Ava Terry

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MARCH 2009

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Is the spring thaw starting? I try hard to stay in the middle of the road and not make predictions because, fact is, no one knows what is going to happen. I also know that one or two good months does not mean much. However, looking at the numbers I think I just might see a little bit of an upswing starting. The number of sales have been easing upwards since November. Inventory levels have steadied and actually dropped this month. Average sales price is creeping upward. Of course, on the other side this month median price is down and Days on the Market is up. When you look at the charts there is nothing to really indicate it's improving. However, if you look closely at the trend line, which is a three month average, the Homes Sold trend line is pointing upward for the first time in many months. Months of Inventory turned the corner and started downward. All this is far from conclusive and may turn downard next month, too. I was talking to a local banker this past week and he was saying March had started out as a much better month. People were seeking loans for vehicles and consolidating, areas that had been very slow. You're welcome to call me optimistic, but for some reason I think that this is the first sign of some improvement in the market. Maybe it is just wishful thinking, but I hope I am right. Now for some numbers. The number of sales was up 20% for February compared to last month. 294 homes sold compared to 245. Average sales price ($195,464) and Median prices ($165,000) were off -6.1% and -5.2%, respectively. Compared to Feb 2008 the number of sales were down 31.6%, but Average price was up 1.4% and Median price was up 5.8%. Jeff Horton In order to improve the Newsletter the data now includes all of Madison County. If you prefer not to receive this or have received it by mistake, just follow the directions below to remove your name from the list.

The Charts Chart shows the number of Residential homes sold in each month along with the average Days On the Market for those properties. I like to put Median and Average prices together. The main number to watch is the Median Price. It is the better indicator of what price homes are selling for. This chart is pretty obvious, just the raw number of homes for sale. Number of months of Inventory is a better indicator of the Market. This is a good indicator of supply and demand since it included the number of homes sold. More inventory the more it is a buyers market. Less inventory it becomes more of a sellers market. Of course all factors must be considered and you should not just rely on one set of numbers. This chart is a duplication but I like the way it is laid out. You can see the number of sales each year for each month making it easy to see differences in the past few years. The Trend Line is important. It averages over the previous 3 months of data and helps to allow for the spikes and dips and shows what I think is a more accurate trend. It is the thin black line at the top of the bars in the graph. It is more important than any single months data.

The data is current as of the day of writing. Every month it seems the previous months sales data has changed since I wrote the previous newsletter. In order to keep the newsletter timely we have decided not to wait but to update the previous months sales data. Please keep this in mind when using the information in this newsletter.

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Avar Realty is part of the Help Me Sell Network. Our Help Me Sell website is Http://huntsville.helpmesell.com We abide by all Alabama Real Estate Commission laws and guidelines. We cooperate fully with all real estate professionals. Member of the Chamber of Commerce, National Association of Realtors and North Alabama MLS Service.

Issues affecting the fee-for-service brokerage
There is concern about the sustainability of the business model as fee-for-service brokerages face regulatory changes. In Canada, discount brokerages claim their access to the MLS has been limited by the Canadian Real Estate Association (CREA). As a result, the Competition Bureau has made inquiries into proposed changes. In November 2006, Realtysellers (Ontario) Ltd. suspended operations, claiming itself a casualty of CREA's actions, despite its victory in 2004 in a protracted legal battle over access. Meanwhile, consumers await rebate cheques (cash back) with increasing uncertainty.

In addition, there is speculation that the business model is not economically viable given increasing brokerage and registrant costs, competition, and liability (which could lead to disciplinary penalties). However a number of flat fee brokerages have maintained profitability over periods of 5 years and longer and continue to do so in spite of these obstacles. There is a growing sentiment within the industry that "fee for service" will eventually supplant the traditional brokerage model as growing consumer distaste for the inefficiencies inherent in a commission based system broadens.

Avar Realty is part of the Help Me Sell Network. Our Help Me Sell website is Http://huntsville.helpmesell.com We abide by all Alabama Real Estate Commission laws and guidelines. We cooperate fully with all real estate professionals. Member of the Chamber of Commerce, National Association of Realtors and North Alabama MLS Service.

Flat fee MLS (sometimes referred to as "flat rate mls" or "fixed fee mls") refers to the practice in the real estate industry of placing pertinent information about a property for sale into the database of the local Multiple Listing Service (MLS) for a set fee or dollar amount as opposed to a commission based on the sales price of the property.

In this instance, the Listing contract between the real estate broker and the property owner typically requires the broker to enter the property into the MLS and calls for the seller to pay the broker a flat fee for the service. The net effect is to make the real estate industry's standard MLS available as a marketing tool to house sellers without the necessity of the seller purchasing a package of other services from the real estate agent.

This service is typically much cheaper than using a traditional real estate listing contract. The listing fee for a "flat fee MLS" can range anywhere from $200-$500, depending on the area, while traditional brokers charge a total of 4% to 7% of the selling price of the property, that amount typically being split between two brokers involved in the transaction or two agents/brokers from the same company. However, in all cases where the property is "listed" in an MLS when using a fixed fee service, the seller must still offer a "Buyer's Agent Commission", typically 2.5% to 3% of the selling price paid to a co-operating broker who brings a buyer. However, the commission which is normally paid to "listing" broker is eliminated by payment of the flat fee. The savings can be substantial.

Variations and types of limited service
The term "flat fee MLS" is also used to describe the service and fee structure provided by real estate brokers and agents who offer real estate services on "limited service" basis rather than as part of a bundled suite of services provided in the traditional, full service model. Since the seller is paying only and specifically for a listing in the MLS, the seller often takes responsibility for the other services typically provided by a full service real estate broker and is, in many respects, selling the property as a For Sale By Owner (FSBO). Typically, with flat fee MLS the fee is paid at the time of listing the property, rather than at closing (or settlement, as it is known in some parts of the US) as is the case with traditional brokerage services.

Many fixed fee services also offer contractual terms that permit the seller to advertise as a For Sale By Owner (FSBO) seller. Therefore, if the seller finds his own buyer, even the buyer's agent commission is eliminated.

Other advantages for the seller may include the option to cancel the listing at anytime and take it elsewhere in addition to not requiring that a seller be locked into a contract for a minimum amount of time.

A potential downside of using a flat fee listing service is that, in most cases, the seller must represent himself in the transaction, or arrange for other services such as an attorney or title company to handle closing. Some companies offer "limited representation" by the real estate broker, which include basic information to help sell the property. Because of this, flat fee listings may not be the best choice for the beginner. In any case, both flat fee (limited service) and traditional full service brokers normally advise clients to seek qualified legal advice regarding their real estate transactions.

History
Traditionally real estate brokerage services in the United States have been delivered as part of a bundled package including such services as (i) assisting the seller in setting a list price for the property; (ii) marketing and advertising a property for sale, including listing the property in the MLS; (iii) handling buyer inquiries and scheduling and arranging showings of the property to prospective home buyers; (iv) holding "Open Houses" to allow the public to preview a property for sale; (v) handling contract preparation and negotiation on behalf of the seller; (vi) management of the real estate transaction to final settlement (or closing escrow). The fee structure for this bundled package of services in the United States and Canada has generally been to pay a commission on the gross sales price of the property of between 5-7%.

Stephen J. Dubner and Steven D. Levitt report that this typical large commission does not even benefit the average real estate agent as much as one might expect from the recent run up in housing prices because of the excessively large amount of time that the average real estate agent must spend trolling for new clients, and the relatively small percentage of their time they spend actually performing real estate services for each client.

However, the fixed fee concept existed for many years before the internet became popular. There are also fixed fee broker groups that cooperate with each other across the United States. Many FSBO websites will also locate local flat fee brokers for interested sellers. Those offerings normally include a FSBO webpage to assist in advertising the property.

In recent years, with the unbundling of services accelerated by the advent of the Internet, a number of brokerage models have developed to cater to the FSBO market by providing services on an "a la carte" basis. The widespread availability of information about properties for sale has caused downward pressure on real estate fees in the United States. For changes in the industry also read real estate trends.

A useful overview of real-estate payment practices in the United States is found in an October 2006 report by the AEI-Brookings Joint Center for Regulatory Studies. The study notes that "real estate broker commissions are strangely unrelated to either the quantity or quality of the service rendered or even to the value provided." It further concludes that "consumers would benefit most from a fee-for-service approach - combining flat fees, hourly fees, and bonuses, including percentages of extra value created." It offers a number of examples

Avar Realty is part of the Help Me Sell Network. Our Help Me Sell website is Http://huntsville.helpmesell.com We abide by all Alabama Real Estate Commission laws and guidelines. We cooperate fully with all real estate professionals. Member of the Chamber of Commerce, National Association of Realtors and North Alabama MLS Service.

Minimum service laws
One of the current issues affecting a property owner's ability to select individual real estate brokerage services from a fee-for-service broker, such as flat fee MLS listing, is the imposition in certain states of "minimum service laws". These laws require real estate professionals entering into exclusive service provision agreements with their clients to provide a state-mandated minimum service package that includes many of the duties associated with negotiating a property sales contract.

In some States, such as Texas, these laws have already been passed. New Mexico's Real Estate Commission passed a similar set of rules for real estate brokers in that state, but rescinded them after pressure from the Department of Justice.

Termed as "anti-competitive" by the Federal Trade Commission, these laws have come under scrutiny by the United States Department of Justice. Citing a lack of proof of any harm to or complaints from consumers or any calls from consumer groups for such stricter regulation of the industry in this regard, the DOJ says these laws tend to require real estate brokers to charge more for their services and restrict choices for consumers.

Critics of minimum service laws claim the effect and intent is to protect traditional commission fees. And by forcing consumers to purchase services they may not want or need, these laws actually harm the public. Proponents argue that requiring a minimum level of service insures uniformity within the industry and protects property owners from being taking advantage of by unscrupulous buyer's agents.

Avar Realty is part of the Help Me Sell Network. Our Help Me Sell website is Http://huntsville.helpmesell.com We abide by all Alabama Real Estate Commission laws and guidelines. We cooperate fully with all real estate professionals. Member of the Chamber of Commerce, National Association of Realtors and North Alabama MLS Service.