Sunday, January 24, 2010

Property Sold Outside of the MLS - A Bad Thing

So I've been poking around Austin to buy a property for the last few months. First, I'm frustrated by the fact that Austin has this "non-disclosure" rule whereby sales are not reported and available to buyers. Well, at least realtors can get you MLS sales data right?

Well, there are two things wrong with MLS sales data:

1. It's self reported. That means you are depending on realtors to voluntarily report the prices. They have some fairly powerful incentives not to report the right number which makes me suspicious. (In California where I live all sales are recorded under penalty of perjury at the county recorder. So, even if you sell it to your brother the market knows the price)

2. Lots of people are trying to sell real property without listing it in the MLS. This includes builders and the big realtors. This didn't make sense to me until today. The reason they give is that they don't want to disturb their tenants (by getting the highest price available?) with all those pesky buyers coming around.

Of those two, #2 bothers me the most. In fact, some of the condo buildings downtown don't want to put any of their real prices in the MLS and if you do buy one for less than the publicly listed price, they make you sign a gag clause as part of sale.  Now that smacks of market manipulation.

I personally experienced a similar thing with the builders of new homes further out. They will advertise the base price of a home in the MLS and then throw in 100k in upgrades so they don't have to advertise a fully equipped home at the real prices. I'm not sure what they end up putting in the MLS since they aren't advertising a specific home. My guess is nothing.

I also think that they are trying to sell homes in high end areas like Barton Creek as "pocket listings" as well. I've run into several realtors who mention, in hushed tones, that they can show me this or that property which isn't listed and get me a "great deal". This sale, presumably at a lower price, would be hidden from future buyers allowing future sellers to sell to suckers who believe the MLS data. (Go look at see how few sales there are in Barton Creek. That's evidence that sales at 2010's admittedly lower prices are being concealed)

Folks, this a deliberate attempt by the real estate industry to AVOID SETTING NEW COMPS in a falling market. It is an attempt to withhold valuable market information from buyers in order to protect builders and existing homeowners from falling prices. I am convinced of this.

Unfortunately, all of this self serving protectionist behavior serves to decrease investment in Texas real estate.


  1. Mr. B,
    Nice collection of articles and thoughts. Not unlike you everyone wants to know that they got not just a fair deal but an incredible deal. In the current market conditions , yes even in Austin, you can only do the research and come up with a price you are willing to pay. Sometimes a deal is struck and sometimes not.
    Real Estate is local in nature, not local as in "Austin Area" but local as in one neighborhood can be "hot" and another not to far away can be "dismal." Here are a few points to consider when looking in Austin for a residence.
    1- January of 2009 we had about 13,000 single family homes for sale. January 2010 we have less that 8,000 homes for sale. Population continues to grow as did job in 2009.
    2- New home permits are lingering at around the same levels as we saw in 1957!
    3- Home Affordability index is about .5 while California is still at about 1.4. This means that in Austin a worker making half the average wages can buy the average home. In California even after 3 years of steep declines it takes 1.4 times the average wage earned to buy the average priced home.
    4- Forclosed homes for sale make up about 3% of all listings but represent 12% of all closed sales.
    5- MLS data entered by Realtors is required to be reported acurately for homes listed. Homes sold outside the MLS are not required to be reported.
    6- I would mention that in recent times most out of MLS sales do eventually get reported but not through the MLS. We have a property tax and more and more people are protesting their appraised value. The first thing the assessors representative asks for is your purchase data. If you refuse they will not consider your protest any further in most cases.
    7- Galleria Mall sale was predicated on the fact that the developer could not get permanent financing after constuction was finished. The Mall has performed well and is 90%+ occupied. A crazy situation for sure. What a steal at $75 million! The rich get richer.

    Please fell free to contact me directly with your questions. I will answer you directly without smoke and mirrors if you can take it.

    Yes I am a Realtor but I am also a small business owner and business man first and foremost.

    Bill Austin

  2. Ethics 101 + Manditory Rules for Members of the Austin Board of Realtors.... All Members must report the sale within the MLS or it is an immediate $500 fine. I feel that most sales are completed by a REALTOR board member and eliminate this concern.

  3. Austin downtown area condo prices are a joke. We were with my son who's looking. High rise without any view, unless you want to call a concrete wall and a parking lot a view. To its credit the building did have great amenities, but hurry and grab this 1200sf that was just reduced from 489k to 462k. Overpriced and over taxed. Give me a break. We rent quite comfortably with a better floor plan, better pool, and better location in the heart of SoCo for about the same as we would have to pay in taxes and HOA, not even mentioning interest, or maintenance.

  4. First of all, I'd like to say to the "Anonymous" coment above... You had no business looking at a $462K Condo if you are currently comfortably renting for peanuts in SoCo. you entered those streets without a plan and you went squealing out like an injured dog. super lux is not your game. stick to SoCo.

    Now for Bubbles...
    Listen to yourself Bub. You are so full of fear, trust me, you're not going to purchase anything. And, if you were to purchase something, it would be an absolute orphan that nobody wanted and you picked up for cheap cheap, which only puts a problem in your hands, not an investment. Orphans rent for less too ya know, oh... and they sell for less later!

    All your talk about price, you should really quit looking at the mls market and the new home market, and start looking at the courthouse steps so you can find the real deals where someone's great misfortune has occured in order for you to get a good deal.

    New Homes and Developments and average resales is not your game. Think about it for a minute, it's really pretty simple.

    And your comment about Realtors selling off the market, not reporting correctly, and so on...
    wow, I mean come on.. you act like those few FEW deals/scenarios that exist out there actually affect the market. Those are just the Realtors that have a good price and they want both sides (meaning that you'll never see that 3% you are so vested in).

    Here's an easy key note to remember:
    The market is effected by the number of available buyers. This means that when there are more buyers than there are homes available for sale, prices go up!
    When there are more homes for sale than there are buyers, prices go down. Simple.

    So, in response to your above paranoia about these "off the market" deals being made; they still fall under the amount of available buyers to available homes (ratio). Those buyers are buying OFF the market, so the homes ON the market will still drop prices in order to intrigue buyers. And you can believe that those "OFF Market Buyers" have looked at homes on the market before they bought.

    This isn't a scam Mr. bubble. This is people buying and selling real estate.
    Get your thoughts together as to what you want to accomplish with your real estate investment goals, and then hire a good Realtor to help you so you don't get wrenched. You are easily recognizable out there and you will lose in the real estate game if you do not seek help.

    that's not a general comment, that's a direct response to all your commentary that shows your incompetence (common outlook from unrepresented buyers).
    IT SHOWS, trust that.

  5. "First of all, I'd like to say to the "Anonymous" coment above... You had no business looking at a $462K Condo if you are currently comfortably renting for peanuts in SoCo. you entered those streets without a plan and you went squealing out like an injured dog. super lux is not your game. stick to SoCo."
    First of all I would like to say to the anonymous that posted the above that you are lacking in reading comprehension.
    What part of "We were with my son who's looking," do you not understand smarta$$?

    Secondly, Overpaying is not my game, nor my son's either. Someone a lot smarter about money and investing than you or I once said "Price is what you pay. Value is what you get." Just don't see it in the condos we've seen so far.

    If you call what I saw with my son "super lux", where you walk through the front door right into the kitchen with next room being a tiny poorly laid out living room, you must be insane as well as being reading challenged.

    Furhermore my plan was to downsize from a 3100sf energy draining money pit thing called a house to an apartment after 46 years of home ownership. I had a plan and a dream three years ago, and have succeeded in fulfilling it. Sorry to disappoint you. Now why don't you start "squealing out like an injured dog" for being shown what a no-mind you really are.

  6. This guy is just a frustrated Real Estate queen. He's crying because you wont get up over the barrell for him. Realtors and agents...the profession(?) is lower on the scrotum pole than a first year barber. Consider the source, vomit, and continue on.

  7. RE Foreclosures....someone's misfortune? Nice spin. Nine times out of ten, the only misfortune was that they made a terrible judgement call and bit off more mortgage than they could chew or cared to chew in the case of preemptive defaults -- a judgement they were likely pushed into by a greedy agent like yourself. Listen to you, dude -- you're freaking out all over these commentors for simply having thoughtful discourse before they decide to take on a bunch of debt and stick 6% in some jerk's shirt pocket. Yours is the most reviled profession out there next to Wall Street bankers. Get yourself buried.

    Let's see a law passed where an agent has to remunerate their commission if/when a house loses its value by more than 10% in five years. Then we might have some honesty, albeit, forced honesty.

  8. Austin is seeing the tip of the iceburg where -- what we call in economics -- a "normalization" of the market is occurring. A distorted market like what we are currently seeing is one that has been manipulated by cheap debt, easy credit, and public programs designed to drive debt bias. House prices in Austin will fall further, gradually at first, just as wages have fallen and salaries have been cut or remained static.


    ...realtors rated lowest "profession."

  10. This might be a better link>

  11. Ha, that is too funny. This overly-opinionated, intolerant fool was too busy being condescending to pay attention to what you had written - good on you for setting him straight. My guess is there are a lot of dogs in the real estate business right now with wounded egos.