At Home With Diane

Own Your Own Internet Real Estate Company

America-at-Home Real Estate — Thu, 21 May 2009 14:54:40 -0700

America-at-Home Real Estate out of Washington and Oregon states is now offering Brokers an opportunity to have their own internet real estate company. We specialize in a Cash Flow business concept offering our services via the internet. Our A' la Carte Menu of Services allows sellers to choose which service suits them best and they only pay for that service. Buyers can pay a flat fee and do most of the work themselves and receive a 100% rebate at closing.

This business runs on volume not just one or two transactions monthly. Brokers can work from home or an office. They can build a big business with many agents or just be a one man/woman band. It's up to you.

Very significant proven income projections can be made. If you qualify we'll show you our statements.

Exclusive territories are available based on MLS regions not on counties. Brokers will have the entire MLS in their region as their own exclusive territory. Lead generation and referrals are exclusive.

To qualify for a License to own and operate your own America-at-Home Brokerage, Brokers must be licensed to operate a real estate compnay and have been in the business at least 5 years with over 25 personal transactions completed. They must have a good standing with the local MLS and Real Estate Commissioners office. Have a reasonable marketing budget to get started and the ability financially to be comfortable for at least the first 90 days.

Small investment required. Please only seriously interested principals should apply.

Send your resume with a cover letter letting us know why you should be the Broker of Record for your MLS territory to dianewebster@america-at-home.com.

Thanks and we sincerely look forward to speaking with you soon.

Diane Webster

Broker/Owner

http://www.america-at-home.com

Bernanke: Recession may end in '09

America-at-Home Real Estate — Tue, 03 Mar 2009 14:35:40 -0800

You must have read already, but it's still worth sharing. Please read on.

Stocks up on Bernanke remarks; focus now on Obama

By MADLEN READ and TIM PARADIS, AP Business Writers

Tue Feb 24, 6:37 pm ET

NEW YORK – Federal Reserve Chairman Ben Bernanke gave Wall Street a double dose of reassurance. Now it's President Barack Obama's turn.

Bernanke told Congress on Tuesday the recession might end this year, and that regulators aren't planning to nationalize banks. The news alleviated some of investors' worries about the economy and the banking industry, and lifted the Dow Jones industrial average and Standard & Poor's 500 index off their lowest levels since 1997.

And investors are hopeful that Tuesday night, Obama will provide specifics about his plans to stabilize the financial system and further stimulate the economy. Anticipation of his remarks helped drive beaten-down financial shares up sharply.

"There's growing optimism that Obama can deliver the details that the market is so desperately looking for in his speech," said Ryan Larson, senior equity trader at Voyageur Asset Management. If it gets those details, Larson added, the market's upward momentum could continue.

Stocks remain on shaky ground, however. Bernanke may have helped stem the market's slide Tuesday, but the market also found stability from temporary technical factors: bargain-hunting, the unwinding of short bets, and selling exhaustion after six straight down days for the S&P 500.

And though it appears the government is trying to quash the notion of bank nationalization, the Obama administration still has not demonstrated how exactly it will repair the banking system. The nation's financial system remains "zombie-like," said Nick Kalivas, vice president of financial research at the brokerage MF Global.

"We had an up day today, but nothing has really changed on that front," Kalivas said. "If nothing is articulated on that tonight, we're moving to the downside again."

The continued focus on the stability of the financial system comes a day after the government moved closer to dramatically expanding its ownership stakes in the nation's banks, including Citigroup Inc. The Treasury Department, the Fed and other banking regulators said Monday they could convert the government's stock in the banks from preferred shares to common shares.

The Dow rose 236.16, or 3.3 percent, to 7,350.94. On Monday, the major indexes tumbled more than 3 percent, including the Dow, which fell 251 points and hit its lowest close since May 7, 1997.

Broader stock indicators also rebounded Tuesday. The S&P 500 index rose 29.81, or 4 percent, to 773.14. On Monday, it logged its lowest finish since April 11, 1997.

The Nasdaq composite index rose 54.11, or 3.9 percent, Tuesday to 1,441.83, while the Russell 2000 index of smaller companies rose 17.90, or 4.5 percent, to 412.48.

Advancing issues outnumbered decliners by about 6 to 1 on the New York Stock Exchange, where consolidated volume came to 7.09 billion shares, compared with Monday's 6.35 billion.

In his semiannual report to the Senate Banking Committee, Bernanke predicted the economy is likely to keep contracting in the first six months of 2009, but that "there is a reasonable prospect" the recession will end this year.

He warned that a recovery will require getting credit and financial markets to operate normally, and that the government must continue working with ailing banks to bring them back to profitability. To the market's relief, though, the Fed chief said formally nationalizing the banks "just isn't necessary."

Traders were encouraged that the S&P 500 index has so far managed to stayed above its Nov. 21 trading low of 741.02. Investors searching for a recovery look for signs that market can test its lows from the worst of the credit crisis and then bounce higher.

Still, many analysts expect the market to remain volatile for the foreseeable future.

Rich Hughes, co-president of Portfolio Management Consultants in Los Angeles, said the market's rallies are likely to be based on hope or on rebounds from selloffs. He contends Wall Street still hasn't seen the wrenching decline that is often needed to scare investors from the market and set the ground for a lasting recovery.

"The underlying fundamentals just aren't there to support anything that's sustainable right now," Hughes said. "We haven't seen the capitulation that you'd want to see before you'd get thoroughly enthused."

The market's slide has been tough on long-term investors. A person who in 1997 put $50,000 in a fund that tracks the S&P 500 would now only have about $46,256.

Bond prices fell Tuesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.80 percent from 2.76 percent late Monday. The yield on the three-month T-bill, considered one of the safest investments, was unchanged at 0.29 percent.

The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude rose $1.52 to $39.96 per barrel on the New York Mercantile Exchange.

Home Depot posted a loss but the nation's largest home improvement retailer's results topped expectations when excluding costs for shutting four home-improvement brands. The stock rose $1.96, or 10.5 percent, to $20.67.

Target Corp. and Macy's Inc. said fiscal fourth-quarter earnings fell sharply as shoppers cut back on purchases. Office Depot Inc. posted a loss for the quarter. Target fell 60 cents to $27.83, while Macy's rose 89 cents, or 12 percent, to $8.29.

Two big drags on the Dow this year — Citigroup and Bank of America Corp. — regained ground Tuesday. Citigroup rose 46 cents, or 22 percent, to $2.60, and BofA rose 82 cents, or 21 percent, to $4.73.

Another bank in the Dow, JPMorgan Chase & Co., rose $1.51, or 7.74 percent, to $21.02 after announcing late Monday it would slash its quarterly dividend to 5 cents from 38 cents in a move to save $5 billion a year.

The only loser in the Dow Tuesday was Microsoft Corp., which dipped 4 cents to $17.17 after it reiterated its belief that the economic crisis will persist at least into the second half of 2009.

Stocks fell in Asia and Europe following Monday's drop on Wall Street. Japan's Nikkei stock average fell 1.5 percent, Britain's FTSE 100 fell 0.78 percent, Germany's DAX index fell 0.73 percent, and France's CAC-40 fell 0.73 percent.

$15,000 homebuyer credit cut in compromise

America-at-Home Real Estate — Fri, 13 Feb 2009 13:06:28 -0800

Stimulus package may restore higher loan limits

BY MATT CARTER, THURSDAY, FEBRUARY 12, 2009.

A proposal to provide a $15,000 tax credit to homebuyers was stripped from a $789 billion economic stimulus package that appears headed for a vote Friday, but a restoration of higher loan limits for Fannie Mae, Freddie Mac and FHA loan guarantee programs appears to have made the cut.

The $15,000 homebuyer tax credit -- included in an $838 billion economic stimulus bill passed by the Senate Tuesday was scaled back to $8,000 and limited to first-time homebuyers as part of a compromise between Democrats and Republicans.

The Congressional Budget Office estimated the larger tax credit would have cost $35.5 billion, a price tag that proved too tough to swallow in conference committee negotiations where differences between House and Senate versions of H.R. 1, The American Recovery and Reinvestment Act of 2009 were ironed out.

Instead, the compromise bill falls back on language approved by the House Jan. 28 which would have eliminated the repayment requirement on an existing $7,500 tax credit that is currently available only to first-time homebuyers through July 1.

According to a summary of the compromise bill released by lawmakers Thursday, the tax credit will still be available only to first-time homebuyers -- those who haven't owned a principal residence in the last three years. But they won't have to pay it back, as is currently the case, and the credit will be increased to $8,000 and be available through the end of November. The smaller tax break will cost taxpayers closer to $6.6 billion over 10 years, a savings of nearly $30 billion.

The compromise version of H.R. 1 would nevertheless increase the statutory limit on the public debt by $789 billion, raising it from $11.3 trillion to $12.1 trillion.

While not everything that the industry was hoping for, the National Association of Realtors nevertheless welcomed the more limited expansion of the tax credit.

Eliminating the repayment provision on the first-time homebuyer tax credit could drive more than 200,000 additional home sales, NAR President Charles McMillan said in a statement, which will help stabilize home values.

McMillan said the bill will also reinstate the $729,750 loan limit in high-cost areas for Fannie Mae, Freddie Mac and FHA loan guarantee programs that was in place throughout much of 2008, which he said would help reduce inventory and improve liquidity in the overall mortgage market.

In a separate development, investors were cheered Thursday by a report that the Obama administration is planning to launch a program to subsidize mortgage payments for troubled borrowers who can pass a standardized re-appraisal and affordability test. A Reuters report on the Obama administration's foreclosure prevention plan helped stocks recover much of their losses for the day before Thursday's closing bell.

The foreclosure prevention plan is presumably part of a comprehensive housing program that Treasury Secretary Timothy Geithner promised Tuesday the administration would roll out in coming weeks as part of a "TARP 2" financial stability plan for banks.

In announcing the plan, Geithner suggested an expansion of a $600 billion Federal Reserve program to drive down mortgage rates could also be in the works. That program has already driven down mortgage rates to around 5 percent through purchases of mortgage-backed securities and debt issued by Fannie Mae, Freddie Mac and Ginnie Mae.

Reuters reported that the Obama administration has shelved a plan for the government to stand behind low-cost mortgages with rates between 4 percent and 4.5 percent.

Banks to unleash flood of REOs

America-at-Home Real Estate — Mon, 26 Jan 2009 16:16:51 -0800

Part I: Impact on inventories lags foreclosures
By Matt Carter, Monday, January 26, 2009.

Inventories of unsold homes are likely to swell in coming months as lenders begin to push a growing backlog of repossessed homes up for sale -- often in communities already awash in distressed properties.

While builders have cut back drastically on the production of new homes, it's likely lenders will soon be putting pressure on inventories even if they succeed in efforts to keep more troubled borrowers in their homes rather than foreclosing on them.

Because it can take weeks or months for lenders to put repossessed homes on the market, the impact of real estate-owned (REO) properties on inventories lags behind foreclosures. Government efforts to recapitalize banks through the Troubled Asset Relief Program (TARP) and other bailout measures may also have taken some of the heat off of lenders to unload REO properties at fire-sale prices.

But with the emphasis of TARP and other government relief efforts now expected to shift to creating jobs, helping troubled borrowers avoid foreclosure and providing incentives for home buyers, lenders could soon unleash a torrent of real-estate owned, or "REO" properties -- even in markets already flooded with an oversupply of homes for sale.

"It's almost like a tsunami -- you can see it coming and you know it's going to hit but you can’t get out of the way," said Ann Stickel, vice president of affiliated services with Sarasota, Fla.-based brokerage Michael Saunders.

The value of REO property on the books of FDIC-insured banks at the end of the third quarter surged 21 percent from the previous quarter, to $23 billion. That total -- which includes single-family to four-family homes valued at $11.5 billion and another $1.5 billion in property purchased with FHA-backed loans securitized by Ginnie Mae -- represents a 134 percent increase from a year ago, according to the latest quarterly report from the Federal Deposit Insurance Corp.

Repossessions by Fannie Mae and Freddie Mac grew by nearly 25 percent from the second quarter to the third quarter of 2008, hitting 15,196 homes, according to a recent foreclosure prevention report by the Federal Housing Finance Agency (FHFA). With Fannie and Freddie repossessing homes faster than they could sell them, the companies were left with 95,553 REO properties to dispose of at the end of September -- a 25.5 percent increase in just three months.

Not all of those homes are in areas hard-hit by speculation and subprime lending, either. About six out of 10 homes in Fannie and Freddie's REO inventory were purchased with prime loans available only to borrowers with good credit.

Fannie and Freddie both stopped foreclosing on loans they own over the holidays (Fannie's moratorium is in effect throughout the end of January and several states have passed legislation that's intended to slow down the foreclosure process. Lenders are also stepping up their efforts to do workouts and loan modifications with troubled borrowers, rather than foreclosing on them.

But those measures may only be slowing down the foreclosure process for many borrower, and the downturn in the economy and rising job losses have many convinced that foreclosure filings will continue to rise.

President Obama is promising Congress that $50 billion to $100 billion of the next round of TARP money will be committed to foreclosure-relief programs aimed at reducing mortgage payments for troubled borrowers, and broadening the scope of FHA's little-used "Hope for Homeowners" refinance program.

With more than half of the loans modified by lenders in the first half of 2008 already in default again, it's clear that lenders will have to take the more drastic step of reducing the principal balance to make loan mods work, said Sean O'Toole, founder and CEO of ForeclosureRadar, a company that tracks California homes through the foreclosure process.

Forgiving loan principal is something lenders and loan servicers haven't been very willing to do so far, O'Toole said -- in part because of the potential for legal objections by investors who own the securities many mortgages were packaged into.

"We likely have $4 trillion in bad mortgage debt created created during a period of inflated home prices," O'Toole said. "Any program that doesn't directly deal with eliminating that debt only delays the inevitable and makes this problem worse. Foreclosure remains the only working mechanism for clearing this bad debt at the moment."

If lenders aren't willing to do more meaningful loan modifications, Congress could give bankruptcy judges the power to "cram down" loan principal -- a bad idea, lending industry critics say, because that's likely to raise the cost of borrowing for all home buyers. Another idea is for the government to provide incentives to servicers or guarantee a portion of lender's losses when they agree to do loan modifications that involve principal write downs.

Some states have also attempted to address foreclosures, with limited success. O'Toole has been monitoring the impact of a California law, SB 1137, like similar statutes in other states including North Carolina, Maryland and New Jersey, is intended to slow down the pace of foreclosures by creating new hoops for lenders to jump through.

California's law, which requires lenders to reach out to homeowners and extends the waiting period before initiating foreclosure proceedings, put a significant dent in notice of default filings.

In the process of acquiring troubled rivals, banks may write down the value of some of the bad loans on their books. Once the loans are written down -- often to as little as 20 cents on the dollar, Olshin said -- some of the pressure to foreclose on properties and sell them is gone.

"The loans are being carried for what they are worth, and they think there's upside potential" to hold onto properties and sell them when prices rebound, Olshin said. "We think there's not an upside potential -- that we're going to be in this problem for awhile."

Lenders are trying to stretch out some of their losses, and avoid the need for massive new reserve funding when possible, said Norm Miller, a professor at the Burnham-Moores Center for Real Estate at the University of San Diego. At the same time, Miller said lenders are "overwhelmed with the sheer volume of defaults which may turn into foreclosure."

Auction boom
Regardless of any pullbacks by lenders, Tranzon and other auctioneers had a banner year in 2008, and expect this year will be even better.

"I think we'll see a lot more properties moving to auction as banks realize they need to sell at the market price," Olshin said.

Real Estate Disposition LLC (REDC), which claims to be the nation's largest real estate auction company, held 300 ballroom auctions in 2008 and sold nearly 33,000 foreclosed homes for $3.4 billion -- a seven-fold increase in sales volume and nearly triple the proceeds the company generated in 2007.

Company CEO Jeffrey Frieden said he expects to "smash that record" this year as banks and lenders continue to amass a huge inventory of foreclosed homes and are more motivated than ever to sell their inventory.

"I'd say all of the top 10 loan servicers have an auction strategy in place, and that between 5 and 15 percent of the (REO) portfolio is sold through auction," said Michael Davin, president and co-founder of Hermosa Beach, Calif.-based discount brokerage CataList Homes Inc.

CataList, which provides marketing and transaction management expertise for sellers, is a partner with the Los Angeles Times Media Group and others in Zetabid, an online auction marketplace for bank- and builder-owned properties.

Industry groups like the National Association of Realtors, the Mortgage Bankers Association and the National Association of Home Builders have been pushing for more emphasis on incentives for buyers, such as tax credits, subsidized interest rates, and higher loan limits for Fannie, Freddie and FHA loan guarantee programs.

But O'Toole thinks such subsidies were what "got us into this trouble in the first place. Subsidies may increase demand, and in the case of subsidized interest rates might even increase prices, but for how long?"

Some observers fear that if the massive amount of debt the government is taking on to stimulate a recovery, inflation -- and higher interest rates -- are inevitable consequences. Inflation can spur home sales because households are looking for an inflation-proof place to park their assets.

But rising interest rates can also reduce consumer's home-buying power, undermining prices. If interest rates shoot up, buyers who close a deal on a home with a subsidized mortgage could see the value of their homes plummet when subsidies end and interest rates shoot up.

"Unless we want to continue the foreclosure cycle, we need to return to traditional home-buying practices -- with qualified buyers, in affordable homes, at market interest rates," O'Toole said.

Stickel said she is all for programs aimed at preventing foreclosures and keeping troubled borrowers in their homes, because that would help check falling home prices.

"I really think if we can just keep people in their homes, we're going to do wonders for stabilizing our market," Stickel said. "I don't know if that's what a real estate agent wants to hear -- that if I can keep someone in their home, then I can sell a home."

But Stickel thinks a strategy emphasizing foreclosure prevention would actually produce a healthier environment than a market glutted with REOs, because stemming foreclosures would limit the carnage among lenders and get buyers off the fence.

From his perspective in Oakland, Calif. broker-owner L.J. Jennings said the key to stabilizing neighborhoods hit hard by speculators and foreclosure is to get properties in the hands of homeowners, rather than investors. That means bringing homes up to livable condition, or providing loans that provide the funds for buyers to make repairs on their own.

Jennings, whose Pyramid Real Estate and Investments specializes in REO properties, also wants to see more TARP money channeled directly into foreclosure relief -- including government guarantees of loan modifications -- rather than used to prop up banks' bottom lines.

"Let's hope the next round of TARP reaches consumers," Jennings said.

Home financing to get 'creative' in '09

America-at-Home Real Estate — Thu, 08 Jan 2009 16:11:43 -0800

Broker sees return to seller carry-back mortgages, lease-options

BY TOM KELLY, THURSDAY, JANUARY 8, 2009.

Searching for a home can be draining in "normal" times. When inventory is high and home mortgages are more difficult to obtain, the process of finding a property and securing financing can be downright exhausting.

"Creative financing" is one of the items that is "in" for 2009, according to an annual survey conducted by Mark Nash, a Coldwell Banker broker and real estate author who uses a network of 839 Realtors in all 50 states and eight Canadian provinces to acquire consumer responses to a variety of housing questions.

Nash, whose book "1001 Tips for Buying & Selling a Home" is a helpful guide for consumers considering the residential market, believes that seller financing, or "carrying the paper," will return to popularity this year along with the lease-option. The lease-option allows a potential buyer to lease the property and have some, or all, of the lease money applied to the purchase price if the potential buyer exercised the option to purchase.

In a conventional lease with option to buy, the seller charges the buyer a nonrefundable fee for the option to purchase the property at some agreed-upon point in time. The amount can vary depending on how eager the seller is to sell and the size and quality of the house. Typically, the higher the fee, the better the buyer maintains the property.

Because the lessee has made no down payment, the monthly rental fee is typically higher than prevailing market rates. The two parties agree on what portion of the rent will be applied to the down payment. Any amount can be credited.

The seller doesn't have to pay tax on the option fee until the option is exercised or the option period expires. If the option is exercised, the fee is considered part of the down payment.

It's often difficult to locate a seller willing to accept a lease-option unless the seller is eager to move. There will be many eager sellers in 2009.

Not all buyers are eager to seek bank financing, and an increasing number are finding they are unable to qualify under new stringent loan guidelines. Buyers would rather avoid loan costs and the possibility of a deal going south at the last minute. In return, they often offer the seller a slightly higher price.

Most of the time, seller financing works well for both sides, but both sides -- especially the seller -- should be prepared to handle the deal much like a small business. While the buyer can simply mail a check every month, it's up the seller to craft the ground rules.

If you participate in any sort of seller financing, make sure to build in safety features that protect your investment and sanity. In fact, it's not a bad idea to copy many of the loan requirements a local bank would insist upon.

Here are some other interesting topics on Nash's "in" list for 2009:

• Home uplifts. Not a big renovation, but some new finishes that can visually help. Not a gut rehab to the studs, but new flooring, countertops and appliances.

• Real estate agents as a housing resource, not a salesperson. Skilled agents who help consumers determine if they should buy or sell a home. Homeownership is not for everyone. Factors such as a job move in less than three years, marginal credit and lack of interest in home maintenance can be reasons for a resource-driven agent to advise their client not to buy.

• Property tax appeals. With home prices dropping, many savvy homeowners are appealing their property taxes. This is especially attractive to those looking to sell their home in 2009. With a competitive marketplace, those with the most realistic taxes are more likely to offer buyers an overall lower expense in homeownership.

• Loveseats. A pair or trio is gaining acceptance as the functional way to rearrange a living or family room. People are tired of sitting miles away from others on oversized sectional sofas.

• Obama-era paint colors. Look for parchment whites, cashmere yellows, bright optimistic blues and radiant golds in the White House.

Here's a sampling that made the 2009 "out" list:

• Fixer-upper homes. With larger down payments required by mortgage lenders and consumer credit cards maxed out, homebuyers want a home in move-in condition.

• Real estate agents that started career in the boom. It was easy for any new real estate agent to have instant clients during the boom years. After all, they thought the business was about order (contracts) taking. Now they've realized they didn't build a long-term client base during the boom or acquire knowledge about servicing a client's needs in a not-so-easy market.

• Home staging. This is a recently overused, low-cost marketing strategy for vacant or occupied homes with longer-than-normal market times. Buyers have said "enough" of the nonprofessional usage of assorted leftover props placed around a for-sale home to make it supposedly homey. Buyers are saying "market it as it is!

Fed cuts short-term rates to the bone

America-at-Home Real Estate — Wed, 17 Dec 2008 14:45:12 -0800

Next up: More purchases of mortgage debt

By Inman News, Tuesday, December 16, 2008.

The Federal Reserve slashed short-term interest rates today to nearly zero, bringing to an end a 15-month campaign of rate reductions intended to encourage borrowing and stimulate economic growth.

With further cuts no longer possible, members of the Fed's open market committee promised to continue to "employ all available tools" to support financial markets and stimulate the economy, including purchases of mortgage-backed securities and other debt.

In cutting the target for the federal funds overnight rate to a never-before-seen low -- between zero and 0.25 percent -- the committee acknowledged that as weak as the economy is, it's likely to stay at "exceptionally low levels ... for some time."

The committee also cut the discount rate -- the rate the Fed charges banks for short-term loans -- from 1.25 percent to 0.5 percent.

Today's action was the last of 10 reductions in the federal funds rate intended to stimulate economic growth. Before the cuts began in September 2007, the federal funds rate stood at 5.25 percent.

While some critics of the Fed's monetary policy worried that slashing interest rates would spark inflation and devalue the dollar, those concerns were overridden by the worsening financial crisis and its impact on the economy. In understated fashion, the Fed's open market committee noted in a statement that "inflationary pressures have diminished appreciably."

The Department of Labor today reported that the U.S. consumer price index fell by a seasonally adjusted 1.7 percent in November, the biggest drop since 1947. Falling energy prices, especially gasoline, drove the decline -- the index was virtually unchanged when energy prices were excluded.

Although the Fed can no longer make money available more cheaply, it can still provide liquidity through "quantitative easing" -- debt purchases that will further swell the Fed's $2 trillion balance sheet.

In coming quarters, the Fed will purchase "large quantities" of debt and mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae to provide support to the mortgage and housing markets, the committee said.

The announcement of that program helped bring mortgage rates down by 1 percent (see story), and the Fed stands ready to expand its purchases of agency debt and mortgage-backed securities "as conditions warrant."

Early next year, the Federal Reserve will launch the $200 billion Term Asset-Backed Securities Loan Facility (TALF) initiative to encourage lending to households and small businesses. The Fed is also evaluating the potential benefits of purchasing longer-term Treasury securities, and will continue to consider ways of using its balance sheet to further support credit markets and economic activity, the committee said.

Feds say real estate brokers block competition

America-at-Home Real Estate — Wed, 09 May 2007 14:37:52 -0700

Feds say real estate brokers block competition

Report recommends repealing existing laws

Tuesday, May 08, 2007

By Glenn Roberts Jr.
Inman News

A report released Tuesday by the U.S. Federal Trade Commission and U.S. Department of Justice concludes that real estate brokers, state legislators and state regulators have impeded competition in the real estate industry, and recommends a repeal of existing laws, rules and regulations that limit consumer choices.

While surveys suggest that real estate commission rates -- based on a percentage of a home's selling price -- have dropped during a rapid run-up in home prices from 2001-05, "real commission fees rose about 25 percent" during that period.

Because commission fees "do not tend to vary in proportion to changing home prices," they are considered to be "relatively inflexible," the report states, and the agencies recommend that regulators pursue a detailed study of commission rate and fee practices to better measure price competition in the industry.

The president for the National Association of Realtors trade group said in response that the industry is "fiercely competitive," noting that there are about 1.3 million Realtors nationwide, and the association has worked for the past quarter-century to educate its members about antitrust laws.

The 72-page "Competition in the Real Estate Brokerage Industry" report is based on a workshop on industry competition that the agencies held in October 2005, a collection of about 400 public comments associated with that workshop, and other literature and studies.

"Our review suggests that although the real estate industry has undergone a number of substantial changes in recent years -- in particular as a result of technological advances such as the Internet -- competition in the industry has been hindered as a result of actions taken by some real estate brokers, acting through MLSs and (the National Association of Realtors), state legislatures, and real estate commissions.

In addition, consumers likely would benefit significantly from additional knowledge about the range of options available in brokerage services and fees," the report concludes.

Deborah Platt Majoras, FTC chairwoman, said in a statement, "The FTC is committed to working with the industry and policymakers to ensure that competition is not inhibited and that consumers are well-informed about this important marketplace. Home ownership is the American dream, and real estate brokers have helped to achieve that dream for many. But when anticompetitive practices stand in the way, consumers lose."

Thomas O. Barnett, assistant attorney general for the Justice Department's Antitrust Division, said, the report is intended to "help inform Americans about their real estate brokerage options and alert state legislatures and real estate commissions about the danger of enacting laws and regulations that harm competition."

The federal agencies recommend that state "legislators and industry regulators should consider repealing existing laws, rules and regulations, such as minimum-service and anti-rebate provisions, that limit choice and reduce the ability of new brokerage models to compete and that do not appear to provide any consumer benefits that would justify such restrictions. They should also avoid enacting such laws, rules, and regulations in the future."

Both agencies have written letters in opposition to a variety of so-called state minimum-service measures, backed by Realtor trade groups, that set a list of specified services that real estate licensees must provide to clients, at least for some types of representation agreements. And the Justice Department has launched several investigations and taken legal action to oppose state-imposed limits on the ability of real estate professionals to offer real estate rebates to consumers.

In addition, the Justice Department is engaged in an antitrust lawsuit filed against the National Association of Realtors real estate trade group in 2005, and the Federal Trade Commission is in the midst of an antitrust lawsuit filed last year against a multiple listing service in Michigan, though the report on industry competition "does not draw on any non-public information gathered during investigations conducted by the FTC or DOJ or obtained through litigation brought by the agencies," the agencies stated.

Pat V. Combs, 2007 president of the National Association of Realtors, said in a statement, "The real estate industry is dynamic, entrepreneurial and fiercely competitive. For the past 25 years, the association has conducted membership education and training programs to ensure compliance with antitrust law. The Internet is making real estate even more competitive and transparent to consumers."

While transaction-level data is not publicly available for real estate commission rates and fees, the report concludes that "commission rates and fees move in tandem with housing prices," based on "broad national aggregate data."

While an FTC study in 1983 "provided valuable information about how real estate brokers competed in the late 1970s and early 1980s, a new study examining how transaction-level commission rates and fees vary based on such factors as market conditions, housing prices and regulation would provide a better understanding of the current state of competition in the real estate brokerage industry," the agencies recommend.

The report references a workshop presentation by Chang-Tai Hsieh, an associate professor of economics at University of California, Berkeley, who said that booming real estate markets tend to boost the number of agents.

This phenomenon, which Hsieh referred to as the "tragedy of commission," leads to more agents spending more resources chasing transactions, and ultimately can result in fewer transactions per agents even in an environment with escalating sales.

"The 'tragedy' of relatively inflexible commission rates, according to Hsieh, is not just that consumers receive more services and fewer commission fee reductions than many consumers might prefer, but that the agents themselves are no better off," the report states.

The FTC, DOJ and other real estate industry regulators should work to promote consumer understanding of the range of options available to them when hiring a real estate broker, the report also recommends.

"Some consumers may not be aware of the range of alternatives available to them when hiring a real estate broker, including the types of business models available and the negotiability of fees, for both home buyers and sellers, and/or may not understand the duties owed by their broker." The information could help enhance competition, according to the recommendations.

Albert Hepp, president of the American Real Estate Broker Alliance, a group of flat-fee real estate brokers who advocate for free market competition and consumers' right to choose from a range of real estate service offerings, said he expected the federal agencies to make "a stronger call to eliminate minimum-required-service legislation and rebate prohibitions in states."

He added, "I think the report could have gone further and called for true, consumer-oriented state regulation of real estate. For example, the FTC could have pushed for the reform of state real estate commissions as the Consumer Federation of America did in (its) report, which recommends that the majority of members of the real estate commissions should be consumers and not a supermajority of the most established and politically connected brokers.

"I hope that this report is a wake-up call to State Legislators to reconsider how they should be serving their constituents and not the special interest groups. Consumers need protection but not from flat-fee brokers. They need protection from unfair competition in the marketplace which restricts their choices."

Also, Hepp said he agrees with the report's recommendation that the FTC and DOJ should continue to monitor the real estate industry for anticompetitive behavior.

Michael McShane, a partner with the Audet & Partners law firm in San Francisco, who works with antitrust lawsuits, said the federal report will hopefully move the industry "toward a more realistic approach to selling houses" in the form of improved price competition, and said that industry commission practices do not "pass the sniff test" in his opinion.