Death of a Real Estate Agent

Posted by admin | Real Estate | Posted on April 26th, 2007




The Indianapolis real estate agent is a dying breed. It’s been a long death because, even in the current precarious condition of the economy and the confirmed death of the real estate market, the Indianapolis real estate market was still considered strong as recently as January 2008. Unfortunately, the agents were already coming to their demise.

Obviously, the condition of the housing market has affected the Indianapolis real estate directly. These men and women work solely on commission. If they do not sell property, they do not get paid. Many real estate agents have left the industry because of the housing market crash. Many have filed bankruptcy. For many long-timers, this is all they have ever done and will have to train for a new career. Sounds familiar, right? What the public doesn’t really understand is that the real estate agent does not get paid for any work they do unless a house is sold. The agent receives even less of a commission of both the buyer and the seller are not his clients.

The real estate agent’s career has been in jeopardy since long before the crash of the housing market. At one time, the Indianapolis real estate agent was a critical component to the purchase of selling of a home. He not only had property listing tools at his disposal which were only available to real estate agents, he also has exclusive access to all information required to determine the fair market value of the property, and informative knowledge to help a client determine what price bracket they were in when purchasing a home. This has all changed.

In the past, the Indianapolis real estate agent contracted to sell a property would post a listing on the Multiple Listing Service (MLS) internet system, which would include all of the information a purchaser would need to know to determine if they were interested in a property that was for sale. This listing was posted on a private internet system, and only accessible by other licensed real estate agents.

About 15 years ago, the a few real estate agents decided that they could save a few dollars on newspaper advertising for their listed properties by including the MLS# in the ad. They would just list the city where the property is located, the price and the MLS#, and direct the potential buyers to use their company website to look up the MLS listing. Exclusive MLS access used to be the single biggest reason that a real estate agent was required in the buying or selling of property.

Now that the public had access to an agency’s website, they could look up any Indianapolis real estate by location, asking price, number of bedrooms, and dozens of other parameters that the agents formerly used to narrow down potential properties for an interested buyer. Also eliminated, by the same process, was the necessity of the agent to determine the property taxes of any Indianapolis real estate. This information is also listed on the MLS. The potential buyer of any property can now look up all of the features, legal description, property tax info, and seller’s comments on the internet without the aid of an agent. The buyer can also take this information and plug the numbers into any number of websites that will calculate the monthly income needed to support the mortgage payment. Strike three for the agent.

As for handling all of the paperwork associated with the buying and selling of property, a real estate attorney will charge a flat rate which is less than the commission an agent would command. In fact, most Indianapolis real estate agents will agree to act as “transaction coordinator” for a flat rate; a service they have been forced to recede to just to keep their heads above water.

In closing, the death of the Indianapolis real estate agent, has been facilitated by other short-sighted agents, who eliminated the need for their own services by giving out their “secret code”. These “pioneers” of a new way to do business deserve the full brunt of the fury and resentment of the entire industry for destroying the careers of so many. While the current economic climate is being blamed for so much of the housing market crash, the “Craig’s List ” option for home sellers is now becoming the norm because of all of the tools that used to be exclusive to the real estate agent.



No comments

Real Estate Home Mortgage Deduction Soon to Vanish

Posted by admin | Real Estate | Posted on April 24th, 2007




The American Dream is often paired with owning one’s own home.  For decades Legislator’s have protected that dream with allowing home owners to claim the mortgage interest paid on their homes as a tax deduction.  With a possible phase out of this deduction, could the dream fade?

“There are no cows more sacred in the tax code than the deductions for mortgage interest and property taxes. Together, they add up to at least the $ 75 billion annual subsidy for housing and Homeowners. ” The New York Times.

In 2002, 37.2 million taxpayers claimed the deduction, writing off $336.6 billion, or about $9,000 per taxpayer. Representing about 37% or so of itemized deductions, it was slightly more than itemized deductions for deductible state and local taxes, and twice as much in deductions as charitable donations.  Clearly, the mortgage deduction is important and worth a huge amount of money.

In 2005 it was estimated that:

* The mortgage interest deduction will cost the Treasury $72.6 billion, according to congressional estimates.

* The $250,000 and $500,000 tax-free exclusions of home sale profits for single sellers and joint filers, respectively, will cost $23 billion .

* Property tax write-offs cost $20 billion, and tax subsidies for local and state housing bond programs account for $1 billion.

When a congressional committee examined the distribution of homeowner benefits for 2004, it found that people earning $200,000 and more a year – just one-half of 1% of all homeowners filing for deductions – pocketed 22% of the $70.2 billion in write-offs in 2004.

In 2007, Rep. John D. Dingell (D-Mich.) unveiled a draft of his “carbon tax” legislative reform package. Part of this draft legislation was a phase out the mortgage interest deduction on large homes. The phase-out schedule for the mortgage interest write-off, beginning with houses of 3,000 square feet, which would lose 15 percent of their deductions, and ending with houses of 4,200 square feet and larger, which would receive no deductions at all.

Dingel said: “In order to address the issues of climate change, we must address the issue of consumption-we do that by making consumption more expensive.”

Naturally, with the real estate market bust, the Dingell package was shelved. Once the housing market recovers, lets’ say two years from now, it’s a very good bet the administration will be looking hard at ways to increase taxes to pay down the huge bailouts. The unusual financial troubles and the move to green, will be the perfect time to push through such legislation.  Unlike the Dingel proposal ,which was aimed at larger homes, the future legislation will most probably cover all mortgage interest deductions. To increase its’ chance at passage, it is a good bet it will be a phased in plan with deductions decreasing over a number of years.

To get the reversal of the sacred deduction started, President Obama’s impending budget proposes a cap on the mortgage interest rate deduction.  Couples earning $208,850 or more would loose the deduction. Where currently households at the 33% and 35% tax rates are allowed the deduction, Obama would reduce their deduction to only 28% of the value of those payments.  This is likely a first step to what seems to be a total elimination of mortgage tax deduction.  If (when) this passes, Obama will find it easier to lower the earning cap for the mortgage tax deduction, leading up to an even lesser amount in the future.  It seems on the horizon that the mortgage interest rate will be only for low income earners.



No comments

Recent Posts

Categories

Archives