All Forum Posts by: Scott Szurek

I was curious about previous real estate cycles and came across this short article: "How to Use Real Estate Trends to Predict the Next Housing Bubble", by Ted Nicolais (2014).

http://www.dce.harvard.edu/professional/blog/how-use-real-estate-trends-predict-next-housing-bubble 

I am wondering what you BiggerPocket REI's think about the current trend. Are we still in recovery or expansion? I know prices have recovered or even surpassed the bubble prices from 2006 in most areas, but supply is still limited throughout. If expansion has already started, how long do you think this trend will last? How do existing home sales come into play?

Originally posted by @Joe Splitrock:

1. If a home sold itself, the market would move away from agents. There are many examples of industries that have changed and moved towards a different sales model. If agents had no value, their pay would decease or an alternate sales model would replace them. 

2. If it is true that an agent just makes tons of money for doing nothing, everyone would move into the profession. As Sarah pointed out, a large percentage of people who become agents fail. That supports the fact that it is not as easy as it looks. 

In the posters original example, the first deal he did the agent probably did more work than he got paid for. The second deal, maybe they got more paid more then the work they did. They are not paid for the difficulty of each deal, so it has to average out. 

In the for seeable future, the traditional real estate sales model with 5%-6% commission on the final sale price - at least for single family homes - will slowly fade away.  Home-buyers and seller's will benefit from the advancement of technology and software, relieving the consumer's need for a real estate agent.   

How much more work did a real estate agent do 20 years ago? 10 years ago? 5 years?  The average home-buyer today has a vast amount of resources to access an data that was once unavailable to the open market.  

Justifying commissions based on the law of averages is not a very solid sales model.  The agent has to take ownership for a client they decided to take on, but in the end turned out to be a complete nightmare.    

Commissions on sales are just one of the many grossly inflated costs that are involved in the home buying and selling process.  I really think that further advancements in technology will slowly eliminate this gap and will lower the final price of home buying.  

more on forum posting/replies:

autosave

I seem to have a formatting problem when I copy and paste.  The font is larger and I can't seem to reformat back to normal text.

@Stephen Fryer

Earlier in this thread I was using the wholesaling as just one example where a property sold for x amount and then a shortly there after without any repairs sold and or appraised for a significantly higher value y.   This higher value y is significantly higher than what the property would appreciate in the properties normal markets conditions. 

Yes, these are the distressed properties that have value and is one way a REI makes a profit.

I guess I just have a problem with the appraisal process and the sales comparison approach. In a heterogeneous single family housing market no two properties are alike.  Yet, an appraiser will select comparables and manipulate prices up or down to get the appraisal subject's value to almost the exact amount of the purchase price.   I can't see how an appraiser can get that close to a properties actual purchase price such a large percentage of the time?  

@Joshua Dorkin

Better formatting for responding to posts.  Be able to change font type (more than one!) and size. Spell check!  Strive to achieve format capabilities like google docs. 

Develop a BiggerPockets e-transaction, similar to ressio, for members to use both internally in Biggerpockets and externally in the real world.

Where are you getting these stats on FSBO from? Are these experienced FSBO or is this the entire field? It's nearly impossible to get 100% complete FSBO data.

Again, I am talking about turn-key, recently rehabbed properties.  

I am not suggesting the good agents do not add value to the sale of a home.  There are clearly pros to using a real estate agent.  I am suggesting that they are overpaid and have an insanely high hourly rate as a listing agent for higher-end turn key homes in robust markets.  

"Who cares whether your agent has a PHD or barely passed his 90 minute exam after a 6 week course if the know their stuff they will more than pay for themselves".

My argument was that real estate agent's, more specifically, listing agent's hourly rates should not get compared to one of a surgeon.  

Agents that barely pass their exam, do not know their stuff and do not pay for themselves.

Does anyone out there have experience using e-transaction applications?  I've checked out the following:

• Reesio 
• Dotloop
• DocuSign
• Skyslope
• EZ Coordinator

@Coire Fox

How long do you think a typical listing agent spends on one property? If properties sell themselves, why do people continue to use agents?

Like you said all properties are different, but if I had to narrow down an agent's time required to just list a property I would say right around 6-8 hours.  Based on the following:

• 15 minutes to hire a photographer or 30 minutes to take own pictures
• 30 minutes to upload pictures to comp and decide which ones to use
• 30 minutes to write mls/property description
• 1-2 hours to determine listing price
• 2 hours to list on various media outlets, mls, zillow, trulia, craiglists etc... 
• 1 hour to manage staging, if needed. 
• 1 hour to figure out/talk with home owner on what needs to get fixed before listing

There are many reasons why the average home owner will use an agent.  Most probably do because of their lack of local real estate knowledge preventing them from pricing their property correctly, liability on transaction, and having bias attitudes towards their property.   

When you get a surgery done, do you ask the surgeon what his hourly rate is? Agents are not paid by the hour?

There are zero bounds to compare a listing agent to a surgeon. The amount of testing/study/practice/intellectual skill required to become a surgeon is beyond lightyears when compared to the 50-100 hours and one 80 percent or better passing 90 minute exam. A better comparison is possibly a salesman who sells a high-price commodity. Possibly a boat/yacht salesman is the best I can think of off the top of my head. There is major problem in your industry if brokers are taking that much commission for pretty much only providing access to local MLS. They essentially inflate the value of properties across the board.

Do they get in legal trouble if they drastically undervalue a property?

So this is why agents have disclosure agreements?

OK, now compare that definition to the sales price on your contract. Does the contract sales price meet that definition? If so, why should it surprise you that the contract price and appraised value are identical? How is this "not accurate"?

How does wholesaling work? The wholesaler gets a house for a "deal" and quickly sells it for a profit. It's the same house, untouched from repairs, and gets sold three weeks later to a retail buyer, The retailer uses a conventional loan with 15% down. The wholesaler makes an $8,000 profit.  The appraiser values the house $8,500 higher then the wholesaler recently acquired it for.  Why did the price of house increase so rapidly from three weeks ago?