Posted by nithi.vivatrat on January 29, 2009
I have been getting a lot of questions about the housing market, specifically regarding my thoughts on where home prices are going and whether this is a good time to sell or buy.
Before proceeding, and without singling out any one person or entity, let me offer this suggestion: use a healthy dose of skepticism when considering the advice/judgments/forecasts from “experts” who have a business/financial stake in how you act upon their predictions. The economic lessons of late (failing banks, irresponsible lending practices, corrupt investment funds, biased and inaccurate ratings by ratings agencies, and others) should give us pause. WAIT! There is more to read… read on »
Posted by nithi.vivatrat on January 26, 2009
The New York Times has this very interesting analysis of the evolving (and increasing) manner in which the federal government is involved in our financial sector. A must-read (in my humble opinion) for anyone interested in the benefits and risks for all of us as taxpayers and stakeholders.
Posted by nithi.vivatrat on January 24, 2009
In prior posts, I have argued how the commission model is an arbitrary method of calculating the fees to buy or sell your home with no direct connection to the value of services you were provided. Another major disadvantage of the commission model is that it impedes your ability to pick and choose, and only pay for, the specific services you want.
Consumers today are becoming more and more informed regarding real estate information, and many do their own homework when it comes to selling or buying a home. Yet today, those consumers will likely still end up having to use a real estate broker — and pay a considerable commission — to complete any transaction, even if they already did a substantial portion of the legwork. WAIT! There is more to read… read on »
Posted by nithi.vivatrat on January 21, 2009
Complicating the issue with real estate commissions is a widespread belief that only the seller pays the commission, not the buyer. Mark S. Nadel, a DC lawyer who writes on public policy issues, debunks this myth:
“Sellers who agree to pay a 6% commission to their real estate broker and to accept a bid of $500,000 for their home are, therefore, actually willing to settle for net proceeds of $470,000. Since the sellers’ broker has agreed to accept a net $15,000 commission for his or her own services, the sellers would accept a $485,000 bid from a buyer if there was no buyer’s agent to compensate. If, however, the buyer has an agent, and the sellers’ agent has promised half the $30,000 commission to that agent, then, to enable the sellers to clear $470,000, the seller must demand $15,000 more from the buyer. Thus, the commission to the buyer’s agent ultimately comes out of the buyer’s pocket.”
Let’s walk through this example step-by-step again for clarity. WAIT! There is more to read… read on »
Posted by nithi.vivatrat on January 19, 2009
You may be surprised by the how much real estate commissions are paid by consumers in a year — I know I was. In 2007, US consumers spent nearly $80 billion (yes, that’s a “B”) on real estate brokerage fees. The turmoil in the market is likely to put a dent in that — REALTrends believes that new and existing home sales in 2008 will be close to 5 million units, down from 5.65 million in 2007 and a sharp decline from mid-2008 forecasts — but even with, say, a 20% reduction, that’s still $64 billion in fees.
It’s common to see a commission rate on the order of 5-7% of the final sale price of a property split in some fashion between the seller’s and buyer’s brokers. A fixed commission rate is so commonplace that many consumers believe it is non-negotiable, though state law dictates that these fees are absolutely subject to negotiation. The relative lack of price competition (compared to other industries) has been well documented by the US GAO as well as the Justice Department Antitrust Division. But my concern goes beyond the level of competition in the marketplace — my issue is with the entire commission model itself.
WAIT! There is more to read… read on »
