Again, others may have more knowledge on this than I but I believe the model IrvineRenter is putting forth here is much closer to the model that is used in the commercial property market ie greater focus on the listing agent as marketer, agree a marketing plan and budget.  I did work once years ago (was a banker selling a REO commercial property) and the contract with the real estate agent was very detailed on the marketing plan and budget for this property (what brochurs, adverts, etc would be undertaken)...I don’t recall the sales commission but it was less than 6%, but pretty sure we paid more than 1% but the higher fee may have covered the buyer’s broker as well.

Amen.

Blog software will not accept a one word post, so this is the more.

All of this thinking is outdated—like adding features to a current technology.  What is needed is a complete retooling of the process to eliminate ALL potential conflicts of interest.  Marketing?  Seriously?  MLS is really all that is needed.  Sure, plenty of agents can’t spell, write, etc. as seen by the ridiculous listings we’ve all seen.  However, that does not change my interest in any house - though it would make me grumble in signing a sales contract for the house knowing that the GED-level education agent made out with a boatload of MY cash.  Anyone who truly wants to sell their house will keep it clean, etc.  Those that are messy probably aren’t going to negotiate much—and when have you seen a house that is truly priced to sell w/o needing some serious negotiations?  Unmotivated sellers keep messy houses, don’t care if their listings are sharp, etc.  And you aren’t going to be able to negotiate with them.  Bottom line is that the RE agent concept is dead.  Get a RE attorney to do a closing, have someone post the house on all of the free sites AND the MLS for a small fee, and reduce the commission as best you can in your negotiations.  If sellers start just paying for MLS and not “marketing” and huge commissions, the buyers will all respond VERY favorably.

Your pricing model may only work with bubble size prices. $500k is not a reasonable price for a house, hence the discount from $500k is not a good choice for the example.

Redfin’s buyside commision has a minimum of $4000. (which they’ve adjusted upwards at least once) And, at least in DC, they reduced their commision to 2% not to 1%. So, for anything I’d be interested in buying Redfin is either totally a wash, or more expensive.

I like the way your new structure organizes incentives, but I just don’t think it will save money for anything but the top-tier of homes.

I would like to agree with you, but from what I have witnessed with FSBO listings, I don’t think just getting on the MLS works.

Redfin calls out the FSBO listings, so they are easy to find. From what I have observed, most owners if left on their own do not price the property properly, and they do not market it very well. The listing prices are usually beyond WTF despite the fact they do not have to pay a 6% commission. You would think they would price it lower, but they don’t. Often the realtor is the only party to a listing providing a reasonable estimate of current market value. With nobody to push back on the listing price, FSBOs start with WTF pricing. Greed and ignorance if left unchecked is embarrassing.

Also, I don’t know that I have ever seen a FSBO property marketed well. Perhaps I have simply missed them, but I have not seen any with professional photographs or well-written descriptions. I have not come across any FSBOs with nice flyers or other marketing materials.

Perhaps these FSBOs are selling anyway. I don’t have any statistics to know, but from what I have observed, I rather doubt it.

I’m not sure IR’s 1.5 *4 is accurate.  The 3% split part is accurate, but usually the broker’s take is not 50% of the 3%.  Depending on the company and the realtors’s relative value to the company, that number is more commonly in a range from 30% (for rookies) to 2% (for multi-million producers).  Some companies (like Remax), charge the agents fixed fees for rent, etc., but give then 100% of the 3%.

Someone actually paid 870K for a fixer upper 40 year old townhouse.  An appraiser and a bank thought it was worth the going rate…I am speechless! 

Hopefully a mania like this will never happen again.  The entire world economy is on the brink from this stupidity.  God help us all.

I see the Real Estate commission structure similar to an attorney who takes cases on a contingency basis. If they win (the homes sells), they make money. If they lose (the home doesn’t sell), they lose the money and time invested.

Is it just me or does University Park have some of the fugliest houses in Irvine?  I cringed when I saw that elevation.

Thx, IR -

A one-size-fits-all approach to a business model is bound to fail when you have so many different preferences with different clients/partners.

I’ve offered this type of multi-tiered “menu-style” service for several years with (my own limited) success.

Basing a relationship off of a marketing plan gives everyone involved more transparency.  What has been done?, what is next?, what is working?, is much more actionable and less frustrating than simply measuring by “still not sold”.

If it is fair for the buyer/seller and fair for the broker, it would be foolish to turn away business.

I recently went to a Redfin seminar to see just how they do things.

As I remember, properties below the mid 300s hit their minimum commission so they make less sense for the low end.

Above this price they may be a good deal.

I understand this frustration.  If it has a “common wall”, it is not a SFR.

It all boils down to transparancy the more info you have and give out to the buyer the more will sign up for your services. Those RE agents who want the full 6% in this environment are dreaming of the old days.
Taking a listing and setting it high will make the seller happy as it sits for months. A good agent will show the owner what is realistic and not a bubble dream.
I sold my last home even though I had a agent, he did not do any work. I had a list of all my improvements for the property. Warranties for all new applicances (water heater, garage door), information on the landscaping. I staged it myself and a professional thought someone else did (as he showed up on my first open house) I sold that house in twenty days. If you have to move you are motivated to get it sold.

And I do agree many of these listings are trying to see what price they can really get. They really do not want to move but they clog up the system and hurt and waste everyone’s time.

Selling yourself can hurt you as well as the buyer does not want to meet you but for me it worked in my favor as I had information that the buyer wanted. So much of this is missing in selling a home.

I think an educated buyer is what the new RE market will have to deal with. As questions asked first should be before I’ll give you a bid. Hopefully those days are over.

As I look at homes now I have not found one RE agent that has done any kind of homework on the house he or she is trying to sell. They are there to sit and look stupid. If you ask them a question about the home they have to look it up they have no clue as they sit in the home.

It’s really terrible and yet they want to be paid sky high for listing it. 

I am with IR the entire model needs an overhaul and I am totally for it.

I’m not so sure how much sense it makes to buy an attached fixer in a neighborhood of attached homes with incredibly ugly elevations. Talk about a limitation.

And the interior is a complete gut job, I see nothing of value in the photos that could be left. The sunroom and extra room atop it are poorly designed and don’t seemlessly tie in with the rest of the home.

This home is a poor candidate for a fixer project, especially in this market, unless you get it at a screaming deal. And I mean a really screaming deal.

funny, I was just thinking of this RE process yesterday.
What needs to be done is a flat fee buyers agent. I want a house. I also want an agent who WANTS to get me a kickass deal - NOT be motivated by a higher buy price.
Its a buyers market, and agents should be helping buyers get a better price. You can avoid alot of the shopping around by having an agent who LISTENS to the prospective buyer.
Agent would do the following before getting onboard:
1. Have a bullet point list of items in houses (fixer upper or move-in ready, fireplace, pool, etc). Buyer marks ‘must have / desired / no preference / do not want’ on each item.
2. Agent verifies what buyer truly can afford and pay for (how much cash do you have for closing? do you really have a pre-approved loan? etc)

Agent then is able to tailor houses to the buyer without showing them 30 diff houses. Agent also has to listen to buyer, figure out their likes/dislikes and further tailor houses to what they’re looking for.

Absolutely. Even the current asking of $631k is very overpriced from the 160 times rent fundamental.

We, the tax payers, will have to take much more loss on this one.

Just wanted to say that the commission is totally negotiable between agent and owner.  I sold a house in 2005 and had an agent who was open to some innovation.  I thought I could sell the house myself at 900k, so for the listing agent I negotiated a commission that looked like $5k + 15%*(sales price-900k).  To avoid confusion, we appended a table to the agreement that listed the sales price in 5k increments and the corresponding commission I would pay.  I thought this would give incentive to the agent for the highest closing price possible. 

I wanted to do something similar for the buying agent, but my listing agent said it was too complex for them to understand.  In his words, “the MLS only has a space for 2 digits and a percent sign”.

Problem is no one is willing to do any homework and if you find that agent you have a gem.

One said to me when you find your house call me and I’ll do the paper work for 6% of course.

Still renting 4 years now here in OC.

someone find me the house I want and I’ll pay you a decent $$$

any takers??  LOL

“Redfin calls out the FSBO listings, so they are easy to find. From what I have observed, most owners if left on their own do not price the property properly, and they do not market it very well. The listing prices are usually beyond WTF despite the fact they do not have to pay a 6% commission. You would think they would price it lower, but they don’t. Often the realtor is the only party to a listing providing a reasonable estimate of current market value. With nobody to push back on the listing price, FSBOs start with WTF pricing. Greed and ignorance if left unchecked is embarrassing.”

Anecdotally, I can say this is true.  When I bought my house, there was a house on the same street FSBO.  The development is pretty cookie-cutter, so all the houses are basically the same, so we called them to ask them their asking price.  It turned out to be 20% more than the house we ended up buying (which, again, was almost the exact same house).  It ended up selling for marginally more than mine after they got a realtor involved.  It really isn’t possible to underestimate the stupidity/greed of most people.

Speaking of which, I was watching HGTV this weekend and saw a show about some woman from Newport Beach who was a “full-time real estate investor”.  She was planning to buy a second home in Tuscany with the proceeds that she had accumulated buying and selling homes in So. Cal.  I almost threw my shoe at the tv.

iggyshouse.com (part of buyside realty) has a listing option for sellers.  No fee.  Listed on MLS and the seller does all the work.  Good thing is it allows access to MLS.

I would consider a screaming deal to be about 350K for this place.  You’ll probably need another 100K for the gut job renovation.

At the end of the day, it’s still a townhouse located in Irvine.

For almost 900K, these people could have bought a nice SFR in Turtle Rock.  The kool-aid must have been laced with something extra back then!

I am sure that there are lot of people that will spend $631,000 for a slum in Irvine.

The shows on HGTV should have the date (year) watermarked on the lower right of the screen.

We were watching some HGTV shows (“what’s my house worth” - or something like that)that obviously had been shot in ‘06.  Like the cookie cutter house in SoCal that had shot up like 40% in three years…

Nowadays, those shows should be shown in the “Science Fiction Channel”

I’ve been struck time and again by the ineptness of every FSBO I’ve ever encountered. I remember trying to talk a FSBO into selling for 3% less than the value of the house, essentially splitting the 6% real estate commission with me. They insisted on a value above the market and the house went unsold for over a year, including six months they had it listed by an agent.

My theory is that the people who would do a good job selling by themselves also can do a good job of finding the best listing agent, negotiating a deal on the commission, and working as part of a team to maximize return.

As to the way that real estate agents are compensated, there’s no way that the current structure survives any more than the classified ad has survived in the age of the internet.

IR,
I am beginning to lose a bit of confidence in your analysis. First, you reinforce the 6% model under every weekday post, then you continuously trash it in almost every other comment. Why even use it as a reference in your posts? You probably just use it to enhance the shock value of the potential loss of the property.

I think you can finally put 6% commission appendage to rest in your daily posts. The losses are big enough that you don’t need the added “.99 cents” to exemplify the loss.

It seems that you and a lot of your respondents resent the money an agent makes on a sale. Well I do too, especially when you have a bunch of idiots in the business in an appreciating market. It seemed like the best silver-tongued shyster got most of the sales.

Now in a depreciating market, the agents are having to work for the sale. Let me point out Irvine Realtor here. And with lower prices, the pay-off is much less. What you all have to remember is that Irvine is not the only city that agents do business in. What kind of money are we talking about in an average $350,000 sale?

$350,000 x .06 = $21,000 x .5 = $10,500. Divide that by their split with the broker and Uncle Sam and then factor in the months it took them to secure that sale assuming, like most of you, that they just sat on their butts and invested nothing on the transaction. Which one of you would like to work so little money for months of “work”? And why do you people resent real estate agents making so little?

No wonder the system is full of uneducated agents right now. Most of the smart people have left the real estate business and are actually working a real job that pays a living wage.

Wait….  ok, I’ve got my Nomex suit on now. Fire away

I was thinking the same thing.  I can only imagine the woman’s been totally ruined by the crash in the real estate industry.  Based on the show, it looked like all she did was sit at her computer, “research” “investments” and flip the properties she ended up buying.  It’s a testament to how ridiculous things got that people were actually able to live an upper-middle class lifestyle when they added no value to the economy.

According to the listing info, it has TWO common walls!

I can remember Irvine when one house was not below 1 million—-

so where do you get 350k? A condo I assume—

somewhere ??

And we all know what happened fast and easy money sent thousands of people into becomming RE agents—and yes many of then did a lousy job and even fradulant activities as in the one that used his friends to line up and bid up the prices.

But looks like many did this as well with heloc’s abuses.

Many lost all control as thousands poured into this market for the gold at the end of the rainbow mentality.

Find me a real agent that really cares about their clients well being, what they can really afford, who has looked up the condition of the homes, who knows everything about the house and I’ll hire you.

“Owners are sometimes very greedy. They put a WTF asking price on the property to make sure they extract every last penny from the sale.”

I love it…like the owner shouldn’t try to get the most money possible…give me a break.

No, they should just give the house away. Don’t want to appear greedy…heaven forbid! LOL

I sold a home FSBO in 2008 and did comparatively well.  I will admit that when we initially listed the home, we priced it a little high.  But we quickly brought the price down, and ended up selling for one of the highest prices in the neighborhood for around that time. 

We paid a small, flat fee to have the home listed in the MLS.  We drafted a well-written description, IMO, and posted nice photos.  We also printed glossy flyers that we put on the for-sale sign out front for people to take.  Although we did not offer a LB, we were available to show the home on a moment’s notice and it was always clean.

We initially offered the buyer’s agent a 2% commission but ended up raising it to 3%.  The buyer who bought our home was represented by a high-end real estate agent.  The agents who toured our home or showed it all stated that it showed well.  I highly recommend the FSBO option, as long as you have the property listed on the MLS and price it reasonably.

It took ten years and lot of $$$$$ improvements for my house to double in the Bay area and this was insane—moved down to the OC and the houses here tripled in less than three years—
even more so—-

And only a few places in the States came close—NY city and maybe some in Fla.—

And very few improvements as I was shown houses with no yards (grass or sprinker systems) no hardscape, no underground drains, no improvements for mudslides (LOL) a joke here.
NO new paint, falling apart houses, VERY OLD as well.

The OC in my opinion was drinking drug filled Koolaid compared to any where else in the country.

Just look around and do some real homework.

One thing I’ve been curious about on a lot of your posts. Where do you get the mortgage information from? That is, how did you find out that “This property was purchased on 12/20/2006 for $870,000. The owner used a $696,000 first mortgage, a $130,500 second mortgage, and a $43,500 downpayment. The owner went into default, and the property was purchased by INDYMAC FEDERAL BANK FSB on 12/10/2008 for $552,758. That sale represents a 37% drop from the peak.” Obviously this is from public records, but where/how did you look up this information?

I do not reinforce the 6% sales model in my daily posts. I merely reflect the reality of life in the business. When that changes, I will change the posts.

As you noted, the numbers are so large, that no additional “shock value” is needed. I put down whatever number the calculator gives me because I want to be accurate.

Most of the rest of the civilized world has a real estate sales system that operates on 2% commissions. There are fewer agents that cover more properties. In your example above, you made is sound like an agent works 40 hours a week on one property. In reality, if they don’t put in 40 hours total over the life of a listing. Given the amount of time they put into sales and marketing on any particular property, they are overpaid—well, at least they were during the bubble.

Gremlin2000,

I believe most of the derogatory comments are aimed at those “bunch of idiots in the business in an appreciating market”. There is natural envy for someone who works out a way to get money for nothing. This includes flippers, realtors, and investors.

And when I say money for nothing, please don’t take me literally. If a flipper adds $25k worth of improvements to a home, they are entitled to boost the price accordingly. However, boosting the sales price by $100k is not in accord with the actual value they added to the property.

So kudos to you for braving the fiery tongues of the IHB. As others have mentioned, there is a genuine need and a desire for a competent, caring realtor at reasonable compensation (despite the minority of nay-sayers). Even IR supports the role of a real estate agent, although his post indicates a need for a change to the model.

In response to your post about lower priced homes, it seems fair to consider the “minimum commision” that was brought up in previous comments regarding RedFin, who have apparently already discovered there is a price below which a 1% commission does not make sense.

Real estate agents today face a potentially huge change (elimination of the 6% commission). This is whether or not IvineRenter’s plan is adopted at any scale. I consider RedFin to be of greater value to me than any real estate agent. Rather than considering it it a necessary evil to find an agent (to handle the actual transaction), I will seriously consider buying directly through RedFin.

I bought two cars through AutoTrader and in addition to negotiations with the owners, I had both vehicles inspected before purchase. RedFin offers this same kind of shopping service (and risk).

I believe people placed way too much trust in realtors during this bubble. As you may have guessed, that will be difficult to earn back. It is better for a buyer to buy knowing there is a risk: check the title, check the building permits, and get the house inspected. I would want to do these whether I used a realtor or not. So if I can find the property myself, and check the details, why would I need a realtor?

So if you are as smart as your good grammar and spelling lead me to believe, you may want to take to heart your own words when you said “most of the smart people have left the real estate business and are actually working a real job that pays a living wage.”

You are making a straw man argument, but I suspect you know that. Nobody has suggested sellers should be giving their properties away or selling them for less than fair market value.

There are legitimate reasons for sellers to accept a few pennies less than maximum potential resale value of their property. Not the least of these is actually closing the sale. Rejecting legitimate offers in hopes of a better one is a good way to sell for much less later. It happens all the time.

Appearing greedy and unwilling to negotiate is a turn off to many prospective buyers. Unless the property is prices well to begin with, the buyer is inept at negotiation, or the buyer is crazy in love with the property, greedy sellers simply do not sell their properties.

Greedy sellers are the ones most likely to sell for less than the largest bid they received on the property, and they will take the longest to sell it.

There are several data services that organize the public records. Most of these charge for the data. The service I use is sitexdata.com.

Do you recall the name of the service you used to get the home listed on the MLS?  Thanks!

Whomever is writing.  Those housing descriptions.  Really likes.  Short. Sentences.

I can’t imagine why anyone would want to own a property like this unless it was as a cash positive rental. I think IR mentioned this in a previous post, there are two types of properties: those that would only appeal to an investor as a rental and those those that normal(IE not crazy) people would want to own to live in. This property falls in the former category. Thus the 12/2006 price is that much more astounding. It seems to me that any sales numbers that do not differentiate between these two categories of properties are of dubious value.

Oh Look, it is a few houses away from the 405 freeway. How “convenient”.

I know a little about these units and before any purchases, one should really take a hard look at the (cast iron) pipes

I keep looking at the redfin listing to see if there’s something I’m missing that would cause a person to pay over $600,000 for this place.  The prior owners I can understand - they just came to the closing table with $40,000 and expected to be able to just finance the thing forever.  But how do you sit down in today’s financing and decide to spend this kind of money on this place?  Even compared to the rest of the places usually profiled it’s subpar.

http://www.redfin.com/CA/Irvine/4082-escudero-92620/home/4776782

Example of house priced way out of market—

Property History for 4082 escudero
Date   Event   Price   Appreciation   Source
Dec 17, 2008   Price Changed   $1,099,000   —  SoCalMLS #P646208
Dec 13, 2008   Price Changed   $1,149,000   —  SoCalMLS #P646208
Dec 13, 2008   Relisted   —  —  SoCalMLS #P646208
Dec 12, 2008   Off Redfin   —  —  SoCalMLS #P646208
Dec 10, 2008   Price Changed   $1,150,000   —  SoCalMLS #P646208
Nov 28, 2008   Relisted   —  —  SoCalMLS #P646208
Nov 08, 2008   Off Redfin   —  —  SoCalMLS #P646208
Oct 21, 2008   Price Changed   $1,290,000   —  SoCalMLS #P646208
Sep 18, 2008   Price Changed   $1,399,000   —  SoCalMLS #P646208
Sep 18, 2008   Price Changed   $1,599,000   —  SoCalMLS #P646208
Sep 17, 2008   Price Changed   $1,399,000   —  SoCalMLS #P646208
Aug 13, 2008   Price Changed   $1,650,000   —  SoCalMLS #P646208
Jul 10, 2008   Listed   $1,900,000   —  SoCalMLS #P646208
May 21, 2008   Sold   $352,900   -33.3%/yr   Public Records
Nov 02, 2005   Sold   $990,000   107.4%/yr   Public Records
Jun 16, 2005   Sold   $750,000   18.4%/yr   Public Records
Mar 03, 2000   Sold   $307,000   34.9%/yr   Public Records
Sep 10, 1999   Sold   $266,000   —  Public Records

*Per MLS rules, we cannot display prices from inactive listings.
Property Tax
  Taxable Value
Land   $875,439
Additions   $91,769
Total   $967,208
Tax (2008)    $10,107
What’s the Market Like for Houses Near 4082 escudero?
House: $/Sq. Ft. in 92620
92620 House median price per square foot
Median House Values
Select a neighborhood, zip code, or city for more stats.
  List $    $/Sq. Ft.
Northwood (Irvine, CA)    $699,900   $357
92620   $759,900   $357
Irvine   $850,000   $375

Home Value Estimates for 4082 escudero
  Low   Estimate   High
Zillow.comZillow   No data is available for this property.
Eppraisal.comEppraisal   $624,008   $734,128   $844,247
Cyberhomes.comCyberhomes   $902,768   $1,003,076   $1,153,537
Zillow.com
No chart or percentile data is available for this property.

Do I hear an Amen? I say Amen? Amem!

The sooner we flush these realtors the better. We have been getting ripped off by this racket for too long. It wil be refreshing to not have to deal with some of these cheesy sales types (anyone see American Beauty?).

“Most of these”?  So there are sites that don’t charge for this data?  If so, what are they?

You will all love this one.  A small house near me went on the market in December for 540K (4 Briarglen).  No takers.  The realtard has now upped the price to 575K!  I’d love to hear an explanation from Bill White at Prudential.

Wow….this property just reminds you how utterly irrational real estate got in California.  This house for $870k? $630k…?

I’m not even sure I’d live in this piece of crap for free.

Good to know—thanks, brealiving.

That’s the problem isn’t it - will the buyer’s agent be able to find a house you want (i.e. price,location,amenties, etc.) that you wouldn’t find yourself. 

My last realtor did that, and also found someone to buy our old house.  She had a network that was able to get us what we wanted without my having to put in the hours searching the listings or playing ‘open house’.

My first realtor experience was more of the ‘call me when you find something.’ I dropped her immediately.

I am a little embarrassed to say that we used forsalebyowner.com.  I would not recommed using them.  It results in overpaying by several hundred dollars.  The agent that they assigned us to to list our home in the MLS, contracts directly with homeowners for far less.  I can look up her contact info on my home computer, although I am a little hesistant to post it here. 

One other thing that we did is on our flyers we put “Realtors welcome.  MLS # XXXX.”  A few realtors still asked us to sign a one-time contract before they would show the home, but most did not require this.

Has anyone had experience using Redfin and asking the listing agent to show you the home on behalf of the seller as Redfin recommends?  We tried to follow this procedure when we rented our current home.  We did all the research ourselves.  We would find homes that we were interested in and then ask the listing agent to show us the home.  We made a rental offer on one of these homes and asked the listing agent to refund us part of the 6% commission or reduce the commission, since we were unrepresented.  She got very offended and called in her broker who threatened us.  They claimed that the listing agent was entitled to 6% because she originated the rental by showing us the home.  They did not agree that she had shown us the home on behalf of the owner.  We ended up letting it go because it was the exact house that we wanted for the right price, and we didn’t want the owner to not want to rent to us as potentially difficult people.  Any suggestions for how we should have handled this?

Does anyone know what happened to BMIT ??

See <http://piggington.com/bmit>.

Yeah, I’ve seen one show recently about New Orleans. Pre-Katrina.