Your options are many. Are you concerned with a prestigious name and a store front on a main street? All of the employees are licensed by the state, but what makes one person either more highly skilled or more capable if they work in a no frills, low overhead office or in a higher priced, recognizable office with more employees with expensive fees and an office location. Both companies have the same tools available to their employees. The question is “Am I discussing real estate offices or hair salons”?

There happens to be a perception in a service based economy that the more you pay, the better the service. And it does not matter if it is right or wrong, what does matter is that perception is reality. What really is important is that you have convinced yourself that when you pay more you get more. Otherwise, why would you do it?

There is also a stigma associated with a product or service that is priced too low. How can someone do it so cheap? What am I giving up and are these guys for real? There must be additional hidden costs associated with such a low priced offer. We tend to stay away from these because our own skepticism keeps us from investigating further. A formidable challenge to the status quo may not receive the attention it deserves due to the market domination of the bigger competitors. They may feel their margins threatened and therefore may question the experience or integrity of their competitive counterparts. We have all heard “You get what you pay for”, but do you?

Is a bigger name better of is it more impersonal? Do you think you are more likely to get a person with superior skills by using a bigger branded company? Chances are you will never find out unless you speak to a few different organizations and see what they have to offer. Since real estate is a highly personalized service oriented transaction you owe it to yourself to find one that is capable and that you feel you can work with. Since you may be contractually obligated for up to 6 months.

Lastly, since you have so many candidates from which to choose, how many of these people can actually provide you with a difference you can distinguish? Why makes Joe’s business different than Mary’s? Maybe you have convinced yourself that the neighborhood specialist for the last 25 years is your choice. We know these people as the ones who do not know how to use a computer. If they don’t understand technology, how many online real estate sites is your house likely to appear on? Most people begin their home search on the internet these days. This might be an important factor to consider.

An informed consumer is an intelligent consumer. Talk to at least three agents if you are thinking of selling your home. Also you should talk to a couple of different service providers, not just the “full commission” companies. At a minimum, you lessen your chances of getting “clipped”.

According to Altos Research, there are 487 single family properties for sale in Pasadena, indicating a 9.5 months supply, very indicative of a buyers market.

Condo’s & Townhomes

Sales of condos and townhomes also decreased 14% compared to last year, but unit sales continued to decline by almost 50%. Compared to last month units increased from 25 to 31 and sales prices were down about 2% from $470,000 to $460,000. Last year we saw an increase in activity in new units which helped propel the median prices in this category. Now with the slower market, condos and townhomes are returning to median prices seen in 2006.

We are seeing some of the same characteristics as the single family market, mainly condos and townhomes are selling at a bigger discount to their listing prices. Altos Research reports that 289 condos & townhomes are available for sale. With 31 reported sales in April, a 9.3 months supply of inventory exists. If you would like the latest research information on the Pasadena real estate market, email me, indicating single family or condo.

A list of all the homes / townhomes that were sold in Pasadena, Altadena and South Pasadena for the month of April is available at up2daterealestate.

Note: We have modified our “days on market” with two numbers, (1) is days on market for the current listing period, (2) represents cummulative days on market indicating how long a property has been for sale. For instance, a property may have been for sale for 60 days and did not sell and was relisted with a new agent one week later. Numerically it would read 1/61.

Fact or Fiction?

It does appear after many months of decreasing commissions; rates are beginning to rise again. And why not, fear is a great motivator. Real estate agents are convincing clients they must pay more in a declining market in order to increase the likelihood of a sale. Sales commissions have usually been split 50/50 between the listing and selling agents. In a seller’s market commissions declined due to more competition among real estate brokers. Many new business models flourished and the real estate industry offers few barriers to entry. These same companies that did well in a seller’s market are finding the going much tougher when overall sales decline by 50%. As a result, the well established companies that have been around a while and are considered the more traditional models remain despite the market dips.

I last looked at commission rates in our area last June. Based upon the search results below, there has been a trend for consumers to pay more to sell their homes.

While the majority of homes sold continue to offer a 2.5% commission, the number has declined to 56% of the homes sold compared to 70% almost a year ago. Property owners offering a 3% commission increased to 40% from 24%.

Do Homes Sell Faster Offering a Higher Commission?

This is the $64,000 question. I compiled Pasadena home sales from October ’07 to March ’08. While it appears that properties offering a 2.5% commission outnumbered those offering 3% by a margin of 4:3, it took those homes 7 days longer to sell, comparing the median days on market. However, analyzing the average days on market the situation was reversed, selling 8 days sooner. Based upon this analysis, I would have to say increasing the commission offered, begets no real advantage. While extremes do exist, a competitive commission reflective of the area will present your home in a positive manner.

Selling Your Home

The number one key to selling your home is getting it priced correctly. End of story. Now there are supplemental factors consisting of condition, timing, amenities, location and competition. Noticeably absent is THE COMMISSION. With 75% of home buyers beginning a search on the internet, the commission offered to the selling agent is no where in sight. I don’t know of any agent that has ever called our office saying they were working with a buyer who only wanted to buy a house offering a 3% commission. And if 3% was sacrosanct, wouldn’t you think licensed real estate agents would offer 3% on their own properties? We will have to keep an eye on this.

In a market where values are declining and the median price of a Pasadena home is $675,000, a savings of 1% or $6750 is an advantage. As with any category, price is determined by market forces. No agent or brokerage company is going to change that. After all it is your equity.

And now for the usual disclosure “The amount or rate of real estate commissions is not fixed by law. They are set by each Broker individually and may be negotiable between Seller and Broker”.

Let’s take a closer look at the city of Pasadena.  There is a large inventory of homes available on the market today.  In Pasadena, experts estimate about 10 months worth.  The average selling cycle to sell a home often exceeds 100 days with selling prices  well below asking price sometimes up to or greater than 10%.  In addition, the number of home foreclosures & short sales is greater than in past years.  In all, it seems as though, today’s real estate market is prime to purchase a solid investment residential property in a desirable neighborhood at a reasonable price.

OK, let’s go on this hypothetical journey, you purchase an investment home.  Am I going to get a decent rental income?  Who am I going to rent it to?  Is there a demand for homes to rent?   All of these questions have different variables (i.e. size, location, available amenities in the home) that prohibit an absolute answer to them.  However, according to the MLS, the median monthly rental price in Pasadena for the past year (3/07-3/08), is $ 2200.  With the availability of numerous websites for potential renters, advertising a home to rent is easy, inexpensive and accessible to more people.  With the increase in foreclosures, there is and will be a rise in the number of people/families needing to rent.  Plus, these people will be renting long-term in order to save for a down payment towards a future home. 

So, did we hit the real estate trifecta?  No one knows for sure.  Take a closer look.  Do some research on the internet, meet with your local real estate agent and financial counselor to examine the numbers.  Who knows…in five years, you may be the one boasting of the great real estate investment.