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Thursday, June 9, 2011
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65 comments:
CR is reporting Core Logic has issued a new report of negative equity by state.
http://www.calculatedriskblog.com/2011/06/corelogic-negative-equity-by-state-and.html
After peaking in early 2009 at 24-25% of DC owners being underwater, that is now down to 16-17%. Same with VA which peaked in early 2009 at 33% underwater, now down to approx 23% and falling.
Pat, I know this is a fear of yours as you often cite the current percent of homeowners underwater (ignoring the fact that it is declining). Presumably your concern is that it will spread and bring down prices & adjacent homeowners.
The problem with that theory is that is not happening. We are now in the third year where the percent of people underwater is not increasing but declining. Further, we know that the percent of people underwater will not reach 0% until we hit a new peak price, years and years from now.
I understand not wanting to buy when the % of people underwater is increasing, but not when its decreasing. So my question is whats the "trigger point" where you decide this stat is no longer troubling?
20%? 10%? 0% and new peak prices? Is this where you decide its no longer concerning and dive back in?
Not trying to pick a fight here. Im just curious about your thought process.
BTW, if you do answer, I would appreciate an answer on point (versus say tangents about other things that concerning like job loss, austerity etc).
To me the answer seems clear -- the current percent of people underwater is not troubling so long as it is continuing to decline. Thoughts?
anon
as long as employment stays strong and
the C-S Index continues to grow,
then yes, the problems of the market should work itself out, provided
interest rates don't increase and the banks don't dump vacant property.
Anon
It's also about Price/Income and
Affordability ratios. Right now
affordability is at an all time high because interest rates are low.
however the mania is gone. That "Buy buy Buy" mindset is just trashed.
It's more a "Is this a good deal, is this where i want to be, is this a place i can stay in 5-7 years"
and in that respect it's a lot more healthy.
now VA_I's statement was she thought the market would go through a long period of stagnation and in many respects we are seeing that.
Crappy inventory, lots of people holding off, few bidders,
Very few people have to buy and many are especially in the younger demographic opting to rent.
let's consider the housing ladder.
Apartment or shared housing, Condo, Townhouse or starter house, Family house.
now lots of people are crowding the apartment/shared housing model. foreclosees, deferred buyers, young kids.
but the condo/apartment thing is a funny one. If the perception is there is poor appreciation in condo's it may become more common to rent condo's as view those as
the same as apartments...
that will slow the injection up the property ladder.
Add in, while the market is improving locally, (At this time),
the market nationally is still declining, so new entrants have a much tougher time.
Say your job sends you from LA to DC, your house in LA lost another 8%, is that going to help you buy a house in DC?
frankly the best thing would be is if the national market dropped 20%, then started a 4% rise.
Instead these gimmicks have just increased the pain
A friend put in an offer yesterday. It turns out they got 11 offers. Mania or reality? Base this on own vs rent.
VA_I
For that post to be of value we need more information, otherwise it's just noise.
If something is attracting 11 offers in this market it must have been very attractively priced.
Anything anywhere at anytime that is very attractively priced will get multiple offers.
It's when the garbage gets multiple offers, or when the attractively priced place get NO offers that this is news.
"Pat said...however the mania is gone. That "Buy buy Buy" mindset is just trashed."
No doubt. Please note, im not saying you cant be bearish. You are what you are, and presumably that has served you well in some aspects of your life.
All im saying is there are
(a) good reasons to be a bear (such as potential austerity and its effect on DC)
(b) bad reasons to be a bear (Contrarian's theory that the default of "dubai world" would crush DC housing prices), and
(c) reasons to be a bear that made no sense (i.e. citing the % of people underwater when it was declining).
You still sometimes cling to (c) and thats the only thing I was questioning here.
$769k Old Town Alexandria townhouse among the properties featured in latest installment of NYT "what you get for" feature.
http://www.nytimes.com/2011/06/09/greathomesanddestinations/real-estate-for-770000.html?hp
FWIW - that's in really about the nicest part of Old Town (although I'm sure some OT folks with waterfront views would take issue w/ that). Lack off off-street parking is a concern. Market seems really slow in Old Town to me - I've seen signs up some properties for months.
Anon
Don't forget dead cat bounce.
The dc market may be bouncing up a bit as the national market declines.
Dc has some positives. Unemployment is better here.
Incomes are higher here. Wealth is higher here.
Negatives... There was a massive bubble.
The national bubble let out then they had the buyer bribe and a approach to free money.
Why is the national bubble sinking again? Will it redraft in dc?
There are deals especially in PG now and PW
the price isnt right
Even in the wake of the worst part of the foreclosure crisis, prices aren’t rising much. According to Aaron Hargrove of Realty Executives, investors picked up hundreds of foreclosed properties, renovated them, and dumped them back on the market, where they’re selling for lower prices than they might have fetched last year. Meanwhile, tighter lending requirements are keeping some first-time buyers at bay. The sales rep for the Glenncrest subdivision off East Capitol Street says that units were selling quickly until mortgage insurance rates rose; now they’ve slowed to a crawl.
anon
http://baobab2050.files.wordpress.com/2010/10/money-week_clip_image001.jpg
Bull Trap Graph
Any chance we are in the Bull Trap here in DC msa?
pat,
As you know, there is a shortage of rentals in this region. I've got 5 apps on something I listed for rent yesterday.
If you are not long-term, then sitting it out may make sense (or may not). I'm not a fortune teller, but I'll buy stuff at 50% or less of peak if the numbers work.
Again - anyone know what happened to rents in the 30's? I know what happened in the 90's and what the demographic's look like for the next decade.
Pat-
Anything is possible, but I think it is unlikely. I think that chart is more relevant on bubbles on assets where prices move much more quickly. The fact that mortgage payments are reasonable and the fed looks like they have no interest in raising rates for a long time makes me think that Mar 09 was the nominal bottom (or at least will be close to the bottom). Real prices could definitely go lower, as many people on this blog predict many years of flatish prices, while inflation brings prices down a couple percent/year
pat/contrarian, I still can't understand how you can look at this table and can't see how important local factors are to home prices.
"contrarian said...
pat,
of course we are in a bull trap, but Anon is so narrow minded comprehending things such as that are not within his purview."
You hear that Pat? "OF COURSE" we are in a bull trap towards a more scorching, gutwrenching downturn, far worse than 2006-2009. Despite his massive prognostication failures of the last 5 years, this time...THIS TIME, Contrarian will be proven right!!!
Meanwhile...back here on planet earth, new MRIS numbers for May are out:
http://www.rbintel.com/
Prices are generally up, again, as year 3 since the "bull trap" bottom rolls along...
Median prices in Immunington and Immundria have just hit ALL TIME HIGHS for the month of may. So, just like that, all Contrarian's progress towards his "90% off peak prices" forecast for all areas has been wiped off the map, erased from existence.
Just sit back and think about that for a second. Contrarian has endured years of pain and ridicule as prices in these areas held up far better than he could have contemplated in even his most wild fantasies. Just like that, we are back at or above peak prices, and all his progress towards vindication of his "90% down" forecast over the past 5 years has just gone WOOOOOOSH, right down the toilet.
So sad... so very sad...
Va_I, I don't know if you saw my post on the prior thread re: the contemporary Rosemont house we talked about previously, if you didn't but are interested, see (toward the bottom of the page):
Rosemont
to VA Investor: re:depression rents from http://historymatters.gmu.edu/d/6907/
"“The Ruins of Their Postwar Dream Homes”: Housing Reform Advocates Testify before Congress
New home construction declined dramatically during the Great Depression as rents rose, reaching an all-time high in 1940. A persistent housing shortage continuing into the early 1950s forced families to separate and apartment dwellers to “double-up.” The housing reform movement, largely ineffectual in the 1920s and 1930s, gathered strength in the postwar period. Labor and veteran groups pressured Congress and the White House to enact a comprehensive housing policy with money for public housing and continued wartime rent control. President Harry S. Truman, echoing reformers, wrote to Congress, “A decent standard of housing for all is one of the irreducible obligations of modern civilization.” Despite opposition from real estate interests, the Housing Act of 1949 passed. Although the Act called for the construction of 810,000 units of public housing over six years—and two additional housing acts in 1961 and 1965 promised substantial increases—by the mid-1960s, more people lived in substandard housing than in 1949. In addition, many blamed public housing itself for destroying neighborhoods and fostering social problems. In the following 1947 testimony before a joint Congressional committee created by anti-housing reform legislators to stall action, four spokespersons for housing reform—including social worker Mary K. Simkhovitch, a leading reform advocate since the 1920s—presented views and proposals."
anon
what did you think about that City Paper article i posted?
i am a little startled they said foreclosure flippers are selling for less then they bought them for.
pat,
The article does not state that flippers are losing money. It states that some flippers in some areas of DC are seeing lower sales prices than last year.
The take-away from that article, imo, is location, location, location. Florida recently wrote an article that was very bullish on DC.
Ace,
Thanks for posting the Rosemont home. I do recall the discussion when it came on the Market (access. of garage, where to put a TV in the family, lack of kitchen cabs, etc.) I didn't find the objections a problem. I like the house. I would have wanted to buy it at the Courthouse rather than give the agent a big pay-day.
da55id,
Thanks for the history lesson. I'm thinking there will be a shortage for a number of years.
Da55id
Bear in mind after the war we had massive population and housing growth as the baby boom kicked off
We don't have that now and we don't have a war stimulating production
housebuyer (2 posts),
I just read your comments. Sorry, I pop in every now and then. PhD in progress, full-time job, family . . . it gets a little busy.
I'm not entirely sure what I can say to persuade you to this line of thinking. You appear to want to take the "experts" opinion rather than logically think through and investigate the pros and cons of various opinions.
I've read . . . a lot . . of books on this subject. If you really want to understand the banking system, why it's set up the way it is and how it came to be this way you've got to read some history.
If you care to understand more about my viewpoint you'll read or investigate the following:
Human Action,
Money Bank Credit, Economic Cycles,
America's Great Depression,
History of Money and Banking in the United States,
Man, Economy, State
The Creature from Jekyll Island,
The Mystery of Banking,
If you can to remain sheltered without an expansion of mind you won't.
Ultimately it boils down to money and power. Those who have it want more and will do anything and everything to obtain it. They don't give a rat's behind about you, me or anyone else unless it serves their purpose.
To believe that the Federal Reserve System (which is a private organization . . . their employees consider themselves private), which was set up by the powerhouses of the banking industry in 1913 in relatively secret collusion with the government officials, has the best interest of the poor at heart, is to me stretching belief and reality.
Krugman is a shill who believes big government can save us from the evils of private industry. He only conveniently forgets . . . who's watching the government. Certainly not the people as they end up spending their time just putting food on the table. If something is big enough the media will catch wind of it, but otherwise the government runs pretty independently with lots of abuse. Especially in the area of finance where so very few individuals actually understand what transpires. And even less when the Federal Reserve System will not even let itself be subject to an audit.
But to directly address your remark. I sure won't classify the bottom 90% as poor, that's a pretty poor definition (sorry for the pun :-) ).
The current definition of prices changes of inflation is quite new.
http://bit.ly/jppKt4
In fact, if you pick up a 1983 (I believe) Webster's dictionary the old definition will be there. During the late 70s the monetary supply (Ms) was closely watched and reported so people could see how inflation was advancing.
As I've said before, relying on prices to tell you what inflation exists is to some extent pointless. Some industries become more productive and increase efficiency so prices in that category drop. Some industries receive a majority of the newly created money and balloon (see housing bubble). Inflation causes the bubbles that have plagued the US economy for the past 15 years. Prior to that period bubbles were very rare events.
When the stock market crashed in '01 the Fed pumped massive amounts of liquidity into the market (printed money). That money went into the housing market causing prices to rapidly rise.
I'm sure rapidly rising home prices were just great for the poor!! So housing bubble burst, and the Fed injects money again and will inflate another bubble (except not in housing).
In an inflationary cycle incomes are generally the last thing to rise (incomes sure rose a lot during the housing bubble--well except for DC-not). So while many people have debt, they have to hold on until their incomes catch up. Which of course really doesn't help b/c they will then take out more loans to "inflate" away. It becomes a perpetually debt cycle. Far from helping, access to the debt just ends up enslaving the populace to banks. Beside the fact that debt is front-loaded so in order for it to really matter you want wage increases up front rather than further down the road.
Sure just about everyone has debt and they want that debt "inflated" away, so that is what we will get. But it will not be so pretty. Defaults, incomes stagnating, higher prices without increasing incomes. Inflation is not so clean as to just magically increase incomes. Worse, in the process of inflation businesses that shouldn't have started will start, businesses that should have started won't, and in general the economy becomes a basket case.
It is really hard to explain this to DC based individuals. People in DC just don't have a flipping clue as to what is really going on in the US economy. People complain about being down 30% on a house when they make 100k+. Try being down 70% with no job and rents high. After the inflationary binge the deflationary crash always happens. The housing market is paying for the inflation of the 00s and within 10 years we'll be paying for the inflation of the teens.
I do have a comment on the student loans. I challenge anyone to just actually try and get a private student loan. The federal loans have literally crowded out the private student loan market. Basically if you can't get a federal loan it means you're parents are loaded. The private loan market knows this and they consequently charge much higher rates.
And it's not just the loans. Laws are written that until a student turn 23 their parents are "required" to pay for their education. So colleges base their financial aid packages on that and now have access to the parents income level. If I'm a college and have access to a parents 100k income, darn right I'll charge more!
If more parents decided to not paid for their children's education (heresy, I know), college costs would drop dramatically. It will drop anyways (at least compared to incomes) because there is too much debt.
Sorry for more comments . . . in a posting mood. One point Krugman's chart really shows is the path to riches and wealth does not include debt. And the conclusion is inflation will "inflate" away the debts. That only works when incomes rise before default.
The downside is the "poor" have a good portion of the pensions. I don't think those returns will be great with lots of price inflation
gte-
First, its funny you think that I am agreeing with the experts by saying we will not have an inflation problem. Everywhere I look people are freaking out saying how terrible inflation is currently and how it is going to get dramatically worse. Very few people I know are saying the opposite.
Second, I agree people used to think money supply and prices were aligned so they measured inflation as money supply. This stopped a long time ago though. I think part of the reason this stopped is that they realized they are not well correlated and if you look at the actual data actually anti-correlated. In Japan (graph #2) for example the monetary base doubled from 1997-2005 while prices went down a couple of percent a year.
I agree that innovation/productivity can bring down the prices of goods, but this is tiny compared to the amount the money supply has grown so it would likely have a small impact. So that being said people care about prices of goods not the amount of money in society. As long as they have normal income growth and the price of goods is going up slowly most people will not think twice about the money supply. So I guess if money supply matters why is it that almost nothing has gone up in prices except food (caused by a worldwide terrible crop last year) and oil (caused by rapid growth in China demand and little/no growth in supply).
I will definitely admit I am wrong if prices start going up rapidly (5+%)/year on most good, but until then I am going to assume we are still in a liquidity trap where the Fed prints money buys treasuries from the banks and the banks don't want/can't lend the money so they keep the money at the Fed as excess reserves.
Finally I agree with you that many of Krugman's pro government ideas are crazy. I don't want a huge government, but I do think he is correct about inflation.
HB
We have schiz-flation Outside of DC house prices are declining while food and fuel prices are growing.
So, its a wierd form of inflation.
Anon
http://www.zerohedge.com/article/guest-post-its-debt-dummy
the debt overhang is a national problem. Now if nationally there is only 38% equity, and 33% of all houses are owned free and clear,
that means for most people with mortgages there is only 5% equity.
Add sales commisions, and that's it.
So, we will have a class of landlords and a class of homeowners and then an ass load of renters.
now DC is doing better, but, what happens if Interest rates rise, or the feds cut spending, or
we head back into a double dip?
What happens when people start walking away? Maybe it won't happen in DC, but it sure will everywhere else.
Pat-
I agree fully its strange to have housing prices falling while fuel and food prices are rising rapidly and prices on most other goods are rising slowly.
Although I think you can easily explain why prices on food, oil and other commodities are soaring. Last year was one of the worst crop years in history with a massive heat wave in Russia and floods in many other areas. Also the floods in the US a month ago destroyed 25% of the corn crop. As for oil the emerging economies have been increasing their oil demand in the high single digits/year while supply has been roughly flat at 73MM barrels/day since 2005. So I really do believe supply and demand are at least the largest reason for commodity prices rather than money supply issues.
Until the world learns to become significantly more fuel efficient or too use other fuels I think commodity prices will like remain strong regardless of whether the money supply grows or shrinks.
HB
commodity prices are rising because
bernanke gave Goldman a couple trillion to speculate on futures.
so no surprise, volume shoots up and
prices shoot up.
Look at the future volume to physical volume.
Pat-
Future volume being way higher than physical volume has been the case for a very long time. This is also true with many asset classes like currencies.
Do you really think supply and demand don't matter. It is very clear demand is going up due to growth in emerging economies. It is also very clear that supply is flat. What do you expect price to do. The reason that price goes up so much is that the demand is very inelasticity so prices need to move a lot before people cut back a little(in 2008 oil prices doubled and people only reduced their driving by a few percent).
Trying to list a house with the ex-husband. He wants the listing realtor to cut his fee a bit. Are we in that type of environment in NoVA right now? Please respond asap. Thanks
Terry-
I doubt it, but it may depend on the agent. If your husband wants a cheaper agent you could go the redfin route where I think it is a fixed 5500, which depending on the price of your house could be a lot cheaper. Although redfin likely will not do as much to try and get people into your house. So depending if your location/price point is fairly hot this could be a more/less important.
Terry,
You get what you pay for. I'd go with a top lister. If you get a lower offer, that's when I hit the agents up to kick-in some of their commission. I'm sure they love this tactic!
Terry,
You could try giving the listing agent a non-refundable fee in return for a lower commission. If you absolutely know you have to sell the house and the agent is demanding 3%. Offer them 1% non-refundable and 1% at closing. It worked for me. Actually, I paid a little over 1% total. They love cash.
http://franklymls.com/AR7511022
peak assessement 359K,
sells at 260K.
Now the seller bought in 1997 so they made money, but, it's down from
the peak by 2/7ths or 28%
pat,
How much is the NASDAQ down from peak? In other words...so what? I doubt anyone here is a day-trader in RE.
Terry, if he does pursue negotiating the fee, you should be sure that the buyer's agent gets a guaranteed 3%, i.e., the fee reduction comes from the listing agent/broker's share. Otherwise, buyer agents may not be as enthusiastic about bringing clients to see your house versus others. Technically, I understand buyers' agents are supposed to be acting in their clients' best interests so if the house is a good match, the buyer's agent wouldn't be fulfilling his/her obligation if the fee is the reason s/he doesn't alert a particular buyer to the house/show it to a particular buyer. But I would imagine in reality, it happens all the time.
Well, the future housing market is still living at home. If jobs ever return to this country, I think you will see a major housing boom. All you have to do is look at the statistics of young adults still living with Mom and Dad and see where the problem lies. I also chuckle when the president makes reference to having a better educated job market and pushes education..duh! Damit! Who do you think is unemployed?
It all depends on what the commission is. If its 7%, negioating it down to 6% isn't hard at all. Anything below that and you need to look at one of those discount broker agencies.
I looked at the chart and Ar. has a 10% underwater mortage. And 42% of all homes/farms are owned in this state so it doesn't really tell me anything that common sense didn't tell me already. NW Ar.(new build retirement lake/golf) and lake front, mainly vacation/second homes, are in trouble. I don't know how vacation homes effect other states but I'm sure it plays a role in negative equity since loans are practically non-existent.
Hey Arkey!
How goes it? I agree with you on the pent-up demand (either rental or purchase). I've got a 22yr old at my house - but he has a good job! I'd say he will be out within a year.
Cheryl
While I doubt anyone here is a day trader in RE, there were people in the area in the peak of the bubble flipping properties on a day basis.
It was really bizarre.
Now being underwater from the Nasdaq,
at least it was all equity. You book your losses and carry the gains. Anyone trading on margin was liquidated at that time and cleaned out.
What's bad is the number of people who bought in 05, expecting annual returns of 18%, leveraged 5X and are instead hanging in there, hoping it's going to get better. If someone bought in that neighborhood in 05, if they put 20% down, they are barely broke even now after 5 years.
if they put down 5%, they are stil 15% underwater. Not enough to justify trashing their credit, but not enough to make any strategy seem effective.
If they are going to hang in another 5 years, they can get out, but it's 10 years to break even, a pretty horrendous feeling.
now, i'm of the school that there is still downside in residential because of the macro environment but, if i see a good cash flow investment, i will leap on it.
It's just will the cash flows justify the price in of itself, or is it a appreciation play.
I think appreciation is likely ill valued over the long term in this area (Long term defined as 5-10 years).
now one thing is rents are starting to pick up, so, we may see that change.
pat,
Rents aren't just "starting" to pick up. This area was up 8% YOY as of April.
Clearly, it sucks for anyone who bought at peak. We are well off peak.
My point with the NASDAQ is that that particular play proved disasterous for many. At least you can live in your house and it didn't drop 70% (hopefully). Did people abandon the stock market?
pat,
You do realize that you are only talking about first-time home buyers in 2005.
If someone sold a condo and bought a TH in 2005, they may have lost the bubble profits on their condo, but, in this area, they are probably without 'real' losses.
BTW, IMHO there are many more transactions in the latter category than the former.
robert
depends upon how many drew out equity.
california was real bad for that.
DC probably wasn't too bad.
More in the minority community, but,
I suspect a fair degree of SUV's were purchased on the house ATM.
As long as current money is cheap and the unemployment stays tolerable it will be better, but i see plenty of people in the bag.
Robert,
I am often dense. Can you please explain the non-refundable fee strategy in further detail? I am not sure I understand what you are proposing.
Thanks
Terry-
I don't want to speak for Robert, but I think he was saying if you are going to sell your house for sure you may be able to get a good deal with an agent. He was saying rather than offer a agent 3% contingent on them selling the house offer to give them 1% immediately no matter whether they sell the house and an additional 1% if they sell the house.
Terry,
hb has it right.
Agents greatest fear is that you de-list for whatever reason -- usually, you don't get the price you want -- and the agent doesn't get paid anything.
I'm not sure how much you understand about the sale process, but if you don't get the price you want, you don't have to sell and you don't have to pay the agent anything, no matter how much work they've done. Careful, though, if you get a legit offer for the list price, I believe you HAVE to pay the agent, even if you change your mind and de-list.
Is there a way to calculate whether it is better to continue to rent if rent keeps going up or to buy a home? Like perhaps a way to calculate cost of savings during that time or something?
For example, say someone's rent goes up 10%, but savings accounts are only getting 1% interest. If house prices stay the same or rise, it's costing at least 9% not to purchase. Is that right or am I not making any sense? I just want to know if there is a way to determine the cost to wait to purchase.
Sehrwunderbar,
This is by far the best rent vs buy calculator I've seen.
http://www.nytimes.com/interactive/business/buy-rent-calculator.html
My $0.02
OMg, that is an awesome calculator! Thanks $0.02!
It seems that at 10% increase if one is going to stay in a home long-term it is better to buy, even if housing is noly increasing 2%.
HB, Robert, Terry,
I would be concerned that the 1-1 strategy won't motivate the agent to sell the house.
I think that, if Terry's husband isn't willing to go with the full 6% commission using a top selling agent strategy, Terry would be far better off figuring out a listing price that will sell the house quickly, then negotiating a contingent fee of 2% to the listing agent/broker and 3% to the buyer's agent/broker. The contract should also be very clear about what services the LA will provide and who will pay for advertising, etc.
Ace-
I would think the agent would still want to sell the house, because a lot of their business is based on word of mouth. You could also tell them if they sell the house you will use them to buy your next place or something like that.
Although I still think if you are trying to save money using Redfin may make more sense than trying to negotiate and unusual deal with a Realtor.
This is just my one experience as a buyer, but I don't really see what any of the seller's agents actually did for them while we were looking. They were never the person there at the open house, and all the data I wanted to see was on Redfin, FranklyMLS, and the Fairfax County tax website. Do people really sell houses with those junk mail postcards I still get every week (at my new house no less)?
HB, it's an empirical question, so we won't know until someone shows us the data. And if I were selling while in the midst of a divorce, which has its own stresses, the last thing I would want to do is to take a chance on something like this.
My reasoning is that the agent would get only 1% more for selling (vs. 3% in the case of the usual 6% split deals), and there are a lot of costs (and time) associated with marketing a house aggressively. All customers offer the advantages you mentioned, so those advantages don't give the agent any reason to devote effort to the 1-1 deal.
If the 1-1 deal were effective for the seller, I think you would see it used a lot more often than it is.
Redfin charges less because they promise to do less. I can see how that can work really well for buyers who are willing to do a lot of the work themselves (e.g., searching houses on the web). Not sure how well it would work for sellers.
I should have also said that the broker takes part of the listing agent's commission for "office expenses", fees, etc. Unless the agent is able to get the broker to accept less too in a 1-1 deal, the agent would get very little additional net $ once the house is sold.
Also, re: promising to use the agent to buy your next house, agents I have known will do this and discount to 5%, but only if you sign a contract and are looking to buy at the same time you are selling.
Redfin charges less because they promise to do less. I can see how that can work really well for buyers who are willing to do a lot of the work themselves (e.g., searching houses on the web). Not sure how well it would work for sellers.
It's a cartel. If customers weren't in a no-win scenario of having to use (pay for) an agent versus being potentially blacklisted for going sans-agent, people could make those decisions themselves and pay a-la-carte for the services they need. Instead you have a game that's completely rigged. If I approach a seller's agent with an offer, they keep the full commission since it's "part of the listing agreement". If I sell FSBO and don't offer any commission to the buyer's agent, the scumbag realtors will steer their clients away from my listing. Even worse, if I were to offer buyers' agents a generous commission, they'd steer their clients towards my listing.
It's so corrupt, criminal, and anti-capitalist. I wonder when the DoJ will wake up and indict NAR for violating the Sherman Antitrust act.
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