent in a RE transaction has financial interests that are NOT aligned with the buyer, hence you will rarely come across a “good” buyer’s agent!! You will frequently come across a truthful seller’s agent because his interests align nicely with the seller i.e. get the maximum money for the house that is being sold.

• 49 Marc // Jan 25, 2008 at 5:39 pm

  Without commenting on whether the terse exchange was appropriate or not, it’s gems like this that make this blog so fun to read:
  “Mack’s last post didn’t appear to be asking for quarter, and I’m sure he can more than defend himself. After casting broad aspersions on readers of this site, I assume he expected salty retort, and will give back in kind.”

• 50 Greg Perry // Jan 25, 2008 at 5:46 pm

  Money is needed in this economy to eat. Everybody does what they do for money.

  There are 4 stages of growth:
  Survival
  Stability
  Success
  Significance

  In survival most likely anything will done for $$. Clients (leads) are scarce. People with high character resist the temptation to go illegal and cut corners and many, many people who end up with eventual success sacrifice greatly in this stage. REAL ESTATE AGENTS IN SURVIVAL ARE THE MOST LIKELY TO GIVE A DISCOUNT FOR THEIR SERVICES. Why? They need the money. They may even work against the needs of their clients because…..THEY NEED THE MONEY.

  As a business (in this case let’s say a Realtor) starts to move to stability, different choices can be made. This stage still requires sacrifice, but the provider starts to think less about himself and more about the client. More clients are coming and there starts to be some predictability.

  As success is bridged, wealth starts to occur. A steady and predictable stream of clients come into the business. They don’t have to really worry at all about their personal needs and can focus entirely on the client’s needs. Here also where you see real estate agents and other service providers start to serve his/her industry to make it better.

  Significance:
  So much wealth has been built that the person is free to create any lifestyle choice. Here is where decisions need to be made on how to give the wealth away.

  So yes, we do what we do for money. I don’t know about you, but I still enjoy food with my meals. However, motivations change as people grow personally and wealth is created.

  By the way, the best way to stay in survival in life is to never invest in yourself. I had a mentor tell me once, “If you argue for your limitations, you get to keep them.”

  Yes, there are real estate agents in survival. There are also many agents who are very successful. The consumer can have either one of them. All they have to do is to do some research to make a good choice.

• 51 Alan // Jan 25, 2008 at 6:00 pm

  Money is needed in this economy to eat.

  You could be self-sufficient and grow your own food.

• 52 j6p // Jan 25, 2008 at 7:41 pm

  Please, I think this thread could use more:
  1. successful persons (prefer owners of 50+ units with philanthropic business model) posting self-promotions (redundant as they should already be wildly popular by word of mouth)
  2. RE ‘professionals’ advising that now, errm ‘NOW’ is really the best time to buy and that anyone offering an opposing opinion is delusional (also include psychological deconstruction of said delusionals).
  -thanks

• 53 Amarjit Sandhu // Jan 25, 2008 at 8:04 pm

  Money in Real Estate is made by buying and selling real estate, building and selling real estate or selling high profile properties(multimillion $$). I do not know of any Real Estate agent achieving that kind of success. I would like to know if someone has done that in recent years.

  Amarjit Sandhu
  http://www.500realty.net

• 54 leanne finlay // Jan 25, 2008 at 8:36 pm

  Consumers Wish List …. geez, it matches my Agent Wish List … I want my clients to want these same things. There is nothing abnormal (or even “new and improved”) about this list, and for all of you buyers or sellers who feel it’s difficult to find an agent who will be “as good or better than this list”… something is wrong with the method you’re choosing for finding a good agent to represent you.

  Lax, you already know you can have difference service levels. There are a ton of choices out there, and individual agents also will negotiate with you depending on what value they feel you bring to the table, and what you are asking them to do at what price.

  Garth, you wrote a great piece.

  Marc, you sound like a fine attorney, although I gotta say I’m sick of that empower word :-).

  Mack, your wit is what keeps us smiling, and hoping for more.

  Biliruben, c’mon, at least admit you think Mack’s a great guy, and you’d trust him as an agent.

  Bucieri, you said “And by the way, all of you Real Estate agents, get out of your offices and sell!!! Stop blogging!!!”
  Damn, are you my broker in disguise????

  Greg, you always write a good posts, with good stats. I especially liked your 4 Stages of Growth, and the ending comment “Yes, there are real estate agents in survival. There are also many agents who are very successful. The consumer can have either one of them. All they have to do is to do some research to make a good choice.”

  So people, do your research, it pays off in every field.

• 55 Scotsman // Jan 25, 2008 at 9:00 pm

  I’d like to meet more Realtors who had some real business or economics education, had put some serious time and effort into meeting licensing requirements, and brought more to the table than big boobs and blond hair. Naw, real estate will forever be the last stop for the divorced bimbo who can learn how to sell…..

• 56 economist // Jan 25, 2008 at 10:27 pm

  There are great doctors, great car salespeople, great insurance salespeople, great stockbrokers, great attorneys and great real estate agents.

  And just what is the point of lumping together providers of professional services with commissioned salespeople? To confuse the issue?

  A great commissioned salesperson - whether for used cars or used houses - is one who makes the most money for the seller. That’s what they’re getting paid for.

  The interests of the buyer and seller are diametrically opposed.

  And anyone being paid a commission on the sale of something is incented to work in the interests of the seller, no matter what he calls himself.

• 57 Jillayne Schlicke // Jan 25, 2008 at 11:59 pm

  http://www.teamreba.com/blog/2008/01/25/i-couldnt-have-said-this-better-myself-oh-wait-i-probably-have/

• 58 Mack McCoy // Jan 26, 2008 at 12:16 am

  - I’d like to meet more Realtors who had some real business or economics education, had put some serious time and effort into meeting licensing requirements, and brought more to the table than big boobs and blond hair.

  We all, in fact, “meet the licensing requirements.” Candidates with the other, uh, attributes, can make more money doing things other than selling single-family houses. Get a few million together and try to do a land deal or an office development and you’ll meet them. Then bring them the above list - don’t give it to them while they’re sipping a beverage.

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

  The title of this blog is Seattle Bubble, correct? Not London Bubble, or Baltimore Bubble, or Toronto Bubble.

  Just because biliruben asked so nicely - oh, wait; he called me dishonest - well, **** him, then, he can do his own research, then, and “guarantee” you all on whether “it is down in the last 6 months.”

  But for the rest of you who are wondering, Gee, could values really have been stable over the past year while we’ve been screaming, Down! Down! Down! - well, there’s probably none of you, either.

  Here’s the tally, read ‘em and weep.

  Period Avg $………………Med $
  H1-07 $561,583………$474,475
  H2-07 $579,706………$481,000

  Sorry.

  But, don’t despair. If you wait long enough, values are certain to come down, and you’ll be right. How long have you guys been up and running - three or four years now? Hmmm.

  So where do values have to be for you to have been proven, “right.” Is it enough if they drop this month, or do they have to come down to 2004 levels?

• 59 economist // Jan 26, 2008 at 2:34 am

  But, don’t despair. If you wait long enough, values are certain to come down, and you’ll be right. How long have you guys been up and running - three or four years now? Hmmm.

  Where have I heard that comment before? Maybe on the Housing Bubble Blog ? Not lately, though.

  Oh right, it’s different here.

• 60 ray // Jan 26, 2008 at 7:21 am

  “big boobs and blond hair”

  One of the joys of being in this profession. Not to mention Title and Escrow!

• 61 david losh // Jan 26, 2008 at 8:18 am

  Holy Cow!
  We all want to believe doctors are honest and they are not; lawyers? What profession can you trust, completely? Especially in the United States there is some blind faith needed.
  This post seems to have attracted a lot of Real Estate professionals defending thier honor. Why is that?
  In this one post I think the argument can be made that the system is broken. I miss the old days. I miss big hair and plaid jackets. I miss the fun that the Real Estate business used to be.
  If you ever actually talk to a successful Real Estate agent you’ll find they are also complaining about Real Estate agents. The Real Estate business in the past ten years has attracted some very bottom of the barrell low life loser scum.
  We see Real Estate agents over pricing PsOS until the listing expires. We sit with sellers who bought at the top of the market or over paid; I for one know they over paid. Why did you do it? You’re bright capable people why did you listen to some person who just took a Real Estate licensing course? Why?
  Dr Pepper was an RN and is now dispensing Real Estate advice. Why? Glenn with rodfun is an internet business model promoter and he’s testifying at Congress. Why?
  It’s because the system is broken. Real Estate companies are counting commissions rather than providing over sight. When you actually see the North West Multiple Listing Service you see they hire the lowest wage earners they can to maximize profits. It did not occur to me until today that greed is a motivating factor in the Real Estate business.
  When I started we made money to create wealth. We were looking for that time on the beach, a couple of cocktails, and watching the kids play in the surf. We made money along the way, but it was incidental to building wealth.
  We actually helped people to build portfolios and that’s what being a Realtor for life meant. Share the dream and support each other.
  Today it’s all about having groups that will maximize profits. You’re right Real Estate agents are counting commissions. Real Estate companies are encouraging that. Let’s franchise to get more agents who can earn more commissions.
  What a crock!

• 62 Mack McCoy // Jan 26, 2008 at 8:43 am

  - This post seems to have attracted a lot of Real Estate professionals defending thier honor. Why is that?

  Because it doesn’t serve anybody to live in ignorance.

  I think that the best reason to proclaim that the system “is broken” is to garner support for replacing it with the one you already own, frankly.

  I was thinking about S-Crow’s list, which is the sort of thing that deserves republishing periodically, and while I already noted how that would go over at a commercial office, I was thinking about telling an agent in New York that you don’t trust her – she’d say something like, “So? Do you want this apartment or not?” Whine to her about how she seems more interested in getting a deal done than in looking after you, she’ll say, “Honey, do you want to buy yourself an apartment or hire yourself a babysitter?”

  New York does a lot of things better, but the West Coast does residential real estate a whole helluva lot better. Anything can be improved, but it could be a whole lot worse.

  You can make it better, by looking for the truth, rather than fodder for your beliefs. It’s annoying to be proven wrong, but making big mistakes is a whole lot worse.

• 63 ray // Jan 26, 2008 at 8:45 am

  David Losh….relax….Holy Macrel.. Slow Down!
  And thank you for referring to me as a Real Estate Professional. You R RIGHT on TARGET with that statement!

  The system IS broken and companies like 500 Realty will be giving the consumers choices that they have long been asking for.

  Embrace change! But, more importantly EDUCATE YOURSELF!. The big Gorilla is coming. But, will you be positioned and ready for it?

  In the end it will be the consumer who wins. This is good for us all.

  Ray Pepper
  Broker
  http://www.500Realty.net

• 64 col // Jan 26, 2008 at 8:58 am

  Real Estate Texbook from the year 2045

  Introduction:

  The public today needs real estate professionals. Trained appraisers, mortgage experts, and real estate lawyers. That’s what you will train to do.

  First though, some history. Over 30 years ago, there was another job in the industry: so-called real estate “agents.” Many of you may never have heard of this job, so a history lesson is needed.

  No economists today can explain what the incentive was for buyers or sellers of homes to hire these “agents.” Back then, real estate “agents” were paid to represent their own interests. The “agent” incentive was to hook sellers and buyers, and to make a quick deal with as little time and effort as possible. These “agents” also performed some services that we would not recognize or want today: for instance, they drove from house to house with their clients in vehicles that used internal combustion engines!

  The trouble started in the early 21th century after the Great Crash, when real estate “agents” started to lose the confidence of the public. First, they didn’t warn clients to be cautious as the Great Bubble was inflating. Some real estate “agents” were concerned, but the profession mostly pumped air in the unsustainable Great Bubble.

  In 2010 the government put in place the needed regulations we have today to prevent another Great Crash from occurring. The real estate agents fought these regulations. That battle also hurt public confidence in the profession.

  Of course, being an “agent” was not a sustainable business model in any case. With the rise of the net, “agents” were no longer needed to connect buyers and sellers.

  Today, a quaint remnant of the old real estate profession remains. 1 perecent of luxury home buyers do hire “personal shoppers” to find them a house. Some sellers of luxury homes will hire also professional salesmen to show the house to potential buyers or personal shoppers.

  Other than that, the “agents” became outmoded: like whalers or barrel-makers before them.

• 65 Mack McCoy // Jan 26, 2008 at 8:59 am

  Gee, economist, you seem like a sports fan - taking credit for other people’s accomplishments. Seems like -they- were right, and you’re waiting for your turn.

  I completely understand why those of you want to buy but won’t/can’t pay these prices are rooting for values to come down. Joel expresses it well - and I want you to know that there are always people who feel this way. I felt that way in New York in the 1980s, which is why I moved here.

  But not only am I on the other side of the fence now, I’ve sold houses to hundreds of people (who would have bought even if I’d stayed in New York), many of whom have become friends, some who have let me hold their babies (tip: if the parent rolls the baby into your arms, and you drop it, the scorer will not call it a hit), whose future is reliant on their houses maintaining their value, and I can’t imagine a circumstance where I’d want to root against them by pulling for a crash.

  I hope the businesses you work for have good years so they can pay you more money, so that you can take “financial suicide” out of the equation. You may still elect not to buy, but at least you’ll have the choice.

  Marc, I didn’t get your point. Would you elaborate?

• 66 Cougar // Jan 26, 2008 at 9:23 am

  In the end the consumer will be protected. I expect to see soon in the headlines across America “Buyer beware of Real Estate Professionals” that will trigger a landslide of unhappy people ready to picket, create lawsuits, and drama that will hurt all realtors. Its the American way~

• 67 Ira Sacharoff // Jan 26, 2008 at 9:23 am

  Mack,
  Politicians running for office hold a lot of babies too. That makes them trustworthy?

• 68 just_checking // Jan 26, 2008 at 9:28 am

  If a commissioned salesperson comes up and says “I am here to help you (or hold your baby)” - Run :)

  Mark Mccoy - I am curious what your thoughts are about used car salespeople ? Do you think they are there to help you or the dealership ?

• 69 Greg Perry // Jan 26, 2008 at 10:20 am

  Well, will you look at what has happened here. Tim started an excellent well thought out and thought provoking thread on what the consumer is looking for in a real estate agent. There are many many agents that fit every one of the criteria posted. Tim’s list is a good check list for an agent interview.

  It’s turned into a “mine is bigger than yours” playground argument. The thing has degenerated to the point that there’s not a good service provider (in any industry) left standing.

  So there we have it. The consensus seems to agree that every service provider is a cheater liar scum money grubber.

  I won’t agree, however. I’m just not that cynical. I understand that there are unethical service providers in every industry. However, I still believe that I can find someone to look after my interests…in any industry.

  As I said in a reply above, when I find someone with high character and high competence, I want to do business with that person. In fact, I make sure my clients are surrounded by these people as well. I seek out mortgage originators, title reps, home inspectors and escrow partners who display high character and high competence to recommend so clients are well served in every step of the process.

  And I’m not jealous at all of what any service provider makes. In fact I want people who take care of me to be well paid. People who rise to the top of any profession, rise because they read, go to classes and seminars, and seek out the best mentors they can. Along the way the have wins and losses, but they strive to become the best they can be.

  While watching Tim’s (SCrow’s) writing contributions in the last year, I see character shining through. He’s concerned. He’s fighting for his clients. He’s fighting for the industry. He writes intellegently. I see him as an advocate.

  Thanks, Jillayne for pointing out Reba’s post.

• 70 patient // Jan 26, 2008 at 10:41 am

  Ah, the baby card. Haven’t seen that in this context. Desperation is building rapidly I see. Mack your story would almost be touching if it wasn’t for the fact the people you are now concerned about are where they are partly becuse they drank the poison of everlasting appreciation that you and your peers so happily dispense. While keep doing this without consideration to fundamentals, trends and economic circumstances you risk putting even more people in the same trap. You know it and thereby your heroic stance for troubled home owners rings very hollow.

• 71 economist // Jan 26, 2008 at 11:12 am

  But not only am I on the other side of the fence now, I’ve sold houses to hundreds of people (who would have bought even if I’d stayed in New York),.. whose future is reliant on their houses maintaining their value, and I can’t imagine a circumstance where I’d want to root against them by pulling for a crash.

  The market doesn’t care what I’m rooting for, any more than it cares what you’re rooting for. People why try to defy economic reality will pay the price for it.

  These people have been sneering at the bears for the last 5 years, and they are going to have to take a little sneering back. We have been offering them some free advice - don’t buy at inflated prices. What have they been offering us except contempt?

  “Experience keeps a dear school, but fools will learn in no other”

  Ben Franklin

• 72 Ben // Jan 26, 2008 at 12:01 pm

  Mack,

  If you understood how Real Estate sold in a bubble environment, with credit conditions changing constantly, you would not be quoting median prices.

  As the market has been tanking, it becomes less and less affordable at the low end. So only the expensive houses are selling.

  Here is a thought experiment for you. You have an area with a median house price of $450,000. Imagine if all of a sudden, no house sells for less than $500,000, because the money is impossible to come by for most people. And 100 houses sell, but each of them for 10% less than the last buyer paid for them.

  The median price for this area will be more than $500,000. So the median house price has gone up, despite the fact that nothing is selling in the low end. But values have gone down for every single seller.

  This is why the Case-Shiller index is a much better indicator. Have you ever talked about the Case-Shiller index?

  http://en.wikipedia.org/wiki/Case-Shiller_index

  If you are a Realtor(TM) and you don’t know about this index or discuss it with clients, especially with current market conditions, then IMO you are subpar.

• 73 Greg Perry // Jan 26, 2008 at 12:43 pm

  Hi Ben,
  “As the market has been tanking, it becomes less and less affordable at the low end. So only the expensive houses are selling.”

  At least on the Eastside, this is an incorrect assumption. Absorption Rates for the most affordable houses (low end) in each Eastside have a higher rate of sale at the lower ends. As the price points go up, the absorption rates are weakening.

  High end homes do however affect median prices. For instance, in December for area 600, the median jumped 18.2% from 2006 (SFR). Why? A couple of high end homes sold, one of them for 1.7 million that did not occur in 2006. By the way, last week in area 600 the price point under $400k actually slipped into a SELLER’S advantaged market, the price point from $400-$500K was a strong BALANCED market. The price point between $500k and $600K is a BUYERS market with about 68 wks of inventory.

  Real estate data is many layered. The CS index is a piece of data, for sure. It doesn’t tell you however, what is happening today. From the article, “The indices are calculated monthly and published with a two month lag on the last Tuesday of every month.”

  Yes, I look at CS, but hold more value on weekly AR’s by price range, by area.

• 74 Greg Perry // Jan 26, 2008 at 12:52 pm

  I quickly scanned the Seattle “in city” and the rest of KC. It’s the same in all areas, the lower end is selling at a higher rate of sale than the upper end. A couple of Seattle areas (705 and 710) have dropped completely into balanced markets from buyers markets on a 7 week AR average.

  Bili, aren’t you in one of these areas?

• 75 EconE // Jan 26, 2008 at 1:00 pm

  Greg…thanks for supplying us with the “weeks of inventory” for 500-600k homes. (I thought it was supposed to be months of inventory however)

  I wonder if one of the agents would be so daring as to provide us with “Weeks/Months of Inventory” for 750k+ condos without some excuse that “It’s not the market I handle”?

  Just the facts please.

• 76 Greg Perry // Jan 26, 2008 at 1:28 pm

  EconE
  It can be weeks or months, depending on the way it’s tracked.

  Oh boy, now that’s a gruesome market (I actually looked above $700k). In the last 7 weeks 3 total on the entire eastside, and 4 on the westside with a boatload of inventory. 520 Bellevue alone has 69 units with only one selling in the last 7 weeks (over $2.5 million). Suffice it to say, at the current rate of sale, for the region there is YEARS, not weeks or months of inventory at the current rate of sale.

  I have the AR’s charted by area and price range. Give me the location and I can give you more precise numbers.

• 77 patient // Jan 26, 2008 at 2:07 pm

  Absorption rate is not really a good measure of how and if home values hold either. If now the $400k to $500k is a sellers market in an area but the next tier $500k - $600k is not you can be pretty sure that homes from the higher tier will start trickling in to the lower tier. The resut is downward price pressure through the tiers and falling home values. The reason for the current inbalance is probably since most of the $500k to $600k listings are overpriced and should be in the $400k to $500k which would achieve a better balance.

• 78 patient // Jan 26, 2008 at 2:10 pm

  I would add that absoprtion rate for specific price ranges is not really a good indicator but overall absorption rate is.

• 79