Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Saturday, June 09, 2007

The One, Two Punch.

Tony Soprano and his crew may not be the only ones getting whacked. According to USA Today (and you know if you read it there.....)Realtors are taking it upside the head too. After LA Law went on the air years ago, it was written that law schools saw a sudden surge in applications. It appears that the same thing happened with Realtors and the rise of the Home and Garden Network.
In many markets across the country, the glamour of the go-go days — when investors bought homes sight-unseen and lenders didn't require down payments — are gone. In those areas now, the job of an agent is one of chasing leads, marketing like hell and chauffeuring hesitant buyers to open house after open house.

"Since the first of the year here, I've shown more homes than all of last year, and worked more hours on a regular basis," says Beach, 39, one of the top-producing agents at Coldwell Banker Elite.

For many of today's agents, this is the first housing downturn they've ever seen, and it's become a belt-tightening test of their staying power. Nearly 25% of Realtors nationwide received their real estate license in the past two years, just as the market had peaked and was turning south.

At least there's never a shortage of criminals to keep all the lawyers busy. Not so with the numbers of house shoppers, though somewhere not too much farther down the line the two worlds might intersect with a resouding crash. Many people who go into RE have careers that make the Mayfly look like Methusalah, but surely those piles of cash pouring in more than make up for it , right???

Realtors with two years' experience or less earned a median income of just $15,300 last year, according to the National Association of Realtors. After taxes, association fees and marketing costs, they pocketed a mere $9,400.

Oh. Well. Never mind. well then what was the attraction anyway?

During the real estate boom, Stafford County was one of the fastest-growing bedroom communities in the Washington, D.C., area. Working-class families flocked here in search of more affordable homes, and the local housing market exploded as developers bulldozed miles of trees to make way for sprawling neighborhoods and strip malls. The median home price here more than doubled from $172,000 at the end 2001 to a peak of $403,840 in May 2006, according to Metropolitan Regional Information Systems.

That means the typical seller was writing a 6% commission check for $24,230.

I think operative word here is was. To understand how this breaks down in the real world the article explains the cold hard realities.

Many homeowners don't realize that when they sign a listing agreement to sell, they aren't actually signing a contract with the agent. Their contract is with the real estate company's broker, who is legally responsible for the agent.

The broker gets the commission check from the seller, then splits it with the agent, who's an independent contractor. It's common for new agents to take home just 50% of their commission. More senior producers might pocket 70%.

On the sale of the median-priced U.S. home of $220,500, if the seller's broker received a 6% commission ($13,230), half would go to the buyer's broker. The sales agent might get as little as $3,308.

Out of that, the agent must pay the cost of marketing the home. And when home sales drop, marketing consumes more time and more money.

Now using Sopranos logic, just figure that for every drink or lap dance sold at The Bada Bing, T gets his taste , some body is left with the ice cubes. Speaking of ice cubes....
In a post below I mentioned that Realtors up in Sacramento had been turned into Mosquito Control personnel. Caterer can now be added to that list.

spending two days in her kitchen making soups, salads, cookies and other dishes for an open house for other agents. She printed the menu on posters and delivered them to rival real estate firms.

With a growing glut of homes for sale, she felt she had to do something to tempt local real estate agents to come see her client's $735,000 home in Stafford. On the day of the open house for the agents, she raffled off $5 lottery tickets every half hour; she didn't have enough money for bigger prizes as other agents did.

Still, Hiles spent five months marketing and showing the home before it sold in spring 2006. She got two more listings. Yet they just sat on the market.

Of course around here we've seen just how far a lavish outlay of food can get one. Remember the Hotel Chauvet "auction"?

When a deal closes, the agents often give their buyer a flowering plant, little goodies for the kids and a $50 gift certificate to cover the costs of changing the locks on the house.

They've also been known to pay $400 for a home warranty, which protects against certain unexpected repairs. And soon after the buyer moves in, the agents stop by to give them a framed watercolor painting of the new home.

I must confess I was once given a set of cheese plates (6 of them) by a Realtor I'd purchased a house from in LA, but then I only put down about 30% in cash. Nowadays I could probably get her to come in and clean it for me twice a week.


At 6/10/2007 12:38:00 PM , Anonymous tom stone said...

Oddly enough the few real estate brokers i count as friends are doing quite well.In fact most are doing significantly better than thet did last year.Why? They get personal referrals,price right,and are genuine professionals who ad value to the transaction.what percentage of real estate brokers fit this mold.....about one in four or five,at best.the less competent are still taking listings at any price,cutting their commissions to the bone,and bleeding cash...there are a lot fewer of them than there were last year and the herd is being culled fast.good to see you posting again,don't forget that adults need 8 houre of sleep a week to function well.

At 6/14/2007 12:56:00 AM , Anonymous waiting For Sanity said...

I'm so happy to see some activity here.

The news keeps coming in and it looks like the RE market is doing what we all thought it would.

I hope the ethical brokers will thrive.
We need honest helpful folks.

I have no sympathy for the jerks who played on greed and sucked in suckers.

They made a mess for all of us.

I hope this mess will get better.


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