It Ain't All Big Hair and Cadillacs

Thomas, the typical real estate transaction involves a buyer, a seller, two real estate agents, a title company, perhaps an escrow company, a mortgage broker, a lender..sometimes two lenders, a mortgage loan underwriter, an appraiser, a flood hazard certification company and a homeowners insurance agent. While Redfin, Zillow and dozens of other sites provide some information to the buyer, they rely on "raw" sales data culled from the public record. It is difficult for a relatively informed buyer to accurately assess the value of a home that they wish to purchase from this data, because the information from the Assessors office is often inaccurate or incomplete as to the amount of finshed space, improvements subsequent to the original purchase, the finish levels, views and locational influences that direectly affect the value of a property.

Realtors and appraisers have the local knowledge and expertise to provide an accurate assesment of the value of a particular property. There are many real estate brokerage models currently. The trend seems to be toward a more ala carte fee for services model. HelpUSell and FSBO are two of the recent entrants into this type of model.

It is much easier for an informed borrower to research and negotiate their mortgage loan. Typically, mortgage brokers are able to offer the best combination of rates and fees. It is relatively simple to compare the offerings of several brokers and/or lenders. The operative document is the Good Faith Estimate. This document describes the interest rate and the costs to get the loan (closing costs). It is important to remember that interest rates are exceedingly volital currently. Hence a rate quote in the morning could well be invalid one hour later. This volitality makes it difficult to compare one lender to another since a morning quote from one may appear to be better than a quote from another lender in the afternoon. Since the market may have moved, the first lender could well have changed his quote by the time the quote from the second lender is obtained.

There are companies that have tried to consolidate many of these functions as "affiliated business arrangements". While these arrangements must be disclosed to the consumer, they do not provide a savings to the consumer. Rather they are typically an arrangement to channel business to a particular vendor. This vendor perceives that he has more "pricing power" by virtue of this captured audience.

I expect to see a trend towards consumer information sites that do not accept advertising. There are sites, such as Bankrate that purport to offer some information on mortgages, but the advertising mortgage companies often grossly misrepresent their rates to the detriment of Bankrate and other such sites. Bankrate's model is an advertising model.

Lending Tree is in the business of generating and selling leads to mortgage companies, banks and mortgage brokers. In theory lenders responding to these leads "compete" for the borrowers business. In reality many of these companies make offers that they have no intention of fulfilling. The objective is to bait and switch.. While many aspects of this practice are illegal, it is still quite common. Further, a "commitment" by a lender is worth no more than what the lender decides that it is worth. There is no legal requirement on the lender to provide the terms that were offered. The borrower is often sitting at a closing table, looking at a mountain of paper and trying to decide to go forward with a loan that has much worse terms than they were promised and were expecting.

Appraisers, Title insurance companies, homeowners insurance providers are a little easier to shop. The rates that they charge are set by the State in many cases and, in any event don't change that often.

What would be very useful to consumers would be a site where a "consultant" could be engaged who would, acting as the agent of buyer