R5Realty News and Notes

Market Snapshots and Commentary on Value and Quality of life along the former Main Line of the Pennsylvania Rail Road, up until recently called the R5 Line, and now officially known as the Paoli /Thorndale line. R5Realty runs from Center City Philadelphia through the walkable, Westward outlying Towns & Townships.

Monday, April 29, 2013

Who Really Pays Real Estate Commission in Philadelphia Housing Market, Seller or Buyer?

Open to Interpretation: Who Funds Commissions?
Here's a sort of  twisted truth about Philadelphia/Mainline-area homebuying...While common wisdom might indicate it is sellers who pay all Realtor commissions, the reality is ambiguous - and as open to interpretation - as the shape of the dwelling at left. (Photo copyright Liao Yusheng).

In theory, Buyers are almost never charged a dime for Realtors' commissions when using an agent to buy a home.

But in practice,  Buyers almost always are the party who brings the money to fund commissions for both the Sellers real estate agent and the Buyers agent.

Here's the deal:

In almost all transactions where there is a real-estate company sign on the lawn, the Sellers have likely "hired" a Realtor to be their agent and List the home for sale. As part of the Listing Contract with their Listing Agent, the Sellers will most likely agree to pay a commission to the Listing Company when the house sells.

The amount of the commission the Seller pays the Listing Company is completely open to negotiation. By law, there is absolutely No Fixed Rate for real estate commissions. But for a well-tested examples' sake, lets say Seller agrees to pay a 6% commission to the Listing Company/Agent for handling the sale of the house.

So now, when Seller and Listing Agent figure on price,  and the amount of money the seller must take away from the deal, this 6% commission essentially becomes a pass-along cost to the buyer. While the settlement sheet may indicate clearly that all commission comes from Sellers' proceeds,  there would be no proceeds and no commission if it weren’t for Buyers providing the money.

Since so many - if not a vast majority of home transactions in our area have had the sellers' commission cost applied to the final price for decades – a commission upcharge has become a built-in element that accordingly raises home prices across the region. If comparable sales say a home's market value is $350,000, it is likely that nearly every one of those comparable sales included a commission payment.

Before we summarily blame and execute Realtors for raising home costs, please consider that Realtors offer essential market-making services to both buyers and sellers and can be seen as the lubricant,or critical engine-oil, that allows transactions to process efficiently. I believe there is inherent value in what Realtors bring to the marketplace and the burden our efforts does indeed add to home prices.

But where I find things get interesting is anytime a Seller is not committed to a situation like the one described in the above example, where a 6% Listing commission was  negotiated to be due at settlement. If this described  Seller instead went FSBO (For Sale By Owner and 0% commission), or else partial FSBO, agreeing only to compensate a buyer’s agent 3%, then this Sellers'  total commissions due might be 0% or only 3% . On this FSBO home that hypothetically sold for its market value of $400,000, that’s $24,000 in proceeds to seller, for which  buyer can, could or should request get a chunk! Of course, from Sellers’ perspective, Seller has invested energy and risk in bypassing a full-service Listing arrangement and can lay claim to the proceeds.

Just as there are no established rules or guidelines regarding commission percentages between home-sellers and Realtors, there are no presets regarding how proceeds may be shared when savings on commission occur. Whether or not a seller should pocket all commission savings, is a worthy point of negotiation I would urge buyers to pursue (and sellers to defend against! :).

For Legal, Anti-Trust Reasons, R5Realty.com cannot stress strongly enough that there are absolutely no fixed standard rates/practices regarding fees and commissions for Real Estate brokergage services in Pennsylvania. Everything is, legally, 100% open to negotiation and figures cited above are for illustrative and example purposes only. With that said, like any business service or relationship, when you pay less there is oftentimes an appropriate discount in quality and results.

April's Lower Merion Homes Sold and a Twilight Tudor Near Cynwyd Elementary School

Elegant Cottswold Tudor Near Cynwyd Schools. Sold for $790,000.
April was a relatively quiet month for settlements in Lower Merion and Narberth, with only 30 homes (under a million dollars) settling and officially changing hands. The home sales below represent deals that were struck, for the most part, in the frosty days of February. We like the warm glow of burning lamps at twilight outside 239 Meetinghouse Lane in Merion Station pictured at left.

Sold ForStreet AddressTownBedsBathsSq  FtListed For
$235,000 9 Chatham RdArdmore311,332$250,000
$425,000 115 W Montgomery Ardmore63.13,160$599,000
$580,000 107 Woodside RdArdmore63.13,076$624,900
$382,000 532 Ott RdBala Cynwyd31.11,411$399,500
$700,000 317 Cynwyd RdBala Cynwyd43.22,996$729,000
$156,000 30 Chestnut AveBalaCynwyd311,144$165,000
$350,000 117 Upland TerBalaCynwyd51.11,957$339,900
$425,000 411 W Levering MillBalaCynwyd52.12,444$449,900
$465,000 730 Lindy LnBalaCynwyd353,777$499,999
$485,000 361 Trevor LnBalaCynwyd42.11767$494,900
$910,000 621 Oxford RdBalaCynwyd53.23,818$859,000
$446,000 121 Kennedy LnBryn Mawr321,832$479,000
$535,000 66 Rosemont AveBryn Mawr32.12,492$559,000
$379,000 1815 Blackberry LnGladwyne42.12,100$399,000
$650,000 1101 Rose Glen RdGladwyne43.12,059$650,000
$715,000 415 Dove Lake RdGladwyne43.13,300$743,000
$225,000 104 Woodside Rd B106Haverford32.11,468$239,900
$460,000 205 Avon RdHaverford43.15,708$499,000
$657,469 520 Old Lancaster RdHaverford33.12465$614,990
$710,000 432 N Rose LnHaverford444,124$750,000
$292,000 115 Kenilworth RdMerion Station311,248$300,000
$790,000 238 Meeting House LnMerion Station63.13,770$839,900
$501,000 9 Narwyn LnNarberth42.12,776$499,000
$422,000 1840 W MontgomeryVillanova32.22,200$419,900
$649,000 546 Oriole LnVillanova43.13,500$649,000
$755,000 508 Candace LnVillanova42.13,162$785,000
$285,000 1362 Arbordale RdWynnewood63.12,437$299,900
$515,000 1304 Andover RdWynnewood43.12,783$535,000
$750,000 514 Lancaster Ave 4Wynnewood32.12,600$800,000
$855,000 1400 Hillside RdWynnewood53.23,555$879,000

Proof in the Pudding: National Housing Market Surge Rolls into Lower Merion and Philly Burbs

New in Wynnewood: Bids to be reviewed in less than 100 hours!
 All real estate is, Duh, local. So while national headlines decried depression and utter calamity in Arizona, Nevada, Florida and other far-flung markets over the past several years, those headlines never accuately reflected the less dramatic swoon in values that affected the Philadelphia-area market.

But right now, the univeral memes trumpeting a surge in home prices and buyer activity on Main Street, Anytown, USA. are just as applicable to the Philadelphia/Mainline housing markets.
What's playing in Peoria is also now playing our part of Southeastern Pennsylvania, namely:

*There are lots of buyers out this spring.
*There are a lack of quality homes for sale
*Good homes at above market prices are selling at, or above list price, in 24-48 hours.

To boot. the following language just showed up in a brand new Wynnewood listing posted to the Realtors multiple listings service:   Offers to be presented on Wed. evening 5/1/13.
This note was posted on Thursday April 25, with the first showings not permitted until Sunday April 28. The Sellers' agent is already anticipating there may be multiple offers and setting up a cattle corrall to organize incoming offers and to prevent Realtors from beating down the door to the brokerage to get their clients' offer reviewed first.

Is this home completely amazingly oufitted and one of a kind?
Is the price outrageously low?
Is the agent full of hubris to already discuss when offers will be presented, when there have yet to be showings?

The answers:
No. The house is not amazing and one of a kind. (But it is Very Nice)!
No, the price is in no way irresistible. (But it is in the ballpark)!
No, the agent is not being unrealistic in expecting multiple offers and intense competition.

The agent is being prudent and is sensitive to the fact that very good houses in Lower Merion, especially in the Shortridge section of Wynnewood are being very competitively sought after. This language and notion of predicting offers in advance is not something our housing market has seen in years. But while buyers and demand are coming back, prices are still below what many folks may have paid during the boom days of 2005-2007, so many homeowners are still skittish to sell. As a consequence of limited supply and pent- up demand, sellers who are taking the plunge are seeing a significant uptick in price paid, as well as a delightful downturn in days spent on the market. And statements, like the one above -which predict multiple offers before the home has really even hit the market - are pretty much the proof in the pudding that national buzz of a rising market is also true in our neck of the woods.

April's Haverford and Radnor Township Homes Sold and the Auction Foreclosure Home on Manoa Road.

Manoa Road Home with Office Space Sold at Auction for $141,750.
Havertown dutch colonial, with office space on first floor, sold for $375,000 in Feb. 2007. The market was ablaze and rising, so eyebrows probably didn't rise  much when just six months later, in August, the new owners loans exceed what they had paid for the house in February.  Just six months after purchase, could you really borrow more against a home than you had just paid?. Absolutely. This was not uncommon in 2007 and hindsight is 20/20. Home was auctioned this April for $141,750.

Sold ForStreet AddressTownBedsBathsSq.  Ft.Listed For
$190,500 2428 E County LineArdmore311,436$209,900
$224,000 611 Woodcrest AveArdmore311,432$227,900
$264,900 2315 Belmont AveArdmore31.11,462$264,900
$265,500 613 Malvern RdArdmore311,432$265,500
$425,000 16 Cedarbrook RdArdmore32.12,080$425,000
$679,000 647 Overhill RdArdmore43.12,816$725,000
$137,000 210 Landover RdBryn Mawr41.11,510$149,900
$155,000 710 Preston AveBryn Mawr31.11,700$179,900
$234,900 846 Penn StBryn Mawr51.11,613$234,900
$290,000 223 Fitzwilliams RdBryn Mawr31.11,368$285,000
$325,000 314 Bailey RdBryn Mawr31.11,460$325,000
$332,500 122 Fairfax RdBryn Mawr31.11,360$349,000
$351,500 221 Lee CirBryn Mawr31.11,636$359,000
$356,000 822 Martin AveBryn Mawr421,953$355,000
$475,000 453 Wyldhaven RdBryn Mawr42.12,594$500,000
$637,000 346 Strathmore DrBryn Mawr53.13,560$649,900
$730,000 111 Arbor PlBryn Mawr42.12,860$760,000
$141,750 500 E Manoa RdHaverford73.12371$229,900
$215,000 1327 Warren AveHaverford21988$219,900
$279,000 347 Crescent Hill DrHaverford321,584$279,000
$920,000 14 Scarlet Oak DrHaverford44.16110$949,500
$195,000 212 Washington AveHavertown311,664$199,900
$209,000 456 Olympic AveHavertown31.11,392$229,900
$209,000 1435 Fairview AveHavertown21.11,405$219,900
$215,000 1437 Sunnyhill LnHavertown31.11,528$240,000
$230,000 316 Francis DrHavertown31.11,750$239,900
$234,900 147 Campbell AveHavertown41.11,194$234,900
$255,000 101 James DrHavertown42.11,726$259,900
$255,000 35 Nancy DrHavertown42.11,964$244,900
$260,000 1728 Tyson RdHavertown31.21,478$269,900
$261,000 349 Glen Gary DrHavertown53.12,252$274,900
$274,000 98 Rodmor RdHavertown331,440$279,900
$278,000 209 Friendship RdHavertown31.11,672$284,500
$285,000 110 Columbus AveHavertown32.11,518$285,000
$310,000 401 Washington AveHavertown42.11,900$324,900
$314,000 111 Strathmore RdHavertown42.11,892$319,500
$315,000 1812 Manor RdHavertown32.11,714$319,900
$320,000 1246 Center RdHavertown42.12,376$329,000
$330,000 1100 Darby RdHavertown52.12,282$339,000
$330,000 125 E Hathaway LnHavertown321,768$329,000
$335,000 324 Golf Hills RdHavertown42.12,380$350,000
$343,000 615 Merion AveHavertown41.21,952$349,900
$350,000 603 Hirst AveHavertown31.11,801$350,000
$374,900 29 Campbell AveHavertown42.12,600$374,900
$389,000 254 Kathmere RdHavertown62.13,350$389,000
$430,000 2424 Wynnefield DrHavertown42.12,318$429,500
$625,000 32 E Park RdHavertown53.13,400$625,000
$205,000 41 Lowrys LnRosemont31.11,231$200,000
$332,500 102 Barcladen RdRosemont311,166$350,000
$409,125 119 Hickory LnRosemont32.11,410$435,000
$795,000 427 Iven AveWayne53.13,300$795,000
$351,500 831 Powder Mill LnWynnewood42.11,939$350,000
$419,900 1002 Severn LnWynnewood53.12,705$419,900