patrick.net

DinOr says,

"Even though I took active steps to NOT be a participant in playing “musical houses” (sold primary residence well prior to peak, took up renting....."

Then speaks of being in a casino in Vegas

Hope you still got all that equity money!

Headset,

Oh that's exactly what I mean! I was a debt slave/home debtor for years. Now that we are empty nesters (without a nest to look after) it's like this whole new world opening up before me!

Actually I'm the guy playing penny slots that's running out of room to set his...... "empties"? I'd love to spend part of our drab OR winter there but my clients (and our daughters) are here so a permanent move is out of the question. I like HB Crash Vegas style though! A 255% increase in foreclosures, which in essence is more a reflection on specuvestors from SoCal then anything.

New Housing starts sink for August:

http://money.cnn.com/2006/09/19/news/economy/housingstarts/index.htm?postversion=2006091911

"Housing starts tumble; Builders pull back on new projects, permits as latest reading shows real estate market even weaker than forecast."

Tucson Man,

Most of my family lives in Sierra Vista now and have been on board with the bubble up until recently. I mean over the last several years what wasn't to like? We've heard that both Phoenix and Tucson are now in dire straights. What's your observation? Oh and Welcome Aboard!

Tucson Man,

Were you ever able to convince an applicant to stay within his means?

Or would that kinda talk be "insulting" and cause him to find a new load officer?

Headset,

My retired friend down there has a buddy we'll just call "Eddy". Anyway, Eddy makes his living gambling, lives in a hotel and keeps some pretty weird hours o.k?

So Eddy wins a Hummer at a poker tournament and sells it the next day for 25K. Yeah, it's probably worth what 40 or 50? So the guy he sells it to totals it out the same day he bought it! Vegas Baby!

LILLL,

I too find myself wondering where all of these thousands upon thousands of buyers are going to come from? They've absolutely tapped out their book of potential clients for first time/illegal/homeless/wino buyers and anyone else will have to be a seller FIRST!

That's why so much (if not all) of the language we're getting from REIC is geared to igniting sales from the "sell side". Most people when say trading in a car will do so if the don't have too big of a "dead horse" on trade-in. Given the HELOC/MEW/ATM withdrawals of the last 5 years everyone needs to get pretty close to what they owe before they can move on.

Even if Headset* were right and I blew all of my money at a craps table at least I wouldn't have the negative equity situation to contend with. (Actually a lot of it went into college for 2 and a wedding for 1) but all the "regulars" here know I DO like to tip!

Tucson Man,

I've often commented here as to why the average American male would be in the least bit concerned (or impressed) with 18" tile, granite counter tops or up-grade shower heads?

Aren't we supposed to be out in the garage?

"how professional their 'For Sale' sign looked"

Well that's it then right? BAM!

Housing Bubble problem solved!

All that's needed to alleviate the swelling and unrelenting inventory growth (and get out from under a ton of debt) is a really cool sign! Pffft! Why didn't I think of that?

Look, the reason so many people are going FSBO is b/c they couldn't afford to pay the 6% comm. and walk away with anything!

CB Says:

This past weekend we went out for a walk and almost tripped over by all the open house signs on the sidewalk, my wife said there is no need for all these signs, you drive on any streets in my neighborhood, you will find open houses.

Maybe now that there are so many homes for sale, what should happen is towns will pass ordinances: only those homes NOT for sale have signs up, saying they aren't available. Otherwise, assume it's for sale.

DinOR Says:

Look, the reason so many people are going FSBO is b/c they couldn’t afford to pay the 6% comm. and walk away with anything!

Exactly. There are likely many, many FB's, or at least semi-FB's who will have to bring money to the table if they pay a commission. Otherwise, they will break even. Given flat or (-) appreciation over the past year in many places, anyone with less than 10% down who bought in the last year or two is in this situation. Add on top a neg-am loan, and it's a big problem for them.

Don't knock the FSBOs. In recent years, the "ask" price for a house included enough of a cushion for the seller to pay his broker and still make a profit. Now, if a seller has a choice between trying to sell his house for $400K and watching it (in the hopes of pocketing $376K ex broker fees), or just listing it for $380K FSBO and selling it sooner, they will go the FSBO route. Buyer saves $20K.

This is good news for home buyers. If everyone went the FSBO route, homes, overall, would be cheaper.

Of course there are some people who are trying to go the FSBO route in the hopes of getting top dollar, but they will eventually (a) buy into the realtor hype that they just need to find the "right" broker to get the house sold at their unrealistic price (then watch the home sit until they are forced to lower the price or until their broker drops them); or (b) continue with the FSBO, but at a lowered price.

So, if you deal with a FSBO, should you make sure that you have a buyer agent in order to make sure everything is done correctly? I was wondering about how to ensure (or buy) a buyer agents loyalty to me and not any comission he is being offered by the seller's agent or bias he/she may have towards FSBO's

Glen,
The current problem with your scenario is that there is data (sorry, can't recall the reference) that FSBO's are more likely to list their homes at too high a price given comps. This may very well change in a falling market, but it remains to be seen. Still, with enough due diligence, a FSBO should be able to price their home appropriately without an agent, imo. This is especially true with the internet. In fact, in a falling market, recent sales comps may be too high compared with current listings and future (declining price) listings anyway.

Claire, re: buyers agent for a FSBO, the downside is that of course, the agent will want his/her commission, probably 3%. One would have to ensure that the seller is willing to do this. On the other end, many unscrupulous agents will steer you away from FSBO's. I don't know if that's an issue of protecting the realtor commission in a larger sense (evil), or merely not wanting to deal with often difficult FSBO's (benign).

Not home buying advice - If I deal with a FSBO I would go without a buyer's agent but with a RE attorney and a good home inspector. They'll probably tell you more about the house than a buyer's agent could, for much less money. FSBO is interested in saving every penny of commission possible, that means they'll be a lot happier to see a buyer with an agent.

It goes without saying that I do not recommend buying a house in any form. Unless you have a desperate need for owning a home, have worked through the contingencies of a forced sale at 30-50% below current selling price and the house is very special in some way (layout, location, price), staying on the sidelines for the next year or two will be more fun than being in the middle of the vortex.

I was thinking along the lines of paying the buyer agent a set fee and having a clause that 1) they can't tell the other side that we are paying them and 2) the comission handed over by the seller and/or seller's agent would then be given to us. Obviously, you would probably have to pay them a bit more than if it was just the comission, but it would certainly be an incentive for them to get the price down as low as possible as it will not be cutting into their comission - if you see what I mean?

ughh, I'm truly hopeless

"that means they’ll be a lot happier to see a buyer with an agent."

should be

that means they’ll be a lot happier to see a buyer WITHOUT an agent.

Glen,

Agreed. FSBO doesn't have to necessarily spell bad deal. What's frustrating though is when the assign some kind of "blue sky" pricing model like it seems be standard on C/L.

FSBO's that know what they're doing let the price sell the home. Typically if I'm going to look at one I'd prefer to see something a little older in a more mature neighborhood where the owners can entertain lesser offers.

When I see a home built in 2004/5 and the "owners" want to go FSBO it's usually a dead give away. Now, I could be wrong and they could have put 20-50% down and actually have some "wiggle room". With the way though that homes have been marketed over the last several years I'm willing to cast a healthy amount of doubt on it and move on. Besides, most "Bubble Built" (TM) homes were so hastily constructed I can't see anything but problems for the new owners.

Astrid,

I am not planning to buy yet, I was just trying to get all the info I can, so I can have a master plan of what I want to do when the time is right!

Perhaps, if we offered buyer's agents a % of the total price reduction they achieve? It's just that the current system seems to encourage them to get the buyer to pay the highest possible price, rather than the lowest.

Claire,

Having been through both the buy and sell side, I can tell you personally the buyer's agent adds very little to the transaction, as long as you are halfway intelligent (I know you are - you post here!), and you have a good RE attorney.

You mention the "% of the total price reduction they achieve..." Most likely, the agent would then be paying you, since their motivation is strictly get the deal done, despite anything they tell you otherwise. They had no small hand in the run up in prices, encouraging overbidding and what not during the bubble run up, in order to bag their commission. Our buyer's agent at the time (I'll never use one again) pushed and pushed to come up in price towards the seller's price during the negotiations. We did fine (didn't listen to him), but he was annoying as hell. I don't think this scenario is out of the ordinary.

Don't get me wrong, I'm GLAD to see the explosion of FSBO's throwing their hat in the ring! In order for me to be consistent I can't bad mouth the REIC AND FSBO's! Hopefully as time goes by they will get better at it.

Right now? It's just adding to the "sloppy" pricing and confusion. We (or should I say "I") just don't know what to think?

Two homes, across the street from one another, identical floor plans, same sq. ft. snout house w/pool. Realt-whore (TM) listed home? 485K. FSBO home? 515K! WTH?

Claire,

I guess you're looking for buyer agent to get a fee from FSBO and get a kickback from the agent. I don't think that'll be necessary. I think you can personally extract just as a good deal without an agent. You need to know the market cold and maybe even do some oppo research on the seller. You and the FSBO seller both know that you going in without an agent saves them 3%, so you should feel confident about wrangling for a lower price without fear of being rejected.

Furthermore, even an agent that you pay personally still have an incentive to get a deal done with minimal time expenditure. They're more likely to grab for the quick deal that you and the seller would both accept, than to drive the hardest possible bargain for you the buyer. You're just a unit they got in stock and now they want to sell you out ASAP so they can jot down another transaction on their ledger.

It's possible that an exceptional agent will know stuff about the neighborhood or about the seller that you do not know, and end up doing you a real service by finding just the right home. However, those agents seem to be extremely rare and you're unlikely to find one that'll work with your terms.

Claire Says:

I was thinking along the lines of paying the buyer agent a set fee and having a clause that 1) they can’t tell the other side that we are paying them and 2) the comission handed over by the seller and/or seller’s agent would then be given to us. Obviously, you would probably have to pay them a bit more than if it was just the comission, but it would certainly be an incentive for them to get the price down as low as possible as it will not be cutting into their comission - if you see what I mean?

A couple more things to add to your scenario. First, most "exclusive right to sell" contracts spell out that if a buyer is brought to the table without a buyer's agent - say, if the seller mentions to coworkers he's selling, or decides on his own to put up a CL ad, the seller's agent pockets the ENTIRE commission. We negotiated to eliminate this clause (seller's agent agreed), but it didn't matter, as it didn't come to this scenario.

Second, I'm not sure the above tactic is considered "legal" from the Realtor (tm) code of ethics, the joke that it is, anyway. Maybe George can comment, although I understand these rules may vary from state-to-state.

"FSBO in 2008 means dealing with the bank"

Robert, absolutely. I don't want to get on a negative here but I fear you're quite right. I'll do anything to help kick the chair out from under the "sacred 6% comm. cow" but most FSBO's are NOT coming from a position of strength. It's being done out of fear and desperation.

We've said here before that most people won't change (until they're forced to). Can you imagine just how much disgust/desperation it takes for the avg. guy who's life consists of the people in the adjacent cubes to take this kind of plunge!

There's a difference between legal and ethical though - which one is it?

M. Cote,

Wow! I'm totally in awe.

Claire,

My parents knew a people who were trying to sell houses (SFH, middle class to upper middle class area, comparable to other houses in the neighborhood) between 1990 and 1996. Those people describe the experience as humiliating and an endless effort to woo buyers and dealing with buyer demands. When the market slows down enough, a seller will entertain any contract, as long as they can afford to do so. Home ownership become millstones when you're trying to sell into a hostile market.

I believe that the term is a buyer's broker rather than a buyer's agent. In point of fact I do know a realtor that is a pretty nice guy (our kids used to go to pre-school together) and when we asked (two years ago now) about the market he said then, that he thought that if there was a market correction it would be in the order of 15-20%, which we decided we didn't want to risk. He briefly mentioned that we had two options, a buyer's agent who gets the comission from the seller, or we pay for them to find us a house and we get the comission (which he said could work out to be much more expensive) - but it was long ago and we didn't get into details as we felt we weren't ready to commit yet.

Claire,

I don't know. It is certainly not ethical according to the "code":

http://www.realtor.org/realtororg.nsf/pages/narcode#DutiesRealtors

However, I don't know if it is strictly legal. On the other hand, much, much worse has transpired between realtors and clients before, and it will certainly continue.

Claire,

The relationship you describe works like a buyer kickback in practice. 1-2% kickbacks are pretty common in hot markets. I don't think you're violating any established legal or ethical standards.

I know some realtors will say it's more ethical to maintain the 6% norm and not undercut other realtors.

I'd say nonsense. You shouldn't be paying a 6% transaction cost just so an agent can snag ridiculous amounts of money for minimal work.

Claire,
Who knows, by the time you decide to buy, RE agents as we know them today may be truly obselete. One can hope, anyway.

skibum,

I don't think there's any technological reason why we can't keep total RE transactional costs under 2%. Mortgage brokers and most realtors do zelch except fill out a couple standard forms. Most of this stuff could be outsourced to India or Mexico or North Dakota and no one would know the difference. It's not as if these RE "professionals" had more training than the average Indian telemarketer.

"when you're trying to sell in a hostile market"

It may be a little early to call this market "hostile" just yet but I don't think it's far off. Once buyers realize that they are dealing with an FB ill-equipped to do anything other than spend bubble bucks it will get hostile!

What's amazes me is in spite of a 255% increase in LV foreclosures that banks are still dealing with people (that as George describes) are"no longer are available at that number"? Why? I mean, I understand having foreclosure laws in place to protect "home owners" but this is getting ridiculous! These "homes" have never had anyone spend the night there, the "owners" can't point to it on a map but they're getting the same protection under the law? This is the kind of BS that will breed hostility. From a lot of quarters!

We'll just have to wait and see what happens. The reason I wanted to use an agent is that I've no experience in the US market and don't want to fall into a "trap" which an agent would have know about. I agree that their commission is outrageous here - especially when the house prices in my area are currently $1m + for ordinary houses

know=known

Claire,

We fell into the same boat - as first time buyers, we didn't want to get "suckered" or merely not realize something we should have done. I can tell you with certainty, those fears were ill-founded. What to do?

Continue to go to open houses in your neighborhood of interest to get a very good idea of what's available and what prices are doing. Talk to the realtors at the open houses to pick their (small) brains about what they know about the market. Honestly, business is so dead right now, they are usually sitting on their asses at these open houses and would probably enjoy talking to a human for a change. Read a book or two about RE transactions (no, not the ones about flipping!)

For the BA, check out movoto.com - it's one of those sites that links into google maps with new and old listings, DOM, etc. (BA only). Use zillow.com (although their zestimate is way off). They are atthe very least good for giving you prior sales histories for most homes. There are probably several other useful websites (redfin?) Read up on the art of negotiation (see DinOR's old thread on this). The rest of the equation, as astrid mentioned, can be taken care of by a good RE attorney.

Speaking of Zillow.....I know the Zestimates are a bit wonky, but they do help in knowing which way the local market is going.

I've noticed that Zillow has not updated its numbers since sept 1st, despite the fact it is supposed to be a weekly update.
Does anyone have the skinny on why?
Or news on when they intend to update...?

Claire,

If you want to avoid "traps" then you must get a real estate attorney and maybe even a specialized tax attorney (if you're a foreign national). To avoid simple mistakes, read homebuyer websites or borrow a couple of library books. If you need more hand holding, run through the house with a shrewd friend who's been through the process. I concur with skibum's sentiment that a buyer's agent does virtually nothing for an intelligent buyer and may work to your detriment.

The biggest selling points for most buyer agents are convenience, MLS access and the erroneous belief that buyer's agents don't cost you anything. Convenience is not a major issue for you (since you already live in the area and know it pretty well), MLS listings are now pretty open and easy to research, and buyer's agents can cost you a lot of in terms of the seller's final price point. If a seller knows they must pay your agent, they're going to tag that onto their selling price.

There are few things worse than an unscrupulous buyer's agent. My parents worked for years with someone they thought was their friend. They got shown high priced dumps in sucky locations. They later found out that this "friend" was only showing them the runts in her own listings or her own property (!). Fortunately, my parents didn't buy anything with her and when they got serious about buying, they found a decent place on their own that gave much better value.

LILLL,

Good for you! Losing the "obsession" to BUY NOW is a major step toward a "full recovery"! And no, a 20K "discount" after a 200% run-up is not a reduction, it's an insult. Not the least of which to one's intelligence.

Yet there's more to it than just saying renting has made the "world my oyster". (That's true and I've certainly not been remiss to exploit exactly that). It's much easier to "fantasize about your next place" (than to be saddled with debt and maint. on our old place) but beyond that is the chance to "re-invent" yourself. I realize in L.A giving one's self a "life-style make-over" can become a weekly event but I've yet to have mine.

Everyone here has this remarkable opportunity to create a more balanced and healthy environment for ourselves. Like most of us I don't get handed this opportunity every day so it's nothing to be taken lightly. I don't want to speak for others but it's not uncommon for us to be in a rut that goes a lot deeper than any housing bubble. I tried the suburban lifestyle and knew almost instantly it wasn't for me but when you have family you have to do what's right for the majority.

This implosion will provide a window for ALL of us to "shop" for a home and lifestyle like we probably haven't had since the 70's in this country. I for one am not about to screw that up. IMHO.

PS - and my parents did this before the days of online MLS listings and Zillow. They were going by newspaper and realtor booklets. Research nowadays is much easier and more targeted.

Where do you get information about foreclosure properties though? As I imagine they might be the better buy next year/in a couple of years?