Anecdotal evidence shows more FSBOs

I haven t been able to confirm these numbers yet, but a press release from a large For Sale By Owner advertising site presented data showing that the number of homes being sold by owner is up signficantly. One of the sources cited was the largest maker of "For Sale By Owner" yard signs - who reported 20% growth in sales of that item in the last year.

If I can find or confirm this information from a source other than some company s marketing department, I ll post more details.

NAR on Defensive

I almost hesitate to point out this release, for fear of giving it more attention/credibility than it deserves. But this press release yesterday from the National Association of Realtors (NAR) is just so comically desparate that I have to. Even if only for its entertainment value.

It s entitled, brazenly, "NAR: Buyers Need Real Estate Professionals in the Internet Marketplace" Of COURSE the NAR would say that!

The picture comes to mind of a grade school bully chasing his former "punching bag" classmate who, during summer break, went through a growth spurt and now towers above the bully - emphatically trying to convince him he still needs to give up his milk money "for his own protection"

We as live sex chat consumers are the ones who have undergone a growth spurt called "the internet" The internet has liberated information only agents had access to for decades - what houses are for sale.

I would offer advice to the NAR on how to better communicate their message and not seem so desparate, but how would you advise the horse-and-buggy makers to convince people not to use cars, back in the early 1900 s? It s just technological progress, and there s nothing they can do about it. Time to adapt and move on.

Let the free market be free

Home Owners, if you are contemplating selling your home, you will probably think through the 2 primary options you have: 1. Sell by owner (FSBO), or 2. sell with an agent.

You may have noticed there is an all-out war going on in the real estate industry, between agents, discounters, and FSBO sellers. The industry is in flux, though in a definite transition for the better (for us as consumers, anyway). The battleground is the media - that s why you see stories like the 20/20 piece last Friday, and almost weekly discussions on the Today Show with the authors of Freakonomics, and why you see sometimes conflicting stories in newspapers from week to week. Each side is fighting for the high ground, which isn t coming easy for either side.

As consumers, we have the truth on our side: that we can sell our own homes ourselves, just as effectively as a real estate agent. Agents have lots of money and power relationships on their side. Over time, however, the truth always prevails - because we develop creative ways to getting the truth out - such as this jasminlive blog.

So if you re noticing the war and wondering who is right and which way you should go, think about this: the only reason just about everyone doesn t sell By Owner is they have been only been presented the "Agent" side for decades. They have been scared to try selling FSBO because of the Realtor-funded propoganda. The truth, however, is that FSBO is the fastest growing method of selling real estate, because Americans are trying it with the new tools available thanks to the internet, they re liking it, and they re talking about it. If you know someone who has sold their home By Owner, you will probably hear from them how simple it was and be encouraged enough to give it a shot yourself.

Many agents will argue that the free market will prevail, and if FSBO was so good then fewer people would be using agents. Not so. Remember that war I mentioned, and how much money and political/media influence the agents have. We are no longer in a free market. Agents have worked very hard to create laws that guarantee their necessity in the world.

John Stossel, co-host of ABC s 20/20, thought so much of this topic that in addition to the show segment last week, he took the time to write a full-blown op-ed on the subject - "Let the free market be free", because the TV time didn t give him enough freedom to say all of what he wanted to say. His article is extremely well written, and does an EXCELLENT job of making the case for freedom of choice in real estate, and that freedom in real estate is something we don t have right now. It would be nice to "reprint" John s entire article here, but a link is sufficient - I definitely recommend you go read it.

Wonder how fierce this war is, and how far some agents are willing to go to protect their stake and keep us from having a choice? Read this Wall St. Journal article from today, entitled "Discount real-estate brokers spark a war over commissions".

The real estate industry is no longer a free market. This, dear reader, is why the Department of Justice has sued the National Association of Realtors.

So as you are trying to decide whether or not to sell By Owner, consider this: there can t be so many articles from so many sources (which are being chronicled by this blog) about FSBO ease/success without there being a whole lot of merit to what those Livejasmin stories (and this blog) are promoting. And question why agents would tell you how hard it is to buy/sell real estate. Think about it: they re human, just like you. If they can do it, so can you.

Go ahead give it a shot - sell By Owner, help your family s economy by getting thousands of dollars more from the sale of your home! You ll like it - and then you can be the one on the cutting edge, and have all your friends thank you for the suggestion when they too sell By Owner successfully.

Congressional Report, the Economy, and What It Means to FSBO

On this blog, we ve refrained from discussing the economy or "housing bubble" - partially because many other sources are covering that topic adequately, but more significantly ..because it s rather boring to read. For once, however, I ask you to indulge me as I jump into economy talk. I m not going to write (much) in the typical, ethereal sense though; my purpose is to bring home some of the news of the past few days, explaining how it applies specifically to you and what you can do with it.

Yesterday the General Accounting Office (GAO; a research branch of Congress) publicly released a report entitled "Real Estate Brokerage: Factors The May Affect Price Competition"

The report is very interesting, not due to its content (it doesn t reveal much that hasn t been revealed before), but rather because of the fact that it was even requested and created. Based on the specific questions asked and answered in the report, we can tell that many members of Congress view the current cost to sell real estate paid by many as enough of an abnormality and risk to look into ways to address it. Specifically, what they see is that, as the report notes, the total dollars in real estate commissions are estimated to have risen nearly 50% in just 4 years - from $43 billion in 2000 to $61 billion in 2004. The cost of a house has risen approximately 35% in the same period, while inflation was only 10%. That means agents as a whole have received a 25% pay raise for doing no more than they did before. (Let it be known that I have no problem with a profit growth like that in and of itself, as a matter of principal)

Real estate is directly tied to the economy, being one of the most significant factors. This is why Alan Greenspan is pleased that there s an "equity cushion with which to absorb a potential decline in house prices" In real terms: If there IS a housing bubble, and it DOES burst, and the value of your home is no longer rising as you anticipated, MANY can sell without it causing much of a problem - such as having to come up with an extra few thousand dollars of cash to pay off the mortgage.

With an "equity cushion" of 10-15% profit on a house, and the common cost to sell of 5% (which pulls directly from that equity cushion), our economy would appear to be in a far more secure position if the average cost of selling real estate were to dramatically drop .say from 5% to 0.5%. This is accomplished by promoting price competition in the real estate industry. (Rob Steiner addressed some of this in his earlier posts - though we can t know for sure that DOJ/FTC and Greenspan are coordinating)

As discussed in the GAO report, realty agents have been getting this windfall profit for years. Prudent minds would conclude that now that technology, information and laws have simplified the means, that windfall should be shifted to the people who actually invested - homeowners. The best way you can help your "personal economy," as well as the "national economy," is to sell your home By Owner.

And with stories like "Crazy Loans: Is this how the boom ends?" from CNN Money, and "Overdue Credit Card Bills Hit Record High" from the AP, don t we know that both need help!

Selling By Owner is easy these days, especially if you work with a good FSBO service & advertising company. You can find all kinds of information about the process here on this blog. And feel free to ask questions!

Greenspan/American Bankers Association

I want to address Greenspan s recent discussion with the American Bankers Association. I touched on it a little bit in my previous Middlemen post.

Different outlets have provided different perspectives on his comments. The AP s Jeannine Aversa summarized his comments with this article . As you can see from the headline, Greenspan s reassurance that most homeowners have accrued enough equity to survive a housing recession was highlighted in her summary.

It worries me a little bit because this rosy colored headline is what most Americans read. Every newspaper I read displayed this headline.

Of course Greenspan is going to shed some optimism on the situation. He never makes discouraging comments without also bringing some optimism to the conversation. I interpret this comment as little more than fluff certainly unworthy of the headline.

Of course, there is merit behind his optimism. The portion of consumers who do not have a sufficient equity base are generally in markets where the recession will be minimal. In markets where prices may recede, homeowners do have more of a cushion.

This address to the ABA was made in the wake of the release of his comprehensive report on housing market as it relates to consumer debt.

Remember, the plan to create an economic surge by lowering rates to allow for increased consumer spending through home equity extraction is Greenspan s brainchild. He believes in the maneuver. There is a faction of economist who do not support this method. His optimistic statements could be in defense of his strategy.

Of course, I must make a reference to the DOJ/NAR investigation

There is probably no one who would rather see the 6% standard commission decreased more than Greenspan. It would buy his strategy more time and/or help homeowners dig themselves out of the hole that Greenspan has endorsed digging.

Middlemen

A. Murray wrote an article in the WSJ this week that attributes some of the frothy market conditions to realtor commissions. A 5-6% commission requires at least the equivalent to be added on to each sale of the property. With people flipping and moving with such frequency, it s hard to calculate the exact effect these commissions have had on the overall appreciation rates through out the nation. We do know this: Americans are over leveraging their home equity to support their spending. I believe that the Fed realizes that many homeowners will not be able to afford to move if prices drop even marginally . unless the price to move is reduced. That s where the DOJ investigation comes in to play. Alan also makes some great points about the value that realtors have lost over the years. I m sure that they were worth their 6% before the advent of free-flowing data. He also echos our oft used comparisons of realtors to Wall St., travel agencies, and insurance companies. It s always nice to see what we ve been screaming printed where the mainstream can see it.

Follow the Puck

The NAR lawsuit "fits into the broader effort that we and the FTC are undertaking," -J. Bruce McDonald, deputy assistant attorney general for antitrust.

I believe that the U.S. D.O.J. intends to soften the blow to consumers that the pending housing recession will inflict. If more people keep more equity in their pockets by not paying 6% to a realtor, they will be able to spend more money on their next home, more money at the gas pump, more money at Wal-Mart, etc. If the bubble starts to pop this broader effort will become known soon thereafter.

As for the currently documented investigation .

When the MLS is finally put completely into the hands of the consumer, listing agents will lose their value completely. When every listing, exclusive or non, is made available to the public, sellers will have no reason not to use a flat fee MLS service.

It will then be all about a REA s ability to generate buyers. They will be the ones who provide value, thus earning the money.

The question must be asked, "How do you create value for a buyer?" Why would a buyer choose to use you or your company to buy their home?

Convenience? Larger selection?

Being able to truly provide EVERY listing, including FSBO s would provide value.

REMAX realized this 3-4 weeks ago when they announced that they will putting the entire MLS on their site. Good effort but I don t see them providing FSBO services any time soon.

The only way for a company to provide every listing to the public is to engulf itself in a given market. Don t try to conquer the world with your big, elaborate web site. Conquer a small market first. Dominate that market. Make the realtors in that market realize that their cheese is now gone. When you ve done it one market, do it in another.

OR, better yet, we unite. Working simultaneously on FOCUSED geographic locations to bring the consumers every listing. Perhaps a medium such as thehomenet.com could suffice.

I have the blueprint. I am more than happy to share it with those who are like minded. You are more than welcome to use our model which is more complex than it appears on the consumer end of our website. The real power of our model lies in what you don t see our integrated Customer Relationship Manager (CRM) and our additional revenue streams.

The shift will happen.

It may come down to who can best integrate technology and touch a founding cornerstone of my company. Proper integration of this cornerstone into both the back end of the business (CRM) and front end (user facing web site) could put us where we need to be. Certainly a great deal of touch is accomplished, too, through the afore mentioned focus on a contained nexus of operation.

Keep in mind, too much Touch and not enough Tech will slow you down. Vice versa, will keep you from ever moving.

WHEN YOU AIN T GOT NOTHING, YOU AIN T GOT NOTHING TO LOSE. - Jimi Hendrix

The NAR has everything to lose. They will fight tooth and nail to hang on to their archaic methods. While they spend time, money and energy fighting, others can prepare.

While they are chasing the puck, we can skate to where the puck is going.