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by James Stefanile, ABR, GRI, SRES, QSC, gCertified, REALTOR/Salesperson, Berkshire Hathaway Home Services New Jersey Properties, Montclair Office

REALTOR.com has introduced a partnership with Airbnb, the home sharing and vacation booking website.

The rationale for this affiliation, according to REALTOR.com, is so that prospective home buyers can “try before you buy” by actually living in a neighborhood.

See the REALTOR.com article:

http://realtormag.realtor.org/daily-news/2015/06/24/airbnb-realtorcom-team-up

It took me about 10 seconds to come up with a host of reasons why this was a bad idea.  I’m usually alone in the wilderness criticizing my beloved National Association of REALTORS but, this time, I seem to have company from other REALTORS whose reactions I have read.  Many of my fellow agents have the same doubts I do.  REALTOR.com is an official website of the NAR and if it’s teaming up with Airbnb then, by extension, so am I.

For starters, Airbnb has ignored local zoning laws and justifies this by saying it is simply a website which puts renters and landlords together.  Very clever but the net effect is the violation of local zoning laws in most locations. New York City is in the process of cracking down on residents who use their homes for this purpose.  I don’t want to be a partner to that kind of conflict with government and I don’t think it’s wise for REALTORS, anywhere, to be put in that position.

In New Jersey, hotels, inns, boarding houses and anywhere a landlord charges a fee for service is regulated by the Hotel and Multiple Dwelling Law of November 2005 . This law mandates standards of habitability and safety, among others and requires hotelkeepers to pay a tax on hotel rentals.  Read the law below and some other source material:

http://www.state.nj.us/dca/divisions/codes/codreg/pdf_regs/njac_5_10.pdf

http://www.state.nj.us/dca/divisions/codes/offices/bhi_faq.html

http://www.ehow.com/list_6666862_new-jersey-hotel-laws.html

These standards are codified in law for a reason.  They set the bar for what is minimally acceptable and safe for the consumer.  Anyone in the hotel business works to comply with these regulations and is subject to inspection.  Anonymous Airbnb landlords have no such responsibility nor are they willing to accept these verifiable standards of practice.

Next, I question the supposition that a home buyer can get the “feel” of a neighborhood in a short-term rental.  Also, the buyer is only getting a glimpse of one neighborhood.  Further, many Airbnb neighbors are opposed to their neighborhoods being turned into rooming houses and it has spawned many neighborly disputes.  I can’t imagine that’s going to help a buyer get a good sense of their surroundings, especially if a neighbor tattles to the township and the short-term renters are thrown out by the code enforcement department.

Then there’s the issue of liability.  Heaven forbid anything goes wrong, or worse, someone is injured during the rental.  Airbnb takes no responsibility and the culpability of the landlord is vague, at best.  You know what happens when that’s the case – lawsuits.  This is just what I don’t need when I’m trying to get a transaction going, not to mention that my brokerage could, conceivably, be named as a third-party to the suit if I recommended Airbnb.  I want nothing to do with this.

I’m all for buyers making informed decisions.  But, they’ve been buying real estate for decades without living there first.  Or, some buyers decide to actually rent a legal, leased apartment in order to find out more about a location before buying – I’m all for that.  You can really immerse yourself into a neighborhood in the course of a 1 year lease.

Proponents of this NAR/Airbnb collaboration will say that a short-term rental will enable buyers to act more quickly if the market and mortgage rates change.  If you see a house and a neighborhood that attracts you, you should act, not wait a weekend or a few weeks.  I can always see the buying signal when I’m showing a home.  If it’s strong it should be acted on with due diligence and immediately.

On a practical note, how am I helping buyers if I’m showing them properties they won’t buy until their short-term rental ends?  In my market they would be too late as homes sell more quickly than the time they spend in the short-term rental.  Homes sell fast because a market is desirable because of schools, safety, transportation, amenities and ambiance.  I can explain that to a buyer in 5 minutes and, hopefully, I will have sufficient rapport with the customer so my explanation will be well received.  They don’t need to hear this from a short-term landlord whose objectives are very different from theirs.  I’m working hard to find them a home they will be happy with.  The Airbnb landlord is working hard to simply rent space.  And, if a buyer approaches me after they’ve done an Airbnb rental they have, in my view, wasted that time and money.  They will have just as good an idea of an area after a couple of sessions with me.

Here’s some more reading material:

http://www.realtor.org/field-guides/field-guide-to-shortFo-term-rental-restrictions

And, here’s an article by John Gondelman in the August 2nd New York Times Sunday Review which describes a wildly exaggerated (and pretty funny) Airbnb experience.  Between the laughs, however, are real concerns with the entire concept of home-sharing:

http://nyti.ms/1KBDLK4

Recently my daughter was about to rent an apartment and she asked me to review the lease.  My main concern was the fact that the landlord stated her intention to participate in Airbnb.  My daughter was not comfortable with that and I suggested she absolutely refuse the rental on that basis.  Fortunately, the landlord relented and decided not to become a short-term hotelier.  I have never found that people are very responsible for things they own on a short-term basis – ask any car rental agency. In my daughter’s case I was not anxious for her to be exposed to transient renters who could manifest that behavior.  In the case of buyers renting first with Airbnb I think the same transient irresponsible temptation will be there.  If that’s the case in just one instance and an Airbnb tenant (my customer) acts irresponsibly it’s not a good way to start a relationship with a neighborhood and, frankly, it doesn’t do me any good at all.

In my opinion the entire concept of the “sharing” or “on demand” economy exemplified by such companies as Airbnb and Uber has not been thought through.  These companies show no sign of maturing into responsible corporate citizens but, rather, have chosen to fight to solidify their positions in the face of any law or government body that opposes them. Some people (yes, you, young, tech savvy Gen Xs and Millennials) will argue that this is a new concept making better use of resources and that objections to it are from entrenched interests who resist change.  Personally, I’m all for change – responsible, well thought out progress that benefits us all.  Just because you own a car or a home doesn’t mean you can do whatever the heck you want with them.  Airbnb homeowners will argue that they are entitled to use their property however they wish.  No you are not.  Property rights come with responsibilities which are codified in local ordinances.  In my town a homeowner built and stocked a chicken coop and was astounded that the township would object.  That homeowner didn’t bother to research the laws and regulations regarding keeping live, undomesticated animals.  Medical offices and therapists who work out of their homes must obey the zoning laws for their neighborhood.  I once had a seller who was manufacturing chemicals in his basement and he couldn’t understand why I didn’t want his listing.  You can’t run a sweat shop, factory, boutique or brothel in your home in a residential area unless it’s zoned as such (for the brothel you’d need to go to parts of Nevada, anyway).  In a society, especially a crowded one, your imagined rights cannot trample those of the people around you.  That’s why there are laws and licenses.  Driving, for example, is not a right, it’s a privilege requiring a license. Being a plumber, restaurant owner, therapist, cab driver, carpenter or REALTOR also demands licensure because the public needs to be assured there is a standard of practice.  Running a hotel or inn is no different.  Any sense of entitlement outside of these considerations is a false one.

I am very reluctant to be a formalized partner to an enterprise that is only partially thought out and based on false suppositions of rights and privileges.  I suspect REALTOR.com is pandering to a new trend without realizing its consequences and I don’t think the National Association of REALTORS has thought this one out as well.

Can’t get enough of my opinions? Take heart. I have another (non-real estate) blog called “The World At Large by Jim Stefanile – Thoughts On Everything Else”.

I am currently writing a history of my family.  You can visit the website at:

https://jimstefanilesotherblog.wordpress.com/

and scroll down to read the chapters in order or you can use the following links to jump to individual chapters.  I hope you can visit:

May’s post was “Saddest of Smiles”  Chapter 1 of the history of my family

https://jimstefanilesotherblog.wordpress.com/2015/08/03/saddest-of-smiles/

June’s post was Chapter 2, “The Sanest One” in the continuing history of my family:

https://jimstefanilesotherblog.wordpress.com/2015/08/03/the-sanest-one/

July’s post was Chapter 3, “No Real Connection” in the continuing history of my family:

https://jimstefanilesotherblog.wordpress.com/2015/08/03/no-real-connection/

This month’s post is Chapter 4: “Damon Runyon Redux” in the continuing history of my family:

https://jimstefanilesotherblog.wordpress.com/2015/08/03/damon-runyon-redux/

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New Idea, Old Objections

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by James Stefanile, ABR, GRI, SRES, QSC, gCertified, Salesperson/REALTOR, Prudential NJ Properties, Montclair, NJ

The Federal Government’s programs to assist financially distressed homeowners have not performed up to expectations and have helped only a limited few.  Congress would not authorize bankruptcy judges to modify distressed mortgages by court order in order to assist homeowners in bankruptcy to fairly re-structure outdated or predatory mortgage loans.

The banking industry has pretty much had its way with regard to dealing with underwater and distressed mortgages.  This is despite its robo-signing, its redlining practices, betting against its own toxic securities, its part in the greatest domestic and world-wide financial collapse since the Great Depression, its rescue at every taxpayer’s expense and isolated incidents of out-and-out fraud.

Now, a few municipalities have hatched a new plan to help distressed homeowners within their borders since it’s clear the Feds aren’t going to help and the banks are a united front against these owners while large swaths of some towns disintegrate.

The plan is for the municipality to offer to buy distressed properties’ loans, pay the lender a fair market value and then sell the property back to the homeowner, after the town takes a write-down, with a modified, refinanced mortgage, most likely through a government program.  The investors who put up the money to buy the original loan and the town would benefit from the way the town writes down the loan and the homeowner may go from being underwater to actually having some equity in the property.  If the lender declines the offer the municipality would use its right of eminent domain to condemn the properties and buy the loans with the permission of a court.

The aim of this plan is to prevent neighborhoods from falling into disrepair with the presence of foreclosed or abandoned properties and to assist the town’s citizens who have suffered from outdated or predatory lending practices.

As you can imagine, the banking industry is strongly opposed and is threatening any town with the nerve to hatch this plan with the prospect of a lending embargo and lawsuits.  What’s puzzling to me, however, is the opposition of the National Association of REALTORS.

The banks are opposed because they give up domain over their customers only at the point of a gun.  They complain the eminent domain strategy is government interference in private enterprise but they were more than willing to accept the government’s interference in the form of billions of dollars in bailouts.  The REALTORS (NAR) claim this eminent domain idea (they call it a “scheme”) strikes at the heart of private home ownership and property rights.  The banks and NAR have called this “unprecedented and unconstitutional”.  In other words, they are using the old chestnuts of  “property rights” and a threat to private enterprise as opposition to this strategy which they feel will compromise their industry position.   I have come to regard this and many of NAR’s positions as knee-jerk, calcified opinions justified by their claim to be the protector of home ownership.  This is only a cover story for the real reason for NAR’s opposition – it may disrupt the flow of dollars in the real estate industry.  If NAR is the protector of home ownership it’s odd that they aren’t in favor of protecting the home ownership of the Americans affected by the financial crisis.

Sure, there are risks for abuse by homeowners under the eminent domain plan as NAR warns ominously.  But there is a court ordered step in the process which can be a protection against abuse.  Opponents of this strategy use the public’s existing fear of eminent domain to paint this very specific strategy as an example of Big Brother seizing properties.  They argue that undeserving, irresponsible homeowners will also be rescued.  This is a blanket indictment ignoring the millions of Americans who have either fallen on hard times through no fault of their own or have watched their property’s equity disappear.   As far as property rights are concerned,  I wonder if any of these distressed homeowners feel their rights are being abused.  As to the rights of their financially secure neighbors, anything that will prevent neighborhood  homes from falling into vacancy will protect their property’s values and the quality of their neighborhoods, promoting the public good and preventing the blight, crime and vandalism associated with abandoned properties.  Municipal governments have the right and the obligation to maintain a high quality of life for the constituents they represent.

Banks are terrified that eminent domain strategies could, among other things, engulf the secondary liens and equity lines of credit they hold.  They posture opposition based on morality and fairness, but, in fact, their concerns are dollar based, as always.  As far as the banks’ investors are concerned, eminent domain strategies just may be a way, possibly imperfect, but at least a valid attempt, to fix a mess that has defied solution for many years.

The National Association of REALTORS, as the largest trade organization in the country, has been very successful politically and in protecting its turf.  There are already rumblings in Congress of legislation and regulations to prevent eminent domain in these situations .  I’m sure NAR’s lobby has been busy with our leaders – elected representatives who should be concerned with their constituents and not the welfare of the National Association of REALTORS and the national banking trade organizations..

It may seem strange that I, a REALTOR, should have a favorable opinion of eminent domain as an instrument to deal with distressed mortgages.  My position is that it’s worth a look and not worthy of being murdered in its cradle because of the entrenched interests of entities with large influence.  I understand, and benefit from, the importance of the bottom line in banking and real estate.  I have also seen, in my career, the flip side of capitalism in all its gruesome glory – situations where money was the only motivator at the expense of fairness, professionalism and common sense.  I also understand that the unfettered and unregulated pursuit of profit is what almost sent the world economy off the cliff.  It’s time for new initiatives that take into account more than just the bottom line and it’s time for the trade organization that, supposedly, represents me to think beyond the dollar sign at the end of its nose.

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Filed under Eminent Domain

A Hand In My Pocket

by James Stefanile, ABR, GRI, SRES, QSC, REALTOR/Associate, Prudential NJ Properties

I don’t like to write about money because I tend to get whiney when the subject comes up but I’ve been doing some math lately and, as Mr. Spock would say, “The figures are taking an alarming direction…”

I was thinking about how much it costs me to remain a REALTOR.  When I was in show biz I had some union dues and the occasional expense for a piece of equipment (a light meter, a monocular for lining up a shot, an editing system which I used for 15 years and charged my clients for its use).  That was it.  My accountant and I always struggled to figure business expenses at tax time because I was reimbursed by my clients (sometimes handsomely) for every meal, taxi ride, tank of gas, cocktail, airplane journey, rental car and hotel room.

No such problem finding deductions now that I’m in the home selling fraternity.  On January 1st of every year there are any number of entities lining up with their hands in my pocket.  Here are some:

Errors and Omissions Insurance: To cover me and my company in case I screw up.  $500. yearly premium payable to my brokerage.  So far, like most insurance, they’ve been collecting my premiums and haven’t had to pay out a dime.

Auto Insurance:  As soon as your insurance carrier hears you’re a REALTOR your auto premiums go up because they figure your liability increases with many more passengers in your car on a yearly basis.  Not reporting your profession accurately is not a good strategy since if, heaven forbid, something does happen with customers in the car, your insurer may deny the whole claim based on your misinformation.

Garden State Multiple Listing Service Fee: $132 per year for the privilege of using the MLS.  The New Jersey MLS charges $222 per year plus both of these services have set up fees for new members.  You can’t possibly be a REALTOR without these services.

REALTOR licensing fee: The State of New Jersey must wet its beak (as the old Italian Black Hand used to say) in order that I be licensed to practice my craft: $160 for the initial license and $100 every 2 years to renew the license plus 12 credits of continuing education courses in that period, expenses for the CE courses to be determined – it’s new.  You must satisfy the continuing education requirements in order to maintain your license.  I’m all in favor of REALTORS continuing their education even if it’s at the point of a gun.  I sometimes feel like I’m being mugged – someone’s holding me down while someone else rifles through my pockets.  This is one of those times.

Supra EKey Service: A General Electric company.  They make the gadgets that we use to get keys to houses out of keyboxes ($89 each).  I pay $21.85 per month for this service.  I couldn’t show houses without it nor could I set up keyboxes at my own listings.

Initial fees and yearly dues for my professional designations:  ABR (Accredited Buyer Representative), $400 for the opportunity to work for the designation and $100 dues yearly (they publish a swell newsletter).  GRI (Graduate Realtor Institute), it was a while ago that I labored for 2 years to earn this little nugget and I seem to remember the courses cost hundreds of dollars each (there were 3).  Much to their credit, the GRI organization does not charge yearly dues (no newsletter).  I’m sure that as soon as I say that they will change that policy.  SRES (Seniors Real Estate Specialist), another $400 for the privilege of sweating through classroom and field requirements and another $100 yearly dues for the honor of being listed as a Seniors specialist on their website.  I’m getting to be a specialist at paying for things of questionable value.  QSC (Quality Service Certification), my favorite.  This designation allows me to guarantee the level of service my clients receive.  No problem.  They also charge me $100 per year and will strip me of the designation if my clients’ feedback on my service is negative.  Who wouldn’t love paying dues to a group who holds that over your head?  There is also an additional galaxy of designations we can pay for and earn, everything from green issues to computer literacy.

Training: In addition to the training associated with earning a specific designation, there’s a steady diet of classes for everything from oil tanks to Facebook.  These classes are usually offered by the local REALTOR board and you can pay for and attend classes at other boards.  The fees are not prohibitive, about $25 to $50 each, depending on the topic and the length of the class.  I have nothing bad to say about these.  I’ve been to quite a few that have offered me big benefits.  What I don’t understand is when you’re charged for attending webinar training.  All webinars should be free of charge, in my opinion.  I’m already paying for the internet service so the webinar fee seems like double dipping.

Franchise fees: 6% of your commission, on average, payable to the corporate parent of every national brokerage for the use of the brand.  In a recent post I came to the conclusion that brands don’t matter that much in real estate but we’re proud to be paying for the name all the same.

Relocation certifications: Prudential Relocation requires 3 separate certifications which you can earn online at the cost of $55 per certification.  They instituted this policy after I had been doing relocation work for many years so now I can pay these fees to prove to them that I remember how to do it.  Sirva Relocation used to allow you to earn the certification for free but this year they are requiring that all REALTORS who they use (they’ve been using me for years) be re-certified and are charging $25.  Ok, it’s not a large amount but look at it this way:  how would you like it if your husband or wife charged you $25 to prove you still knew them.  That’s what this feels like.

Relocation referral fees: 32% to 38% of your commission, off the top, payable to a relocation company, for closing a deal with a relocation transferee.  I’m much too polite to write about what I think about the services relocation companies provide or to comment on how they support REALTORS during a relocation transaction.  Add to this a 5% fee off your commission, imposed by the relocation department of the local brokerage.  More bad news – on relocation deals your “split” with the company goes down.  If you are entitled to. let’s say, a 62.5% split, you are bumped down to a 53% split just because it’s a relocation deal.  In the worst case, the transferee’s home will remain unsold even after they have to relocate, in which case it becomes an “inventory” property.  The listing agent has to baby-sit this empty house and make sure the grass is cut and the snow gets shoveled and the heat stays on and the pipes don’t freeze.  What you get for your trouble is another fee – another chunk – taken out of your commission.  Your commission split can go down to as low as 30%. A classic case of “no good deed goes un-punished”.

On-Line Referrals: God forbid you get a referral from your company’s website.  You still have to develop that lead into an income producing opportunity so you’re not exactly getting a free ride.  For your trouble your commission split goes down just like a relocation deal.

The Lawyer’s Diary: An online service that enables you to look up any lawyer’s contact information and bio in the state of New Jersey.  $80 per year.  No comment – there are too many lawyer jokes out there already.

Lawn signs: Whenever you see a sign with a specific REALTOR’s name on it you should understand that REALTOR paid for the sign, it wasn’t paid for by the company.  This also includes many of the sign riders (the inserts that say “under contract”, “for sale”, “for rent”, etc.).  Also for sale: personalized open house signs and flags, riders with your picture, gadgets to light the lawn signs (even though that’s illegal in most towns), QR Code signs and much, much more.

Third party websites: Realtor.com, Trulia.com, Zillow.com and other real estate websites.  REALTORS pay for enhanced listings and other premium services so they can market your home with pictures (photographers lying in wait for agents to hire them) and virtual tours (also expensive and paid for by individual agents), expanded descriptions and other services.  Some sites even let you buy zip codes where you will be among a small group of agents whose name will appear if a consumer searches that zip code on that website.

Audio and video:  There are services we can hire to produce videos for our clients’ homes.  Thank goodness I have 30 years experience in that so I can do it myself (I knew it would come in handy some day).  There’s even a service where you can have a narrated audio tour of the house posted on the lawn of your listing.  Then, the hapless passerby will be bombarded with the spoken virtues of the home.  I remember an amusement park my daughter and I used to go to where they had statues of people who would talk to you if you got too close.  Little kids loved it and would stand there for hours conversing with these mannequins whose voices were those of concealed employees with microphones.  The “Talking House” service reminds me of those dummies.

Advertising: Understand that the smiling picture of the REALTOR on your supermarket cart cost that agent a pretty penny.  There are also many real estate journals and magazines where you can buy your personal ad.   If you market really expensive homes you can buy advertising in the many glossy “fine homes” magazines out there.  Prudential publishes one and there’s the Robb Report and many others.  Ads are hundreds of dollars in these publications.  There are also many specialty publications aimed at certain demographics (seniors, for example), where you can buy an ad to appeal to that niche business.  You can pay to have your name and picture plastered on almost anything.  One year I even paid to have my ad and picture on prescription bags from a pharmacy.  How bizarre is that?

Conventions:  The New Jersey Association of Realtors hosts a convention in Atlantic City every December.  Not exactly beach weather.  $100 to attend plus your hotel if you stay for the entire 3 days and, of course, food, transportation and all you can lose at the casinos.  The Prudential Real Estate Affiliates (or whoever we are now) hosts a national convention every March in some pretty good destinations: Orlando, Florida; Austin, Texas; New Orleans, Louisiana, to name a few.  Early bird registration fee is $399 and it gets more expensive the closer to the event until it’s about $599.  This year my local company is offering to subsidize most of this cost.  That’s very good of them.  If I had a burning desire to travel to Orlando to hear the producer of “Survivor” talk about his life (no kidding – he was a featured speaker at a past convention), I’d go.  Or if I had an inclination to be massaged as a top producer in front of my national peers or see my company praised for its charitable donations work, I’d certainly attend.  Or if I wanted to network with people I will never again see in my lifetime, I’d be there.  Or if I was dying to hear what this year’s leadership suits had to say to motivate me, I’d be happy to pay for the airfare, hotel, food and booze (oh yes, I’ve seen many the drunken lady REALTORS arm wrestling at the bar) associated with these events.  There are also conventions for every professional designation in real estate, all with registration fees and traveling expenses.  In addition, Prudential has a “Summit Conference” convention for top producers – by invitation only.  Very flattering, but you still get to pay your own way, including a registration fee.  Maybe it’s just me, but if you are that important to a company that they invite you to a conference, shouldn’t they at least not charge you a registration fee?  Finally, there’s yet another convention hosted by the National Association of Realtors every year where they talk about God knows what.  I think it would be great fun to go to every one of these conventions in a year.  It would be your job, with no time for anything else – like earning a living.

Trinkets: No convention would be complete without the trade show exhibitions. You can buy everything from REALTOR cuff links to software that will change your life to closing gifts for your clients (I think the wrong people are getting the gifts. Shouldn’t it be the other way around?). If you have an urge to wear a shirt, poncho, hat or eye patch with your company’s logo on it you can certainly buy this haute couture as well. I have colleagues who can’t resist these convention booths and come home with the most amazing assortment of expensive stuff you’ll never need.

Coaching: Don’t get me started on this one.  I’ve written at length in this blog about what I think about the real estate coaching industry.  Suffice it to say it ain’t cheap to drink the Kool Aide this bunch ladles out.  I  spent $12,000 one year for a weekly coaching session (at 6am!! – what was I thinking??) plus the registration fees and traveling expenses for that organization’s conventions and seminars (more conventions!).  I also doled out more money than I care to remember for books, cd’s, kits and associated services.  By the time I wised up I had paid a small fortune to a guru who specialized in telling me the obvious.  Good times!

Charities: I’m all for “giving back” or “paying forward” or whatever the popular term is.  We are bombarded with golf outings, basketball pools, bowling tournaments, 3 legged races and who knows what else, all for charity.  Maybe someday I’ll be able to contribute to all the charities our companies urge us to support without becoming a charity case myself.

Awards dinners and luncheons:  $50 to $75 a pop, on average, to eat the rubber chicken at an over decorated catering house and fete your fellow practitioners who have achieved sales goals or have been elected to REALTOR leadership positions.  There is rarely an open bar.

Business Models: If you’re an agent with certain companies (not mine, thank God), their business model has you paying for every paper clip, memo pad, keybox, paying for internet access and phone service and paying a monthly “desk fee” which, alone, can be hundreds of dollars.  Paying for the privilege of having a desk in an office!  Even the worst examples of corporate America haven’t come up with that one!  There are brokerages out there who consider their offices as just places to meet clients and figure agents can work at home for the rest of the job and if you want more of an office presence it’s gonna cost you.

Commission splits:  How would you like to work at a brokerage who charges you for all of the above plus takes a chunk out of every one of your commissions?  All this and you’re not even an employee, you’re an independent contractor with all of the nothing you get for that designation.  Luckily, many brokerages have a business model where you do get a desk (mine would make a 4th grader proud) a phone and the internet in exchange for the part of your commission they take, plus they offer training (some free) and some marketing tools – oh – and the brand – you remember how important that is.

West Essex Board of Realtors dues and membership in the New Jersey Association of Realtors and the National Association of Realtors: You can’t practice without this membership.  I suppose our dues fund the state and national lobbying efforts of these organizations.  Oh – and I can get a discount renting a car as a member.  Other than that I can’t figure out why I’m paying a very expensive $500. every year.  The National Association of Realtors is the biggest trade organization in the United States and I’m all for trade organizations but it makes me wonder when you can’t ply your trade unless you’re a member.  It’s a trade organization, not a union.  Required union membership is, at least, based on the presumption that union members have fulfilled a standard of knowledge in the industry the union serves.  Before full union membership is granted, usually there is an apprentice or journeyman period to ensure a standard of competence.  The newest, least knowledgable REALTORS must belong to a local board and the NAR so that REALTOR you chose could be the greenest of apprentices but is still a full-fledged, dues paying member of the NAR who only had to pass a soft-ball State sponsored exam to be admitted to the club.  Further, other industries have a formalized agreement that they will use the services of union members and there is a Collective Bargaining Agreement codifying the relationship to ensure that all parties (the union membership and its clients) are treated fairly.  You, the consumer, have offered no such license to the National Association of Realtors.  The NAR has appointed itself your exclusive partner and will allow you no other choice – it will even force you to use its dumbest, least able members if you’re unlucky enough to choose an inadequate REALTOR.  You may think agents know what they’re doing just because they’re wearing the REALTOR lapel pin and are sanctioned by the NAR.  Not by a long shot.  You get no guarantees from the NAR.  We have a Code of Ethics but there’s no formalized agreement with you that will protect your rights as a consumer.  You need to depend on the government for that in the form of the NJ Real Estate Commission which oversees this industry.  If it takes a dedicated government organization to wrangle a trade organization that’s gotta tell you something.  The unions also have pension and welfare benefits – no such luck with this bunch.  Instead of that kind of support, if agents don’t pay these outrageous dues they will strip you of your WEBOR, NJAR and NAR membership, deprive you of your status as a member of the MLS and will force your brokerage to return your license to the NJ Real Estate Commission.  This is serious, strong arm extortion.  Supposedly we’re paying for the NJAR and the NAR to work for our collective benefit…I would laugh myself silly at the idea if I didn’t feel so assaulted.  I ain’t laughing at all.  If you are suffering, as a REALTOR, from the downturn in the market, your trade organization will help you by kicking you out, making it impossible for you to make a living.  Nice policy, huh?  This is how a trade organization who is supposedly there to support and represent you treats its members.  Even the worst of the entertainment unions I experienced (and there are some doozies) wouldn’t do that.  I have seen unions go to extraordinary lengths to prop up struggling members.  Some unions will even take care of their ancient membership until death in facilities funded primarily by the unions.  Last I heard, there weren’t any old REALTOR’s homes.  A union will always go to bat for its members, right or wrong.  If a consumer even thinks I’ve done wrong I’ll have the Real Estate Commission down my throat and the NAR and NJAR will be nowhere in sight.  My advice to the NAR: If you’re going to act like a union, then behave like a union toward your membership, not some half-assed imitation of one with no regard for its members.  I know I’m going on and on about this and I don’t care…these organizational issues are among the biggest insults of all the indignities agents are asked to endure.  On some of the other issues in this post I’ve tried to be amusing.  On this one I’m just plain damn mad.

I told you I can get whiney when money is discussed.  I had a friend recently ask me, after I was whining about something associated with this job, “And you continue to do this – why?”  All of a sudden I had to come up with some good reasons or just look like a complaining idiot.  “It’s local…”, I stammered, and probably came up with enough banal other reasons to change the subject.  So now, having had the opportunity to ponder this question calmly and without the pressure of conversation I can give some good reasons why I continue in this profession:  It’s interesting, I can make my own schedule (was very important when my daughter was little), it certainly is local – I don’t have to commute to NY every day and I like my local area, I like being there every day.  One of the reasons I left show business was I was tired of living in airports.  Most of all, real estate is a challenge.  If I’m not on my toes I can’t do this job, it’s too demanding.  You’d think I’d resent that, given all the complaining I’ve done in this post.  Well, I’m sorry to disappoint you but it’s what makes all the expense almost worth it.  I think the only reason real estate can get away with having its hand in my pocket all the time is that the work is interesting and challenging and, even, fun, in a macabre sort of way.  And if you work really, really hard you can actually make a living at it.

So, the next time you speak with a REALTOR, understand that he or she is paying dearly for the privilege of serving you.  And we do it with a smile.

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Filed under Business Expenses, Realtor Expenses

The Wait Is Over

by James Stefanile, ABR, GRI, SRES, QSC, REALTOR/Associate, Prudential NJ Properties

Let’s take it by the numbers.

I’ll show you, with raw market data, that prices are AT THE BOTTOM in our marketplace.  There’s little point in waiting any longer for prices to drop .  You’ll see comparisons from 2011 to 2010 that will prove we are at the beginning of the upswing in real estate values.  If you look at real estate for the last 50 years in the US you’ll see 5 year cycles of boom and bust.  We had an artificially elongated boom cycle from 1996 to 2006 because of 9/11.  The loosening of regulations that resulted from the government panic brought on by that tragedy gave us another 5 years of boom.  The market should have deflated in 2001.  Instead, it did so in 2006.

Most people think the “bubble” burst at the end of 2008 with the overall financial crisis in the US.  Actually, if you tracked the numbers, town by town, in the market every month (which I’ve been doing in my market area for the last 10 years) you would have seen prices slipping during 2006, the amount of inventory rising and the differences between asking and selling prices moving downward.  Those trends continued during the period 2006-2008 and the financial crisis made it more obvious and accelerated the downward spiral.  It’s a very clear 5 year cycle: 2006 to 2011 and, now, as you’ll see, the real estate market has been improving for the last year – not dramatically and there’s still lots of distressed properties weighing on prices – but improving nonetheless.  The graph at left shows existing home sales for from the National Association of Realtors (NAR). It shows a very clear upswing lasting from 1996 to 2006.  It also shows the very clear dip beginning in 2006 and the beginning of another upswing now.  The consensus of this graph is for sales of 4.80 million at a Seasonally Adjusted Annual Rate (SAAR) for late 2011.  If you click on the graph you’ll see a more readable full-sized version.

 I understand that different parts of the country are performing differently.  On February 1st there was an article in The New York Times about the Atlanta, Georgia market which is still experiencing a depressed downward slide in prices.  There are other hot spots (cold spots?) in the country like Las Vegas and Phoenix where their lofty highs in real estate made them the first to fall and the hardest to recover.   The figures I’m going to present are for Essex County, NJ.  This data is from the Garden State Multiple Listing Service.  It’s not conjecture.  Let’s see the numbers:

Town

  Avg. Sales

Avg. Sales

Sales Price
    Price 2011

Price 2010

% Change
         
Bloomfield  

$260,102

$291,230

-10.69%

Caldwell  

$399,051

$389,581

2.43%

Cedar Grove  

$463,011

$467,615

-0.98%

Essex Fells  

$799,580

$845,799

-5.46%

Fairfield  

$443,031

$500,872

-11.55%

Glen Ridge  

$609,263

$551,086

10.56%

Livingston  

$574,620

$648,104

-11.34%

Montclair  

$630,787

$625,957

0.77%

North Caldwell  

$831,572

$740,701

12.27%

Nutley  

$329,211

$362,032

-9.07%

Roseland  

$479,471

$503,985

-4.86%

Verona  

$386,059

$408,120

-5.41%

West Caldwell  

$431,056

$446,060

-3.36%

West Orange  

$367,941

$393,782

-6.56%

         
Totals  

$430,735

$446,967

-3.63%

This is a comparison of average sales prices for all of 2010 vs. all of 2011.  You’ll notice Caldwell, Glen Ridge, Montclair and North Caldwell all had IMPROVING prices year to year.  Cedar Grove, Essex Fells, Nutley, Roseland, Verona, West Orange and West Caldwell had drops, but not by much, some less than 1%. certainly not the town by town 10% to 15% drop in prices we’ve seen year to year over the last few years.  Only Bloomfield, Fairfield and Livingston did not fare well.  Bloomfield has a lot of diverse neighborhoods from upscale suburban to heavily urban which translate into lackluster overall performance.  Fairfield and Livingston are slow markets, even in the best of times.  The overall year to year price comparison was a loss of 3.63%.  I regard this small number as a sign of stability.  It’s well below the recent average 6% to 7% declines.  It’s certainly not the gloom and doom we hear every day in the media.  Even in The New York Times – which I believe hates real estate based on its coverage – there have been stories of improving consumer confidence, rising numbers in new construction of housing and glimmers of hope in real estate in general.  As lately as January 21st The Times Business Section ran a Reuters piece called “Markets End Day With Slim Gains”  where it was said, “In economic news in the United States, home sales hit an 11-month high in December and the number of properties on the market was the fewest in nearly seven years, pointing to a nascent recovery in the housing sector. The National Association of Realtors said on Friday [January 20th] that existing-home sales increased 5 percent to an annual rate of 4.61 million units, with all four of the nation’s regions recording gains. Sales of both multifamily and single-family homes rose…There were 2.38 million unsold homes on the market last month, the fewest since March 2005.  That represented a 6.2-month supply at December’s sales pace, the lowest since April 2006 and down from a 7.2-month supply in November.” (Copyright 2012, The New York Times and Reuters).

Don’t forget, markets are partly psychological.  When more people feel good about purchasing homes, an improving market becomes a self-fulfilling prophesy.  The market will improve, and is doing so now, based partly on the positive perception we’re beginning to see in the media.  When you consider, also, that whatever you see or read in the media about real estate has already happened, you see that the confident trend is not just starting but is well under way.

Let’s read our next set of tea leaves:

Town

 

# Sales

# Sales

   

Closed 2011

 Closed 2010

       
Bloomfield  

218

236

Caldwell  

59

46

Cedar Grove  

85

86

Essex Fells  

20

17

Fairfield  

48

36

Glen Ridge  

84

76

Livingston  

247

266

Montclair  

305

317

North Caldwell  

56

56

Nutley  

185

187

Roseland  

65

51

Verona  

131

140

West Caldwell  

79

83

West Orange  

371

367

       
Totals  

1953

1964

The numbers of closed sales between 2010 and 2011 are an obvious sign of improvement.  Most towns had more sales or an almost identical number and even in the slowest town markets, where there were less sales, the difference was slight.  This is not dramatic improvement, as I said before, but it’s no longer a downward trend.  Think of the market cycles like a roller-coaster (and there has never been a more apt comparison).  The car shoots downward to the bottom of a curve and then slows, stops and begins to slowly ascend the next curve.  These numbers of sold units show the roller-coaster car slowing at the bottom and beginning, slowly, to trudge up the other side.  I believe the sales prices in the previous graphic show the same thing.

Here are some more telling numbers:

Town

 

Avg.

# Listings

Avg.

# Listings

    DOM 2011

12/31/2011

DOM 2010

12/31/2010

           
Bloomfield  

97

291

79

285

Caldwell  

87

33

116

42

Cedar Grove  

123

69

71

85

Essex Fells  

141

19

115

29

Fairfield  

97

96

195

90

Glen Ridge  

65

36

67

30

Livingston  

56

144

69

144

Montclair  

83

181

73

196

North Caldwell  

95

70

97

64

Nutley  

98

170

79

194

Roseland  

114

45

97

55

Verona  

83

110

76

115

West Caldwell  

82

58

62

39

West Orange  

103

397

92

452

           
Totals  

80

1,719

74

1,820

The DOM or days on market numbers are about the same or a little higher in 2011 which can be a continuing reflection of consumer reluctance and non-awareness of  the continuing improvement in the  market or the fact that there has been more protracted negotiation in housing sales.  The significant issue is the number of listings on the market.  For the most part, these numbers are shown to be in decline or virtually the same.  Over the last few years the number of listings on the market has steadily increased, inflating the overall inventory and increasing the time it would take for that inventory to be absorbed through sales and putting more pressure on price.  Now there’s a sign of stability and decrease in those numbers which will bring down the absorption rate and will be another factor contributing to the stability and, then, rise in prices.

Here’s my favorite set of stats:

Town

  List Price/Sales
    Price Ratio – ’11
     
Bloomfield  

96%

Caldwell  

97%

Cedar Grove  

95%

Essex Fells  

95%

Fairfield  

95%

Glen Ridge  

99%

Livingston  

96%

Montclair  

97%

North Caldwell  

95%

Nutley  

96%

Roseland  

95%

Verona  

96%

West Caldwell  

96%

West Orange  

95%

This is the percentage of what sellers got in sale price in 2011 vs. what they asked in listing price.  In fairness, these percentages may reflect the final sales price as compared to a price reduction.  There’s no way to ascertain how much of a factor price reductions play in these percentages.  It’s also unlikely that every sale used in these averages had a price reduction.  That aside, no town’s sellers got less than 95% of what they asked, even in the worst performing markets.  The overachiever, Glen Ridge, had a whopping 99%.  In the good old days we’d see lots of numbers in the 100% to 105% range in the best towns.  What’s interesting, however, is that underperforming towns could be in the 75% to 85% range in the best of times and now are joining their better performing brothers and sisters in the mid 90’s.  This, to me, is a sign of overall strength where all results are about the same.

If you want to see results on a national basis go to: http://www.realtor.org/wps/wcm/connect/b810d08049dae5a8972adf7393f1335d/RELEHS.pdf?MOD=AJPERES&CACHEID=b810d08049dae5a8972adf7393f1335d where the National Association of Realtors has published a chart of existing home sales and sale prices since 2009 with a detailed recap of the last year.   All the results for numbers of units are in the plus column with the exception of the Midwest and the sales prices, while showing declines, are no more than 3.2%, except, again, in the unfortunate midwest.

Well, there you have it.  If your butt is sore from sitting on that fence maybe it’s time to jump off and get on with your hopes and dreams.  There has never been a better time to be a housing consumer and there may never be a better time if these trends continue resulting in higher prices and less inventory.  Certainly this trend can be halted or reversed with some political, financial or natural disaster but assuming normal conditions (normal being current conditions) there’s no reason to believe this improvement won’t continue.  We’re not falling anymore so time spent waiting is time spent watching your purchasing power decrease.  You may think you’ll wait another 6 months and maybe prices will fall another 1% to 2%.  I don’t believe that will happen, over all, and, in 6 months, when everyone is finally convinced that we’re at the bottom, there will be more competition for less inventory.  Competition always means higher prices which can negate any falling prices, assuming those decreases occur in the first place.  Also, I hope mortgage rates stay low forever but, normally, improvements in the economic picture lead to higher rates.  Mortgage money is available for well qualified buyers and has not been this cheap for 60 years.  There are even reports that lenders are loosening their underwriting standards in order to lend more.

As is the case with most trends of this nature, we don’t become fully aware of them until they have matured and burst into view.  Wouldn’t it be smarter to take the knowledge these statistics provide and act before the herd gets wise and tramples this opportunity?

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Filed under Improving Market Conditions, Market Changes, Market Conditions