Don't know whether to invite Jon Stewart or Stephen Colbert to satire the luxury listing agents quoted in recent news coverage, or harness industry spin into a wind farm. But with more research, trust that readers can assess, or at least monitor, about what's happening in the luxury housing market across Massachusetts from the buyer's perspective. Consider the following:
- Rather than looking at a 27% rise in sales over $2 million (an estimated 15 homes across MA); why not look at the 27% of single homes sold over $1.4 million during early Spring (02/07-5/06/12) for below assessed value?
- Or the 10 of 20 single family homes sold over $2.85 million during the same three month period for more than one million dollars off their original asking prices?
- Or instead of focusing on offers accepted 3 to 10% below the last list price, cheer about sales more than 20%, 30%, or 40% below the original asking price (as shown in the graph above)?
Finally, before falling for "shrinking inventory" hype, why not stop to convert current sales into annual absorption rates and compare that to active MLS listings? If there's a three year supply of single family listings over $2M, and demand for McMansions has peaked, what's the rush? What do readers think will happen to the price and pace of luxury home sales, and does it make sense to buy one before knowing who the next president will be?
What we do know is that pending sales of luxury homes are up, particularly homes between $1.4 and 1.85M. Does that reflect increased demand or a decline in seller price expectations and substantial price reductions including some over $1 million? We'll monitor those questions and more, and invite luxury home buyers to use our research and premium content to assess the luxury housing market from their perspective.
As with past clients, the SAVINGS could be significant - six or seven figures off the original asking price not a mere 4% before median sales price -- the price change reported in recent news coverage. Click on the link below for a sample of The Real Estate Cafe's analysis of "million dollar markdowns."
Is Nationwide Open House Weekend (NOHW) the Realtor's version of Black Friday? Hardly. Instead of deep discounts to get you to shop early, some consumer advocates say NOHW is "farce" that could cost uninformed homebuyers -- see #4 in SmartMoney article entitled, 10 Things Open Houses Won't Tell You.
If you're a DIY homebuyer, who doesn't "need" a buyer agent, do you know that signing into an open house this weekend could forfeit your ability to collect a commission rebate -- up to 100% from the Real Estate Cafe?
Unfortunately, the turf battles in real estate extend beyond open houses, so before requesting an appointment through any real estate site, read this! By definition a listing agent represents the seller, so you may inadvertently forfeit your ability to work with a buyer agent if you schedule an appointment directly with a listing agent!
Ironically, self-reliant, tech-savvy home buyers sometimes let their smarts get ahead of your financial self-interest, as our comment on this blog about "Facing multiple bids?" post cautions:
If you’re doing most of the work yourself, you could be getting a rebate back from a buyer agent who works on a rebate model. If you’re not, you’re rewarding the very system you are rightly criticizing. And for those DIY homebuyers who bypass buyer agents all together because they don’t need help, they are ironically giving the listing agent a double pay day, instead of creating getting cash at closing to reward themselves.
If you've got time between open houses this weekend, or anytime soon, we'd like to tell you more about our Defensive Homebuying strategies. Just let us know if you'd like to meet online or off. If there is interest, we'll gladly host a Defensive Homebuying 101 class, again, online or off.
Three weeks after a front page story in the Boston Globe proclaimed that bidding wars are back, fears are subsiding after readers blasted six blog posts on the subject, including one yesterday: "Bidding Wars: Hype or Reality?" Some of our preliminary analysis was linked to that post; and now we're ready to reveal more to help DIY home buyers relax, even if it's Friday the 13th.
As the graph above shows, only 13% of MLS listings sold over asking price between March 1 and April 10th -- just 3.4%, a mere 176 listings statewide sold for more than $11,100 over asking price! By contrast, another 282 listings sold for $3,100 or LESS over asking price. Not exactly scarey stuff, right?
Want to hear something that is spooky? Guess how many properties sold for more than $11,100 BELOW the list price? 2,263 listings -- would you believe that's 13 times the number that sold for $11,100 OVER asking price?
You can't make this stuff up!
But if you fall in love with a property and fear you'll have to pay over asking price to win a bidding war, don't make up your mind without looking closely at the data. If you click on the link below, we'll create a customized report from the data graphed above to help you decide if you need to go over asking price and how far.
We advise our clients to avoid bidding wars by being proactive. There's lots more on that subject, and so much data we're offering commission rebate credits to clients who help us analyze the data and crowdsource bidding wars.
Interested in that offer or some free number crunching? We'll WAIVE the cost of the first 30 minutes, a $75 value!
When it comes to bidding wars, the real estate equivalent of arms control is a combination of reason, restraint, research, field reporting and fact checking. The key questions are: (1) What's really happening, and (2) what's the impact on individual home buying opportunities and housing markets across Massachusetts? As with our award-winning Real Estate Bubble Map in 2006, The Real Estate Cafe wants your help to crowdsource bidding wars. We can provide MLS data but need field observations and war stories, particularly if you've been wronged (would you believe there have already been 5,000 complaints received in Toronto?). And as before, we're prepared to reward contributions with commission rebate credits.
First pass: Bidding wars in Top 10 housing markets in MA
Rather than addressing the entire market right away, our first pass was to take a snap shot of MLS residential listings in the top 10 cities, neighborhoods, and towns in Massachusetts, as defined by the Warren Group and Boston Globe Magazine, between March 1 and April 5, 2012. Then to slice the data more narrowly, we focused on listings that have been on the market for 7 days or less, or gone under agreement within 7 days or less during the same period. That data query resulted in 299 properties across the Top 10 towns. Here's what we found:
- 40% of the NEW listings are still active;
- 42% (of this sample, not all new listings) are already under agreement; and
- One in ten properties have already closed -- presumably cash buyers.
Here's the good news if you're a homebuyer: Only 13 of the properties that have been on the market for one week or less sold for OVER ASKING PRICE. That’s just 4% of the 299 listings identified in the Top 10 housing markets across MA. Hardly a compelling indicator that the housing market is roaring back, and nothing close to "people trying to get on the last lifeboat on the Titanic," as one bombastic listing agent boasted two weeks ago in a front page story in the Boston Globe.
But let's return to the data in our limited sample before rushing to conclusions.
Of the 31 sales that closed in a week or less, 42% sold for over asking price. That sounds ominous until you realize, once again, that we’re talking about thirteen listings in the Top 10 towns. Would you believe that three of those bids were $1,100 or less over asking price? Not exactly a show of strength from cash buyers, and hardly the stuff of headlines.
So what made front page news? Some listing agents are quick to sensationalize, so that fact that prices were driven more than 5% above the original asking price sounds like a market on fire. That only occurred in six of the 299 listings in our preliminary data analysis, and the details are revealing:
- Two properties were priced about 15% below their assessed values and sold for about 10% below their assessed values;
- Two properties were located in Cambridge where the People's Republic has been replaced by the Poupon Republic; and
- Two luxury condos priced over $1M in Back Bay generated bids approximately $100K over asking price. (That may say more about the difference between the 1% and the rest of us, than it does about the housing market).
Stay tuned for the rest of the story
When others reported that 15% percent of the homes put on the market in Greater Boston during 2012 have gone to contract within three days, buyers may have assumed many of those homes were selling over asking price. So far, looking at the narrow market slice described above, we've only identified 13 sales over asking price between March 1st and April 5th, but nearly 100 more properties are under agreement. As their sale prices become public in coming weeks, we'll know more about what’s really going on.
Until then, we encourage buyers to act prudently, and don't fall for fear or pressure tactics that could cause you to bid unnecessarily over asking prices. Further, we invite you to click on the button below to make an appointment to:
We're available tomorrow April 7 at BarCamp Boston or at your earliest convenience, online or off. If it's urgent, just call us at 617-661-4046.
Have you see the front page news yet? Bidding wars are back, or at least that's what some buyers are experiencing as they house hunt across Eastern Massachusetts.
The story, IMHO, should be required reading for any home buyer, as much for what it doesn't say (or even ask) as what it does. That's not to say the reporter did a bad job; bidding wars are a complex subject: seasonal phenomena at best, full of smoke and mirror manipulations at worst. Are bidding wars really back? How will you defend yourself? Get our preliminary response, we invite yours:
- What would you like to know about how to compete in or avoid bidding wars?
- Should industry regulators or app developers provide a solution to prevent a replay of manipulative bidding practices that helped create the housing bubble?
- Think we should publish a guide to "games real estate agents play" for April Fool’s Day (eg. see cartoon on our 2005 ad above warning homebuyers about that the housing bubble was about to pop)?
If so, The Real Estate Cafe invites your contributions, either real victims stories or parodies of industry hype! Our comment on this morning's Boston.com blog post addresses one of them:
Jima,—Thanks for raising the “Phantom Buyer” technique, one of the games listing agents play this time of year when there is a short-term imbalance between overeager homebuyers and MLSlisted properties. As Scott knows, The Real Estate Cafe has proposed a variety of responses to “blind bidding wars” and the unethical business practices that sometimes accompany them.
Here’s one of our blog posts from last year:
http://bit.ly/VerifyRE
Hope to hangout on Google+ and even host a virtual Town Meeting shortly to discuss the “problem” and possible responses, both for individual buyers, industry regulators, and application developers.
First things first, though. SVV, thanks for asking: What’s really happening with bidding wars, and how much of this is self-serving industry hype and high pressure sales tactics? IMHO, 48 hours bid deadlines may create a fear of loss, but shouldn’t be mistaken for housing demand and purchase power roaring back. Glad a lead listing agent and buyer agent quoted at the end of the Globe article both told buyers not to overreact to a passing phenomenon.
Given that, one wonders why the story was on page one? Want to read our line-by-line response to the Globe story and be invited to the virtual Town Meeting if there's enough interest to host one?
Good news / bad news?
Looks like the Feast of St. Joseph passed yesterday without any coverage on @WSJrealestate, @Realtors, or @InmanNews, the leading real estate technology site. Would you believe an article in the Wall Street Journal entitled When It Takes a Miracle to Sell Your House was the most emailed story of the day five years ago? What's happened -- have people lost their faith? Are rabbits feet next?
If you purchased one of the 2 million St. Joseph statues alledgedly sold each year (unconfirmed source) and your house did not sell, The Real Estate Cafe has some BuyBack offers. Read on, particularly if you own one of the 20,000+ Expired & CANceled MLS listings during 4Q2011 across Massachusetts.
Background:
In 1998, Inman News wrote a story about one of the first real estate web sites to sell St. Joseph statues online. When we searched their archive for "St. Joseph statues," we did NOT see our response below; but you can clearly see that their headline called the practice of burying St. Joseph statues upside down a "trick" (that's an understatement IMHO, no pun intended):
Beyond Superstition: Doing Justice to the "Just Man"
In the past, articles like Inman News’s "Faith can move real estate: St. Joseph’s statue trick gets Web site" would have hit my sacrilege hot button sending me into a fit of holy anger. Now, I see the playful human interest story as a timely opportunity to invite believers and non-believers to draw inspiration from this guardian of the Son of God during this, and important transition time in the local, national, and international housing market.
Whether Inman News published our op-ed or not, they did not to write us off as religious zealots. Instead, about a decade later they wrote about our interactive, interfaith campaign: "'St. Joe 2.0' samples the many forms of faith." Regrettably, that experiment in collaborative mapping ended when Platial pulled the plug.
Expanding spiritual perspectives to include social justice, we could not resist the urge yesterday to echo, at least indirectly, the "Mad as Hell and not going to take it anymore" sentiment Brad Inman described in his Welcome Keynote at ConnectNY 2012. Combine that with a leading real estate educator / author warning that Eroding Equity the Coffin Nail for Percentage Commissions, and that's a serious threat to business as usual!
Repositioning St. Joseph
When one in three households are upside down on their mortgage, is it a sin to "reposition" St. Joseph as the Patron Saint of Consumer Advocates and invoke his intercession to topple the obsolete, two-sided real estate commission that overcharges consumers billions of dollars annually?
Of course, The Real Estate Cafe can't bring about that revolutionary change single-handedly, but we've been waiting for the real estate industry and consumers to reach a tipping point since April 2006. Some have predicted that 2012 will be the Year of Customer Activism - Can social media harness enough holy anger from distressed sellers to expand money-saving alternatives to the traditional, one-size fits all real estate commission? Read what IAREC.com says:
“Our 100 year old business model is on life support… Absent new approaches, we’re already out of business, we just don’t know it yet!” (watch 2 minute video)
Got expired or canceled listing? Explore your "trade-in" options
We began to offer a St. Joseph Statue BuyBack Program five years ago; then, there were 16,000 expired & canceled listings across MA. Last year, there were 20,000+ during 4Q2011. That represents an estimated $250M in lost real estate commissions or a quarter of a billion dollars in potential consumer savings from one quarter, in one state alone!
Delivering those savings would be the answer to prayer for this consumer advocate and the DIY clients we serve. What's your take? Are people losing faith in burying St. Joseph? Should they bury Tim Tebow statues instead? Or like the Denver Broncos, should they explore trading options? Click on the link below to learn more about what we've offered in the past, and call 617-661-4046 to discuss what we're considering this year!
PS. Why do we keep writing about St. Jospeh statues? Read what one publicity hound wrote:
"No other column I have ever written in my 22 years as a newspaper editor and reporter resulted in as many responses..."
Catholics don't believe in luck, they believe in prayer and Divine Providence.
And Social Justice. And in President Kennedy's immortal words, "God's work on earth must truly be our own." So, was it providential to receive an email last night offering to develop a real estate app and run into the same programmer this morning, on the Feast of St. Joseph -- the Patron Saint of Social Justice -- while reading our guest editorial from 1998?
Beyond superstition: Doing Justice to the "Just Man"
Years before the occupy movement put income inequality onto the national agenda, the National Catholic Reporter wrote that "Housing was creating wealth, but leaving other behind." A decade ago, when housing values appeared to be doubling while homeowners slept, we created a friendly-fundraising competition and invited buyers, sellers, and everyone in the real estate industry to share profits and savings from online real estate transations with AIDS orphans (view slides) and asked St. Joseph to bless our S.O.S.
But the collapse of the real estate bubble undermined those good intentions. Now, one in three households are "trapped by negative equity" and some have wisely "repositioned" St. Joseph as an intercessor for those facing financial problems in general and foreclosure in particular.
As Patron Saint of social justice and protector of the Universal Church, we'd like to nominate St. Joseph for patron saint of "Consumer Protection" as well. Although we object to burying St. Joseph statues upside down, as consumer advocates over the past two decades, The Real Estate Cafe has deliberately looked at the real estate industry upside down and backwards:
From that perspective, we wrote a "Real Estate Minifesto" two years ago and are eager to work with software and app developers, like the one who contacted us last night, to co-create that money-saving vision.
Which idea starters could turn the real estate industry upside-down?
For starters, if sellers could find buyers as easily as buyers currently find listings, their ability to communicate directly could deliver billions of dollars of consumer savings -- perhaps as much as $20 to $30 billion annually according to industry critics. Imagine what could done if a portion of those savings were donated to non-profit organizations or invested in social justice entrepreneurs doing God's work?
Or contributed / invested in a crowdfunding mechanism to development and implement our reVRM Minifesto? Want to TweetUp to discuss that or join a real estate group to study Doc Searls new book on The Intention Economy: When Customers Take Charge? Let us know!
What's this got to do with social justice?
According to one award-winning educator / journalist:
"The typical mortgaged homeowner has less the 13% equity in the property. So what happens if they attempt to sell using the traditional percentage commission structure? After commission and closing costs, they might be lucky to net 2% on the sale. (see video)
New tools and business models can help home buyers and sellers interact more efficiently and enable better decisions with lower transaction costs. Won't working together towards that goal honor St. Joseph more than planting plastic statues upside down? If you've already purchased one, ask about our "St. Joseph Statue Buyback Program."
During the two weeks between the Ides of March and April Fool’s Day, will you help us raise awareness about the dangers of dual agency and “counterfeit buyer agency" by sharing this video with your social networks? Read how this victim of dual agency was told by his "so-called buyer agent" to bid $70,000 over an eventual sales price.
Five years later, it's tragically obvious that bloated housing values hurt more than individuals. One in three households is upside down on their mortgage which means that millions of families were victimized by artificial housing prices driven, at least in part, by unethical brokerage practices.
Exposing the hypocrisy of dual agency, and it's evil counterfeit buyer agency twin, "designated agency" has been a crusade for real estate consumer advocates, like The Real Estate Cafe, for more than 15 years. Protect your friends by sharing the video above and Pledge of Allegiance below via your social networks.
Does Your Buyer Agent Have a Conflict of Interest? Use this DIY Pledge form to find out!
PS. If you Tweet this or want to follow other Twitter posts over the next two weeks, use the hashtag #DumpDualAgency
In December 1993, Gail Shaffar, then New York Secretary of State, warned the Consumer Federation of America that "real estate is the sleeping giant of the consumer movement." Her warning -- unheeded by policy makers -- has been vindicated by the worst housing bubble in American history. Property values have fallen back a decade, creating victims in one in three households upside down on their mortgages.
If residential real estate brokerage practices are outside the scope of the new Consumer Financial Protection Bureau, and state regulatory real estate boards are dominated by real estate brokers, who will fill the regulatory void and deliver consumer education and long-overdue reforms?
Proposal: Seed "Consumer Revolution" with consumer education
As the 20 anniversary of the Consumer Revolution in Real Estate (a two-day event organized by our founder in April 2-3, 1993) approaches, The Real Estate Cafe would like to work with fellow real estate consumer advocates nationwide to conceive and co-teach a series consumer seminars -- ONLINE and OFF. In Boston, we're asking, once again, if it's time to host an "unconference" for DIY home buyers and FSBOs (see idea starters on The Real Estate Cafe's blog).
The Real Estate Cafe's recent blog posts -- http://bit.ly/RERights & http://bit.ly/PrivRE -- have pointed to 2012 as the Year of Customer Activism. So, we welcome the opportunity to identify and involve fellow real estate "change agents" to educate and organize tech-savvy homebuyers and sellers to:
2. Prevent another the boom / bust cycle that decimated home equity for millions of households.
More than a consumer revolution, that's a moral imperative. Do you agree? What courses would you like to see The Real Estate Cafe and others offer this Spring?
Want to save money by selling "for sale by owner"?
If this trend is true, we'd like to reverse it by making our FSBOs on Steroids class in variety of formats, including small group seminars offline, webinars or on demand online, as well as one-on-one presentations at local cafes or in your own home. Preview a sample of slides, and let us know when and where you'd like to learn more.
FOOTNOTE: For historical context in 1993, the early days of buyer brokerage, read NYTimes article entitled, When the Broker Works for the Buyer
Regardless of how you access the MLS, did you know that real estate agents can see every property you view on their website? Seen by the right eyes, that's a powerful tool; but what if your "click stream" is seen by a listing agent negotiating against you? That "privacy violation" could undermine your negotiating position -- think that conflict of interest should be disclosed upfront?
It’s been nearly 20 years since agency disclosure regulations were updated in Massachusetts, but less than 20 days since the White House called for a Consumer Privacy Bill of Rights. What are the implications for real estate? In this era of participatory democracy online, we'd like YOUR idea starters. Here are two of our own:
IDEA STARTER #1: Create "Smart Disclosures" to guarantee informed consent
Past studies and a "sting operation" 15 years ago this week in Massachusetts revealed that real estate agents routinely ignore their obligation to inform buyers of whether they are acting as a buyer's agent, seller's agent, or facilitator. On the seller's side, listing contracts seek permission to engage in a conflict of interest BEFORE agreeing to represent a seller, but some fail to present a second disclosure (see Mass.gov) at the actual time of conflict so both buyer and seller can avoid the conflict of interest and be represented by their own adviser / agent / advocate. Think "smart disclosures" and mobile technologies can improve on that?
IDEA STARTER #2: Require digital disclosures online
Existing regulations required disclosure at the first personal meeting to discuss a specific property. Because that language was written twenty years ago, it does not protect DIY home buyers online and their privacy rights are routinely ignored. If a listing agency is trying to get the highest price for their seller clients, and as a DIY home buyer, you're trying to buy at the lowest price, do you think that conflict of interest should be disclosed UPFRONT BEFORE that breach of confidentiality undermines your negotiating position?
A decade before the White House called for a Consumer Privacy Bill of Rights, the Real Estate Cafe and fellow real estate consumer advocates called for a Real Estate Consumer Bill of Rights in Congress. Unfortunately, not only are existing agency disclosure regs functionally obsolete and non-compliance widespread, but residential brokerage practices are outside the existing regulatory scope of the Consumer Financial Protection Bureau. So don't look to them to protect you.
What can YOU do to protect yourself NOW?
New technologies have the potential to create “Smart Disclosures” which could have profound implications for day-to-day business. The Real Estate Cafe is excited about conversations were having with others about new product to protect DIY home buyers and sellers. Until those are ready, we'll simply invite you to empower yourself by presenting your own "Terms of Service" to potential buyer agents and listing agents.
- Download the Pledge of Allegiance form below, developed nearly twenty years old ago to see what's possible when a regulatory agency is serious about protecting real estate consumers.
- Don't wait until your first meeting offline ask a real estate agent to sign it. Email the document or contract language to an agent BEFORE you sign-up to use their web site or visit their listing -- particularly "luxury listings" -- on any real estate portal like Zillow.com, Trulia.com, or Realtor.com, etc.
- See what happens when you exercise your right to their "undivided loyalty," and please share your story with us and your social network!
If both the real estate agent and their brokerage firm agree to sign this Pledge of Alligience, then you've protected both your right to privacy and ability to save money! Congratulations!
