When you hear "bubble market," do images of Miami condos pop into your head?

A real estate broker working with lenders to value foreclosed properties in Miami estimates that 70 percent of the condo sales in one 43-story, 643-unit building during the last year and a half may have been questionable, Reuters reports.

Glenn Theobald of the Miami-Dade Police Department is heading up a county mortgage fraud task force. He tells Reuters that properties that didn't sell when they were listed for $450,000 were pulled from the market and then closed for $800,000 or more.

Regardless of how many of the sales may have involved fraud, the Club at Brickell has the highest number of foreclosure proceedings among any single property in South Florida, the story said. Properties like these may be headed for the auction block.

The U.S. Justice Department's Antitrust Division today launched a new Web site focused on competition in the real estate industry that includes charts on real estate commission costs (see chart from DOJ site at left) and potential savings from low-cost real estate brokerage companies, as well as maps that indicate states that have adopted restrictive minimum-service and anti-rebate real estate measures.

The site is intended "to educate consumers and policymakers about the potential benefits that competition can bring to consumers of real estate brokerage services and the barriers that inhibit that competition," according to an announcement today.

The estimated median commission paid by home sellers in 2006 was $11,672, and that amount rose from 2001-06 while falling slightly in 2007, according to the DOJ site.

The Justice Department has a lot of information to draw from for the Web site -- the agency has been locked in an antitrust lawsuit against the National Association of Realtors trade group for the past two years, alleging that policies the group had adopted for the display and sharing of online property information were anticompetitive.

Another federal antitrust agency, the U.S. Federal Trade Commission, last year launched a competition in real estate Web site at: http://www.ftc.gov/bc/realestate/index.htm.

See related Inman News article.

Foxtons -- the London-based discount real estate brokerage that in a little more than seven years grew to 500 employees serving New Jersey, New York and Connecticut -- issued a press release late Wednesday saying it was laying off 350 of its 380 remaining employees and may file for bankruptcy protection.

A finalist for the 2007 Inman News Innovator Award, Foxtons blamed the decision on a "sharp decline" in the real estate market.

"Foxtons is well run, very efficient, has a great team and has pioneered a new model in the real estate business – a model which has proven itself and, we believe, will have lasting influence on our sector," John D. Blomquist, Foxtons’ senior vice president and general counsel, said in a statement.

Blomquist said Foxtons has "been battling against a real estate market that recently has turned into a sharp decline, and the company no longer has the liquidity to operate as a going concern.”   

Foxtons said intends to "preserve the value" of its 4,400 current listings, while minimizing customer disruption and dedicating anticipated revenues to pay creditors. 

In today's Inman News there's an article about RealUmbrella.com. According to the article, Realtors "are being re-purposed for tomorrow. Stand by for the real estate market shakeup."

Granted, a proportion of the market will always purchase based upon price/commission. Nevertheless, we have just come off the best real estate market in history. What's fascinating, however, is that the number of For-Sale-By-Owners that listed with an agent increased during this amazing market from 84 percent in the early 1990's to approximately 87 percent in 2006.

The fallacy that permeated the market over the last few years was that advertising a property is the same as marketing a property. These two functions are very different. The challenge that today's slowing market poses is that there are so many listings out there, how will one particular seller stand out in an ocean of foreclosures, new homes, and other desperate sellers? This is where a strong agent who understands marketing, not just advertising, will make a tremendous difference.

A strong market means more FSBOs and more downward pressure on commissions. In a buyer's market, home builders, lenders, and people who absolutely must sell will raise commissions to garner the attention of the brokers who actually have buyers. This is a market where Sellers need MORE service--not less.

As I travel across the country, I hear the same theme. The top agents who provide stellar service and have stellar skills are doing great. Those who lack the skills or do not provide the service are being forced out of the business.

Bottom line--there's a shake up going on--in fact it's an earthquake. Sellers and buyers expect their agents to use the latest technology tools, provide the utmost of service, and have the negotiation skills to handle mortgage rate increases, jittery buyers, and a host of other problems. In my opinion, advertising alone is no longer enough.

Posted by Bernice Ross

Photo by D'Arcy Norman

Do you have an adjustable-rate mortgage? If so, what's the margin on your ARM? What about the caps? Is there a pre-pay, and when is a pre-pay a good thing? These are all questions that many real estate industry professionals have a hard time understanding. Most borrowers are completely at a loss. Yet, when it comes to comparing loan programs for a variety of lending sources, knowing the correct answers can result in thousands of dollars saved over the life of a loan.

OfferAngel.com, a recently launched third-party Web site, seeks to provide an unbiased evaluation of competeing loan offerings. Rather than selling the borrowers' information to competing, lead-buying lenders, their system collects a fee from the borrower. Actually, part of the sysstem is free. The borrower completes a profile, then chooses any lender they want to participate. Lenders can then submit their offering for free, but are required to give detailed information on the parameters of the loan. For an aditional fee to the borrower, Offer Angel offers a custom report that explains the differences between the offering, and warns them when said offering does not meet the criteria the borrower originally requested.

Meg Burns, co-founder of Offer Angel explains the advantages of a third-party relationship. "Online quotes are a good place to start your research when deciding which lender you would like to apply with, but when you are actively shopping for a loan you need the terms of a real mortgage offer, not on an online quote generated by the lender's marketing department. OfferAngel.com is automated in that as many as 100 loan terms are passed to the borrower directly from the lender through our system. This information is based on a complete mortgage application and is provided by the loan officer that has spoken to the borrower and has structured a loan for their unique needs."

Offer Angel has also created the "Offer Challenge," which is a way for lenders to prove their competitiveness in the market. Once the loan officer has taken an application and provided a detailed offer to the borrower they can submit the parameters to Offer Angel. The borrower can then go out and ask other lenders to see if they can beat the deal, but each of those lenders will be required to offer a program that meets the parameters set up by the original loan officer. Even though the loan officer is opening up their prospect to additional competition, that competition has to play on a level playing field.

For a loan officer who overcharges their customers, Offer Angel holds little allure. But for a truly competitive LO, this could be a great way to prove themselves. It remains to be seen just how many loan officers will encourage their borrowers to take the "Pepsi Challenge," but transparency in the mortgage industry is gaining momentum. Look for companies like Offer Angel  to give growing leverage and clarity to borrowers.

--Todd Carpenter - lenderama

Jeff Corbett, The Xbroker gives us a particularly topical challenge today in his post; Traditional Real Estate Commission Structure, The 30,000,000,000 Problem.

He gives us a link to an abridged version of a paper (PDF) written for the Cornell Program in Real Estate by Mark Nadel, a Washington, D.C. attorney and policy advisor. The paper is titled  “A Critical Assessment of the Traditional Residential Real Estate Broker Commission Rate Structure” and offers a particularly scathing review of the current state of the industry.

Nadel's conclusion?

"The traditional, straight percentage-of-sale-price residential real estate brokerage commission does not serve the interests of either home buyers or sellers. Fees are unrelated to the quantity or quality of service provided by brokers and their agents. The rate structure creates little incentive for agents to provide the value-added services of which many are capable, and also produces some serious harms to buyers and sellers. The traditional commission rate structure has become structurally unsound and should be rebuilt."

The Xbroker asks us to

...take off your ‘business’ hat for a bit and put on your consumer shoes. Read the article objectively and find the opportunity to capitalize on what is probably the most comprehensive work of its kind.

Anyone want to take Jeff up on his challenge? Based on the article, is Nadel right or wrong? Sound off in the comments below.

Technorati Tags: real estate, real estate commissions, real estate industry

On Tuesday, I discussed on Transparent Real Estate how the number of online users of real estate-related Web sites seem to be capped, and indeed is shrinking due to the national housing malaise. I posited that the best way to engage this limited set of readers, particularly those contemplating transactions, is to communicate and interact with them, and Web 2.0 applications facilitate this.

Louis Cammarosano, General Manager of  Homegain engaged - don't dismiss Web 1.0 businesses like Homegain, they work because they are tried and true business models...

"Web 1.0 companies, like HomeGain and "bricks and mortar" franchises like ReMAX, will add web 2.0 features when and as it pays to do so. Adding heat maps, HVAL tools, blogs, user generated content is not all that difficult. The trick is making those features pay. Making real estate pay is something that companies like HomeGain and ReMAX have a long history of doing.
 
Have Web 2.0 companies like Zillow and Trulia figured that out yet?"

I see what Mr. Cammarosano means. Simply put, Web 1.0 upheld, even enhanced the status quo real estate business models like lead-generation and brokerage... Web 1.0 is perfect for efficiently making the one-way connection between the agent with the customer via an online contact form. Web 2.0 is disrupting these models because it empowers the consumer to interact directly with the agent. It's simplistic to say this, but the middlemen become less valuable (yes, it's disintermediation)... and that includes the lead generation companies and real estate agents, both of whom see their commission rates shrinking.

The current lead generation business model depends upon making sure the agent and the consumer do not communicate until the agent has contracted for the privilege. Homegain, by design, can't adopt Web 2.0 features that facilitate a direct connection between its revenue producing agents and the consumer without changing its existing business model.

Mr. Cammarosano is correct that Web 2.0 companies haven't empirically proven a profitable business model, but lead generation is growing on Trulia, Zillow and Active Rain. These organic Web 2.0 lead gen models won't disappear, although the companies might.

So, how does Homegain grow if it can't evolve beyond Web 1.0? It relies on providing a smorgasboard of services to the consumer - listings, mortgage information, a recently relaunched AVM - that funnel the consumer into eventually giving up their contact details. It's adding agent advertising on their AVM site. It can continue to develop traffic partnership relationships like the one it has with other Web 1.0 sites like Yahoo Real Estate. Any moneymaking feature that doesn't allow that dreaded Web 2.0 interactivity. This is a sound "here and now" strategy... but it relies on the assumption that a new Real Estate 2.0 lead-generation model won't be adopted quickly and change the game.

Related article: at Transparent today, I chronicle the evolution of lead generation Web sites.

--Pat Kitano, Transparent Real Estate

Zillow founder Rich Barton reports in the company's blog that there is a pending sale on his Seattle home.

"I'm sure thousands of you have been following the saga of my attempts to sell my house in Seattle (OK, maybe not thousands, but it certainly feels that way)," he writes.

In fact, his home sale was the subject of a Wall Street Journal, and his home's Zillow page has collected more than 5,800 views.

The newspaper reported that Barton had originally priced his 3,740-square-foot, four-bedroom, 3.5-bath home at $3.48 million when it hit the market last summer, which was about $1 million more than he paid for the home in 2002. But the listing price has been reduced.

The "owner's estimate" listed at the Zillow site is $2.98 million, while the latest for-sale price was listed at $2.85 million and the Zillow estimate, or Zestimate, is $2.67 million. The home has been listed for sale at the Zillow site for 132 days.

Barton is working with an agent, Gordon Stephenson of Real Property Associates Inc. in Seattle.

"Hopefully, I’m not jinxing the closing with this post.  I recall something about not counting chickens before they hatch," Barton blogs.

Not to be outdone by the upcoming 60 Minutes story, the Seattle newsmagazine show Evening did their own mini-expose this week where they profiled Redfin and its controversial CEO Glenn Kelman. (You can watch the video here). The program claims that Redfin has sent "shock waves" through the real estate industry by refunding 2/3rds of the buyers commission. 

The show also interviewed a home buying couple in Seattle who claimed that listing agents "wouldn't give us the time of day" because they we working with Redfin; and it profiled star Redfin agent Kelly Engel who claims to be selling up to 4 listings a day due to Redfin's "streamlined" process.

Forced to defend the traditional broker model, Patrick Glimm, an agent with Windermere, says "you get what you pay for" by going with with Redfin and described the difference between a traditional broker and Redfin as "the difference between getting a gift in a Tiffany package or a Kmart package".

Kelman ratchets up the rhetoric and counters by saying "the only way that most Americans can afford a real estate agent's commission is by paying it over 30 years."

Reactions?

via John Cook.

Update: More from Kelman on the Redfin Corporate Blog - turns out he's been named one of the 24 Top innovators by Fortune magazine.

This nagging question continues to stump the experts. Is the reluctance to adapt to the changing technology environment a function of the industry having a median age of 52? Is it laziness? Is it fear of what is new? Are we too set in our ways? Will the smoke signals Gen X and Gen Y text each other replace the Boomers' and the Greatest Generation's preference for complete sentences and spoken communication? Do agents really need to blog or set up a social network?

I believe the greatest challenge that agents face is knowing what to do. They are constantly bombarded with every new possible technology product. As one agent told me, I feel that I'm being $29.95ed to death. Certainly, the products that offer multiple services in a single solution with a single payment per month are very appealing. In fact, there is an overabundance of solutions out there. The issue is cutting through the noise to determine what really works.

Consequently, the question I have for Inman bloggers is this: If you had to choose the three technology products (excluding your cell phone) that you absolutely have to have to run your business, what would they be? What would you advise a new person to purchase first and why? Let's see if we can clear up the confusion.

Posted by Bernice Ross, www.RealEstateCoach.com and www.LuxuryClues.com