Apparently, the Canadian version of the National Association of Realtors is not as powerful as our domestic lobby. The Canadian Federal Competition Bureau blasts Canadian Real Estate Association's Multiple Listing Service.
Flippers are buying properties for significant discounts from resale comps and selling them quickly for a profit. Today's featured property was purchased less than a month ago, and the flipper stands to make over $100,000.
Irvine Home Address … 12 FOXHILL Irvine, CA 92604
Resale Home Price …… $769,000
{book1}
Take me to the action, take me to the track
Take me to a party if they're bettin' in the back
I've been working all my life, can't afford to wait
Let me call my wife so I can tell her I'll be late
I want the easy, easy money
Easy money, I could get lucky
Oh, things could go right
I want the easy, easy money
Easy money, maybe this one time
Maybe tonight
Billy Joel — Easy Money
Flipping properties at auction isn't terribly complicated; determine resale comps, buy for much less at auction, and sell in the resale market. As lenders crank up the foreclosure factory, Trustee Sales become more common, and thereby, so do Trustee Sale flips. The good news is that these properties are making it to the market, the bad news is that there still are not enough of them to change pricing — at least not yet. Lenders and homeowners hope it stays that way.
Canadian bureaucrats take on the Canadian Real Estate Association
As we cope with our market issues, Canadian bureaucrats are squeezing excess from realtor commissions. If you remember the series I did no selling a home, the second post was on cash listing services.
12-2-2009 — Sell a Home: For Sale By Owner
12-1-2009 — Sell a Home: Cash Listing Services
11-30-2009 — Sell a Home: Conventional Brokerage Listing
The Canadian Real Estate association banned them by changing their rules of access to the MLS. It was a brazen anti-competitive move, and Government bureaucrats are fighting back.
MLS challenge could change the way houses are sold
The federal Competition Bureau has launched an aggressive attack on the Canadian Real Estate Association, challenging its rules governing the Multiple Listing Service and calling for a radical change in how homes are sold in Canada.
“Our concern is that [CREA] are improperly and unlawfully leveraging [their control over MLS] in order to impose these restrictions and to deny competitive forces and to deny good old-fashioned market competition,” said Competition Commissioner Melanie Aitken. “This case is focused pure and simple: Let consumers have the choice, let agents have the opportunity to satisfy and serve those choices.”
I can't believe the CREA had the nerve to try this, and I hope the Canadian Government does something about it.
The MLS has been around for more than 50 years and only registered agents are allowed to list homes on the service. The MLS trademark is owned by CREA, which has nearly 100,000 members, and each real-estate board operates the service in their region. Roughly 90 per cent of all residential real-estate transactions in Canada involve MLS data.
The bureau has asked the federal Competition Tribunal to strike down a series of rules CREA adopted in 2007 that tightened the MLS listing requirements.
Ms. Aitken said the rules stifled competition because they restricted the type of services real-estate agents offered, which resulted in higher fees for consumers. Agents who wanted to offer a wider range of services, such as flat fees instead of traditional commissions charged by full-service agents, have been excluded from the MLS by CREA, she added. “What that means is consumers don't have any choice, it's either all [services] or nothing,” she said.
The charges levied by the Canadian Government are clear, and despite the legal maneuvering through shifting requirements, the transparent and anti-competitive nature of the changes are obvious and intentional.
…“This is big news for us,” said Steve Neil, a Vancouver agent who runs HomeBuyAndSell.com and has pushed for changes. “There is no question it will change things in the next several years.”
Discount brokers, who mostly operate online, have long argued that CREA's rule changes were designed to put them out of business and protect full-service agents who rely on commissions, which average about 5 per cent in total on a residential sale.
Is the CREA clinging to a number already 1% below ours?
Before the 2007 changes, some discount brokers offered to list homes on MLS for a fee, typically less than $700. The homeowner then handled the sale.
The CREA changes required all agents to inspect homes before listing them on the MLS and work with other agents throughout the sale. As a result, discount brokers say they could no longer offer their low-fee services and had to charge more to carry out the various CREA requirements.
Mr. Neil, for example, charges customers $299 to list their home on MLS, plus $79 for each week the house is listed. When the house is sold, he charges a fee of 0.25 per cent of the sale price. Mr. Neil said if the bureau wins its case, he would likely lower his fees and change his services.
“We would offer probably a sort of à la carte -type menu of services; if [customers] want them they can pay for them,” he said. He also believes several American online services would expand into Canada.
The trend is toward online listing, and ultimately realtors will lose control of the MLS. As this occurs, you will see significant pressures on commissions on the listing side of the transaction. It may take longer here in the US, but realtors will endure some of the industry purging experienced by travel agents… you do remember travel agents, don't you?
Irvine Home Address … 12 FOXHILL Irvine, CA 92604 
Resale Home Price … $769,000
Income Requirement ……. $160,137
Downpayment Needed … $153,800
20% Down Conventional
Home Purchase Price … $615,000
Home Purchase Date …. 1/15/2010
Net Gain (Loss) ………. $107,860
Percent Change ………. 25.0%
Annual Appreciation … 300.5%
Mortgage Interest Rate ………. 5.05%
Monthly Mortgage Payment … $3,321
Monthly Cash Outlays …..….… $4,090
Monthly Cost of Ownership … $2,940
Property Details for 12 FOXHILL Irvine, CA 92604
Beds 4
Baths 2 full 1 part baths
Home Size 2,522 sq ft
($305 / sq ft)
Lot Size 5,400 sq ft
Year Built 1975
Days on Market 11
Listing Updated 2/3/2010
MLS Number P720033
Property Type Single Family, Residential
Community El Camino Real
Tract Dc
Beautiful Newly Remodeled Home in one of the most sought after areas of Irvine. Open & Spacious Floor Plan. Very quiet neighborhood with a serene view of the greenbelt. Living Room with Cathedral Ceiling & Fireplace. Brand New Gourmet Kitchen with Granite Counter Tops and Stainless Steel appliances including a refrigerator, dishwasher & range. Expansive Formal Dining Room. Master Suite with it's own private Bathroom. All Bathrooms have been fully remodeled. Spacious Ladscaped backyard that is great for entertaining. Lowest Association fee and no Mello Roos. Assocaition Tennis Courts, Pools, Racketball Courts and Spa. Excellent Schools and Superb Location. Move-In Turnkey Condition. This One won't Last!
I hope you have enjoyed this week, and thank you for reading the Irvine Housing Blog: astutely observing the Irvine home market and combating California Kool-Aid since 2006.
Have a great weekend,
Irvine Renter
Larry Kudlow gets a beatdown:
Larry Kudlow, Cokehead
Yesterday, we introduced you to the farcical “Draft Larry Kudlow” campaign, a pretend movement to convince TV economist Larry Kudlow to run for Senate against Chuck Schumer. Today, for fun, we’ll introduce you to Larry Kudlow the addict.
A 1995 New York Magazine story goes deep into Kudlow’s history of substance abuse. He was addicted to cocaine for much of the 1980s and 90s, when he was a successful banker and economist and pundit.
Kudlow (or “Kuddles,” as his friends nicknamed him in the ’70s) clearly has an addictive personality, and he’s incredibly susceptible to fads. While campaigning for Democrat Joseph Duffey (with a young Bill Clinton!) Kudlow (along with everyone else) smoked “reefer” constantly. In late 1980, the longtime registered Democrat and “monetarist” became a dedicated supply-sider “overnight.” This landed him a job in the Reagan administration. (In 1995, as a rehabbing Kuddles contemplated becoming a Roman Catholic, a friend described the discredited economic theory as just another “religion” in Kudlow’s life.)
We’ve no problem with a bit of recreational drug use—drugs are fun, after all!—but Kudlow spent “tens of thousands of dollars a month” on lengthy binges. He lied to the National Review about having beaten his drug habit. He missed meetings. He went to rehab four times in three years, finally ending up at celeb rehab clinic Hazelden in Minnesota.
Obviously if he’s been clean since then, we’re thrilled for him, but since the mid-’90s everyone’s clammed up about his history. He didn’t just experiment, he nearly killed himself with drugs. The New York story features the odd scene of Kudlow in the depths of his addiction advising a group of congressional Republicans on the Mexican bailout, with no one voicing any concerns about his reliability or credibility.
(And, quite frankly, being a proponent of supply-side economics who was wrong about the housing bubble and said in 2008 that there was no chance we’d enter a recession and who called Bush an economic genius should disqualify you for public office way before a coke habit should.)
The entire Draft Kuddles campaign is a hilarious band of embarrassing misfits. In addition to their candidate—the Lindsey Lohan of economics—and campaign head Michael Caputo, their finance director is “financier” John Lakian. We mentioned Lakian’s history as a repeatedly failed candidate for public office. Steve Kornacki explains just why he kept failing: the guy repeatedly, pathologically embellished his resume.
Lakian’s gubernatorial campaign ran aground when the Globe disclosed that he had falsely claimed to have attended graduate school at Harvard; had said in campaign literature that his father died of war-related injuries when in fact he was killed in an automobile accident; and that he had embellished his own military record, even though he had been cited for valorous action as an Army lieutenant in Vietnam.
That was in 1982. In 1994 he claimed to have taken part in domestic intelligence operations for the Army during Vietnam. He was then forced to retract that made-up claim. (Lakian ran on a flat-tax platform—just like Steve Forbes, whose presidential campaign briefly excited a manic Larry Kudlow a year later, shortly before he went back into treatment.)
continued…
I think Larry Kudlow is great and watch his show everyday. He’s got fantastic guests and discussions if you like economics that is.
Anyway, thanks IR for the crash-a-party invite last night.
I drank their booze, ate their food and saw their miss-priced, high HOA, small apartments.
A real pretentious crowd too.
I heard them commenting that their turn out is TWICE what they expected…I’m sure this site had something to do with it.
great stuff.
I have a question for those who think that flipping is easy money? Are you flipping? And if not, why not?
It’s definitely not as easy as it used to be.
I don’t necessarily see it as easy money, but I do see it as contributing to a dysfunctional system.
People need a place to live; we don’t need people speculating on houses any more than we need people speculating on food by emptying the shelves at the grocery store and selling at 2x out in the parking lot.
Nothing of value is added – it just forces people to spend more on food and therefore spend less on other things.
I don’t flip because I save my money the hard way and will not risk the haircut.
If I had made a few hundred K selling some properties at peak that I bought in 1990’s then I might be up for the game – gambling using the casino’s money.
So I bet that your average flipper these days is between 40 and 60 years old, bought a property or two back when they were affordable, made a bunch of cash during the boom, and now continuing the game during the bust.
It’s not like you are going to see some 25 year old kid suddenly come up with 500K to go and buy a trustee flip.
It’s one more way the boomer generation gets to eat their young.
“I don’t flip because I save my money the hard way and will not risk the haircut.”
Exactly! One of the fundamental freedoms this country was founded on was the freedom to own private property, and it is none of anybody’s gosh darn business if anybody “needs” your flip to live in, or how you speculate with YOUR money or YOUR property. The right to own property is a thousand times more important to a free society than someone determining what someone else needs. When people speculate, they risk their money. They are rewarded or punished for their risk, guts, and smarts. And it does not force anybody to do anything. People are not forced to own homes. There is a huge supply of homes in this country, both to buy and to rent. Nobody has a right to own a home. They do however have a right to do what they want with their money, including speculation. Homeowners are no more righteous or morally correct for their decision to buy a home than a flipper. Speculation does not add to cost. No one cries for speculators who lose money, in fact, they celebrate. It is hypocrisy and jealousy disguised as morality.
I think flipping is easier now than it was during the bubble; however, the pool of potential flippers has been significantly reduced. You just need a huge pile of cash to purchase the property and then turn around a sell a month later for 100K more. The amateur flipper during the bubble are all gone.
Flipping in the bubble years required little if any cash. Sign up for a no down IO loan and turn over the property in a short period of time. As long as prices were still going up, there wasn’t much to lose. Do the usual flipper recipe: exterior and interior paint, new carpet, minor bath and kitchen remodels, new sod and minor landscaping…and then list it for +100K more.
wheresthebeef,
You missed the raising of the dead, come on interest loans for 1 to 5 years) and 60% Debt service to income loans from yesterdays blog.
Even our married sandwich artists at $25,000 each per year can now afford this house with innovative banking. Come-on interest ARM for 4 years at 2% plus 1% tax = 3% debt & tax servicing ($23,000 debt service/taxes to $50,000 income). Better lend through a small mortgage corp and sell the corp to a larger corp in four years.
The flipper has risk. What if it doesn’t sell or sales at a much lower price? Cost of eviction, prep. (cleaning and fixing), carrying cost and sales.
On the dark side, could be another price fixing scheme such as on oil speculation (currently blamed on a single trader instead of a conspiracy). The consumers will never be reimbursed for the additional gas expenses of the price manipulation (only the retailers and lawyers will be paid). Will this be the case for house buyers?
Missed the party last night. Buy before you’re price out of the market. The housing market has turned and economy has recovered. Remember the new job of the press was to make sure BHO got his programs passed and implimenated. So much for mandate for objective journalism and a free press. Better buy more stocks before your priced out of the market too.
Is that a cold north wind coming in or is that your money being sucked out to the south?
“It’s one more way the boomer generation gets to eat their young.” “To serve your fellow man and children,” it’s a cookbook!
“The flipper has risk.”
Hell, everything involved in money has risk. Flipping just amplifies it.
“What if it doesn’t sell or sales at a much lower price?”
Stocks (especially dot com stocks), anyone? I got Greek bonds that I can sell you as well 🙂
Risk is all relative. Currently, flippers have more potential upside than downside, especially in Irvine.
This is an interesting video worth watching
http://www.thinkbigworksmall.com/mypage/archive/1/29027
FDIC claimed that the video is a slander (this coming from CR):
http://www.calculatedriskblog.com/2010/02/fdic-responds-to-blatantly-false-video.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+CalculatedRisk+(Calculated+Risk)
Well, I’m not sure if people will believe FDIC at this point. Believe at your own risk.
Thanks Chris, I knew that an IHB reader would likely have more info on this. I’m glad that the FDIC responded and I hope that the video is wrong.
It will be interesting to see where and how fast today’s profiled home gets taken down at.
92 Townsend is also worth taking a look at
Sold to 3rd. party at auction for $451K on 12/03/09
Per Redfin-
Initially listed at $565,000 on Jan 12, 2010
Jan 19, 2010 Price Changed $549,000
Feb 10, 2010 Price Changed $533,000
If I as a buyer want to do all the work myself (finding and visiting the properties, negotiation, etc.), what is the recommended avenue? Certainly I can do the finding part already with Redfin and other tools, but visiting the properties doesn’t lend itself well to people like me. Any suggestions on overcoming this problem (besides waiting for open houses)?
Once it comes down to the transaction, what’s the cleanest way of making it clear 3% goes to me (after all other price negotiations are complete)?
Tia.
Easy, work with the listing agent for that specific property.
Agreed, but when I’ve tried that they get annoyed I don’t have a buying side Realtor. Or, they get wide eyed and immediately start thinking that means they get both sides of the commission. I suppose the latter scenario can be rectified when the time comes. Is it fair to assume the fact they are showing me the property doesn’t somehow lock me into giving them the buying side commission? I’m not signing anything.
The contract is between the seller and the agent and the buyer has no business interfering with the commission.
The buyer can, when making their offer, take into account that any listing agent worth his salt will renegotiate his contract with the seller if he/she is the only agent involved.
Bottom line, if you make an offer through the listing agent, no matter what they say, they represent the seller and you are on your own. If you did not know this, you probably do not have any business representing yourself in a real estate transaction. There is a lot more to know, such as there is no such thing as a fair price.
At the risk of getting hammered, I do not think it’s that simple. I’m not sure if there is a “best way,” however; I do not think that I would recommend working with the listing agent in most cases; their duty is to their client, per their listing agreement. However, if the listing agent is ethical, it’s likely that the seller would successfully sell for a fair price in line with market value and the buyer would successfully buy for a fair price in line with market value by working with the listing agent.
Nevertheless, I do not think that in most cases one would be successful at saving the 2-3% that is the objective. If the intent is to save the 2%-3% commission using the listing agent whose duty is to the client they have the listing with probably will not help to achieve that end. Of course, once they agree to represent both parties they have a duty to both but as a result they will get both sides of the commission.
That being said, if you are a good negotiator, know the market, have the best available comps, I believe that the best way to make sure you save the commission would be to write in the Residential Purchase Agreement that you have no representation and as a result you would like for the commission to credited towards closing costs and or reduced from the purchase price. Since in this scenario we are assuming that the buyer does not have a license the commission cannot technically be the commission and depending on the listing agent’s contract, they may get the entire listing commission regardless, thus not helping the buyer at all. Moreover, it’s really only truly a benefit if the buyer is getting the property at 2-3% or more below market value. As in a buyer’s market most good agent’s can negotiate a larger discount than this the buyer would actually want to make sure they are getting more than a 2-3% discount. While this strategy probably works best in a sideways market, to make sure that the 2-3% discount is sufficient value add for the extra work of not having an agent. While in a seller’s market, it will also work to a point, where as, just getting the property may be sufficient for some buyers, regardless of a discount or not.
At the risk of getting hammered, I have a lot of experience in real estate, however, when I buy an out of state property, I still use an agent
Did anyone go to the Astoria Central Park West event last night? Not that I have any interest in buying there now, but simply curious as to how that beautiful disaster went.