Re post on Real Estate Commissions

thursday, may 29, 2008

Wal-Mart and Real Estate commissions

I am biting off a hard subject here today. Realtors and their commissions. I read an editorial this morning in USA Today. It had to do with a recent agreement, under pressure from court action, between National Association of Realtors (NAR) and so called internet real estate brokers. One such broker is Redfin which is an online brokerage that supposedly gives its users a big break on real estate commissions. The meat on the table is access to the 800 something Multiple listing services (MLS) around the country. Redfin insists that they should be able to access that information just like all other brokerages. NAR decided that they would share the information. Let it be said that they sure don't share that knowledge with me, a licensed real estate broker, unless I pony up about $1200 a year. The big, all knowing, USA Today Editor accuses the real estate industry of collusion, antitrust violations and downright meanness. He is as uninformed as he is opinionated.

First off, I am positive that this editor does not donate his time to USA Today. I will bet that he makes a pretty decent salary and probably some incentives. Why? Because he knows how to run a newspaper, or at least a department within a newspaper. So we can assume that the nasty old profit motive runs deep to his core beliefs.

The belief that the commissions realtors earn is out of line is not a new concept. When I first got into this business I had no clue how a Realtor made a living. I was advised that the average Realtor makes about $36,000 per year. I would be willing to bet that Mr. USA Today makes a lot more than that in a year. You must then take into consideration that a Realtor pays all, and I mean ALL of their own expenses. No company car, gasoline credit card, health benefits, etc. Add a 15% self employment tax on top of that and you will find that most Realtors make less than minimum wage. That does not take into consideration the costs for membership to the MLS, Licensing fees, Education costs, Lock box dues, cell phone, PDA, laptop computer,ISP costs, errors and ommissions insurance, etc. Then a salesperson has to split their commissions with their broker. My first broker splits were 50%. The negotiated 8,7,6,5% commissions are split between the Listing agent and the Selling agent, one representing the Buyer and the other the Seller.

I was fortunate to enter the business 6 years ago when the boom was on. I attained several listings from people who knew me and thought me to be a pretty savvy business man and wanted me to sell their houses. I had this "friend" who was a Broker who went around behind my back telling the people I had listed that he would have charged them 1/2 of what I was charging them to sell thier home. I confronted him and he told me that we Realtors make too much money in commissions. He spent his career in the Public sector so I laughed him off as just not quite understanding the good old American profit motive.

I told him this story that was told to me by an economics professor when I was in college back in Alabama. Seems that there was this manufacturer of widgets located up around Sylacauga, Alabama. He turned out 10,000 widgets a day which he sold for $1 each. He had several employees and business was good and life was rewarding to all involved. One day his assembly line came to a sudden and alarming halt. Over the next couple of days he called his engineers together to address the problem. Nothing, 4 days passed without a single widget rolling off the assembly line. They finally had no other choice but to ask for the Tech rep of the manufacturer of the assemblage machinery to come have a look. Into Sylacauga on a private plane comes the Tech rep. He comes to the factory with an attache' case in hand and walked up and down the frozen assembly line. He finally stopped at one particular place and opened the atache' case. He pulled out a hammer and gave a mighty whack to the line and it came to life rolling along without a hitch. Business was back on track and the widgets rolled off the line as before. A couple of days later the CEO recieved an invoice from the manufacturer for $10,000. The old man was livid. He told his Secretary to call the company and demand an itemization on the invoice. The itemization arrived a few days later. It said: $1 for hitting with a hammer. $9,999 for knowing where to hit. He paid the bill.

I remember back around 1988 putting my home on the market by myself as a For Sale by Owner. Interest rates were 18% on mortgages. Mine was 13.5%. No one was selling houses. My little FSBO sat there for two years. All the while I wondered what in the world I would do if someone came along and wanted to buy it. I had no clue what the next step would have been. I finally woke up and gave it to a Realtor and about 3 months later I attended the closing and got a check. I had little clue as to what happened in between.

You pay a Realtor for what they have between their ears. I have sold a little more than $10 million dollars since I first entered into the business. I have handled over 100 transactions, not all successfully. One thing I have learned along the way is that if you have seen one real estate transaction then you have seen one real estate transaction. They are all unique one to another. You need the professional by your side. Please see my last post.

In our modern world we have, including myself, developed a Wal-Mart mentality. We are all about saving the dollar, getting the best deal. Can we find it at Wal-Mart? You know they ALWAYS have the best price. What about Craigs List, E-Bay, etc. ? Let's take the Realtor out of it and then we can really shuck some corn and save a boat load of money.

I cannot for one minute imagine some faceless person on the internet in front of a keyboard on a computer caring about me in a real estate transaction. I mean really caring about me and my best interests first. You need someone you know well. A person who you trust and believe will put your best interests first and foremost. Most people only buy or sell a house 1-2 times in a lifetime. Wal-mart, E-Bay, Craigs List, Amazon discounting just does not apply in that scenario.

Please visit me on my website: http://elvass.com/.

Enjoy this bottom line philosophy of Marvin Gaye and Tammy Terrell:

http://www.youtube.com/watch?v=-0QjqErjTRU&feature=related

Choosing healthcare coverage

It is open enrollment time for the people of America. If you are now Medicare eligible you can choose to have your government pick up a sizable portion of your healthcare costs. Whereas before you were paying an exorbitant premium for private health care insurance, now you can shift those monthly costs lower. In my case almost $1,000 per month to $68 per month. Now that is a deal !

That is like getting a pay raise of $932 per month. Not only do you get that extraordinary deal but there are hundreds of plans to choose from. There are almost 100 in the nice booklet the government sent me. Now don't worry if this stuff is hard to understand. Anyone of the 100'ish  or so company plans listed in the book will send a representative to your house to explain their particular plan to you and sign you up. There is enough profit in whatever plan you choose that these representatives get a nice commission and renewal fees for the rest of thier lives, as long as they remain licensed and you remain alive. So how can a plan like this save you money and pay somebody else commissions?

What we seniors fail to remember is that we paid into this plan all of our working lives. You remember under FICA in your pay check? You paid in 10's of thousands of deneros over your working career. Now you have lived long enough to start to receive this benefit. The principle of risk-pooling has application in this scenario. While you were paying in money the likelihood of your becoming ill was pretty remote overall. Besides you were paying into a private insurance plan simultaneously that covered those risks. Now you are  in an elevated risk pool because of your age. But not to worry, there has been enough money set aside to cover your costs.

I remember when I used to lobby state legislatures. Anytime there was a proposed piece of legislation that might affect Medicare you could drive by the local airport and see an entire wing of private jets parked there. They had been used to fly in their legal muscle to follow the legislative threat and buy up influence and insure  the safe passage of any adjustments so as to not unfeather their nests. It is a known fact that the insurance companies are rich beyond belief.

So now we are eligible to to benefit from the largess of this system. It is an emotional playing field and has become more costly  simply because of the swelling ranks of beneficiaries. We " baby boomers" are tipping the scale. Add in the fact that the ranks of the worker bees who fuel the system are dwindling and we approach a fiscal and political landscape. You will hear our politicians speak many cumulative sound bites about this emotional subject. One of my favorites is " If I am elected, I am going to see to it that Social Security and Medicare are placed in a lock box and protected from the intrinsic evil of my opponent who wants to throw granny off the cliff."

Who says that getting older is a drag? Just to live long enough to benefit from the many thousands of dollars that have been taken from my pay checks over the years is exciting. Of course the front loaded funds I put in are almost like the poker chips thrown on the table in Vegas or Atlantic City. How far is the gamble going to take us down the road?    

Malpractice Reform

Florida can take lead on medical lia bility

As a physician who has traveled the country speaking to my peers, I can tell you that doctors want to provide better patient care but are hindered by our inefficient system that drives a wedge be­tween physicians and pa­tients and leads to increasing health-care costs.

I was not surprised when a recent study found that $640 billion out of the coun­try’s $2.4 trillion total health­care costs are spent on med­ical tests, procedures or consultations of no clinical value. They are ordered merely to protect the pre­scribing physician from having an attorney attack the care as malpractice. It’s called “defensive medicine,” and it is a fear­driven practice that on average costs each United States citizen $2,084 every year.

Reducing malpractice costs has been imperfectly addressed by malpractice “caps,” which reduce the total payment that attorneys can collect. However, physicians who have been burned by attorneys never want to return to the court room, regardless of the “cap,” and will continue to practice defensive medicine.

Patients should be paid for medical in­juries, just as they should be paid when an injury occurs on the job. Adopting a similar approach to worker’s compensation in pay­ing patients for medical injuries would re­duce the exhaustion of litigation. More im­portant, physicians no longer would seek the false security of protection in defensive medicine.

How can such a change occur, to the ben­efit of patients, physicians and our econo­my? In the next legislative session, Florida will have the opportunity to adopt a solution that works — a Patients’ Compensation Sys­tem.

The Patients’ Compensation System fo­cuses on the patient’s need for both prompt recognition of a medical injury and prompt payment. The doctor is not blamed for the injury, and in fact we may recognize and learn from our mistakes without being sued. This removes the wedge between patients and their physicians, allowing the doctors to choose the best health care for their pa­tients.

Compensation under the Patients’ Com­pensation System would take 180 days, as opposed to the current system that can take up to five years, and there would be defined steps to ensure a seamless process and an­swer key questions:

» A patient advocate: How do I get my claim submitted?

» A medical review department: Is a medical injury present?

» An independent medical review panel: Is this an avoidable medical injury?

» A compensation department: What should be paid for the injury?

» An administrative law judge: Was the patient’s need and physician record re­viewed properly?

» A quality improvement department: How do we reduce preventable medical injuries?

The new system’s patient benefits in­clude access to justice for all patients; deli­vering more compensation to more patients faster; increasing patient safety; encourag­ing medical innovations; avoiding unneces­sary tests; and providing more access to physicians — as additional part-time physi­cians will practice medicine. Economic benefits include lowering health-care costs, lowering employer costs and creating more jobs, as well as decreased state and federal taxes.

Florida has the opportunity to take the leadership role in reducing the real driving force behind skyrocketing health-care costs, while extending patient care to compensate medically injured patients more quickly and compassionately.

J. James Rowsey, M.D., is a longstanding delegate of Florida Medical Association and board member of the Florida Society of Ophthalmology; he also recently served on U.S. Sen. Tom Coburn’s Medical Legislation team.

Chump Change

Perhaps I will post up one day on the chump subject but my post today is about change. Change is an arena that some play in with total and absolute control while others do not. I endured a great deal of change as I grew up. I lived at 18 different addresses up to the time I was 20 years of age. Those addresses stretched from the hills of southern Appalachia to the concrete jungle of Los Angeles to Jacksonville, Florida to Montgomery, Alabama to Tallahassee. I endured changes to new classes and teachers to new jobs and circumstances and so forth. These multiple experiences seem to catch my attention, lately change is an anxiety promoting and filthy beast.

I am speaking of the most minimal change. For example this website that you may be viewing this blog on. I have had the same website since 2003. The people who hosted it decided to sell this side of the business and I had to change. I went from Myers to LinkU. I always was able to fix my website any way that I wanted, in any fashion I wanted. It was easy. Now I have a whole new administrative quadrangle of approaches to accomplishing a particular function. It is decidedly difficult. I have become a pariah to the nice techie people at LinkU. They are nice and patient and always get me to the end point desired. However, I find myself lying in bed at night distraught by the fact that I could not figure it out for myself.

On another front, I very recently went from using a Blackberry to an I-Phone. I had used that Blackberry about five years. It got to where it would not hold a charge for the entire day and some keys stuck and so forth. My children told me that if I was going to change phones then I should get the I-Phone. " It has all sorts of apps that you are just going to LOVE !!!!! " gushed my son-in-law. The one with the IQ north of 150. For about two weeks I could not even answer the phone much less download an app to watch water buffalo drink from a river in Kenya. Needless to say I lost tons of sleep obsessing about how to remember the 6 or so passwords I had created to download apps from the app store via my I-Tunes account. I-Tunes account ????? Nothing like good old Looney Tunes, that I have loved since I was six.

Change is a daunting and terrifying concept. I believe the more advanced you become in age the more daunting it becomes. My wife and I follow the same routine day in and day out. Up at 6:00 to meet our little Bellamy. Bellamy is our little 20 month old grand daughter. The one with the IQ north of 160. Lunch at 12:30, dinner at 7:00, to bed at 10:00 and so forth. Any deviation from that schedule induces meltdown and insecurity.

As my sensibiliies have become more and more lulled by the sameness I have occassional lapses of wanting a change in routine. Ah, a wakeful moment. However enticing such a desire might be I fight it and remain in the endless rut that I am in.

I suppose that there is security in the sameness. I think about the people who are forced to evacuate their homes due to Isaac the hurricane ( same old big wind, different name). Their lives get changed whether they want it or not. I worked a Katrina, Red Cross, temporary shelter here once. As you looked into the faces of the refugees and engaged them I could see the unsettling anxiety I speak of with them.

Change is hard. Sometimes it is necessary for the common good but man it comes at a cost. Not a very successful political slogan " Hope and Sameness". Hmmmmmm, perhaps I could get behind such a candidate. Nah, that would be a complete juxtaposition to that which makes our kind the creatures in charge of this planet. Someone has to find out what is over that mountain. What makes that little blob of matter tick? Bellamy knows all about this from the many episodes of Sid the Science Kid that she makes me watch with her. Maybe there is hope for me. After all I have learned to use my I-Phone and I am making progress on my website. Evidence this totally non essential and boring post to my blog today.

Tallahassee Home Sales

I read an article in the local fish wrapper yesterday morning. It had to do with the fact that home sales were up 18% points. Now I appreciate the attempt at painting the home market in some sort of positive light. The fact is that it is just hard to find any encouraging news concerning the sale of homes in this current market. We are in the worst real estate market since the Great Depression.

If you like graphs and reports that will make your head spin take a look at the following. This is put together by our Tallahassee Board of Realtors and Timberlane Appraisers. You may have to copy and paste it in your browser.

http://www.tbrnet.org/uploads/file/Snapshot/2012cumulativeJan-Jun.pdf

The take away from this statistical monstrosity is this. We had the worst year on record in Leon County 2010 to 2011. Year to date sales of detached homes was 1645 through June 2011. We look at year to date sales of detached homes through June 2012 we see that we sold 1756 detached homes. That is an increase of 7% anyway you want to slice it.

Now we have a tepid increase in sales based on the worst year on record. That is hardly news that should start us dancing in the streets. The attempt to paint a strong positive trend on that news is sort of like putting the lipstick on the proverbial pig. It is still a pig.

A much higher % of distressed sales marks our current path. We are moving more and more properties onto the lis pendens list at the courthouse. Therefore we can predict that trend is going to continue.

The bad news is that house values continue to be driven down by the mix-in of the financially impaired sales. Note current trend past six months average selling price of detached homes is $199,400 as compared to the earlier one year trend with value at $201,100.

When my friends call me about putting their homes on the market I tell them the same thing. If there is any way that you can stay in it, please do so. Try to wait it out. If you simply have to sell then price it lean and mean. Also, make sure you take the professional realtor with you.

Tallahassee vs Tallahassee

Posting today on a weird subject. I think it highlights how comedic and entertaining watching government operate is. I walk in my 40 year old NE Tallahassee neighborhood mostly every day. I have noted a vacant house of an acquaintance of mine and wonder about the disposition of the property. Today I noticed that there was some sort of a declarative poster on his door. So I wondered up to the front door to read it. The notice was from the division of compliance for the city. It said something to the effect that numerous attempts have been made to contact you about the code violations existent on your property. This notice serves as a summons and you are to appear at the hearing that is scheduled before the city commission on August 2, 2012.

The notice was printed on official City of Tallahassee letterhead and signed by an official's official. Mr. Herman VanSnoot, Esquire. The ending paragraph declared that failure to appear could result in one or more liens being placed on your property. Later on in the day I am going to call Mr. VanSnoot and ask him if he would, please, let me know if my friend appears at that hearing. That will be immensely newsworthy because, you see, I attended this man's funeral approximately 18 months ago.

Now, let's see, it makes you sort of wonder if the city's computers are networked at all. I would assume that there was a death certificate created when my friend passed away at 87 yoa. It would seem to me that there should have been some sort of data collision within the system when measures were taken to engage this property in code enforcement, allowing that the owner is all dead and stuff.

Sequel this out and you have to imagine that at some point, with the city not being able to collect property taxes on this residence, that perhaps the city would end up owning the property. In that case the city would have placed liens on property that they own. Thusly, the city would have to bring a legal action against itself at some point in the future

.Sort of reminds me of an Andy of Mayberry episode. Old Luke who lived just within the city limits had a dilapidated old house. The town condemned it and placed liens on it and property taxes were delinquent so Sheriff Taylor was given the directive to go down and evict old Luke. Whilst delivering the eviction notice Andy discovered that Luke was in possession of a war bond issued by the township 100 years prior. Andy did some quick math and determined that Mayberry owed Luke over one million dollars.

The town could not pay this debt. So they bartered themselves into the position of helping Luke fix up his house. The city commissioners, mayor, Andy and several locals happily worked replacing shutters and windows and painting up the old place. They did this shoulder to shoulder all the while picnicing and drinking Aunt Bee's famous lemonade having a wonderfully collegial time.

At the end of the episode someone determined that the bond was issued during the Civil War and was worthless as it was to paid in confederate currency. They all laughed it off and Luke was able to stay in his home and all was well.

Can you just imagine that happening today? Even in a small fry city like Tallahassee we are so paralyzed by law and regulation that there is no amount of compassion that could ever be transacted in most any business that comes before the commission.

What was it Mark Twain called it? " Man's inhumanity to man."

Magic's Paradigm

I recently watched an ESPN made for TV movie about Magic Johnson of the L A Lakers, basketball fame. It was called The Announcement. As you recall, back about 20 years ago Magic announced that he was HIV positive. He had contracted the disease through one of his multiple 100's of heterosexual encounters as he starred for the Lakers. This announcement shocked the world as this ailment had been pretty well qualified as a gay man's disease, prior. Now that you were to understand that you could contract the illness through a sexual encounter of your own choosing with some loose floozy at the orgy du jour everyone was more petrified of this disease. There was an enormous amount of misinformation flying around about it. If you will recall, Karl Malone, the star of the Utah Jazz declared he would not play on the same court with Aids infested Johnson for fear of being infected by casual contact.

I worked in the pharmaceutical industry and our company had a candidate for treatment. The government was making all sorts of tax concessions to the pharm industry to come up with treatment for this dark illness. At the time of Johnson's diagnosis there was one drug only, ATZ. This was a antiretroviral drug classified as an NRTI, nucleoside reverse transcriptase inhibitor. After 100's of millions of dollars of research there are 20 or so compounds today that treat the virus. Protease Inhibitors, Non Nucleoside Reverse Transcriptase Inhibitors, and on and on. Research is still pressing for a vaccine. The greater bulk of the disease now is found in Africa, amongst children who are born to HIV positive mothers. Little children who had no choice in the matter are afflicted with this fatal disease. The most famous child who was dx'd early was a young boy with hemophelia named Ryan White. He died at 17 from fully engaged AIDS.

Nowadays, if you are dx'd with HIV you get on the meds. You are placed on cocktails of the various drugs and are able to proceed though life living pretty normally. That is if you have access to 10's of thousands of dollars to procure the meds. If you are so unfortunate to live in South Africa where the median income is $500 per year then you are out of luck. You are going to die.

I had an acquaintance through my church who died from the illness in the early 90's. He was an attorney who had contracted the virus through a gay lifestyle. He found the Saviour and changed his lifestyle. He was a brilliant fellow and worked for a prestigious Association of high level corporations. He ultimately became one of the sickest people I had ever laid eyes on. I had been around these patients at a rotation I went through with my company. They were Hatians and the attending physicians at Jackson Memorial Hospital told us that they really did not know how that disease was transmitted. For all they knew, at that time, it could have been airborne during one of it's phases. He had told me that he had the ailment and how he had contracted it. As I mentioned, he had become my friend through our church association. He died at the young age of 37. If he had lived now he would have the prospects of a long life into the 80's. He would simply need to swallow the pills.

In America most of the HIV drugs are purchased through third party payers, the largest of course is Medicaid and Ryan White Title 21 funds. President Obama just signed a new version of the Ryan White funding. It makes it a little more understandeable why there are so many people in our country looking to pass a national healthcare bill with or without individual mandate. The country we live in has the highest standard of healthcare on the globe. Used to be if you had AIDS you wanted to be in the prison system because they were fighting desperately to contain the AIDS epidemic. You sure would not want to be a south African with the disease even today. Not unless you owned a diamond mine.

One thing we know about the disease is that it is spread through serum to serum contact. If you really think about that it gets down to a pretty earthy conclusion. You can greatly reduce your risk of infection by practicing safe sex simply by using a $1 condom. If you want to totally avoid the most minimum chance of contracting AIDS then keep your intimate, serum producing, body parts to yourself. That is until you have qualified a sexual partner through appropriate blood testing and within the holy bonds of matrimony.

Simple conclusion from a simple lesson. Thanks for the Magic lesson Mr. Earvin Johnson.