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Realtor production or customer satisfaction – importance and meaning of rankings

realtor rankingsWhat’s more important? The number of homes your real estate agent sells; or the customer service they provide?

“#1 Real Estate Agent.” “#1 in Sales.” “Top 1% Nationwide Producer.” If you’ve spent some time with real estate agents, you may notice how many tout themselves as being #1. And although some of these rankings are legitimately given by a recognized organization; many agents may be creating their own production ranking designation to use for marketing purposes.

by Dan Krell © 2013

Ranking designations are used in various industries to demonstrate a superlative product, or excellent service. One of the most recognized organizations that bestow ranking designations is J.D. Power & Associates. J.D. Power & Associates is most notable for ranking customer satisfaction in the auto industry, but they also rank satisfaction and other industries including real estate. In fact, you may see the J.D. Power & Associates ranking on a home builder or national/regional broker.

Production ranking is more prevalent in the real estate industry, however, and there are a number of organizations that rank the production of agents, teams and brokers. With the growth of the internet, unofficial production rankings can be found on many home search and real estate data websites. REAL Trends (realtrends.com) is a company that is dedicated to providing analysis of the residential real estate industry, and offers real estate data online; the site provides agent, team and broker production rankings in the U.S. and Canada

The National Association of Realtors® has been toying with the idea of adding a ranking system on the consumer home search site Realtor.com (operated by Move.com). The pilot program, called “AgentMatch,” has not been received well by many agents. There are concerns about the perceptions created by the displayed production statistics; some critics cite issues about statistics that may not be representative of production, which also may not tell the entire story behind of many transactions.

Another NAR initiative in agent ranking is a pilot program called the “Realtor Excellence Program.” Currently the program is being tested in several U.S. markets; and as a recent Chicago Tribune article (Realtor group testing agent ratings program, March 15, 2013; by Mary Ellen Podmolik) reported, it is being received well. What’s different about the “Realtor Excellence Program” from other agent ranking programs is that this program provides agent ranking through customer satisfaction. A quote from Laurie Janik, general counsel of the Mainstreet Organization of Realtors® says it all, “I’m looking at reducing liability. I want happy sellers and happy buyers…Right now we measure agent performance based on how many deals they did…But was (the transaction) a train wreck?”

This distinction between agent production and customer satisfaction is an important one. Although you might think that high volume production and customer satisfaction are not mutually exclusive, the relationship usually has some negative correlation; customer satisfaction typically takes a back seat when production goals increase. If a high volume real estate agent or team is invested in maintaining or growing their production, you need to ask about their commitment to customer satisfaction.

Many agents use national averages to determine that they are in the top percentile in production. Using these averages and stats, I also find myself in the “top tier” of various categories. Be that as it may, many consumers deem self promotion about production in a service industry as gauche and trivial. Many consumers are less interested in hiring agents whose focus is about being #1; rather, consumers want to be treated as #1.

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Disclaimer.  This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice.  Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction.  This article was originally published the week of November 18, 2013 (Montgomery County Sentinel). Using this article without permission is a violation of copyright laws. Copyright © 2013 Dan Krell.

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Is there a best way to predict the housing market

predicting the real estate marketIf you’re like most home sellers and buyers – you want an edge over your competition.  What better way to get the edge than having a way to predict the market.  If you don’t have a working crystal ball, there are a few methods to forecast and measure housing (some of which have been used in empirical research).

Various studies demonstrate that you can assess and somewhat predict activity in a housing market; which, albeit in hindsight, can assist home sellers and buyers in determining whether it is a good time to sell or buy a home.  For example, I recently wrote about gauging real estate through divorce and premarital agreements; which discussed the implications of these life events to the housing market.  The increase in prenups could indicate an increased perception in the value of home ownership and possibly the overall housing market.

Another recent study indicated that it may be possible to determine home pricing through internet search data.  Beracha and Wintoki (Forecasting Residential Real Estate Price Changes from Online Search Activity; The Journal of Real Estate Research 35.3 (2013): 283-312.) set out to find out if keyword search engine data from Google could determine price shifts in various cities.  They concluded that this may be the first study that directly links “aggregated” search engine data to “abnormal crosssectional home price changes.”

Essentially, the research established that you can figure out metro housing market activity through Google Trends and Google Insights, which provide keyword volume measurement in internet searches.  The study examined the keywords “real estate [city]” from 2004 through 2011, and concluded that “…cities associated with abnormally high real estate search intensity consistently outperform cities with abnormally low real estate search volume by as much as 8.5% over a two-year period.”

And although the study’s authors discussed prior research linking internet keyword searches and consumer behavior, they caution that there are a number of keywords related to real estate that may be more relevant than the keywords used in their study.  Regardless, the authors assume that their results may be useful in home sales and purchases.  More importantly, it may seem as if their results may strengthen the link between specific search engine keywords (e.g, “real estate Rockville” or “real estate Bethesda”) and the ability to predict a housing bubble, or possibly home price peaks.

Generalized, “global” data, such as those described in Beracha and Wintoki’s study, and their meaning may be interesting; however, limiting yourself to such indiscriminate analysis for your home sale or purchase could be disadvantageous.  Global data does not distinguish the many factors that impact regional markets; nor can it sort out differences within a local market (neighborhood data within a region can vary significantly).

Using “global” tools may be useful; however, if you are planning a home sale or purchase – seek out the assistance of a local Realtor®.  Your real estate agent has access to local specific data that is reported through the MLS.  Using MLS data, your agent can prepare a market analysis that compares your home to recent neighborhood sales; the breakdown can put your home in perspective and can give you a price range to assist you in listing or purchasing the home.  Additionally, your agent can provide a hyper-local trend analysis so as to help you understand what to expect from the local housing market.

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by Dan Krell © 2013

Disclaimer.  This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice.  Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction.  Using this article without permission is a violation of copyright laws. Copyright © 2013 Dan Krell.

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Luxury real estate and the people who live there

Luxury Real EstateWhat is about luxury homes that many people find intriguing? It may be the home itself; or maybe people are interested in the lifestyle of the owner, who may be a celebrity. Regardless, the concept of the luxury home has changed through the ages from an expression of power and security to possibly encompass your home – depending on your perception.

by Dan Krell © 2013

According to Rachel K. Ward (luxurystudies.blogspot.com), luxury is a point that exists between comfort and extravagance; there is no absolute measurement of luxury because it is a matter of personal perspective. And since the definition of luxury depends on who you ask, one’s “level of comfort” may seem excessive to others. Believe it or not, this has led some societies to instill “ethics of luxury.” Dr Ward has attributed the ethics of luxury to the Romans, who instituted laws limiting spending on many items because of their belief of a natural limit when a person has “enough.”

The concept of luxury may have developed in early hominids if there was an awareness of the notion of comfort; which may have been about eating and sleeping well. As civilization developed, the luxuries of life were typically had by the wealthy and powerful. Feudal manor life is an example of this; the manor was a substantial and large building that was the center of feudal life and also served to show the wealth of the lord.

As the middle class emerged during the industrial revolution, simple living comforts became more affordable and widely available. As the middle class became an increasingly important sector of the economy, the housing industry provided affordable comfortable homes that were equipped with the latest technology and living trends.

Although the general concept of a luxury home has changed through time, there are certain characteristics that come to mind when describing a luxury home today. The first is cost: many consider homes that cost in excess of one million dollars in the grouping “luxury real estate.” And according to Luxury Portfolio (luxuryportfolio.com), “A luxury home or luxury real estate is generally defined as a property priced within the top 5-10% of a given real estate market…” However, there are many area homes that sell in excess of one million dollars that seem rather ordinary; “upper bracket” homes may be expensive, but not all are classified as “luxury.”

Luxury Portfolio also describes luxury homes as having “…a unique quality or distinct feature that makes it stand out in the luxury home and luxury real estate marketing arena.” Many luxury homes are thought to be larger than most in the market area; although like price, size alone does not necessarily denote a luxury home. Luxury homes can be of modest size, as well as exist in high rise buildings.

Sometimes, the features and uniqueness of a home may give it luxury status. Luxury homes are often custom homes with the latest in technology and comfort amenities. Unfortunately, a home’s luxury status may diminish with time if the home’s amenities and technology are not maintained and regularly updated; today’s luxury home can be tomorrow’s tear-down.

Ultimately, according to a Peter G. Miller article (What’s A Luxury Home; Realty Times, June 20, 2001), “…For a surprising number of people, ‘luxury’ probably defines a house of reasonable size — and the ability to afford far more.”

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Disclaimer.  This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice.  Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction.  This article was originally published the week of November 4, 2013 (Montgomery County Sentinel). Using this article without permission is a violation of copyright laws. Copyright © 2013 Dan Krell.

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Private, pocket listings surge during housing recovery

luxury real estateThe recovering housing market has brought to light the controversial practice of the pocket listing. Although pocket listings are more common in the upper bracket and luxury real estate market, pocket listings tend to increase during hot markets when there are few available listings and increased home buyer competition.

by Dan Krell © 2013

Sometimes called “off-market” listings, or “private” listings, the pocket listing is a home sale that is not openly marketed in the multiple list service. The listing is kept “quiet” and is only known to the listing agent and/or broker who typically market the home to a select network of contacts and clients.

Pocket listings are common among the utra-wealthy because of privacy concerns; anonymity is an often cited reason for a home seller to choose to have a pocket listing, typically because the seller has some celebrity status. Private listings may also be promoted as a way to limit home viewings to those who are financially qualified to purchase the home; the focused buyer pool reduces the number of showings, which may be less disruptive to the seller’s daily schedule.

However, critics of pocket listings often point to MLS concerns, dual agency issues, and housing laws as reasons to be wary of the practice. Agents are not the only ones who have access to an MLS listing; MLS listings are often syndicated throughout the internet and available for anyone with internet access to see. Clearly, one of the obvious issues of a pocket listing is the reduction of marketing exposure that is lost from not having an MLS entry. Another issue that arises from a pocket listing is that it skews home sale and price data that appraisers use for valuations.

Consumer Advocates in American Real Estate (caare.org) cites the possibility of dual agency (where the buyer and seller’s agent is from the same real estate company) as a major concern for pocket listings. Because dual agents do not act exclusively in the interests of either the seller or buyer, the possibility of a conflict of interest may arise. Additionally, CAARE states that a seller who agrees to a pocket listing may exclude 70% or more of qualified buyers who are actively searching for homes.

A recent Maryland Real Estate Commission newsletter (The Commission Check; Summer/Fall 2013), reprinted an article from the August 2013 ARELLO® Boundaries discussing pocket listings, that stated; “pocket listings may run afoul of federal fair housing laws that not only prohibit readily apparent or intentional housing discrimination against protected classes, but also practices that have a “discriminatory effect” that “… actually or predictably results in a disparate impact on a group of persons or creates, increases, reinforces, or perpetuates segregated housing patterns because of race, color, religion, sex, handicap, familial status, or national origin…”

Unbeknownst to some home sellers, their home sale may be marketed as a pocket listing during the period between the signing of listing paperwork and when the home is entered into the MLS. Although this time is often used to prepare a home for sale; it may also be privately marketed by the listing.

Although the National Association of Realtors® has “not defined what constitutes a pocket listing, nor do they have an official policy regarding the practice” (“What is a Pocket Listing”; Realtor Magazine, May 2013); potential housing law issues and ethical concerns of pocket listings should be addressed with your real estate agent/broker.

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Disclaimer.  This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice.  Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction.  This article was originally published the week of October 28, 2013 (Montgomery County Sentinel). Using this article without permission is a violation of copyright laws. Copyright © 2013 Dan Krell.

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Gauging real estate market through divorce and premarital agreements

divorce and real estateCan we gauge the real estate market through divorce and premarital agreements?

A recent news item (prnewswire.com) from the American Academy of Matrimonial Lawyer (AAML.org) appears to be good news for real estate.  The October 16th press release proclaimed that a majority of AAML members surveyed indicated that there was an increase in prenuptial agreements over the last three years.  Among the top reasons cited for a premarital agreement included “the protection of separate assets” and “the division of assets.”

According to the AAML, the increase in premarital agreements correlates to an improving housing market and overall economy.  Alton Abramowitz, president of the AAML was quoted to say, “As the financial and real estate markets continue to improve, there is a greater awareness of risk to possibly sharing these gains in a divorce…”   Mr. Ambramowitz further stated, “…The trend of divorcing spouses fighting over which one has to take possession of a devalued home and other depreciated assets appears to be coming to an end.”

Although this was an anecdotal survey that does not provide empirical evidence linking the increase of prenuptial agreements to an increasingly healthy housing market and strengthening economy; Mr. Abramowitz’s logic makes sense, and you might think his reasoning as intuitive.

However, the increase in premarital agreements is not necessarily an indication of a growing economy and housing market – but rather, there may be other anecdotal evidence explaining the prenuptial increase may be due to the increasing number of couples delaying marriage to a time when some wealth has been amassed.  The results of a 2010 AAML survey indicated a rise in premarital agreements was also attributed to couples marrying later in life.

Additionally, the link between the concept of delayed family formation and an enduring sluggish housing market was cited by Ben Bernanke, in a February 2012 speech given to the National Association of Homebuilders.  The speech identified economic concerns and a decline in family formation as reasons for the decreased commitment to home ownership.

Furthermore, counter-intuitive results from a recent study found that divorce rates drop during housing slumps and recession; but the notion that divorce rates are higher during prosperous times may support the most recent AAML survey that premarital agreements could be an indication of a healthy housing market.  Abdur Chowdhury’s 2013 study (’Til recession do us part: booms, busts and divorce in the United States, Applied Economics Letters, 2013, vol. 20, issue 3, pages 255-261) analyzed data from 45 states between 1978 and 2009 to find that “divorce is pro-cyclical.”   During a recession, Chowdhury believes that there is a “new appreciation for the economic and social support that marriage can provide during tough times.”

Supporting Chowdhury’s results, Melanie Lawder (Divorce Rates Lower During Recession, The Marquette Tribune, 2012) reported that divorce rates dropped to 16.9 per 1,000 married women (from 17.5 per 1,000 married women in 2007) during the Great Recession.  Lawder also quoted a study by the National Marriage Project at the University of Virginia indicating “29 percent of Americans aged 18 to 45 believe the recession has deepened their commitment to marriage.”

Although there may be numerous reasons for divorce rates to drop during difficult economic times, the recent increase in prenuptial agreements can certainly be viewed as a positive sign for housing; it may be that there is an increasing perception of the value of real estate, which people seek to protect.

by Dan Krell
© 2013

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Disclaimer.  This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice.  Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction.  Using this article without permission is a violation of copyright laws.

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