Real Estate: In Need of Massive Reform

LadyThinker and I have been in the market for a house for about 8 months now. While we started looking in San Jose, LadyThinker came back from a trip to Europe and let me know she really wants to live in a more urban environment--namely, San Francisco.

So 6 months ago we shifted the search north to the 2nd most expensive city in the US. Lovely. We've gone back and forth, had some heated discussions over what we will make an offer on, what we won't and what classifies as a legitimate reason either way. After seemingly ages, we agreed on a house, not you on the market, that we had an inside angle on. Supposedly, an offer that they considered strong would win the house before it hit the market.

On the assigned night, we made our way to the "City" to see the place and agreed it was just about right. No house is perfect, but this was a strong 8 of 10 in a city full of 6s. In the kitchen that night, with BOTH agents present, we discussed the plusses and minuses. OUR agent proceded to wax poetic about the hot market, how no house goes for asking in this area, and brings up comps of houses in recent months that went for $60k above asking. Needless to say, I was a little peeved at the agent.

We made the offer--at the "asking price." Only contingnecy was a home inspection--rather common in this flat market. Well--they came back with a counter offer $46k above the asking price. We were the only bidder. Very frustrating time. Very.

As to why the market should be reformed...

1. Buyers agents have an inherent conflict of interest in the current framework. 3% commission doesn't encourage them to get the best price--a $50k cut costs them $1500.
2. Buyers agents cannot possibly be worth 3%. OK--in some cases, where the buyer is lazy or requires a TON of work, yes--3% is fine. In cases where the house costs $200k, yes 3% ($6k) is fine. But in san Francisco, where the median price is $755k--the median commission therefore $22.5k, something's wrong. I find possible places before my agent does.
3. Kickbacks. Our inspection was to cost $700 on a small condo. Most inspections cost $300-400 tops. I smell a kickback.
4. Lack of transparency. For example, there is no way to track seller contributions or other under the table elements of transactions. The numbers say real estate is up a trickle in the Bay area. Most think otherwise, but we'll never know. We shouldn't rid ourselves of such tools, but this should be transparent.

As for me, the search goes on. With a few changes: I'm firing our agent and using Redfin.com, which does the same thing that a realtor does, but only takes 1%. The adventure continues...

Land of the Wii

I am not a video gamer. Haven’t been since my original Nintendo (the original) was broken by my sister’s friend back in 1992 (and yes, I am still bitter). However, I have found myself swept up in the search for a Nintendo Wii. I’ve also found it to be quite a trek, and rather revealing, both of people, and of the power of a market.

For those of you who aren’t aware, the Wii is Nintendo’s new gaming system. Rather than compete with the PlayStation3 and the Xbox360, Nintendo intelligently opted to focus not on raw graphics and power, but rather appeal to the rest of the world—the non gamers, if you will—those who can’t and don’t want to sit in front of a monitor all night playing against some 12 year old in Poland. Nintendo just may revolutionize gaming with its motion sensor remote controller, which allows players, for example, to play tennis by swinging the remote. You can imagine the myriad other applications, as well.

This one is a win for Nintendo over Sony on a lot of levels—a win no one expected. On the marketing side, expectations were so high of Sony that they could not possibly deliver, especially for the $500-$700 price. Yes, it has a BluRay player, but, really, who can take advantage of that today. Yes, the PS3 is more powerful, but who the graphical capability won’t be realized by developers for another year or more—when they cost much less. Long story short, I can find a PS3 anywhere right now (and that was not expected).

But I cannot find a Wii, and it’s not for lack of trying. Nintendo has masterfully shipped small quantities, keeping everyone’s interest and also maintaining scarcity (and therefore desirability to some degree). It’s also an interesting view into the market. People with too much time or no jobs are hoarding Wiis, creating a cartel effect and driving up prices (it’s not uncommon to see someone on CraigsList or eBay who has sold 6-8 at $150 profit each). As Christmas passed, prices on eBay dropped from $500 to $400, and then to $330 this weekend.

But my quest continues. I could make a living reporting on the shipping and logisitics of big box stores now. It’s an interesting little world here in Wii-land. There are online support groups; a cottage industry has popped up with automated inventory notifications (by SMS and email); and of course, there’s eBay and Craigslist. It just proves that while markets, as a whole, are rational, people aren’t. And for the first time in my life, I’m in the camp with the people, not the market; yet I refuse to pay the $50 premium on eBay—which makes me wonder: am I in it for the Wii at this point, or just for the kill?