As election day nears, let’s take a look at Prop 5, sponsored by the California Association of Realtors – who is encouraging agents to help get the vote out.
I’ve been skeptical that, if passed, Prop 5 would bring many more long-time owners to market. The benefit only helps those who have a low property-tax basis currently, and won’t move unless they can take the same low tax basis with them.
The latimes.com featured a typical example here:
After Robert Holland’s knee surgery a few years ago, he’s had a harder time climbing the stairs in his trilevel home in the Tujunga neighborhood of Los Angeles.
Holland, a retired stagehand, wants to move from his residence at the foot of the San Gabriel Mountains to a one-story place nearby with a yard large enough to raise a goat and a couple of chickens.
But one big thing is holding him back: taxes. Holland purchased his home in 1995 and owes $4,500 this year in property taxes. If he buys a new house where he wants, his tax bill will more than double.
“It’s a matter of the quality of life,” he said, chuckling about his dilemma about whether to move. “I’m 63. I’m thinking what do I got, 20 good years left?”
The California Assn. of Realtors has a solution to Holland’s problem. It’s sponsoring Proposition 5, a statewide initiative that would provide property tax benefits for homeowners 55 and older as well as the severely disabled and natural disaster victims if they move to a new home.
Under the measure, qualifying homeowners would no longer have to pay property taxes based on the purchase price of their new home. Instead, they’d pay based on a combination of their new and old home values, lowering their property tax payment. The Realtors’ group, which has raised $13 million for the campaign, contends that the tax breaks are needed to help older residents and could free up larger homes that young families could use.
But a host of Proposition 5 opponents — including economists, local governments and labor unions — argue that older homeowners already receive disproportionately large property tax benefits in California. They say that providing additional breaks will exacerbate those disparities while costing cities, counties and schools billions of dollars a year.
Fernando Ferreira, an economist at the University of Pennsylvania’s Wharton School who has studied California’s property tax system, called Proposition 5 “completely nonsensical.”
“Right now, you’re giving a gigantic tax break to older homeowners who live in the best houses in the richest parts of the state,” Ferreira said. “This new proposition unfortunately will just perpetuate this inequality.”
But once you’ve lived in a house for 20+ years, it has become very unlikely that you will move again. Just the cost and hassle is mentally challenging, and the usual result is to make the old knee last a few more years.
Here’s why.
These folks could move right now, and take their old tax basis with them – all they have to do is buy a house that is less-expensive than the one they sell.
If they sold their house for $810,000, they could buy this one-story house on a flat half-acre that would seemingly suit all their needs, listed for $799,999:
If they were that committed to moving to a one-story house where they can have “a yard large enough to raise a goat and a couple of chickens”, they could do it today – and take their low tax basis with them.
Do they need a swankier place?
If this house isn’t good enough, and they need a single-story that costs a whole lot more, than they should pay the regular property tax.
What is behind the scenes is the C.A.R. intent to put this measure back on the ballot in 2020 with another initiative:
After gathering signatures to put the initiative on the ballot this year, the Realtors lobbied the Legislature for a deal. The group wanted to replace Proposition 5 with a separate measure that included the same tax breaks for older homeowners, but eliminated the inheritance tax break for vacation and rental properties, and clamped down on businesses that avoid higher property taxes when they buy commercial real estate.
The California legislature didn’t go for it – and this year’s initiative just seems like a trial run to test the waters. Can’t wait for 2020!
Below is the evidence put forth by a Bay Area realtor to show two things:
Redfin home-value estimates are tied to the list price, and their estimates are increased as they gauge the traffic.
Buyers are assuming the Redfin estimates to be accurate, and rely on them when making an offer.
In the beginning, zestimates were thought to be wildly inaccurate, and dismissed. But now that portals have been around this long, are consumers putting too much trust into the data received? It appears so.
Are buyers satisfied with internet values now? Are they subconsciously thinking that the estimates are close enough AND that everyone else does too?
Will future home values be determined by internet traffic?
When the bluff-top mansion at the end of Malibu’s Sweetwater Mesa Road sold for more than $30 million in 2016, it looked like the end of a years-long intrigue involving the playboy son of the president of an oil-rich African nation.
Instead, the sale and a quick flip of the property for nearly $70 million has opened a new, scandalous chapter. This time, instead of an accused kleptocrat and the U.S. Department of Justice, the key players are a celebrity real estate broker and an insurance company.
The most fascinating thing about working for Compass is how many people ask about Compass (especially other agents). I signed up primarily for the future potential, and where big money might lead us.
We got another sense of how big yesterday:
Compass, a real-estate marketplace startup, raised $400 million in an investment round that will bring the company closer to an eventual initial public offering.
After the investment, the New York-based company will have a $4.4 billion valuation, a person familiar with the matter said. The financing will help Compass expand its real-estate technology into more cities, including outside the U.S., the firm said in a statement.
The Softbank Vision Fund and Qatar Investment Authority are leading the round, Compass said. The company expects growth in 2018 to double to almost $1 billion in revenue, according to the person, who asked not to be identified because the information is confidential. Compass makes its money by taking a small cut of each transaction coordinated by its real-estate agents. The company said it’s on track to post more than $34 billion in sales volume this year.
“We will continue to capitalize on our momentum nationally and internationally,” said Ori Allon, the company’s co-founder and executive chairman.
The latest funding brings the total raised by Compass to $1.2 billion. Besides international expansion, Compass is seeking to enter related businesses beyond property listings, such as mortgage title transfer and moving, CEO Robert Reffkin said in a June interview.
“What books were for Amazon, the brokerage model is for us,” Reffkin said at the time.
On the same day, the same bank announced the same for OpenDoor:
Growing direct homebuyer Opendoor now has $3 billion in financial backing (yes, that’s “billion” with a “b”) thanks to a sizable new investment from Japanese technology company SoftBank Group.
Opendoor announced Thursday that it secured a $400 million investment from SoftBank Vision Fund, SoftBank’s investment arm.
That investment pushes Opendoor’s total equity capital raised above $1 billion – $1.045 billion, to be exact.
In addition, Opendoor said Thursday that it also recently secured $2 billion in debt financing from unnamed “top banks,” meaning the growing company now has more than $3 billion in total funding since it first began buying and selling houses in Phoenix and Dallas-Fort Worth in 2014.
Since then, Opendoor has been growing by leaps and bounds and raising money hand over fist.
Opendoor is now operating in nearly 20 markets, including Atlanta, Charlotte, Dallas-Fort Worth, Las Vegas, Nashville, Orlando, Phoenix, Raleigh-Durham, Tampa, and San Antonio, and has plans to into California, the Pacific Northwest, and several other areas over the next few months.
Opendoor’s next market expansions will be in Sacramento, California; Riverside, California; Denver, Colorado; Portland, Oregon; Austin, Texas; and Jacksonville, Florida.
And the company plans to be operating in 50 markets by 2020.
Our local associations of realtors are done suing each other, and as of today, those of us in the NSDCAR are officially using the nearly-statewide CRMLS. We are going to share the other local option, SDMLS, for the next two years so consumers probably won’t notice any difference on the portals.
What does it mean?
It means Jim the Realtor is going state-wide!
Well, almost – the map above shows the areas of coverage. While Temecula and the OC would be obvious markets that are closer to home, it’s not out of the question that I can sell homes anywhere.
When my Dad died in 2010, I sold my parents’ home in Concord for top dollar, and the long-timers here might remember my grandparents’ house.
My sister had just become a realtor in the Bay Area when it came time to sell the family homestead. It was a custom home my grandparents had bought in the 1940s, and there had not been much upkeep or improvements:
Plus, like with many families, there was an overload of sentimental value. It’s where we had most of the holiday gatherings, and there’s even a photo somewhere of me as a toddler sitting on Earl Warren’s lap in the living room!
My Mom and sister were convinced that it would sell for over $2,000,000.
I told them to send me the comps, and once reviewed, I said it was going to sell for $1,500,000. They were outraged and hurt, and accused me of knowing nothing about the local market – how could I possibly offer any assistance?
Here’s how it turned out:
I don’t think it’s feasible to be able to help homebuyers in other areas, but I can offer my full compliment of sales skills to sellers – contact me and we can discuss. I already have a listing coming in Murrieta, and another possible one in the OC so we’ll see how it goes. Tract houses and condos are a little easier to evaluate, but as you saw with my grandparents’ house, I can get pretty close on the custom estates too.
One other change with the CRMLS:
They have the same policy as Sandicor did about requiring that listings are inputted onto the system within 48 hours – but CRMLS only counts business days, not calendar days. So listings taken on Thursday don’t have to be inputted until Monday. Of course, agents are still welcome to use the SELM form to exclude the listing for days or weeks if they so desire.
This is how the industry enforces the rules – run an article like this every once in a while that gives tips how to CYA. We do have a form that absolves agents from wrong-doing, which just begs agents to ignore the rules:
From N.A.R.
If you or your client is interested in proceeding with an off-market listing, be aware of the potential peril of compromising your fiduciary and ethical responsibilities. Here are five scenarios to avoid, along with ways to reduce your risk.
The real estate agent or broker, not the seller, is the one pushing for an off-MLS listing. Ensure the decision is made voluntarily, solely by an informed seller. Have a signed listing agreement that spells out to clients the limitations of not listing on the MLS (such as that it may reduce their chances of getting the highest and best price for their home by reducing its exposure more widely to the public).
“Coming soon” marketing that limits the listing’s availability to a specified group of brokers during the premarketing period. Be certain all brokers and buyers have equal access to the listing.
An agent fails to notify their member MLS when a client opts to keep the listing private. Most MLSs require that after a listing agreement is signed, the agent must file a certification—signed by the seller—noting the listing is not to be disseminated to other brokers using MLS. Typically the notification must be filed within two to three business days after a listing agreement is signed. Agents can be fined for failing to do so.
An agent faces accusations of breaching fiduciary duty in order to earn a double commission. Off-market listings can lead to more dual agency transactions, as the agent may actively advertise the property only to his or her clients. While not illegal, the practice can be problematic if the prospect of a double commission is the reason an agent suggested an off-MLS listing. Agents risk being sued by a buyer client, for example, who might believe you didn’t seek the best price since you also represented the seller.
Agents are accused of antitrust or fair housing violations by limiting listing exposure to a narrow buyer segment. Be sure you are fulfilling your duty to “cooperate with other brokers except when cooperation is not in the client’s best interest,” as stated in Article 3 of the REALTORS® Code of Ethics.
Opendoor, the ibuyer who purchases your home for cash and closes escrow at your leisure (as long as you don’t mind paying their 6% to 13% fees plus home repairs) has made a deal to acquire a discount brokerage:
Opendoor announced Tuesday morning that it has acquired Open Listings, a real estate site that offers homebuyers a 50% refund on the fees their real estate agent would have received.
With the acquisition, Opendoor will now be able to buy a home directly from a seller, then help that seller find a new home (whether it’s a newly built home or an existing one), offer them a mortgage, and close on the sales through its own title operations.
Basically, buyers who use Open Listings find, tour, and buy homes through the platform. Real estate agents only come into the process when it’s time to make an offer on the home.
They are building a platform similar to the Red team’s, and both are weak in the beginning – they both offer inexperienced agents or no help at all at the initial showing of the home. These guys expect you to go to the listing agent’s open house, and then make an offer with their online agent.
I believe that every buyer should receive professional advice from their agent while at the property – and reflect those details into the offer price. Otherwise, you pay too much!
The online agents haven’t seen the house in person, and can’t offer the same expertise. Besides, if you are an online agent, you just want to hurry up and write the offer and expect any defects to come out during the home inspection. The buyers end up basing their entire investigation on a $500 guy who has no fiduciary duty to them and whose job is limited to the moving parts of the house.
But let’s say you can live with that.
These types of disrupter platforms are entirely dependent upon all agents sharing their listings on the MLS. But as the major brokerages continue to input their listings on their company website first (Redfin’s publicly-stated policy), the MLS will soon become a relic, and the marketplace of last resort.
All of the market conditions are pushing in this direction. We are transitioning from the Wild, Wild West to Full-Tilt Chaos!
People are wondering where real-estate-selling business will go.
The Uber Real Estate yesterday proved to be fake news – they aren’t affiliated with the real Uber – but they did follow a familiar theme; bashing the traditional realtor model.
Virtually every disrupter does the same thing, accusing regular agents of charging too much for doing too little. Then they claim to do the same thing (full service) for less money.
But nobody has offered a different way to sell homes. Why? Because there isn’t any mystery about the process; it is what it is.
Sellers decide how much help they want and need to expose their home to the marketplace, and handle the details of getting to the finish line. Buyers review the offerings, and decide how much help they want and need to buy one.
That’s it – that’s the process.
HOW MUCH HELP DO PEOPLE WANT? DO THEY KNOW WHAT THEY NEED?
Because nobody in the business does much to expose what they actually do to sell homes, the difficulty of buying and selling is a mystery. As a result, it looks easy – easier than it really is, especially as we’re transitioning into new and relatively unknown market conditions.
They don’t know how much help they will need because they under-estimate the difficulty. Sellers have sold cars and other items in their life, and take pride in knowing a few things about their world. Buyers have rented homes before – how hard can it be to buy one?
Disrupters ignore the difficulty too, and claim their Full Service is all you need.
But we’re in an era where the difficulty is getting harder, as the disrupters are making it sound easier – and cheaper.
As a result, the consumers (sellers and buyers) are under-served. Some don’t think they want much help, if any. This includes the sellers who think that paying less for limited exposure will still net them the same money, and the buyers who go to the listing agent direct – thinking they will get a better deal.
Traditional realtors could make their stand by mounting an effective advertising campaign to demonstrate the truth about the difficulty, and how important it is to get good help. It’s what consumers need to hear – and then find the appropriate service provider.
Without that guidance, consumers will select their realtor like they buy everything else in the Amazon era – rush a cursory review of the choices, and then grab one based on chance and luck, not thorough research.
Why don’t the traditional realtors step up to the microphone? Because they haven’t had to yet.
But when they do, they will be faced with an interesting decision. Do they take the high road, and educate consumers properly? Or jump into the swamp?
Let’s hope for more consumer education. We have more choices of service providers than ever, but less truth!
Things that blow out deals are usually avoidable, and are easy to identify in hindsight. In this case, the agent let the buyers pick a roofer out of the book, which is a terrible way to do business. He gets paid the same whether he blows the deal or not, so of course he tells the buyers the house will fall down some day. No wonder he has great reviews – think of all the homebuyers he saved from buying a regular house, and are still renting!
But the most important lesson is how the agent handled the situation once a concern has been identified. Buyers are counting on their agent for expert guidance, which should include pointing out that there are no perfect homes out there, and let’s find a way to deal with the imperfections – because in this case, the house had far more positives than negatives.
But instead, the agent – who had been telling me that everything was fine – just sends over the cancellation form in the dead of night. She didn’t give me any more opportunity to address the concern (even though I has already provided ample evidence), or try to fix it herself. Instead, once her buyers objected, she just cancelled.
This is where we will see the last nine years of a bull market come back to haunt us. There are plenty of agents who got into the business since 2009 that not only consider themselves one-percenters, but have built teams and are riding a high horse. But they have never had to handle buyer objections.
Expect a long, stagnant, bumpy market ahead.
Get Good Help!
What did I do? I went back to the second-place finisher and sold it to them.
