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Eliminating asking prices on homes: make it so [editorial]

Could simply eliminating asking prices on homes and allowing buyers dictate pricing make a difference in the real estate industry? Let us take a look at who really sets asking prices on homes.

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eliminating asking prices

Who sets the price of a home?

Okay real estate insiders, I have a question for you. Who sets the price of a home? The seller? Nope. It’s the buyer that says, “I want to pay X dollars for Y house.” Yes, a seller sets a price, but in the end, there has to be someone ready, willing, and able to purchase the home.

Because of that, why are we letting sellers dictate a sale price? Why do we continue to allow some agents take listings at ridiculous prices in order to buy the listing (which is a NAR violation)?

It’s the buyer that sets the price

So, to that end, I propose the elimination of an asking price. Then, a good real estate agent can do their job by researching what someone should pay for a home, the overpricing listing agents and their sellers will not be able to make up unrealistic numbers anymore, and the mortgage lenders will realize that value is what someone is willing to pay at that date in time. Impossible? No. Improbable? Probably. But, let’s take a shot at it.

How this would work

Say your client wants a three bedroom, two bath colonial in the Repel School District with at least a one-car garage and swimming pool.

You, as the agent, then research the sold listings and then the MLS for the type of house, not the price.

You can also hire a certified, quality appraiser to help you go deeper if you need their help!

Then, your buyers will put in an offer based on reality and the seller will get an offer, again, based on reality.

Yes, I know, there are tons of details, but I am an idea guy. You can help me by coming up with the ideas and see if we can make this move forward.

Make it so

It makes everyone’s life easier, it makes the good agents stand out, it eliminates the bad listing agents that constantly overprice, it puts sellers and buyers into reality pricing, and it helps mortgage companies know values.

As Captain Picard would say, “Make it so.”

make it so

Realty Reality! That describes Fred, a sharp witted and outspoken realist for the mortgage and real estate world who has appeared on CNBC and NPR's Marketplace along with being quoted in the New York Times, The Wall Street Journal and other media outlets. Fred is the CEO of U S Spaces, Inc/Arrivva (a real estate brokerage firm in PA, NJ, DE and CA) and U S Loans Mortgage Inc (mortgage brokerage in PA, CA, FL and VA), and serves on the Board of Directors and is the Federal Legislative Director for the UpFront Mortgage Brokers. Fred is also the co-creator of real estate startup Rentscoper.com, a mathematically driven rental search engine. See everything Fred at fredglick.com.

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6 Comments

6 Comments

  1. Jonathan Dalton

    June 17, 2013 at 3:48 pm

    > You, as the agent, then research the sold listings and then the MLS for the type of house, not the price.

    Ummmm … we already do this for our buyers. I think that came up around day two.

    > You can also hire a certified, quality appraiser to help you go deeper if you need their help!

    Ummmm … because in an imaginary world, appraisals are unbiased evidence of a home’s intrinsic value and not just one person’s opinion of value often colored by whether the appraiser a) has a brain and b) had a fight with his spouse and hates the world.

    > Then, your buyers will put in an offer based on reality and the seller will get an offer, again, based on reality.

    Ummmm … have you worked with a buyer recently? I listed a short sale, priced right on the number of the last two sales. Call that “market value.” Received an offer at market value less $30,000, another at market value less $75,000. Somewhere, the buyer and his/her agent skipped the other two steps.

    We’re not selling homes on Beezid, Fred. Tell me how many other retail items you see where there is no price set by the seller. Off the top of my head, I’m not coming up with much outside of the two guys on American Pickers rifling through some hillbilly’s garage.

  2. MattThomson

    June 17, 2013 at 4:19 pm

    I’m not sure if you’re being serious here. Is the basic premise of your argument that seller’s and listing agents are unrealistic, but buyers and selling agents have the market nailed?
    You’re wrong about value. True, sellers don’t determine value. But, contrary to your argument, neither does a buyer saying I’m willing to pay X price for Y house. Value is determined by what a buyer will pay AND what a seller will take.

    So, similar to what Jonathan commented, if a buyer is only willing to pay 80% of fair market value, the seller should just take it? Is that really your argument?

  3. Hank Miller

    June 18, 2013 at 8:56 am

    Great idea, but as we all know it’s far too simplistic to work. There are a mountain of reasons why and it starts with agents willing to say yes to any price just to list, buyer agents just putting folks in homes just to make a sale, owners that are convinced they “have to get X”, buyers that are convinced they have to pay “Y” and appraisers that are simply writing to keep underwriters from ripping them apart.
    Simplistic view but also not far off when everything is boiled down. There are too many influences in a real estate transaction to have it be as simple as a garage sale transaction. And with our friends in Washington getting more and more involved, it’s just going to get worse.

  4. Guest

    July 25, 2013 at 9:20 pm

    OK, so I like this concept. A lot. It would require an awful lot of unified momentum to happen in real life, and our industry is as fractured as our government.

    Two big challenges I see to making this happen: First, how to deal with the cognitive dissonance of sellers, who aren’t willing to list their home unless it’s at X price (where X = market value + 15%). In those situations, the rational offer amounts of buyers should help get them to “face reality as it is, not as [they] want it to be.” (credit: Jack Welch)

    The other challenge is the not-so-serious buyer who has the same disconnect from reality and would be approved for $200,000 and ask an agent to show such-and-such property, whose actual market value is somewhere around $350,000. In other words, it would lead to a lot more wasted time among agents. And when it’s their collective will you’d need, it’d be hard when that would be the negative byproduct.

    Having said that, you may know that in Austrailia it is typical for homes to be listed within a broad range, which helps give SOME indication of where the value may lie, helpful for both buyers and sellers to get a basic sense of things. Then it is on the market and available for viewings and inspections for 30 days, at which time it is then auctioned it off in a public auction. Now THAT is an accurate and efficient way of determining market value. No more time pressure on getting in your offer first, on wondering why your buyer didn’t get the house, the seller doesn’t have the tough choice of either (a) capitulating to the offer from the buyer of the moment or (b) holding out with faith that someone else will eventually come around. The seller knows they got market value, for they see everyone who does (or doesn’t show up) and know that no one else was willing to pay any more than the auction winner.

    The combo of range pricing, 30 day marketing periods, combined with auctions at the end, is a wonderful concept in my mind, and one that I think would be easier to pull off in real life. You wouldn’t even need the whole industry to migrate all at once; you could still have this strategy operate within the existing culture of list prices and required fields in MLS systems.

  5. Aaron Lewis

    July 25, 2013 at 9:21 pm

    OK, so I like this concept. A lot. It would require an awful lot of unified momentum to happen in real life, and our industry is as fractured as our government.

    Two big challenges I see to making this happen: First, how to deal with the cognitive dissonance of sellers, who aren’t willing to list their home unless it’s at X price (where X = market value + 15%). In those situations, the rational offer amounts of buyers should help get them to “face reality as it is, not as [they] want it to be.” (credit: Jack Welch)

    The other challenge is the not-so-serious buyer who has the same disconnect from reality and would be approved for $200,000 and ask an agent to show such-and-such property, whose actual market value is somewhere around $350,000. In other words, it would lead to a lot more wasted time among agents. And when it’s their collective will you’d need, it’d be hard when that would be the negative byproduct.

    Having said that, you may know that in Australia it is typical for homes to be listed within a broad range, which helps give SOME indication of where the value may lie, helpful for both buyers and sellers to get a basic sense of things. Then it is on the market and available for viewings and inspections for 30 days, at which time it is then auctioned it off in a public auction. Now THAT is an accurate and efficient way of determining fair market value. No more time pressure on getting in your offer first, on wondering why your buyer didn’t get the house, the seller doesn’t have the tough choice of either (a) capitulating to the offer from the buyer of the moment or (b) holding out with faith that someone else will eventually come around. The seller knows they got market value, for they see everyone who does (or doesn’t show up) and know that no one else was willing to pay any more than the auction winner.

    The combo of range pricing, 30 day marketing periods, combined with auctions at the end, is a wonderful concept in my mind, and one that I think would be easier to pull off in real life. You wouldn’t even need the whole industry to migrate all at once; you could still have this strategy operate within the existing culture of list prices and required fields in MLS systems.

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Austin

Austin tops the list of best places to buy a home

When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?

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Looking at the bigger picture

(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).

That said, SelfStorage.com dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).

They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.

“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”

Click here to continue reading the list of the 12 best places to buy a home…

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Housing News

Average age of houses on the rise, so is it now better or worse to buy new?

With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.

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aging housing inventory

The average home age is higher than ever

(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.

With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.

Prices of new homes on the rise

Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.

Click here to continue reading this story…

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Housing News

Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?

The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.

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zillow move

zillow move

Why Realtors are vulnerable to these rapid changes

(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.

Note: We’ll let you decide which company plays which role in the image above.

So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.

1. Zillow poaches top talent, Move/NAR sues

It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.

Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.

2. Two major media brands emerge

Last fall, the News Corp. acquisition of Move, Inc. was given the green light by the feds, and this month, Zillow finalized their acquisition of Trulia.

…Click here to continue reading this story…

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