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Radical changes coming for CREA

QUOTE (JDaley @ Oct 18 2010, 12:28 PM) a well known strategy of realtors is to encourage sellers to sell low for the quick sale. A recent study showed that when realtors sell their own homes the DOM is quite a bit higher than the average rate because realtors holdout for a higher price, however realtors (in general) don`t necessarily apply this rule to sellers because of the need to do a quick sale.

Do you have a link to this study? I`d like to take a look.

There are lots of realtors in the city and many will have different strategies for listing and selling. The prudent seller will interview a couple. Just as many realtors bid high to score the listing and then wait for the seller to clue in that they are over priced when no offers come in. It isn`t the realtor`s decision to sell it`s the home owners. They see the comparables and weigh the local market data against their own pressures of time and money.
 
QUOTE (bizaro86 @ Oct 21 2010, 08:34 AM)
It's derived from the research of an economics professor at the University of Chicago, the same one who wrote Freakonomics. A description of the study is here.



http://www.wired.com/wired/archive/13.05/r...e&topic_set=



Basically the results came from a study of 100,000 house sales in the Chicago area, ~3,000 of which were owned by realtors. Houses owned by realtors stayed on the market for an extra 10 days longer, and sold for an extra 3+%, holding constant for location, age/quality of the house, aesthetics, etc. I'm not sure how what the methodology was, but the conclusion fits with economic theory and human nature.



I'm not sure if it was ever published academically (wouldn't show up in google anyway) because the author was incented to publish it in the popular press and make millions of dollars in royalties.



Michael


:

Thanks for positing. Interesting read but I don't think the author's point is made as strongly as he may think it is. Consider this:



- What about all of the listings that expired - as in the seller's didn't get their price and the property didn't sell? How many agents would take their house off the market if they didn't get their initial price vs. chisle the price down until it sold, and how does this number contrast against the general public?



- Is a mechanic more likely to have a better running car than the average person? Would a chef eat better than you or I? I think realtors are more likely to know what it takes (on behalf of the seller) to get a home sold. So while some sellers would need to have their certain specific price and terms (and when it doesn't sell, the listing expires) realtors know there is give and take to the process and hence need less convincing to close a transaction.



- What is the 3% higher sales price based on? You have to be very careful with this... is it just averaging the overall market sales over a specific interval and then comparing them to realtor owned houses? If so is that truly a good indicator? Wouldn't you have to take the realtor's sale and then compare that to the average in their local market? Realtors are in the industry and I think can be expected to have nicer properties than the average person the same way your car mechanic would have a nicer car or your chef would eat better at home. So the average price would naturally be higher....



The article uses commission calculations to come to their conclusion that the realtor just isn't motivated to get you that extra 3% or 3,000. But commission arrangements are completely negotiable and sellers are free to set whatever compensation structure they wish as long as the realtor agrees to it.
 
QUOTE (RedlineBrett @ Oct 21 2010, 03:14 PM)
is it just averaging the overall market sales over a specific interval and then comparing them to realtor owned houses? If so is that truly a good indicator? Wouldn't you have to take the realtor's sale and then compare that to the average in their local market?




It was all data from the Chicago area, and he claimed to control for location, size, quality of house, etc. I'm not quite sure how that's possible though, so I'm definitely a bit sceptical of the results. It's an interesting theory, and it kind of makes intuitive sense, but its source is popular economics, not rigorous testing. However, people won't buy a book that's full of pages of numbers and detailed explanations of methodology. Ultimately though, that's required to determine whether the result is credible.



Michael
 
[quote name=`RedlineBrett` date=`Oct 6 2010, 10:11 AM` post=`94578`]All kinds of mis-information here. "1. The Seller gets he property valued by an independent appraiser rather than by the selling agent, eliminating the temptation to manipulate the valuation too high (to win the listing) or too low (to get a quick sale)."

The seller is always the one to choose the price. They are the one signing the contract and the purchase contract. Listing agents provide sellers with the same data appraisers do but also much more. They can also take stock of the current active competition and even take their sellers through currently active property to price their home for whatever strategy the seller needs. Some need to sell quick, others need to know they aren`t leaving any money on the table. Real estate appraisals are far from an exact science and often aren`t as thorough to sellers because they don`t offer dialogue (you get a written report, no Q and A) and you cannot see how your home slots up against the current active competition. (DOM, price reductions, expired listings etc.)

2. The Seller gets the property listed on the MLS.

This is the huge piece of the puzzle you (or whoever wrote this article) is missing. CREA OWNS THE MLS. It`s not a government owned system, it`s private. So you want your property on the MLS you will have to pay a broker to put it on there.

3. Interested buyers who see the listing on the Internet then approach the seller directly.

What makes you so sure this is what everyone wants? Do you think buyers want to go through a property with the seller hanging over their shoulder the whole time? The seller knows one property -their own- where a realtor knows how the seller`s property stacks up against other alternatives and been through this process hundreds of times... whereas both buyer and seller will be working with much less experience. How does the buyer get their questions answered? Directly from the seller? How likely are they to trust that information? What if they have concerns and need expert 3rd party information? If you are an amateur how do you know who to call and who`s opinion to trust when it comes to property issues, title issues, zoning concerns funky comparables better yet how does the buyer get comparables? Hire an appraiser? What happens when each party`s `expert` appraiser comes back with a different number? Are they going to do this for every property they have interest in? You do know it`s $400 a pop for an appraisal right? All kinds of hazards that are easy to glaze over when looking at this scenario from 10,000ft.

5. A Buyer wanting to make an offer is advised to get legal counsel. The buyer`s lawyer and the Sellers Lawyer then negotiate the terms of the purchase agreement.

So in a huge stroke of genius to cut out the middleman and save money both parties are going to fire their agents and hire their lawyers to work out the agreement for them. Please read this sentance again and again until you realize how ridiculous it sounds. How do lawyers get paid? What motivation does a lawyer have to execute a quick, simple deal? Have you ever even heard of a lawyer doing something quickly and simply? Lawyers are contract experts not experts at valuation and negotiation. Are you going to trust your lawyer to work out the details of your purchase when they have never even been in the property? Is your lawyer going to call you when you`re off work or offer advice on the weekend when thats the only time the buyer/seller can get together? How is this approach better than working with your agent and having a `approval of buyers/sellers lawyer` condition? Buyers and sellers have always had the option of nominating their lawyer to represent them under the current system but when you look at the logistics of working this way you will see why no one does."This approach raises ethical standards considerably by minimizing potential conflicts of interest. When an agent is paid by commission, the temptation is to get a sale at any price rather than at a price that is best for the vendor.
A Lawyer Will Handle the Paperwork: Real estate lawyers—not agents—are responsible for ensuring that documents and other legal matters pertaining to the sale are in good order, and actually closing the deal. Agents can offer some direction, but only an Lawyer can provide legal advice and handle the contract and other paperwork. Sellers should always have a Lawyer whether they have an agent or are selling their home themselves.

Again what is in the best interests of the lawyer? Are you so sure the system you propose is free and clear of ethical issues? Is it truly cheaper and more efficient to have your lawyer `handle the paperwork`?



"There is a great deal of resistance whenever disruptive technology or innovation threatens to spoil the comfortable status quo. Those who have invested heavily in the old ways, those who will be slow to adapt, and those who must answer for failing to protect consumers against the previous industry “owners” all stand to lose."--Peter Mericka BA, LL.B
 
$109, list your house on MLS.


http://www.bestvalue.biz/
 
This development is sure getting a lot of dialog for something that `won`t change anything`.
 
QUOTE (Rickson9 @ Oct 28 2010, 05:06 PM)
This development is sure getting a lot of dialog for something that 'won't change anything'.




We just have a couple posters that love to take shots at the real estate industry, and a couple industry members that want to make sure their mis-information isn't the only voice in the room. Say what you want about it but this is certainly one of the top threads in REINspace history
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I for one see the value that a RE agent brings to a team, particularly on the buying end of transactions. I rely on mine to scout out properties, check financials, etc before engaging me with a property.

But to say that this decision changes nothing is misconceived as well. What what I see, this reinforces the a-la-carte service that has become prevailent in the the US. For sellers, it`s a boon. Not for all, but for some. A first time seller may very well require a full service realtor. But for investors who know their properties well, have all the paperwork in order, this could result in significant savings. It will not be for everyone, but providing that choice is a good thing in my opinion. I will continue to use my realtor extensively on the buying end. Not sure if she will be as engaged on the selling end.
 
QUOTE (fumbrunner @ Oct 29 2010, 12:40 PM) I for one see the value that a RE agent brings to a team, particularly on the buying end of transactions. I rely on mine to scout out properties, check financials, etc before engaging me with a property.

But to say that this decision changes nothing is misconceived as well. What what I see, this reinforces the a-la-carte service that has become prevailent in the the US. For sellers, it`s a boon. Not for all, but for some. A first time seller may very well require a full service realtor. But for investors who know their properties well, have all the paperwork in order, this could result in significant savings. It will not be for everyone, but providing that choice is a good thing in my opinion. I will continue to use my realtor extensively on the buying end. Not sure if she will be as engaged on the selling end.

Good post. There will be a range of "a la carte" services. Even I will probably offer one and I suspect I`ll end up making more money than before for various reasons. But when you average out the fees I really don`t think we`re talking about a huge drop on the horizon. What the media missed was any kind of study of existing business models. You never saw it. All they ever quoted was the high end of 5% or 7/3 and they rambled on about how realtors run a cartel. If they dug deep they`d see the uber-cheap options exist they just aren`t popular because they don`t get results and most realtors aren`t willing to work so cheaply.

Along with some news of reduced fees we`ll see stories of reduced service and consumers getting burned by shady sellers or sellers getting burned by unqualified buyers and that will bring the service professional back into style again.

with regards to your last comment you better get ready to pay your buyer agent now... because if you are buying from "investors that know their properties and have all their paperwork in order" they won`t be offering selling commissions and your agent will need to come to you for compensation.
 
I would happily pay a buyer agent as long as the didn`t ask send me to simply pick from the mls and "we`ll go see them" - my experience as a rookie.

A good buyers agent is gold and can help you to distinguish an average property from a great one... As the saying goes, you get what you pay for.

Terry
 
QUOTE (TerryKruse @ Oct 29 2010, 08:35 PM) I would happily pay a buyer agent as long as the didn`t ask send me to simply pick from the mls and "we`ll go see them" - my experience as a rookie.

A good buyers agent is gold and can help you to distinguish an average property from a great one... As the saying goes, you get what you pay for.

Terry


I can`t agree more. Just finished a purchase with carrying my agent`s 5% commission.
 
QUOTE (RedlineBrett @ Oct 29 2010, 02:39 PM) with regards to your last comment you better get ready to pay your buyer agent now... because if you are buying from "investors that know their properties and have all their paperwork in order" they won`t be offering selling commissions and your agent will need to come to you for compensation.
My understanding is that the savings will be on the selling end but that individuals will still have to pay the 2%-2.5% to the buyer`s agent.  I guess we will all see how things work themselves out.
 
New fight over MLS may be on horizonSTEVE LADURANTAYE — REAL ESTATE REPORTERFrom Saturday`s Globe and MailPublished Friday, Oct. 29, 2010

A new fight threatens to break out between the country’s real estate agents and the Competition Bureau, this time over the way the industry handles the treasure trove of data generated by each sale on its Multiple Listing Service.

The Canadian Real Estate Association recently ratified a deal to open the MLS to those who want to pay a flat fee for a listing, and then handle the rest of the sale on their own. But that isn’t the end of the bureau’s interest; industry sources say it is also examining whether the data agents generate and keep in the password-protected section of the MLS should be made available to anyone listing with a flat-fee brokerage.

Access to data is important to those handling their own sale because it helps them decide what their property is worth.

The information includes such items as prior sale prices, comparable sales numbers and days-on-market data. The statistics are vitally important in setting prices, and for gauging the health of a neighborhood’s real estate market.

Realtors are the gatekeepers of that information, and consumers can only access it by contacting an agent directly. But those who run flat-fee brokerages want that information to be automated, so they don’t need to interact with their customers once the listing has been put online.

“You could understand why the Competition Bureau would want to take a hard look at data,” said Queen’s University real estate professor John Andrew. “The real estate industry still has a stranglehold on the numbers generated with each deal, and they don’t share that information easily.”

The real estate industry in the United States has already gone through these changes. First, regulators forced agents to allow easier access to MLS for those who wanted to post flat-fee listings. Then it compelled real estate boards to automate the way data was disseminated by decreeing that anything that could be given out in person or on the phone could also be distributed electronically.

Lawrence Dale, who said he was forced to shut down his Realtysellers website in 2007 because of anti-competitive rules in the real estate industry, recently relaunched the site and is offering free MLS listings and rebate programs for buyers.

Making data available to his customers is key to his business plan, he said, because it helps them study the market without him spending time acting as an intermediary.

“Consumers want to receive this data in the most time-efficient manner and I am determined to be able to give consumers what they want,” said Mr. Dale, who said he has met with the bureau “extensively” as part of its investigation.

The Competition Bureau declined to comment because its investigations are confidential. Not all investigations lead to charges.

“We have a number of inquiries ongoing at any time in a number of industries and unfortunately we are required to do those in private,” said Competition Commissioner Melanie Aitken.

The Canadian Real Estate Association said it wasn’t aware of any further inquiries that would affect its 100,000 members.

“We plan to return to a working relationship with the bureau based on co-operation and consultation, such as we had in the past,” the association said in a statement. “We assume they will do the same.”

Those in the industry point out that much of the information that is hidden on MLS, such as prior sale prices, is available through other channels such as land registry offices.

Phil Soper, chief executive officer of Brookfield Real Estate Services – which operates Royal LePage in Canada and Real Living in the United States – said the American settlement opened up data in a way that small players may not have expected.

“The main challenge is that the data suddenly feeds right into some really good sites,” he said. “You’re not only competing against brokerages anymore, you’re competing against eBay and other huge companies that know a thing or two about data. It creates a very big challenge for a small Canadian upstart.”
 
This is all focused around another facet of the web site. Assuming that a web site can`t sell real estate this will be a non-issue as well.
 
Is that a correct assumption for all homes?
QUOTE (Rickson9 @ Oct 31 2010, 12:44 PM) This is all focused around another facet of the web site. Assuming that a web site can`t sell real estate this will be a non-issue as well.
 
QUOTE (gwasser @ Oct 6 2010, 10:34 AM) What do you think that WalMart could offer that a Discount Real Estate Broker couldn`t?

With the discount brokerage being barely an economically viable model, buying re-sale housing through WalMart seems even more ludicrous.

Walmart could offer mortgage products and commission rebates, that a discount real estate broker couldn`t.
The U.S. NAR (National Association of Realtors) didn`t think resale housing through WalMart was ludicrous. In fact they FEAR and OPPOSE it.
 
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