Property Grunt

Friday, October 07, 2005

20/20: Boom or Bust

Last night 20/20 did a fantastic job on the real estate boom. Here are some points of interest.

John Stossel had the authors of Freakonomics do an analysis of certain aspects of the real estate industry.

One aspect was the vocabulary of ads. Certain key words are used like cozy, quite to cover up certain deficiencies of a property. Quiet could mean it faces a wall. Cozy means small.

The authors also argued that brokers actually undersell properties because they want to cash in on a deal ASAP. The reward for leaving a property on the market for an extra week for a higher offer is not worth their time and effort.

In terms of under pricing, I suspect two brokers who under price some of their inventory. It takes a lot of time and effort to close a deal. So it is understandable that agents take the quick way out. However in Manhattan since sellers are in the driver’s eat at this time they have been demanding higher prices

John Stossel also touched upon the fsbo route. One woman sold her house for 495, 000 when realtors told her she would be lucky to get 400,000. And not one cent went to a broker. Instead she

David Lereah of NAR was defending the current ad campaign NAR has implemented to scare the pants off of sellers into using realtors. The ads are acting on the insecurities of customers while claiming that they are not trying to squeeze anyone out. When John Stossel pegs David on minimum service laws being passed, David lawwry claims that Nar is not involved with the states. That is complete bulls**t. Where the hell did the states get the idea to pass these laws in the first place? I have yet to hear any complaints by consumer regarding discount brokers.

David also began to state that a lot of these operations are not legit preying on the fears of the consumer that their properties are in the hands of very unsavory characters. Stop the spin cycle David, your not doing laundry here. Real estate is full of cutthroat, back stabbing bastards, who will screw people over for a commission.

John Stossel asks him “Why should you decide?”

Daivd “We want to make sure the discount broker does the right thing for the consumer.”

David, from the bottom of the Grunt’s heart, stop this. If the consumer has a problem with a discount broker, then the consumer will ask the government to intervene. Your objective to protect your market share.

John Stossel also raises the well know fact that you can negotiate the commission however David jumps in saying you get what you pay for. The lower the commission the lower the service.

Levitt, one of the authors of Freakonomics counters that the 6% commission will be in the past. He states in the future that we will be paying $500. Sounds outrageous? With the advances in the Internet and e-commerce solutions, it is only a matter of time before commission start getting cut. The first rule of real estate is don’t overpay. And if it means cutting the middleman out so be it.

What I really found interesting was that John Stossel did not mention the antitrust suits that were being filed regarding those minimum service laws.

But the scariest part of this program was seeing this herd of husky housewives called ASPs. Which stand for accredited staging professionals and are led by their staging coach Barb Schwarz.

When asked what staging is. She goes into this long convoluted explanation.

"Staging is using your time frame and your budget to prepare your home for sales so it appeals to most buyers."


Ribbing aside. They do a great job and the sellers got an offer way over ask. And the ASPs did it for free. I do admire Barb’s creativity and business savvy but I doubt the longevity of this occupation. ASPs skillsets can be reproduced quite easily. All one needs to do is to watch reruns of Bob Villa to learn how to properly stage a home.

When the bubble pops these Asps will be certainly be making ASPs of themselves if no one is buying or selling. I can see the now on the streets holding signs. “Will stage for food.”

Perhaps it is because I am smarter than the average bear but a lot of what 20/20 covered is old news to me and to a lot of people who have been in the thick of things. 20/20 even acknowledges that the boom is most likely over, particularly in Florida.

It is just another sign that the boom is so OVAH.

Perhaps my macabre sense of humor I do find this situation rather amusing. However I am sure I am going to stop laughing tomorrow when I do my open houses.