After the Arab Spring last year, some pundits predicted 2012 would be the "Year of Consumer Activism." But 80 degree February days triggered Spring Fever early in the real estate market, instead of consumer rebellion. That may be changing. In the past 24 hours, The Economist & Financial Times have hit the real estate industry with a one-two punch the same week 10,000+ Realtors marched on Washington.
With one in three households underwater, repositioning Dealtors as "Architects of the American Dream" is a hard sell -- particularly when surveys show consumers believe that real estate agents are overpaid. More important, millions of equity-starved homeowners simply cannot afford to pay the prevailing real estate commission (watch short video).
Into that pain comes a headline from The Economist which could become a rallying cry:
The great realtor rip-off:
Why is it so expensive to buy or sell a house in America?
As housing inventories rise is the stage set for bidding war backlash? Every year, thousands of unsold properties come off the market after the 4th of July. After buyers willing to pay “tens of thousands of dollars over asking price" fail to materialize, will disappointed homeowners drop their real estate agent and try selling "for sale by owner"?
Beyond that semi-annual flood of expired and canceled listings is an overdue systemic change that could result in billions of dollars annually in savings. What would it take to use this pregnant moment to mobilize a new generation of tech-savvy, DIY home buyers and sellers eager to save money on real estate transactions?
Next year marks the 20th anniversary of “The Consumer Revolution in Real Estate,” a two-day conference hosted in Boston with 50 panelists including Ralph Nader and Steve Brobeck, Executive Director of the Consumer Federation of America. We're still driven to redesign the real estate industry, and are eager to collaborate with others, inside and outside the industry, to develop disruptive business models and apps capable of delivering billions of dollars in savings annually.
At a minimum, we’d like to begin hosting educational events for FSBOs, including FSBO Field Trips; and create a “Defensive Homebuying” course for DIY home buyers, too.
If you're a real estate innovator in Boston or a disgruntled DIY homebuyer or seller, can we invite you to watch our 80 second video introduction to the Real Estate Cafe? If you like our mission, we'd like to share some of our money-savings ideas and initiatives and invite your dreams as well. We're available to (1) TweetUp this weekend and Monday, (2) host a roundtable offline on Tuesday, or (3) "hangout" on Google+ at a mutually convenient time. Text of call 617-661-4046 to let us know what works for you.
If you'd like to save money by selling "for sale by owner," please preview our slideshow below and add our upcoming seminars & fieldtrips to your watchlist.
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.
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..."
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
This week, a leading real estate consulting firm urged their clients to "strip your search, bare your soul." They invited Realtors to enter into "a deeper examination of your value." But to me, it wasn't clear whether their admonishment challenged a nation of lookalike websites to "soul search" about a deeper problem: a one-size, fits-all real estate commmission that home equity ravaged sellers can no longer afford and shouldn't tolerate.
As we mark the 17th anniversary of our original lease, The Real Estate Cafe's money-saving mission
now echoes across The Boston Globe's new hyper-local
site and seeks to responds to the needs of one in three
Americans trapped in negative equity. Headlines this week revealed that another 400,000 homeowners
were dragged into negative equity by falling housing prices.
What implications does that have for real estate professionals, and their obsolete, bloated real estate commissions? Listen to this award-winning journalist, educator talk about "Eroding Equity the Coffin Nail for Percentage Commissions" and share this link with friends:
"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. With so little cash available, the seller might be tempted to look to the real estate professional assisting him, who stands to pocket more than he does, and suggest that he take a commission-ectomy
So what's our our plan to help 50 to 100 real estate consumers save $1 million dollars between March 1st and December 1st, 2012? It's too long and too compelling to fit into a single blog post, so we invite you to:
- subscribe to this blog,
- follow @RealEstateCafe on Twitter,
- and / or fill out this form
Let us know if you're a interested in saving money as a DIY home buyer, DIY seller (not just "for sale by owner" or FSBO), or both buyer and seller and we'll email you a link to learn more about the Million Dollar March / Million$March.
When we launched our "FSBOs on Steroids" slideshow eight years ago
, we began with the end in mind: helping real estate consumers save money
by minimizing real estate transaction costs. While other "alternative" real estate brokerages like Redfin
are moving away from that core value, it remains our passion seventeen years after opening as the first real estate cybercafe
in the world.
As fee-for-service buyer agents
, we don't represent sellers; however, we are eager to educate prospective sellers about their options, regardless of whether they want to try selling by owner or selecting
a traditional full-service, full-fee listing agent. So without disparaging their business model, we invite readers to compare the "Guidelines for preparing a home for sale" offered by a fellow blogger on Local.Boston.com
and give thoughtful consideration to your options.
Rather than chosing a single option, we encourage homeowners -- particularly anyone who thinks real estate agents are overpaid
or anyone lost home equity
after the housing bust
-- to consider a five-phase listing strategy. Here's a quick overview: PHASE 1
: Pre-listing phase: Be aware that proactive home buyers may be eager to buy your home "as is" without listing in MLS or reducing your net profit by the broker's fee;PHASE 2
: For sale by owner: Even if you don't list your home in the MLS you can still "syndicated" it across a variety of sites including Zillow
, etc, and get help "a la carte" from fee-for-service real estate consultants
like the Real Estate Cafe;PHASE 3
: Listing Entry Only
: Pay a flat fee of approximately $99 to $499 dollars to have your home listed in the MLS, and offer a "traditional" or minimal BOYB (bring your own broker) coop fee to any real estate agent who represents a buyer; PHASE 4
: Select a traditional listing agent based on our Listing Agent Report Card
with a reduced real estate commission because you've already created and partially implemented a marketing compaign that might include a virtual open house, video, etc. (see options offered by FSBOSherpa.com
and other vendors); and finallyPHASE 5
: If the property fails to sell during a specified time frame, let your listing contract expire; drop your price by the amount of the commission and still net the same profit
as a for-sale-by-owner, again.
Our recollection (pending fact check
) is that a study by the California Assocation of Realtors (CAR) revealed that 70% of first time home sellers CONSIDER selling "for sale by owner." If you're open to that possibility yourself, The Real Estate Cafe is eager to go over the options above in more detail in person, individually or in a small group. Watch this innovative new site
for our next FREE FSBOs seminar, or schedule an appointment using the link below and will email you a sample screencast!
Readers of this blog may recognize that the lead story today in today's Boston Globe -- Home of the housing bust: Central Mass. towns reel; no recovery in sight -- reflects ongoing research The Real Estate Cafe has been doing regarding expired and canceled listings across Massachusetts. During 4Q2011, there were more than 20,000 expired and canceled real estate listings statewide. Those failed MLS listings represent an estimated $250 million dollars in lost commissions to real estate agents -- that's right, a quarter of a billion dollars in one state, during one quarter alone!!!
From our perspective as consumer advocates, a portion of those lost fees could be converted into consumers savings for both DIY home buyers and sellers.
As housing advocates and others have preached, a crisis is a terrible thing to waste. Our goal is to help turn those 20,000+ failed listings into a win-win-win opportunity, for sellers, home buyers, and local communities like those described in the Globe article. We're eager to find out if any of the high-credibility sources in the article -- Tim Davis, Barry Bluestone or any of affordable housing advocates -- are involved in any ongoing responses to the problem or organizing anything new, and how we might collaborate with them.
- OUR GUESS is that real estate investors will be the first respond to the "give away" housing prices that some Boston Globe readers say exaggerate the magnitude of the problem.
- OUR BELIEF is that the conventional real estate industry is not offering enough options to homeowners, particularly those who may be forced to try selling "for sale by owner" because they cannot afford traditional full-service, full-fee listing agents (watch this 3 minute video).
- OUR HOPE is to collaborate with others, including investors, who are already organizing or would like to explore alternative solutions that drive sales to achieve housing goals or some other social good.
At this point, we're sharing our proposal privately with real estate and technology innovators who are ready to "think outside the box." If you're one of them, or if you own an expired or canceled listing anywhere in Massachusetts, or if you're a DIY home buyer or renter interested in a win-win-win opportunity, we'd like to hear from you. In the meantime, we invite you to share this blog post or our Twitter post above with your social network and download our "Insider's Guide to Approaching Owners of Expired & Canceled Listings."
PS. Earlier today, we were surprised to find that the Globe headline story was NOT one of the most frequently shared by email. Our initial thought was maybe the housing bubble is old news. Five hours later, the story had been shared on various forms of social media over 400 times and generated over 200 comments. That confirming that the crisis represents an opportunity to win-win-win solutions. Want to join us in that quest?
Continuing our annual end of the year analysis of expired and canceled listings across Massachusetts, focusing this time on the 10 days before Christmas, 12/16-25/11. How much money can a DIY home buyer save by buying an expired or canceled listing directly from the owner? As the working graph above shows, commission savings on expired and canceled MLS listings dwarf the $8,000 federal tax credit that had some overeager home buyers rushing like fools (see our cartoon) into bidding wars in 2009 and 2010. (The Real Estate Cafe was outspoken critics of that policy, arguing that financially-savvy buyers who timed the market saved considerably more money.)
If you've been timing the market to avoid paying real estate commissions, now's the time to "carpe diem" or "carpe discount." As the graph above shows, commission savings (based on 5% off the last list price of an expired or canceled listing) are multiples of the $8,000 tax credit:
- Nearly 500 listing offer savings of one to two times the $8K tax credit;
- Approximately 300 offer savings of two to three times the tax credit; and
- Another 310+ offer savings of more than $24,000 -- or more 3 times the tax credit!
- A surprising number of luxury listings are also expiring or being canceled offering commission savings over $100K!
The good news from the sellers' perspective is that they can pass commission savings to potential buyers without lowering the profit on their last asking price. That's why we've likened this seasonal opportunity to a "tax-free" or "commission-free holiday" for buyers and sellers. If you AGREE that expired and canceled listing can be a win-win proposition for DIY home buyers and FSBOs, as we wrote in our last blog post, should we talk briefly about what to do next?
Technical note / disclosure: Savings graphed above are based on approximately 1,300 MLS listings that expired or were canceled across Massachusetts during the ten days before Christmas, 12/16-25/11. Commisssion savings based on an estimated 5% of the last list price in the MLS. Actual savings will vary depending on price negotiations between DIY home buyers and homeowners selling for-sale-by-owner (FSBO) after their listings expire or are canceled.
It's that time of year again. Thousands of real estate listing contracts are ending or "expiring" across Massachusetts. Using 9/26/11 as a starting point, we estimate that 20,000 listings will expired or be canceled by the end of the year. Between 09/26 and 12/05 this year, about 6,000 listings went under agreement or about one for every three homes that has come OFF the market. Why?
Looking down from a 20,000 foot perspective, there are three broad ways to look at this annual waiting game:
- Sellers who overpriced their homes are waiting for buyers to meet their unrealistic price expectations;
- Sellers who are at risk to selling at a loss refuse to drop prices because cannot afford to so;
- Home buyers who watching prices fall hope that will translate to reduced asking prices in 2012 or the ability to negotiate price concessions.
Over the past two weeks, we've downloaded thousands of MLS listing to try to make sense of expired and canceled listings. Here are some quick findings based on listings which expired between a ten day period, December 6 to 15, 2011:
Our research shows that many sellers would rather let their listing expire than reduce price expectations. That strategy appears to be self-defeating because reducing prices, in some cases BELOW assessed value, hasn't been enough to thousands of other expired listings. (That raises questions about location, condition, falling demand, and shrinking purchasing power despite record low interest rates, but those are beyond the scope of this blog post.)
Our research also shows many sellers who priced their homes well OVER their assessed value refused to drop their prices (as shown in the working graph above). If local tax assessments have been reduced that may hide the fact that some sellers might be unable or unwilling to sell at a loss; rather than pricing their home too aggressively or being greedy.
Finally, our PREVIOUS research showed that 1 in 5 homes sold for more than 10% off the original asking price during the holidays. In contrast during the ten day period analyzed in the graph above, price reductions of 10% were not enough to sell hundreds of expired listings, many of which were already priced 10% below their assessed value. What implications does that have for pricing strategies when sellers relist their homes with a traditional, full-fee agent in 2012 or try to sell on their own?
Normally sellers relist with traditional, full-commission real estate agents who are already courting their business. However, if sellers are willing to think "outside the box," here are three possible win-win scenarios for "do-it-yourself" (DIY) home buyers and homeowners who want to sell for-sale-by-owner (FSBO) to save money by avoiding full-fee, traditional listing agents:
1st: FSBOs can accept a lower offer NOW, as much as 5-6% off their last asking price and still net as much profit as a full price offer with an traditional agent;
2nd: Relist in Spring 2012 without traditional agent, selling either FSBO or discount MLS listing service at your last asking price. Then reduce your list price 1.25-1.5% every 25 days over 100 days so you net as much profit or more than your last asking price with your full fee agent; or
3rd: Think about creative ways to reduce market risk for buyers who do not want to "catch a falling knife" -- buy while housing prices are still falling. We're eager to help buyes and sellers experiment with some ideas we've to add to our "FSBOs on Steroids" presentation.
To learn more, whether you are a buyer or seller, sign up for a FREE 15 minute consultation, in person or by phone. Click on the call to action below for more details.