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Are Existing Home Prices Overrepresented By Up To 40%?
A reader writes in with some troubling observations on what could potentially be a pretty substantial scheme to artificially "boost" existing home prices by up to 40%, putting all the NAR data, and all other relevant public housing data materially into question. Since trick is painfully simplistic, and all too easy to spot, we wish to open it up to our readers for verification, as this could be a huge hit to the credibility of all existing home price metrics, and put into question all transitory upticks in home prices, such as the backward looking Case-Shiller index indicated yesterday.
From the email:
Realtors are not reporting the true sold prices on homes. Here are 2 examples. If a home is listed on the MLS and then sells at a auction like Hudson & Marshal or RealtyBid, you can see the sold price online or if you attend the live auctions, see the house sell at open outcry auction. The next day the houses are reported sold on the MLS but always at full price.
The example below sold for $115,000 at Realtybid but is listed as sold for $159,500 on the MLS.
Also, homes are listed on the MLS and sold on the HUD site. You can see the sold area on HUD and the Bid Stats. The house listed below sold on the Hud site for $90,061 but again was listed as sold for full price on the MLS $113,400.
These are only 2 examples, I have seen over 100 and assume it is occurring everywhere. I understand that foreclosures are not included in the sales stats from the Realtor Assoc. but the stats they use are taken from the sold prices listed on the MLS. They are all false.
Simply said, this means that any pricing data coming off Multiple Listing Services is fatally flawed, and if this observation is verified, could potentially be a simplistic means to misrepresent the true home price by up to 40% higher.
As for the examples, here is property 1 as represented by the MLS: note the price of $159,500
And below is the actual final auction price on the exact same property taken from RealtyBid:
The MLS certainly pulled all the correct information on the property... all except for the price.
Another example: 5572 Goodhue Ave, Rockford IL 61109. The house was sold in auction for a purchase price of $90,061 as the below screenshot from the HUD auction indicates:
Yet the very same property was listed on foreclosure.com, and subsequently pulled by Zillow, as having a value of $113,400
These are merely two examples.
We have a simple question: which price is the NAR, Case-Shiler, and every other resi real estate index service pulling: the higher or the lower. For the ongoing credibility of the suddenly green shoot free recoveryless recovery, we at least hope it is the correct one. Which is why we ask readers to advise us of any comparable bifurcations between paid and listed price on properties they may be aware of.
Suddenly David Rosenberg's claim that no properties over $750,000 sold in the past month doesn't seem all that outlandish...
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Not to be critical of your suggestion, as I may not understand it, but, most counties now have their property records, which show a selling price for each transaction, online.
There may be a way to distort the recorded selling price but I have assumed that the sales price shown is accurate.
I am sure that the records aren't never exactly current but they seem to be updated reasonably soon.
this really needs to be exposed to the maximum amount !
When i told an estate agent about this story today he said " the transaction price "
in rare cases in a down market can sometimes be less than the " market value ".
I said to him......" fucking crap " ..........and i sincerely hope the general public dont get sucked in by this kind of misrepresentation !!
just anecdotally, i have access to our local mls site and generally there's a listing price and once sold there's a selling price and in 98% of cases the selling price is lower. may be something that is at the discretion of the selling agent but i haven't noticed any funny business.
there are lots of holes in the MLS system according to my realtor - MLS is patching the holes but realtors exploit any they can find
one of the cute MLS games (supposedly this hole has been plugged) is to bury a listing by 'accidently' entering the wrong zip code - presto-magico, the MLS listing no longer shows up in searches for the zip code of interest - this can be used to hide a low closing price or to hide a prior listing when the realtor wants to re-list a property
how can you tell when a realtor is lying? class? anyone?
If they are breathing, they are lying.
Do I get extra credit?
So the question is...does reported MLS sales prices influence data on comparables given to potential buyers/sellers as well as appraisers? Could be a reasonable fraud or manipulation case. Personally I've seen enough out of the RE sector so I say go after anyone doing this to the maximum allowed as well as their firm/licensing. That ought to clean it up.
http://money.cnn.com/real_estate/storysupplement/overvalued_cities/
Four years after home prices hit their peaks, CNNMoney looks at how 330 metro areas have fared.I was about to buy a condo/hotel unit in Florida in December 2007. The seller owned serveral units in the building. The agent stated the following "perks" due to a "buyer's market":
1. $40k cash back
2. All closing costs and 1-yr of management costs paid for.
So I would have had an ~40% "rebate", so that the owner wouldn't be hindered from selling the other units for more...
Luckily I was saved by the bank who had suddenly closed the door to giving mortgages to foreign national! Live and learn...
by the way,
at least in the foreclosure arena,
there are quite a few people fighting back these days ....
http://www.msfraud.org/LAW/Lounge/Standing.html
here's another angle - apartment rentals. the amount reported to what ever agency are significantly higher than the actual amounts they are able to get. i just signed for another year and the amount is approx 25% lower than what is being reported as the "fair market price".
i was completely blown out of the water in 2001 (dot com branding/advertising) and survived on hocking assets until about 2004. i've been a renter since (happily so). bidding my time until i can purchase at depression prices is now getting very, very old. it's why i have great trepidation that the charade in the broad economy can go a lot longer than any of us can stand.
Regarding this article, I noticed in the example given that the price on the MLS is listed as LPR. Does this mean List Price? If so, it is true that the houses were listed for those prices. The problem would be if they are using the list prices as comps for other potential sales. In MD, the sold prices don't show up in the public records for a few months after the sale. The Realtor may be able to enter the sold price into the MLS sooner (like when the sale closes) so that they have accurate comps for sales occurring between the closing and recording in the public records. This might just be a case where the sales price has not yet been updated, hence the listing price is still being shown.
In other words, I know there is a lot of fraud in the housing market, but this just doesn't have me riled up. Everyone should know that the list price is not necessarily the sales price. If you have evidence that the list prices are being used as comps for other sales, then I'd be angry.
Here is a possible explanation from a poster over at the SeattleBubble website:
That’s actually a very questionable report, most likely written by someone who simply doesn’t understand what they’re reporting.
I don’t like to comment on sales data that I don’t understand, but it’s very hard to see how that one example is a listing showing a sold price of $159,000. First, there’s the status of “SP.” I guess you could assume that “S” means sold, but what would “P” possibly represent? Second, there the field where the price is indicated, which is “LPR.” That I would probably guess is List Price Reported. The NWMLS has a similar field, without a field for the sold price, where a listing isn’t sold.
Seemingly this is just a listing that didn’t sell, and later sold at auction. In such a case there is no reason for the agent to update the listing, or even know what the sales price was. The point is, on the NWMLS in such a situation where the property didn’t sell, and was auctioned, the LP would still be shown and the SP doesn’t even appear as a field in many reports.
BTW, you can easily verify the sales price of local listings against the number reported to the county for excise tax. There are some times where people cheat on their excise tax, but that’s pretty rare on listed transactions. There are also some complicated transactions where determining the price can be difficult due to the nature of the buyer (trust entities).
Tyler -
Talked to some folks the other night who are experienced real estate investors, and mentioned this story. Their take on it was that the bank bought the property back at the foreclosure auction at the lower price (notice the date of Jul 20). The bank then turns around and lists the property via the MLS. Note the Aug. 20 date on the MLS listing. They all mentioned that real estate agents can get into trouble and fined for not entering/updating the MLS with the correct sales price. These folks indicated that this was not a wink, wink, nudge, nudge requirement, and they certainly aren't NAR puppets or lovers.
Lord knows that plenty of fishy things have been going on for quite some time, and of late it seems the stench is getting overwhelming (gov't control over the BP spill access and news flow is a prime example). However, let's hope that we're not getting so paranoid that we start seeing ghosts that aren't there, and lay the groundwork for a Peter and the wolf scenario.
Please keep it tight. There is so much real news presented on ZH that needs to be taken seriously by a broader audience. The fewer openings for factual barbs, the better.
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