Real Estate Blog

Choice A - For Sale by Owner (FSBO)

Here is a great new for-sale-by-owner site, Choice A, for selling your real estate. It is free to list your property, and is very simple to use. If you are looking for property, you can select an area by either city-state or by zip code. However, because this site only recently went live, most of the properties are restricted to Portland, Oregon and Seattle, Washington, but I'm sure that it will expand rapidly. It is easy to survey properties by thumbnails, map, or by a tabular list that can be sorted in numerous ways, such as by price or zip code. I'm sure there will be many more features in the future, but this is a great site right from the get-go. Below are some annotated screenshot snippets that provide more detailed features of the site.

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Buying or Selling Real Estate Online—Redfin and BuySide Realty

Some real estate companies are combining experienced local real estate agents with e-commerce applications that reduce the workload of the agents, which allows these companies to pay the agents less for each sale, which allows the companies to pass the savings to the company's clients.

Right now, Redfin covers the San Francisco Bay Area, Los Angeles, San Diego, Orange County, Boston, and Washington D.C.

Sellers pay a flat fee, either an upfront fee of $3,000 or $4,000 at closing, for those people who don't want to pay upfront, or in those states, such as California, that don't allow payment of an upfront fee. The houses are listed on the Multiple Listing Service (MLS). The seller saves $11,000-$12,000 of the typical seller's commission on the average Redfin home price of $500,000.

Buyers, if they don't use an outside buyer's agent, save 2/3 of the buyer's agent's commission that is refunded at closing, which can amount to $10,000 on a $500,000 home. The average commission refund was 1.95% of the purchase price in Redfin's 1st year of operation.

Buyers can tour homes online and draft an offer online. Redfin handles the negotiations and the paperwork, and gives a 100% satisfaction guarantee.

Redfin doesn't use dual agency—different agents will be assigned for the buyer and seller of the same property, if necessary.

To find homes, the buyer can use maps on Redfin's website to zero in on a general area.

Homes for sale are represented by small green houses on the map. Selecting 1 of the houses highlights more detailed information displayed in a table and shows a picture of the property. There are also links for much more detailed information for each property. The buyer can use a filter to narrow search results, such as price range or number of bedrooms, etc., and the map can also show what surrounding property recently sold for.

BuySide Realty is another similar service with coverage in more states, but offers its services to buyers, who are refunded 75% of the commission at closing. BuySide agents are members of the National Association of REALTORS.

REX & company Invests in Home Equity

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RealEstateJournal | Product Taps Home Equity Without Taking Out Loan

REX & Company, a small San Francisco real estate investment company is offering homeowners a way to get cash out of their homes by allowing it to invest in the price appreciation of their primary house—not rental or investment properties. When the house is sold, REX would receive a percentage of the increase, and if the house were sold at a loss, REX would get less than what you received from REX for its interest. The amount of money that you would receive would depend on what REX's percentage is in the appreciation of your home. According to its website, REX establishes what it calls the Option Exercise Price, which is paid to the homeowner as 2 payments. The Advance Payment is paid when the homeowner signs the REX Agreement. The Remaining Payment is paid when the REX Agreement ends, in 50 years or when the home is sold, whichever occurs 1st. (I'm not sure about the details of this, but it seems that the Remaining Payment is not really a payment, unless your house declined considerably in value, since you would then have to pay REX its share of your home's appreciation, which would probably be a lot more than the Remaining Payment. Also, does REX pay interest on the Remaining Payment?)

It is not a loan nor is it a reverse mortgage, so no interest is charged and no payment is required until the house is sold, or the REX Agreement ends. You could get a lump sum payment for up to 13% of your home's appraised value. There are no minimum income or asset requirements, but you do need a FICO score of at least 680. You do not need to pay off the mortgage, and you can terminate a REX Agreement at any time by paying REX the value of its interest in your home. Currently, it is available in only 9 states, but REX is planning to expand in all 50 states shortly.

Option ARMs

RealEstateJournal | Lenders Adjust 'Option ARMs' To Lessen Impact of Rising Rates

How to prevent the many foreclosures that will surely be coming? Offer option adjustable-rate mortgages, where, each month, the borrower can decide to make a regular payment of both principal and interest, an interest-only payment, or even a lesser payment that doesn't even pay the monthly interest, leading to negative amortization in which the remaining balance increases until a cap is reached, such 110% of the original loan, when, thereafter, the borrower has to start making much bigger payments. Or the borrower can opt for a fixed payment for 3, 5, or 7 years. This may help the borrower if he expects to be making a lot more in the near future, or interest rates drop quickly, and by enough, to lower payments on the larger remaining balance. These mortgages are now being offered by IndyMac and American Home Mortgage.

These are very risky mortgages. Real estate prices are declining, and will continue to decline for a few years, at least. It would probably be better to try to sell now while prices are still in the lower stratosphere. Risky mortgages like these, and others, such as interest-only mortgages and the new 50 year mortgages, is what led to the high home prices in the 1st place. This is a situation where refinancing, or selling the home for enough money to pay off the mortgage becomes impossible. When you overpay for something, you are sure to lose. I'll tell you a little secret. Buying high and selling low is NOT the path to great wealth!

Mortgages

LendingTree

This site provides a quick, easy way to find out if you can get a mortgage, and what it will basically cost. There is on credit report inquiry (which would have a slight negative impact on your credit score), and they don't require your social security number. Proffered advantages include:

Home Steps, A Freddie Mac Unit: Special Financing

Home Steps is a Freddie Mac program that helps low- to moderate-income people can mortgages. Advantages include:

New 50-Year Mortgage Keeps California Real Estate Bubble Inflated

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50-year mortgage debuts in California

First created in Southern California's San Bernardino County as an alternative to interest-only or payment-option adjustable-rate mortgages, and also as a great PR tool for the banks marketing them, it allows people to pay even more for California real estate than they already are. It's bad enough that a quarter of Californians are buying real estate with 40-year mortgages, now they want to pay for 50 years, but I guess Californians need this since half of the houses sold in February cost more than $535,470! Considering that half of first-time home buyers are older than 31, reverse mortgages probably won't be an option for these people. Of course, one of benefits touted is that it prevents negative amortization that can occur with payment-option ARMs, when the monthly payment is less than the monthly interest on the loan.

The 50-year mortgage is a 5/1 hybrid indexed to the London Interbank Offered Rate (LIBOR)—the introductory interest rate lasts for 5 years, then is adjusted annually.

The total payments for a 50-year mortgage is more than 3 times what the home cost.

The 50-year mortgage, the interest-only mortgage, and the payment-option ARM are symptomatic of too many people willing to pay too high a price for real estate, or are going beyond their true means, which will, in many cases, lead to hardships and foreclosures. This is a clear indication that the real estate bubble is reaching its limits.

Of course, many people buy homes at these prices because they think they'll be able to flip it over within a short time for an even higher price. Good luck with that!

Real Estate Links, Tutorials, and Articles — Quick Takes

The Mortgage Professor's Website

If you are shopping for a mortgage, this seems to be an excellent site that covers just about every aspect of mortgages. It explains, concisely and clearly, just about everything you would need to know about mortgages, and includes many calculators and Excel spreadsheets to help in finding the lowest cost mortgage available.

USATODAY.com - Real estate investment trusts boom

Real estate funds are doing well. The average real estate fund was up 36.6% in the past year, but can it last?

MONEY Magazine: Closing cost scams - Mar. 29, 2006

Discusses the numerous fees that need to be paid at a real estate closing—title insurance, settlement fees, appraisal fees, processing fees, document-preparation fees and others, as well as charges paid by the seller, like your broker's commission. Illustrates numerous scams to increase the broker's or the lender's bottom line, such as kickbacks from title insurance companies to the broker or the lender that recommended them.

MSN Money - Insurers keep a secret history of your home

Insurers are using the Comprehensive Loss Underwriting Exchange, or CLUE, database to drop or deny coverage based on a home's history of claims or damage reports. Used previously to find fraud and consumers who file numerous claims, insurers are now using this database to exclude greater risks, especially if a claim or even a report from the homeowner, indicates that the home may be susceptible to water damage or flooding.

You can request your own file from the Medical Information Bureau at MIB.com - Request Your MIB Consumer File , which will allow you to correct any mistakes, and you can see what they have on you. Likewise, for the CLUE reports: You can obtain free copies of your CLUE Auto Report and CLUE Personal Property Report at LexisNexis Personal Reports.

Real Estate Commission Rebates

Real Estate Rebates New Home Rebate Reps - Home

This seems like a promising way to save money on buying real estate. Below are some extracted quotes with what I thought was the most important information.

RebateReps is a Nationwide Network of top Real Estate Agents. If you are buying any new construction or resale home, we can save you money by connecting you to one of our agents who will put their commission into your pocket.

RebateReps agents share their commission with you with the "two zeros" program. Just take the last two zeros off the price of the house, and that's your rebate! Example: If you buy a house for $200,000, you get $2,000 back as a rebate.

When buying a resale home, the seller's agent is known as the "listing agent". The listing agent charges the seller a fixed fee, (often 6% - so we'll use 6% as an example here). The seller pays this 6% fee whether or not you, the buyer, have an agent representing you. This means that when you do NOT have an agent, the listing agent keeps the entire 6% commission. The seller has no motivation to offer you a better price if you buy his house without a real estate agent, because he has to pay the same 6% commission to his listing agent either way! RebateReps lets you take advantage of this "loophole". When you use a RebateReps agent to represent you, the RebateReps agent gets paid part of the listing agent's commission, and then rebates part of it to you!

When buying a new construction home, the builder sets the price. If you buy a new construction home and have a RebateReps agent present, the builder must pay your agent a commission - even though you pay the same price for the home! The law stipulates that a builder can only pay a commission to a licensed real estate agent. Without an agent present, you pay the same price as you would have if you had arrived with a RebateReps agent. However, without an agent, you forfeit your opportunity to get a rebate.

The rebate is paid to you at closing, meaning you bring less of your own money to the closing table. There is never any charge nor any fees to you, the buyer. A traditional real estate agent might spend several months driving you around every weekend to look at new homes. That takes a lot of time, which is why the agent has to make a large commission on each transaction (which, by the way, the seller pays). But we figure that you'd prefer to start your home search on the Internet instead, right?

So, imagine if your real estate agent could leave the taxi driving up to you and just focus on negotiating you a great deal on your home. That's how RebateReps works. And to thank you for not having to be a taxi driver, the real estate agent shares his commission with you!
Once you're ready to get serious about buying a home, the RebateReps agent will provide you with a full service experience, but since he doesn't have to be a taxi driver, he can afford to share his commission with you!

Selling Your Home

Selling a house after the market has turned south - Jan. 13, 2006

Tips to sell your home.

Some websites mentioned:

Homethinking: Objective Real Estate Metrics and Realtor Reviews for Savvy Home Sellers

This site helps you to find real estate agents in your zip code. You can see what houses they have sold recently, what price was asked for, what price did they get, and what opinion the home seller had of the real estate agent. You select the real estate agents. No forms to fill out, no unsolicited calls from agents, and no unwanted email.

HungryAgents.com - Find a Discount Realtor - low real estate commission, cheap real estate agents, compare realtors

Get matched with full service REALTORS® in your area ready to reduce their commission & compete for your listing. Your options include:

For Sale By Owner, homes for sale, houses, real estate, for sale - ForSaleByOwner.com

This site obviously helps you sell your house yourself. There is a small fee that starts at $89.95, but they guarantee that you will sell your home at your price, or they will refund your money.

For Sale by Owner

Owners' Web Site Gives Realtors Run for Money - New York Times

This is long overdue. I find it baffling why there can't be a successful website that can give real estate owners a means to sell their property without paying thousands of dollars to realtors.


"FSBO"-For Sale By Owner-Real Estate-Madison Wisconsin-Houses-Madison WI-Madison Wis-"fsbo"-for sale by owner-homes-houses-real estate-madison Wisconsin

Here's the site discussed in the above article. Mostly for the Madison, Wisconsin area, but I see no reason why this couldn't work elsewhere. Need a money-making idea; here it is. This business requires very little money to get started. The 2 women who run this site operate out of a spare bedroom, and neither one worked in the real estate industry. Eventually, somebody will create a search engine that can search all such sites across the country, giving MLS some real competition.

Selling Real Estate by Listing a Price Range

USATODAY.com - Sellers put their homes on the 'range'

A marketing method that originated in Australia, and used in the U.S. to a small degree since the mid-'90s, there seems to be an upsurge in this method as the number of real estate listings increase, and buying interest diminishing. Proponents of this marketing method say that its main advantages are that it gets buyers and sellers talking, which obviously could lead to a sale, and listing a price range will allow the listing to show up in more searches when pricing is used to filter the search.

Although there is 1 or 2 examples of sellers getting even more than the price range, seller beware. An article in The Journal of Real Estate Finance and Economics stated that homes with a range take longer to sell, and with little effect on actual selling prices.