Monday, February 22, 2016

Possibly the Biggest Trend in Real Estate You'll Never Read About, Until Now...

The number of residences sold without the assistance of real estate agents appears to be growing but relatively few know about the trend because it's not been widely reported, and those who have noticed aren't publicizing it.  In fact, the National Association of REALTORS (NAR) has reported a decrease in the number of for sale by owner (FSBO) transactions despite evidence contradicting that conclusion.
I've personally witnessed a surge in FSBO transactions over the last year or two, and there's been a corresponding growth in the number of home purchasers without agents.  My observations are unscientific but nonetheless are evidence of the shift away from agent-assisted transactions.  To back up my own observations I've discussed the topic with title company closing agents, residential appraisers and other home inspectors who've observed the same.  Each person I've discussed the matter with described a substantial increase in residential transactions closed without the assistance of real estate agents in the last year, and some speculated non-agent transactions have doubled as of late.  One appraiser told me 25% to 40% of the appraisals she'd performed in the last few months were on FSBO transactions when in prior years the number was less than half that.
Real estate transaction data and trends are recorded by and publicized through organizations that exist for the advancement of real estate agents and affiliated groups who rely on real estate-related commissions and fees, thus they aren't likely to publicize stories describing the ease at which these transactions are successfully facilitated without agents because it might empower homebuyers and sellers considering going without agent representation.  The NAR and other real estate entities discourage individuals from buying or selling homes without an agent.  Type "Should I sell my house FSBO" into an internet search and you'll likely discover most of the results are posts by real estate agencies or organizations trying to sway people into using agents through fear and subjective statistics.
The number of persons buying and selling homes without agents is unknown.  There's not an independent organization tracking these statistics, and local register of deeds offices aren't a good resource because they don't always differentiate the demographics of the parties to transactions and/or whether the properties are residential homes, lots, commercial buildings, or multifamily dwellings.  The numbers publicized by the NAR and the affiliated Multiple Listing Service agencies (MLSs) overseen by the NAR are recorded by those agencies using information culled from their clients and reported by real estate agents.  Subsequently, statistics of home sales transacted without agents are purely anecdotal, and the research is less than scientific. 

The NAR has published this information on their website, presumably to discourage FSBOs:
FSBOs accounted for 8% of home sales in 2014. The typical FSBO home sold for $210,000 compared to $249,000 for agent-assisted home sales."
From the 2015 Profile of Home Buyers and Sellers, National Association of REALTORS®
These statistics are misleading:  First, the NAR doesn't actually know how many transactions were FSBO because they're using subjective and partially fabricated data - the NAR's stats are not derived from objective or independent sources (they do sell their data for $249.95 on their website if you want to check it).  Second, NAR's data doesn't compare the price of identical houses sold both with and without agents, rather they compare the comprehensive sales of all residential properties minus those sold by agents.  Their numbers exclude low-dollar residences, such as trailer homes and dilapidated properties that are generally far more likely to be sold without the assistance of agents, which skews the statistics significantly.
Independent studies have shown FSBO properties and those sold by agents generally sell for the same price.  A report published in 2009 for American Economic Review by Igal Hendel, Aviv Nevo, and François Ortalo-Magné revealed virtually no difference in sales price of agent-listed homes versus those sold without agents.  From the report's conclusions:
"We have compared the performance of MLS and FSBO platforms for the sale of single-family residential properties. After controlling for differences in house and seller characteristics, we find that the MLS delivers no price premium (even before netting commissions)"
Independent research, such as the study cited above, raises doubt to the legitimacy of the NAR's claims.  To make matters worse for the NAR, it has been determined agents have been providing inflated and inaccurate sales numbers to the NAR's affiliated MLSs from which the sales data is sourced.  A January 27, 2016 article in the Washington Post by Kenneth Harney reports independent researchers discovered inflated or inaccurate sales prices provided to the MLS by agents 8.75 % of the time.
The FSBO trend hasn't gone entirely unnoticed.  A May 2015 article cited statistics from Eddie Tyner, president of, who claimed seller traffic to its website was up more than 200% for the first quarter of 2015 over the same period in the prior year.

The shift towards buying and selling real estate independently is likely the result of unprecedented opportunities to market or search for properties via Zillow, Trulia, Craigslist, and other online services.  These resources offer buyers and sellers the opportunity to both publicize and seek properties without an agent's assistance, and at little to no cost.  Advancements in technology and free access to real estate listings have provided most homebuyers and sellers with many of the same resources and tools that weren't available to non-agents in the past.    
Another reason home buyers and sellers might forego using an agent is poor customer service.  According to the 2015 National Association of REALTORS Profile of Home Buyers and Sellers, only 67% percent of home sellers would definitely use the same agent again.  This is an abysmal number for an industry so driven by customer service.  A 67% satisfaction rating indicates many agents aren't doing a good job in the eyes of their clients. 
The worst home buying or selling horror stories I've heard are from people who felt they were misled or underserved by their agent.  Of all the persons I've worked with who've bought and/or sold both with and without agents, almost every one that expressed a preference said they'd rather go without. 
To be clear I am an advocate of real estate agents in many cases.  I'm friends with many agents and I've seen first-hand the benefits of using a good agent.  There are some very good reasons for enlisting the assistance of a real estate agent to help home sellers and buyers conduct residential sales and purchases, and there are a number of excellent agents that have to ability to make the process easy and expeditious.   However, diligent persons considering the sale or purchase of a home without an agent shouldn't be intimidated by the fear tactics used by some in the real estate industry.  Title companies, mortgage lenders, home inspectors, lawyers and appraisers are available to help independent buyers and sellers navigate through the process without an agent's assistance.  Documents for buying / selling homes are available at title companies, office supply stores and on the internet. 

Buying or selling homes can be done independent of real estate agent assistance, and it appears a growing number of people are discovering that fact for themselves despite what some are publicizing.  

Saturday, February 20, 2016

"Is the house I'm buying safe?"

Subsurface contamination from old fuel tanks and industrial facilities is much more common than most people realize.  Earlier this year I performed a home inspection for a home buyer at a vacant residential property that sat on an EPA “Superfund” site.  I knew about the history of toxins at the property because it was near my childhood home and the presence of hazardous materials at the location had been publicized when discovered some 30 years ago.  I was surprised to learn the seller’s disclosure made no mention of the hazardous waste, nor did the agents involved with the transaction have any knowledge of the past problems with toxins on the site.  Subsequent to my inspection I returned to my office and conducted my own investigation, discovering the property’s status was “active” on the EPA’s list of Superfund sites.  The active status indicated the property had not been give a clean bill of health.

I informed the buyer and buyer’s agent of my discovery, and later called the listing agent to notify him of my findings.  I consider it my ethical obligation to inform homeowners, real estate agents and tenants of any potentially hazardous conditions at a property, regardless of whether they’re my clients.  After I explained my discovery the listing agent said, “I find that hard to believe.  I’ve had this house listed for over 6 months and hundreds of people from the community have walked through the house - not one of them mentioned any problems with hazards.  I think my clients would’ve said something to me if they knew.  They’ve owned the place for over 10 years and they aren’t the type of people that would try to hide something like that.”

Despite his disbelief the agent was polite and we laughed about the fact we’d never dealt with something like an EPA “Superfund” site before.  Before I got off the phone I asked the agent to keep me up-to-date.  I told him I wanted to know if I followed the proper protocol and how could we prevent a situation like this from recurring.

I did receive a very thoughtful email from my clients who were thankful for my diligence and opted not to buy the property because of the uncertainty related to the EPA status.

In the days after my inspection the listing agent contacted the EPA and took the property off the market until the situation was resolved.  At this point no one, including the EPA, is sure why the property’s status is “active.”  The agent is coordinating testing to ensure there are no hazardous materials on the site, and if there are any problems it will be taken care of by either the USDA or EPA.

Typically, as a home inspector I don’t do a “background check” on properties I inspect, but that’s going to change.  Through the course of this experience I discovered an interesting website that provides information about properties at no charge:   

The website gives information about a property’s history, schools, crime, nearby registered sex offenders, hazardous spills and other information including any local Superfund sites.  I recommend all real estate agents and home buyers check prospective properties on – it could prove invaluable.

Friday, February 19, 2016

Are all real estate agents "REALTORS"?

Not all real estate agents are Realtors.  Real estate agents can’t call themselves a “Realtor” unless they are members of the National Association of REALTORS® (NAR).  As per the NAR, the term “Realtor” must be capitalized because it is trademarked, thus the use of the term “realtor” with a lowercase “r” is technically forbidden, and non-member real estate agents can’t refer to themselves as either a Realtor or realtor.  There have been multiple lawsuits attempting to remove the trademark, but the courts have decided “Realtor” is a trade name and not a generic term for real estate agents, despite the fact many of us use the terms “realtor” and “agent” synonymously.  There is a pending lawsuit challenging the exclusivity of the use of the term “Realtor” and there have been other attempts to remove or limit the trademark, but all have failed.

It should be noted that not all Realtors are agents.  Many of the members of the NAR are not licensed agents, in fact, according to the NAR’s Field Guide to Quick Real Estate Statistics, only 58% of Realtors are licensed sales agents.  Non-agent members might include appraisers, property managers or non-sales staff and administrators of real estate organizations. 

Licensing of real estate agents is handled by the individual states and licensed agents facilitate real estate transactions without being members of the NAR.

According to the NAR there are approximately 2 million licensed real estate agents, and 1.1 million members of the NAR.  Using NAR’s statistic that only 58% of its 1.1 million members are actually licensed sales agents; one could conclude only 32% of all licensed agents are actually Realtors.  


Thursday, February 18, 2016

Should I use a "certified" home inspector?

Real estate experts often recommend homebuyers hire "certified" home inspectors. In the state of Nebraska there is no licensing for home inspectors, thus certification is often used as a way to verify the legitimacy of an inspector, but certification or membership to a home inspection certification organization is not a reliable measure of a home inspector's qualifications.

Becoming certified as an inspector sometimes requires little more than a membership fee and an online test that a novice could pass. There are numerous home inspection organizations that use different protocols for membership and certification, and it can be difficult for someone outside of the industry to differentiate experienced home inspectors from beginners.

Another problem with certification is verification can be difficult. I've known of home inspectors that weren't certified but fraudulently claimed to be certified and/or used certification emblems on their website and promotional literature. There isn't a policing organization to oversee or stop this type of behavior, and most consumers don't have the motivation to check the qualifications of every inspection candidate.

Many home inspectors violate ethics or just don't do a good job for their clients yet continue to remain certified. I've written the American Society of Home Inspectors (ASHI) regarding violations of ethics of certified inspectors, but the organization has never responded to any of my communications. Individuals who've violated the organization's code of ethics or performed substandard inspections continue to remain certified. I was informed by a local ASHI chapter officer the organization doesn't respond to informal complaints, written or otherwise, or publicize a process for filing complaints against home inspectors that have violated ethics or performed substandard work, thus bad inspectors remain certified and the phone calls, emails and letters from consumers complaining about bad inspectors are ignored. Even if a bad inspector's certification was revoked, there are numerous other home inspection organizations jumping at the chance to gain new members and willing to overlook past violations of ethics or performance.

I am not certified with any of the various home inspection associations for a myriad of reasons, such as all the behind-the-scenes politics and what I consider a lack of oversight by allowing their members' unethical behavior to continue unchecked. I am however certified as a home inspector and 203(k) consultant through the United States Department of Housing and Urban Development.  I don't think being certified makes me a better inspector, but it does probably give some clients peace of mind knowing my credentials, qualifications and experience have been verified by a third party.

Tuesday, February 16, 2016

What's with the title "A Total Idiot's Guide to Home Inspections"?

In 2011 an unethical real estate agent broadcast false and misleading information about me in an email to most of the real estate agents in my community in an effort to steer business away from my inspection company, at one point referring to me as a "total idiot."  The agent didn't smear me because I'm an inadequate inspector, the agent was upset because I conducted a thorough inspection exposing serious flaws at a property she'd listed. 

Subsequently the Nebraska Real Estate Commission disciplined the agent for such inappropriate behavior, but the damage to my reputation at that point was irreparable.  Instead of letting it get me down I've decided to use the experience as a motivational tool for exposing the behind-the-scenes world of the home inspection and real estate industries.  My goal is to educate home buyers, home sellers, real estate agents, home inspectors and those interested in the workings of the real estate industry by sharing stories about my own experiences as a home inspector, and maybe someday write a book about it all.