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Expect to find a wealth of information, from market updates and investment tips to neighborhood spotlights and design inspirations. Our team at Pro Star Realty is dedicated to empowering you with the knowledge you need to make informed decisions in the dynamic world of real estate.

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Thank you for choosing Pro Star Realty as your trusted partner in real estate. Your journey begins here, and we're excited to be a part of it. Here's to unlocking doors, realizing dreams, and making Phoenix your extraordinary home.

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Feb. 20, 2024

The rise of Zuul(ia)

As Promised to my Youtube viewers. 

The rise of Zuul(ia)

July 29th 2014, a date that will live in infamy. Market leader Zillow announced the purchase of second place Trulia for a crap ton of money.

About 5 seconds later the real estate industry messed its pants. Hysterical shrieks rang out across the interwebs and the weeping and wailing of the damned rung up unto the heavens.

And about 5 seconds after that, the voices of calm and reason replied that all was well, and to settle down.

By the next day people were sending pictures of cats again.

 

So what does it all mean?

Zillow and Trulia (here after named Zuulia) calls themselves advertising companies, but they also sell information to Realtors. Zuulia lists properties on its website and encourages home buyers and sellers to use that information to assist in their real estate transaction. The information to the consumer is free, because it gets eyeballs on screens. It is effectively free to the Realtor to make sure their listing is placed on Zuulia, and that greatly helps the Realtor sell the home.

SO how does Zuulia make money? (They really don’t, take a look at their P&L’s). A large share of their revenue is from charging Realtors for information.  In particular the names and contact information of the consumers that are accessing the listing information for free. (tanstaafl)

I can pay Zuulia a set fee and receive 10% of all new registered consumers in my zip code. The last time they pitched me it was an introductory price of $50. (I’ve seen other agents say they pay $500) So for $600 a year I get a list of people who have expressed some sort of interest in buying or selling a house. Now a quick Google Trends search of “85014” and “House for Sale” show that 96 people in June used that particular combo of search words. If for arguments sake we say that every person who ran that search wound up on Zuulia and registered that means for $50 I’d get 9-10 leads a month. Zuulia’s own numbers tell us that 2/3’s of those registered users are not represented by agents yet, so we can say that 6 of them are “good” leads.

These are not the Glengarry Glen Ross leads though. These are people who are just registering. And there are various reasons why they could be registering.

So we can see that Zuulia could make $6000 annually a zip code. There’s about 192 zip codes in Maricopa County so we’re looking at over a million dollars in sales.

That’s if they just sell the information.

But what they also do is they offer to sell me ad space on their website. So a small fee I can be a “Premier agent” and get my name and photo on the page when you are looking at a property. Hopefully if you want to learn more about this property, you contact me for the information.

Additional revenues to the company comes from ad space like any other website, which is why you can find a Cabela’s ad embedded on the page.

It’s a pretty good business model and seems to be performing well enough that investors are willing to buy and hold on to their stock.

What does the merger do?

Fundamentally nothing to begin with. They now control about 70% of the online market, with the reduction of competition they are now able to raise their prices. Which is a given. I would like to make the case that companies start merging and buying other companies when they discover they can’t grow their profits through normal expansion of services. But that conversation is outside of the scope of this article.

For you the consumer this means very little at this point. If you’re selling your house, it will appear on Zuulia within days of it being listed on MLS. And you don’t care how they buyer finds your property and long as it’s found. As for buyers, you’ll still have a site to search.

For agents, we can expect to see the prices for advertising on Zuulia go up soon.

But what does it mean for the future?

Well this is my “doomsday scenario” Put your tinfoil hats on guys it’s going to be a bumpy ride!

 

Sometime this week I saw a quote from the founder of Zillow, where he stated something to the effect of “We don’t want to replace Realtors, but I think they make too much money” If I can find that quote I’ll update this posting with it.

I think what will happen in the next 3-5 years is that after the merger is finalized and all the kinks are worked out you will see Zuulia partner with a national brokerage. Possibly Realogy Franchise Group with its brands (Coldwell Banker, Century 21, Sotheby’s, BHG, and ERA).

Zuulia will then offer sellers the chance to list their properties on the site for a flat fee. Say $5000. The transaction and listing will then be handled by the local partnered brokerage (LPB). Any buyers that found the listing on Zuulia will be sent to the LPB that will handle the showing and closing of the property. If the buyers do not choose to purchase that house, then the LPB now has a buyer to work with.

This business model already exists with HUD, Fannie Mae, Freddie Mac and banks that sell foreclosed properties.

The next step is the truly revolutionary part. They Don’t list the property on the Local MLS, and they don’t offer a co-broke to buyer’s agents. (translation: They don’t pay anything to other agents.)

This model also exists, it’s what New Home builders do to an extent.

The reason why Builders, Banks and Government agencies bother to list their properties for sale is that the local MLS is the only game in town. If you want to sell your house and it’s not on the MLS you might was well be offering it on Craigslist. And Zuulia gets it’s listings from the MLS.

But with this market share, and the majority of home buyers going online first before they even talk to an agent, Zuulia doesn’t really need to list the property on MLS, and therefore they don’t need to pay the buyer’s agent.

Little side note here. Buyers do not pay their agent. The seller’s agent pays the buyer’s agent out of the commission the seller’s agent earns facilitating the transaction. This is a contractual agreement the seller’s agent agrees to when they list the property on the MLS.

If you go into a New Home Builders office without your agent, the builder will not pay that agent anything. They are not obligated to. Even if you leave and come back with your agent, they are still not going to pay that agent. They will be happy to let you use that agent to negotiate the sale, because that spreads some of their potential liability onto your agent, but they aren’t going to pay them dime one.

So if we take the existing New Builder Model and apply it to the Zuulia LPB situation, we see where this is going. Instead of $6000 a zip code, we see a potential for much more. In the last year (7/31/2013 to 7/31/2014) there were 444 sales in the 85014 zip code. At $5000 a transaction you can see they don’t need much of the market share to make more money.

In return sellers get to feel like they are saving money. ($12000 is the average commission in 85014).

Now the buyers SHOULD see reduced sales prices since the seller no longer needs to price in the commissions into their sales price, but in Realty you’ll just see the seller trying to pocket the difference. Eventually this might even out, but there’ be problems with that…

If we take a look at houses that are “For Sale By Owner” (FSBO), you do not see those properties offered for 6% less than the market value. There is a reason we say FSBO = “For Sellers Benefit Only” so a good rule if you ever make an offer on a FSBO is to knock 6% off the top of your offer. Why not do this on a Zuulia listing? If I know you are listing your place for full price, and just paying $5000 to list it, I’m going to see how much of that extra $7000 I can get out of you. Now where is the seller getting their price? From Zuulia of course! And Zuulia is using normal (Realtor/MLS) sales to get pricing. It would be interesting to see how that plays out.

In a New Builder Model a buyer walks in unrepresented and they don’t know that if they brought their agent the Builder would pay that agent a commission. But they’ll still buy for full price. You won’t see a “3% off for using our agent” sign because of laws against that. They also won’t tell you all the extras and upgrades you can get by asking, and they won’t volunteer the knowledge that they can drop the sales price. Those perks only come out if they think they’re going to lose the sale. It’s just like buying a car, you’d haggle on the car, why not your home?

Will the Zuulia agent let you know these things? Can they if they also have an agency agreement with the seller?

Here is the most controversial thing I’ll say in this entire post. Reduced commissions will result in reduced service and less agents out there to choose from.  

A real estate agent on average makes $39000 a year. And 80% of real estate agents make less then $40,000 a year.

How can this be?

Well there are a lot of “part-timers” and “Hobby Agents”, these people might only close one or two deals a year. They tend to have their license just for those clients that are generated by their networking circle. These numbers drag the average down.

Right now an individual agent can handle 2-3 buyers at a time, there are “Rock Star” agents that try and handle more, but there is only so many hours in the day, and so much agent to go around. Buyers only have certain times they can view properties, and those times tend to overlap. So if I’m showing the Johnsons on Saturday, the Smiths are going to have to wait till Sunday.

So if I’m an “average” agent making $39000 in 85014, I need to close somewhere around 8-9 deals a year. $6000 (half the $12000 commission) less 20%-30% brokers fees.

To close 9 deals I need to work with about 10-12 buyers, because deals will fall out. Clients will suddenly decide they don’t want to buy, or the lender tells them they can’t buy. They’ll close with another agent because they’ve been seeing someone else behind your back etc…

Can you see where this is going?

If we start seeing the LPB model an agent needs to close much more then 8-9 deals, how do they do that if they only have time for 2-3 at a time? Simple, spend less time per client. Outsource as much of the work to the buyer as possible, and the agent becomes a Facilitator instead of a Counselor.

You already partially see this at work with Real Estate Teams. Several agents working under the lead of a Team leader. The leader has the experience and leads, and the members do all the running around and showing pretty kitchens.

 

(and this is the kitchen…)

If you are working with a member and not the lead you basically are working with a Facilitator.

And in an LPB model your Facilitator is also working for the other side.

AS this business mode takes over it will have the same effect as Amazon did to the small mom and pop book store. Sellers will gravitate to Zuulia, and the buyers will follow. Your nice friendly local doctor who made house calls will be replaced with an HMO.

I could keep going but I’ve just broke the 2000 word mark and this has taken longer then I originally thought. The scenario I presented here may not come to pass, and might not work in all states due to local laws. But it’s my theory, and all my theories are correct until proven otherwise.

I will also mention as an aside that when I presented this theory on a Real Estate Agent Forum I had a Social Media person from Zillow jumping all over me within minutes saying that Zuulia didn’t want to become a broker. When I clearly pointed out to him that I never said anything about Zuulia being a broker he kept on message like a politician in a sex scandal. After a while I realized he wasn’t talking to me, he was performing for the audience. Take from that what you will.

 

Posted in Ray Dawson
Feb. 13, 2024

What to do when you are Moving to a New City

A friend of mine has relocated to Las Vegas and was looking for advice. He wanted to know what he should be looking for to find a location to live in. I have a few ideas about what you need to do when you're resettling.

1) Rent at first, don’t buy.

          Hopefully you’re going to know where you’ll be working. But you won’t know the neighborhoods, the commutes, and the things you are going to wind up wanting to do. Finding a one year rental gives you time to get settled, and also give you time to start looking for the right house to buy, not just the right now house.

2) Ask the locals.

           Every town has “That neighborhood”. Although you will get different opinions, you can pretty much tell where the locals wouldn’t live. I find everything to be relative though. Some areas can be depressed because it was not a nice neighborhood years ago, but with new people moving in and gentrification it might be the new happening neighborhood.

3) Talk to the Cops

           Most police departments have “Lunch/Coffee with a Cop” outreach programs, they know EVERYTHING….


4) Online searches.

 

There are a bunch of great websites that will give you the rough stats on an area. There are some sites that also specialize in crime reports. For Crime reports I like to use.
http://communitycrimemap.com/
Also check out the sex offender website most places have now a days.

5) Drive around.

 

Get out, start looking around. Don’t settle into a routine where you aren’t exploring new things. Find what you want BEFORE you buy.

 

 

 

 

Many years ago Aunt Beth and her husband moved to Phoenix. He went ahead and bought a house while she finished up things in Wisconsin and followed later.

She showed up to her new house and hated it. She hated the layout, she hated the location, she hated it.


They lived there for many years. He passed away, and she lived in that house she hated.


Then one day, she decided to move from the house she hated, and that
’s where I came into the scene.

I asked her one question: “Where did you *want* to live?”


And she had an answer, within weeks of moving down here she had found a group of condos built around some man-made lakes. There were trees, there were walking paths, and that
’s where she dreamed of living all those years.

So we searched those condos, and eventually one came up that had been recently remodeled, walking distance from the lake, and just the size she wanted.

There was a bit of drama. We had to time the sale of her house with the purchase of the condo. Her bank fell out, after assuring us that they didn’t have a problem with the condo. A new lender had to be found. But in the end, she got the place.

 


Now she lives in the neighborhood she always loved and takes her old rescue greyhound Jake for walks around the lake. (Jake even found himself a girlfriend!)

Ray Dawson
Residential Sales Manager

 

Posted in Market Updates
Feb. 12, 2024

Importance of Homeowners Insurance

If you own a home, you probably know that homeowner’s insurance is a must-have. But do you know what it actually covers and why it is important? In this blog post, we will explain the basics of homeowners insurance and why its a smart investment for your future. 

Homeowners insurance can save you from a lot of financial stress and hardship if something bad happens to your home or your belongings. Imagine having to pay out of pocket for repairing or rebuilding your home after a fire, or replacing all your furniture and clothes after a burglary. That could wipe out your savings or put you in debt for years.

There are two main reasons why you need homeowners insurance:

- To protect yourself. As a homeowner, you are responsible for the safety and maintenance of your home. Homeowners insurance can protects you from legal trouble if someone sues you for causing an injury or property damage. For example, if your dog bites a neighbor, or if a tree falls on your neighbor's car, your homeowners insurance can help pay for their medical bills or car repairs, as well as any legal fees or settlements.

- To protect your lender. If you have a mortgage on your home, your lender will require you to have homeowners insurance. This is because they have a financial interest in your property and want to make sure it is not damaged or destroyed. If you fail to maintain adequate coverage, your lender may force-place insurance on your home, which can be more expensive and less comprehensive than what you would choose yourself.

Homeowners insurance typically consists of six types of coverage:

- Dwelling coverage: This covers the structure of your home and any attached structures, such as a garage or a deck. It pays for the cost to repair or rebuild your home if it is damaged by a covered peril, such as fire, wind, or hail.

- Other structures coverage: This covers any detached structures on your property, such as a fence, a shed, or a gazebo. It pays for the cost to repair or replace them if they are damaged by a covered peril.

- Personal property coverage: This covers your personal belongings inside and outside your home, such as furniture, clothing, electronics, or jewelry. It pays for the cost to repair or replace them if they are stolen or damaged by a covered peril.

- Loss of use coverage: This covers your additional living expenses if you have to temporarily move out of your home while it is being repaired or rebuilt after a covered loss. It pays for things like hotel bills, restaurant meals, or rental car fees.

- Personal liability coverage: This covers your legal responsibility if you or a member of your household accidentally injures someone or damages their property. It pays for the medical bills or property damage of the other party, as well as your legal fees if you are sued.

- Medical payments coverage: This covers the medical expenses of someone who gets hurt on your property, regardless of who is at fault. It pays for things like ambulance fees, hospital bills, or surgery costs.

Homeowners insurance is not one-size-fits-all. You need to choose a policy that suits your needs and budget, and that covers the risks that are most relevant to your location and lifestyle. You also need to review your policy regularly and update it as needed, especially if you make any changes to your home or acquire new valuables.

Homeowners insurance gives you peace of mind knowing that you are prepared for the unexpected and that you have a safety net in case of a disaster. It can also save you money in the long run by helping you avoid paying for costly repairs or lawsuits out of pocket.

 

Posted in Home Buying
Feb. 6, 2024

How is your credit score generated?

 

If you've ever applied for a loan, a credit card, or a mortgage, you probably know that your credit score is one of the most important factors that lenders consider. But do you know how your credit score is actually calculated? In this blog post, we'll explain the basics of how credit bureaus generate your credit score and what you can do to improve it.

 

Your credit score is a three-digit number that summarizes your credit history and reflects your ability to repay debt. The most common type of credit score is the FICO score, which ranges from 300 to 850. The higher your score, the better your chances of getting approved for credit and getting lower interest rates.

 

Your FICO score is based on five main categories of information from your credit reports, which are records of your borrowing and payment activity. These categories are:

 

- Payment history (35%): This is the most important factor in your credit score. It shows whether you pay your bills on time and how often you miss or are late with payments. Paying on time and avoiding delinquencies can boost your score, while late or missed payments can lower it.

- Amounts owed (30%): This factor measures how much of your available credit you are using, also known as your credit utilization ratio. It compares the total amount of debt you have to the total amount of credit you have access to. For example, if you have a credit card with a $10,000 limit and a $2,000 balance, your credit utilization ratio is 20%. Generally, the lower your ratio, the better for your score. A high ratio can indicate that you are overextended and may have trouble paying back your debt.

- Length of credit history (15%): This factor considers how long you have been using credit and how old your accounts are. It takes into account the average age of all your accounts, as well as the age of your oldest and newest accounts. A longer credit history can help your score, as it shows that you have more experience with managing credit. However, you can still have a good score with a short credit history if you demonstrate responsible credit behavior in other areas.

- Credit mix (10%): This factor looks at the variety of credit types that you have, such as credit cards, loans, mortgages, etc. Having a diverse mix of credit can benefit your score, as it shows that you can handle different kinds of debt. However, this is not a major factor and you should not open new accounts just to improve your mix.

- New credit (10%): This factor considers how many new accounts you have opened or applied for in a recent period of time. Opening or applying for too many new accounts in a short span can lower your score, as it may indicate that you are in financial trouble or taking on more debt than you can handle. However, this effect is temporary and your score will recover over time if you make timely payments and keep your balances low.

 

As you can see, your credit score is generated by a complex algorithm that takes into account many aspects of your credit behavior. The good news is that you have some control over your score and you can improve it by following some simple tips:

 

- Pay all your bills on time and in full every month. This will help you build a positive payment history and avoid late fees and interest charges.

- Keep your credit utilization ratio low by paying off your balances or reducing your spending. Aim to use no more than 30% of your available credit at any given time.

- Maintain a long and stable credit history by keeping your old accounts open and active. Don't close accounts that you don't use unless they have annual fees or other costs.

- Apply for new credit only when you need it and space out your applications over time. Avoid applying for multiple accounts in a short period or shopping around for the best rate too frequently.

- Check your credit reports regularly and dispute any errors or inaccuracies that you find. You can get one free copy of your report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) every year at www.annualcreditreport.com.

 

By following these steps, you can improve your credit score and enjoy the benefits of having good credit. Remember that building or repairing your credit takes time and patience, but it's worth it in the long run.

Posted in Ray Dawson
Feb. 2, 2024

How do Real estate professionals Value a House?

If you're thinking of selling your house, you might be wondering how much it's worth. How do real estate professionals determine the value of a house? What factors do they consider? Here are some of the main methods and criteria that real estate professionals use to value a house.

 

1. Comparative Market Analysis (CMA). This is the most common method of valuing a house. It involves looking at similar properties that have sold recently in the same area and comparing their features, such as size, condition, location, amenities, etc. The real estate professional will adjust the value of the house based on the differences between the properties. For example, if the house has a larger lot, a newer kitchen, or a better view than the comparable properties, it will have a higher value. Conversely, if the house has less desirable features, such as outdated fixtures, structural issues, or a noisy street, it will have a lower value.

 

2. Appraisal. This is a more formal and detailed method of valuing a house. It involves hiring a licensed appraiser who will inspect the house and prepare a report that includes the estimated market value of the house based on various factors, such as market conditions, supply and demand, quality of construction, functional design, etc. The appraiser will also use the CMA method to compare the house with similar properties that have sold recently. The appraisal report is usually required by lenders when applying for a mortgage or refinancing.

 

3. Online Valuation Tools. These are websites or apps that provide an estimate of the value of a house based on public data, such as tax records, sales history, square footage, etc. They use algorithms and statistical models to calculate the value of a house based on the available data. However, these tools are not very accurate and reliable, as they do not take into account the unique features and condition of the house, nor the current market trends and demand. They should only be used as a reference point and not as a substitute for a professional valuation.

Posted in Ray Dawson
Jan. 30, 2024

Benefits of buying a home instead of renting?

Hey there, welcome to our blog! Today I want to talk about the benefits of buying a home instead of renting. I know that renting can seem like a more convenient and affordable option, especially if you are not sure where you want to settle down or how long you will stay in one place. But trust me, buying a home has many advantages that you might not have considered. Here are some of them:

- You can build equity. When you buy a home, you are investing in your future. Every month, you pay down your mortgage and increase your ownership of the property. This means that over time, you will have more wealth and financial security. You can also use your equity to borrow money for other purposes, such as home improvements, education, or emergencies.

- You can enjoy tax benefits. Homeowners can deduct the interest they pay on their mortgage and property taxes from their income taxes. This can save you a lot of money every year and lower your tax burden. Renters do not get any tax breaks for their housing expenses.

- You can customize your space. One of the best things about owning a home is that you can make it your own. You can paint the walls, change the flooring, add a deck, or renovate the kitchen. You can also choose the appliances, fixtures, and furniture that suit your taste and needs. Renters have to abide by the rules and restrictions of their landlords, and they may not be able to make any changes or improvements to their space.

- You can have more stability and security. When you own a home, you have more control over your living situation. You do not have to worry about rent increases, lease renewals, or eviction notices. You also have more privacy and peace of mind, knowing that no one can enter your home without your permission. You can also feel more connected to your neighborhood and community, and enjoy the benefits of homeownership associations, local services, and amenities.

If you want more information on how to start becoming a homeowner, contact us today at 602-265-4600

 

Posted in Home Buying
July 31, 2017

Curious About Local Real Estate?

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Curious about local real estate? So are we! Every month we review trends in our real estate market and consider the number of homes on the market in each price tier, the amount of time particular homes have been listed for sale, specific neighborhood trends, the median price and square footage of each home sold and so much more. We’d love to invite you to do the same!

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You can sign up here to receive your own market report, delivered as often as you like! It contains current information on pending, active and just sold properties so you can see actual homes in your neighborhood. You can review your area on a larger scale, as well, by refining your search to include properties across the city or county. As you notice price and size trends, please contact us for clarification or to have any questions answered.

We can definitely fill you in on details that are not listed on the report and help you determine the best home for you. If you are wondering if now is the time to sell, please try out our INSTANT home value tool. You’ll get an estimate on the value of your property in today’s market. Either way, we hope to hear from you soon as you get to know our neighborhoods and local real estate market better.

Posted in Market Updates