Monday, June 10, 2013

Real estate needs some re-working to tip the balance to the consumer

Having spent the last several weeks in the real estate sector, as a potential seller and buyer, there are clearly visible gaps in the "self-regulation" of the industry that could easily be closed, for the benefit of both the consumer and the industry.
Since the cap industry has instituted the "carfax" report, or some other forms, to document the history of the vehicle for unsuspecting purhasers, why does the real estate industry not insist on "building inspections by independent agents" prior to any listing. Pictures, videos that depict a seductive residence, with all the apparent amenities a purchaser might be looking for, do nothing to show the hidden weaknesses, structural red flags, or gaps in insulation that might be lurking for the unsuspecting purchaser.
How many real estate deals have gone sour once the inspector's report is completed?
The argument will be that the purchaser will wish to select his/her own inspector...and yet, a pool of licensed inspectors would go a long way to meeting that independent and objective requirement.
And then there are the less visible and often more irritating omissions in communication that drive potential deals off the rails.
When an agent is preparing an offer to purchase, for the client, it would seem reasonable for that agent to know a few basic facts about the offer...
  • Is it truly a final offer?
  • Is there a range of prices within which that agent can negotiate on behalf of the purchaser?
  • How wide is that range?
  • Is the agent representing client who will use the residence for its current purpose, or is the purchaser intending to use it as an investment and rent it to tenants?
  • Is the seller an estate, a family, an elderly man or woman represented by a lawyer, or some other entity?
There have been attempts to establish codes of construction, for new buildings, with warranties, most of which seem to have been fairly empty of teeth, if and when their terms were expected to be fulfilled.
Warranties, just as in the car industry, especially with new vehicles, have to be specific, reasonable, reasonably written for the average reader (not only for the legal profession) and redeemable. Such integrity seems not to have been built in to the real estate sector's self-governing process.Self-governing, while irritating and annoying, in the long run is probably preferable to government stepping in on behalf of the consumer. It seems that government may have to insert itself in the real estate industry, if the consumer is to have real, redeemable and reasonable protections, especially in the case of new home construction.
And then there is the question of the real estate agent knowing his client, especially if that client is an estate, with a lawyer in another city, who considers it reasonable to yank permission for an extension of an offer, without warning to either the estate representative, or the real estate agent who is acting for the estate.
So much of the real estate industry operates on available information, including the sales of comparable properties in a similar geographic area, over a period of time. And so much of 'price-establishing' is subjective, based on the agent's experience and knowledge of the market. Perhaps it would be reasonable for purchasers to acquire at least three proposals on current market value from three different agents, all from different agencies, prior to signing a contract for a listing. In that way, the seller would have a much clearer picture of what the real estate is "worth" in the current market.
Setting a number, primarily based on the agent's commission (the higher the value the greater the size of the commission) is hardly a reasonable, nor trust-building premise on which to establish a value.
With real estate values galloping higher and higher in too many markets, the only ones who are really laughing all the way to the bank are the real estate agents, and their brokers, while ordinary purchasers and sellers are too much at the mercy of the insiders who are operating the market.
And this little memo does not attempt to address the questions of land use planning and the mounting evidence of gate-keeping in too many towns and cities in North America, for the establishment, and against newcomers, based on economic "value" of the person. And that little toxic bug requires another piece, given its growing malignancy.

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