Thursday, June 18, 2009

More Dallas home sales prices kept secret

Early this year, a Tudor-style cottage in the M Streets with a stately stone exterior and stained-glass windows was listed for sale at just under $500,000.

How much it sold for is top secret.

That's because real estate agents, buyers and sellers are keeping sales prices under wraps on hundreds of houses – even on the Multiple Listing Service.

The trend is troubling some market watchers because Realtors and appraisers use the service to set prices and prepare offers. And everyone who depends on the data – including the economists who track the North Texas housing market – is getting only part of the housing picture.

"It started pretty much in the high end, and it's spreading out and getting worse," said longtime Dallas appraiser Jack Towers. "It's misleading, and most people are unaware of this happening."

Only five states don't require home sales prices to be disclosed – Texas, Kansas, New Mexico, Utah and Wyoming. In states with disclosure rules, all sales are recorded at the courthouse.

The 'Z'

The MLS is a proprietary real estate database in which property agents share information about home listings and sales among themselves. Most home and condo sales are supposed to be recorded in the MLS, but the process is voluntary and unregulated.

Many MLS sales forms now have prices marked with a "Z" – Realtor lingo for a price that's not the actual sales price. Often the Z price is simply the original list price.

The agent who sold the M Streets house, Kate Mote, wouldn't explain why the price was kept confidential.

"I am sorry, but any undisclosed property sale cannot be discussed," Mote said in an e-mail. "I do not discuss confidential information."

In neighborhoods with large numbers of undisclosed prices in the MLS, the practice can skew median home price data, which is made public each month and widely reported.

"They say the sellers or buyers don't want this information public," Towers said. "But they shouldn't be manipulating the market."

Agents say the practice has grown over the last two years, partly because some buyers want to keep the data out of the hands of tax appraisers and sometimes because sellers don't want anyone to know how little they got for their houses.

Agents sometimes push secrecy as well.

Some of the lowest-priced homes are being kept out of the system, which makes overall prices seem higher, agents and appraisers say.

"All we hear about in every aspect of the capital market is transparency," said Chuck Dannis of Crosson Dannis Inc. "This flies in the face of that. This is going to further lead to inaccurate values across the spectrum."

The MLS is not open to the public or the news media, but real estate agents often share the data with their clients. The growing use of undisclosed prices threatens that information source, some agents and appraisers say.

Because of the way the MLS database is structured, it's hard to find out how prevalent the practice is.

Rich Thomas, CEO of Dallas' MetroTexas Association of Realtors, says undisclosed sales account for less than 10 percent of total MLS listings.

But he concedes that in some neighborhoods – the Park Cities, Preston Hollow and other high-end areas – the majority of transactions are being kept hidden.

"In some pockets, it's the chic thing to do," he said.

Clients' wishes

Thomas said real estate agents must abide by their clients' decisions about disclosing information.

"The MLS member is in a difficult situation – they are trying to get this property sold," he said. "You can guess that people who are selling their property at a little bit of a distress have a desire not to release this info for ego reasons.

"And if you are an institution holding lots of foreclosed properties, you don't want to be in a situation where you are creating fire sales."

That may have been the case with a house that agent Jackie Dorbritz sold late last year off Hillcrest Road in North Dallas. The five-bedroom, six-bath, 2-year-old house was listed at $1,448,500 – less than the appraised value.

The ultimate sales price was withheld.

"That was a bank-owned property, and the bank requested it," Dorbritz said. "It was written into the sales contract that way."

Another recent sale in North Dallas was kept secret at the buyer's request.

"Ninety-nine percent of the time, it's the buyer who's pushing for it," said listing agent Greg Pape.

"A lot of agents are complaining about it," he said. "In the last two years, it's quite prevalent."

One appraiser looking at homes sold in the Park Cities priced at more than $3 million found that almost two-thirds of the recent sales were undisclosed.

Mary Frances Burleson, president of Ebby Halliday Realtors, North Texas' largest residential firm, said: "I don't like it either. It skews the ability for an appraiser to give us a really updated evaluation.

"It's a growing issue, and there is not a thing you and I can do about it."

At the same time, Burleson said, she has never been in favor of mandatory disclosure of home sales prices. And she agrees that undisclosed sales can mask falling prices.

"In today's marketplace, people are reducing prices and sometimes don't tell everyone," she said. "They don't want their neighbors to know what they sold the house for because they took a lot less."

The tax man

If buyers are trying to keep their home values secret from tax appraisers – well, good luck with that, said Ken Nolan, chief appraiser for the Dallas Central Appraisal District.

"Is it going to get them out of paying taxes? No," Nolan said. "They may get a lag. But in most areas, there are going to be enough sales reported that we know what is going on."

Thomas of the MetroTexas group says there's no evidence of slashed prices on foreclosed homes in the area. But he's not pleased that so many prices are being kept out of MLS data.

"There is this misconception on the part of the consumer that it is helping them," Thomas said. "What hurts the consumer is that when they go to try and adequately price their home for sale, they don't have as much data as they should have."

Thomas doesn't think withheld sales prices are skewing real estate data.

"It puts pressure on [the media] industry, reporting accurate median prices in some areas," he said. "But that's why a person really needs to use a Realtor."

Researchers who count on accurate MLS data have the opposite view.

Jim Gaines, an economist with Texas A&M University's Real Estate Center, wonders how withheld prices affect the data his center releases to the public each month.

"Of course, if these are systematically at lower prices, then our averages and medians are overstated to the extent they are not showing lower-priced property sales," Gaines said.

He said reporting only part of the housing market picture doesn't work in the long run.

"You are better off to have everything, even if you don't like it, than to try and edit and restrict it to make it look another way."

Economist D'Ann Petersen of the Federal Reserve Bank of Dallas was surprised to learn that not all home sales make it into the housing reports.

"It's so confusing anyway, and that's what we depend on to be able to do our jobs," she said. "No data is perfect, but this could definitely make it more difficult to find out what is going on.

"If you can't believe your numbers, you don't know what to report."

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By STEVE BROWN / The Dallas Morning News