Monthly Archives: June 2006

Seattle isn’t just a real estate startup hub

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O’Reilly discusses research that suggests Seattle is fertile ground for startups, coming in behind San Francisco and Boston at number 3 based on a rough analysis of SimplyHired job postings. Downturn or not, the real estate market here is going to change if a couple more Amazons or Microsofts grow up in the Seattle area.

John Cook has more Seattle-centric observations and points to analysis by (New York-based) Fred Wilson, who claims that New York is number 3, based on an analysis of Conecticut-based indeed.com. Maybe Seattle would hit number 2 if the analysis used job listings from jobster.com, a Seattle based startup.

By the way, for those who travel a lot, I have invites to my favorite Seattle-based startup, Farecast. Let me know if you want one.

Interesting, not-so-nice Craig’s List practical joke

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Anytime you see a house listed FSBO at over $200K below market you gotta wonder what’s going on. This particular one on Craig’s list was just down the street from my home so I decided to take a look.

$307000 – 4 bedroom fhouse or sale by owner

4 bed 2 bath completely remodeled inside in desireable redmond location for sale by owner.this lovely split level home is located within walking distance of lake sammamish ,parks,and schools in a secluded neighborhood!

Serious buyers only!

I will be holding an open house friday through sunday 7am-8pm if im not there my wife will be so feel free to stop by and have some cookies and a mocha 🙂

please do not email i rarely check it

These poor owners had people knocking on thier door all weekend thanks to someone’s idea of a practical joke. Open posting options like Craig’s List, Google and others are free and get great exposure, they are also prone to abuse. As the man said “If it sounds too good to be true…”

Agents and Consumers – A Perplexing Business Model

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Seems to me that misinformation fuels many of the conversations regarding relationships between agents and consumers in today’s real estate marketplace. So let’s take a crack at one of Craig’s comments in #48 of Dustin’s post.

“If the mls were “open” – i.e. anyone could list – then agents will have an even harder time justifying the 3%/3% commission.”

Last I looked, every option known to man was available to sellers, with very few “having to pay” 3% to their listing agent, at least in the Seattle area. Many if not most agents do not charge 3% on the listing side, if the seller buys their next home from the same agent. There are many flat fee options available for limited service. High end often pays 1% for full service, especially on new construction homes. 2% is fast becoming the norm for the average Joe. 3% is more typical in the lowest of price ranges where 3% doesn’t amount to much and is a bargain for full service on a $120,000 condo. I have to wonder why people keep pretending that sellers by and large pay 3% to the listing agent? As this figure is not published, there must be some “hidden agenda” to the purveying of misinformation, I think.

As to why sellers offer 3% to convince more and many agents to come and show their home, I guess because it must make sense for them to do that, or they wouldn’t be doing it. That doesn’t mean the Buyer’s Agent GETS 3%, that only means that there is an allowance in the List Price, up to that amount, as far as the SELLER is concerned. Then it is up to the buyer and his agent to determine the actual fee, as they negotiate it within the target amount set by the seller.

Clearly all commissions are negotiable and always have been. Anyone who believes an agent, or attorney in this case, who pretends otherwise is mistaken. All commissions are and always have been negotiable. You just have to understand the structure, and the reasons for it, to maneuver within the system to your best advantage. If you don’t understand the system in place, you leave yourself open for someone to take advantage of your lack of knowledge, by exploiting that weakness. Know that you can, for sure, and in fact, negotiate any fee you want AND participate in the mls system in place while doing so. This is true for both buyers and for sellers, as long as the seller negotiates his side, and the buyer negotiates the other side. There is absolutely nothing in the system, as it exists, that prevents you from negotiating commissions, other than the misinformation which is keeping you from understanding the system.

As to using an attorney instead of an agent in a real estate transaction, it’s apples and oranges. No attorney purports to do, or even tries to do, what an agent does in a transaction. A great attorney is no replacement for a good agent in a real estate transaction. A monkey is a sufficient replacement to both, if they are not good, and monkeys may be more pleasant to deal with 🙂

Brokers and Agents – a perplexing business model

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For those who aren’t agents let me explain how many of the larger brokerages (eg., in this area – Windermere, John L. Scott, Coldwell Banker Bain, etc) operate. As an agent you are an independent sub-contractor usually paying a monthly desk fee to associate with a particular company, plus variations of splitting your commissions with the broker. For that you get office space, administrative support, access to training etc.

What you do NOT get is client leads from the company. (except for Relo clients if you last long enough). For that you do your own marketing and/or sink to using the sourcing companies like house values, home gain and others of those ilk whose business model Ardell summed up so well long ago.

So here’s the part that I just don’t get. As an agent, there is no way I can come up with the marketing dollars to compete against House Values online. But my brokerage (Coldwell Banker Bain) spends millions in advertising, development of their website and overall branding. Yet for all of that they have no pro-active lead capture system or method of distributing leads to field agents. Certainly any of the larger brokers could compete better for the internet business and yet they don’t. Plus, if there are agents willing to pay for lead sources why not capture that revenue back into their own company.

It seems to me that the logical thing to do would be develop a virtual brokerage office.

  • Create a staff of salaried agents for an inside sales team
  • Implement a product like LivePerson to monitor web traffice and engage potentinal clients online
  • Capture those leads and turn them to field agents in the local office for a percentage of the commission (you have to pay for that inside sales team somehow)
  • Quit making your agents rely on 3rd parties for additional lead source generation

I’m going to propose this idea to my company but thought I’d run this by everyone for some feedback.

Free classes

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On the fourth Thursday of every month, I offer a free one-hour class at the Phinney Neighborhood Center, where I offer my attorney-perspective on the purchase and sale of real estate.  The classes are interesting, and everyone always thanks me after the class for taking the time to do it.  Of course, I’ve got a little self interest: I do it to promote my law practice, which is focused on the purchase and sale of residential real estate.  After my last post, I promised Dustin I’d post on some of the questions I have heard and answered.  Unfortunately, a brief summary is not possible.  Questions run the gamut, from ultra-basic to super-sophisticated, addressing every stage of the process from beginning to end. 

For you real estate service providers out there — agents, attorneys, inspectors, mortgage brokers, title insurers, escrow providers, etc. etc. etc. — consider investing the two hours per month (and about 40 bucks) as a marketing endeavor.  Attendance at my class runs about 5-7 people.  So over the course of a year, I’m able to introduce myself to 60-80 potential clients (some of whom have become actual, paying clients), and all of them will hopefully mention my name to their friends, family, etc.  Small, but then again Rome was build one marble block at a time…

Paying for the Privilege of Marginalization

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The real estate industry is a funny place…

There is an obvious tension between the industry players who win through cooperation and the individual agents who win by differentiation. It kind of reminds me of the Tragedy of the Commons in that the actions that individual agents are taking in their best interest are slowly breaking apart the well oiled machine that is today’s real estate industry.

In particular, I’m thinking of all the agent money that is currently being poured into advertisements for companies that are building tools designed to marginalize the role of real estate agents. Joel Burslem picked up on one example when he mentioned that Topix (jointly owned and run by the newspaper publishers: Gannett, Knight Ridder and Tribune) is getting into the FSBO market. If this is not a clear enough signal of the newspaper’s intent, the fact that the Tribune recently purchased forsalebyowner.com should make it clear that the newspapers are now the competition…

While it may be in best interest of individual real estate agents to put ads in local papers, these ads are funding companies who are clearly attempting to completely disrupt their industry. (Don’t even get me started on the irony that a bunch of real estate professionals in Seattle are giving content to the PI that will likely be plastered in FSBO ads before long!).

But it is not only newspapers where agents are paying for the privilege of creating their own demise. Every time an agent buys an ad on Google, they are helping to fund a tool that is clearly meant to marginalize them.

I’ve been holding my tongue on this issue for quite a while because I’m sure a good argument could be made that I’m too biased in that I’m viewing the topic through my employer’s tinted glasses. Nonetheless, I can’t help but wonder if agents are going to get hip to the fact that they really should be using and/or creating their own media before the commons are destroyed.

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“Man in the Bushes” Listing

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[photopress:man_in_the_bushes.jpg,thumb,alignright]This article is in response to a reader’s request yesterday, that I describe what a “man in the bushes” listing means.

Over the years, I have used the term “man in the bushes” most often in response to the question, “Can I sell my home myself as a For Sale by Owner”. If they are ready, willing and able to do that, I tell them to try it for up to 30 days, even two weeks, to see if they have a “man in the bushes”. I once sold a home with 23 men in the bushes.

A “Man in the Bushes” property is usually a unique home that has something that no other house has, and is also one people have suspected may at some time be sold. In this case a stand out corner property in Mount Baker built at or before the turn of the last century in the late 1800’s with some Lake view. It also has an owner who for some reason, actually many reasons, never got around to moving into it. So it has been vacant on and off for some forty years.

There’s usually someone, or several someones, who drive by it on a regular basis (in this case visiting his brother who lives nearby) who has said to himself a skazillion times, “If that house ever goes up for sale, I’d like to have it”. Of course they don’t know for sure until it does go on market and they go in it. But they are already 70% sure they want it. That’s a “man in the bushes”. Not just someone who is the first one to view it when it is listed, but someone who has been waiting for that opportunity to arise for a long time.

A seller can either try a FSBO on that, or get a deeply discounted rate if the “man in the bushes” comes forward very quickly. Another option is to list it in the mls and “exclude” the man in the bushes from the listing with a timeframe. “If Mr. X arrives and makes an offer on the property within 7 days, the listing is null and void”. To do it that way, you need to know who Mr. X is in advance and put him in the contract by name.

Sometimes the Man in the Bushes is a relative who has indicated an interest in buying it over the years, but may be “all talk” and “no ability to do so”. You give them 7 days to “put up or shut up”. This way the family doesn’t have to hear for the rest of their lives that this guy would have bought it, but no one gave him the opportunity to do so. There should never be a fee connected, other than maybe a handling fee, for people to sell their home to a relative. So if you think you have a “Man in the Bushes” in your family, give them 7 – 10 days to at least put that interest on paper, with no or little fee paid if a family member buys the property in the early part of the listing.

Want to live in the Golden State? Bring lots of Evergreen State money.

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[photopress:180px_California_state_seal.png,thumb,alignright]I recently returned from my almost annual vacation in beautiful California to visit my family and a few famous real estate bloggers (Dustin & Andy). And it was interesting to note what I learned about real estate in the Golden State during my two weeks down there…

Non surprises 

Bay Area real estate is still expensive. That wasn’t surprising at all. It’s been that way as far back I can remember. During my coffee talk w/ Andy, we discussed how the San Francisco side of bubble bay has popped, and the Oakland side is peaking. 

LA traffic is still awful.

Small Surprises

Santa Barbara is even more expensive than Silicon Valley.

Camp Pendleton is the only thing separting San Diego from Los Angeles & Orange County. I hope for San Diego’s sake, the Marines stay put.

RedFin has finally invaded the Bay Area. I wonder who’s next? 😉

Bay Area traffic is catching up to LA.

Big Surprises 

Home values in Southern Ventura county (home to Dustin’s new employer) are on the ridiculous side of expensive. In fact, it’s Silicon Valley expensive. I wasn’t expecting cheap prices (after all, I did grow up in California), but I wasn’t expecting this!?

I didn’t expect Santa Ynez to be as expensive as it is. Maybe Wacko Jacko’s Neverland ranch has done to Santa Ynez’s property values, what Bill Gate’s house has done to Medina’s? My parent’s home town (Santa Maria) is comparitively inexpensive, but it’s about as pricely as the Seattle Eastside is (median price ~$450K).

San Diego County is downright cheap in comparission to it’s neighbors to the north. In fact, prices there are less than 10% more expensive than Bellevue! Maybe being next to the Mexican border is keeping prices low, but I would’ve expected San Diego to be second only to Santa Barbara and the Bay Area. 

So what other markets in the country (or the rest of planet earth for that matter) have surprising prices (both more expensive and less expensive than you might expect)? I’ve heard from more than one local realtor, that many out of state real estate consumers have sticker shock when they first come to King County. And I’m still surprised that Portland is so cheap compared to it’s nothern & southern big city neighbors.