One of our regular readers, Q-Diddy, is looking for some advice on getting a new heating and air system. Sounds like he’s looking for 2 furnaces and 2 air units for 2-zone heating and air conditioning of a large space.
My questions to him are what is the total square footage to need two full systems, and what kind of system is in there now?
If anyone has had a new heater or air conditioner installed recently, we’d appreciate your input.
I received an email announcing that The Taylor Jay and Doug Bright Combo are “performing hot jazz standards from swingers like Louis Armstrong, The Inkspots, Billie Holiday, Bonnie Guitar, and many others.”
Looks like Friday night from 7:30 to 10:00. I expect it’s free, as there is no info regarding price or tickets and likely in the open food court area. I don’t know them, but I like that kind of music, so I thought I’d throw it up here as a public announcement of a local, apparently free, event.
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King County Residential Sales
Active/For Sale – 9,779- UP 148 – median price $525,000- no change
In Escrow – 2,712- UP 11 – median price $444,000 – DOWN $4,000
Closed YTD – 2,883 – UP 332 – median price $437,500 – UP $1,500
King Conty Condo Sales
Active/For Sale – 3,435 – DOWN 6 – median price $324,950 – no change
In Escrow – 902 – UP 5 – median price $299,950 – no change (asking prices)
Closed YTD – 958- UP 111- median price $285,000 – no change
Allowing for late postings I went back to March 15th to track volume changes YOY.
Single family home closings are down 33% and condo closings are down 40%.
“Statistics not compiled or published by NWMLS.
I teach a class called “RESPA” which is about the federal Real Estate Settlement and Procedures Act. This act has been around since the mid-1970s and the industry sometimes refers to it as the anti-kickback legislation although RESPA does much more than that. Sections 8 and 9 of RESPA prohibit exchanging something of value for a referral of a federally related loan. The industry went through a wave of federal consumer protection legislation during the 1970s when we received the Truth-in-Lending Act, RESPA, ECOA, and the Fair Credit Reporting Act. It is my opinion that the mortgage lending industry should not be surprised to receive no less than four new federal laws during the next 7 years.
In order to truly understand the spirit of RESPA, let’s take a trip in the way-back machine and visit the 1970s. We had an oil embargo, inflation, rising unemployment rates, a recession, and other events I was too little to recall, but I’m sure our readers will help us remember. I DO remember sitting in line at the gas station with my dad. Times were economically tough for American families. Politicians like it when homeownership rates are increasing because homeownership supports the economy in many ways (and boy are we ever going to learn that lesson during the next decade) and economic growth is good for re-electing politicians. I know I’m grossly oversimplifying here but back in the 1970s, it was important to promote homeownership. Since costs were rising for families, this included the cost of buying a home. One of the main reasons we have RESPA is to help keep the cost of buying a home affordable by eliminating “unearned” fees such as kickbacks.
Sections 8 and 9 of RESPA say we are not to give or receive an item of value in exchange for a referral of a federally related loan. We = any person that earns a fee on the sale or refinance of a one-to-4 family, owner occupied, federally-related loan. Realtors and mortgage lending workers have tremendous power to influence the direction of business for third-party vendors to companies such as title insurance, escrow, home inspectors, home warranty, hazard insurance, private mortgage insurance, appraisers, attorneys, and so forth. For example, title insurance companies do not chose to spend their advertising dollars on general public promotions because a title company can have a much stronger effect on market share by focusing on the people who are in a direct position to refer lots of business: Mortgage lenders and Realtors.
Handing out normal promotional marketing material is considered acceptable under RESPA. What’s not acceptable is to promise something of value in exchange for a transaction. So let’s see, what season is it? Baseball. Here is an easy example: A third party vendor offers opening day box seats to a Realtor or mortgage lender in exchange for a referral of a federally related loan. Just say no. Both the giving and the receiving party would be violating Section 8 of RESPA.
HUD asks us to consider who is paying for the box seats. The answer is the consumer pays, in the form of higher fees from your vendors. The true spirit of RESPA is to keep settlement costs down in order to help make homeownership affordable.
Title insurance companies in Washington State were given a major public spanking at the end of 2006 and then again in 2007. Title companies were violating a not-well-regulated “Only spend $25 per customer per year” rule. Some of these insurance commissioner cases are still pending. The $25 per year rule is a state Insurance Commissioner rule but it also bumps up against the provisions of RESPA.
In their defense, title companies pointed the finger at affiliated business arrangements (AfBAs), legal under RESPA. AfBAs, also known as Controlled Business Arrangements (CBAs) say that a mortgage lender or a real estate broker can open up affiliated businesses in order to continue to grow profits. Examples in WA state are: Windermere Real Estate and Windermere Mortgage. John L Scott Real Estate and Response Mortgage.
Along with the affiliated mortgage companies, a group of Windermere broker/owners owns Commonwealth Title and Escrow. John L Scott and Coldwell Banker Bain own Rainier Title and Escrow as part of a joint venture. AfBAs and CBAs exist all over the United States.
Affiliated Business Arrangements are perfectly legal under RESPA, provided the companies all follow a long list of requirements. AfBAs/CBAs have come under scrutiny in several states during the bubble years and title companies nationwide have paid out millions of dollars in fines to settle these suits while “admitting no wrongdoing.”
AfBAs/CBAs are under scrutiny in Washington state now because of the title insurance commissioner smack down. The other title companies are trying very hard to help the insurance commissioner understand that it is difficult to compete on a fair and equal playing field when your competition is being handed title and escrow business by real estate offices.
Here’s how this goes down. A real estate broker/owner owns a percentage of interest in an affiliated title insurance company. That broker/owner has power over the real estate agents when it comes time to negotiate annual contracts. An agent may be offered a better commission split with his or her broker when that agent refers more business to the broker/owner’s affiliated mortgage, title, or escrow companies. This offer is done behind closed doors, sometimes only verbally. The “better commission split” equates to an “item of value.”
Top producing Realtors and Realtors with a set of balls or ovaries call their own shots with their brokers. So this problem mainly affects medium to low end producing real estate agents, which, let’s face it are the bulk of the real estate agents out there.
An obvious solution, if I were a title insurance company sales manager, would be to send my sales force out to work with only top producing Realtors. However, this will require that the title insurance company have a very, very high quality title and escrow interal staff. This is easier said than done. Title companies that put their money into recruiting exceptionally top-notch internal staff tend to grow market share slowly and steadily. Yet even these companies have had a difficult time competing with real estate broker owners who strong-arm their agents into directing title, escrow, and mortage business to the real estate broker’s affiliated companies.
Many have tried to reform RESPA. Many have failed. That’s where the states have taken over. State Senate Bill 6847 passed the state house and senate and has been delivered to Governor Gregoire for her signature. From the bill:
A real estate licensee or person who has a controlling interest in a real estate business shall not, directly or indirectly, give any fee, kickback, payment, or other thing of value to any other real estate licensee as an inducement, reward for placing title insurance business, referring title insurance business, or causing title insurance business to be given to a title insurance agent in which the real estate licensee or person having a controlling interest in a real estate business also has a financial interest.
Apparently the Deparment of Licensing is going to help the Office of the Insurance Commissioner scrutinize the relationship between the real estate broker/owners and their affiliated title insurance companies. Broker/owners with nothing to fear would surely welcome any increased scrutiny.
Consumers reading this blog, a red flag for you to watch for is if a real estate agent or mortgage lender strongly insists on using a specific third party vendor. Ask the following question: “Can you please tell me exactly what you are receiving in exchange for me selecting this vendor?” If the answer is “Nothing,” ask to have that put into writing.
Reputable lenders and Realtors select third party vendors because their rates are low and the service is consistently exceptional.
Not only does strong-arming raise red flags when it comes to RESPA violations, it’s also a red flag for possible mortgage fraud.
I would like to return title insurance to the days where Realtors and lenders selected title and escrow companies because the companies offer great rates, awesome service, and maybe a pen or a notepad. Title companies reading this: That means the money you’re saving by only spending $25 per year per client can be re-allocated towards hiring exceptionally high quality internal staff and less on beautiful hotties to distract the Realtors and lenders from the fact that your internal service is subprime.
Well, unless the title rep is really hot. Exceptions must be made in some circumstances.
Realtor: “Jillayne I have nine short sales going on right now and,”
Jillayne: “Wait a sec, did you say NINE short sales?”
Realtor: “Yes, and here’s my question. One of my clients refinanced her Redmond home and took 89,000 cash out. Then she bought another home in another state with that cash. Now she wants to do a short sale on her home here in Redmond. It looks like she’s going to be short about 100,000. The lender on the Redmond home can’t go after her new home out of state, right?”
Jillayne: “Short sales are for homeowners in financial distress with no assets. The lender being shorted will ask your client to sign a new note/deed of trust in the amount of the shortfall and this new deed of trust will be recorded against your client’s new home.”
Realtor: “Yes, but their home is out of state. The shorted lender can’t do that, can they?”
Jillayne: “Yes, the lender can do that.”
Realtor: “But the home is in another state.”
Jillayne: “Your client is going to have to prove that they do not have any other assets. Just because a piece of real property is not located in Washington state doesn’t mean it’s not an asset. Washington state is not that special.”
Readers, why should lenders just randomly “forgive” the shortfall for all homeowners wishing to sell short? Especially homeowners who took cash-out equity loans to buy other real property. Surely there are some hard luck, true financial distress situations going on nationwide, but this is not one of them.
Besides, I thought homes in Redmond were holding their value.
Reminder: Homeowners selling short and/or in foreclosure should always obtain legal counsel. Google your state bar association to get started.
…in the NYTs on this article about the impact of the housing crunch on the high-end market:
“The first step for distressed homeowners, said Rhonda Porter, a certified mortgage planning specialist and broker in Seattle, is to pull out their loan documents and see what they say.”
When I told my wife that RCG turned three years old today, she looked at me in disbelief…
Not because the site has been around so long, but because it seems impossible that RCG has brought so many (wonderful) changes to our life in only three years.
While RCG started out as an experiment to cheaply market my wife’s new real estate business, it turned into an epic personal journey that has allowed me to foster a fabulously healthy real estate community, learn a tremendous amount about building and marketing real estate websites, and make a living educating real estate professionals on how to improve their online marketing.
No part of this journey could have been expected or predicted, and yet, my wife, Anna, has been more than up to the challenge every time I choose to pursue another wild idea (such as spending hours each day writing posts on RCG back when we had no readers, moving to Southern California to pursue a new profession, leaving a well-paying executive position to start my own business, etc.) with my usual caffeinated gusto.
And while I normally try to take every opportunity to thank the RCG community for making everything possible (I am truly appreciative!), I want to take this special opportunity to give thanks to Anna for giving me so much support as I continue to chase my passions.
The ride has just begun!
The number one thing that everyone can do to clear up the misunderstandings about “The Real Estate Commission” is to
1) STOP looking at the number as ONE commission. This is true for everyone, including agents and brokers.
To do this everyone needs to understand that agents represent people, they do not SELL anything. There is one fee for the person who represents the seller and there is another fee for the person who represents the buyer. STOP adding those together as if they are both all about the seller. They are NOT all about the seller. The seller includes BOTH in the asking price so that both can be financed inside the transaction by the lender. But they are still two separate fees, one for the person who represents the seller and one for the person who represents the buyer. They may or may not be equal amounts.
When a seller puts their home on the market for sale they decide whether or not to hire someone to represent THEM in the sale of their home. They negotiate that commission, usually somewhere between 0 and 3%, with THEIR agent, The Listing Agent aka The Agent for the Seller.
When a seller puts their home on the market they ALSO “set aside” a commission that will be paid to the agent who represents the buyer. Usually 0 to 3% and not necessarily the same fee as the one they are agreeing to pay to their agent, the Listing Agent. Why do sellers set aside an amount to be paid to someone else’s agent who doesn’t represent the seller at all? So that they can be in the MLS “pool” of homes for sale and so that ALL commissions to be paid at the end are INCLUDED in the asking price for financing purposes.
2) Price of home and commission issues DO have a direct relationship.
Pretend you are selling your home right now, whether or not you own a home. Let’s say the homes in your neighborhood generally sell for $500,000 and there are 25 homes just like yours on the market. You might say, I would price my home at $470,000 to beat everyone on price, if I didn’t have to pay any commissions. You might say, I would price my home at $480,000 if I could cut the commission from $30,000 to $10,000. So price of home and commissions to be paid DO have a direct relationship to one another.
The seller may want to save his 0 to 3% by not listing with an agent. The buyer may also want to save their 0 to 3% by not having an agent. By treating the commission as two separate fees from the time the asking price is set, everyone is free to either have representation or not and save accordingly.
The seller should NOT benefit if the buyer chooses to not be represented IF the seller intended to pay a buyer agent at the time the home was priced. If the seller “set aside” 0 to 3% within the original asking price for the buyer to use to pay for their representation, then the seller should not simply keep it if the buyer is not represented, nor should the listing agent just keep it “because they can”.
The only reason the seller agrees to pay the listing brokerage BOTH fees, is because the buyer and the buyer agent are unknown entities at the time the home is priced. Consequently the seller is agreeing to pay the buyer agent fee through the listing agent’s company and the listing company should not simply keep it, but legally the way the contract is currently worded, they can. Someone should change that.
3) The commission as stated at the beginning is not always the commission paid at the end.
Often the buyer and seller are just a bit apart a few times in the transaction.
Sometimes it is at time of offer. Let’s say the Asking Price is $519,000 and the buyer offers $490,000 and the Seller won’t go lower than $510,000 and the buyer won’t go higher than $500,000. They can both be unsuccessful and walk away or the agents, if their commissions were set high enough at the beginning, may share the difference equally creating a positive outcome for both the buyer and the seller.
Sometimes it is at the time of the home inspection. The buyer and seller negotiated OK at the outset, but now there are $7,000 of repairs and the Seller will only give $3,000 toward them and the buyer wants them all done. Again, if the commissions were set high enough at the beginning and the agents did not have to contribute anything or too much at the original price negotiation, the agents may split the difference and the transaction will proceed to close.
Sometimes the costs go sideways at the end. Let’s say the seller agreed to pay $5,000 of the buyer’s closing costs, but the costs are $6,500. The seller won’t pay any more than the $5,000 agreed and the buyer just doesn’t have it. Again, the agents can step in to cause the transaction to close by splitting the amount, or one or the other can pay the whole thing.
This is one of the reasons that people say commissions are 6% but NAR says in final calculations they come out to 5.1% on average. Without any budge room, often the transaction fails as agents who gave at the beginning, will not give again at the normal timeframes in the transaction where budge room is needed. Perhaps this “budge room” should be a set aside that goes back to the seller or the buyer in the event that money is not needed. That may create a better scenario than simply cutting things to the bone up front and leaving everyone without a satisfactory recourse as issues arise while the property is in escrow. Just a thought.
Postscript: In comment #44 of Gordon’s Post, Q-Diddy asked, “Tim & Ardell-Since I’m obviously in the wrong, If I’m the Seller what are the “traditional
This from CNN Money for March 18, 2008: “The U.S. central bank cut key interest rate (federal funds rate) by 3/4 of a percentage point to 2.25%.”…”In a related action, the Board of Governors unanimously approved a 75-basis-point decrease in the discount rate to 2-1/2 percent”
Most people know I’m a huge advocate at generating content that leads to free search engine traffic, but I have nothing against paying for traffic if you know how to do it wisely. Along those lines, the Reachd team has teamed up with Zillow to provide ad-buying advice at Zillow’s (beautiful!) office in Downtown Seattle on the morning of April 17th. These are the same smart people behind the Ubertor content management system and I’m convinced will put on a great educational event.