We don’t have a multiple listing service here in Manhattan, so I’m not terribly familiar with it. But with the recent talk here of an open-source MLS, I thought it was only fair to pass along this insightful comment from Brian Villanueva on the Inman blog that could be a big obstable to any Open MLS system:
As both a RE broker and an IT consultant for many years, I’ve looked into the "Open MLS" concept many times in the last decade. The problems have never been technical (those were solved 7 years ago with IDX); they are social and legal.
From an advertising perspective, the MLS is just a really big Internet ad database. There’s been nothing special about it since IDX came out. However, the MLS is much more than just an advertising medium.
The MLS provides a legal framework to enforce the the coop rates that are posted. Buyer’s agents don’t need to negotiate with every seller individually, and the agent who sells a house knows she has a solvent individual (the listing broker) to charge her commission against.
That’s the hidden problem with any "Open MLS" system: buyers don’t pay their own agents. That may be an inefficient, antiquated convention (I certainly think it is.) But, for better or worse, it is the social structure of real estate for most of America. Sellers pay both sides.
All of the free, public MLS proposals fall down when they approach this issue. Data is free. Access is free. But buyer’s agents still need to get paid. Any agent who tries to charge buyers (instead of sellers) faces an uphill battle, and a seller who lists homes with no commission gets ignored. Hence the massive inertia of the current MLS system. Both parties have an incentive to change it, but those incentives are all divergent.
I applaud Mr. Barry for his attempt. I would gladly post my listings on his database, or on any other medium that I thought would get me a buyer. However, it is not accidental that all previous efforts in this area have fallen flat. Until the real estate commission structure changes, this will remain an unrealized dream.
Because NYC has no MLS, much of this is an education for me as well. I too would welcome Mr. Barry’s concept of an open “non-profit” MLS but there appears to be many obstacles and according to Mr. Villanueva, the very structure by which real estate agents are paid could be an insurmountable one.
Here’s one idea. I have been a proponent for change in commission structure for years and believe that the market would become much more efficient with less conflict of interest if buyers paid there side of the commission and sellers only had to pay their side. Imagine the industry with bona fide buyer’s brokers who were dedicated to the often exhaustive process of finding their clients a home. Certainly, the buyer would win as would their agent. The seller obviously wins too because they don’t have to pay the full commission (often 6%). With the majority of transactions involving two brokers anyway, this structure would greatly alter the dynamic of the industry and in my opinion, create a much more cooperative and pleasant real estate market for all involved, especially consumers.
I learned about this the Open MLS Institute the other day from the Inman Blog. Here’s what they do:
The Open MLS Institute aims to bring competition to real estate markets in the United States by opening multiple listing services (MLSs) nationwide. We are committed to championing innovators and energetic competitors, and to combating longstanding policies – both formal and informal – that unfairly and unethically obstruct these innovators. We aim to upgrade ethics in the real estate community.
Another page says this:
The Open MLS Institute was founded by real estate firms and realty agents who believe that consumers deserve a higher standard of commitment from the licensees who serve them. Institute founders believe that listing data should be open to every consumer, so they will have the widest possible choice of homes. And listing data should be dispersed widely so sellers get the best prices and offers on their homes. The openness of this real estate information will tend to protect consumers and real estate professionals from the few who don’t share this view. That is, the very openness of the data will raise the ethical standards of the profession.
With time, the current rag-tag collection of 900 MLSs should be replaced by a smoothly integrated network of inter-operable open MLSs carrying all listings of homes for sale and rent.
The first truly open MLS should take place in Maine, where an Open MLS Initiative has been presented to the Maine Secretary of State. Passage of that initiative in the November 2007 election is expected to be followed swiftly by enactments of similar initiatives in about 18 states in the 2008 election. By then, the entire nation should have been upgraded to open MLS.
One of the challenges of my job is that I have to combat negative broker stereotypes. One of the most basic stereotypes of realty is that agents and brokers don’t do anything for you–but you have to hire one to get full access to listings.
Truth is, there’s a lot of expertise, and elbow grease, that goes into being a successful New York broker.
If the listings were all freely available, however (which they inevitably will be at some point soon anwyay, whether it’s through Google, Zillow, Craig’s List, or something else) it would make clear the true value of a good broker, while giving the industry a welcome shakeout.
So I got all excited when I read about the Open MLS Institute. It really would be fantastic for all of this data to be in one easily searchable, centralized database for everyone to view and use as they like.
But it’s not all a bed of roses. For one thing, the commenters at Inman are livid about it. For instance, the MLS has a lot of information about how to get into people’s vacant houses and the like. Obviously, that shouldn’t be public.
Another good point is, even if you support the idea of an open MLS, why does it have to be these people? It appears they are a for-profit entity. And if they have all the searchable listings, no doubt they’re then going to want to charge brokers for premium listings, etc. And they’ll make a fortune from advertising to all the internet traffic they would doubtless generate.
They also have a lot of language about ethical real estate professionals. They even have an ethics test. I took it. At five questions long, it’s not so rigorous. I think I answered all the questions the way they anticipated an ethical broker would–but I’m sure plenty of brokers who don’t behave ethically would answer those questions the same way. And one of the questions asks whether I would send them all of my listings. I could be ethical, and determined to support an open listings service, without necessary choosing the Open MLS Institute as my open listings service of choice, correct? Seems a tad unethical to try to turn serving their interests into an ethical issue, if you see what I mean.
Just got a disturbing email from a client.
We have an exclusive agreement for me to sell her apartment. Last week, I showed the property to an attorney. He is representing his family, and by law attorneys are licensed real estate brokers who can represent themselves or their families.
After seeing the apartment, he made a very low offer–more than 30% below the asking price. Fair enough, that happens every day. But what doesn’t happen every day, but did, unfortunately, happen today, is this:
My client just e-mailed to say that this attorney/broker contacted her directly at home last night to attempt to negotiate a deal behind my back.
Of course, now my seller wonders if she and her husband can expect these kind of shenanigans from others in my industry as we proceed with the sale of their home. I hope not, but stuff like this makes it easy to see why the public distrusts a community that can’t even seem to follow its own rules and “play nice.”
By the way, this same attorney/broker? He contacted another client of mine, asking to see an apartment without me. When told he had to be accompanied, he showed up early, with a six member entourage, and attempted to be let in without me.
With characters like this running amok out there, it’s easy to see why real estate brokers and attorneys are constantly defending their respective professions.
Did you see the Janny Scott article in Sunday’s New York Times Week In Review about the dwindling middle class in New York? The whole article is well worth reading, and here’s one paragraph that especially jumped out at me:
Meanwhile, New York University researchers reported last month that the number of apartments affordable to households making 80 percent of the median household income in New York City dropped by a fifth between 2002 and 2005. Nationally, median household income ranges from just above $20,000 in Miami to around $40,000 in New York and Boston and about $60,000 in San Francisco.
To me, that’s shocking. The number of affordable apartments dropped 20% in three years?
Look, here’s the deal. I’m a Manhattan Real Estate Broker. Expensive condominiums and apartments are the bread and butter of my trade. If Manhattan is filled 100% with luxury apartments, that’s great for my bottom line. So you’d think that I’d be thrilled with news of Manhattan going upmarket.
But even I, with everything to gain, am not happy about the trend of making Manhattan inhospitable to most people. It makes me a little queasy and depressed, for a number of reasons. Here are some:
- I don’t want to live in a gated community. I want my kids to grow up in a diverse environment. One of the things that appeals to us about the city is the now waning socio-economic diversity.
- Even as the city is wealthy, the public schools suck–which is shameful. The article points out that of all groups the middle class usually fights hardest for better public schools (the rich kids go to private schools, and the poor parents don’t have the leverage to force change).
- New York City has always been chock-full of rich people… and every other kind of people too. This is the one place America where everyone gets to breathe the same air, walk the same streets, and curse the same cockroaches. There’s something great about that. Making it a place only for the very rich and the very poor makes it really not like most of America at all.
- What can be done about it? I’m not sure. It’s a shame that measures like rent control and rent stablization are so exploited that they don’t work properly.
I’m going out today sell a $10M apartment. Good thing there is still affordable housing in the boroughs–if this $10M place ever catches fire, the brave souls who will put it out can’t even afford to live in this zip code.
Have you ever read Pate Hamill’s book Downtown?
It has a lot of great stuff about life in New York City. "New York," he writes on the first page, "is a city of daily irritations, occasional horrors, hourly tests of will and even courage, and huge dollops of pure beauty." Anyone care to argue with that?
The whole book is rich in historical perspective from all angles. And when you talk about how New York used to be, inevitably someone starts talking about how much cheaper New York used to be. For instance, Hamill writes of Little Italy:
Some families stated in the same tenements for decades. Others could not bear the thought of leaving behind the coffee and pastry at Ferraro’s or the Café Roma, the cheese, bread, and pastries in a dozen beloved groceries.
And that that too all changed. In the 1980s, the third generation of Italian Americans began to leave. They were Americans, after all, and many had now gone through high school to the City University, and then on to medical school or law school. They moved to Staten Island or New Jersey or Long Island, where they could own homes, have American driveways where they could park American automobiles, and have American barbecues on Sunday afternoons in summer. They found no raffish charm in the myths of the Mafia and the dumb stereotypes that came with those myths. Some of the old tenements were sold. Most were rehabbed and rented for sums beyond the imagination of the older residents. As in other parts of New York, some people fell into a new longing for the past: rent nostalgia. "See that place? My aunt used to pay sixty-two dollars a month there; now it’s eighteen hundred!"
Much has been written about 455 Central Park West, which is a developer’s bold attempt to make a top-shelf condo building out of a cancer hospital next to the projects on 105th street.
(A big article in New York, for instance. One nice tidbit: that article says the towers of the building were made round so that germs couldn’t hide in the corners.)
Today there’s news that sales of the premium condominiums have been slow.
I don’t think this surprises anyone.
It’s a shame for the developer that Columbia University–which bought a lot of units in the building–didn’t spring for the whole thing. There is no question that the project is beautifully designed and features stunning views and amenities. But even with that, the asking prices have been insane, considering the building sits directly in front of the Lincoln housing projects and is quite a distance from transportation and a lot of the amenities of the Upper West Side.
Even on the building’s official website, the guide to the neighborhood curiously includes no attractions at all–other than a middle school–within two blocks of the development, but sees fit to highlight such attractions at the Jewish Theological Seminary on 122nd or Zabar’s way down on 80th street. In Manhattan, five blocks is a long way to walk for a coffee shop. But on this map, Zanny’s at 108th and Columbus is the closest one that gets any attention–all of which inadvertently confirms the notion that this development is on something of an island.
Perhaps the site is jinxed. It was once a sanitarium, and many have failed trying to build there–many were stalled in planning for various reasons. The current developer is a pioneer, but like those who settled in the wild west, he is likely to experience plenty of obstacles before convincing many others to "settle" there–at least at those prices.
Marketwatch’s Amy Hoak reports at the Real Estate Journal:
A recent Securities Industry Association retirement study identified a "wealth effect" that surfaced as homeowners amassed equity in their properties and perceived they had less of a need to save. Factors such as rising interest payments and higher energy prices also pushed Americans to slack off when it came to lining their retirement nest egg, the study concluded.
For many American homeowners, nearly half of their net worth is based on the value of their home, the study found. At the same time, the number and percentage of households holding a retirement account such a 401(k) or an individual retirement account have fallen since 2001, and nearly half of American households are not saving at all.
The study also estimated that half of the next wave of retirees — the baby boomers — will be unable to maintain their standard of living in retirement, even if they postpone it.
Hoak goes on to talk to lots of financial experts who agree that having a ton of home equity is not a replacement for retirement savings, for a lot of reasons. I couldn’t agree more. I have watched first-hand as public sentiment has shifted from the idea of a home as primarily shelter (with the possibility of appreciation), to an all-out outlook of a home as a “liquid-like” asset.
This is mainly due to the incredible appreciation that people have seen in their homes over this past “boom” period, and the ease with which homeowners have been able to take equity out of their homes.
In New York, where so many people rent, I think there’s also a little voice in a lot of people’s heads that says selling the place, keeping the cash, and renting again one day would be OK, too. But don’t forget–a fat New York rent is one of the best ways imaginable to eat through that retirement nest egg.
A primary home purchase serves a multitude of purposes and none more important than the roof over your head. Other obvious benefits are the tax relief that ownership provides and the likelihood that if you are long in any housing market, your home will appreciate. That said, don’t expect the insane appreciation that we have seen over the past decade, and don’t forget that even when you retire, you’re still going to want a roof over your head. The experts quoted in this article make the point that the best way to use your home equity in your retirement is to have your home paid off entirely–and to live cheaply without mortgage payments at all.
The Boston Globe’s Kimberly Blanton reports:
The hope is low prices will attract more prospective buyers, leading to faster sales. Other real estate agents in the Boston area report success with similar strategies in a housing market with an unprecedented glut of properties for sale.
Called “drama pricing" or “energy pricing," it is a drastic measure for difficult times. And it seems to run counter to the conventional strategy of selling your home for the highest price possible.
Buyers are “overloaded" with options and “only respond when they see a perception of value," said Angela Stamoulos, who teaches Coldwell Banker’s course on this pricing technique, which the firm rolled out this spring in Connecticut and last month in Massachusetts.
By grabbing buyers’ attention, she said, “the true market value of the property comes to fruition."
It’s no secret that when a buyer perceives real value in a home, they are more inclined to buy it. In a market with increasing inventory, there is one sure fire way of setting yourself apart from similar properties… price aggressively. This is been my mantra for 15 years, even in the booming market aggressive pricing almost always led to multiple offers and sales prices that exceeded the asking price as well as normal market appreciation statistics. It certainly gets people in the door!
That said, buyers in the current NYC marketplace are almost always bidding 10% or more below the asking price regardless of “perceived value.” I have found that in a cooling market that both aggressive pricing and traditional pricing (with room for negotiations) are successful. It really depends on the property. If you are selling something “unique” in a cooling market, it may be wiser to price with some room for negotiation. If there are several similar units on the market, an aggressive price tag will sell your place quicker than any other marketing “trick” out there.
Unrelated to anything, I strongly recommend you check out this incredible video of a skateboarding dog.
All over New York, there are people who are upset about this or that building coming or going. I totally understand that urge. But one thing always strikes me: it’s hard to make the case that anything in New York is precious.
Pate Hamill’s book Downtown addresses this:
This book is littered with casualties of time and greed and that vague reality called progress. Just one example here: I was in high school in Manhattan when I came to know the Third Avenue El. Sometimes I took it as a ride, not just as a means of getting from one place to another. I loves its rattling noise, the imagery associated with the 1933 movie King Kong, the stark shadows cast by its beams and girders, and the rows of tenements and Irish saloons that I could see swishing by from its windows. I had no memory of the Second Avenue El, or the Sixth Avenue El, or the Ninth Avenue El. They were all gone. But in some ways, the Third Avenue El seemed as permanent as the Statue of Liberty, and for me it provided a ride through more than a simple space. It hurtled me through time as well. They started tearing it down in 1955. By the time I returned from Mexico in 1957, the Third Avenue El was gone too.
There would be many other disappearances, including too many newspapers. Buildings went up, and if you lived long enough, you might see them come down, to be replaced by newer, more audacious, more arrogant structures. I came to accept this after the el had vanished and some of the worst office buildings in the city’s history began rising on Third Avenue. There was no point, I thought, in permanently bemoaning change. This was New York. Loss was part of the deal. In that same year that the Third Avenue El disappeared, so did the Brooklyn Dodgers and the New York Giants. The demise of the Third Avenue El was a kind of marker, the end of something that had outlived its time.
