The Ugly Truth Behind “We Buy Ugly Houses”
propublica.org
propublica.org
I don't really know what to do about it. How can you ensure people are educated enough to know that a discount buyer is a buyer who will under pay for your house? I guess you legislate away discount buyers completely?
In Canada, they have regulated severely the amount of interest pay day loan companies can charge. This has led to a shrinkage in the number of pay day loan companies. So I guess some similar type of consumer protection laws could be enacted in this space.
People desperate enough to use payday lenders have no other options. And the high interest rates reflect the risk.
Take that option away and the need doesn’t magically disappear, they just go to black market lenders where there really is no backstop at all.
Far better to regulate.
Not always true, some folks misuse them for a variety of reasons.
Take the option away in the UK and a friend’s boyfriend wouldn’t have been able to use an app to take out a bunch of short term loans in her name for Xbox games…
So I think sometimes these facilities are used frivolously. You’re right that a portion of users in real hardship would turn to “informal” lending if these lenders were to disappear. But it feels like we as a society should come up with a better solution there really.
There's already a solution there, she could take him to court to recover the money. Your argument is basically "ban X because X can be used in an illegal way".
Further to that, my argument is that for people who are in such severe need that they would then turn to loan sharks, there is probably a better solution out there that we as a society should be looking into, than usurious payday lenders.
At no point was my argument anything close to “ban X because X can be used in an illegal way"
In fact, I personally believe this scenario is likely the most essential use for government run services.
You are replacing friendly-looking loan sharks with door-to-door salesmen with clearly illegal loansharks.
For the same reason you don't want cocaine sold near "fun toys for kids"
https://www.upcounsel.com/lectl-state-interest-rates-and-usu...
In 1980, due to high inflation, the federal government passed a special law that allowed national banks to ignore state usury limits and pegged the rate of interest at a certain number of points above the federal reserve discount rate. In addition, specially chartered organizations like small loan companies and installment plan sellers, such as car financing companies, have their own rules.
If 20% is usury when the law was written and prevailing rates were 10-15%, 19% shouldn't be allowed when prevailing rates are 0-5%
Sort of:
The 1978 case Marquette National Bank v. First of Omaha Service Corp. unanimously held that nationally chartered banks may charge the highest rate allowed in the bank's home state. This is why so many banks are located in states like Delaware and South Dakota, which have very liberal or nonexistent usury laws. So even if you live in a state that has a very low usury limit, it typically has no bearing on the interest you pay on your credit card.
https://caselaw.findlaw.com/court/us-supreme-court/439/299.h...
2) Professional buyers contracts must allow a 30 day cooling off period in which the seller may back away from the agreement without punishment.
3) The 30 day cooling off period is initiated by the buyer prominently posting the offer in the local MLS service or similar prominent and accessible system. The buyer is responsible for ensuring any alternative offers during this period are conveyed to the seller.
4) The buyer and seller may avoid the 30 day cooling period by having a certified appraiser conduct an appraisal of the property and executing the sale at no less than 6% below appraised value.
I could throw in a couple other clauses in there to take care of people "brokering" regular sales to straw buyer or about requiring disclosures that recommend sellers consult with family and/or homeowner advocacy group within the 30 day cooling off period, but that is the crux of it.
This wouldn't eliminate the industry, but it would limit the actions of the worst offenders. Offers dramatically below market value should get counters. The worst consequence seems like it would be that the seller will get absolutely swarmed by realtors trying to convince them how much more money they would get with them.
This isn't really a story per se. People are doing illegal stuff or stuff that won't hold up in court if challenged. We have a system for it - it works ok, not fantastically. We don't need new regulation for cases like this, we just need better execution on the existing system. Better execution costs more money, and as a society we get to some balance of more taxes v more stuff slipping through.
Of course there are perhaps unintended side effects from new regulation, but "this is already a crime, we don't need anything new" isn't prima facie a sufficient argument.
If a lot of a similar type of crime is going unpunished, there may be a reason other than "enforcement agencies are lazy", and perhaps a new law can help.
Once you punish the fraud and crime, there's no problem left IMO. There's multiple of these companies competing and you should price shop before selling to one.
I use eBay's "Buy It Now" functionality all the time, in preference to the "Wait 7 days and deal with snipers" auctions. I fully know that I'm trading low-price for low-friction.
I see no reason to excuse fraud and deception, those are not convenient low friction services.
I see no reason to ignore how there is supposed to be a take-backs provision which they are merely getting around, producing exactly the outcome those provisions were created to prevent.
A private justice system, competition and a reputation system will help
a) a person needs money asap, can't wait for a cooling off period. b) a person has greedy children who expect the house as inheritance, and don't like that mom/dad has decided to sell the house and spend the money cruising around the world so they decide to declare mom/dad mentally incompetent.
None of these are new issues. We've arrived where we are (and that place is different in different jurisdictions) as we lurch back and forth between the least bad solutions.
I’m sorry but your comment is weirdly unconstructive.
What interest rate is too high? What price for your home is too low?
They both depend upon your circumstances and your view of them.
There is a set of circumstances rationally viewed where you can pay a very high interest rate or take a very low price for your home.
If you're acting irrationally then you have problems - the question is should we try to help you with your problems or removing some of the ways you might act irrationally, keeping in mind that in doing so we're stopping some rational people from doing something they want that is by definition rational.
Can't fix any of this until the fiat network is fixed.
In Canada it's the big 5 banks that provide the liquidity to the payday loan network.
It's entirely possible to get it down to $5 per $100..which is still a shit deal but way better than $23 per 100 but ain't gonna happen while the big 5 is making bank
Huh? Elaborate?
https://wallethub.com/edu/cc/average-credit-card-interest-ra...
I started getting postcards around 2012: "I/we want to buy your house." I have a pile of them. None of them offered more than $20k.
The home in question is very near Augustana College in Rock Island, Illinois. I do a two mile walk through campus every day, schedule permitting.
The house was lost by previous owners who engaged two mortgages on the property to fund their gambling.
I had pandemic tenant problems; they didn't pay during the last six months, and the damage was substantial. I repaired the damage, then sold it on contract for $60k; I'm done with rental property.
I'm still getting calls and postcards.
p.s. I drove by a house, very similar to mine, but with substantial roof damage, that was for sale for many months for $15k. It dropped to $5k near the end of the summer. I walk by it, going downtown, and the current owners seem to have repaired the damage, and are on their porch from time to time.
1. The home being in a state of disrepair such that most lenders won’t fund a mortgage
2. Being located in a region where the local economy can’t support high home prices
3. Because of the lack of desirability, a lack of speculative investment.
After driving through Port Lavaca, TX, that seems really nice.
If you like snow, you will be happy with Rock Island.
"with great damage"
Which would explain why they are cheap, and also land in that area is very cheap, so it basically converges onto the price of the land.
Really, the purchase price and renovation costs were rounding errors compared to coastal and major metro real estate.
My area also hosts a U.S. arsenal with custom manufacturing for military equipment that has kept many people employed. We also have the largest aluminum press in the world that makes all the skin for Boeing, Airbus, and all the rest (Bombardier, Embraer, et al).
I've worked for all of them.
We never recovered from the loss of farm manufacturing, which has depressed home prices.
Our winters are not very pleasant, but if you like to ski, there is plenty to indulge within a two hour drive.
I've been to Davenport several times, my ex was from CR, and I went to school about two hours north of there... and I don't recall anywhere that you could actually ski without driving far north into MN or WI. What am I missing?
https://www.sundownmtn.com/the-mountain/snow-report-trail-ma...
I wonder what it would take for eBay to auction real estate, and whether older people in 2030 would try that instead of this caveman.
I wish more Americans overall understood how real estate works. I see people get screwed all the time because of bad information. Here's an example: several times a year I will talk with a member of the public who will say something like "we want to work with the listing agent because then we won't have to pay as much commission" not understanding that in fact they are (assuming a traditional two sided commission offered by the seller) actually just giving that listing agent both sides of the deal.
Or, similarly, they will say things like "we want to work with the listing agent because it's their listing so they will know the most about the property" again, not realizing that depending on your state, the rules for dual agency may not give you as a buyer the same representation as getting your own separate buyer's agent. In fact in some states, you may not actually be getting any representation at all, IE: they fill out the paperwork on your behalf but actually represent the seller.
Those are just some trivial examples, but it's dumbfounding how many bad ideas the public has about real estate. So much of my job is hours of educating my clients apart from anything related to the actual transaction.
-- My experience with real estate attorneys has been as mixed as your experiences with realtors. Some know what they are doing, many do not. Many care about billable hours just as much as the outcome. YMMV.
-- Some realtors care about volume, and some care about their fiduciary responsibilities to your business. If they are actually a Realtor and following the standards set by the NAR, then volume or commission % shouldn't be their motivation. Again - just like any profession - some are good, some suck.
-- Finally, regarding commission percentages - yeah, in many markets commissions shouldn't be as high as they have been. In my market(s) we are seeing commissions decline. That said - I regularly more than pay my own commission in the earnings / savings I negotiate for my clients. If I make you an extra $50K and I get $10K for that service, I've earned my money. Again - if you haven't found that with the agents you've used, I fully encourage you to report any fraudulent activity to the local real estate association and/ or state agency. In any case if you don't receive the service you expect, find a new agent.
That's totally fair on the surface.
But it's also impossible to demonstrate. Nobody can know if the house would've sold for 50K less if a different (less competent) realtor sold it, or if the owner sold it on craigslist or wherever.
Now - sometimes there are emotion-driven data outliers. For example, sometimes you will see someone overpay in cash for a property that could not have appraised at that same value. So again, using data you can account for those scenarios as well. Point being - all that sales data is available and you can pretty accurately create a model of which agents overall are having success not only selling properties, but the degree to which their clients are winning negotiations. I'd argue that even if an agent was being "overruled" by their clients - even that would be interesting, as it would show that their clients were not actually listening to the negotiating advise offered by that agent (IE: the data could actually demonstrate that there are communication / trust issues between the agent and their clients).
While no individual knows for sure what their next best alternative was, their hunches and hindsights add up to a reliable picture in aggregate (that I’ve seen, anyway.)
Studies have shown that’s not what actually happens. It was one of the chapters in the Freakonomics book.
https://freakonomics.com/2008/02/real-estate-agents-revisite...
And then the second time around, trying to negotiate those terms with several different realtors was like talking to a brick wall. None of them wanted to understand that as two parties sitting down to sign a legal document, you can agree to cross bits out. Full on steering wheel tossed out the window for the game of chicken.
I'm sure there are many realtors who do a decent job - the problem is the incentives are just set up all wrong. I wouldn't actually mind if they got a 20% or 25% commission on every dollar over the market appraisal of the property. It's just ridiculous that they're taking 6% from the first dollar when the property would sell itself for a low amount.
As an outsider it seems that RE agents bring exactly nothing to the table except FUD around the transaction process which they then exploit for commissions so everybody, except the agents, are worse off.
More than happy to be convinced otherwise.
Best and easiest $21k I've ever made (saved).
RE agents have some value. Maybe $1-2k? For convenience, paperwork preparation, etc. Similar to a lawyer.
But I sold our house in record time, at a price that was good for both us and the buyers. No games of telephone, just meeting and sending emails directly to one another. The lawyer does the actual legal work, the agent mostly just prepares PDFs. The various PDFs took me maybe a couple of hours total to get together.
But - some of the things I have to know about in order to assist clients might persuade you that there's more to real estate than what you see on the surface. For example:
-- Environmental issues, including water bacteria testing, well issues, oil tanks and their mitigation, radon, lead, and asbestos issues.
-- Zoning, which includes a whole lot of topics. Can I build an ADU? Can I build a house on this ag-zoned property? Can I use this property as a VRBO?
-- Marketing. Sure, some properties sell themselves - but some require getting the property in front of a unique buyer. Ever try to sell an equestrian property? A vineyard? A single-wide?
-- Negotiating. Again, easy to think it's all about whoever brings the most money to a deal, but it's not always that simple.
-- Market Analytics. Good agents know their numbers and spend significant time in their week crunching numbers to understand what's really going on and how to help their buyers and sellers maximize their positions.
-- Psychology. Your buyers and sellers are from every background imaginable and you have to try to understand their familial and financial situation and help them achieve their goals. This is an art form.
-- Financing. Sure you might not be the mortgage lender, but understanding all the different types of financing options so that you can advocate for your client - both with the other party as well as with lenders - puts you in the best possible position.
-- Law. A real estate license is a limited license to practice law. And every year I have to not only stay up on dozens of standard state form changes, but also whatever the legislature has done and any meaningful case law that is changing how we do business.
That's just kind of a smattering... it's easy to get a real estate license in most states, but to actually become a skilled agent is another matter. If you believe that in software there exist 10x developers, I assure you the same concept exists in real estate - there are agents that are worth their weight in gold for the things they can do for their clients, and then there's the great unwashed masses who can barely fill out the forms.
There aren’t good resources for learning compared to many other fields. Compare learning about real estate to e.g. learning how Linux works. Even though the latter is far more complicated conceptually, you can go and read man pages and the Arch wiki or whatever and learn it all from whatever level of abstraction you prefer. Learning about real estate from any source feels like the equivalent of trying to learn how Linux works via ChatGPT prompts.
Case in point: my mother, who I would not consider elderly, and who's skeptical enough to pretty much assume everything is a scam, yet wasted a fair bit of time on a scam email from "PayPal".
She doesn't have a PayPal account, and, for reasons, doesn't want one. So she was certain the email was part of a scam. What she did not know was whether it was phishing email from a scammer — her words, so, yes, she's generally well aware of the practice; again, not elderly — or the result of a scammer attempting to set up a PayPal account in her name (in order to defraud her friends and family, perhaps).
So she went to PayPal.com, emailed, called, etc., and they weren't willing to confirm or deny whether they may or may not have sent her an email concerning an account that may or may not exist in her name, for privacy reasons, unless she was first able to log into this hypothetical account that an unknown third party may or may not have set up in her name[1].
She then showed me the email, and it was immediately obvious to me that it was low-effort scammer spam of the "From: PayPal Security <SecurityPayPal@gmail.com>" variety.
Even if only useful for trivial cases like these, it would be helpful if some government agency or trustworthy nonprofit would set up a well-known mechanism where anyone could forward potential scam emails and receive a prompt, semi-automated "obviously a scam / not necessarily a scam, but still exercise caution as follows; …" result.
This would obviously need to be set up with measures in place to minimize its usefulness as a fraud-detection oracle for scammers themselves, but still seems like a worthwhile cause.
[1] I'm not trying to call out PayPal for bad behavior here: while they could have been a bit more helpful by offering useful, general advice, this is otherwise a reasonable response to what, from their perspective, was an admitted non-account holder requesting information about someone else's account in violation of their policies (and possibly the law).
Our experience with real estate agents has been far from this ideal. We had to fire one after she lied to a counterparty and then lied to us in an attempt to cover it up. Other agents weren't much better, and none of them seemed to take their fiduciary responsibility seriously. They seemed to be looking out for themselves 100% of the time, and their client only when interests were aligned.
The relationship epitomizes the principle-agent problem.
My best advise is to treat a real estate agent the same way you might your accountant / lawyer / financial planner / private banker: don't just pick one off Zillow or at random, but carefully cultivate a relationship before you need their services and take steps to discern for yourself whether they are acting as a fiduciary. I agree completely - there are a lot of bad actors in this space, but over the next decade I expect market forces to drive a lot of people out of the business and improve the professional standard.
FWIW: In one of the states where I do business, it is about to become law that we have to have these with clients. I expect it to be a total clusterfuck.
Requiring it to show, seems like a mess that will slow things down or people will just ignore it/backdate it like they do so much already to beautify things for underwriters and such.
I have to get creative to get the commission into my pocket when I don't use agents. First, the other side usually does have an agent and explaining to them that I want the commission and it's already a sunk cost is usually a nightmare. I do it at the end, because otherwise it impacts negotiations "but your keeping the commissions already". (No I'm talking to you, doing the work of an agent, so I should get paid just like you are; it doesn't cost your seller anything more than the transaction costs they were already planning - in reality, I know it's because the sell side hears no agent and thinks "I get to keep it all").
In my state, it says only licensed RE brokers and attorneys can collect commissions. I'm neither. But we also have a clause in the law that allows commission rebates. So, I typically just pay an attorney a small flat fee to collect the commission and rebate it back to me. It can be a pain but then I realized I don't have to tell the sell side anything, I now have a standing agreement with my attorney who will collect the buy side commission and subtract out the flat fee part and rebate the rest to me. I just put his info on the offer as my agent and give him a heads up a few days before close. It works pretty well.
Essentially - I expect some combination of technology / low-cost brokerages to take over a lot of the business, while some demographics of buyers / sellers or types of properties will continue to rely on the services of brokers who will be forced to up their game in order to compete. I fully expect a bloodbath among some of the larger national / international brokerages, as many of them have abusive, unsustainable business models.
I had a neighbor once tell me how much they loved their agent, and before I could stop myself I blurted out "I can't believe they stayed sober long enough to get your deal done!" It's a sad reality that while agents get to know who is trustworthy / skilled, because we deal with each other every day, the public seldom really gets the whole picture. I think it's worse in large metro areas because there are thousands of agents - so doing your research is hard. I assure you - national brands have very little to do with quality either.
If I'm being really crass - I find a lot of people pick their agents like it is a beauty contest. They pick based on age, looks, they go to the same church we do, our kids are at the same school, etc. And for a lot of people, whether they feel good about the agent has more to do with if they are now "friends" then if there was actually a successful business outcome.
Agreed too that my office lease is about the same number of pages as a typical residential contract, but far more dense. My landlord added some of the most ridiculous clauses I've ever seen in any contract - and prior to real estate, I regularly wrote business contracts from scratch.
You’re in the business so this might seen brash but it’s not meant to be. I’m just a pretty experienced buyer/seller.
The assumption I have to make is 1) buyer couldn’t have negotiated that themselves (I happen to be a good negotiator) and 2) further negotiated to keep the buyer’s agent portion of the commission (it’s a standard seller’s cost they’ve already agreed to pay so doesn’t matter if it goes to me or to an agent, net to seller is the same). I’ve done both, regularly. It’s not for everyone for sure, negotiating skills are the hardest to screen for when I have used agents but people not knowing how to negotiate should definitely focus on trying to find that skillset. But saving more than you cost someone is good, but not guaranteed and it’s always possible to pocket the fee you do charge; so you still have a cost and I usually have to decide if “you’re” worth it for something I can do over a handful of calls/emails.
Also I’m a landlord and those contracts like you said are much more dense. Where I am, the standard sales contracts change annually but not significantly in the last 15 years anyway. For example, I’ve noticed they’ve recently done away with the X days after in favor of precise dates. The math involved in X days and then finding later it lands on a Sunday or something was always sloppy IMO so I welcomed this change. But anyway, the fact it’s focused on a sale makes it so much easier to read than a lease which specifies so much more about condition, use, pets, roommates, etc.
Where I work, there's added complexity to the market in part by the variety of properties and the shortage of skilled agents. Of the licensed agents in the area, only about 30% are actually "full-time" agents, and of that 30% very few will do much outside standard residential work - and we've got several types of specialty agriculture, bare land, commercial, and we are on a state line. Our forms in both states have been going through a surprising amount of volatility the past few years, as have what I'll call "practices", Ie: what's considered normal buyer / seller responsibilities and negotiating chips. For example - with one of these practices I saw a way that our area was behind the times, I started doing things differently and it put my clients in a negotiating position such that my sellers were getting a much higher return relative to comparable properties.
I agree on negotiating skills - unfortunately, the public seem to pick agents based on who they know socially rather than on professional abilities. Finally, to your point about negotiating - one of the challenges for many buyers (and sellers) is that they really don't know the value of a property or where it should sell. So for example many buyers (assuming they aren't in a competitive situation - in which case it's a different set of strategies) will offer some stupidly low number in hopes to get the seller to come back with a reduced price. It's "let's split the difference" negotiating, rather than a data-driven approach. So for example when we go into a negotiation, we don't just index off of the asking price, but rather we've done a market analysis (as a example) of our own and thus have arrived at what we believe to be the fair market price. From that, anything below that number is gravy. So when I not only negotiate below the asking price, but below where we believe the property should fairly sell, then we've really won for the client. Or likewise when I'm on the sellers side, there's a whole slew of ways I set us up pre-market to put us in the best possible position. Even knowing how to read the possibly negotiating strategies for a property, or what "levers and dials" are available in a negotiation isn't something that the general public understands - if you've done a number of deals on your own, you may have developed this expertise.
The notary has a monopoly and charges for it a lot (the amount is regulated as well) but at least you have no legal worries.
It's entirely possible and happens all the time that a fraudulent document is notarized.
This means that when you are done with the signature, all legal aspects of the transactions are covered.
Since what needs to be checked is completely standardized and what is in the contract is standardized as well, you are not expected to negotiate anything (except for the price). There are no surprises in the contract either - it is all standard (and boring).
When you are at the notary the contract is read out loud but for one you do not understand everything, and for two you do not worry either as this is the same thing everytime and cannot be neither less nor more than what is required by law.
BTW, each party can have their own notary (what each of them do is legally defined as well and they share the fee (also according to the law :)) or you can have the same for both.
It is very comforting for a stressful act like this.
This is very similar with labour contracts (no notary involved, but a fixed set of points in the contract, no more an no less)
This is typical in the US, too (just called a lawyer, not a notary) but it's not required
If you're buying a house with a mortgage, you're going to be represented by a lawyer who makes sure everything is on the up and up (and more importantly the mortgage company is being represented to make sure everything is on the up and up)
But, it's not required and really all that's required to transfer property is a signature on a deed
This is actually a two-step process. You sign a first contract that entirely engages both parties - the only exception is if the buyer cannot get a credit. They have a month (or something like that) to secure it.
Then once the funds are there the final contract is signed.
There is a legal possibility to negotiate part of the notary cost (to lower it below the legal maximum) but the chances are thin (they get better for expensive houses).
We had a house to sell, and were hoping to get it wrapped up before leaving, so "we buy all houses, we can close the deal in a few weeks, great prices offered!" sounded interesting.
But then you look up people's experiences and the shady practices start to show. They give slightly low-ball offers, but nothing outrageous, 5-10% under market to hook you in. Most people who use them have some sort of extra motivation to sell and these arseholes know it, so at the last minute* they drop their offer significantly, in the region of 20-30%, and try to really screw you.
So we stayed well clear!
(*and there are a lot of last minutes in UK house sales, in fact several last months sometimes... our eventual sales process took about 4 months from acceptance to completion, and either party can drop out with no penalty up to roughly the last two weeks. It's a terrible system)
(The above does not apply to Scotland, who have sorted this out long ago!)
I feel like doing this consistently as a tactic shoyld amount to fraud and misrepresentation
I started getting postcards around 2012: "I/we want to buy your house." I have a pile of them. None of them offered more than $20k.
I had pandemic tenant problems; they didn't pay during the last six months, and the damage was substantial. I repaired the damage, then sold it on contract for $60k; I'm done with rental property.
I'm still getting calls and postcards.
(... kidding, but where is this?!)
I did not drop any zeros. Salary.com rated this as one of the least expensive places to live in the U.S. a few times.
I drive over the Mississippi twice a day, to and from work.
We have the second largest airport in Illinois, but lost our budget airline (Airtran), so I use O'Hare or Midway now.
In Australia, for many people the (new) Australian dream is:
"One day I hope to have the income to be able to afford to pass the grueling real estate agent's suitability test to rent a house and move out of the tent/car."
I just don't understand it. Mortgages are insane. If you're buying a rental property with a mortgage, you can't afford to not rent it out.
But home costs are up, rental costs are up, and properties are vacant. Do we really have so many people able to afford to sit on empty properties rather than lower rental price? It's also insane. Most rents are north of $600 around here, and a $10-a-week difference is $520 a year in rent. So if you raise rent by $50, that's $2600 a year extra(excluding taxes). but if the apartment stays empty for 6 weeks while you wait for someone willing to pay, that's likely to cost you > $3000. So that $50 increase has a 1 year payoff, assuming a long-term tenant.
The whole market is irrational. The greed of landlords these days is palpable.
I think we need a wealth tax on people who own more than 2 properties. Start making landlording infeasible and get people to instead invest their capital in productive assets.
From my perspective 2007 just destroyed the market. So many troubled assets and loose government money and no one putting any effort into helping the average citizen. A giant wealth and land transfer occurred. The second largest in recent memory.
> I think we need a wealth tax on people who own more than 2 properties.
All you will do is create a "straw purchase" market for homes.
> Start making landlording infeasible and get people to instead invest their capital in productive assets.
Temporary housing is a useful thing, though.
2007 was the end of the destruction of the market (that time when housing prices doubled for no other reason than the money that left dotcom poured into housing.)
Fact is, after people are used to paying more, there's a new baseline and a new level of profit expected. Not even by the landlord, who overpaid for the property and needs you to pay an absurdly high rent or they'll get behind. It was just a phase change in how much people were expected to pay for housing, and that money ultimately went to the people who owned that real estate back in the 90s.
I met a guy who in 2005 sold a house in Los Vegas for $750K that he bought for $175K 5 years before. We're still paying him. Multiply that by orders of magnitude for real, wealthy property owners. Then to add insult to injury, when a bunch of leveraged people lost their shirts on property derivatives, we bailed them out, paying twice.
Overall home ownership increased from 64.0% to 68.4% from 1990 to 2007. During that time the population also increased from 250m to 300m. Ostensibly, around 47m new home owners were added to the list during that time. Going from 160m owners to 205m owners, or adding a new 28%.
During the same period 27m new housing units were completed, with 21m being single family homes. I would assume this imbalance would impact pricing, and there were plenty of other ventures for bummed out dotcom money to pour into right around 2004.
Total ownership continued to fall until 2016. New single family home construction rate has only recovered to about 1995 levels. The current population is now 330m. I contend this suggests it's _still_ going.
> Fact is, after people are used to paying more, there's a new baseline and > a new level of profit expected
If you take the chart of average home sale prices over the past 45 years, you see mostly linear growth. 2007 was a bubble in pricing, seeing around an 18% higher price than this trend line. The prices stabilize back to the trend from 2010 until 2013 again, since then, prices have been about 10% above trend until 2021 where they rocketed back up to 18% above the half century trend.
There's been more than one mode impacting price, and whatever it is, it's happening again. Probably worse, because we don't have any corresponding movement in new home construction with this "bubble."
> Multiply that by orders of magnitude for real, wealthy property owners.
Then divide it by all the people who didn't do that, which I'm estimating to be of at least a similar if not slightly greater order of magnitude. I know quite a few of these people. Some who bought into the irrational exuberance as an opportunity to just remodel the home they've lived in for more than a decade. They don't live there now. The smart ones managed to just barely break even.
> Then to add insult to injury, when a bunch of leveraged people lost their > shirts on property derivatives, we bailed them out, paying twice.
Bailing the American people out is how it was sold. This is not a bad idea if that's what they actually did. It would probably have a little more sticking power if they bothered to put more than a token banker or two in jail for minor indiscretions during the first pump and dump of housing turned commodity.
I presume you mean Australia. Here is how we got here:
The government pays money to property investors/landlords via negative gearing.
The government gives tax incentives to property investors/landlords.
Australia excludes real estate from money laundering - making it a prime destination for proceeds of crime from China, Russia and many other places, driving up prices. https://www.theguardian.com/australia-news/2021/nov/09/wides...
AirBNB has turned vast numbers of houses into hotels/short stay accommodation, pushing local ordinary people out of the local housing market, especially in popular tourist towns.
Australia sells its residential real estate to any buyer from anywhere around the world - which results in millions of empty houses, and locks Australian's out of owning houses.
Australian politicians have huge property portfolios, so they have incentive for all the above mechanisms to stay in place.
The Australian government does not build any substantial number of public houses any more.
Australia has a vast flow of foreign students into our universities and the unspoken transaction is that if you buy the education then you also get a permanent resident visa, putting pressure on housing.
The current Australian government - the ALP - has a "huge Australia" policy and is importing 715,000 migrants this year and next, with 1.5 million overall for the next five years - despite what the government says, these people need somewhere to live.
IIRC it's actually quite difficult for foreign buyers to get into the market, and expensive as well.
The housing vacancy rate is lower than ever. There definitely aren't millions of empty houses.
Largely the issue is just going to be too many people and not enough houses where they are needed. The more liberal we are with permitting apartment and unit construction, the better things will be in the long term. I'm not sure restricting migration is the solution - but you can definitely argue that the rate is too high.
You see exactly the same kind of stuff endlessly parroted in the US by people who somehow think that confiscating property from all landlords will make the millions [1] of needed housing units just manifest out of thin air.
[1]: https://www.cnn.com/2023/03/08/homes/housing-shortage/index....
And the ALP government is adding 1.5 million people to the demand side of the equation.
https://www.smh.com.au/politics/federal/negative-gearing-cos...
Tax concessions for housing investors to cost $20bn a year within a decade, analysis shows.
https://www.theguardian.com/australia-news/2022/nov/03/tax-c...
The Australian government should be spending $20BN a year building public housing, not giving money to property investors.
I rather the gov't give back the tax dollars in that case. And nothing stops an investor from making a company, and using that mechanism to negatively gear - unless somehow the proposal specifically targeted real estate.
People in australia complain about high property prices often think it's negative gearing causing it - but it's not. Australia is full of rich people, and high income earners. That's why property prices are high.
https://www.ahuri.edu.au/analysis/brief/are-there-1-million-...
The 2021 Census reveals that 10.1 per cent (1,043,776 homes) of Australia’s 10,318,997 private dwellings were unoccupied on the night of the Census. While this may seem that a very large proportion of Australia’s housing is unlived in, the reality is dwellings are identified as unoccupied for a number of reasons such as:
homes are being renovated
homes being sold as vacant possession
newly built or bought homes where no one has moved in yet
rental homes awaiting new tenants
people living away temporarily from home during the census count (travelling or visiting other homes)
homes are deemed unliveable
subject to a probate application or other legal proceedings
holiday homes
homes owned by people currently living overseas
homes being land banked, that is held vacant until the local area economics (or personal circumstances) make it more profitable to sell or redevelop the property.I'm not sure about where you are, but in Perth properties aren't vacant. AFAICT availability of rental properties is at a historic low, and so is the availability of properties for sale.
So agents can pull tricks like giving a nod that overbidding is going to be required, and you'd better make that rental profile sparkle if you want a place, and be prepared to put up with rent rises at the first opportunity, because there are 30 other people looking at this house today so if you're not willing to do what it takes, buh-bye.
On the other hand ... to this Brit, mortgages are more easily available for very large sums and you get much more house for your money than you would in the UK. But maybe that's a west coast thing.
South Coast of NSW is particularly bad.
People in the US, at least, can’t stand the idea of not being allowed to own absolutely everything you want.
The Reserve Bank just put out an honest ad to explain that a few days ago
If you're running it as a commercial operation, claim loss from vacancy for tax credit. That is how they all survive.
The interesting things is that the signs appeared to be handwritten with a black marker but all of them looked exactly the same. There were commercially produced but they took the effort to hide it.
If your motive is to make money, you are always going to have the incentive to take advantage of the imbalance of power created by said tight spot.
How is this possible when looking at 2 houses, one $700,000 and one $850,000. The realtor makes more money on the latter.
How is that not a breach of fiduciary duty?
(And the much bigger conflict is for properties with a no or reduced buyer’s agent commission.)
I work in two states, one of which now has a mixed commission model and the other soon going there... we aren't seeing a lot of properties without a buyer's agent commission, but in those cases (mostly FSBOs) I've simply negotiated a reasonable fee to represent the buyer and we've baked it into the cost of their financing. They get representation but don't have to come up with more out-of-pocket.
I would encourage people to ask their agents about commissions and have open conversation. I have a closing tomorrow and another next week and I couldn't even tell you the commission amount other than that yes I'll get paid something. If an agent is paying excessive attention to the commission or trying to strong-arm you into a house, find a different agent. Real estate is seldom about traditional sales - I don't sell you the property, I match-make you to it, IE: I'm here to find you the right property for you, and if I do a good job on your behalf the money will come. Again - if that's not the experience you are having, go find a different agent.
I think it would be better if the system didn't have this conflict of interest in the first place. It sounds like your market is there already, I expect the rest of the country to eventually follow even if they have to be dragged kicking and screaming. (See Moerhl, Sitzer/Burnett)
On the positive side for agents, currently the best and worst buyer's agents are forced to charge essentially the same price. Breaking up the current model would in theory allow some differentiation. The best agents can offer more services that buyer's may want. Experienced buyers who need less help can go to an agent who charges less, etc.
This statement right here is truly disgusting and real. It doesn't just apply exploitive contracts either. In the case where the victim is deemed incompetent by the government, this is how families have them die. You want to talk about socialist death panels? Family members with power of attorney will turn down surgery knowing full well its not only a death sentence, it's excruciatingly painful the whole time. People show more mercy to their pets.
Even from the very first alpha prototype or placeholder Web site we create, we almost always throw in third-party "analytics". Haven't even launched MVP, and already selling out out the privacy of our visitors.
In some municipalities, adverse possession can be used without paying back taxes to squat and legally transfer a portion of another title to a person occupying that area.
Why the fuck is this kind of "ambulance chasing" allowed in the first place?!
If you read the article, and the excellent primary reporting it links to, you'll see that these companies are swindling people for significantly less than they would get from the open market. These people could hire a realtor and retain 95% of the value of their home. However, scams like "We buy ugly houses" blanket areas in advertisements so these folks never even get to find their market value - instead, selling for 50% or less of it. They're intentionally targeting folks who are least-likely or least-capable of protecting themselves with due diligence.
I've witnessed this myself. An elderly man under full-time care, in another state, inherited a property in my neighborhood. A "franchisee" of one of these places got him to sign over the "right to buy" for a fraction of what it would have sold for in a single day on zillow or similar. I was interested in buying it, but I didn't want to end up owning something that way, so I reached out to the man directly to link him to the (much higher) estimated value.
I never received a response from him: just from a "caretaker" who, I imagine, was being enriched somehow by the deal. I doubt the actual owner was ever informed.
It's incredibly predatory and there's a whole industry of "how to" get into it (it being "wholesaling," or unregulated real estate brokerage):
I am simply challenging you to educate people or invent a competition that is better and can advertise better. What you call predatory is a fair business practice given the responsibility of spending your money after being well informed is the consumer's responsibility while the business simply needs to not deceive or coerce consumers.
Yes, who do they think they are, taking options away from grifters and swindlers from their deserved profits?
The nerve on these people.
No bad faith on my part.
You people blame these companies instead of blaming the reason people are ignorant. It's their wealth to protect or squander. Is lottery predatory, I bet you think so, payday loans? Car title loans? Casinos? Welcome to capitalism! People lose money because of their ignorance all the time.
I will give you a personal example since you gave me one. Many moons ago, I needed money for an emergency and took out pay day loans, they asked for only basic info and they were fast. i am sure banks would haggle you and give you a better loan anyways but I needed it fast and lost a lot of money because if it. And guess what? i am grateful for those companies that people like you are trying to shut down.
If you think your peers are ignorant then educate them!
I will give you another example, I sold a car I paid in total 10k+ on for a few hundred dollars from a "we buy junk cars" company, just the metal alone could have gotten me more money but I just needed it gone ASAP and I am so glad I did that.
You wanna take away my choices to stoke your freaking ego about how nice and caring of a person you are? Go do that elsewhere! Leave my freedom to make bad decisions alone. Neither you nor the government are my fucking nanny!
If I had a house that needs to close fast even at a huge loss I wanna find the first company I see advertised on a billboard or google results and get liquidity immediately! My wealth. mine! Period.
It feels good I bet to pretend to be the savior of the uneducated poor from the evil greedy corporations, but in my perspective you are the virtue signaling hero wannabe's taking what little freedom we have away.
Millions of americans love predatory businesses, this is a democracy not a technocracy or meritocracy, which means we the people get to have whatever shitty situations we want and your role to affect change is to communicate and engage in debates (I wonder how many won't even participate in this thread seeing me downvoted to max lol) not in silly outrage and virtue signaling, so you can change our minds (and I give you credit for at least replying and trying to do just that).
I don't like deceptive businesses, I just want predatory ones for when I want to be preyed upon. If they promised the best prices that would be a different story but their only claim is that they will give you cash for your crappy house.
It is amazing how many red tapes and regulations and bullshit I have to jump through just trying to exist in this supposedly free society. please stop making things shitter so you can feel like you helped people that aren't asking for your help.
And it would take longer. If my parents house was dilapidated and I had moved away years ago, I would do something like this not to deal with the hassle.
If I had to relocate quickly and didn’t want to sink money into a mortgage waiting for a house to sell, I might use something like OpenDoor knowing I could get more if I made the house ready for sale and use an agent.
And it might take longer.
I recently sold our old house without a realtor. It's the 5th house I've sold, the first one where I did FSBO, and it was the fastest to close.
If you presented the same people with: I can get you $150k today or I can get you $300k in 45 days, it's pretty ridiculous to suggest that any reasonable person would choose the former. There are plenty of means to get short-term loans of tens of thousands of dollars, as a homeowner, without setting fire to half the value of your largest asset when you're 65 or older.