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The high interest rate and low inventory housing market of the past few years, have many home buyers trying to forgo the services of REALTORS® and real estate agents, in an attempt to save money. However, inventory has been growing here in the Rio Grande Valley since the summer of 2024. Check out this graph depicting the change in homes for sale in McAllen, TX over the past 3 years (courtesy of my local MLS).

Many home sellers list their homes as For Sale By Owner (FSBO) listings to try and maximize their profit. Technological advancements and the establishment of companies like Zillow and Redfin have made it possible for both home buyers and home sellers to have an unprecedented access to information that buyers and sellers, in the past, could only dream of. Most REALTORS® and real estate agents are generally honest, but many have contributed to the negative public perception of the industry by their own questionable words and actions. All of this begs the question: Do you really need a REALTOR® to buy a home?

The Quick & Dirty

My answer is no. You do not need a REALTOR® to buy or sell real estate. Just like you do not need a barber to cut your hair, a mechanic to do an oil change, or a personal trainer in order to exercise. However, you do need to learn about the process of buying and selling real estate, the potential pitfalls (including their legal consequences), and details/nuances of it all. This takes time. You will not be able to learn everything you need in a 5 minute Youtube video. You also need to be willing to put in the time to actually do the transaction. How many hours from your day can you afford to dedicate to this if you are doing it on your own? How many weeks or months do you think this process will take?

Buyers

First things first, if you are the buyer, you are actually the one paying for both your agent’s commission and the seller’s agent’s commission. I will die on this hill. Agents who say the seller pays both agents’ commissions do not understand how price setting works. This is because the commission is baked into the price. Everything else is semantics. Do you really think that when companies offer you “free shipping” when you purchase their products online that it’s really free? The shipping is “free” because the company has made enough off of you from the sale that they don’t need to tack on the extra charge. It’s the same thing with real estate. If the seller offers to pay your agent’s commission, it is because the purchase price that you are agreeing to warrants their concession. If you want representation, know that it’s coming out of your pocket.

Secondly, be wary of For Sale By Owner (FSBO) homes. A home that is “off market” is not necessarily a good deal. An agent that I know was fired by his buyers because they found a FSBO home, but the seller would only sell it to them if they did not have an agent. The seller claimed it would save both parties money. The buyers fired their agent and entered a purchase contract with the seller. When the appraisal report came out, the property appraised for under the sale price. The seller refused to lower their price. Though the buyers were able to get back their earnest money (since their former agent had emphasized the importance of an appraisal contingency on any offer they make), the buyers were still heartbroken. They also wasted several weeks of their time. The seller lost a little bit of time, but since it was a FSBO listing, the contract falling out did not have the same negative effect it would have if it were publicly listed on the MLS (Multiple Listings Service) with a REALTOR®. If that seller wanted to, they could claim any number for the total days on market, and it would be difficult to confirm that number. Also, no other buyer would know that it had fallen out of contract previously unless the seller told them. Come to find out, the seller apparently had a relative who was an agent working for them on the side that they were paying under the table. If that isn’t playing dirty, then I don’t know what is. Stories like this are not as uncommon as you would think.

Finally, if you decide that you do not want an agent representing you, you should at least consider paying a lawyer to look over the purchase agreement for you. This goes double if you are buying new construction. For context, the standard contract that Texas REALTORS® use is about 10 pages without any addenda. The standard contract that Texas homebuilders use is over 20 pages without any addenda. Do you think a lawyer will go over either with you for free? You also won’t have the same access to a lawyer that you would with a REALTOR®. Don’t be surprised if they charge you by the hour.

Sellers

If you are looking to sell your home and decide you want to brave the For Sale By Owner route, let me give you some free advice: do not overprice your home. One of the biggest reasons a home doesn’t sell is that the asking price is too high. This is true for FSBOs, off-market properties, and publicly listed properties on the MLS. Even if you have the best REALTOR® in the world as your listing agent, if your list price is too high, your property won’t sell.

You don’t need a REALTOR® to price your home. You can use the free data that Zillow provides. Fair warning: Zillow is the Wikipedia of real estate data. It’s a good starting point, but you probably want to dig deeper. Zillow is clunky if you are trying to look at data sets over a period of time. Zillow also does not give information on any seller concessions or on the type financing used for a sold property. One of the benefits of using a REALTOR® is that they have access to the MLS. Comparing the MLS to Zillow is like comparing the Whataburger patty melt to the McDouble from McDonald’s. They are both burgers, but one is vastly superior.

The main benefit of using a REALTOR® or a real estate agent to list and sell your home is that they save you time. Answering phone calls and emails takes time. Vetting buyers takes time. Showing the property takes time. Going back and forth on negotiations takes time. Going over offers and making counteroffers takes time. Are you as a seller willing to put in that kind of time? Will your other responsibilities even allow you to put in that time?

Final Thoughts

Many people online (and from the safety of being behind a screen) are very vocal about their dislike of REALTORS® and their desire for the end of the profession. I think they had a bad past experience with a real estate agent. Either they got screwed over by an unethical agent in a deal, or they got their heart broken by someone who just happened to be in the real estate industry. Like many professions, there are some bad apples among real estate agents. And unfortunately, a few bad apples really can spoil the whole bunch. But just because you had one bad barber, are you really going to cut your own hair for the rest of your life? What if you’re about to get married? Are you going to risk an unplanned buzzcut a few days before your wedding? 

I am not trying to convince you to use a REALTOR® or a real estate agent in this blog post. Many deals are not even that complicated, and if the buyer and/or seller is willing to put in extra time and effort, they might even be fine without an agent. I am pointing out that the job exists for a reason. Someone with no real estate knowledge or experience will have a rough time buying or selling property. They would be easy prey for unscrupulous investors and agents. For many buyers and sellers, the peace of mind that comes with working with an ethical and competent real estate professional is worth the cost of their commission. And for those buyers and sellers who don’t want to hire a real estate agent, but are willing to put in the time and effort to learn the process, willing to do the work themselves, and have the time to do the work themselves, more power to them.

Howdy! My name is Ace Palomero. I am the younger and handsomer half of the duo, that is the Palomero Realty Team. Welcome to the blog.

 

I am here to educate, create and entertain my readers. 

 

The launch of my first post, is to give you my thoughts on the current housing market here in the Greater McAllen Area in South Texas. I will be using data that can help clients have a better understanding of what maybe happening in your area.

 

Before starting I would like to add a disclaimer, that I am not a financial advisor. And before we have any substantial discussion about a specific property, we will have to sit down and discuss representation.

 

Below you will find the monthly housing report for May and April for the McAllen-Edinburg-Mission MSA (metropolitan statistical area, provided by the Greater McAllen Association of REALTORS®.

For month-to-month and year-over-year data, both the median price and the number of active listings have increased. Average days on market for houses sold from April to May 2023, had a negligible increase. For the month of May, the days on market is 15 longer compared to the same month last year.

 

The number of home sales has increased from the month of April. While the number of sales this past May decreased compared to May of last year, the months of inventory stayed the same. Months of inventory (a measurement of housing demand) is calculated by dividing the number of active listings, with the number of houses sold. This measurement stayed the same from April to May 2023. However, if you compare that with the 2.2 months of inventory in May 2022, it has almost doubled. This is suggesting that demand is going down.

 

One of the benefits of being a REALTOR® is that we have access to the data of our local MLS. Check out the charts that generated from the GMAR MLS for median sale price, average CDOM (cumulative days on market), with the number of new listings, and number of sales in Hidalgo County for the past 5 years. The data points are grouped by month.

The number of sales and number of new listings are back to pre-pandemic levels. The cumulative days on market (CDOM) are up 60% from last year, but not quite where they were in 2019 and 2020. From May 2019 to May 2023, the median sale price of a single-family house has increased over 62%. Remember that mortgage rates are also higher this year than they were last year. And while there was no increase to the federal funds rate this month (the first in ten consecutive months of rate hikes), there was a lot of ambiguity in the Fed Chair’s statements on to what would happen next month and the rest of the year (Neil Irwin, 2023).

 

During the Great Recession of 2008 and 2009, the house price index for the McAllen-Edinburg-Mission MSA dropped from 2008 to 2009, and did not really start to recover until after 2012 (All-transactions house price index for McAllen-edinburg-mission, TX (MSA) 2023). According to rentdata.org, median rent for the MSA at the time period went down in 2008, before going back up in 2009, from which it continued to increase (McAllen-edinburg-mission fair market rent FY 2023 McAllen-edinburg-mission, TX MSA Rental Data).

 

Home prices and rent are closely tied to together. The price-to-rent ratio is often used by financially-savvy and level-headed potential homebuyers as a benchmark to help decide if it’s better to rent or buy (Hargrave, 2022). The ratio can also help indicate whether the median home for sale in a metropolitan area is fairly valued, or if the area is in a bubble.

What does this all mean? And what is my take on it? I agree with content creators like Travis Spencer and Orlando Miner (who are both full-time REALTORS®) that at the national level, we hit the peak last year. Data from Redfin backs this up (United States Housing Market & Prices | Redfin). On the local level, the data that I pulled from the MLS shows the highest median home price for our county to date was last month at $243,000. It might go up in June and July. But this cannot last. Homes are already sitting on the local market longer than they did last year. Our local inventory (621 new listings last month) is also up. And that isn’t even accounting for the new construction that homebuilders have not put up on the MLS.

 

Again, I am not a financial advisor, and I cannot and will not give you financial advice. If you want specific real estate advice, we may need to sign some papers first. However, I will happily share with you some general thoughts that can help you with your next buy.

 

Firstly, real estate like many industries, is cyclical. They have ups and downs. We see this in the seasonality of the housing market. At the national scale and on year-over-year terms, I believe we’re on the way down. On the local level, we will likely see that turn this year. The massive runup in property value in the past couple years was wildly abnormal, and we are already seeing the correction begin in some metro areas. I believe we’ll see the correction in our area this year as well.

 

Secondly, there are things that are out of our control, and that is fine. Don’t worry! The mortgage rates are out of anyone’s control. So are the expectations of the average sellers and buyers. Yes, if you wanted to sell at highest price and the shortest timespan, the best time to sell was probably last year. But people buy and sell houses for reasons like new jobs and growing families, not just because it’s a “seller’s market” or a “buyer’s market.”

 

 

Finally, there are things that we have control over. We can choose the financial decisions that shape our futures and when to make them. I am hoping that whatever your long-term goals you may have, the actions you take, are done with this in mind. If you are planning to invest in real estate in the next few years or even next few months, start cutting your expenses, getting rid of debt, and finding ways to increase your income. If you are looking at properties here in the Rio Grande Valley, maybe we can work together soon!

 

There’s more that I want to say (like about the growth rate in jobs and construction locally), but I told myself that I would finish the first blog post before the weekend. I’m also getting hungry. So I’m ending the post here. Comments and criticism are welcome! I would love to hear what you have to say. 

References

All-transactions house price index for McAllen-edinburg-mission, TX (MSA). FRED. (2023, May 30). https://fred.stlouisfed.org/series/ATNHPIUS32580Q

Hargrave, M. (2022, October 2). Price-to-rent ratio: Determining if it’s better to buy or rent. Investopedia. https://www.investopedia.com/terms/p/price-to-rent-ratio.asp

McAllen-edinburg-mission fair market rent FY 2023 McAllen-edinburg-mission, TX MSA Rental Data. 2023 Fair Market Rent in McAllen-Edinburg-Mission | RentData.org. (n.d.). https://www.rentdata.org/mcallen-edinburg-mission-tx-msa/

Neil Irwin, C. B. (2023, June 15). Fed’s rate hike campaign may be at a pivot point. Axios. https://www.axios.com/2023/06/15/fed-rate-hikes-inflation

United States Housing Market & Prices | Redfin. (n.d.). https://www.redfin.com/us-housing-market