Sunday, September 9, 2012

The Death of the Dreaded "Z" Sale

Since I began in the real estate industry back in 2003, there has always been a huge debate regarding the dreaded "Z" sales price. For those of you not familiar with the real estate jargon, a "Z" sales price means that the true sales price was not disclosed in the MLS. Area brokers and appraisers would see the last list price of the home with a "Z" next to it; therefore, no one in the real estate industry would be able to use that sale as a reliable comp.

The impact of this little letter will never affect approximately 99% of the real estate market areas throughout North Texas. However, in some of the higher end neighborhoods, such as the Park Cities, Preston Hollow, and Turtle Creek, "Z" sales could account for up to 20% of all the sales. This meant that agents and appraisers would never be able to use any of those sales when running market analyses for their respective clients. Since Texas is a "non-disclosure state" there was a question of whether or not our local MLS could prohibit area brokers from using the "Z" sales price and require them to disclose actual sales prices.

Well it looks like this debate has finally come to an end...for now. Feel free to read the full release from the MetroTex Association of Realtors below. (Link provided here) In short, as of October 15th, 2012 brokers will no longer be allowed to utilize "Z" sales in the MLS. I'm happy this rule is being abolished. It will mean more accurate appraisals for agents, appraisers, and the city of Dallas. Of course, this will also mean some of the more expensive purchases will have to pay more property taxes. For example, I once looked at a home listed at $10M; the Dallas County Appraisal District had it valued at $3.95M. It turned out that the last few times this home had sold, the price in the MLS had been "Z'd out;" therefore, the county had no way of knowing what the home was truly worth. I'll save my paying-your-fair-share debate for another blog post, but for now let's just say that I'm happy with this change. I also hope the commercial real estate sector will jump on board. (See my post about Dallas Country Club for my thoughts on that)

Newly Revised NTREIS Rules have received final approval from NAR and among the changes is new language that removes the “Z sale” provision and clarifies mandatory reporting of sales prices to the MLS.  MetroTex has adopted an enforcement policy that includes a period of time to educate MLS subscribers about the rules change and allow for existing contracts with a non-disclosure requirement to close.  We will include announcements at the area MLS meetings as well as in this publication and other written notices from the association with information about the Rules change and we will not accept any non-disclosure requests dated after October 15, 2012.
Why this change and why now? 
The NTREIS Rules and Regulations have always required that MLS Participants disclose the sales information for listings and that listing agreements with your Sellers include provisions for including this information.   However, since the State of Texas is one of a few states that does not require the sales price be included in the publicly recorded Deeds,  there was always some question over whether a purchaser had the right to demand that their purchase price not be reported to the MLS system.  For that reason, our Rules inserted a provision that allowed a purchaser to make this request and, if all parties agreed, the Listing Participant could report this as a “Z sale”.  This was always intended to be an exception for the rare circumstance where a purchaser made the request and the “Z” was a placeholder beside the last list price so that these “Zero” sales would not significantly affect our statistical reports by including a “$0” sale within a sampling of comparables.  A last list price would be reasonably close to the actual purchase amount and would be on an insignificant number of sales, thus having little effect on comparables.     For example, in 2005, “Z sales” were less than 1% of overall sales in the system, though even then we were seeing over 10% in some neighborhoods.   By 2010 we saw a 150% increase to over 2% of the market being non-disclosed sales and close to 20% in some neighborhoods.  This begins to have a significant impact on comparable sales available and hinders the ability of real estate sales professionals to accurately advise clients on home values.  The inability for Appraisers to provide accurate comparables negatively impacts the lender’s loan approval process.  MetroTex began an educational process on the Rules requirement to report sales information and to enforce the “failure to report sales” provision of the Rules against MLS Subscribers that had a high level of non-disclosed sales and to closely scrutinize the documentation to support such sales to ensure that the requests were being initiated only by purchasers and in compliance with the Rules.   We also began discussing with our neighboring MLS Providers and with NTREIS possible rewording of the provision in the Rules that allowed for nondisclosure requests.  These efforts did result in a reduction of non-disclosed sales to approximately 1 ½ %,  but there still remains a significant impact in some neighborhoods.
At the same time, an unrelated challenge in another market area over the requirement to report sales information in a “non-disclosure” State* resulted in a legal opinion and a Rules clarification in the National Association of REALTORS MLS Policy and Model Rules clarifying that an MLS, which is a private subscription based service, can require its Participants to report all sales information, including sales prices.   In a “non-disclosure” State,  this requirement can still be made as long as the information is reported to the MLS service and the MLS service does not publicly distribute that sold information to 3rd parties  (with a few exceptions for academic and statistical reporting).  Mandatory adoption of this new language from NAR  removed any question of reporting sales prices, allowing NTREIS to remove the exception that allowed for non-disclosure.
A common reason given for a purchaser to request non-disclosure has been privacy.  This is often the case for a high profile government official or celebrity and accounted for the reason the “exception” was added to Rules many years ago.   In today’s world of social blogs and tabloid news,  locations and prices paid are now public fare.  We have seen several cases over the last few years where this information was not disclosed to MLS Participants and Subscribers  (who pay a fee for their services), but was front page “news” in tabloids and gossip blogs.   The information reported did not come from the MLS then and will not come from the MLS in the future -  the MLS Rules include specific provisions on how Participants and Subscribers may use sold information and specifically prohibits distribution of this information to the public.   For more information on how to address questions over reporting of sales information, see our FAQ’s.
*non-disclosure State:   In most states, the Deed recorded in the Public Records states the amount paid for the property being deeded.   In a “non-disclosure” state  (like Texas),  there is no legislative requirement that the amount tendered be included in the recorded Deed, thus most Deeds in such states include “$10 and other consideration” in place of the actual amount tendered.    In Texas, there is no law prohibiting the amount tendered being included, it simply is not legislatively required.

Tuesday, August 21, 2012

Remarkable Marketing

This property at 5946 Llano Ave. in Dallas was just listed by an Edwin Dolatkhah with Plugin Realty. It's priced at $209,000, which is pretty good for the area. It's also listed as a "short sale." But how about those photos, huh? I mean, nothing says "Welcome Home" more than scary pitch black photos. Amiright?

But seriously, how in the hell can any reasonably intelligent person upload those photos, knowing they will be distributed to all major real estate websites, and not think to themselves, "You know....These photos are a little on the dark side. I wonder if I should retake them?"

And then there is the person who snapped these photos. Did you even think to try a light switch or maybe open the blinds? You didn't? Okay. No. That's fine. No, no, no. Really. You did a great job. :/

Thursday, May 24, 2012

How to Protest Your Home's Value

If you live in Dallas County, you have until May 31st to protest your home's assessed value. So, if you feel like DCAD's valuation of your home is worth more than what you could actually sell it for in today's real estate market, then you should keep reading because you're paying too much money to the man.

The quickest way to protest your taxes is using the new uFile Online Protest. Here are some screenshots to help guide you through the process.

  • Type your name in the box as instructed and choose the property you want to protest

  • Click on the uFile Online Protest link and follow the instructions

Click here for the full protest procedures located on their website. And if you'd like me to send you some comparable sales information in your area to back up your claims, shoot me an email and I'll do what I can to help out.

Don't live in Dallas County? Try one of these websites to learn more about your appraisal protest procedures.


Friday, February 17, 2012

Two More Reasons Why I Have Little Respect For Real Estate Agents

#1 - Commenting on offers before presenting them to your clients

When I receive offers on my listings - even very low offers - my standard response is, "Thank you very much for your offer. I will present it to my clients and get back with you as soon as I can." Unfortunately many agents feel the need to interject their personal opinion on the matter before we ever start negotiating. For example, recently I made an offer on behalf of my buyer clients and it went something like this:

My client offered $275,000 on a home listed at $300,000 in hopes of meeting somewhere in the middle. This is pretty much standard practice, depending on various other factors, but for the most part this happens frequently. The listing agent called my cell and said, "Jeff, your client's offer is VERY low. I don't think we're going to be able to get this to work." I asked if he had presented the offer to his clients yet and he said, "Well, no. But I think they're going to be offended." He thinks. He doesn't know. He thinks! So in his mind, before even presenting the offer to his clients, he thinks we have no chance of making this work. The best part of this true story is that they accepted $275,000.

#2 - "Agent is owner"

If you don't know how I feel about agent-to-meet showings then you can catch up by reading this post. Yesterday I scheduled about 10 appointments for homes priced at or just under $300K and I gave the homeowners more than 24 hours notice. Under 99.999% of circumstances homes under $300K should never be agent-to-meet appointments. One listing tried to reschedule our showing by an hour because the agent had to meet us at the home to let us in. When you're looking at 10 homes in a 10 mile radius it's too much hassle to go back to view one home. I cancelled the showing. There is simply too much inventory to look at. The scary part about this story is that the home is owned by a licensed realtor. She should know better than to a) reschedule a showing with 24-hour notice, and b) require that she meet us at the home to let us in.

Happy Friday, indeed.

Wednesday, January 25, 2012

Most Expensive Homes In North Texas

Here is the list of the most expensive home sales for 2011 in North Texas. Not surprisingly, the Park Cities (as Highland Park and University Park are collectively known) delivered 4 of the 10 most expensive sales, with the Preston Hollow area only accounting for two.

#10 - 1745 Turbeville Rd. (Hickory Creek)
List Price - $5.6M.
Sold Price - Not Disclosed

#9 - 4636 Chapel Hill (White Rock Lake)
List Price - $5.995M
Sold Price - Not Disclosed

#8 - 10340 Gaywood Rd. (Preston Hollow)
List Price - $6.495M
Sold Price - Not Disclosed
Only 26 days on the market!

#7 - 6900 Baltimore Dr. (Uber Swank Volk Estates in University Park)
List Price - $6.99M
Sold Price - $6.5M
Only last 14 days on the market!

#6 - 9338 Meadowbrook (Preston Hollow)
List Price - $6.795M
Sold Price - Not Disclosed

#5 - 6815 Baltimore Dr. (Volk Estates Lot in University Park)
List Price - 6.99M
Sold Price - $6.5M
Only 27 days on the market!

#4 - 3816 Turtle Creek Dr. (Private street that overlooks Turtle Creek)
List Price - $7.9M
Sold Price - Not Disclosed

#3 - 3711 Lexington Ave. (Highland Park)
List Price - $8.5M
Sold Price - Not Disclosed
Only 27 days on the market!

#2 - 3851 Windsor Ln. (Two Adjacent Lots in University Park)
List Price - $9.6M
Sold Price - Not Disclosed

#1 - 1850 Turbeville Rd. (Hickory Creek)
List Price - $15M
Sold Price - Not Disclosed