Hamptons Listings Said to Be Under Investigation

If Wall Street denizens thought they could escape the specter of Justice Department inquiries by decamping to the Hamptons, it appears they’re wrong.

Real estate listings in the Hamptons are the subject of a Justice Department inquiry, The New York Times and Bloomberg News reported Wednesday, keying off an earlier article in The New York Post.

Several Hamptons real estate executives told The Times on Tuesday that they had been contacted by Justice Department officials seeking information about a listing service that has been criticized as an effort to keep smaller agencies from having access to the area’s best properties.

The service, known as Realnet, allows members to share their listings with other members. Last year, George Simpson, who runs his own real estate listing company, sued more than two dozen local brokerages and Realnet. Mr. Simpson said that because only larger brokerages could afford the annual fee, which he said ranged from $15,000 to $50,000, those brokerages ultimately controlled “80 percent to 90 percent of the exclusive real estate listings.”

The stakes for brokerages are big, and apparently getting bigger, according to Bloomberg:

Hamptons home sales more than doubled in the first quarter, the biggest annual increase in seven years of record keeping, according an April 22 report by New York-based appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate. A shift toward larger, more expensive homes pushed the median price up 35 percent to $908,500.

Three brokerages named in the lawsuit — the Corcoran Group, Brown Harris Stevens and Prudential Douglas Elliman — declined to comment or did not return calls, The Times said. Realnet did not return a call and an e-mail message seeking comment.

“The question I think the Justice Department is asking is: Are they putting their own profits ahead of what they should be doing for the clients?” Jonathan Lerner, a managing director at the Engel & Volker brokerage, told Bloomberg.

Gina Talamona, a spokeswoman for the Justice Department, also declined to comment about the inquiry to The Times and Bloomberg.

By August, Mr. Simpson had withdrawn his lawsuit and said that he planned to refile his case under “different circumstances” and continue “moving forward with the crusade.”

But the original case apparently caught the attention of Justice Department officials. Mr. Simpson told The Times that in the past month, he spoke for 90 minutes by telephone with several department employees about the structure of the real estate industry in the Hamptons and which firms dominated the market.

Members of a multiple listing service post their sales listings for other members to see; nonmembers could be at a disadvantage because sellers generally prefer to have their homes placed on listing services and exposed to as many potential buyers as possible.

John Nickles, a broker based in Southold and the chairman of the multiple listing service for the Hamptons and North Fork Realtors Association, told The Times that he was interviewed on May 5 by two Justice Department lawyers, an economist and a paralegal. Mr. Nickles said that his brokerage could not afford the more expensive system; he pays $160 a month for access to the local multiple listing service that he leads.

Joe Kazickas, owner of an East Hampton real estate company that runs a Web site called Hamptonsrentals.com, said he was scheduled to speak to Justice Department officials on May 24. He said that smaller brokerages that could not pay for the costlier listing database would find it “very difficult to compete.”

Source New York Times, Edited by Andrew Ross Sorkin

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Cut foreclosures by slicing real estate fees

Al Lewis

Tuesday, February 2, 2010

President Obama has often said that it would be a shame to waste this economic crisis. Nowhere is that more true than in residential real estate. Federal home-buyer tax credits up to $8,000 designed to increase home sales and reduce foreclosures are having little impact.  Sales of existing homes fell a record 17 percent in December, while foreclosure petitions are rising. Instead, let’s use this crisis to try a new approach: permanently slashing the 6 percent real estate brokerage commissions prevalent in most markets.

Unlike commissions paid for buying cars, stocks or insurance, these hidden commissions include two payouts – about 3 percent each to the seller’s broker and the buyer’s broker.  But there’s no need for two brokers in real estate transactions.  These hidden fees survive only because real estate brokerage is a cartel.  Forty years ago, you needed one broker to buy a house – today you need two.  In law and medicine, fee splitting is illegal. In real estate, it is required.

Most people would not hire commissioned brokers if they had to pay for them directly – that’s why the brokerage industry wants them hidden.  So let’s eliminate hidden fees for the buyer’s broker.   We could then drop the homeowner tax credit, since the buyer is saving three grand, and replace it with a $1,000 incentive credit.  This cash bonus would go only to home buyers whose purchase prices include a total commission of 3 percent or less (or none at all).

The selling brokers will naturally complain: “We can’t afford to split a 3 percent commission with the buyer’s broker.  That’s how much we need to make ourselves.  So buyers will have to make their own arrangements if they want assistance.”

And that is exactly the point:  Instead of allowing the 3 percent commission to be hidden in the sales price, this tax incentive would encourage home buyers to pay openly for whatever level of assistance they want, if any. Given those other options and the chance to collect $1,000, few buyers would opt to pay a 3 percent out-of-pocket commission – about $15,000 on a median-priced Bay Area home.  Faced with the prospect of paying that bill explicitly, most Internet-savvy buyers would probably opt for personal advice just a few times during the home-buying process, and pay by the hour or by the showing.

Even with only $1,000 of tax credit, these buyers will be better off financially than first-time buyers who collect a hefty home buyer credit, but who still pay hidden commissions.  And taxpayers are better off, too.  Any buyer could still opt to pay the traditional commission at closing – but would have to forgo the incentive credit.

This temporary incentive credit could permanently alter the structure of real estate brokerage, because there would be no going back once the credit expires.  As happened when stock commissions were allowed to decline, much lower transaction costs would create more transactions and hence more liquidity.  Liquid markets will allow people to sell houses more easily before they go “underwater,” thus reducing foreclosures.

Of course the real estate brokerage industry, which has strongly endorsed home buyer tax credits, will oppose this incentive credit. Fortunately, an equally powerful coalition of builders, bankers, mortgage brokers and consumer advocates will be lined up supporting it.

Much lower transaction costs would not just reduce foreclosures by facilitating transactions, but would also increase people’s net equity in their existing homes.  Homeowners would be better off and, at least in real estate, this economic crisis would not be wasted.

Al Lewis is author of “OOBonomics: 12 ‘Outside Of the box’ Ideas to Improve the Economy.”

http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/02/02/ED4C1BP3O5.DTL

This article appeared on page A – 10 of the San Francisco Chronicle

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BEWARE:   Moving company scams, thefts and frauds are bold, brazen and at a record levels.  Bottom feeder scum bags, with 2 assets…a back and a truck, are preying on thousands of unfortunate people being forced to move.

Watch Out.  The “moving” con artist generally targets the most vulnerable among us.  Their primary victim is the internet price shopper, who enters personal information on ‘moving quote’ type website, promising to provide the lowest, legitimate price or quote for a move.

Devastating like Fire.  Victims report horror stories that range from being extorted out of thousands of dollars to get their belongings off loaded, to even more disturbing reports that some families lost every possession, family photo, etc. that they owned, when the moving truck never showed up at the destination, ever.  

What possibly disturbs me the most, is that like the con artist who  sells “cures” to the dying, stealing what little they have left, the majority of moving scam victims are in the same boat.  They are being forced to move due necessity,  job loss, foreclosure, overall affordability, health problems, old age, wage cuts, etc.   

ACTION:  If you have been a victim of a moving scam or moving quote website, report this crime to MOVING SCAM.COM IMMEDIATELY!!  The website has a single complaint form that they file with various legal and reporting agencies.  In addition, victims can print copies of the compliant form to provide to local police and state authorities. 

Advise:  Search MovingScam.com before you become a victim.  The site also provides great infomations including moving company reviews, helpful links and a consumer forum.

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Toxic, sulfur laden sheetrock, Made in China, is making people sick, causing electrical wiring to go crazy and is corroding copper, wire and stainless steel in American homes.   The problem has affected thousands of homes in 20 states, yet, the US court system is powerless to hold Chinese manufacturers (most of which are owned by the Chinese government) responsible for problems caused by their products.

To learn how to spot a problem in your home, follow ongoing litigation, read about disclosure requirements and implications for homeowners insurance… CLICK HERE

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Vangelakos purchased the property, with his wife and three kids, for $430,000.  The plan was to use the home for vacations, until his retirement in 4 years.  Unfortunately, the housing market had another plan.

An Empty Condo Building is Spooky. 

The family randomly hears people on the grounds and inside the building.  One night, someone even banged on their door and disappeared.  The community pool is especially popular for break ins and intruders toss the chairs into the pool, as they abandon the building.   The management company shut off the water to the building for 10 days, but the TV’s worked. 

So what can be done about this nightmare in Fort Myers?  Vangelakos wants out and who can blame him.  He has not filed a lawsuit, yet, but he has written to The Related Group, the seller, about building maintainence and their undelivered promises for ammenities such as a marina, pro shop and fancy resturants.  To date, his plea’s have fallen on deaf ears, even though the developer could easily buy him out or move him to the Oasis II building located next door.

Betsy Lu McCoy, mouthpiece for the developer, responded to homeowner saying, “We did not foresee, nor did anyone else foresee, the collapse of the real estate business and the concurrent collapse of the lending industry,” Mc Coy added, “They’re caught and we’re caught.” 

Our opinion…Give me a Break!  You’re not caught Ms McCoy, this family is caught.  Give them their money back or rent their unit from them, and be brave enough to live in your own building by yourself.

Thank you for visiting Why 6 Percent.   If you need a chuckle after this frightful story, Click Here to see our Nominee’s for Worst Contractor of 2009.   Good luck on the sale of your home and please let us know if we can help you with an MLS listing.

We have been warning Why 6 Percent readers about the danger of appraisal problems, after the new “Home Valuation Code of Conduct” went into effect on May 1st.

After being in effect for less than 90 days, 90 percent of real estate professionals have reported that they have had at least one sale fall apart, due to the new rule.

One thing is certain.  Something is Wrong and the Timing Couldn’t Be Worse.  To Read More about Appraisal Problems and Learn What Others Have Done to Correct Them, Click Here.

Thank you for visiting Why 6 Percent.  We have saved thousands of home sellers and buyers a lot of money.  We can Help You, too, by providing you with the power of the MLS and protecting your by owner status.

Home sellers and real estate agents have a new worst enemy: inaccurate home value appraisals.

Even as prices begin to stabilize and buyers re-enter the market, the appraisals many banks rely on to approve financing are causing some deals to fall apart at the last minute or forcing sellers to agree to lower prices.

Lawrence Yun, chief economist for the National Association of Realtors, said the appraisal problem is serious.

“Lenders are using appraisers who might not be familiar with a neighborhood or who compare traditional homes with distressed and discounted sales,” he said. “In the past month, stories of appraisal problems have been snowballing from across the country, with many contracts falling through at the last moment.”

Washington real estate agent Jeffrey Tanck agreed. Tanck, with the Czuba Group at McEnearney Associates, said bad appraisals have affected two of his deals in the past three months.

“In one case, a $364,000 condo came in $80,000 less than asking,” Tanck said. “That buyer was using an out-of-town lender who had no concept of this market. Another appraisal on a $317,000 coop came in $27,000 under, forcing the buyer and seller to meet halfway.”

The potential problem inaccurate valuations pose to sales can be seen in numbers that measure pending sales of existing homes. Those represent contracts that are signed but sales that haven’t closed, and are usually considered a more forward-looking gauge of housing sales.

Earlier this month, the NAR reported that pending home sales in April rose for the third-straight month, advancing 6.7 percent from March, with pending sales up more than 3 percent from a year ago. By contrast, closed sales of existing homes in May rose 2.4 percent and remained nearly 4 percent below year-ago levels.

The NAR’s Yun said he sees a danger of a delayed housing market recovery and a further rise in foreclosures “if appraisal problems are not quickly corrected.”

Tanck said part of the problem is too much work and too few appraisers, who he said are in demand right now.

“People are buying, and lenders and appraisers are both busy,” Tanck said. “But lenders should make sure they’re using appraisers with the correct market knowledge.”

Still, many indicators continue to point to stabilization in housing. The nationwide May increase in existing home sales was the first month-to-month increase since September 2005.

A separate report Tuesday from the Federal Housing Finance Agency showed declines in prices moderating, with the average U.S. home price down 0.1 percent in April from March. (All contents of this site © American City Business Journals Inc. All rights reserved.)

Click Here to Read What to Do if you Get a Low Appraisal

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Few buyer’s, low appraisals and tight fisted lenders are encouraging some seller’s to consider “rent-to-own” options in order to sell their property.  

Lease with the option to purchase agreements are effective tools for selling a home.  They are ideally suited for “would be” buyers who have financing issues or don’t have a down payment saved.  But, before you jump in, educate yourself about the pro’s, con’s and the proper way to draft the agreement.

How Does Lease with an Option to Purchase Work? 

• Generally the buyer pays an up-front fee, usually  from $1000 to 5 percent of the sales price.  If the buyer completes the purchase, the upfront fee is credited to them at closing.  If they do not purchase the home, the seller keeps the fee.

• Generally, the buyer agree’s to pay extra rent each month.  The normal rent is used by the seller to pay the mortgage, maintainence costs, etc.  The extra rent is credited to the buyer and lowers the purchase price at closing.

The Pro’s of Lease Options

• Because the typical contract term is typically from one year to 36 months, it gives the buyer ample time to establish job history, correct credit problems or save for the down payment needed to obtain financing for the home.

• During the option period, the buyer can lock in today’s reduced price, yet, continue to look at other neighborhood’s, area’s and properties without fully committing.

• The seller receives cash upfront, the normal rent for the property and extra rent that they can use to offset the costs of ownership.  The seller does not have to refund any money, if the buyer doesn’t exercise the purchase option.

• The homeowner will likely get a tenant that cares more about the property condition than an average renter.  Because the buyer has committed their own money and plans to own the home at a future date, it is likely that they will care more about maintenance, upkeep and paying the rent on time.

The Con’s of Lease Options

• Buyer and Seller need a well written agreement, drafted by a knowledgeable attorney.

• The Buyer can lose their investment.  If they can’t obtain financing by the end of the rental period, they forfeit the cash paid into the deal.  If the buyer falls behind on the monthly payments, they lose the extra rent and money paid upfront.

• The Seller may get the home back, if house prices fall below the agreed upon sales price.   The seller can opt to renegotiate the price, but net profits may be lower than if the property was sold now, versus at a future date.

• Some renter’s have been burned by seller’s who hide the fact they are going through a foreclosure proceeding on the property.   After a period of paying inflated “rent” and upfront fee’s, the seller may lose the home to the lender, in which case the tenant will be evicted and lose all the money paid into the deal.

• Some Seller’s are Foreclosure Scammers.  Some seller’s take the upfront money and run, never to be seen or heard from again.

• If home prices increase, the seller would lose money, if the agreed upon purchase price is lower than the market price.  In the case of home price inflation, the seller may benefit from renting the property now and forgetting the option to purchase in the future.

Thank you for visiting Why 6 Percent.  We have helped thousands of sellers market their property and keep more of their money.  Ask us about our low cost MLS and Realtor.com marketing package for sellers.   We can help you reach thousands of buyers every month for $399.

The nation is sitting on over 19 million vacant, abandoned pieces of residential real estate.   And, that number is growing.  As these homes languish on the market, and prices are further slashed to the deteriment of all property owners, many people are asking, “Why aren’t these properties moving?”  We have one answer, but it isn’t very pretty.  The answer is Filth. 

The ridiculous truth of the matter is that Bank Owned (REO) property is often left in a disgusting condition.  And, we aren’t talking about worn carpet or peeling paint.  Some of the homes owned by the banks are in such a vile state that no one could ever envision themselves living in them, after taking one step inside.  

Buyers and real estate agents, alike, report that banks place homes on the market for sale with feces smeared on the walls, rotting food everywhere, animal waste covering the floors, and with odors so strong, that they actually stick to people and their clothing hours after the encounter.

As the taxpayers continue to bailout the financial sector, maybe we should demand to know why the banks are allowed to own homes that are in this type of condition?  In addition to the fact that no one will buy them at any price, and they continue to drag down the values in otherwise good neighborhoods, they present real health risks for the entire community.

Sellers, do you feel better about your “for sale” competition now?  

Thank for you visiting Why 6 Percent.  We are the MLS and Realtor.com connection for thousands of owners, builders and investors.  Call us at 1-800-381-9496 to reach millions of real home buyers each month!!

The Department of Justice (DOJ) and the Columbia, SC Multiple Listing Service (MLS) have agreed to settle an antitrust lawsuit filed one year ago.

The DOJ filed the law suit on behalf of consumers, accusing the Columbia, SC area MLS of illegally stiffling competition to keep sales commissions and fee’s high. 

Some of the charges against the Columbia MLS are:

1. The Columbia MLS required all brokers to offer identical services to consumers (ie: full service listings).  The intent was to eliminate flat fee MLS and ala carte brokers, whose business model allowed home seller’s to chose services they were willing to pay for.
2. The Columbia MLS charged $5000 member initiation fee’s, far exceeding the costs charged by other MLS’s.   By raising the initiation dues, the Columbia MLS hoped to make the dues prohibitively expensive for new brokers or for those with alternative business models that charge less for their services.
3. The MLS board forced members to use one form for services.   This form prohibited home sellers from doing some of the sales work themselves in an attempt to save money.
4. The Columbia board required brokers to have a stand alone office, apart from their homes.   The ban on home based business kept overhead costs high for brokers operating on a low cost sales model, making it difficult for them to compete with traditional 6 percent brokers.

DOJ Agreement Forces Major Rule Changes in SC:

1. The Columbia, SC area MLS agreement “will remove unlawful impediments to competition for real estate brokerage services in the Columbia area and will lead to more choices and lower brokerage fees for South Carolina consumers,” said Christine Varney, assistant attorney general in charge of antitrust at the DOJ.
2. The Columbia MLS has agreed to allow membership to any broker in charge, regardless of their business model (ie: flat fee MLS and ala carte services).
3. The board must allow home owners the right to choose the services that they want, in order to save money in selling commissions and fee’s.
4. The MLS must repeal rules that require a single contract form for service.
5. The standalone office requirement has been removed. Broker members can work from home to keep their overhead low.
6. The Columbia MLS will allow members from other area’s to use their service and access the MLS data. 

Why 6 Percent  applauds the DOJ on its win to protect South Carolina sellers and buyers alike.   It is a Realtor’s fiduciary obligation to expose a home seller’s property to as many sources as possible, even if they want to do some of the work themselves.   It is also the right of every broker to work with consumers in any legal way that they chose.  The DOJ settlement should go a long way toward lessening the costs or buying and selling property in South Carolina.

Why 6 Percent has flat fee MLS and ala carte brokers ready to serve home sellers in South Carolina.   Call us today at 1-800-381-9496 to learn how to expose your home to thousands of buyer agents and millions of home shoppers each month.