Archive for January, 2008
Would You Sue Your Buyer’s Agent?
There is an interesting article in the New York Times today about a buyer in California that is suing her buyer’s agent. Marty Ummel believes that her real estate agent hid information that similar homes in a neighborhood were selling for less, in order to keep a deal together and retain his commission.
There are a lot of things at play here; the real estate agent was also the mortgage broker (which to me seems to be a clear conflict of interest), each party has an appraisal stating a different amount for the time period when the home was purchased, there is no clear agreement if agents should provide price recommendations to a buyer.
The National Association of Realtors says it has no cases that revolve solely on valuation. It will be interesting to see where this case leads and the precedent that will be set. What happens if Realtors are no longer allowed to provide price guidance? How will this affect price recommendations for sellers? Will they need to hire appraisers?
More on Seller Concessions
Oh Lordy. That was my reaction when I read the title of the Hartford Courant’s front page article on Sunday, Truth About Home Prices. Most troublesome were the comments posted online by Courant readers. I could feel the venom oozing out of my laptop. It seems like there are a number of misconceptions out there about seller concessions.
A few observations after reading both the article and reader comments…
1. The MLS covering the Greater Hartford region has used a Seller Concessions field since 2005. It was not recently created because we are seeing more seller concessions. When an agent closes out a listing once a home has sold, they indicate a “Yes” or “No” in the Seller Concessions field, based on that home sale. The agent then may or may not enter the amount of the concession.
2. The article cites seller concessions for the last 4 months in West Hartford. When I pull the data for single family homes in West Hartford for the last 4 months, this is what I get when it is compared to the same time period in 2006…
and if I look at the entire year for 2007 compared to 2006, this is what I get…
I believe it’s important to compare statistics over time rather than looking at a single observation in isolation. In this case the comparison shows that there is no meaningful difference between seller concession this year and seller concessions last year.
3. Real estate commissions are paid on the net sale price, which is the gross price less the seller concession. So the agent doesn’t inflate their commission by encouraging seller concessions. Concessions help facilitate deals and are especially helpful to buyers that are short on cash. However, sellers do pay conveyance taxes on the gross sales price, and the gross sales price is picked up when towns do reassessments.
4. As the author of the article points out, seller concessions are legal but “become sticky if the sales price of the home, with givebacks, exceeds the true value of the home as determined by an appraiser.” When dealing with concessions, the main issue is that the bank’s loan must be secured. They cannot loan more than the house is actually worth. Hence, the house must appraise for at least the purchase price, with the concessions built in. For example, suppose a house is listed at $400,000. My buyers agree to the list price, but only if the seller gives a $10,000 concession back to the buyer to cover closing costs, resulting in a net price of $390,000. The house must still appraise to $400,000 in order for the bank to fund the loan.
5. So if house prices are decreasing, then why are houses still appraising with the built-in concessions? Homes are still appraising well because they use historical data. An appraiser will use home sales that closed in the last 3-6 months when choosing comparables for their report. Theoretically, if home prices have recently decreased, the house will still appraise, even with seller concessions added on, because the appraisal is using prices from 3-6 months ago.
If prices are decreasing, in 6 months houses won’t appraise as high and sellers will have less room to give concessions. This will still be to the advantage of buyer if prices continue to fall because there is a lag and the lag will continue. However, when prices begin to rise, buyers will have to bid higher to purchase the house. Those without cash that need a seller concession to make the purchase will be at a disadvantage because the appraised values will still be tracking the market lows. The house may not appraise and the bank won’t fund the loan.
Just some things to think about as we try to deal with the data that is out there and where the housing market will go in the upcoming months.
Bodies Revealed- Hartford’s Limited Engagement Science Exhibit
If you’re eating breakfast, you might want to finish up before you read this post.
You may have seen the billboards around the area for Bodies Revealed. It’s a somewhat graphic human form, cut in half, skin pulled away revealing muscles and organs. Kind of invokes the reaction of “Eeewwww…” from most of us.
Well, I put my queasiness aside this weekend and went to check it out. If you have any interest in science, what your innards look like, or how much body weight you’ll lose if your spleen is removed, I would highly suggest you go see it for yourself.
The exhibit is located at the XL Center in Hartford and is sponsored by Hartford 21 and Northland Investment Corporation. It is running until March 23, 2008 and is open every day from 10am to 10pm. Admission ranges from $18 for a child to just over $25 for an adult, with discounts available for seniors. More pricing information can be found here.
The premise of Bodies Revealed is to use real human bodies and body parts to allow us to see and understand our inner workings and various systems. The process of polymer preservation is the fascinating technique that allows the forms in the exhibit to reveal the true intricacy of the human body.
Here are my takeaways and recommendations…
1. My reaction to the exhibit was more “neat” than “gross” or “sad.” There was the thought of “this used to be a real person” when I approached one of the full body specimens, but the person donated their body to science so people could learn. The exhibit was truly fascinating, from both the standpoint of how the body actually looks inside and how they actually preserved the bodies. My main takeaway from the exhibit was how complex my body actually is and that I’m grateful all of my systems are working well and that I am, in general, a healthy individual.
2. I visited on a Saturday around noon and it was quite crowded. It was sometimes hard to see the display cases because there were so many people. If your schedule allows, you might want to visit during “off hours” which are probably weekday evenings.
3. You can buy tickets online, but be warned that Ticketmaster will charge you a $3 surcharge for each ticket. You might just want to buy tickets at the XL Center and avoid the extra charge.
4. Allow at least an hour and a half to get through the exhibit. If you purchase the audio option with your ticket, you might want to allow more time.
5. No cameras, cell phones, strollers, backpacks, etc. You know the drilll. Just turn your cell phone on vibrate and you’ll be fine.
6. Not sure about the age appropriateness. My husband said he would give it a movie rating of PG-13. It’s somewhat graphic, but scientific. I didn’t see too many children when I visited and the ones I did see were probably between 8 and 10. They seemed to think it was “cool” and not scary.
Enjoy the exhibit!