Portland Real Estate Blog

Shannon’s comment on my previous post, Who Does Your Agent Work For?, brings up an interesting point. She thinks that buyer’s shouldn’t be represented by commissioned sales people. The more the buyer spends, the more the agent makes. That is therefore bad for the buyer.

She say:

I’m thinking a flat fee plus a bonus based on how far below whatever price I’m qualified for I actually spend. But that’s just one idea. On a commission basis, the closer I can be worked up to the most I can spend, the more money “my” agent makes. Does this really reflect my best interests?

I’m not sure that will work because what you are qualified to spend and what you want to spend are totally different things. It would have to be tied to the actual property that you decide to buy. But it does raise the question about how buyer’s agents get paid.

In today’s co-op transaction in most cases, the buyer’s agent commission is set by the seller and the listing agent. It is not negotiable. The buyer isn’t paying their agent directly. The agent has a responsibility to show all properties of what the offered commission is unless the buyer and agent have a Buyer/Broker Agreement where the buyer will make up the difference between the offered commission and the agent’s minimum “fee.”

Under the current co-op model, the buyer “pays” their agent but indirectly, it is built into the listing price. A potential new model has the buyer and agent entering into a contract before they see a single home together. The buyer knows exactly what the agent is making. The sales price theoretically drops by the buyer’s agent’s commission because the seller is not paying it.

How does an entrenched model change? Should it?

Two things hitting mailboxes this week: property taxes and voting material. Pay attention to both!

Let’s talk about property taxes. Want to talk about politics? Go to Blue Oregon.

Your tax bill is either white or yellow. Yellow, your lending institution is paying the bill because they have an impound account and the yellow copy is just for your records. If it’s white, be prepared to write a check. Postpone the inevitable beyond November 15 and your three percent discount gets smaller based on the amount you do or do not pay. Decide that the City can do without your money and they’ll place a lien on your property. After three years, they can foreclose on your property.

If you have a mortgage you may or may not have an impound account. Banks like impound accounts because they know that your taxes and insurance is getting paid since they write the checks on your behalf. They collect 1/12 of the expected annual bills each month with your principal and interest payment. The total payment is PITI (Property Insurance Taxes Insurance). Each year the bank looks at the expected bills versus the amount in the account and decides if they need to adjust the payment. If they have collected too much, they’ll cut you a check.

What’s the Portland property tax rate? Our discounted tax bills are all 1.95% of the Taxed Assessed Value. Where the TAV comes from is beyond my expertise. It’s considerably lower than the Real Market Value.

10/21 Update: Read the comments! For every rule, there are exceptions. If the County makes a mistake and sends you a yellow statement, their fault or not, you still owe taxes!

Our townhouse listing in Forest Heights is featured on the front page of yesterday’s Homes and Rental section of the Oregonian focusing on the Forest Heights area. Forest Heights is coming of age with its own schools and own shopping area complete with its ubiquitous Starbucks. Before the retail space the morning coffee fix or forgotten milk had to come from the shopping center at Burnside and NW Miller.

The entire Forest Heights area is a part of a homeowner’s association. The condo and townhouse communities each have their own associations so owners are members of two HOAs. The Forest Heights Association maintains standards throughout the area and upkeep of the common area spaces and paths.

We’ve found that there is no typical client for the area. The last three properties that we sold were to a single woman, a retired couple and a family of five.

Dual agency, put simply, is one agent representing both the seller and buyer. The agent is responsible for the interests of both parties. In Oregon, the buyer and seller must agree, in writing, to dual agency. Transactions where there is an agent for the buyer and an agent for the seller is called a co-op transaction. The footer at the bottom of this page has a link to the Agency Disclosure Pamphlet.

As a rule, we will not be dual party agents. In our opinion, one person can not successfully represent two competing sides equally. Dual agency is great for the agent- they typically earn the entire commission or take a small discount from the full commission offered if it was a co-op transaction. It also creates a greater financial incentive to “get the deal done.” The financial windfall often leads to softer ethics as evidenced by the fact that the majority of real estate complaints involve a dual agent (source OAR GRI conference in Sunriver 3/06).

The only place I’d take a softer stance on dual agency is with new construction but ultimately, dual agency seems to be a bad idea. In our case, if we find a buyer that is interested in our listing, we will refer it to another agent.

Comments?

It should have been a great moment in the buyer’s life: getting the keys to their their first house. The sellers had done a great job of cleaning and were just finishing up. Some minor casual conversation in the kitchen led the seller’s mother to say to her son, “Did you tell him about the serial killer that used to live here?” Ooo, this is going to be awkward.

What followed was a brief exchange between the two of them with us standing there where the seller said he had no idea what she was talking about while she insisted he did. It just died into uncomfortable silence.

Once the seller had left, the buyer and I talked about it. In Oregon, facts about the house that are not material to the physical condition of the house are considered nondisclosure items. That includes any manner of death that may have occurred in the house- natural or otherwise. In this case it is not thought that the actual murders took place in the house but that the killer lived there. It was confirmed by both my managing broker and the listing agent’s broker that it did not have to be disclosed. I believe the buyer called a real estate attorney to verify as well.

The seller’s mother opened a can of worms that didn’t need to be opened. There is nothing to be done about it. The neighbors were only too happy to confirm the story and the buyers would have found out eventually but it should not have been in that manner with the seller denying the fact. In California, the laws are different and it would have been a disclosure item in all likelihood.

Should it have been a disclosure issue?

Older wood burning stoves pollute more than current models- much more. Sunday’s Oregonian article by Michael Milstein reports a potential law change that could require non-code wood burning stoves to be replaced when a house is sold:

About 94,000 homes in Oregon burn wood for heat, said David Collier of the DEQ. Surveys have found that roughly half of homes in Oregon that burn wood do so in wood stoves. But more than half of wood stoves used in the state are older, noncertified stoves that are major contributors to pollution.

The story continues:

The DEQ also has asked the governor to back legislation that would require replacement of noncertified wood stoves when a home is sold. Some Oregon cities already have or are considering such rules.

The potential outcome is that a buyer that buys today thinking that their stove is not an issue could find the same stove costing them to replace down the line.