Brian Brady proposed an interesting, albeit fundamentally flawed, idea on Active Rain the other day regarding real estate data. The basic premise is there needs to be more transparency and more information provided to help buyers as they weigh whether to purchase a given property.
Prominently display the terms and dates of the rejected offers, verified by participating market professionals, in the MLS system, and you solve the demand side of the equation because you identify the “size of the market”. Share that information with the banks and they’ll start trusting you. Show it to the prospective buyers and they’ll throw their arms around you in joy. The sellers will “get real” about the market, also.
What Brian describes here are NASDAQ Level II quotes which, incidentally, only a small percentage of the equity trading population has access to see. Here’s a screen shot of the Level II quotes (image courtesy of www.realfasttrader.com):
When you enter a stock symbol on Yahoo or elsewhere you see Level I – the current bid and ask (what someone’s willing to pay and what someone’s willing to sell for); only those who subscribe to a paid service, hold accounts through a brokerage offering the service or are themselves market makers see Level II with the full breadth of the market.
And they only can see the breadth of the market on NASDAQ stocks; unless the NYSE changed its rules in the handful of years since I held my Series 7 license, the specialists on the floor of the stock exchange did not have to disclose their book.
Such a premise raises several questions in my mine, prime among them … why?
Setting aside bank owned homes in today’s environment, it’s not common to see multiple offers on any given property. Some may argue that a lack of offers in itself indicates the “market” for any given home when the “market” for the home is next to irrelevant to any one particular buyers’ decision. Someone probably enjoyed the movie “Land of the Lost” and doesn’t care that the rest of America didn’t.
This premise is built upon a faulty foundation, one serving the needs only of real estate buyers while ignoring the needs of the sellers. (Just a thought … Does flipping history on its head and gutting representation for sellers in favor of buyer agency benefit the public as a whole?)
And does it make sense to place the onus for providing the additional data that buyers might want in theory on the real estate agents representing the sellers in the transaction? Does it behoove my sellers to have to report on every offer they receive and, if you agree that it does not, do not the sellers deserve representation?
What Brian considers to be control is in fact facilitation. The real estate industry facilitates the flow of information on properties where an individual seller has elected to hire an agent to market and sell their home – maybe the information is less than some may wish to see for whatever reason – but information’s still provided.
There is nothing – repeat, nothing – that prohibits a listing agent from sharing information on past offers on a home IF the seller gives the agent permission to share that information. Our fiduciary duties include confidentiality but the seller can dictate what we can and cannot disclose. The seller has the ability to tell his or her agent to advertise all past offers.
Why they would want to do so, though, is beyond me as is a reason why their right to confidentiality should be lessened.
Forget that bit of reality and we continue with the premise …
Take the real estate industry out of the equation, eliminate the MLS and where is the information going to come from? You can create a national clearinghouse for real estate sales data – the particulars of every home that is for sale, for instance – but you can’t compel individual homeowners not using an agent to participate.
Eliminate the MLS and you’ll have a far worse picture of the market because you won’t be able to see the current inventory which at least constitutes one side of the Level II quotes on a macro scale. Instead you’ll be counting on those color fliers you’ve taken out of your neighbors’ boxes, and the few print ads you see and the sometimes dated information or otherwise incomplete or incorrect information you see on line.
Let’s go further …
If you’re going to argue that this must be done for real estate, should we not require everyone who is attempting to sell something on craigslist to disclose every offer made on every dinette set, every coffee table, every 1980 Monte Carlo (if any are still running)? What makes housing so different that this personal asset ought to be treated differently and that an individual homeowner must be compelled to disclose additional information?
And the data that Brian suggests making public isn’t necessarily relevant. If you look at a Level II quote screen, it’s not uncommon to see unrealistic buyers wanting to purchase blue chip stocks for a penny and sellers wanting to sell $25 stocks for $1,000. Does the presence of such outliers have any real impact on the current market? Not at all.
Does the fact a buyer of mine offered $270,000 for a $300,000 home have any bearing on the house itself? Not really. What does have a bearing are the closed sales in the area that show $300,000 is a pipe dream … and this information is available to the public through the recorded sales data of whichever local taxing and recording authority handles such things (here it’s the Maricopa County Assessor and Recorder.)
Once upon a time the dominant question was “what did they pay for this house?” as if the fact someone paid $225,000 in 1989 changes the fact the house comps for $300,000 today. It’s a piece of data that has no bearing on the current value of a property. Wanting irrelevant data for the purpose of personal validation does not raise the value of that data to the level of public necessity.
Putting aside the particulars, though, the bigger issue as I see it leading to such patently absurd notions seems to be the need to find a scapegoat for whatever perceived wrong someone feels needs to be righted.
Buyers are having trouble purchasing homes in some fast-moving markets and so there’s a need to find someone to blame; some real estate agents are thoroughly incapable of making a living in this market and, rather than look in the mirror at their own flawed business concept, they point fingers at everyone from NAR to the government to the Twitter users for their own challenges.
History provides multiple examples of what happens when personal accountability is shunted aside in favor of a witch hunt. Maybe I’m a little more sensitive to this type of discussion than most given my background.
At the end of the day, though, it’s troubling to watch blame get shifted to combat what is promoted as a problem when, quite frankly, it’s not all that much of an issue at all.
[tags]Phoenix real estate[/tags]