A local San Diego brokerage, ARG has announced they are the first broker in San Diego to pull out of listing syndication.

I am not going to go into great detail on this site which is consumer orientated.  If you want to know more please visit an excellent article by Lily Leung with the San Diego Union Tribune.  She has also posted some consumer reaction to the announcement here.

Fred Glick makes several important points in the video below about ARG’s announcement which focus on Zillow, Trulia, and Realtor.com.

First, that the underlying message is to call the listing agent, no one else will know more about the property or represent you better.  Sounds like dual agency to me.

Second, that the seller should be concerned and not allow his or her listing to be syndicated on Zillow Trulia, or Realtor.com, the three largest consumer real estate sites on the Internet.

http://www.youtube.com/watch?v=WMQm3ZvVRl4

What are your thoughts?

Tips For Finding A REALTOR®

This past week I met a colleague in the real estate business for coffee and conversation.

The topics included the latest tech items, commission structures, contact data base management, and the overall perception of the REALTOR® and real estate industry.  He went on to tell me about a recent get together attended by professionals including attorneys, physicians, and educators.

The conversation eventually got into real estate and how easy it is to get a Broker’s licensee to save money by representing themselves.  The overall consensus from the conversation would be a savings of between 5% and 6% of the selling price.  It was a simple as that.

Of course I shared with him my old favorite saying that an Attorney that represents himself, has a fool for a Client.

A good deal of the perception of the real estate industry is our own fault.  Too many of us clamor about being number 1 or “top producer” and drive fancy leased luxury cars, wear expensive clothes, and have a ego the size of a 3rd world country.

From the consumers point of view why wouldn’t they believe we were an overpaid bunch of buffoons?

The things that traps all of us in life is we don’t know what we don’t know.  We second guess our doctors recommendations based on a Google search, a teacher’s method of running a classroom, and our public servants.  And we do this with out all the facts – assuming our judgement is correct.  BTW sometimes it is!

When I first started practicing real estate, I thought fresh out of the Department of Real Estate test that I was qualified to advise people in undoubtedly the largest financial decision of their lives.

Some 20 years later I am still learning something new each day, and realize how much more there is to know.   In other words, I know more than I don’t know, which is what a professional should bring to the table in any field.  You need to be immersed in a field day to day to understand it.

Last week the big story on Twitter, Facebook, and the news was the former CEO of ForSaleByOwner Colby Sambrotto had listed his 2000 square foot New York apartment for sale by owner (FISBO).He advertised the condominium through on-line classified ads and FISBO sites.  After 6 months he gave up, hired a real estate broker, and sold the property with multiple offers going $150,000 over asking price.  You can read more about on Curb New York.

In part three of my 10 part article on successful traits of a REALTOR® I listed “experience.”  The story is about a melt-down at a power plant that could not be diagnosed, an outside expert was called in, and within 10 minutes time he had corrected the problem.  Everyone was really grateful until they received a bill for  $2,000 of what they perceived as 10 minutes of his time.

Later that week the Plant Manager received a bill from the expert. When he opened the statement he was surprised to see a bill for $2,000 and immedialty rang up the expert to inquire how 10 minutes of time could be worth so much money and could he please itemize his statement.

Later that week another amended invoice arrived for the plant manager.

10 minutes time assessing the problem and troubleshooting plus travel time $25.00

20 years past professional experience in knowing which instrument to tap – $1,975.00

To immediately view or download 9 Tips For Finding A REALTOR® click image below.

I have done a bunch of thinking about real estate and how we are traditionally compensated. Most consumers are convinced that we are overpaid, and while that is not always true, the system is far too inefficient in its current structure.

There are way to many real estate salespeople for fewer transactions, and the cost of being affiliated with a brokerage is very expensive – note below the average REALTOR® commission rate is 68% of the gross commission.  Add this to the cost of franchise fees, insurance, and technology fees and you can see how inefficient the industry is?

Why is this?

Because that is the way it has been for decades and certain aspects just work.

There have been companies like Redfin that have gone to a rebate model for buyers. Other’s like Zip Realty had real estate agents become employees for greater control. Look around today and you can find every imaginable model available, but none that have seriously challenged the status quo, including for sale by owner websites, real estate auctions, and so called “discount brokerages”.

Partly because buyers want to be driven around for free with no commitment to the real estate agent. An agent may spend many months only to find the Client has changed their mind about buying, made an offer the weekend the agent was out of town, or simply cannot obtain financing.  A Seller does not incur and marketing expenses or commission charges unless the home sells.

Understand that real estate commissions are negotiable in California. With that said many brokerages have set minimum rates for their Associates to support their business model and profit goals. Dropping below these gross commission rates requires management approval and is discouraged.  By having layers of management, offices, and support staff a certain amount of money must flow through to pay the bills and make a profit.  The inefficiency of the industry has lead to high costs of operation combined with legacy real estate practices like brick and mortar, paper factories, and franchise fees, and the hiring of anyone with a sales license.

Unlike travel agents, stock brokers, and airlines, real estate is only bought and sold two or three times in a lifetime and each home and transaction is unique. Combine that with the litigious California environment, constantly changing Government laws and regulations, and the biggest financial purchase of most people lives and you’l start to understand how the status quo rolls on.

According to the National Association of REALTORS® 2011 report the average member completed 8 transactions sides per year.  REALTORS® that have been in the business less than 3 years average 3 transaction sides while agents in the business over 16 years averaged 10.  If you look at all REALTOR® they are receiving an average commission split of 68%.  For example, if the gross commission amount is $5,000 they are getting $3,400.00 before paying expenses, taxes, and overhead.  Keep in mind that all real estate sales people are not REALTOR® members and including non members would drop the average transaction per year dramatically.

For example, when I worked for a large franchise over 50% of our associates did not do any transaction sides.  The only benefit to the brokerage was bragging rights of how many agents they have, collection of monthly transaction fees and errors and omission insurance, company produced classes and training, and the hope that one of them would stumble upon a transaction.

The solution?

Hopefully now you can begin to see the complexity of the question.

Would having the consumer pay an hourly rate for services result in less average cost?  Probably, but not always, particularly in lower priced transactions.

What my real concern of an hourly based service is the Seller or Buyer trying to save money and not spend sufficient money to protect their interests.  While the commission percentage model allows the REALTOR® to just get the job done, an hourly rate can run up pretty quickly when issues in the transaction crop up.  I am not saying that it could not work.

Also beyond the rebate model brokerages that kick back a certain percentage of the commission to selling broker, the Client paying on a hourly basis will pay regardless of the results.  It may take 2 or 3 transaction negotiations before something comes together – or nothing may result other than a large bill with no sale.  Are Sellers willing to take this risk or would they rather continue with the percentage base model?

Beyond that are questions regarding real estate agency, Fiduciary duties, and who will be doing the work.  If a buyer retains his or her own Broker which they are paying by the hour – who is going to show them properties and what will happen to the commission offered to the buyer’s agent?  Will the buyer be willing to pay to have preliminary title reports reviewed, buyer’s request forms to be drafted, or negotiation of the transaction?

Here are a few other questions that come to mind.

1. Should a real estate agent that is paid by the hour represent both the buyer and seller in a single transaction?
2. What happens to the commission amount that is offered in the MLS to the selling (buyer’s) broker?
3. Would a flat fee percentage be better than an hourly rate?
4. How will marketing costs like advertising and internet exposure be paid for?
5. Would you expect an hourly professional to be available 24 hours per day and 7 days per week like most commission based salespeople are?

I have wrestled over these questions in my mind for years with no clear answer of what would serve the consumer better.

What are your thoughts?

Photo courtesy of Simon James via Flickr

In the last 10 years it has become common for real estate agents to use a Transaction Coordinator (TC).  This is someone that may or may not have a real estate license that is paid a fee to make sure that all the documents get out to all principles and are fully executed.  The fee for this can be anywhere from $300 to $500.00 and some real estate agents actually pass this cost to their Clients.

It makes some sense for volume driven real estate agents to use a transaction coordinator, but the majority of agents have plenty of time to manage the transaction and by doing so they are much more on top of what has been done, and what needs to be done.  A few paper challenged agents should clearly use a transaction coordinator.

From a real estate brokerage perspective the management wants to make sure that a certain standard of care is used across all transactions.  Many brokerages hire agents that are not experienced or don’t like to do paperwork.  In order to protect their company and E&O insurance many will require the associate agent to use the transaction coordinator.

In my practicle experiance of managing for many years and doing file reviews, too many times the transaction coordinators are asked to prepare contracts and addendums without the experiance or full knowledge of the complete transaction.  This is very dangerous and should be of concern for the Client that is paying the agent a great deal of money.

The more involved your real estate agent is in your transaction the better.  They should be preparing and reviewing all contracts, addendums, buyer request forms, and contingency releases.  With the advent of software to write the contracts, digital signatures, and cloud storage solutions there is no reason not to.

Photo courtesy of Rian Castillo via Flickr

Confidentiality is key to your succes.

One of the many advantages of being a small closely held real estate brokerage is my ability to deal with sensitive Clients and confidential real estate dealings. If the Client is a celebrity or public figure having the ability to sign confidentiality agreements and deal in a confidential manner is crucial.

Because I work without staff or assistance in my personal real estate business I know that someones identity can be assured. In fact I am quite prepared to sign a confidentially agreement before taking on the client and their real estate needs.  I am the only one that reviews the file and I don’t have staff or transaction coordinators working on any files.

In California transfer of real estate is recorded by the County which the sale is in and is available to the public.  While many multiple listing systems do not release sold information to the general public there are plenty of sources to find out purchase prices and the names of the purchasers.  One can visit the County Recorders office, pay for a service like Data-Quick, or subscribe to a business related publication that publishes sales.

For many years clients would ask that the sales price be withheld from the multiple listing system when it closed escrow.  This resulted in some wide spread deception up in Los Angeles of flippers and shady investors to hide the sales price from potential buyer.  Many multiple listing systems had fairly ridged procedures and costs for excluding the sold price on the MLS.  This practice has been discourage by the California Association of Realtors for obvious reasons and now each case is normally dealt with on a case by case basis.  Even with this practice someone could go down to the County records and find the transfer fee tax stamped on the back of the document.

So not releasing a sales price is very problematic but not impossible depending on the individuals reasons.

The second big consideration is the name or names of the person holding title and is normally overcome with forming an Limited Liability Corporation (LLC) or a blind trust.  With a little leg word you can find out who is in a LLC normally, but a blind trust is more difficult as the “Trustee” would not easily be connected to the client.

According to an article on Zillow’s Blog here are a few examples of celebrity holdings:

For instance, when Jennifer Aniston purchased her new penthouse digs in New York, pictured above, it was reportedly under “Norman’s Nest Trust.” Norman was the actress’ beloved terrier-corgi mix that died recently at age 15.

According to The Arizona Republic, Sarah Palin’s Scottsdale home, above, was purchased by Safari Investments LLC, a company created the day before the deal for the home closed. The name Safari is thought to be taken from Alaska’s Safari Lake where the Palins own two large cabins.

And when Britney Spears and Kevin Federline bought their piece of Malibu real estate together in 2007, pictured above, they made the purchase through “The Love Shack Trust.”

Many celebrities often go a step further to ensure their privacy and have their real estate agents and everyone else involved in the purchase sign a non-disclosure agreement.

Most larger brokerages will not sign confidentiality agreements.  They have too many people that are touching the file including staff, transaction coordinators, branch managers, and may not keep files secure.  While it is not often that the REALTOR® or brokerage is guilty of leaking information, it certainly can happen.

I use a standard California Association of Realtors confidentially agreement for most cases.  Celebrities or public figures will likely have Attorneys that will prepare custom agreements.  You can view a sample of that document at the end of this article.

At the end of the day you need to hire a REALTOR® or Broker that you have a great deal of trust in and has fiduciary duty only to you and not be in a “Dual Agency” situation.  I take my fiduciary responsibilities very seriously and give all my Clients the privacy and confidentially that they deserve.  We live in a connected world where privacy is being challenged every day and anyone with a name and Google can find out a great deal about most anyone.

Comparative Market Analysis AKA as our best guess of your home value.

In real estate we have lots of forms and procedures with complicated names, and we have a habit to save ourselves time using initials instead of full names.  For instance the Real Estate Transfer Disclosure Statement becomes TDS, the Residential Purchase Agreement is RPA, and the Comparative Market Analysis becomes CMA.

For all the consumer knows that stands for Country Music Awards.

Years ago when I started in real estate the CMA was a process of gathering a bunch of information from paper multiple listing books (MLS), title information from property profiles, and recent sales activity.  This of course was well before the days of Zillow and other on-line sources of active or sold information.  This involved a lot of cutting and pasting, a copy machine, and active knowledge of the market, and a whole bunch of paper.

The REALTOR® would try to find at least 3 active homes on the market that were comparable in size, style, and location as the subject property, 3 expired listings, and 3 sold listings, usually within the last 6 months.  Adjustments were made to take into consideration square feet, amenities, actual locations, and a suggested list price was recommended.  I used to do these at the kitchen table using a A-frame paper flip chart so that we could go over the CMA together.

Fast forward to today and the information overload.  Many of these components are now available on consumer facing websites like Zillow, Trulia, and Realtor.com.  The gatekeeper of old now has to be the local expert that can interput market trends, past sales, foreclosure rates, and a multitude of other factors.  You know the old saying “garbage in – garbage out”.  The correct selection of the contents of your CMA and the interpretation of market dynamics should result in an accurate market price range.

I consider active listings to be “wishful thinking”.  These are sellers that are trying out the market with various motivations, some are distressed sellers, some are fishing for unreasonable selling prices, and others are motivated sellers like bank owned properties (REO).  They in fact become you competition as most buyers are likely going to look and compare them to what your home has to offer, otherwise known as the “principle of substitution”.

The expired listings noted on the Comparative Market Analysis were likely priced to high for the current market.  Price really solves all issues, because with the right price condition can be corrected or the property becomes interesting to investors looking for flip a property.  Everything sells for the right price.

Finally we have the sold comparables for our CMA.  This is where the rubber meets the road with buyers and sellers coming to terms on a “market price” in a given market, at a given time. REALTOR® and appraisers do their best to select comparable solds within the last 6 months to as far back as 1 year if the market is very slow.  The more recent the sale the more likely it is accurate but one must understanding if the market is trending downward, flat, or appreciating.

The REALTOR® that prepares your CMA should have this basic information and will either have a fixed market price or a range of market prices that would sell your home.  It is so important to realize that your best option of selling is normally within the first few weeks, and the longer your home stays on the market, the more the buyer’s will feel the property is overpriced since it has been passed up.

My goal with San Diego Lifestyle is to share as much factual information as I can to the consumer.   That is why you will find statistics on active market inventory, recently sold comparables, foreclosure activity, and the mortgage market.  These tools combined with a REALTOR® that is fully involved in the real estate market will give you a better start in positioning your homes for a quick sales at top dollar.

So now that you know that CMA in real estate has nothing to do with the Country Music Awards, my next post will be to demonstrate how I put together a modern CMA using technology combined with good old fashioned market knowledge to give you a solid idea what your home is worth in today’s market.

Talking with Katrina Dodson, one of my associates, she picked up these 5 homes that are great buys in Encinitas 92024.  If you want to see them or get any more information send her an e-mail or call her at (858) 518-1670 to set up a showing.

These properties are update on a regular basis so if one or more does not appear it has been reported sale pending or the listing has expired.

We're sorry, but we couldn't find MLS # 110028238 in our database. This property may be a new listing or possibly taken off the market. Please check back again.

We're sorry, but we couldn't find MLS # 110021455 in our database. This property may be a new listing or possibly taken off the market. Please check back again.

We're sorry, but we couldn't find MLS # 110020768 in our database. This property may be a new listing or possibly taken off the market. Please check back again.

We're sorry, but we couldn't find MLS # 110020554 in our database. This property may be a new listing or possibly taken off the market. Please check back again.

We're sorry, but we couldn't find MLS # 110025190 in our database. This property may be a new listing or possibly taken off the market. Please check back again.

Katrina is an expert in North County real estate and particularly Encinitas and is one of the best REALTORS® I know, give her a call at (858) 518-1670, you’ll be glad you did.

The process of purchasing real estate is a complicated one.  Each transaction is different and requires full investigation during your inspection time to make sure you know what you are buying.  More questions will always follow, but here are 8 questions I think you should always ask when you first start the process.

1. How long has the property been listed in the Multiple Listing System?
2. Is this the first time on the market or was it listed with the same or another Broker?
3. Have there been any status changes like price changes or pending sales?
4. What was the original price of the home and when did the current owners purchase the property?
5. How many loans are against the property?
6. What is the foreclosure and pre-foreclosure rate of the neighborhood.
7. Are there any substantial disclosures on the Real Estate Transfer Disclosure Statement or Seller Property Questionnaire?
8. Are the property taxes current or any other liens showing up on the Property Profile or public data?

http://www.youtube.com/watch?v=zkZPMbvDsQg

One of the newest tools that I am using is Skype with multi-user conferencing  capabilities.  While the service works best with three or four users, it can do up to 9 users provided everyone is on a good internet connection.  What many people don’t realize is that Skype has partnered with Citrix and you can also share your screen over a Skype call.  While I still use Fuze Meeting, I have found that Skype does a really good job when we need to review a contract, disclosure, or preliminary title report.

Working with Clients from all over the world is easy with Skype and very cost effective.  A quick initial meeting with potential Clients can be done on Skype saving everyone the trouble of a commute and having to all be in the same place.

So now besides my “meet me at Starbucks” you can also set up a Skype video meeting.  Check it out and give me a call someday.

You can reach me at RealtyV2.

We are pleased to announce that our new home search including lifestyle is now live on RealtyV2.com.  While you can search for homes on Zillow, Trulia, and Realtor.com, this systems allows you to expand your search to school districts, communities, amenities, and recent sales.

For example you want to find downtown condominiums within 1/4 miles of Starbuck’s, in the Marina District, and within 1/2 mile of a middle school district.

Here are some short videos on how the system works.

Start your search today and register for a complementary account.