Does Real Estate Need An HMO?

Peter G. Miller
OurBroker®

For millions of Americans, health maintenance organizations (HMO) have turned the promise of cheap medical care upside down. This doesn't sound like much of a real estate concern until you realize that HMOs and real estate on the Internet have much in common.

When HMOs were first proposed they promised what everyone wanted: quality care at less cost. This would be done, said HMO backers, by taking a fresh approach to healthcare delivery. Computers would reduce paperwork, cut costs, and speed the care-giving process. It was going to be a "win-win" situation we were told, one where patients would pay less and doctors would be more efficient.

Have you spoken with a doctor lately? Mine faces so much paperwork he may join a union.

Been to a hospital recently? The UN budget is barely adequate to cover even minor medical events.

Have your premiums declined or even remained stable? (Sorry....)

Day after day come announcements of new and innovative web sites, each claiming more savings, less paper, and greater speed. And like HMOs, most are long on theory, short on measurable results by independent third parties, and curiously quiet on the matter of self-interest.

Using computers and such, HMOs promised to weed out inefficiencies thus lowering overall costs.

We see the same thing with real estate online. Using computers and such, we are told the Internet will weed out inefficiencies thus lowering overall transaction costs....

Alas, it costs money to run both HMOs and web sites. Both HMO owners and web site operators want to make a profit. Such a perspective is neither unfair nor unreasonable, but neither should it be unmentionable.

What's not said is that to run either an HMO or a major web site requires big investments, lots of people, and big budgets. These are costs that must be offset by savings elsewhere in the system, otherwise consumer expenses rise.

But how do you save money with a real estate transaction? Check the numbers, look at the specifics, and inevitably in the main it's brokers who are supposed to reduce their fees. The assumption, it appears, is that brokerage services are without value -- or at least less worth than brokers should charge. Web services, of course, are magically blessed and a cost we should all be honored to pay.

But properties -- like patients -- are each unique. While some aspects of a real estate transaction plainly lend themselves to computerization, much of the pricing, bargaining, and negotiating process are not matters which can be reduced to computerized equations. After all, what's the mathematical difference between a room with a window and a room with a view?

Online real estate winners and losers are beginning to emerge. In essence, the HMO model with its slick promotions, convoluted logic, and faulty premises is being rejected. The winners are the sites with real and growing numbers, real successes, and no interest in coming between brokers and their clients to create still-another layer of costs, complexities, and controls.

Question Of The Week

Q Do real estate agents benefit by offering consumers low appraisals?

A This is a short question with a complex set of answers. Let's consider the issue briefly.

First, in a technical sense, real estate brokers and salespeople cannot provide "appraisals" for homes they wish to list. An "appraisal" is an independent measure of value made by, well, appraisers. Appraisers are paid for the opinions of value they offer and not sale results.

Instead of an appraisal, brokers can offer a "competitive market analysis" (CMA) which looks at past sales and current offerings. In good faith, several brokers can look at the same data and derive different valuations. Each broker will need to explain how they obtained a particular value, and how they expect to market the property.

Second, it's not unusual for owners and brokers to have differing valuations. While some values are more or less clear (all the "B" units in a large condo project), in many cases market values are difficult to project (think of a small farm in a rural community where a like property has not sold in two years).

So, if you wish to offer a property for sale, it makes sense to either speak with several brokers before listing, obtain an appraisal, or both. Note that a lender will require an appraisal before financing a property, and will provide a mortgage on the basis of the sale price or appraised value -- whichever is lower.

In either case, what you want is a clear explanation detailing why someone thinks your home has a given value. Look at the comparisons they make with recent sales of like properties -- and be certain the comparisons are relevant to your transaction.

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Published: July 20, 1999

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Editor's Note: This article reflects the opinions of Peter G. Miller only and not necessarily the views of this or any other publication, organization or Website owner.