Greater Hartford Real Estate Blog

Last week I reported on real estate market statistics for the spring in a number towns in the Greater Hartford area. Most towns had seen a significant decline in the number of closed sales when comparing April through June of 2008 to 2007.

While those statistics are troubling for sellers, they are also troubling for those who earn their living in the real estate industry; your local real estate agent, closing attorney, mortgage broker, home inspector, appraiser, and insurance broker.

I was curious to understand how bad things really are on a transaction-per-agent basis, and I have access to the data, so I did a little digging. The results are startling.

Let me explain this little chart to you.

The CTMLS is a big database that agents pay to join and it tracks most of the closed real estate transactions in most of the state. Commercial agents tend to use other methods of tracking their deals and Fairfield County has their own MLS to track their transactions, so they won’t be included in this analysis.

Anyway, there are 20,000+ agents that pay to have access to the CTMLS. Some of those people are brokers that manage offices and appraisers, so I estimated those groups to be 5% of the members and took them out of the analysis, as they aren’t actively trying to sell real estate. That leaves us with approximately 19,250 agents actively trying to sell real estate in a significant portion of Connecticut.

Then I looked at the number of closings this year for single family homes, condos, multi families, land, and commercial. Each deal has a buyer and seller represented, so the number of “sides” that agents share is actually double the number of closings. Remember, this doesn’t include Fairfield County and most commercial deals.

And now the results, getting to how much the average agent has earned this year PRE-TAX.

For each sale, the total commission is split between the buyer and seller brokers. The agent then takes their check back to the broker and it’s split again, this time between the broker and the agent. I estimated the split between the brokers to be 2.75%, as we typically see 2.5% or 3% offered in the MLS. I also estimated the split between the agent and their broker to be 70%. This split between the agent and the broker is a little bit more of a guess, as each broker has different split plans which are closely guarded. So the 70% is a rough estimate and may actually be a tad high.

On average, for my analysis with my assumptions, a real estate agent in the CTMLS has taken home a little less than $7,800 for the entire year. And that is PRE-TAX. Oh, and that doesn’t take into account the expenses for getting to a closing (advertising, membership dues, gas, etc.).

There are many agents that have done well more than the 1.4 closings this year that averaged in my chart. Which means there are many agents that have done no closings this year.

Last year, the National Association of Realtors saw a decline in membership for the first time in 8 years. I wonder what will happen locally to many of my real estate colleagues? It truly seems to be survival of the fittest right now.

I recently received showing feedback for one of my sellers. The buyer didn’t like the layout of the house. All I could conclude from the feedback was that the buyer didn’t like that very typical house style. There was nothing my seller could do to improve this objection for future showings. Which brings me to the subject of issues with a house that cannot be fixed.

Some houses are cursed with in-cure-able conditions. Here are some common examples…

- The house is 3 feet from the neighbor’s house. Like my house. Hello neighbor…

- The house is very close to the road.
- The house is on a busy road.
- The house has a shared driveway.
- There are power lines in the backyard.
- The neighbor’s house is blighted.
- There is no usable backyard space.
- The ceilings are very low.

As a seller, there is nothing you can realistically do to fix these issues. If you continually get the same complaint and you want to sell quickly, typically the only way to respond is to lower the price to a level where the incurable becomes a non-issue. It’s painful, but it’s the only way to get past the recurring “My buyer didn’t like the …” feedback comments.

If you’re in this situation, don’t get panicky and upset. Just remember that the condition was most likely present when you purchased the home, which, at the time, should have allowed you to get that house at a discount compared to similar homes without the incurable condition. Be aware of these issues when you’re buying and remember them and be realistic when you’re selling.

I recently received an email from a reader interested in the West Hartford market. Because their question was related to property taxes, something people are fixated on most of the time, I thought I would share the conversation with the masses…

When looking online, every once in a while I am thrown off when i see two similar houses that have two totally different “estimated tax” amounts. A good example i found this morning is:

Property A (Est. Taxes: $7,641)
Property B (Est. Taxes: $4,112)

Both have similar square footage, same bedrooms, similar size lot, but two totally different estimated tax amounts.

Any idea why that is?

Here’s most of the reason why the estimated tax amounts are so different in this case:

The local Multiple Listing Service automatically calculates taxes for the agent when they enter the listing into the MLS database. The system does not appear to do the calculations correctly if the town is doing some type of phase-in, or if the mill rate recently changed. In this case, West Hartford is doing a phase-in and the mill rate recently changed.

What agents should do to properly calculate the taxes is manually calculate them on their own or call the town tax department and ask for the current year’s property taxes for the parcel excluding any special adjustments for veteran status, senior citizen discount, etc. Agents really need to be more diligent about tax amounts because it’s something that buyers look at closely. The local MLS also needs to fix the program for automatically calculating taxes, but those requests seem to fall on deaf ears.

These are the most common reasons why you will see estimated tax amounts vary widely on seemingly similar properties, user and system error.

So, the correct taxes for Property A (based on the new mill rate of 37.09) is $5,698 and the correct taxes for Property B is $4,448, a difference of $1,250 this year.

And why the actual $1,250 difference in this case? There are a few reasons to explain that as well.

The assessment which drives the taxes is based off of some of the things the reader mentioned like square footage, lot size, # beds, # baths, etc. It’s also driven by what the Assessor sees as external and internal condition and the improvements the owners have made. The one major difference that I see between Property A and Property B is that on the Assessor’s website, Property A is called out as having an updated kitchen. That means when the owners of Property A improved their kitchen, they pulled town permits. That then alerts the town to place more value on the assessment for that property. Often we’ll see homeowners make improvements without notifying the town because they may get “penalized” with higher taxes. This type of system deters people from pulling town permits when they have improvements done on their home and creates a whole separate host of issues.

Additionally, when the town did its revaluation in October 2006, residents had the opportunity to challenge their assessment. Some homeowners choose to challenge, while others do not. So the homeowner on Property B may have challenged and received a modified lower assessment, while the owner on Property A did not.

Finally, the location may make somewhat of a difference. Property A is in a neighborhood that would have slightly higher home prices, so the Assessor probably has some way to factor that into their analysis.

In order to be perfectly clear on the tax amount for a property, call the town hall’s tax collection office and ask for the property taxes with no exemptions. Just don’t call on a Friday because they’re closed.