Scary Precedent - 40 News Organizations in Collusion to Suppress News Story

We all found out yesterday that the New York Times successfully asked 40 other news organizations to suppress a news story about one of their kidnapped reporters for the last 7 months. I completely understand them wanting to protect their employee and not endanger him, but this is a very scary example of a double standard that is unacceptable.

I am concerned that a "monopoly" of news organizations could essentially get together and create an anti-trust situation, where they would collectively decide what "news" should or should not be disseminated. I am not naive about the fact that most news IS manipulated in some form, but the suppression of information by a collective of news organizations in a variety of countries is a little too much to ignore. They even got some bloggers to remove their posts on the subject.

I question the subjectiveness of their actions; would they have done the same thing if it had been a politician or business person that had been kidnapped instead of a reporter? I doubt it.

Your thoughts?

REO Liabilities not Covered by E&O Insurance

I have found that most agents and brokers who are listing REOs from a variety of different banks and asset managers are not aware of some risks they may be facing.

Many banks and asset managers require indemnity statements to be signed upon taking the listings, that essentially place all of the traditional seller liabilities on the listing agent and broker. Our industry has spent endless time and effort over the past decades getting our contracts to effectively shift significant liability to the seller for property condition issues and other items. These REO indemnity clauses undo all of that, and the broker's Errors and Omissions policies generally will not cover these issues.

I am curious if any other REO listing agents and brokers have realized this and are taking any actions to protect themselves. Do any of you have any experiences with this or any examples of what is being done to mitigate these new liabilities?

When Is a 20% Drop in Average Prices Really a 0% Drop in Average Prices?

Here is a post from Tim in Atlanta that makes the point of my previous post much clearer. Thanks for clarifying the issue!

Via Tim Maitski "Video Agent Guy" (HomeAtlanta.com):

Market stats can be deceiving.

Every month the MLS in Atlanta comes out with average home sales prices for the Atlanta metro area. They are useful in general terms but let me show you how easy it is to get an entirely incorrect picture of what's going on in the Atlanta market.

Fulton county is in the middle of metro Atlanta and is a very long county. It could take you one hour to drive from the south side to the north side. Houses in the north part of the county might cost on average $500,000 while houses in the south part of the county might cost on average $200,000.

Here's a hypothetical situation with simple numbers to make the math easier.

10 sales at $500,000
10 sales at $200,000
= ave. price of $350,000

Next year the prices stay the same, total number of transactions stay the same, but the relative number of transactions changes in the two areas.

5 sales at $500,000
15 sales at $200,000
= ave. price of $275,000

The MLS would report that the average price of a home in Fulton county dropped 21.4%, from $350,000 to $275,000 and total sales remained constant at 20.

That would be an amazing number that would be reported in the newspaper. If you are an agent you might recommend that a seller reduce their price, when in fact the only thing that has happened is that more homes sold in south Fulton than north Fulton.

I've spent many hours this week creating market reports that drill down to smaller market areas around Atlanta. I've created average house price charts for specific areas going back to 2002 which show both price and volume. I will start posting them in the next few days.

It has been really eye opening. There are sections around Atlanta that have had average prices drop around 50% in the past year while other areas have remained level. In general, the volume of transactions in the decreasing markets is increasing and the volume in the steady markets is declining significantly. This explains why so many agents are hurting all over. Prices in north Fulton are staying even but there are half as many homes selling. In south Fulton, prices have plummeted and the number of transactions has increased. This will skew the area wide numbers in a similar fashion as my simple example.

The bottom line is real estate is local. Use national numbers with caution and also metro wide numbers with caution. Know the big picture but also know what's happening in your very local area.

Low Median Home Prices are Unrealistically Distorted

In a discussion with a very wise colleague, he pointed out that the median pricing reports are not truly identifying values of all properties and is actually distorting valuations. The reason for this is that one segment of the market (the higher-priced homes) is not really "open for business" due to the lack of jumbo loans. This means that the median price reports skew to the lower priced houses, which are the majority of most markets right now.

He described it as a "product-mix change" in the market, rather than an overall drop in values. In other words, in a market that once had 40% of its sales above $700,000, and now only has 5% of its sales in that price range, the median price drops, but the value of the $700,000 house does not drop at the same rate.

Many consumers read these reports and have the impression that their house value has dropped a lot more that it really may have. If someone bought a $2 Million house 3 years ago, and the median prices of homes in the area have dropped 50% in the same time frame, that house is not necessarily worth only $1 Million now. I contend that its value is much higher because the median pricing reports have an abundance of low-priced homes dragging the median down.

I am curious if you agree with this thinking, and if so, how are you explaining it to buyers and sellers of more expensive properties?

Let me know what you think.