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Why Buyers Don't Trust The Real Estate Industry

Buyers don't trust real estate agents, lenders, nor appraisers, because we willfully withheld material market data from them. I talked about this on Bloodhound Blog:

What If The Real Estate INDUSTRY Didn’t Control The Real Estate Market?

Please click the link and read the full article before you comment because you'll look silly if you don't understand the full depth of the problem and proposed solution.

Here's the problem:

We hid market information from the buyers while the Baby Boomers moved through the home ownership life cycle. A huge generation, yearning for “The American Dream of Homeownership”, assured strong demand for houses in the post-World War Two housing boom. Banks were all too happy to hand out money, even when forced to lend by the Government. Lew Ranieri saw a 25-year boom ahead and found a way to create a shadow banking system that could “bury bad loans”. Any agent dealing with a short sale understands the problem of buried loans because she’s heard:

“Well, we aren’t quite sure WHO owns this loan”

Kind of sounds like the forensic audit of Bernie Madoff’s books, doesn’t it? That’s what you hear when the jig is up on a Ponzi scheme: confusion, wagon-circling, and practiced deflection. It eventually catches up with the schemers. I’m firmly in the camp that no matter how many incentives we offer to stave off the inevitable forced sales, or to provide a middle-class tax cut, or to bribe the next generation of buyers, the simple fact remains that we have more houses than we need in this country…and the people just ain’t buying like they used to.

Here is a way the industry can solve the problem:

Prominently display the terms and dates of the rejected offers, verified by participating market professionals, in the MLS system, and you solve the demand side of the equation because you identify the “size of the market”. Share that information with the banks and they’ll start trusting you. Show it to the prospective buyers and they’ll throw their arms around you in joy. The sellers will “get real” about the market, also.

This is why it won't happen:

We all know that ain’t gonna happen because “The Man” doesn’t want to release his clutch on the market.

That’s the real problem. We don’t have a real estate market, we have a real estate industry created market.

Here is the final solution:

I met a guy last month who thinks he has a solution. It’s so simple it’s silly; an open market, like the NASDAQ, for real estate. Watch offers for houses, in real-time, be accepted or declined. NASDAQ Level Two Quotes go beyond the bid and ask; they show the “size” of the market for those prices. The implementation of that transparency greatly reduced the previous NASDAQ market manipulation, that stymied the individual investor to favor institutions. It isn’t perfect but exposure to that data makes the market operate more efficiently. Apply that model to real estate and you will quickly determine what the “real” market is for a property.

Posted by Brian Brady- America's VA Home Loan Broker on 06/11/2009 05:45 AM

Comments (102)

National Association of Realtors in the Real Estate Market Channel

Originally posted at: America's #1 Mortgage Broker: Why Buyers Don't Trust The Real Estate Industry

Post is included in group: The Economics of Real Estate
Post is included in group: First Time Homebuyer

102 Comments on Why Buyers Don't Trust The Real Estate Industry

JUN

Please read the full article before you comment:

What If The Real Estate INDUSTRY Didn’t Control The Real Estate Market?

I don't agree that the real estate industry controls the real estate market.

I believe it falls under the control of supply and demand. Not only for supply and demand for homes, but supply and demand for loans.

I have to say that your idea is an interesting one, but I don't think that it would necessarily have the desired effect your post expresses. I believe that in certain markets there is an oversaturation of inventory in the market, but the current economic climate is taking care of the overly zealous builders that expanding inventory on speculation. Our system is already self-correcting and I think so long as population growth continues, there will still be a necessity for the inventory we currently have and expanding as the economy begins to expand again. I just don't think that there will be the rapid increase of home prices that we have seen in the last few years before the decline. I say prices rather than values, because I don't think that house values are dropping so rapidly at this point, only the prices.

I would also say that a NASDAQ like real estate trading system would invite even more speculation and what's worse, foreign speculation that could cause our housing industry to crash. Transparency has it's merits, but at the same time, if it were truly fail safe then it would have already been instituted before now.

Thanks for the comment, John.

Can you tell what the demand was for 10455 Riverside Dr # 7, Toluca Lake, CA 91602, prior to accepting the offer your seller did? I'm specifically interested in the terms and frequency of the offers.

I would also say that a NASDAQ like real estate trading system would invite even more speculation and what's worse, foreign speculation that could cause our housing industry to crash.

Crash? Hmmmm. Do you think that proves my point, Raymond? If market forces, armed with demand data, determine that homes are priced too high, because of a supply/demand imbalance, is that bad or sorely needed?

I think that it just allows for financial planners and clever mathematical geniuses to be able to create new methods for benefitting from a "transparent" market. I was in Houston when Enron fell, and as I recall it was publicly traded and fell from an inflated value in a "transparent" market over night. I recently saw WaMu do the same thing here in Seattle recently. I don't think that our market systems are sound enough to throw people's shelter in to the mix when so many already have their livelihood tied to such a system. The reason that real estate can be an alternate form of investment is because it is a different system. Would this system then also have the ability to sell short on a market? Or reduce the population growth rate, property tax revenues, and employment of a metropolitan area because of this transparency? I know in Washington 23% of our jobs are tied to the real estate industry, and I just think it opens up our budget to short falls if excise taxes dropped dramatically and unemployment spiked with foreclosures. I understand the merit of your suggestion, I just see the system as it is and know that a crash on top of a recession would not be the best solution. Perhaps a long term goal, with fail safes implemented over decades of a transition, rather than a solution to our current situation. I just feel like it would ultimately decimate our economy and eliminate the US economy as a global leader.

Would this system then also have the ability to sell short on a market?

I can't imagine it would because properties have functional utility wheras marketable securities don't. In fact, I know you can't "borrow" a property to sell short.

I just feel like it would ultimately decimate our economy and eliminate the US economy as a global leader.

Fair enough, Sir. I"m less protectionist in my thinking but yours is sound (albeit from another camp)

Thank you for the interesting post, I definitely respect your thoughts and do acknowledge that something needs to be done.

Ralph and Ray are right. I cringed when I saw headline "Why Buyers Don't Trust The Real Estate Industry." I think the media hammers away at us enough so when someone involved in the process shouts the negative sentiment, it just fuels more distrust of ALL of us.

NO! NO! NO!

The Utopian market you describe would be find if we were dealing with only new product in a retail store.

I disagree with the premise of this article, that tired old "transparency" thing.

What is completely ignored in these discussions is that, with the exception of new construction, real estate "goods" sold are used, pre-owned in varying conditions, locations, sizes and with individual private owners, not factory produced, conforming to standards or price points.

Selling a used product is far more complicated than most, even real estate practitioners and surely loan officers, understand. The only way to achieve what this article points to would be to strip the owner of the real property and the "improvements thereon" of their property rights.

I agree that the real estate industry is protective of the Seller, often to the detriment of the Buyer. That's a reflection of the lip service given to Buyer's Agency by the NAR and the entire industry from real estate school through closing procedures.

I could go on and on. Perhaps I will.

When you are dealing with the stock market it is a talking about one company or a group of companies , when you talk about homes for sale you are talking about an individual's home and you can make or break the deal , many sellers are already upside down .

The best way is for a seller to have his own agent and the buyer to have a Buyer's agent who will do due diligence for the buyer.

Our industry despite it's obstacles will always end up to value perceived by the buyers. . I agree, we need to simplify the process so the public can trust us more. .

Interesting to note no one has commented on BHB. Well, far be it from me to be the first. :-)

I think our industry is protective of sellers, because ~sellers~ own and control the product.

Personally, I would feel uncomfortable publizing the price and terms of any failed/rejected offers on any of our listings. I would feel even more uncomfortable publizing the fact that a particular listing had not yet received any offers.

But maybe that's just me.

Thanks for sharing with us this morning. I am continually learning from others post. Great

I have more buyers now then ever, with the 8000. incentive and the prices buyers are coming out of the woodwork

Brian - while the transparency argument may be old, it never wears out. Honesty and transperency builds trust, and that often wins the day.

Having said that, Lenn, I believe you hit the nail on the head when it comes to the Buyer's agent, and the vital role they play. As I'm sure you're aware, it does seem that here in Virginia, VAR's guidance during these past few years has centered on more responsibilty laid at the buyer's agents feet when it comes to doing their due diligence on propertys their clients are considering.

How that'll be reflected in training and prep requirements by the industry? Well, who knows. But, let's hope its sooner rather than later. Other than requiring and standardizing the training requirements, I doubt that many agents will take it upon themselves to complete the neceessary instruction.

Brian, This is a really interesting idea, "an open market, like the NASDAQ, for real estate. Watch offers for houses, in real-time, be accepted or declined."

Personally, I hink the reason buyers don't trust agents is because we have been saying the same thing for the past eight years, "it's a great time to buy!"

On another note, I think the best way for buyers to understand the market is by knowing the month's supply of housing trends on a hyper-local level, Know what the supply is, what direction it is going, and at what speed, and how does it compare to other local markets.

Interesting concept. Not quite sure if I agree. I do believe it all about supply and demand. As for trust in us. We are an industry that everyone is skeptical about. Be in a good market or bad market. I am not sure how to change that.

Ocwen now uses the whole transparency thing on their website. See what the highest net of that home of your dreams is. The sole purpose was to drive up price and streamline the process. Took ups ONE MONTH TO THE DAY to ratify the contract - just days before our "original" close.

Nothing like being set up for failure.

I don't agree that the real estate industry controls the real estate market either. Yes...it's dictated by supply and demand and money...ie, loans, banks,etc.

Patricia Aulson/Portsmouth NH Real Estate

Brian...

When I was a trader ... we would examine all of the bid/ask offers and predict hourly trends ... but a stock is different from real property, because each property is unique and must be exploited to it's "highest and best use" by the title holder.

Interesting concept, though.

Don't get me wrong, I am a born skeptic and I love for people to speak heresy. The problem is you throw out an idea and you don't support it with details. Try posting again and put in some analysis as to why your system will work. Then we can have a debate.

Brian,

In an ideal world, everything would be so transparent that none of us would ever second guess our consumption of anything. Conceptually, of course your idea makes sense.

However...

Following that same train of thought, wouldn't it be great if our local grocer published the prices of its competitors in real time right there on the shelf next to every item so you could easily determine at a glance whether you were overpaying for that gallon of milk or not?? Instead, we blindly buy the gallon of milk for $3.79...and then see an ad from another store offering it for $2.99. Damn.

Wouldn't it be great if any seller of a car HAD to, by law, disclose every single item of repair, how often the car had its oil changed, was waxed, etc. New car dealers should HAVE to publish every single recall notice ever presented on the model you're thinking about buying. Instead, we buy "as-is" and assume a certain amount of risk. I found out too late that the particular vehicle I own has a history of blown engines. It's almost certain that when the mileage hits 80,000...POOF...the engine fails. I rebuilt mine at 88,000 miles. I could have searched the internet for more info, but I was swooned by the car's style, how it drove, the stereo system, the price, etc. Perhaps had I known I'd have to spend an additional $3,800 down the road, with the inconvenience of downtime and car rental, etc...I'd have opted for a different car. By the way, it's a Chrysler...and they knew the engines failed miserably. Class action suits were being filed, the internet was abuzz with the problem, yet somehow none of that was ever disclosed to me. LOL!

Your suggestion for transparency in real estate is an interesting one. Perhaps eBay will be offering up its own version of that exact concept soon? A place where people can go...bid on homes in real time, see what the latest offers are, etc.

I mean, as it stands now, the poor home buyer has to rely on his agent's advice as far as what to offer, with the "protection" being that the appraisal will determine actual market value, and they have x days to cancel the deal with the appraisal contingency. Yeah, that's funny in today's world given the whole HVCC thing and the fact that appraisals are taking longer than the contingency allows. It also wasn't too long ago that buyers lost all protection afforded by the appraiser anyway due to pressures being placed on appraisers to "just get the job done and bring it in at what I say to bring it in at."

Transparency might also force lenders to disclose the realtime figures of how many of their loans have gone into foreclosure, what types of loans they were, and how much overage was charged by the loan officer while those loans were being made.

Aaaahhhhh, transparency equals enlightenment.

You're kidding, right??

Husbands aren't honest with their wives, police don't pull over every driver that's speeding, hospitals charge you $14.00 for an aspirin, and we're still blindly buying the gallon of milk at whatever price is on the shelf.

It won't work. You're hoping for a way to force honesty into the equation. Transparency doesn't do that. Our small claim courts are congested with eBay buyers feeling duped by the seller. The only way we've found to get car manufacturers to admit to lack of quality is by forcing them into bankruptcy. And the grocer with the higher-priced milk justifies by his price because of his better location, higher caliber employees, advertising expense, etc.

And so the story goes.

Transparency will only open the world up to ways of avoiding the true intent of transparency. eBay buyers already have figured that out. Watch an item expiring in the next minute, and you'll see the sharks come out in force. Automated bidding that at the last millisecond ups your bid by one dollar and you lose. Transparency. We've knowingly watched hospitals charge $14.00 per aspirin (how much more transparent can it get?), yet I can go to the 99-cent store and buy a bottle of 300 for $0.99. Transparency somehow hasn't helped in that arena, and as a result our healthcare system is in disarray, with thousands being added to the list of uninsured every single day.

Utopia.

You show me exactly how many loans you funded over the last four years. How much overage was charged on each loan, what your income was per funding, whether your friends got better deals than strangers, etc. At that point, I might believe that transparency could indeed find a place in the real estate business.

That won't happen.

It's a great idea, but mankind isn't ready for transparency. It prevents us from living our lives the way we want.

Whew. :: stepping down now ::

Thought-provoking post though, that's for sure!

Dave

but a stock is different from real property, because each property is unique and must be exploited to it's "highest and best use" by the title holder.

This is the only argument I thought of that held water until I understood that when you know the size af a market, you define demand. You can make a market on anything Richard (you know that) so it refutues the whole "houses are unique" argument. If you can make a market in anything, you can define size of that property, subdivision, zip code, town, state, and country. Defining size measures demand.

Cheryl Johnson got it. Here's the REAL reason this feels weird, folks:

But maybe that's just me.

No CJ, it's not just you it's the definition of the real estate industry; protect the seller to the detriment of the buyer. My idea is going to feel uncomortable because you have decades of experience and training that tells you to do this. All we're really doing is evening up the playing field here.

Banks have already started to implement a modified verison of this sytem, on short sales, with the two-step "highest and best offer" auction and y'all are participating. Banks will start demanding that listing agents certify a list and terms of all rejected offers, in addittion to the property appraisal, to determine valuation for the property. Some of you will say, "They can't do this" which is fine. To protest this you should then refuse to do transactions that involve buyer financing.

This has already started; the wheels are in motion at the secondary loan markets level.. The system that automates and commercializes it will just be an opportunity for real estate agents to participate.

It's a great idea, but mankind isn't ready for transparency. It prevents us from living our lives the way we want

Dave, you used principal transactions as examples; real estate brokerage is an agency transaction. Shouldn't an industry that makes its money as agents rather than principals explore the availability of market data for both buyers and sellers?

Hi Brian, Good post. Thanks for sharing.

Best - Sash

Brian: I'm going to try and simplify here. Transparency is about the individual real estate person explaining in layman's terms the transaction to their client. Its as simple as that. Yet all the foibles of Wall Street, etc. were caused by supposedly smart people thinking they could put one over on the consumer. I've seen it in our business. Arrogance is a dangerous thing. People with advanced this and that think they know more than their clients and sell them something that's not in their best interest. Ultimately a successful real estate transaction should be one where the client fully understands the terms. How many customers fully understand what they just committed to? Yet that should be our mantra. If it isn't, shame on us! Thanks for the post. Your thoughts are always interesting.

The initial premise is incorrect; many buyer--most buyers--do trust real estate professionals. Homes are not like stocks in so many ways that the idea of trying to apply a stock market system on a particular home is just dumb. Don't confuse transparency in any industry with providing personal information about buyer/seller transactions to the general public.

It won't happen not because agent want to control who uses their marketing information--a completely different problem--but because there would be extra unnesessary levels of headache paperwork and nasty mls database problems, it would expose personal information about buyers' financial situations to the general public, it would not adequestly tell other buyers why previous offers were rejected--was it price, closing date, contingencies, etc? The first taddenda to be attached to any offer should any mls try and implement this idea would be a non-disclosure agreement. Given that many states have implied or stated non-disclosure statutes regarding contract negotiations, this idea would create needless legal hassles for all parties. The list goes go on and on.

If you're finding that folks are not trusting you, I expect that providing thier personal information to the public will not gain their trust.

Brian,

Real estate is a principal transaction too. A buyer (principal) buys a seller's home (also a principal).

It's facilitated by an agency relationship, just as the grocer acts as an agent for the dairy farmer to get his product to market, or the car dealer acting as agent for the manufacture to sell to the consumer, or the hospital to distribute drugs on behalf of the drug manufacturers to the patient, or even with eBay acting as the "agent" between the buyer of an electric guitar and the seller of said instrument.

No difference whatsoever.

Dave

Brian: I have a differing point of view on your question ... "Why don't Buyers trust the Real Estate Industry?" I don't think it has as much to do with the serious and complex issues you raise. I think it boils down to a much simpler answer.

When people express their distrust to me regarding the industry or process (or at times question me with "why should I trust YOU over another loan officer"?), that distrust is usually based on their personal past experience or an experience they have heard about via the grapevine regarding a friend, relative, or contact. They've either experienced a bad situation or heard of one. And as of late, there have unfortunately been plenty of these situations truly experienced to give ALL of us (whether guilty or not) a terribly bad name. We ALL are guilty by association in their eyes.

These experiences only grow with each telling too. What started out as a simple, easily explained glitch in a closing, during the re-telling becomes a full-blown act of incompetency or something of an illegal nature on the real estate professionals part. Again, some problems are valid, but it has become something of a national sport to beat-up on our industry.

It doesn't help that the media has sensationalized the issue. They are like a dog with a bone. Yes, there was flagrant misconduct within the industry and real mistakes were made, otherwise we wouldn't be suffering through the present crisis. But, the sensationalization has made the general public so scared and so distrusting that they are seeing evil in every corner and are wary, even if they have had no personal experience with such issues. I've had past customers that have no reason to feel that way (and should have developed loyalty and trust regarding my services based on multiple past transactions) seem cautious at times. After 30 years plus in the business, experiencing that can really hurt and I grow tired of feeling like I'm playing defense much of the time.

Now we are beginning to hear about dishonesty, misconduct, and scamming taking part within the services meant to assist and clean-up the problems created by the original crisis. Loan Modification scams, credit/debt counseling scams, foreclosure rip-offs. Can we really blame the buyers/public for not trusting our industry?

It's not the systems. It's not the equations or reports. It's not terms, rates, dates, or etc. It's the conduct of the professionals found within the industry. When there are no more stories to relate regarding dishonesty, unprofessional behavior, ill-prepared professionals, or misconduct, ... the public will start to heal and trust will return. Until that occurs in great measure, it will continue to be a very bumpy ride for us all.

Thought provoking dialogue--it boils down to trust and it is sadly missing from our industry. I do think a hyper-local monthly update on number of homes for sale, number of homes in escrow and number of homes closed is the next best thing to a real-time NASDAQ quote. Tracked over time it builds trust and establishes value based on real numbers---all numbers in the neighborhood.

If the prospective buyers can see what is available and at what price, what is selling and at what price they have information that will help them determine the real demand and value of property in a specific location. However, property is not as uniform as a share of stock and value must be added or subtracted for location, amenities and condition.

Is this in the sellers best interest?

What if the seller rejected an offer months ago that they would gladly accept today? A buyer might not make an offer for the same amount based on the logic if they turned it down before, they will turn it down again. Some buyers will not care about previous offers, other may.

But someway of reassuring potential buyers that their offer has been seen and rejected outright is what is needed. Maybe the offer contract could have boxes for the seller to check:

counter see attached counter sheet
rejected no counter
you have deeply insulted me, go away, far far away.

Interesting concept. I think the lack of trust is not because of transparency, but lack of confidence in the "professionals" in the business. When your nail tech is selling real estate on the side or your loan officer is also an Amway salesman, it is hard for the public to have any kind of respect for the work performed. Until 80% of the people in the business get out of the business and leave it to the 20% of us who actually do 80% of all the transactions anyway, nothing is going to change.

In my mind, transparency is having a buyer's agent who actually has the potatoes to tell their client's that a house isn't worth X and buying that house is a bad mistake. Or it is a listing agent telling their seller's that listing their home $100k above the current market is retarded.

The Real estate purchases are too illiquid and too unique at the individual property level to be commoditized in the way people buy and sell equities. Smart buyers want professional and knowledgable counsel about their purchase. However, to date they really haven't gotten it. All they see are sales people who want to sell them a house at any cost - not trusted advisors.

Maybe decoupling Agent compensation from the transaction altogether would put a true value on market knowledge, expertise and results.

Selling houses is set up this way right now:

Sellers pay from the proceeds of the sale of their property.
Real estate agents only get paid if a closed transaction occurs.

Knowing this, why WOULDN'T the industry be set up to favor sellers? Heck, they are paying all the real estate agents... You think sellers will LIKE your idea? That's the real reason it feels uncomfortable.

As to the trust issue? That also has to do with how agents get paid. Whether they admit it, whether it is subliminal, it still boils down to this question in the client's mind: Is the agent telling me this because it is what is best for me? Or because this will get him paid?

What if the buyer paid a fee up front for the services of the agent? Once it isn't "free" they can focus on who they REALLY trust before the fork over several thousand bucks (like they would with a lawyer). Once they have paid the money, they don't have to worry about the motivations of the agent. Once they try to "do it themselves", a whole new appreciation for their services would be realized.

You would also see the focus shift heavily towards the buyer and away from the seller as the entire industry would suddenly need to prove themselves to buyers in order to get paid.

Bingo!

Here's the end game, Janet; banks will start requiring a disclosure for the dates/terms of the rejected offers, before they fund a loan. Sellers will elect to check of the "will not disclose" box and the more cautious lenders won't fund the transaction. More banks will adopt this model, requiring this disclosure. Consumers will start asking for it, on advice from savvy buyers' agents and the curtain will be lifted.

The NAR will try to lobby state legislatures to outlaw this disclosure in order to force banks to make loans against collateral with a "blind value". Banks won't lend in those states and the people of that state will replace their legislature.

Banks figured out that the baby boomers stopped buying homes so the Ponzi scheme is over. They want this data; they'll get it or pick up their marbles and play elsewhere.

Bingo again! You're on today, girl. If you have a few hours, digest this post and all of its links. Greg Swann identified this problem and offered a solution, as early as 2.5 years ago.

I disagree with many posters that the real estate industry doesn't have SOME control of the market. Yes, we can't force buyers to buy something they don't want, nor sellers to sell if they don't want to, so yes supply and demand is a factor...BUT

there are laws which keep the real estate industry in a rut. In your scenario, the biggest would be client confidentiality laws. It's great that banks may want that information, but sellers have the legal right to not give it per our laws in Oregon. The real estate industry would send out their lobbyists en masse to stop this practice. So yes...the real estate industry is very powerful. I think it is naive to say we don't have some control in the market.

On the flip side of your argument, if you want sellers to be all transparent the same should go for buyers. Ebay had their buyer rating system...so...what if buyers had to be registered on the MLS and agents could see how many lowball offers they made. I mean if you want sellers to disclose so should buyers. Just as buyers could evaluate what types of other offers were made, sellers would have the same ability to see what types of offers buyers make.

If the problem is that the system is seller favored, then why swing the other way? In 20 years, we would all be having the same discussion about how the system favors buyers.

I also agree with Janet that the fact that the current model is that most of the time, the sellers pay all of the real estate fees. No seller is going to allow a system that is to their detriment when they are the sole payer.

Then I think that there are practical problems with your idea. Price is not the only factor. Are we going to have 100 fields in the MLS for all of the terms. Sometimes the price offered is good, but it is contingent on the sale of a home. Seller says no. Maybe the price is good, but the close date doesn't work and we can't negotiate it out. Maybe the buyer listed out 20 other terms on there, that make them sound unreasonable. Terms matter for both buyers and sellers, and I for one don't want to spend tons of time entering in every single term on an offer.

Price is not the end-all-be-all. Your system would make price be the end-all-be-all.

Terms matter for both buyers and sellers, and I for one don't want to spend tons of time entering in every single term on an offer

What if we could find a way to automate all of that?

No seller is going to allow a system that is to their detriment when they are the sole payer

Who is this nation's single largest seller of property, right now?

It is an interesting concept, but there is one primary difference between real estate and other "commodities". In the case of a stock or a retail item, there are anywhere from several to millions of the same item. I can buy one, and so can you... and maybe everyone we know. But each house is unique.

The demand and supply are limited. Supply is one property, and demand is limited to at most a few families... maybe only one. For them, it might be a dream.

Let's go to the extreme... Look at a property like the Pontiac Silverdome. It cost tens of millions of dollars to build. And there might only be a handful of entities that would even consider purchasing it. If it were on the market, who would be served to know what offers had been turned down?

In the business world it is common for the terms of deals to not be disclosed. And the terms of failed deals are almost never disclosed.

The only people that would be encouraged would be low-ball investors... and those that want to bid a dollar more than someone else just did on a popular property. For most properties it would lead to a false transparency.

If there was a way to automate that's fine, but I would still want to see what other offers buyers made. Transparency has to go both ways. So the question is how many buyers want their "bidding" history right there for every agent to see?

I'm not sure who the largest seller is, but I would guess Fannie, Freddie, or one of the other big guys.

I have not read most of these comments..time constraints...so if I'm being redundant - forgive me. But what of my FIDUCIARY obligation to the seller. The SELLER owns the property. By tipping the hand of the seller in that way - we violate that obligation.

Perhaps the best way to deal with this problem is to do away with dual agency - at least with respect to agents "double-ending" deals. This is an area that is frought with peril for both the buyer and the seller. It has been very lucrative for top listing agents, but the room for conflict is great. So many people say "You list, you live." That means that LISTINGS become the be-all and end-all. The system needs to change where buyer's agents are given their due respect and place in the world.

Finally - you can't trade a property like a stock or bond. Nooooooo way!!!! People don't buy and sell homes that way. Plus - one share of Apple is just like another share.. but no two homes are alike. The process is slower and the terms and conditions far more torturous.

Just my off the cuff $.0.02!

I'm guessing Lenn Harley is here..hope so...this was meant for her!

I'm not sure who the largest seller is, but I would guess Fannie, Freddie, or one of the other big guys.

It's a bank or an agency, that's for sure, Melina. For arguments sake, let's assume they adopt this model and list all of their properties this way. Let's further assume that they require it for all of the properties they finance.

But what of my FIDUCIARY obligation to the seller. The SELLER owns the property. By tipping the hand of the seller in that way - we violate that obligation.

Thank goodness someone mentioned this because that was the first thing I thought of when I heard about it. That IS your fiduciary obligation, as defined by your agency contract with the seller. That contract, however, proves my point; the industry controls the market to the detriment of the buyers.

I think this one's a done deal, folks and I'm just the messenger. Banks recognize that the demand/supply imbalance has been turned upside-down and they don't trust appraisals anymore. I just want to find a way to profit from it.

The process is slower and the terms and conditions far more torturous.

I think the idea is to mitigate that problem, Ruthanne.

Ruthmarie is so right. The real estate industry leans so far to the seller side, without a good, experienced buyer's agent, a buyer is like a lamb going to slaughter.

In my business, which is buyer's agency in terms of representation, our job is actually to protect the buyer as well as help them with the easy part, like finding a home.

I respect the rights of any home seller to maximize the gain on their resale property. However, since terms and condition are a component of a transaction, that buyer need all the help they can get and they will not get it from a listing agent, if the listing agent is doing their job.

I always stop and think before I respond to Lenn Harley. Any sane man would. Here we go:

I agree that the real estate industry is protective of the Seller, often to the detriment of the Buyer.

You've stipulated that the spirit of this article is correct.

That's a reflection of the lip service given to Buyer's Agency by the NAR and the entire industry from real estate school through closing procedures.

Agreed, Lenn. Would exclusive buyers' agency practices improve that problem? If this movement is originating from the end investors in the shadow banking system, and they require this before financing property, is this an 800-lb gorilla that won't go away?

I could go on and on. Perhaps I will.

Please do. Nothing I write (about real estate brokerage) ever gets published until I consider the WWLHD question.

I completely disagree with your ideas, but respect your chuztpah to put them out there. Sales and offers are confidential and I disagree that they should be published.

I do think it should be required that any buyer have a buyer's agent, and I would almost recommend that they not even be in the same office. This would do away with the Consent to Act practice. Then we'd have two individuals completely devoid of any potential collusion to the detriment of EITHER party.

This is a very interesting post indeed. Anytime you have "change" there is going to be resistance. Take the HVCC for example, you and I both know that thousands of people can't stand the new HVCC guidelines. I have no problem with them. I have decided to look at the positives of the HVCC..... value didn't come in? sorry it's not my appraiser. Decided to go with another lender.... sorry the appraisal can't be transferred. Change is inevitable. If I was planning on buying a home today I would love to see what the offers were on a home. If I was selling that home and I wanted to get it sold faster for a top price why not publish the current offers. Sounds like a cool concept. Maybe you should try to start a real estate company and see how it works?

If I was planning on buying a home today I would love to see what the offers were on a home. If I was selling that home and I wanted to get it sold faster for a top price why not publish the current offers.

Glad you understand, David. Say hello to Roy Meschel for me.

Sounds like a cool concept. Maybe you should try to start a real estate company and see how it works?

Stay tuned. I spoke with the guy who has the answer today.

Very interesting Brian. I've presented 7 offers already this week for buyers that have never seen me or spoken to me. All went in over asking price based on my advice that was given via email. So I have NO problem with buyers trusting me.

The reality is that right now none of this "posting of rejected offers" and "The sellers will “get real” about the market " has any baring on the cuurrent market. The current market is already controled by the banks. They are bringing values down because they want properties sold in 30 days or less.

Most REOs and short sales are priced very low in an attempt to create bidding wars. And it's working. Just like Range Pricing worked when the market was hot. Either way it's the buyer who determines the value of the property. Not the seller. And the buyer almost ALWAYS wants a deal....even if that "deal" was based on future appreciation.

Knowing how many offers were rejected and how much they were for would make no difference to the consumer. The property will still sell for what the seller is willing to accept and the buyer is willing to pay. Market value.

I like this one. I think my buyer prospects would also become real and they would know that lowballing is a myth because they would know that their neighbor just bought THE house that THEY were lokking at. How many times have you heard" What was the other offers at?

Watch offers for houses, in real-time, be accepted or declined.

The buyers might like that but would the sellers? All buyers will eventually be sellers. Wouldn't that be the sellers choice? If you want you can get all your sellers to let you display that information right now. See how it goes.

It's not the industry they don't trust. People don't trust salespeople. And real estate agents are salespeople. And up until recently that's pretty much all they were.

With the way the internet is getting involved, or the way agents are getting involved with the internet the trust can be built before you decide to make a transaction. Have you ever sold a house to or for a good friend? Did they trust you before the transaction? Do they still trust you?

This won't work. Nor should it. How do account for lowball offers and deal that couldn't have been made in the first place? I this would make the problem worst.

There is mistrust in every industry, not just real estate. Until the system changes and the seller pays the listing agent, the buyer pays their buyers agent so there is no conflict of interest, then we'll be rehashing this dialogue for years to come.

This is why I like real estate consulting. You pay me upfront for my advice, just like your attorney, Doctor or CPA. I tell you what you should do, you do it or not, but I get paid anyway.

Real estate is the only industry that gets paid for selling a product ONLY if we are successful, aside from attorneys who only take on deals they know they'll win anyway. And we ask them to trust us for advice when the only way we make money is if a product gets sold? What if you only paid your Dr. for a successful cure, wouldn't that be nice? Or your CPA if he got you a fat refund? Our entire system is antiquated and has been from day one.

This whole issue would be a moot point if the commission and agency options were thrown out the door, and we got paid like everyone else does, but since lenders won't let buyers put their fees into the loan, and many of them hire appraisers (or worse yet, use zillow-ish desktop appraisals or BPO's from agents with the ink on their license barely dry) things won't change, unless we change them.

If it were harder to get a real estate or mtg brokers license, most of the problem would go away as well. But that's another post ;-)

Check this link out and see if it doesn't spark some debate on the trust issue. One day, in the near future, I along with many others believe this is how real estate will be conducted.

Not far from that day will be the demise of the MLS, since most properties can be found anywhere on the internet now, and if each party paid for their own agent, the agency issue would go away as well. What we need is more education, harder licensing laws, and LESS regulation.

http://www.TheConsultingTimes.c om

Brian:

I think the premise of this wntire discussion is totally off! The real issue is not that buyers should trust real estate agents but what real estate agents should or can do to position themselves as trusted advisors. The second issue with thie entire conversation is that it is based on a generalization: "buyers do not trust agents" all buyers? all agents? all the time? Are there any buyers who hapilly and rightfully trust their agents? Assuming the answer is yes the real question becomes: what are those agents who are trusted doing different than you?

With all due respect to people who believe that properties are bought by "buyers", they tend to forget that real estate is heavily gamed by banks. It is the pre-approvals which bid against each other.

Several years ago, they gamed it by issuing pre-approvals which were too high for the market values. The pre-approvals took the market up.

Now, they are bringing the listing prices down but issuing pre-approvals at the market levels they have "blessed" appraisers at. Buyers will bid the prices up to THAT level.

While banks are playing their usual games, it is time to develop a Private Money infrastructure by creating mechanism to deploy Self Directed IRA money which needs to find "dream homes" to grow their nest eggs.

That's why I invested 8 months of my life to wrote "Private Money: The #1 Solution to Eliminate Booms and Busts in Real Estate Forever!"

I am getting unexpected response from the investment banking industry. As soon as some of these players get SEC, FINRA, etc., blessing, they can give banks great run for their money. :)

Lee Ali

BankFreeInvesting.com

Interesting thoughts, Brian. And there is absolutely no question that "realty" is due for a "reality check!" But, frankly, to think there is ANY CORRELATION AT ALL between the stock market and the real estate market is stretching things....A LOT! Not only are there no two IDENTICAL properties to compare and equate values (so once one is gone, it's gone...you can't go out and buy another one just like it....not so with stocks), but transactions are not solely about PRICE. A seller could reasonably, responsibly refuse a particular PRICE on their home one day, and accept that same price the very next day. Heck, he could concievably even do it the very same day. There are too many other variables in an offer...downpayment, qualifications of the buyer, closing terms, financing terms, timing, concessions, and a whole lot more.

Not only that, terms that a seller might reject at one point might be ultimately acceptable at another. If a seller is buying new construction and has a year to sell his home, an offer that would not be considered a year before he needed to move might seem very attractive a month before he needed to move.

I agree that buyers need QUALITY representation! They need someone in their corner who will counsel them, advocate for them, and protect them (often AGAINST THEMSELVES!!!) Maybe when our lopsided way of getting paid gets its own reality check that will improve. Right now, with agents for the most part only getting paid UPON CLOSING, regardless of the quality of their counsel and advocacy, there's always an inherent conflict. Buyers understand that. Why doesn't the real estate industry?

The real issue is not that buyers should trust real estate agents but what real estate agents should or can do to position themselves as trusted advisors.

I can't think of a better way to position yourself as a trusted advisor than to explain that a market is a market that operates most efficiently when transparency is present. If buyers and sellers are to pay you for advice, why cloak the data?

Jeff Corbett once said that the problem with agents (and originators) is that we somehow feel like our hand is on the tiller of the ship. When we stop lying about our ability to "affect market forces", and let buyers and sellers transact in an open outcry market, then we will be paid for being trusted advisors.

Not only are there no two IDENTICAL properties to compare and equate values (so once one is gone, it's gone...you can't go out and buy another one just like it.

Jusi, so may of you are using this argument that I'm going to address this by inviting you to look at my comment to David Gibbons, from Zillow.

Maybe when our lopsided way of getting paid gets its own reality check that will improve.

This system addresses that, Judi. I spoke with the founder of the exchange today and it empowers agents to be "market makers"

Brian, ok I read the article first, before commenting.

The article is long. It is detailed. It appears to be tailored specifically to a lender.

I'm no dummy, but found the article difficult to follow.

Also, the link about the Mercedes and the Toyotas takes you to a New York Times log-in page -- can't go directly to it.

What I find within this article is typical of people in general. My previous life as a police detective I interacted with people in the most of adverse situations, day in and day out. (A lot like the real estate market these days) What I did learn earlier on in my previous career was a simple one. If the team wasn't on the same page with their agenda and couldn't come to common ground, then how would you be able to convenience someone else of what you are trying to sell them? What I am basically trying to express is simple, how are we suppose to get the buyers and even the sellers on board if we can't even agree?

I don't agree with the theory of placing homes on a stock market style agenda. Next thing th ebanks will overcome and become realtors as well. What I do agree is that we all need to be on the same page as professionals and press up from under all of this ruble; and as a group, move in a positive direction instead of bickering (intelligently of course) amongst ourselves.

http;//www.pspres.info

Next thing the banks will overcome and become realtors as well.

That's impossible, as of March 11, 2009, Kyle. A direct question for you (and anyone else who cares to respond):

If this idea were enacted and only licensed real estate agents were authorized to make bids for buyers, would that change anyone's view of a transparent marketplace?

I read through this blog and am not certain exactly where to start! The concept of transparency is of great value in plenty of circumstances - particularly where there are lots of either the same product being sold repeatedly (insurance policies, credit cards, all sorts of services... like Realtors...), or where lots of people have an interest in one "thing" (be it political, a company, executive pay packages, industry, or what have you). But, while a great many homes are indeed sold, each sale is a vastly different circumstance than what would typically benefit from transparency.

The real estate "market" shouldn't be compared to the NASDAQ, because that modern market is apples to the much more traditional oranges market of real estate. Real estate as a market is much more like a farmers market, where price is determined on a case by case, or booth by booth basis. Success in selling at the farmer's market depends on the quality and price of your product relative to the farmer selling the same product four booths down. More money per item in Real Estate, but a much more sensible comparison.

There are of course other issues brought up here: Have Realtors been overly protective of their sellers? No, but they weren't protective enough of their buyers - so the discrepency amounts to the same result. Today buyer's aren't just in charge of the negotiations, but they aren't dealing with a sub-agency system that always has them being sold to, but instead are now represented. Properly advised, and perhaps calmed down when overly excited about buying a particular house, ensures fewer will overpay for any given property.

Of much, much greater concern in any real estate market (and my market is in Ontario Canada - so it's wildly different than the US from this following perspective) are the artificial incentives used to get people into the market who just simply shouldn't be there yet, or at all. Interest only mortgages, 30-40-50 year ams, tax deductible mortgage interest... and lots more I'm sure. Not only do you find ways to squeeze inappropriate credit risks into the housing market, but you also create a system where there are disincentives for people to pay off the debts they've taken on.

It isn't the lack of financial transparency that is the problem - wages and affordability will set house values as much as supply will - it's the gasoline the financial and regulatory players keep throwing on the fire. Buying real estate shouldn't be easy, there should be a degree of difficulty involved in buying anything as significant as a house. When it is harder for consumers to buy the appliances to go into a house than the house itself there is a problem. You have an imbalance in how a market based economy is supposed to work - it's artificial and it's violating the spirit and function of the very forces intended to keep things balanced. This is why bubbles, crises and mass bankruptcies occur. Not from a lack of transparency - at least not at the level of consumers buying and selling their homes. Bank transparency and regulatory transparency, for certain, but it's not the transparency of Joe and Jane public selling their house, that's just apples and oranges.

well what an interesting thread......I decided to weigh in -- as a Realtor in Canada, we are not dealing with the short sales like you are in the U.S

However, as a prospective buyer in the U.S. -- I have to agree with post #16, where "we" as realtors are more known to say "now is a great time to buy".

have to say -- as a prospective buyer -- I was asking questions about the market, more future potential balloon mortgage fallout, and the exchange, -- and the retort was "now is a great time to buy". That was 3 mths ago, our dollar was at .80 cents, and prices were much higher then now....at the time I suggested more foreclosures could be favorable for a buyer -- plus the dollar was expected to strengthen.

the realtor reply -- now is a great time to buy.

now -- the cdn dollar is closer to .90 cents, and the realtor is now saying there is potentially way more foreclosers to come on (in Palm springs) -- but where was this thinking 2-3 mths ago...... when we were pushed into putting paperwork in on a very much over priced listing.

definitely a credibility issue.

Buying real estate shouldn't be easy, there should be a degree of difficulty involved in buying anything as significant as a house

Huh? Why?

JUN

"Huh? Why?"

Scarcity mindset.

If people have flexible payment system, we would not have this many problems with foreclosures.

For example, if people can buy disability insurance, why can't they buy job loss insurance which cover mortgage payments for X number of months. Those X number of months are calculated based on employment trends. So if it takes an average worker 6 months to get a job in Connecticut, he should be able to buy insurance to cover mortgage payments which go directly to the mortgage company WITHOUT affecting his credit rating.

Certain number of payment holidays over the life of the loan would be nice too.

When banks start operating in customer service business instead of pain infliction business, then we will have less housing problems.

Better yet, implement securities model on real estate as Brian is suggesting, and let the investors roll with punches like all share buyers do. If I pay on time as agreed, my housing stock value goes up to certain level. I then get brownie points and my future issues are anticipated.

If I am lousy payer, then my stock value goes down and no one buys my future offerings.

For example, if people can buy disability insurance, why can't they buy job loss insurance which cover mortgage payments for X number of months

Been around for at least seven years

When banks start operating in customer service business instead of pain infliction business, then we will have less housing problems.

Huh? I love my lenders; they lend me money at a rate less than the appreciation of the assets I buy. At this point, they still love me. Then again, I've never really overborrowed. Now Blockbuster Video's collection department may have a hired a hit man on me but I consider their late return policy "pain infliction".

Brian. Nobody cared whether the people getting the loan should be getting the loan because they would just sell them in a bundle of loans the next day. Many of those loans were insured by our government. Now WE are flipping the bill. NO CONSEQUENCES for anyone.

Nice try Brian,

99% of the time I agree with you.. this is the 1% that I feel that you are deflecting the actual problem.

In reality... the internet is the problem as clueless people get to spout opinions and use clever marketing tactics to induce people to buy with get rich quick schemes and dreams.

Long, long ago I was writing market opinions on RealtyTimes and it was amazing what other agents were writing about...

"I have an in with the builder to buy in the first phase, contact me", prices go up $20K with each phase, etc, etc..

Buyers jumped all over this and a couple of those same writers made a killing selling dreams and schemes... much like Tulips, baseball cards and tech stocks.

The fundamentals were all wrong and this had nothing to do with the MLS except for the messengers of the data thrown in with lenders that were lending to everybody including dead people.

Step back and think about the people who made massive profits and what they were selling and you will have an answer to the problem.

Econ 101 defines a normal market as an equlibrium of buyers and sellers agreeing to a price to set market value without undue influences.

Undue influences were created with artificial interest rates and lax lending standards such as buying homes with no money down.

What other market allowed for the purchase of $200,000+ products with nothing down?

NONE..

I have 1,000 acres in the Wind Funnel of OK/TX that will support 60 1.8 MW wind turbines... do you want to lend me the money to buy these with nothing down???

Probably not... but the electricity generated from these 60 turbines will pay for the loan in about 7 years which should make you realize just how ridiculous the whole entire lending market is/was for homes.

Agree & disagree...

There is a certain distrust buyers have with themselves. When you have buyers & home owners putting themselves into "too good to be true" situations on the scale we just witnessed, there has to be a certain gun-shyness, if you will, among anyone considering purchasing real estate today.

My experience:

I was overseas a good majority of the time between 2001 and 2006 on active duty in the USMC. I turned down countless offers in several fields to come home to Sacramento and start a real estate brokerage. When I landed back in the States, the writing was written clearly on the wall: "What the hell have we just done?" - bankers, brokers, borrowers, lenders, builders, landscape artists, conservatives, liberals.... anyone with a finger to point found several fingers pointed at them. I soon learned that in order to heal... in order to learn & move on, it would require EVERYONE (including myself and my fellow Marines who came home to this mess) to confront themselves and ask where did I screw up? What part did I play?

One of my favorite consultations is sitting down with a client who is facing foreclosure and comes to us for representation for a modification to the terms of their mortgage (which they CLEARLY agreed to). During these consultations I ask their opinion on the state of the economy, RE market, etc... and how they got to the point of coming to see me.

Finger pointing begins. It was the broker or the neighbor who introduced me to the broker. Or it was the mortgage guy who told me I shouldn't cash out 50k by paying 50k in fees... he wasn't stern enough...

I've heard it all. I shut it all down. Everyone needs to take responsibility for their own actions. Until people do, they will be at the mercy of anyone they listen to... and guess what? THERE WILL ALWAYS BE SOMEONE THERE TO SELL YOU A PIECE OF THE BK BRIDGE. If you were selling neg-ams to people who didn't have a clue as to how the product works, head-butt yourself. If you took the loan, head-butt yourself. Then let's move on.

What part did you play?

This is an interesting idea, but the comparison is not a very good one.

The reason why: shares of stock are fungible, real estate is not.

I totally agree with alot of the opinions here but, you all new that it was comming, we do and don't control it.

We control the market in the respect that we price the homes. We increase or decrease the prices, which is suppose to be based on sales. Unfortunately that does not happen. Many realtors Just list a property for the price an owner wants. Examples : I went on two listing appointments Comps for 1st one said house price should be from $399,000-425,000 Another realtor listed it for 575,000.

House # 2 Comps again said house should be listed at $400,000 - $425,000 Listed for $525,000.

I still cannot find any justifications for the prices unless I go back to 2006. Of course we all the the houses will not sell but, We are responsible for this.

As to generallities the market dictates the prices...supply and demand yes! but we end up with an over supply because of the way Agents are pricing.

What about confidentiality issues?

The reason we are in this mess is because of Wall Street. Why would you want to further their cause and have the industry fall further down this rabbit hole?

I used to respect your opinion .... until now. No way, there are so many points I disagree with I don't know where to start!

Great idea, Brian. As a buyer agent, I'd love to know the offer history on a property when counseling a client. Technically, it's very possible. We already have systems to enter closed sales data, with various qualifications --- type of financing and seller concessions, for example. Offers could also be entered with fields for explaining the rejection, e.g. Rejected due to price, conditional on sale of other property; rejected due to weak financing, etc.

Reading through many of the comments, however, illustrates why such an open system is unlikely to happen in the near term. Most of the Realtor comments reflect some version of the belief that buying a home is "special", needs our "special care and attention", professional guidance, etc. etc. etc. There is a long standing bias in our industry that empowering buyers with information will somehow lead to chaos. I don't quite see how knowing the offer history on a particular property will do that. The only thing I see it doing is shortcircuiting the magical belief that a "new" buyer may come along and make a higher offer. If that fresh buyer knows the offer history on a house, their offer may not be as high as they might otherwise make if they were blind to previous offers. Of course, it would also sharply reduce the time wasted writing up low offers that have little likelihood of acceptance.

Our business needs to desperately rethink its paradigms if we're to remain relevent, or we'll find ourselves sidelined by the Trulias and Zillows of the world in a decade.

It's an interesting idea. I don't think I agree with it but it is interesting. The marketplace for financially distressed properties can be a real quagmire. The solution is not necessarliy to overhaul anything just to build strong relationships with buyers -which is what we should always be doing.

Two points to consider.

1. Setting up a system like this strictly for short-sales and bank owned properties is a little bit of a slippery slope. The next step would be for buyers who are looking for traditionally-owned homes to demand to know about rejected offers. This would change forever, the landscape of home-buying. Right now, the balance of power is tipped to seller. It has been that way forever. Once the buyers have access to know about prior offers, they will want the specifics of multiple offers. This totally tips the scale so that the seller has no control. Each time he rejects or makes a counter offer, he is providing the buyer pool with additional data points which will ultimately lead the "next" buyer to knowing all he needs to know to make an offer that will be the seller's "bottom line".

That may or may not be bad, but it's a drastic change.

2. As far as not trusting the industry - that's OK. Consumers don't trust any industries. No one trusts auto dealers yet somehow they manage to buy cars. Everyone assumes that appliance retailers are going to bait and switch them, yet people get new fridges and ovens every day.

I've sold cars, furniture, million dollar communications systems, tech products to the government and a few other things before landing in this business a few years ago. The only trust that has be developed is between the client and their agent. Consumers can distrust an industry yet have complete faith in their Realtor.

This trust is built one brick at a time and begins with the first interaction. We must disclose everything we can as early as possible. Initial buyer counseling session is the key. I never skip it. If a new client calls and wants to see just one house, I always meet them at my office, or perhaps at a coffee shop if geography demands it, and spend a minimum of 30 minutes explaining the process.

I start by telling them that they may know some of the stuff, but it's my responsibility to make sure that they understand it. The market is very complicated today and I need to insure that they are making informed decisions throughout the process. If a short sale is in the discussion, I explain that it ads even more complexity and that I may not know all the data we want to know, but I'll do my best to learn everything I can, share it with them and we willl make the best decisions we can.

Transparency is indeed the key to trust but transparency doesn't mean telling them everthing - it means telling them everything we know - and if we don't know it yet, we'll give it our best shot to find it out.

Trust is about letting the consumer know we are on their side. Although we are "in the industry" we can let the consumers know that we are their advocates.

Trust is a one-to-one concept. They never trust "the industry", no matter what happens but that has nothing to do with developing trust with us as individuals.

Brian, you are fulll of smoke. There is no such thing as a non-minipulated market. Well, maybe if you wanted to market home just like pork bellies. But even then the Hunt brothers demonstrated the market could be minipulated. As long as attorneys and banks are at the helm, there will be no transparancy, not for the man on the street. Your solution would most certainly destroy the industry as we know it. The most corrupt would be the inheritors of what remains. And you want to call that position protectionism.

If you want to be trusted you need to be calling wolf before the chickens are stolen! Citizens should have heard 'Don't buy at these inflated prices!' 5 years ago. Citizens should have heard, "Don't buy this house using this ARM. You really can't afford it!" Today they should be hearing, "This short sale will leaave you in 18 years of finanical purgatory! Let's get real closure on this now." This profession is not trusted because "by are lack of actions" we have proven oursleves to be untrustworthy. Where is the accountability?

DO NOT AGREE... Real Estate Market is always based off of supply & demand. Also with the internet there's WAY more info out there at the fingertips of the public than ever before. If that's not enough i make sure i get that info out to them actives, pendings, closed sales, etc.

There's so much info online that i'm seeing buyers & sellers that know more than the average Realtor. As Realtors we all better be continually learning and knowing what's out there for our tool belt and use it because our future clients already are using those tools.

Our business needs to desperately rethink its paradigms if we're to remain relevent, or we'll find ourselves sidelined by the Trulias and Zillows of the world in a decade.

Completely agree, David. Most folks are pushing back because that was how they were trained (seller confidentiality, etc, etc). It is my opinion that this demand-side data will be a requirement from banks before funding a loan on a property, within 24 months; if they don't get it, they won't play.

I used to respect your opinion .... until now. No way, there are so many points I disagree with I don't know where to start!

I'm just the messenger who's looking for a way for us all to benefit from this.

As long as attorneys and banks are at the helm, there will be no transparancy (sic), not for the man on the street.

The idea is for the "man on the street" to have equal access to the data as the "attorneys and banks". I hear you and want to see that access made available.

Your solution would most certainly destroy the industry as we know it.

I don't follow your reasoning. By giving consumers access to data that helps them make better buying decisions, I believe many of the frenzied purchases wouldn't have been made. I think if the consumer has access to this data and the data on Zillow, in 2004, there might have been more deliberation and better questions would have been posed to real estate professionals.

PS: (added later)- access to this data will certainly alter the "industry as we know it". I think the real estate industry (lenders, appraisers, and real estate brokers) is at fault. If this change stops the insider trading and "caveat emptor" approach to engaging the services of a lender or real estate broker, than I'm all for it

The banking and credit system is a problem to more than just the housing industry. The model relies on constant level of inflation at at least some minor level. I think in general markets work. The real estate market is not as fast to respond to market forces as the basic consumer goods. It is like trying to turn an aircraft on a dime, it does not happen. Your argument about new cars in the warehouse does not work. In real estate the "new" market is now crawling along, it just took them a long time to slow down.

I wish there was a way to put all offers on the MLS for the sellers only to see. I think there are some issues this might resolve, especially with REO Offers.

Many agents have been caught up in the market problems too, it is not like they knew a big secret. I looked at what was going on and figured inflation was coming (and it still is). I did not see a bust this big.

Brian,

Wow, this sucked me right into AR from an e-mail this morning. Of course, it was one of the BHB gang! It sounds like you think this is coming and is inevitable. If I read this correctly, it will be driven from the lending side. So, since the initial question is how do we make money with this paradigm, isn't the next layer of the onion theorizing about how this system might be be born and evolve into something we use?

I certainly don't follow the lending side of the market like you do. From my little perch that has no real view of the details of the lending market, might not this be driven from the legislative side of this increasingly nationalized market? If so, wouldn't it be pitting the lobbiests of the NAR against something as yet to be defined? I like the idea of a more even playing field. I just don't know how inevitable change is if it doesn't yet have a deep pockets champion and there are some big rocks yet standing in the way. I rarely see effective and creative legislative solutions, so could you expand a bit on why you think this is inevitable? Thanks!

I rarely see effective and creative legislative solutions, so could you expand a bit on why you think this is inevitable?

Of course, Al. I met a guy last month who is bringing an agent-friendly model to market. I'm interviewing him this weekend on BloodhoundBlog Radio. He'll share a peek of his site, pre-launch, with all the BHB gang.

Good point that lenders will probably drive the move to requiring demand-side statistics. Agents are already doing this in effect when they put together the seller side of a short sale package. It's not much of a leap for lenders to start requiring a property-specific offer history as part of the appraisal and underwriting process. They're asking for everything else, what not one more thing?

Ultimately, the push for it may come from the marketplace. First, create the mechanism in the MLS's for sellers to provide an offer history if they choose. Then when presenting a property to a client, one of the items I can discuss with a buyer is whether the seller has chosen to disclose the offer history. Buyers will likely show a preference for dealing on houses where the seller is disclosing an offer history versus ones where they're not, and over time houses without an offer history disclosure will be at a market disadvantage.

I expect a move like this will come first in states where transaction brokerage is common, versus states like New York, where we don't have transaction brokerage yet.

I started in this industry in 1979. I have seen three boom-and-bust cycles. Greed drives the boom, along with easy money. The bigger-fool theory steps in "Even if I over pay for this home, a bigger fool than I will come along and I can unload it on him." Every time the market skyrockets, buyers panic, worried that they will never be able to buy a home to inhabit if they don't buy now. Speculators buy homes they don't want to inhabit. They want to "flip" them to make instant profits. (Flip is a four-letter word) This speculation, added to panic purchasing, drives home prices beyond realistic prices. Fraud starts playing a bigger and bigger part in the market, with builders, lenders, appraisers and Yes, real estate agents complicit in sales to buyers who have no real chance of paying the mortgage. 80-10-10 loans 80-20 'sleeper' loans and other hybrids that look good to buyers today and are poison tomorrow (neg-am, anyone?) are employed to sustain an unstustainable market. No, we don't learn. Yes, it will likely happen again. Each time we crash, I think maybe folks will resist the temptation to jump in and over pay. Herd instinct makes it difficult to resist, especially when what you are trying to do is put a roof over your family's heads.

As a conservative, I don't like legislation as a means of solving economic problems. On the other hand, maybe tighter controls on the market are warranted.

I have to agree with an earlier response by Ralph G. It is all about supply and demand. As far as the buyers not "trusting" I take that one client at a time.

As a conservative, I don't like legislation as a means of solving economic problems

Good Lord Steve, neither do I! I"m talking about solving this problem through the free market. Read David's (from the Catskills Agency) comments. Especially this one:

I'm not sure What Buyers' you are talking about. My buyers trust me, almost to a fault. Making a simple statement, doesn't make it true. Buyers, (people) trust THEIR Realtor/Loan Officer/etc. (people). I guess as you can tell, I simply disagree with the statement, therefore disagree with the solution.

And yes, I did read the entire Article before commenting.

Our buyer really don't have to trust the industry. We prove to our buyers that they can trust us and we will protect them from the boogy men and women in the market.

"Prominently display the terms and dates of the rejected offers, verified by participating market professionals, in the MLS system, and you solve the demand side of the equation because you identify the "size of the market". Share that information with the banks and they'll start trusting you. Show it to the prospective buyers and they'll throw their arms around you in joy. The sellers will "get real" about the market, also."

The seller or the seller's agent can game this system. As a seller I get three of my well qualified friends to make 3 under asking price offers, but each one successively closer to asking price. These offers are refused. I can now make a case that it is not going to sell under asking price. It matters not what people aren't willing to pay for the house, only what they are willing to pay (and in almost all cases, what banks are willing to lend).

Thanks to Len Harley for saving me the time to rebut Brians post. The real estate market has as many variables as do the parts of four exabytes ( = 4x10 to the 19th power). One would have to create the worlds largest stock exchange to handle all the value range propositions. Can you say mind boggle? Then again, a whole new industry would be born and we could possibly get the unemployment rate back under 8%.

"Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself especially, are in a state of shocked disbelief." Alan Greenspan beofore The house committe on Oversight and Gorvernment Reform, late in 2008.

This idea (as you suggest in your post) that all we need is lassiez-faire transparent, free market capitalisim and it will regulate itself in "enlighted self interest" is Hokum. And if you or anyone still think that the CRA loans had something to do with the mortgage meltdown you might find interesting reading here

http://www.traigerlaw.com/publications/traiger_hinckley_llp_cra_foreclosure_study_1-7-08.pdf

I too read the entire article, but you raise several different points. Some have to do with mortgage lending, some with buyer's agents and some about how the government may have contributed to the mortgage meltdown. So I'm just going to address the transparency issue because that's what most people are talking about.

I'm not sure I completely understand how you would implement the transparency idea in the real world. Are you suggesting to: (A) list all competing offers on a website (like an eBay style auction) or B) just post all offers after the bidding period had ended?

If you are suggesting option A so that a buyer could better judge how much demand there is for a property, mightn't this approach still inspire dishonest listing agents to "forge" offers to sway buyers/lenders?

Personally, I would favor option B because the main dishonesty issue that I see, usually has to do with "insider trading" issues - where an REO agent from Company A will ask you to bring your "highest and best" offer, you comply, you lose and then three months later you discover that a much lower offer than yours had been accepted. And the buyer was also from Company A - but with a different agent than the listing agent.

In this case, transparency is valuable. So if option B is used and all offers could be simply posted on a website for any buyer to see, buyers could see for themselves the amount of supply/demand and make adjustments to their future offers. And lenders could feel happy too!

Brian,

Good points, perhaps why some people look at Realtors with more disdain than some lawyers...

Truth works best, though it really is interesting how some people have no idea how to take, or tell the truth.

Perhaps it is getting better, though if Habitat for Humanity has anything to say about it, everyone will be begging...oops...seems some people have forgotten that it is a privilege to own a home, not a right.

In other words it takes work, in order to buy or own, while also on the other side it takes work to help people sell, though they need to know the offers when the Realtor recieves one...

Not if dual agency were not permitted on the website. A website that monitors the agents would dissuade the sort of collusion you fear

Interesting concept. I think the whole discussion as to whether a house can be brokered like a stock is valid since location, location, location is key in real estate. I would strongly agree that much of the information regarding these properties being kept super secret is a problem and it wont be solved by the lenders voluntarily doing anything. The inside deals and the lack of transparency of information make this whole process very prone to corruption.

Anyone ever observe a real estate auction of a quality property with on line only bidding ?

Omar

"Not if dual agency were not permitted on the website. A website that monitors the agents would dissuade the sort of collusion you fear."

Okay, so what you are saying is that if I am the listing agent from ReMax and have 100 agents in my office, then Mary who works in my office could not submit an offer on my listing, correct? Because that is dual agency.

And because I would be the person who is posting the offers I have received online.

What you are saying is that if I receive one offer from Mary in my office and want the bank to take Mary's offer, I could not simply post the information of two, lower "fictional" offers that I supposedly received from Agents G and D. Right?

Okay, so what you are saying is that if I am the listing agent from ReMax and have 100 agents in my office, then Mary who works in my office could not submit an offer on my listing, correct?

Not on the site.

JUN

Your headline states that the reason for this is to establish trust. If that's the reason, the whole idea should be thrown out. You will not increase trust one iota because there will be someone, somewhere who comes up with a way to expoit the system and use it in a manner that was not intended. Once this fact is known, you'll be right back to having trust issues - this time it might be the SELLERS who don't trust the industry.

Changing a process will not cause consumers to trust an industry more or less. It is how the system is applied by their Realtors that will determine the level of trust.

My clients trust me and they always will regardless of what the systems and processes become. I act firmly within the code of ethics and I always do what is right for them. My Grandfather taught me that if you are in business you must always do what is right for the customer - if you do that, success will come.

Perhaps there's another valid reason for this but somehow I think the real benefactor will be the lenders - which maybe will ultimately be better for us all - I'm not sure - but to sell this idea in order to build trust - that just doesn't wash.

Your headline is wrong, it is not the real estate industry that is the subject of mistrust, it is the mortgage industry and rest assured the public knows the difference.

it is the mortgage industry

Oh...agreed. I don't think you read the original article, though. I plainly assess the sources of mistrust there and lenders are cited. Lenders are trying to clean this mess up and accurately measuring the demand-side for properties is what they will want to see, moving forward.

I think the real benefactor will be the lenders - which maybe will ultimately be better for us all -

Correct, Rick.

JUN

How to fix an industry:

1. No dual agents.

2. Buyers pay their agents instead of sellers.

3. Government stops making loans through FHA, VA, Rural Housing, etc.

4. Government shuts down Fannie and Freddie

5. Federal Reserve stops manipulating interest rates.

6. Housing lobby banned from Washington

7. Realtors move away from NAR

Won't happen.

How about if we solve 1, 2 and 7, Dale? Might that help?

To this point in time, this information which you would like to make "public" has been "private and confidential". That's based on common laws rules of agency.

That could change if there is a better model.

However, I don't think the trust or mistrust issue is based on that. I think it's based on professionalism, or the lack of it.

Brian Madigan

JUN

Because too many people have had bad experiences. Until the industry becomes more professional, and contains less sharks, Realtors will always be on the same level as lawyers.

JUL

Yeah, lets disclose confidential info. This concept is flawed on so many levels, but I'll mention just two primary stumbling blocks - agency and fiduciary.

FWIW, if agents were on the same level as lawyers, that would be a huge improvement.

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