60 Minutes redux

"60 Minutes" spent some time on the fallacy of the percentage based real estate commission Sunday night and the fall-out will probably be substantial, although muted officially in public. Our local peer group, other agents and brokers, have tried to express their displeasure as will others you may be sure, but very carefully, since to discuss this matter can very quickly drift into conspiracy in restraint of trade territory. We of course, are the guys in the white hats on this issue, and the highly noted Redfin takes a back seat to us on both matters of commission and in service, but even at that I'm happy for the attention that commissions are receiving. When housing prices were accelerating madly the high commissions paid to agents didn't make a dent in the profits realized by the seller. Now it's reality check time. Commissions paid are paid from the owners equity, and squandering it is no longer an option. It never was a good idea to pay those hefty fees, but less so now. I could fill this and several future blogs with the in-person details our agents handle for sellers, the visits to government offices to verify code compliance, the meetings with inspectors, roof, building, termite, etc. The gathering of water samples, arranging for contractors to remedy defects, etc. These are things that neither Redfin nor any purely on-line broker can do, but all full service brokers do. We do all those things, and for fees that are less than Redfin. In this market of sliding home values, retention of equity is becoming increasingly important, and in some cases where equity has been reduced through aggressive refinancing, it may be the difference between selling at break-even or at a loss. The real estate lobby is very powerful and will do whatever it takes to protect the interest of real estate agents. Your protection is being informed and making intelligent business decisions in your choice of agent.
The market is still tough and some sellers have elected renting to try to weather the storm instead of taking price reductions on a sale. Lease options will no doubt increase in number as sellers realize the time required to sell a home is increasing, absent a real price adjustment. The inventory of single family homes is very high and as the following foreclosure figures show, are likely to go higher. The figures are provided by a service we subscribe to and are probably very accurate since they are gleaned from county records. For convenience the following abbreviations are used: NOD=Notice of default, the first step in the foreclosure process; REO=Real estate owned, property foreclosed upon and title held by the lender. Auction=imminent sale date, usually occurring about 120 days after first NOD.
Butte County-302NOD's, 57 Auctions, 94REO's. Tehama County-82NOD's, 7 Autions, 24 REO's. Shasta County-278 NOD's, 45 Auctions, 85REO's. Glenn County-24NOD's, 5 Auctions, 6 REO's. The majority of these NOD's seem to have come about from injudicious refinancing, sometimes serial refinancing, and with home values slipping these folks find themselves owing more than the sale value of their home. Unfortunate, but if this has been a speculative investment it is no different from investing in stocks or tulip bulbs. People who bought their homes to live in will come out ok.
As usual,
thanks for visiting.