4 ms·

>Most homes are not $2mln showpieces that require a special touch, they are a commodity item. But buyers do not treat the much cheaper homes as undifferentiate

by jasode 3y ago

>Most homes are not $2mln showpieces that require a special touch, they are a commodity item. But buyers do not treat the much cheaper homes as undifferentiated commodity items (like paperclips and crude oil) because each house is situationally different. E.g. One house may be listed for $250k and is on a desirable corner lot but also needs a new roof and kitchen remodel. Another house is $280k and already has a new roof and updated kitchen appliances and is also 10 miles closer to the office to cut down commute times but costs +$30k more. The combination of tradeoffs (location, condition of home, price, etc) to be matched to each buyer's priorities is what makes homes -- even the low end homes -- resist becoming commodities like paperclips. In a box of paperclips, you can randomly pick any one and you don't care. Picking a house doesn't work like that. Part of the real estate agent's job is to downplay the negatives and highlight the positives of each house they sell. I don't think that work is worth the 6% commission but regardless, houses are not commodities to the point where most buyers & sellers are comfortable with no intermediaries in the transaction.

ethbr1 3y ago
IMHO, the biggest problem with the US housing transaction market is... home inspectors. No other required party to a transaction has structural expertise, which by far dominates the cost of owning a home. And their liability is typically limited to "what would be obvious without detailed inspection." Which is a pretty low bar for diligence. Afaict, they're all ex-contractors who realized it was easier to fill forms than build (fair!). But which is terrifying when you realize they're the only check against construction-ignorant people (read: the vast majority of home buyers) buying a nightmare property. "What about building codes?" Well, you'd better hope the code inspector was doing his or her job the day your potential house was built. Flip a coin. The mortgage company generally doesn't care, other than the inspection checkbox being checked, because if your home falls down you still owe the loan amount (albeit now unsecured). Things I've had home inspectors flat out miss, that I caught with a tape measure and flashlight: - Undersized joist systems - Misframed houses - Serious termite damage If you want a chuckle, ask a realtor what the appropriate joist size for a given span is. Hell, ask your next home inspector. (Hint: the table for common woods is a 5 minute web search away)
- infecto 3y ago
  Agreed, and unfortunately you as the buyer don't have a good idea of who is a good inspector in your area. People don't buy homes enough. Sure there are google map reviews of inspectors but for such a large purchase thats still less than ideal.
- twic 3y ago
  FWIW this problem is not unique to the US market!
- pierat 3y ago
  "The laundry hamper was in the way of a thing I check and I don't move stuff." "I'm an inspector and I dont warranty my work."
- ensignavenger 3y ago
  Home inspectors are usually optional, and almost always a waste of money... appraisers in my experience are also a waste of money, but banks (and bank regulations) do require those. I have bought and sold several homes, and never used an inpector on either side. (I have seen inspections, and the homes that were inspected, which is how I come to yhe conclusion they are worthless.)
  - sharemywin 3y ago
    the whole point of the inspection is to go back to the seller and get the price lowered when the seller can almost see the check in their hands.
    - m463 3y ago
      And, uh, pass on nightmare homes. It might not happen frequently, but it does happen.
- voisin 3y ago
  The market has been so hot that any offer with a home inspection condition is usually thrown in the trash bin.
infecto 3y ago
I probably did a poor job on my perspective. I see them as commodities in regards to the agent workflows. Sub $500k (picking a number) homes all have relatively the same workflow for agents, almost like buying/selling commodities. The parallel I would make is how Carmax treats cars closer to a commodity then a unique snowflake. They have a fairly good idea of the use price of a vehicle, there is no haggling, the sales person is there to facilitate the deal but is not the sole determining factor. In my worldview homes below a price point are very similar. They are all different, condition, location, features etc, but generally you can get an idea of the potential price based on comps. There is still human touch here to get an idea on listing price but outside of that the workflow is pretty mundane and is just facilitating the process. Maybe in other housing markets its different but all the homes I have bought in the last 10 years, nobody was highlighting positives or downplaying negatives. My (buyers) agent shows me the property, lets me look around and does not really do much else.
_ea1k 3y ago
But not all paperclips are the same and not all crude oil is the same either? We sort of pretend that they are for the purposes of price comparison. And realtors do the same with houses. Have a home on the noisiest street in your neighborhood? NP, all the realtors will use comps that favor their preferred narrative anyway. Why would you get to pay less for that when that other house is available? Comp sheet doesn't say anything about traffic noise. Rightly or wrongly, real estate largely gets treated like a commodity. It is just a commodity where the cost of transactions have been highly optimized in the wrong direction.
- infecto 3y ago
  This is exactly what I was getting at. Unless you are pricing a unique home in the $1+million (not considering NYC, SF and other expensive markets for this price) they really are a commodity for pricing purposes. Those boutique homes on the other hand have a very limited buyers market and there is much more marketing and presentation involved to create a narrative, both with the seller and the buyers agent.
- genericresponse 3y ago
  Paperclips and Crude Oil value, relative to another paperclip or barrel of oil, can be based on well-defined, finite, measurable standards that can be measured indeterminate of their location. That allows pricing to be indexed based on location, time, and quality relative to the standards. A house's value relative to another house is an almost infinite number of variations of measurable and immeasurable variables. One example-- Traffic noise. Maybe the amount of noise is an issue for you, maybe the time of day of noise is an issue for me, maybe noise in one room vs. another. Moreover, there are very expensive switching costs for me
matt-attack 3y ago
But in the end it’s the buyer and only the buyer that sets the sale price. The listing agent can downplay all they want or “offer” whatever made up price they want but it’s all meaningless. The buyer committing to a given number, comes out of their head only, and is the only thing that sets the values in real estate. And agents can think they influence that number but it’s minimal at best.

by jasode 3y ago

ethbr1 3y ago

IMHO, the biggest problem with the US housing transaction market is... home inspectors. No other required party to a transaction has structural expertise, which by far dominates the cost of owning a home. And their liability is typically limited to "what would be obvious without detailed inspection." Which is a pretty low bar for diligence. Afaict, they're all ex-contractors who realized it was easier to fill forms than build (fair!). But which is terrifying when you realize they're the only check against construction-ignorant people (read: the vast majority of home buyers) buying a nightmare property. "What about building codes?" Well, you'd better hope the code inspector was doing his or her job the day your potential house was built. Flip a coin. The mortgage company generally doesn't care, other than the inspection checkbox being checked, because if your home falls down you still owe the loan amount (albeit now unsecured). Things I've had home inspectors flat out miss, that I caught with a tape measure and flashlight: - Undersized joist systems - Misframed houses - Serious termite damage If you want a chuckle, ask a realtor what the appropriate joist size for a given span is. Hell, ask your next home inspector. (Hint: the table for common woods is a 5 minute web search away)

infecto 3y ago
Agreed, and unfortunately you as the buyer don't have a good idea of who is a good inspector in your area. People don't buy homes enough. Sure there are google map reviews of inspectors but for such a large purchase thats still less than ideal.
twic 3y ago
FWIW this problem is not unique to the US market!
pierat 3y ago
"The laundry hamper was in the way of a thing I check and I don't move stuff." "I'm an inspector and I dont warranty my work."
ensignavenger 3y ago
Home inspectors are usually optional, and almost always a waste of money... appraisers in my experience are also a waste of money, but banks (and bank regulations) do require those. I have bought and sold several homes, and never used an inpector on either side. (I have seen inspections, and the homes that were inspected, which is how I come to yhe conclusion they are worthless.)
- sharemywin 3y ago
  the whole point of the inspection is to go back to the seller and get the price lowered when the seller can almost see the check in their hands.
  - m463 3y ago
    And, uh, pass on nightmare homes. It might not happen frequently, but it does happen.
voisin 3y ago
The market has been so hot that any offer with a home inspection condition is usually thrown in the trash bin.

infecto 3y ago

I probably did a poor job on my perspective. I see them as commodities in regards to the agent workflows. Sub $500k (picking a number) homes all have relatively the same workflow for agents, almost like buying/selling commodities. The parallel I would make is how Carmax treats cars closer to a commodity then a unique snowflake. They have a fairly good idea of the use price of a vehicle, there is no haggling, the sales person is there to facilitate the deal but is not the sole determining factor. In my worldview homes below a price point are very similar. They are all different, condition, location, features etc, but generally you can get an idea of the potential price based on comps. There is still human touch here to get an idea on listing price but outside of that the workflow is pretty mundane and is just facilitating the process. Maybe in other housing markets its different but all the homes I have bought in the last 10 years, nobody was highlighting positives or downplaying negatives. My (buyers) agent shows me the property, lets me look around and does not really do much else.

_ea1k 3y ago

But not all paperclips are the same and not all crude oil is the same either? We sort of pretend that they are for the purposes of price comparison. And realtors do the same with houses. Have a home on the noisiest street in your neighborhood? NP, all the realtors will use comps that favor their preferred narrative anyway. Why would you get to pay less for that when that other house is available? Comp sheet doesn't say anything about traffic noise. Rightly or wrongly, real estate largely gets treated like a commodity. It is just a commodity where the cost of transactions have been highly optimized in the wrong direction.

infecto 3y ago
This is exactly what I was getting at. Unless you are pricing a unique home in the $1+million (not considering NYC, SF and other expensive markets for this price) they really are a commodity for pricing purposes. Those boutique homes on the other hand have a very limited buyers market and there is much more marketing and presentation involved to create a narrative, both with the seller and the buyers agent.
genericresponse 3y ago
Paperclips and Crude Oil value, relative to another paperclip or barrel of oil, can be based on well-defined, finite, measurable standards that can be measured indeterminate of their location. That allows pricing to be indexed based on location, time, and quality relative to the standards. A house's value relative to another house is an almost infinite number of variations of measurable and immeasurable variables. One example-- Traffic noise. Maybe the amount of noise is an issue for you, maybe the time of day of noise is an issue for me, maybe noise in one room vs. another. Moreover, there are very expensive switching costs for me

matt-attack 3y ago

But in the end it’s the buyer and only the buyer that sets the sale price. The listing agent can downplay all they want or “offer” whatever made up price they want but it’s all meaningless. The buyer committing to a given number, comes out of their head only, and is the only thing that sets the values in real estate. And agents can think they influence that number but it’s minimal at best.