I Hate Paying Taxes!

Sure, take 30% from each and every one of your closings and put that amount into a savings account. Then on April 15th each year use that account to pay your taxes. Sounds easy, right? Hello! This is America. We love us some credit cards and love to spend beyond our means. There's a reason people escrow their property taxes and roll it into their mortgage payment. Because we're inherently fiscally irresponsible. I can't tell you how many agents I know that owe the gubment tens of thousands of dollars because they haven't been paying their taxes as I described above. (I have to admit I haven't been as responsible as I should be but I'm certainly able to pay my taxes on time...painfully.)

This is the reality of the real estate industry. But it doesn't have to be that way. Ever since I got into real estate I have heard from the old timers and NAR that we want to keep taxes out of our commission checks. Um, I don't! Have at it! I say this at the risk of getting hate mail from my fellow Realtors. But I'm sorry, if I don't have to stay up till 4:30am for 3 days straight running through my Quickbooks trying find tax deductions then I say, "PUH-LEEZ TELL ME WHERE TO SIGN UP!"

Are There Too Many Realtors? Yes!

The National Association of Realtors (NAR) is one of the largest trade associations in this country with over 1.3 million members. In 2000 there were only 766,000 Realtors nationwide. That's a 41% growth over 7 years. That's quite impressive. You probably don't know that a real estate agent can only call him or herself a Realtor if they are members of NAR. Many Realtors probably don't even know this. The running joke in many cities across the country is "everyone knows a Realtor". After looking at these numbers you can see why people say this.

So we have too many Realtors and also have to battle a terrible public image. A major reason for this is because it's not that hard to become a real estate agent anywhere in the nation, but at least in Texas they make it tougher than most other states. You have to sit through 150 hours of class or 210 if you don't have a college degree then pass a national and state exam. In comparison, Georgia and Florida only require 63 hours of class to become an agent. Keep in mind each state decides its own requirements to become a real estate agent.

So wouldn't it help NAR's cause to make the process more selective and harder to get into the industry? Not only would that help rid the profession of the slackers, it would leave the professional and successful Realtors to work with buyers and sellers which would eventually help boost public image. Why not kick out those Realtors that sell 2 or less homes a year? Sounds great in theory but there's a serious Catch-22.

NAR's Realtor Political Action Committee (RPAC) raised $11 million for the 2005-2006 election cycle. That's some serious dough and it gets shelled out to help get NAR supporters across the country elected. Where do you think most - if not all - of that money comes from? Realtors. So if NAR made states become more selective they would lose TONS of money. And if I've learned anything in this life it's that money talks, money's king, show me the money, and all that jazz.

Bitter About Real Estate

My friend Lydia Player over at North Dallas Homes Blog sent me a link yesterday to a blog post on Real Estate Radio USA saying the National Association of Realtors (NAR) is virtually expecting 2008 not to bring any relief to the real estate woes of California, Florida, Vegas and all of the other hard hit cities across the country. (But not Dallas!) The blog authors are also real estate investors with a take no prisoners attitude that want to get the best deals possible. You get the idea from this excerpt.

If your client does not NEED to sell, take the house off the market. It will NEVER sell because the Seller does not and will not understand that his property value is about to s#&t the bed. If he is just seeing what he can get he is wasting the agent’s time and the prospective buyer’s time. Cancel the listing and tell him to batten down the hatches. He should be safe, we’re looking for roadkill!

This blog post caught the attention of NAR's attorneys but it doesn't look like these guys are backing down. I get it. They want to make sellers hurt when they buy their properties 30% below market value. But what is their issue with Realtors?

Using professional and real estate in the same sentence, as I just did, is an oxymoron. A true professional would be able to provide sincere credible advice on their product and most real estate agents simply can not.

They sound like scorned and bitter ex-husbands. Now I won't argue that some of it isn't warranted. There are many real estate agents that do not conduct their business professionally but I don't want to go there right now. (Another blog post maybe?) But there are quite a few Realtors in my market area that should take issue with the statement above. Feel free to leave comments on their website...and on mine.

Discount Brokers

The CBS show 60 minutes aired a piece Sunday evening that is certainly causing a stir within the real estate community. But first let me clear up something that absolutely gets under my skin. The word REALTOR® is pronounced ‘REAL-tor’ NOT ‘Real-a-ter’. Tell your friends. Furthermore, a REALTOR® is someone who is a member of the National Association of REALTORS®. REALTOR®" is a trademarked term and should never be used synonymously with "real estate agent”. So now that we have cleared that up. I did not watch the show but feel inclined to throw in my two cents based on the flurry of blogs and emails I have read regarding the show. The CBS segment led by Lesley Stahl was supposed to examine the impact of online brokerages on the real estate industry. The show featured interviews with a representative from the now-defunct eRealty and the president and CEO of Redfin. Both of these companies are flat fee brokerages which are more commonly known as “discount brokers”. A discount brokerage’s philosophy is to give the real estate consumer full service at a discounted price. On the program they stated the 6% broker commission is “sacrosanct” among REALTORS® and the NAR feels threatened by these new online brokerage business models. They feel the NAR is pressuring the public to pay the full 6% commissions and is at the same time trying to force these online brokerage businesses out of the real estate industry thus limiting the consumer’s choices. Interesting that the Dept. of Justice and Federal Trade Commission released this report showing a 5.02% commission nationwide and still said commissions have been relatively inflexible. Leslie Stahl conveniently did not ask the National Association of REALTORS® to be a part of the program. NAR is America’s largest trade organization with over 1.3 million members. There are 2 main reasons for this.

1) NAR has consistently pursued minimum service laws for real estate agents across the country. Eight states, including Texas, have "minimum service laws" that require REALTORS® to provide a minimum level of service for their clients. i.e. If your home is listed with a REALTOR® all negotiations must go through your listing broker as it is unlawful for the seller to negotiate directly with the buyer’s agent. The discount brokerages certainly did not cheer when Gov. Perry passed this bill in 2005. Can you feel the love from this discount broker’s website?

2) Real estate commissions are 100% negotiable (again, look at the DOJ/FTC report). People have a plethora of choices when it comes to listing their home. These discount broker business models began popping up all over the country 3 to 5 years ago so I don’t understand the attack on commissions. Here in Dallas if you want to list your home in the MLS and get it on Realtor.com then go here. For $299 (plus the buyer’s agent commission) you’ll only have 1 picture and it doesn’t come with a lock box or a sign. Or you can go to this brokerage and for as little as $495 (plus the buyer’s agent commission) you can get your home in the MLS and a “for sale” sign but no Realtor.com presence.

So if I listed my home for $200,000 in the MLS for $495 and offered a 3% commission to the buyer’s agent I would save $5,505. But I would have to meet every showing since there is no key box. And with only 1 picture on the internet people are passing right by it in their nightly internet searches. Those looking for homes on Realtor.com expect multiple photos so when a property only has 1 photo, chances are they’ve already moved on to one of the other 68 listings with multiple photos. And with no sign in the yard weekend drivers casing the neighborhood for new listings have no idea it is on the market. One can only assume a home listed this way will result in many months on the market. When you calculate your monthly mortgage, taxes, etc. the $5,505 you saved by listing with a discount brokerage doesn’t seem like a savings anymore after 5 months on the market. Check out this listing. $2.9 million with no pictures and a poor description. This isn’t service but it’s what the consumer paid for. Have you ever heard of the old phrase, “You get what you pay for?” However we’re not talking about the discount tile guys you called in the Yellow pages to retile your bathroom for $500, did a terrible job then spent an additional $1,500 having it done right. We’re talking about what is most likely your largest financial asset EVER. So although I don’t understand why a person who obviously has the business sense to own a $2.9 million home would want to try to sell his home without pictures and a limited amount of service, I do understand it is his choice to do so. Click here for a true story and a perfect example how a discount broker can actually lose you money.