http://www.msnbc.msn.com/id/12193786/

The above link will refer you to a very interesting article on www.msnbc.msn.com regarding interest only loans and a possible decrease in their availability. 

What does the ultimate real estate company look like?  What does it do differently?

These are the questions begging to be answered.  I am studying the various business models hoping to found "The Ultimate Answer!"...or at least the next and best step forward in that direction.

Obviously this company must empower the consumer, both the buyer consumer AND the seller consumer.

Obviously this company has to have an element of discounting, and yet the ability to survive financially.

Obviously this company has to incorporate some of the old, but be primarily NEW, particularly with regard to new technologies.

I have a basic framework in place that takes the best of what we have, and adds that which no one yet has dared to dream.

I dont expect the fanfare of a ZILLOW...but maybe an opening as significant as REDFIN :-)

Still a work in progress.  Submit your ideas...looking for talent...potential owners welcome to respond.

Ardell DellaLoggia

"I'm Just a Girl in the World...But, Give Me That One Moment In Time" 

Got my first issue of ZILLOW BUZZ this morning.  Or actually an email announcing that ZILLOW BUZZ is coming.

ZILLOW really is exciting news…Im not being sarcastic when I say that.  We need a shot in the arm in this business.

That being said, I would like to say something about how real agents really value property.  I read the about us notation on the ZILLOW BUZZ email and it showed how one of the partners had used spreadsheets to value his property.  I just saw an elaborate spreadheet done by an owner at The Newmark in a downtown Seattle condo.  Boy was it elaborate, and boy was it wrong.  No way that condo is worth what that excel spreadsheet says it is worth.

The way we value property is on a comparison basis.  The more we see the better we can value.  That is why we go to Brokers Opens (at least those of us who arent just looking for a free lunch

We have a mental running calculation in our brains.  It goes like this.  Johns listing last month sold for $700,000 and it was on the best view corner of the building, remodeled and up on the 21st floor.  Better window configuration.  Crappy cabinets, but otherwise a great remodel.  The wall was knocked out around the kitchen.  Penelopes listing down stairs on the 9th floor had the best unobstructable view, but was 600 square feet smaller.  Poor presentation.  Owner left his clothes all over the place and it smelled like sweat.  Original condition, no remodel and had a handicapped bathroom that gave it that hospital feel.  That one sold for $400,000, but it was a pre-foreclosure with the owner under the gun.  So I can list this one at $550,000.  It is between the 9th and 21st floors.  It is remodeled as to aesthetics, but no walls knocked out.  Its really worth $500,000, but I think I can squeeze an extra $25,000 out of it because its the only game in town at the moment.

I dont think a computer can do that.  Robbie, can you do a Vulcan Mind Meld?  LOL. 

One of the big stories in yesterdays Seattle Times, was the piece on Redfin written by Elizabeth Rhodes.

http://archives.seattletimes.nwsource.com/cgi-bin/texis.cgi/web/vortex/display?slug=redfin05&date=20060204

My response is this:

According to the article, Redfin has the ability to reduce the Buyer Agent Fee to 1% of the purchase price.  They have an agent who never goes to see the property write up an offer online, and Redfin gets paid 1% to do that. That assumes that the Buyer Agent fee offered by the seller and the listing company exceeds 1%, which is at present generally the case.

If the buyer only wants to pay 1% for Buyer Agent services, if that is the trend, then why wouldnt I just go out and list property with a 1% Buyer Agent offering in the first place?  Why shouldnt the seller offer 1% and pay only 2% or 3% total fees when he lists the property, with 1% or 2% to the listing agent and 1% to the buyers agent?

 If the agent in Redfins backroom is writing an offer without seeing the property for 1%, why wouldnt the buyer just have the Open House Agent or listing agent write it up for 1% while in the house?  At least that agent has seen the house and will know what amenities to write in that might be unique to this property, even if not offered in the mls, like bar stools that match the decor.

Clearly a buyer who can pick a property off the internet, who needs no assistance other than writing an offer and following escrow to closing, can get a real live agent for 1% or even less.  Why not use one you can talk with in person inside of the house?  If you remove the responsibility to assist in property selection from the agent.  If you further remove the responsibility of the agent to take care of you because you are a savvy and informed consumer and dont need hand holding.  Then clearly you can negotiate those terms with anyone and still retain the right to upgrade the service if needed during the transaction.

The publics perception that all fees are carved in stone is erroneous.  I am concerned that buyers go to less than full service companies, when they can clearly negotiate less than full services with any licensee.  Pick the best agent for the job and negotiate the terms.  This way if you need greater assistance during the transaction than you thought you might need at the beginning, you have the option to upgrade to what you need, no more and no less.

Much has been written about this war between the technology industry and the real estate industry, over agents "hoarding" the mls data and preventing the "free flow" of mls data for public consumption. 

The mls download agreement for members only is restrictive, and does not permit the free flow of all mls data, which includes the alarm codes and other private information regarding owners homes. Often it tells agents when the owner will be at work, when he will be on vacation and when he will be sleeping (night shift workers). Agents need this info to know when they can and cannot show the property for appointment purposes. This is info robbers could use to know when the owner will not be home. It is not available for public consumption and is agent only info. 

Only the listing broker knows which sellers allow the photos for agent use ONLY and do not want a sign on the property nor do they want their living room and antiques on "public display".  Just because those photos are "in the mls" does not mean the seller has given permission for his home to be invaded via the internet to anyone who might want to peek inside his home for God knows what reason. 

So when a "bottom feeding", non LIBB member joins the mls for the sole purpose of getting into the mls data system for public display, they need to understand what the mls IS, and what it is not.

OK, lets Get Real for a minute.

On the one hand we have the consumer who wants:

"What they need, no more; no less, for a price that seems reasonable."

Now, lets look at the service providers, both as you know them, and as I know them as an insider. From an insiders perspective there are three tiers of service providers. The traditional full service model, the discounted full service model and the stripped down to you are mostly on your own model. None of these are good or bad in and of themselves. Its more a matter of what is good or bad for you, depending on your skills. But thats for another day. Just wanted you to know that each of these is good for someone. Only question is which is right for you.

Technology has added a fourth option that is not a model in the service provider sense, but one that many consumers at present are opting for, which I will call ZAP.

I have to use analogies because I am somewhat limited by my insider position in discussing commissions and companies. Straight shooter that I am, being a little vague is not my normal modus operandi, so bear with me. Hopefully my descriptions and analogies will be obvious enough for you to follow. If not, you can ask questions in your comments or by email.

Lets discuss and eliminate the ZAP option first, since it is not a service provider, but a place where many consumers get trapped without knowing that they are getting ZAPPED. It is worth mentioning here that ZIP is not a ZAP. Now back to ZAPs. The most obvious ZAPs have a button that says Find a Realtor, or something of that nature. When you hit that button to find a Buyers Agent or Sellers Agent you are decreasing your ability to negotiate the commission, without knowing it. The technology whizzes who create these websites take a portion of the commission, without disclosing that to you the consumer. They do not provide a service to you, the consumer. They provide a service , for a fee, to the agent who is a participant at a cost. There are many of these and we call them lead generating sites, bottom feeders or troll sites.

Lets take a specific example of how these work, and there are many of these available to you. Lets say you are a buyer, rather than a seller, of real estate. You go to look at property on one of these sites, which is how they reel you in. You then hit the I need a Buyers Agent button and are connected with an agent. Lets say based on the price of the house you will eventually purchase, that the commission will be $9,000 as pre-set by the seller of that house when he listed it for sale in the mls. When you connect with the agent by hitting that button, you have generally spent in that process of merely hitting a button on the website, the money you could have negotiated toward your closing costs or repairs or against the purchase price.

The agent who gets you has paid for you. He pays for you out of the $9,000 on the table in your transaction. Sometimes he pays it up front in a monthly cost of say $1,000 a month. So if it took three months for that agent to get you (the lead), he has paid $3,000 for you. When you try to negotiate something for you from the $9,000, the agent has already given $3,000 to the 3rd party ZAP company, and so you get ZAPPED, as your ability to negotiate has been diminished or entirely eliminated without your knowledge.

Some other sites are not pay as you go for the agent, but pay as you close. In that case the agent will owe the ZAP a percentage of the commission, if and when you close escrow. Again, the monies you may have been able to negotiate with your agent have been sucked up in advance without your knowledge.

Some of these sites operate like the one sided mirror glass of an interrogation room that you see on shows like Law and Order and the like. I find these lead generating Big Brother website options to be exceptionally creepy, but hey, thats technology at its best, I guess. When you sign up to the site to view and save property, you are assigned to an agent in the queue without regard to whether or not it is a good match. Those who have paid in to look at you look at property, get the leads kind of like the way a lottery ball pops up to the top and gets pulled. I'm trying to give you the facts without editorializing, but its difficult for me as I find these sites intrusive and deceptive.

OK, back to facts. The agent who wins you in the lottery of the moment, gets to see everything you are doing from the inside without your knowing he is watching you. He can see what properties you are viewing. He can see which ones you are saving vs. ones you are trashing, he can get inside your head a bit. He gets all of the info you have put in to register for the site. You then get an email from him, and maybe a phone call, saying Would you like to go see X property? You are dumbfounded and amazed and think he is absolutely clairvoyant! Or maybe you DO want to see that property and don't think about how he guessed you might want to go see that property and you just go see that property without a second thought.

LOL OK, I cant stop editorializing, can I? Don't you find this just absolutely creepy? Maybe its me. Ill stop here for today and will continue after some of you comment on this so far. Maybe its just me. What do you think? Id like to hear from you before I go any further. After 5 comments I will go to Part 2 of ? 

As to the Title of this entry, lets review. We are mostly talking about ZAPs that ZAP you, the buyer consumer. ZIP is NOT a ZAP. While you all sit at the edge of your seats awaiting Zillow and its wonders, we all (the insiders for lack of a better term) are sitting back expecting another exploitative ZAP type. Of course No one knows, but the Shadow, but at least know what to look for when it comes. My expectation is that it will not give you what you want. That being What you need, no more; no less, at a reasonable cost as noted in the second sentence of this entry above. (Someone let me know if that IS what the consumer wants, please. Thanks.) 

But it will WOW! you with its technology, reel you in, and then sell you off to the highest bidder. No one knows yet, but if you hear anything new about it let me know and I will decipher the code. 

Five comments from YOU, the reader, and then we will move to the actual means a buyer has to negotiate their commission, unless they have already shot themselves in the foot by being totally or partially ZAPPED without their knowledge, from the ability to negotiate. 

HERE WE GO AGAIN!!

Another super-duper, we're gonna do it better, online real estate company!  I am absolutely positive that someone is going to get this totally right, eventually.

Best we could come up with is giving everyone the freedom of choice.  One shop for all.  Everything from top of the line representation to whatever you can negotiate.  No rules!  All is Fair Game!  Maybe if you can combine that thinking with a Zillow.com type of software talent, you'd be onto something.  The sky's the limit!  Who knows?

With the backing Zillow has, they ought to be able to come up with something good.  Or will it be all about technology?  A glorified Redfin?  Lots of Wham! Bam! Thank you. M'AM.!  Great technology and graphics, but no one who knows a hill of beans about providing real fiduciary services to the consumer?  No one who understands why 5 days is more than 6 days?  No one who understands when to NOT fill in a non-required field to better represent the seller?  Will it be representation worth less than nothing at only a fraction of the cost?  What a bargain!

Only time will tell, and we are certainly all waiting and watching.  I personally hope it's a doozie!  A real show stopper!  A real answer to bridge the gap between the old fogeys and the techies!  I know.  I'm a dreamer.

Well, so far it's all fanfare and hoopla with no substance.

Galen asks: Is it bad if everyone else does it too? What if you are one of the best? 

The Department of Justice suit against NAR is a very complex issue, which, I will follow and explain at length in my own blog. But let me raise a couple of key points for general edification in laymen terms. 

There is absolutely nothing wrong with the consumer getting what he wants. There is absolutely nothing wrong with the consumer having many options with regard to the price he or she might pay for Buyer Agent services or Seller Agent services. 

While we in the State of Washington, may not have to worry about the issue at hand, because our NWMLS is not owned by the Board of Realtors as it is in much of the Country, we have other forces to be reckoned with. There is a misperception that real estate licensees sell houses. We do not sell houses for a living. We represent people for a living. That is required of us by law even moreso in the State of Washington than in many other states. 

Under our State Law, a real estate licensee is obligated to represent consumers as the default, without the consumer needing to invoke the question Will you represent me?. When a seller wants to be a glorified FSBO and garner ONLY mls exposure, a sign in front of his house and a keybox, the licensee is not necessarily relieved of his/her legal obligation to represent that consumer in a fiduciary capacity.  

It is certainly OK for a consumer to trade down to a minimal service for a minimal price. But the State will have to catch up with this option by changing the Disclosure Laws and required Disclosure of Agency Laws pamphlet given to consumers, to incorporate this option. States have the role, duty and obligation to protect consumers from being their own worst enemy, if you will. At present we are one of the only states in the Country that offers full, fiduciary service as the default.  

As long as the Courts continue to hold the licensee liable for being the advocate of and full fiduciary agent of the consumer, the options will continue to favor the consumers protection rather than his money. Fiduciary is a big word.  I have represented consumers in a fiduciary capacity for 35 years or so in both the fields of real estate and trust and investment services, and so "get" the meaning of this word better than most real estate licensees.  

Fiduciary means I always do what is best for you, without regard whatsoever to whats in it for me. 

One simple example, and then I will go to the office to represent a buyer client. We recently fired a real estate licensee. She was bemoaning the fact that we told her to show her client a property that was $200,000 less than that buyers max affordability. It was a great bargain and perfect for that buyer client. The agent complained that she would make less money if the buyer bought a lower priced property. We tried for about three weeks to impress on the agent that her duty was to help the buyer get the best property at the best price, WITHOUT REGARD TO WHAT SHE, THE AGENT, WOULD MAKE ON IT. We could not get our point across. We could not persuade her to come from the right place in her mind and heart. We fired her. 

Someone can say, I dont need full fiduciary services, I just want the mls and a lockbox and minimal service. They can pay any price they want, as long as they understand that they are trading down.

So the answer to your question, Galen, "Is it bad for everyone else to do it too?"  I ask you, what is it?

Per my previous general description of a Real Estate Bubble:

1. An economic cycle characterized by rapid expansion followed by a contraction.

The "Alan Greenspan" warnings started due to the general principal of using hindsight to predict future outcomes.  I use "Alan Greenspan" in parentheses to include like-minded economists and forecasters.  Simply put, this is a theory based on the fact that "history repeats itself".  This methodology is what caused the national headlines "Is the Bubble Ready to Burst?"

Simply put:  "What goes up, must come down".  Markets, be they real estate markets or the stock market or other markets, go up and down.  Even during a sustained up market, there are periods of "correction".  The market can go up 100% then drop back 20% (a correction phase) and then continue up again.  Or it can drop like a stone.  If the longest, sustained, upswing in recent history was five years, then economists will predict that maybe a five year upswing is the longest, sustainable upswing probable.  If they are wrong in that instance, and the new upswing lasts 7 years, then future predictions will warn at 7 years instead of 5 years. 

It is a warning.  Not a certainty.  It is for this reason that Greenspan first warned of a possible flattening of real estate prices in 2003, and economists are even more strongly warning consumers after a 7 year sustained upswing since 1998.  2006 being the year to "watch out"!

I'm not saying they are wrong in general, as there are some markets in this Country that did react in 2003 and will react in 2006.  I am not even saying Seattle won't feel it.  But Kirkland and most of the Eastside will not be affected, except in "bubble areas", those over $1.1 million. where there is a "glut" of homes on market.  More sellers than buyers

Is the Real Estate Bubble going to Burst? 

This question has gotten lots of press in recent months.  But has anyone really answered the question?  Does anyone even totally understand the question? 

The answer is simple.  ALL bubbles burst, or at least deflate, because they contain "air".  The question is not IF the bubble is going to burst, but how and why and when.

More importantly, one needs to define where that bubble is and where it is not.  If you are purchasing real estate located in the "bubble" portion of the real estate market, you will be impacted more than if you are purchasing real estate located outside of the bubble.

Kirkland is a very large City when it comes to this issue, as it contains several bubble areas that may be greatly affected, but the City also has many areas not located in "bubble regions" that will not be impacted as greatly, and some that will not be affected at all.

"Bubble: 

1. An economic cycle characterized by rapid expansion followed by a contraction.  

2. A surge in equity prices, often more than warranted by the fundamentals and usually in a particular sector, followed by a drastic drop in prices as a massive sell off occurs. 

 3. A theory that (housing) prices rise above their true value and will continue to do so until prices go into free fall and the bubble bursts. 

Under definition 1., we find the reason why this topic has received attention in recent months.  This has to do with the nation as a whole, andoes not lend itself to the nuances of specific marketplaces such as Kirkland or the Eastside in general or Seattle and King County generally. 

The reason this topic has come up is not because prices are high, as one might expect.  Prices being high does not, in and of itself, create a warning that a correction is going to soon follow.  Case in point, most of California.