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Open letter to @REBarCampBoston: Realtor, disrupt thyself? vs Disruption funding

reVRM_VisioningExercise_IIW

Greetings, @REBarCampBoston, Curious to see that you’re featuring a participatory discussion about disrupting the residential real estate industry at your upcoming unconference on Thursday, September 18, 2014 in Boston.  As you may know, reforming the real estate industry has been the RealEstateCafe.com’s mission for the past two decades, so glad to see that local Realtors are willing to address what’s wrong with the industry.

For fellow real estate consumer advocates, that’s an inquiry that’s engaged our best efforts for the past 20 to 25 years or more.  Consequently, some of us are already collaborating on a disruption road map as well as seeding a campaign to cocreate an open, transparent real estate eco-system by 2020 (see image above).  We invite anyone else interested to use and follow #RE2020 to cocreate synergy with innovators inside and outside the current real estate industry.

FYI — If word hasn’t reached you yet, the featured story today on Inman News is about angel investor eager to disrupt the real estate industry:

http://bit.ly/FundRE (please share this short URL via social networks)

Here’s the comment we posted on LinkedIn in response to the same offer to provide disruption funding (see original at http://bit.ly/RFProtoRE):

How do we get there [disintermediation] from here, not just more user-driven apps but an open, transparent real estate eco-system?

In 15 days http://REBarCampBoston.com will feature a keynote presentation on DISRUPTION — what’s not working with real estate? Significantly, it’s a conversation from the agent and broker’s perspective, not the consumers. So no need to wait for that event for real estate consumer advocates, including Doug Miller of http://CAARE.org; REAL buyer brokers from http://NAEBA.org; and technology innovators to begin collaborating on the following:

1. A disruption road map — an infographic identifying all of the trends and forces pushing on the current real estate model / marketplace; and

2. #RE2020 — a vision / roadmap to cocreate an open, transparent real estate marketplace by 2020. Here, the focus is on “what wants doing” — like a real estate consumer bill of rights — to reset the industry on right alignment, not disruption for disruption’s sake.

This slideshow includes 22 idea starters:

http://bit.ly/reVRMgameChanger

Posted in Uncategorized

Bidding War Drone: In-House Intelligence Report raises questions

BidWarDrone_InHouseIntel_May2014

So far, no one has been injured by a real estate drone taking photos of their listings or homes for sale, but we’re glad the FAA is implementing regulations to prevent that in the future. Contrast that to bidding wars. For six months we’ve been blogging about runaway bidding wars creating real estate refugees in Cambridge, Massachusetts.  More recently, our findings have echoed in this frustrating headline out Seattle:

When bidding $100,00 over asking price isn’t enough

Thankfully, a fellow real estate agent in Toronto, where various regulations are being considered to mitigate “unnecessarily sleazy” bidding wars, wrote an expose entitled The Blind Offer: How it Works and Why Toronto Should Get Rid of It

Overall, the lack of transparency in this system – which only helps the seller and hurts the buyer – sets our housing market up for disaster. If people continue to pay dozens, and even hundreds, of thousands of dollars over listing prices, the value of Toronto real estate could eventually reach an unsustainable level – and then decline.

http://bit.ly/BlindOffers (please share this URL via social networks)

Rather than sounding similar warnings, local coverage — particularly by Curbed Boston and blogger / real estate agent David Bates — has sensationalized bidding wars.  Without a crowdfunding campaign, we don’t have the resources to launch a counter offensive; so with all of the buzz in the real estate industry around drones, we decided to deploy one to document the “inside story” — LITERALLY! — on bidding wars.

Before overreacting, rest assured that our Bidding War Drone is on a Peace Keeping mission.

Our goal is to protect consumers by identifying what’s really happening on the ground; and to invite homebuyers, consumer advocates, elected officials and industry regulators to address the questions in this blog post:

Will Bidding Wars trigger local regulation or global reformation?

http://bit.ly/BidReform (please share this URL via social networks)

Right now our Bidding War In-House Intelligence is a Top Secret document, but if you would like to a preview a copy and join our coalition of Peace Keepers, please contact realestatecafe@gmail.com  Better yet, if you’ve lost a bidding war and want to see corrective action, please contact us about crowdfunding options we’re exploring.

Posted in Bidding wars, Bubble map, Buyer agent, Consumer protection, Defensive Homebuying, Designated Agency, Dual Agency Detective, Investigative Reporting, Luxury homes, RECALL: Real Estate Consumer Alliance

Will Bidding Wars trigger local regulation or global reformation?

Click on icons above for details of homes sold $100,000 or more over asking price from April 1 to May 15, the first six weeks of 2Q2014 in Cambridge, Boston & Somerville.

As Cambridge goes, so goes Lunenburg.​”​​  Really?  When a credible news source like the Boston Globe publishes statements like that, it’s time to ask what role the media has been playing in the return of self-perpetuating bidding wars in Boston and beyond?  Thank God, others — including at least one member of Boston.com team, question whether runaway bidding wars in Cambridge are a harbinger of The Biggest Home Price Boom Ever?

Think Cambridge is immune from housing downturn?  These flashbacks might cause you to question your assumptions:

Part I: Housing slump hits Cambridge: 1 in 3 single family homes selling below assessed value
Part II: Million Dollar Markdowns coming to a neighborhood near you?

While we’re asking questions, here are some others to consider — and maybe rank in order of importance:

1.  In an age of transparency, why are home buyers forced to use a blind bidding process that manipulates them into overpaying?
2.  If you are a homebuyer, how do I know if you’re bidding against myself?
3.  What role are conflicts of interest playing bidding wars?
4. What role are automatic escalator clauses playing?
5. What happens when bidding wars castrate mortgage contingencies, and take the brakes off mortgage market?
6.  What are the risk and potential costs to taxpayers who are now guaranteeing 90% of mortgages up from one in three in 2006?
7.  What are the social costs of moving rungs of the housing ladder further and further out of reach of first-time homebuyers and others?
8.  After the last boom / bust, what did the real estate industry and industry regulators learn about containing speculative cycles?
9.  How are other cities around the world responding to bidding wars & real estate speculation?
10.  Bottom line:  Is it time to pass an Emergency Bidding War Transparency Act?

Regulatory response

Those are some of the questions the Real Estate Cafe has blogged about and discussed privately with elected officials and the Cambridge Consumer Council since January.  More recently, we’re pleased by the interest of investigative reporters and dream of using http://CrowdSwell.com to raise awareness and funds to mount a Bidding War Backlash, potentially in several cities in the US and even around the world.

What’s the case for a regulatory response, and what might that include?  Let’s begin that conversation where the New Yorker ended an article called:  Real Estate Goes Global

“The challenge for Vancouver and cities like it is that foreign investment isn’t an unalloyed good. It’s great for existing homeowners, who see the value of their homes rise, and for the city’s tax revenues. But it also makes owning a home IMPOSSIBLE (emphasis added) for much of the city’s population. And the tendency of foreign buyers not to inhabit investment properties raises the spectre of what Yan has called “zombie neighborhoods.”

One option would be to severely restrict foreign ownership, but that’s politically difficult, and not great for a city’s economy….”

Restricting foreign ownership would require verifying identity, which is the first step to regulating BLIND bidding wars as we wrote three years ago, before bidding wars reached EMERGENCY levels.  What else should be included in the proposed Emergency Bidding War Transparency Act?

Victims or fools, time for Emergency Bidding War Transparency Act
http://bit.ly/FoolishBids  Please share this URL via social networks

How does the emergence of two housing markets in America shape your response, particularly given this stunning quote:  Incomes for recent college graduates are down sharply from 2006. And the median net worth for graduates under 40 is a paltry $8,700.

NEXT STEPS:  Want to be part of our Bidding War Lab?

Homebuyers, innovators, policy makers, and elected officials:  Please let Real Estate Cafe know if you’d like to collaborate on decision-making tools like the map above, showing bidding war data for the first six weeks of 2Q2014 in Boston, Cambridge and Somerville. The interactive map was created from MLSPin data during the #DigitalFluency workshop hosted recently at the MIT Media Lab. Special thanks to writer and editor Kristie Reilly for her creative insights into the analysis and data visualization. We’re both pleased that the findings generated a strong response from other participants, see http://bit.ly/RELunacy.

Tagged with:
Posted in Affordable housing, Bidding wars, Bubble Hour, Crowdfunding, Defensive Homebuying, Dual Agency Detective, Housing bubble, Investigative Reporting, Real Estate Bubble, Real Estate Consumer Bill of Rights, RECALL: Real Estate Consumer Alliance

Victims or fools, time for Emergency Bidding War Transparency Act

To see how far winning bids are above or below original asking prices, run your cursor over individual sales in this scatterplot.  Each data point shows ($K over or under, as well as %).  Too zoom-in, drag a box across the area you want to expand.

Around the country, homebuilder associations showcase their new subdivisions with an annual “Parade of Homes; ” but blog comments on Boston.com’s post today about homely properties selling $86,000 to $126,000 over asking price in Cambridge might cause one to ask if “Parade of Dumps” is more fitting.

Or is it “Parade of Fools” — homebuyers who are being fooled into overpaying by a blind bidding war process?

Historical or hysterical context?

Writing twenty-five years ago in The Behavior of Home Buyers in Boom and Post-Boom Cycles, Nobel-prize winning economist Robert Shiller and fellow housing economist Chip Case made this observation:

“…we see a market driven largely by expectations. People seem to form their expectations on the basis of past price movements rather than any knowledge of fundamentals.  This increases the likelihood that price booms will persist as homebuyers in essence BECOME DESTABILIZING SPECULATORS!”

That was when just 6 to 10% of homes selling over asking price was considered overheated.  The Cambridge housing market was at that pace in 4Q2010; but by 4Q2013, the pace increased ten-fold to 60% over asking price.  And last month it rose to 75%.

So when speculation becomes self-perpetuating expectation as stated today’s in Boston.com : “just about any habitable patch of real estate in Cambridge is sure to spark a bidding war these days, isn’t it time for more transparency about what’s going on behind the scene?

Consumer protection

In Toronto, another city blinded by bidding wars, regulators are stepping up efforts to protect homebuyers from phantom bidders, but that’s not enough.

http://bit.ly/PhantomBid  Please share URL with your social network

In an age of transparency, where ingredients are routinely disclosed on products in grocery stories, can’t reasonable people agree that homebuyers should be able to make more informed offers on the most expensive transaction in their lives?  Otherwise, buyers are easily manipulated as this scenario describes below:

“The selling agent said repeatedly that the top two bidders were “really close,” so the buying agent and his client spent hours crafting new offers before relinquishing. The eventual sale price was $70,000 over their highest bid, meaning that the final buyer was probably competing against herself for at least the last $50,000.”

What’s the answer?  Several are proposed in Toronto including this call for transparency:

“Mainly what’s needed is tearing down the curtain of mystery dividing buyers from the Realtors of Oz. “All bidders should see all other bids,” says my friend Dave, who finally triumphed over another buyer this March after four months touring $650,000 houses that all sold for $800,000. ‘There needs to be less opacity, and less chance for sellers and agents to collude to squeeze the buyer.’ ”

Bidding War Backlash

For the past four months, Real Estate Cafe has been blogging about runaway bidding wars in Cambridge, and asking what risks bidding wars pose to taxpayers who now guaranteeing 9 out of 10 mortgages, up from just three in 10 before the collapse of the housing market (2006).

Is it time for a ground swell of bidding war backlash, or call for public intervention?  Regrettably, the first might be unlikely because the housing market pits bidder against bidder, so ordinary first-time homebuyers are competing with cash investors — one of whom complained that other cash buyers are also competing against the most irrational or poorly advised homebuyer in the market.

Is there a case for public intervention?  If there were a water shortage, people would not think twice about rationing water, perhaps limiting or alternating days when homeowners could water their lawns.  Similarly, the Cambridge Consumer Council has submitted testimony to support emergency price disclosure regulations in other marketplaces.  Isn’t it time to extend transparency to the real estate marketplace as well so homebuyers can make informed offers by knowing the truth about competing bids, including whether they are from straw bidders or phantom buyers?

What’s the solution?

As we have written before, the technology exists (see bit.ly—VerifyThis), time for those we’ve elected to protect us to enact an Emergency Bidding War Transparency Act?  If taxpayers are guarantee 9 of out 10 loans, doesn’t it make sense for all of us to stop turning a blind eye to the current BLIND BIDDING PROCESS in real estate?

Without that transparency, conflicts of interest expose us all to risk:

http://bit.ly/GotRisk  Please share URL with your social network

So do irresponsible practices, like competing escalator clauses which can knowingly or unknowingly create in-house sales at inflated prices that make all of us look like fools.  Maybe that’s where legislators and investigative reporters will begin to find tangible evidence that there’s need for transparency and regulatory reform.  Anyone want to look?

http://bit.ly/BetrayME  Please share URL with your social network

Posted in Uncategorized

Is growing inventory a bright spot or was housing recovery a giant blind spot?

 

To see how far winning bids are above or below original asking prices, run your cursor over individual sales in this scatterplot.  Each data point shows ($K over or under, as well as %).  Too zoom-in, drag a box across the area you want to expand.

More than 24 hours after it’s publication, only six shares and one comment so far on Boston.com’s latest real estate blog post.  Is that because this “Bright spot for Buyers” is a boring spot or is something more serious going on?

Scan industry and mainstream media headlines this Spring, and many are talking about housing’s slow start.  This provocative blog post goes further, boldly concluding:

The Housing Recovery that Never Was Is Over

http://bit.ly/REconOver  Please share this URL with your social networks

So what’s the real story here: is growing inventory a single bright spot or was the housing recovery a giant blind spot?

More specifically, if you live in Boston, how do you reconcile headlines like this with a scatter plot above showing single family homes selling well below asking prices?

Bidding Wars Are Back: Buyers Face Stiff Competition

“Baltimore and Boston had the largest year-over-year increases in bidding wars, a rise to 50.9 percent and 75.9 percent, respectively.”

http://bit.ly/RedSpin  Please share this URL with your social networks

Contrast that industry spin with the large number of single family homes selling at discounts across Massachusetts, and it’s enough to make you cross-eyed.

To their credit, one Redfin agent is California ends the article above by saying:

“The past two years we’d compete against people camping out in their cars or entering lotteries to win new homes. This year, a bidding war is more likely to drive the price of a home higher than it’s worth competing for, and I think it will be easier for us to walk away from a situation like that.”

Homebuyers in Boston, what are local Redfin agents saying, or any other agents for that matter?  Are they / their advice part of the solution or part of the problem?

DIY homebuyers, what would help you see the housing market more clearly?

Call to Action:

Would be homebuyers, particularly first time homebuyers, please contact us if you’d like to preview our seminar, “Defensive Homebuying:  What they don’t teach in Homebuying 101″?

Posted in Bidding wars, Buyer agent, Consumer protection, Defensive Homebuying, Housing bubble, iCovery, Market trends, Price reductions, Price trends, Real Estate Bubble

Bidding Wars: Will escalator clauses put designated agency into investigative spotlight?

48 Whitehall Zestimate 10yrs

 

Yesterday, the Boston Globe did it again — fanned bidding war fever in the region with another headline that read, Tight housing market drives rising bids:  Tight market drives escalation clause use.  Thankfully, the reader comment that has attracted the most LIKES may reflect a growing “bidding war backlash.” @Chrissie78 wrote:

“And in a year or two we will be hearing about how these people can’t afford their mortgages and that their mortgage is more than their home is worth…will we get to bail them out because the real estate agent “tricked” them into overpaying for a house?”

Well said, …probably better than @Chrissie78 realizes.  If you visit this property on Zillow, one could argue that the winning bid did not make sense when it was made and that will become more obvious as time goes on.  As the image above shows, a year from now Zillow estimates the value of the property at $573,363. That’s $6,500 below the original asking price and $23,600 less than the winning bid.

(Side note:  That’s about the same amount the brokerage collected last November if their commission was only 4%.  If their fee was higher, say 5%, then they collected $29,850 — not bad for a listing that was on the market for just five days.)

Conflict of interest

Dig a little further on the MLS, and the story gets much more interesting.  Like too many transactions, this high bidder was involved in an in-house sale; so that may mean both buyer and seller were represented by “designated agents” in the same real estate brokerage.

Opposing Teams

If their designated buyer agent advised them to raise their bid $42,000 – from roughly 4% under asking price to 3% over asking price to prevail in a bidding war, someday the buyer might conclude that was bad advice and sue their agent as other buyers did in 2008 for misleading or not restraining them:

http://bit.ly/Misled2014

Investigative Spotlight?

The story does not end there.  As taxpayers we’re now guaranteeing 9 out of 10 mortgages, up from just 3 in 10 in 2006. So, when someone makes a bad decision or gets bad advice from their agent because of a conflict of interest, it may negatively impact all of us.   Our research suggests that this is NOT an isolated case and we’ve got some data we’re ready to ask collaborators to cross-examine, expand to recognize patterns, and if appropriate, take corrective action.

So glad the Boston Globe may have unknowingly put this issue into the investigative spotlight.  Here are some more numbers to get citizen journalists, consumer advocates, and professional investigative reporters started.  Any homebuyers or victims of bidding wars want to talk to our Dual Agency Detectives ;-)

http://bit.ly/BidCon

http://bit.ly/BidWarLab

Posted in Bidding wars, Consumer protection, Crowdsourcing, Defensive Homebuying, Designated Agency, Dual Agency Detective, Housing bubble, Investigative Reporting, Real Estate Bubble, RECALL: Real Estate Consumer Alliance

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

Cambridge Inventory 04/11/14 vs 2013

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 war in Newton was reported without context, and second an alarming statement about inventory in Cambridge does not stand-up to cross-examination:

“In Cambridge, where listings plunged 65 percent from a year ago, …”
http://bit.ly/InventoryGate Please share this URL

Real estate fact-checking:  A brief history

When the Real Estate Cafe wrote it’s first blog post a more than a decade ago, we decided to call our blog “Counter Intelligence” because we wanted to use this powerful new tool to fact check real estate spin and tell the other side of the story.  Words we wrote in February 2004 were tragically prophetic and ironically, are still unsettlingly true:

“This is where blogs might find an entry point in the real estate industry. As you know Ralph Nader and SteveBrobeck of the Consumer Federation of America both called the real estate industry a cartel more than a decade ago. One of my visions is a network of home buyers who post reviews of open houses and report on local market trends from the consumers’ perspective. As the air comes out of the real estate bubble and the industry slides into a multi-year down cycle, home buyers will become increasing cautious and hungry for this kind of ‘citizen journalism.’”

http://bit.ly/REBlogs2004 Please share this URL

Last week’s headline in the Boston Globe provides another reason why citizen journalists and DIY homebuyers should fact check industry spin.

Fact check:  Inventory down by 65%?

As of Friday, April 11, a standard MLS report called “On-market snapshot” reveals that were 95 active listings in Cambridge.  That’s down from 124 on the same day a year ago, but that reflects a 23% decline in active listings not 65% as reported in story in the Boston Globe a week ago.

Is it possible that inventory was off by 65% before the Globe article was published on April 6, 2014?  Let’s check.  The same MLS On-market snapshot reveals:

77 active listings in Cambridge on April 3, 2014
64 active listings in Cambridge on April 1, 2014

Further, the “Inventory Lab” the Real Estate Cafe shares with clients documents that there were 60 active listings in Cambridge on March 9, 2014, so it’s highly unlikely that the stat reported by the Globe was correct a month later.

Full context

If you go back to the frigid days of early January, you do find that there were only 33 active listings in Cambridge on Jan. 9, 2014.  That number was 75% less that the previous year, an alarming fact even worse than what the Globe reported.  But inventory responds to seasonality and that includes both warmer weather and increased demand; so it’s not surprising to find that the inventory level had already risen to 45 active listings in Cambridge on Feb. 9, 2014.

Current inventory vs sales volume

ACTIVE MLS listings are up threefold in Cambridge since January 2014 and have doubled since February.  Equally significant is that the current inventory level is rough equivalent to the total number of MLS sales across all residential property types — single family, multi-family, condos & land — in Cambridge during the first three months of the year, 1Q2014.

We don’t know what source the Globe used to report that inventory was down 65% in Cambridge, but the good news is that appears to be wrong and there are more housing choices inside and OUTSIDE the MLS than homebuyers realize.

The Rest of the Story

A month ago, a headline in the industry press revealed this shocking finding:

Study suggests MLS played little or no role in nearly half of 2013 sales
http://bit.ly/MLSnoMas Please share this URL

Should homebuyers look to the Globe or other local journalists to ask what role pocket listings and pre-MLS sales are playing behind the “low inventory” hype?  Instead of waiting, the Real Estate Cafe has developed it’s own Inventory Lab and Bidding War Scorecard for clients, and is putting together a series of seminars on “Defensive Homebuying:  What they don’t teach in Homebuying 101.”

Call to Action

To learn more about those offerings plus our seminars on Proactive House Hunting and the Hidden Costs of Reactive House Hunting, please contact the Real Estate Cafe at (617) 299-8675 to schedule a free consultation.

We’re particularly eager to hear from DIY homebuyers who’d like to earn commission credits for their content contributions.  We call it the Real Estate Cafe’s Tipping Policy, and we’re eager to reward fact checkers and citizen journalists for their insights into what’s really happening.

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

Bidding War Cluster Bomb is homebuyer’s new Killer App

Cluster bid, under development at stealth location in Cambridge, seeks to transform runaway bidding wars into a "Force for Good"

CLUSTER BID under development at stealth location in Cambridge seeks to transform runaway bidding wars into a “Force for Good”

Tired of losing bidding wars, innovative DIY homebuyers in Cambridge, Massachusetts, one of the few cities in the world to have it’s own Peace Commission, are using the Social Enterprise Conference at Harvard Business School today to leak information about a “killer app” they are developing –

a cluster bomb designed to win bidding wars.

Last year, behavioral scientists in the city famous for innovation on both Harvard and MIT campuses, looked to the Slow Food Movement to inspire real estate reforms.  Attention generated by that research and the ongoing state of emergency in the Cambridge housing market caused homebuyers to crowd fund the new “Bidding War Lab” where the cluster bomb has secretly been under development.

“Despite building strong relationships with local law officials and consumer advocates, including the Consumer Financial Detention Bureau (CFDB), we realized there are limits to what the public sector and real estate regulators can achieve with the Slow Bid Reform Act, ” an unidentified sources confided.   “So we’ve turned to a new generation of app builders and social entrepreneurs to launch a “Peace Offensive” that will transform bidding wars into a force for good.”

Imagine the ideas you could generate if the estimated $7M in bidding war premiums homebuyers paid over asking prices during 4Q2013 alone in Cambridge were offered as prize money in an IDEAS COMPETITION, or redistributed to seed social enterprise start-ups, non-profit organizations, and causes?  See similar subversive, open-fundraising model from a decade ago:

ASAP:  AIDS Shelter Alliance Partners

We think the Bidding War Cluster Bid has the potential to become the “Mother of all Crowdfunding Opportunities;” but even if it doesn’t, we’re eager to use the period between April Fool’s Day and Patriot’s Day to recruit courageous consumers and innovative social do gooders to use this powerful new weapon to light up the bidding war process!

When buyers and sellers see the impact of this stealth project has on local communities, we hope Cluster Bids will inspire other legacy bid models — maybe even a new arms race between housing markets worldwide.

Let us know if you’d like online access to our secret lab or meet in person sometime before, during or after the Social Enterprise Conference.

Disclaimer:  The Bidding War Cluster Bomb / Cluster Bid are not products or trademarks of the Harvard Lampoon, The Onion, or the Colbert Report but we encourage all three to help us identify and honor altruistic Bidding War Heroes, both homebuyers and sellers.

Posted in ASAP: AIDS Shelter Alliance Partners, Bidding wars, Creative class, Crowd financing, Crowdfunding, Idea Bar, Real estate philanthropy, Social funding, Test kitchen

Return of frenzied real estate spin? Don’t be fooled again

Excerpt from broker facing MLS:

Named Exclusion

Concerned that the housing market this Spring could become irrational again, Boston.com’s real estate blogger raised questions today about the risks / rewards of waiving contingencies:

A buyer’s most foolish move

Yesterday, one of Real Estate Cafe’s DIY buyers received a conference call from a seller and their listing agent saying their offer was

the lowest of five competing buyers,

one had no financing contingency,

another had no inspection contingency.

However, the buyers were a “named exclusion;” which means they made an offer directly to the homeowner before they relisted in the MLS.  With that offer in hand, the homeowner wanted to see if they could net more profit by working with a well-known listing agent.  Fast forward three weeks from that date, and stir the frenzied FUD pot:

Fear, Uncertainty, and Doubt.

The buyers remained calm, raised their offer a bit, but did NOT remove any contingency clauses, and insisted on the right to get out of the transaction or renegotiate their price if the inspection revealed more than $10K in repair costs.

Guess who won?

Not a cash buyer, nor a fearful or poorly advised buyer playing Russian Roulette with contingency clauses.  Instead, a smart, PROACTIVE, DIY homebuyer who allowed the seller to NET more profit / retain more home equity by selling to them.  We don’t know if the listing agency will receive a partial fee for their role, but both the buyer and seller saved by outsmarting the traditional co-broke real estate commission buried in every MLS listing.

How common is that?  Named exclusions are probably pretty rare in Greater Boston because, unlike some parts of the country, FSBOs — for sale by owner listings — are less common than other cities, (eg. Madison, WI). Still, this isolated case study reflects two larger trends:

Megatrend #1. The MLS is playing a less important role in the housing market

Nationwide, guess what percent of homes are selling outside the MLS?  One study, which has generated considerable debate (including our own comments) suggests that the MLS played little or no role in nearly half of 2013 home sales

http://bit.ly/MLSnoMas

Megatrend #2.  New challenges the traditional two-sided real estate commission

The Consumer Federation of America first called for the traditional two-side real estate commission to be uncoupled more than 20 years ago, predicting billions in savings annually.  More recently, we were delighted to discover an academic paper and feature story in AOL Real Estate about the same:

Price Collusion and Adverse Intermediation

Significantly, one of the coauthors, Benjamin G. Edelman is an associate professor in the Negotiation, Organizations and Markets unit at Harvard Business School.

Real Estate Agents Who Rewrite the Rules on Commissions

CNN Poll Agents Over Paid (2005)

We’ll write more about these two trends and are eager to include them in a upcoming C2C / P2C Real Estate Conference.  In the meantime, we invite DIY homebuyers to contact us now for a complimentary consultation to learn more about alternative money-saving real estate brokerage models, including our PROACTIVE House Hunting strategies.

Posted in Bidding wars, Buyer agent, Commission Reform, Consumer protection, Defensive Homebuying, DIY Homebuyers, Proactive househunting, RECALL: Real Estate Consumer Alliance, Savings & Rebates, Unbundling the Commission

WARNING Homebuyers: Will feeling blue morph into feeling misled?

 

Misled 2008 NYTimes

Rising prices and games real estate agents play have Home buyers feeling blue, according to recent national surveys. Thankfully, Boston.com’s blog post this morning provided stats from Zillow and Redfin, even if it’s a bit confusing to compare and make sense of them.  Regardless, the direction is obvious:

“Only 25 percent of house hunters across the country think it is a good time to buy now, compared to 40 percent last year, Redfin reports.”

Compare those numbers Trulia’s Real Estate Regrets Survey a year ago, Marcy 22-26, 2013:  Then 75% of Americans felt it was a better time to buy a home than it would be one year from now.  Does that make today’s potential homebuyer cringe with regret or congratulate themselves for timing the market?  Before you decide, read today’s stats in the context of Zillow’s forecast / commentary six weeks ago:

Housing Recovery Entering Middle Innings in 2014, as Local Market Performances Are Expected to Vary Widely

“The housing recovery is entering the middle innings after an incredible run in 2013. Below the surface of last year’s market, a number of unsettling trends started to emerge as a result of rapid and ultimately unsustainable appreciation, setting up a bit of a mixed bag for 2014,” said Zillow Chief Economist Dr. Stan Humphries. “Affordability issues will help put the brakes on many markets that saw huge appreciation rates, like California and the Southwest, creating volatility that could potentially cause WHIPLASH (emphasis added) for homebuyers and sellers. At the same time, we expect more homes to be available this year as more sellers enter the market and more homes get built, and a decline in investor competition should make for a more hospitable market for many buyers. While a truly ‘normal’ market remains a ways off, we expect to take more steps in that direction as appreciation moderates, negative equity recedes, federal stimulus is withdrawn and foreclosures wane.”

FULL TEXT:  http://bit.ly/MidREcovery

Whiplash for buyers and sellers?

If you won a bidding war last year, and justified overpaying because rising prices would compensate, does receding buyer confidence and the caution above cause “regret?”  Before answering, check out the excerpt below about February’s pending sales prices across Massachusetts, and let us know if it causes you to do a double take.  Sound like Zillow’s warning about “Whiplash for buyers and sellers?”

When the Massachusetts Association of Realtors released their Pending Sales Report earlier this week, NPR / WBUR said NOTHING about declining median pending sales prices between January and February 2014.  Curious omission but consistent with the seller bias in the industry and real estate media.  In contrast, here’s what Boston Business Journal reported:

The median sales price of single-family homes put under agreement in February was $295,600, up 7.5 percent from $275,000 in February2013. On a month-to-month basis, the median P&S price was down 7.7 percent from the $320,000 posted in January.

The median sale price of a condo put under agreement in Februarywas $282,500 which was up 8.9 percent from $259,450 in February2013. On a month-to-month basis, under agreement median prices were down 5.9 percent from $300,000 in January.

FULL TEXT:  http://bit.ly/PendingPriceSlump

Regardless of whether individual homebuyers experience buyer’s remorse, will we see a Bidding War Backlash in the next 18 months and a repeat of regrets like those in 2008?

http://bit.ly/Misled2008

We’ve been collecting some stats that underline the importance of that question.  Want to see what bidding wars looked like in Cambridge during 4Q2013 or any other real estate market? Schedule a FREE consultation to learn more about our Bidding War Scorecard.

Posted in Bidding wars, Bubble Hour, Buyer agent, Consumer protection, Defensive Homebuying, Dual Agency Detective, Housing forecasts, iCovery, Real Estate Bubble, RECALL: Real Estate Consumer Alliance
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