Dr. Housing Bubble 02/06/09

[Crewleader]

The End of the 6% Commission:
Examining the National Association of Realtors and why Agents and Lenders are Going the way of the Travel Agent.

The real estate business will never be the same because the rules of engagement have now been altered by the collapsing economy. I made this argument many years ago and faced a strong amount of resistance. My argument was that real estate agents and lenders/brokers are overpaid while Wall Street assumed the role of head money cartel funding the dealers while the Fed actually grew the homegrown credit. The entire system was corrupt to the core and these pillars all caused the housing bubble; the users, the pushers, the credit, and the Wall Street delusion. I stand by that claim and I think most Americans are seeing through the crap the real estate industry complex has been shoveling. In fact, on a recent NPR show they had a former Countrywide employee actually saying something to the effect of, “hey, we didn’t force people to sign.” These people were delusional and much of our problems stem from this incestuous rewarding of financial deviants for juggling a decade long bezzle.

There is enough blame to go around but the magnitude of blame for certain groups is certainly not equal. I hold some of these “so-called” professionals to a higher standard because they are professionals (supposedly). If you asked your cousin Johnny to operate on your foot and it gets massively infected with gangrene that is your fault. But if you go to a medical doctor and the same thing happens, there is a certain shared responsibility at this point. The same thing happened with real estate agents and lenders. You were better off doing your own thing than listening to these people but many people fell for the suit and tie theatre and actually believed that most of these people knew what they were talking about. They clearly didn’t. The National Association of Realtors used to have an “anti-bubble” page which miraculously is no longer up. Since the link is now inactive, thankfully another blogger over at Bubble Meter was smart enough to copy and paste some of the text back in November of 2005. Let us look at some of their sage advice shall we?

“Has there ever been a national housing price bubble?

No, not since good recordkeeping began in 1968. There was a national decline in the 1930s during the Great Depression; however, home prices were not a prime concern in that era. The greatest issues were essentials such as food, clothing, employment and shelter of any kind. Declining home prices were a natural result of a general economic collapse caused by the stock market crash in 1929.”

Bwahahaha! Home prices were of little concern during the Great Depression? That’s news to me. Pass me the housing crack pipe please. What they fail to mention is that there were many regional housing bubbles in our history including a 1920s Florida housing boom and bust. Plus these blind mice were unable to see the biggest housing bubble while they were standing in it at the apex! And incredibly, this was the first ever national housing bubble that just burst and the National Association of Realtors flat out missed the biggest economic event of our lifetime and it had a nucleus in their industry, housing. Talk about missing the boat. This almost reads like a poorly written comedic piece:

http://www.doctorhousingbubble.com/commission-money-real-estate-housing-zillow-redfin-ziprealt/

[Digit]

1. I checked out your link, and they don't have a clue how commissions are split

My license is inactive by choice, as I can't afford to do the job as an independent contractor paying both sides of social security, having to pay quarterly taxes in advance, and having to pony up the cost for my own health insurance.

Your link quoted a price of a $500,000 home in California. In my area, a good sale would be more like $200,000 and the breakdown is as follows. Since I usually represent buyers, the split on 6% of that or $12,000 since you quoted that amount (although commissions are not set in stone) is divided 60% for the sellers agent (or $7,200) and 40% for the buyers agent (or $4,800) or at least it is in my area of the country....lucky me. So my side gets $4800 and that amount gets split 50/50 (most of the time) with my broker in charge or the agency.

So, I get $2,400 to represent as a buyer's agent for 2 or more months, showing you dozens of properties, educating you on the pros and cons of each property, going over your final selection with a fine tooth comb BEFORE we even schedule a home inspection so I can put things in the contract which are considered "cosmetic" and will NOT be covered in a home inspection report, pulling comps, crafting the offer most beneficial to you and your terms, negotiating the offer, arranging financing, scheduling settlement, countering the other agents reasons for not wanting to comply with the home inspection reports (always a biggie here), scheduling settlement, having to go back and forth checking to make sure the repairs are made PROPERLY, scrambling when we find the survey is screwed up and the neighbors are encroaching on your driveway, fighting when the appraisal comes in haywire and we have to send the appraiser more recent comps, and then handle things when the sellers new home is not going to be ready on time and it pushes everything back, and then finally we get paid at closing $2,400.
In real estate, your life is never your own. You get calls at 11pm asking you questions about the contract, you are in the middle of dinner and have to show properties and it is like being on call 24/7.
I don't sell real estate anymore because I prefer to represent buyers as I like to protect people from making mistakes. This puts me at the disadvantage of getting only 40% of the commission right off the bat. Then you have the people who you have spent months with only to go and buy at an open house and you get nada. Then they call you when things go wrong and you are not part of the deal and can't help.
I have switched careers since I need something with benefits and some security.
If I had a dear friend or a former client who really wanted my help, I would activate my license and help them, and there is one on the horizon who will probably want me to list her home. We had it built from the ground up and I even chose the lot for her as she was out of state.
Burnt out? Yes, I guess I am burnt out after 30 years, and hearing that you don't think we earn our money is naive. You have no idea of all the things that can and DO go wrong.
Did I mention I was INACTIVE? It is for a reason.