You're reading...
The Business of Real Estate

Real Estate and “Insider Trading”?


There was an interesting letter to the editor yesterday in the local Florida newspaper where I am spending the holidays.  I can’t resist offering a few comments.

The gist of the letter was that real estate agents take advantage of inside knowledge of properties on the market, showing activity, offers made and rejected, etc. so that we can take the good deals for ourselves and flip them at exorbitant, above-market prices to unknowing buyers.  (Or even flip them two or three times among ourselves, driving prices even higher, before taking advantage of an unlicensed “real buyer.”)

The letter-writer is under the mistaken impression that real estate agents — not markets — establish property values.  The reality is that market value is nothing more or less than what a willing buyer and a willing seller agree to.  Whenever there is more than one property for sale, buyers have choices.  Even truly unique properties are in competition with other residential and/or investment alternatives.  Real estate agents are in the business of recommending prices, but ultimately market value is established by the market itself. 

It is certainly true that home prices in most local Florida markets fell farther during the past couple of years than they did in Austin, Texas.  As a result, when the recovery begain, Florida values were able to climb farther and faster, even though they remain dramatically lower than before the mortgage meltdown and the recession.

I have no way of knowing what was behind the letter-writer’s disgust.  If he encountered an unscrupulous agent who took advantage of him, there are certainly steps to take.  If you find the need, or just have questions:   contact the agent’s sponsoring broker if that designation is applicable in your state and/or report the practitioner to the local Board Of Realtors and/or the state Real Estate Commission.  The National Association of Realtors is also active in enforcing compliance with the very strict Code Of Ethics that all members agree to.  Those are the lowest cost and fastest ways to have discipline applied and hopefully remove a non-professional from this industry.  Of course, pursuing legal remedies — civil or criminal — is an alternative, but that can be costly and the outcome is uncertain.

Instead, what may have happened to the letter-writer was that he, like many people I have talked to over the past two years, was determined to buy at the “bottom of the market.”  Unfortunately, the only way to recognize a “bottom” is in the rearview mirror.  When values bottomed in Florida, demand took up the slack quickly because values had fallen so far, and he may well have seen prices move upward quickly.  He may have been caught looking instead of buying as prices moved beyond whatever he considered “reasonable.”

Finally, the letter implied a similarity between real estate professionals investing in properties for themselves and stock brokers trading on “inside information.”  The truth is that there is really very little “proprietary” market information in this business.  If the letter-writer wants access to the same information we work with every day, all he needs to do is invest his own time and money in the education and testing required to get his own real estate license, pay a sponsoring broker hold his license, pay to join his local MLS, and spend additionally each year for licensing, MLS dues, sponsorship,  and continuing education.  With some education and experience in doing proper market analysis, he should be able to do what real estate professionals do every day — determine property values as established by market forces.

Of course, unless he plans to do a lot of this carrying a real estate license is probably not a good use of his time and money.  Instead, he should find a reliable real estate professional through referrals from his friends and family.  Years of experience, annual production, and advanced education and certifications are great ways to measure professionalism in our business, but personal referrals are always the best.  They account for about 90% of my business, and that’s not an accident!

Advertisements

About Bill Morris, Realtor

More than thirty years of business experience (high tech, client service, business organization and start-up, including many years in real estate) tell me that service is the key to success and I look forward to serving you. I represent both buyers and sellers throughout the Austin metropolitan area, which means first-hand market knowledge is brought to bear on serving your needs: -- Seller Representation is a comprehensive process that begins with thorough market analysis and consultation, continues with properly staging the home to achieve the highest price possible in a reasonable time on market, a complete program of marketing and promotion, ongoing updates and communication, closing coordination, and follow-up throughout (and after) the sale. -- Buyer Representation is also full service: shopping, previewing, price and market consultation, contracting, negotiating, coordination of inspections, appraisals, repairs, and closing details, and follow-up beyond the closing of your purchase to ensure your lasting satisfaction. Because the real estate industry is becoming more sophisticated and challenging every day, you need a professional that understands the industry and is positioned to stay ahead of the game. I go the extra mile to help you achieve your goals. That's why I constantly research the market and property values so your home is priced effectively from day one. I also make sure the public knows your home is for sale by using innovative advertising and marketing techniques to attract potential buyers.

Discussion

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: