Wednesday, March 15, 2006

How well do Limited Services Brokerages Perform?

How does limited service representation affect a property's time on the market and selling price? Recent research sponsored by the Texas Real Estate Center revealed that limited service representation can indeed have significant negative impacts.

Limited service representation and discount brokerages in single-family residential markets have been widely scrutinized by the real estate industry. The Internet portal Yahoo! moved from the sixth most visited real estate website to second (behind through its series of partnerships with limited service and discount brokerages. Some of these brokerages offer consumers menu-based pricing, with fees for specific services, such as listing the property on a MLS system, rather than an across-the-board fee for full representation. Others advertise sharply lower commissions while still promising to provide consumers with all of the traditional services.

Limited Service Research Results

Most of the study results were statistically significant, indicating valid relationships exist between limited service representation and marketing performance (time to sale and sales price). The empirical results show that limited service listings sold for 1.7 percent less than typical exclusive-right-to-sell listings and took 17.1 percent longer to sell. Given that the typical discount offered by limited service brokers is approximately 2 percent, there does not appear to be any net gain to sellers using limited service representation.

For example, if the limited service broker charges a total 4 percent commission, then the commission plus the 1.7 percent lower price is approximately equivalent to a 6 percent commission from the seller’s perspective. This would indicate that limited service brokerage offers no dollar advantages to the seller over typical brokerage when using the exclusive right to sell contract.

If "time on maket" is taken into consideration as well, then limited service brokerages could actually COST the seller depending on the fixed costs of carrying the property on the market (mortgage, maintenance, etc...).

But what about agent experience?

Other research has shown that agents associated with limited service brokerages, either no service or menu-based-pricing, tend to be less experienced than those with traditional brokerages. The Texas Real Estate Center study revealed that sellers using listing agents with less than two years of experience received 1.1 percent less for a house compared with sellers who used agents with two to five years of experience, and the marketing time was 1.9 percent longer. While 1.1 percent may not seem to be a large amount, it represented more than $1,900 for the average property in the study. If the listing agent had more than five years of experience, the seller received 0.8 percent more than sellers who used agents with two to five years of experience, and the property sold 1.5 percent faster.

Source: Texas Real Estate Center

Tuesday, March 14, 2006

For Millionaires Only? Naperville Segment Grows...

What's the buzz?
According to the Multiple Listing Service of Northern Illinois...

In Naperville there are currently 172 Single Family (there are also 2 condos in the 520 Washington building) homes on the market over $1,000,000 - 24 of them are under contract (meaning pending a sale) leaving 148 properties for sale. In 2005 there were a total of 58 sales over $1,000,000.

What does it all mean?
If the market is as good as it was in 2005.... those 148 properties have the remaining months of the year to grab one of the remaining 36 sales. Leaving 112 disappointed Sellers ready to face the market in 2007. Of course, this is assuming that no other homes will be coming on the market in that time (silly assumption).

So if I'm a buyer what does this mean?
A buying opportunity! There are motivated sellers that will be be anxious to work with you.

If I'm a seller what can I do?
Be aggressive. Cutting edge marketing combined with realistic goals is the key to your success.

Is all hope lost?
No. In fact there is the evidence that this segment of the market may continue to grow, as evidenced by the yearly numbers:
2005 - 58 sales over $1,000,000
2004 - 37 sales over $1,000,000
2003 - 19 sales over $1,000,000
2002 - 17 sales over $1,000,000
2001 - 9 sales over $1,000,000

Another important fact to keep in mind are the increased numbers of custom built premium homes in this range that won't show up in the MLS system.

For a look at some of the premium homes in the Naperville area visit:
Luxury Homes of Naperville

Friday, March 10, 2006

Mega MLS

Where are the MLS goings? Are large MLS's better for consumers and the agents they serve?
It seems that our state of California is heading quickly towards having larger regional MLS systems. Northern California just announced the merger of 5 MLS regions into one and the writing is on the wall to have others. It is likely that by end of 2007 All of Northern California will be one MLS. Somebody will not join of course either by political or contract limitation but for the sake of this point over 120,000 will be on one system. If Southern California follows, as it appears it is headed with systems like the Alliance, soon all of California could be on one system.
Is this good or bad? And why?
Are agents going to try selling in areas they have no knowledge since they now can get easy access?
Are we going to get better services and MLS technology with economies of scale?
What are your thought?

Wednesday, March 01, 2006

2006 California Market Forecast from CAR

Leslie Appleton-Young, the Vice President and Chief Economist for the California Association of Realtors, spoke at our office meeting last week. Armed with 100 power point slides, their predictions are for a Southern California “soft landing.” The reasons for this prediction include great financing terms, a strong job market, a growing economy, and low inventory.

A link to her presentation is included here. If the link doesn’t work, email me at