Bubble-Screening Real Estate Agents
A comment from reader seattle price drop in yesterday's post got me thinking. In discussing what kind of research to do for an impending real estate purchase, spd suggested:
Step 2) Interview several realtors. Do this with an eye to finding out who will be truthful and represent your interests well when the time comes to buy.Many of us would like to eventually purchase a home, once the market settles down, so the subject of how to select a real estate agent (or whether to go through an agent at all) is definitely a relevant one.
I just got back from a talk with a realtor. I walked in off the street, no appointment.
I asked questions like:
- how's the market between this year and last?
- Where do you think this market is going?
- How many people took out ARM's in this area?
- Do you think we're heading for a lot of foreclosures?
Personally, I've got a black list of people I'll definitely never work with, consisting of the various agents that have emailed me or left comments on here basically telling me how stupid I am not to jump into real estate NOW.
So are you using this interesting time in the market to screen agents for the future when you are ready to buy? What kinds of questions would you suggest asking to separate the wheat from the chaff?
31 comments:
Yeah, I'll only use a realtor that tells me both sides of the story. Like this guy Jim Klinge in San Diego. I watch San Diego because it's ahead of Seattle in the bubble bust. If he was here in Seattle, he'd be my man. Check out his blog - extremely informative with views from BOTH sides of the fence.
http://www.bubbleinfo.com
BTW, I recently had a discussion with an older Realtor and he told me that the Seattle market isn't what it used to be, and that it's not as rosy as the papers suggest.
A friend just emailed me about his Edmonds area (between 5 corners and Hwy 99) home that he is attempting to sell FSBO. He put in his email tickler that "inventories are low."
After doing some research, I wrote him back: "I'd be interested in knowing how you discovered 'inventories are low.' The Snohomish County April stats from the NWMLS show that compared to April 2005, inventory levels were up 10.66%, pending sales were down 3.74%, and closed sales were down 7.27%. In addition, I just scouted out Windermere.com and it seems like there are lots of home for sale in the Edmonds area." Also, based on what I found on the Windermere site, I believe he's priced his house $20-50K too high.
I have to believe some realtor buzz has led him to overprice his home, and made him overly optimistic. My guess, his home will languish for quite a while.
To me this situation provides another example of why it is so important to bubble-screen agents.
I have the same high regard for most RE agents as I do for airline execs.
Has anyone seen the commercial the NAR has now? It's a blatant attempt to clean up their image...they keep repeating over and over that "we have a code of ethics."
We used a buying agent when we bought last year..she was pretty straight forward. Gave us a pretty good assessment of the market which jived with my own research. She found us good deals on inspection, mortgage brokers, and escrow. So it was probably worth it....but the best thing you get out of a good Realtor is their negotiating skills. Unfortunately, there's no use for that in the currently overheated market. When 10 people are bidding on one house you're not going to try and get the seller to do any improvements. You're simply trying to out bid the other buyers....so it might be worth representing yourself.
When I was selling my condo we dealt with some really slimy buyers agents...really evil SOBs.
S Crow, are you familiar with Ballard Escrow? We used them..they seemed to be pretty good. I'll dig out their fees at some point. I'm curious what your opinion is...
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Every single god damned Meshugy post has some sort of subliminal BULL message in it on real estate.
Take his latest comment: "there's no use for that in the currently overheated market. When 10 people are bidding on one house you're not going to try and get the seller to do any improvements. You're simply trying to out bid the other buyers...."
I am sooooooo tired of this guy and his lousy attempts to make the greater fools jump into his real estate pool. Take a friggin hike Meshugy.
I think I'd rather represent myself for a few reasons:
1. So-called buyers agents work on a commission system. They make 3% of the selling price, so they are incented to keep that price high. 3% of $500,000 is more than 3% of $400,000.
2. It costs next to nothing to take the real estate licensing exam and basically know as much as any other licensed agent. For $400 bucks and 60 hours at your local community college, you can save $12,000 on a $400,000 home buy (mind you this is really only a savings if you consider your time to be worth less than $193 per hour).
3. As a homebuyer, you're already doing most of the legwork (looking up homes online, researching home prices to insure that your agent isn't trying to screw you, lining up your bank loan, etc). Why pay some shmoe 12 grand to hand you some paperwork to sign.
If I didn't trust my agent, I wouldn't use them. When I bought my house, my mortgage broker was a friend and my real estate broker was a (trusted) relative to a close friend. Neither one of them were going to screw me over because it's not like we just had a business relationship.
As a result, I had my options carefully explained with both the upsides and downsides for different mortgages and houses. I couldn't imagine using someone who was trying to force me into a deal.
Remember, if you don't like your agent, fire them. You're the one spending the money.
billruben:
An unstable mental state? What the hell is the matter with you? Can't take some of the truth staring you in the face.
Frankly, I don't care a damn what you think. Meshugy is a rotten little troll who pushes his brand of sunshine all to often.
P.S. Francis from Stripes was hysterical. Try not to get your panties all bunched up Bill, defending an unrepentant bull adds nothing here.
meshugy, don't let pissy renters with shitty credit get to you.
Actually, most of us much maligned "renters" have incredible credit. Have mass amounts of savings safely earning interest.
Have no noose (See: House) hanging over our heads, and we get to do as we please. We have beat this to death here and it IS plainly obvious that renting is superior to buying now, so come off it.
Meshugy just doesn't stop with his crap, over and over it is the same shit with him. Ballard is great, buying is just fine now, MY HOUSE is wonderful and I am 50k richer than last year. We are tired of hearing him. He should go out and buy a pair of pom poms, park himself on a corner in Ballard and cheer for his elusive equity.
ITS ALL SMOKE AND MIRRORS IF YOU USE NEWSPAPERS FOR REAL ESTATE INFORMATION
I bought in to the Kent market in 1999, but bought as cheap as possible (modular park with land ownership), as I predicted the bubble breaking soon back then, even possibly in a couple years back to 1999 prices (30% drop) for the following reasons:
1. I have teenagers in high school and I pray there's a Big Bubble, so I can get them out of the house.
2. 2006 wages are stagnant in Seattle, about $50K per household since 2000.
3. Lower wage migrants and outsourcing are down-sizing entree level salaries, degree or no degree (when did the term intern start up?).
4. Boeing and Microsoft have not added any jobs to Seattle area since 2000, Boeing is still flat around 60,000 in Seattle area, most above average income Boeing employees are older and looking to sell, not buy.
5. KOMO, KING, KIRO, etc are insanely overly positive about home prices, and most likely lack private deal listings auditability that would drastically lower selling price averages, in other words the statistics in the paper are most likely way over inflated.
6. If a home doesn't sell, its pulled off, lowered price, then returned as a fresh listing; smoke and mirrors. It sells eventually, but if its too low its pulled off the averages by Realitor (copyrite)?
We're in a serious national housing bubble, that just popped and the Realitor (copyrite mark) is hiding the glum news.
Seattle is definitely not immune, especially with its insane prices. Look at the Seattle School District closing schools, gee, where's all the children in Seattle? What's the average age of a home owner in Seattle? 66? LOL
What happens as all the older baby boomers sell 25% of the Seattle area stock all at once and very soon, and simultaneously ARM investors sell off another 25% this year because they're going bankrupt as their 2000/2002 interest rates are adjusted into the twilight zone?
Sell, baby, sell, before its too late. Your artificial equity is hot air and its about to vaporize this year when mortgage rates hit 7%, a 40% jump in monthly mortgage payments from 5%. Pop goes the bubble!!! How in Hades can anyone stop it?
Buyers are about the average household income, $50K. You guys can afford $150-200K tops, SO DON'T BUY IN TOO FAST, wait for prices to catch down with your puny salaries!
If you're renting, stay tuned, the real bargains will come in a couple years.
Besides, if most rent more and don't buy, the illegal building contractors employers will have to send all the poor illegal immigrants home, with no more work over building new homes and destroying our environment. I'm crying right now.
More and better jobs for the legal citizens if we rid ourselves of them. Property taxes for schools should go way down too.
I like how softwareengineer implies that buying in 1999 and having the bubble burst (if it does) 30% in 2007 or 2008 is "soon".
I also appreciate the rambling about illegal immigration. That definitely convinced me we're in a bubble.
Oh, and the baby boomers all selling at once. Love that logic. Sign me up for your financial management course.
Oh, and the baby boomers all selling at once. Love that logic. Sign me up for your financial management course.
Laugh it up. Any survey of the Mouseketeers will show that better than 2/3 of them think they are going to fund the lion's share of their retirement by selling the garagemahal.
When that shows it is vulnerable, look for a panic.
Speaking of taking a real estate course to get a license so you can represent yourself in a transaction to save the 3% commission - does anyone know whether you can legitimately do that without doing a stint with a broker? I know that if you want to be an agent to represent someone else that you have to work for a broker. If you only represent yourself, can you avoid doing that? Also, I've heard the license is only good for one year and after that you need continuing eductation courses. How much time and money is needed for these and how often do you need them?
I hope people who are wanting to buy in the future and are new to buying can understand a couple things.
One is that your realtor is working for YOU. So if it is normally hard for you stand up for yourself, start practising now so you'll be really good at it by the time you are actually plunking your hard earned money down on a house.
Don't be cowed by a silly at best or sleazy at worst realtor.
Have a really good idea of what it is you're looking for and how much you want to pay. Draw a LIMIT on what you can pay.
A good realtor will show you the properties that conform to what you have communicated.
The bad ones keep upping the anti and showing properties that cost more than your stated limit. Drop these jerks immediately.
The good ones go out and actually FIND just the property you told them you want at the price you were wanting. They WORK for you keeping your stated needs in mind.
Someone above wrote about friends who's property had been overpriced by an over-optimistic realtor and now not selling.
Friends of mine are also in the middle of chasing the market down.
It's sad, if they'd just done a bit of market research themselves, or insisted on a realistic realtor, they might have sold that place months ago at a decent profit.
There are some good realtors out there. But you are going to have to work hard to find them. Some of them ARE experts. MOST of them are not. Most are just dopes with a liscence. Literally.
And some are just plain crooks- trying to sell their other realtor friends properties for top dollar, and other questionable at best activities.
Don't count on "your lucky stars" throwing a great realtor into your lap! You're gonna have to work hard to find a good one.
I'm with the other anon on renters. I'm currently enjoying a totally stress free existence as a renter (and former owner), watching the global housing bubble imploding on a daily basis, and currently have more equity in hand than most "owners" (actually borrowers of money) in safe investments. Furthermore, I do not worry about a housing investment as I am absolutely positive that the bubble will definitely pop here as it is currently doing in virtually every other locale on the globe.
A load of houses I was tracking in Ballard came up on the excise tax reports today. All sold in the last month. All addresses are NW.
Address Asking Sold
8348 21st 460,000 402,000
6728 18th Ave 524,000 576,000
8307 25th Ave 399,000 399,000
8052 32nd Ave 525,000 525,000
2251 64th NW 425,000 425,000
8307 25th Ave 399,000 399,000
7506 Jones St 379,000 385,000
6549 25th Ave 385,000 390,000
832 NW 58th St 419,950 432,000
6037 6th Ave 379,950 380,000
7743 20th Ave 419,000 500,000
7553 14th Ave 569,000 560,000
8034 22nd Ave 425,000 451,000
3021 NW 61st 524,000 557,000
1475 80th Ave 424,000 437,000
7321 27th Ave 398,000 440,000
7024 Cleopatra 494,000 520,000
6733 Earl St NW 355,000 410,000
Only two houses sold below asking...they were ridiculously overpriced to begin with so that isn't surprising. The rest went at asking or above. There's still a lot of overbidding/multiple offers. Most of these places were off the market in a week. A few took two weeks. Overall, still very competitive. I'm sure we'll see some pretty big median price gains in the May NWMLS report.
capitalistchristian,
Do you have any methodology for dismissing the 40% correction in the PNW?
...or is it just a wink, nod, and wild guess based upon the broad time horizon of the past 25 years?
I think we will be in a position where today's bulls will remember a 40% correction with fond nastalgia.
capitalistchristian-
thankyou for your input!
Here's my questions for you. I'm am dying for sby. to answer, so if you are at all in a position to know:
When and how will lending regulations tighten? And do you see any evidence of it happening so far?
If you have some knowledge about this, I wish you would report to us about it every step of the way.
IMO it is the MOST important thing concerning this bubble.
So please please please share any news if you have it.
In response to the question about getting a real estate license "to save the 3% commission": In WA, a real estate salesperson must work under a broker, who will get a big chunk of the 3% (they typically take a % until you've "paid" them so much per annum.) So is the cost and effort worth it? Beyond the fees for a course and the exam, there are significant fees associated with signing up with most brokers. . . fees beyond splitting the commission. The only advantage I see is for a buyer who wants access to the behind the scenes info in the MLS database. For a seller, I really don't see any advantage over just doing FSBO on your own. In addition, once you are an agent, working for a broker, I believe you are obliged to tell buyers/sellers that you are an agent. Given the opinion most of us have towards agents, I don't see that as positive. (By the way, I've both bought and sold FSBO. Just find an attorney or escrow company, and they'll handle the monetary portion of the transaction.)
I've known or worked with many agents. Most are too ignorant, dumb and/or incompetent for my expectations (which I think are reasonable). Think about it, these people are suppose to be agents (which is a fiduciary relationship), yet if they don't know or understand the law, if they can't do fairly complex calculations and analysis, if they can't negotiate, if they aren't technically saavy, if they don't have a good understanding of the human psyche, and if they aren't honest and of high integrity, they shouldn't be in the business. But 95% of the agents and brokers out there are lacking in at least 1/2 these characteristics. The profession belongs at the bottom of the heap in my opinion, about the same level as politicians.
Meshguy-
It will be interesting to see what type of financing some of these new homeowners received. I just pulled several of those addresses and the Deed of Trusts have not yet made it to the King Co. Recording website, although excise has as you mention.
The last group you mentioned earlier this month had a good handfull of 100% ARM's and a couple with 5% down etc.. Some of the ARM were fixed for 10 yrs which will provide some hedge against increasing monthly payments (but zip against inflation), but still does nothing to reduce principal unless you have a frugal homeowner.
A lot of people are moving to Snohomish County where $500K buys a new place vs. Ballard where the 1927 Tudors are in many cases functionally obsolete. Unless I worked downtown, for that money, I'd want a view and acreage. That's why I moved from Ballard to Snohomish. I digress.
what are the rates on ARMs right now? near as i can tell, there is no reason for someone to get an ARM because the percentage span is nominal between those and fixed.
Hi crow,
I wouldn't be surprised to see a lot of ARMS. When I was shopping for mortgages I stayed away from those, but it's worth mentioning that they aren't always a bad choice. Seems like the general assumption around here is that everyone who takes out an ARM is a total moron and is destined for financial ruin. While there are people who are using them irresponsibly, I think a lot of people will actually come out a head with an ARM. For people who only plan to be in a house for less then 5 years, the ARMS are a great deal. One of my employees bought a house a few years ago and got an ARM with a super low 4.5% teaser rate. The rate is locked for 7 years...he did the math and figured out he could actually pay the house off in 6 years. He's almost there now...amazing. So anyway, that's one example of a responsible use of an ARM.
I agree. What's the beef with ARMs?
I have a 5/1 at 4.5% through August 2009. I'm saving $400/month over what a 30yr fixed would have cost, and rolling the savings into paying down principal and funding Roths.
I'll be well past 20% equity (and I'm assuming zero nominal appreciation) by month 60. Even if the maximum adjustment happens, I'll still be able to afford the payment because the principal will be significantly reduced. If, as I suspect, rates will be on the downslope by that time, so much the better.
Why pay $24K in extra interest if I'm likely to be out of the loan in less than 7 years?
I agree the decision today is different than when I borrowed because the rate spread is much lower than when I got one. But you have to do the numbers for each situation.
And, of course, you have to buy a property you can actually afford.
I would go with the one realtor, one, who had the humility to admit that I was right about our local market (Marin Co, CA).
Marinite-
There just might be one out there! I was floored by this guy the other day.
I've struck up conversations with probably a dozen realtors over the past couple months looking for one who was honest.
A couple of them were ALMOST honest, or hinting there MIGHT POSSIBLY be a problem, but this guy was blunt. We talked for an hour and I got a ton of info from him.
Absolutely delightful.
Sourmash-
That's the trick: "..you have to buy a property you can actually afford."
Couldn't agree more. My reasoning for criticism of ARM's is that it has largely been one of the mechanisms in which some (a lot)borrowers can qualify for a specific home.
Still closing refi's where people are trading ARM's for ARM's, increasing their base loan amount to 'pay' for the closing costs, payoff bling bling, CC's, 2004 Escalades etc...
And, to boot, another reason base loan amounts in refinances are increasing and not going down as you would hope to see is:
1) pre-payment penalties
2) loans that have been structured in the past year or so without county property tax allocation. Lenders are allowing borrowers to pay their own taxes, thus, creating a false illusion of say an extra $300-400/mo. available to pay only principle and interest--or in many cases just interest.
3) Debt-to-income ratios are sky high.
i hope to find the time this Summer to research our closing stats for 1st half 06' and report back on the findings.
It would be awesome if you could do that S Crow.
Interesting that they're leaving taxes out of the monthly payments. I was under the impression that it was not common to do that in WA. And that that was the reason there were relatively few auctions for back taxes here.
Lenders are allowing borrowers to pay their own taxes
Heh. I guess I am an oddball. I explicitly wanted that feature when I shopped loans (and I didn't want to pay a quarter point fee to get it).
I'd rather set aside the money, earn interest on it, and pay it myself close to the day it's due. Less chance of some loan servicer screwing up and missing a payment.
sourmash-
I'm with you on the taxes thing. The WA habit is BS as far as I'm concerned.
The home I owned (in another state), I paid my own txes every year, on time, thankyou very much. Rather keep the interest money.
Glad to see they may be loosening up on this in WA. way too big brother for me.
If you can't even set aside your tax money each year, what the heck are you doing owning a house?
A while back, I posted a slew of good interview questions for real estate agents... This might be a good place to start.
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