The bottom line is that home buyers still need to take steps to protect themselves from mortgage fraud and other unsavory real estate services industry practices. Here’s a bakers dozen suggestions of things home buyers can do to protect their interests during the home buying process.

The legislators are focusing on “the growing trend of companies tailoring Internet advertising based upon consumers' Internet search, surfing, or other use.” Ranking Subcommittee Member Cliff Stearns has stated that the subcommittee shouldn't focus just on the tools used by broadband network providers, but also on other companies that track consumer movement on the Internet. The American Homeowners Grassroots Alliance (AHGA) agrees, and believes consumers should have the right to approve the use of their Internet data for such purposes in advance.

More importantly, AHGA also believes that the scope of the inquiry and legislation to follow should be broadened to other very serious threats to consumer privacy and security that are created or facilitated by the Internet. “A consumer opt-in requirement for companies tracking consumer behavior, as suggested by Chairman Markey, can address many of the privacy concerns,” observed AHGA President Bruce Hahn. “However, there are other serious Internet privacy, safety and security issues not addressed by such a narrow investigation, and the inquiry and investigation should be broadened to addess them.”

According to a blog by respected real estate services consultant Stefan Swanepoel in the real estate professional trade publication Inman News, homeowners’ privacy is at risk as a result of their relationship with many real estate agents and lenders. According to Mr. Swanepoel “Many real estate brokerages and professionals do not make it a priority to protect the personal information they obtain” in electronic or written form and “Many consumers who have significant equity in their homes do not realize that they are exposed targets for identity theft.” Given the extremely comprehensive financial information that home buyers must provide mortgagors, the risk of inadequate Internet data protection policies is extremely high.

These problems should also be addressed in an Online Privacy Bill of Rights bill by establishing basic minimum security standards for website designs, and online data sharing and storage policies. “These standards and policies need not be so rigorous or difficult to attain that they would pose any problems for small businesses which incorporate Internet commerce in their business models,” noted AHGA’s Hahn. “They would require only common sense policies and inexpensive Internet security tools which most large businesses and many small businesses already employ. This inexpensive ounce of prevention would save pounds of cure that homeowners and Internet businesses currently pay for.”

You don’t have to pay a higher real estate commission rate to get a higher price for your home and you’ll make more money if you don’t use an agent, according to a study in the August issue of Consumer Reports, the magazine of Consumers Union. Based on 3,753 responses from home sellers regarding their efforts between 2004 and 2007, 80% of sellers used a real estate broker and 17% sought to sell on their own. Most (86%) were successful in selling their homes. Of the remainder, 8% gave up and took their homes off the market and the balance (6%) are still trying to sell their homes. Most home sellers who used a broker and agent (71%) were very or completely satisfied with their brokers performance. Only 12% were dissatisfied.

It is interesting that the period studied included both extreme sellers markets and extreme buyers markets. The last full year of the boom market was 2004, when newly listed homes in many areas often received multiple offers above the listing price in the first week. By 2007 we were in the full grip of the housing crisis, with a large and rapid growth of unsold inventory, declining home values, and rapid growth in foreclosures. During this same period the importance of the Internet in real estate transactions also increased dramatically: by last year over 80% of home buyers used the Internet in the home buying process.

The study found that a large share of traditional real estate brokers and agents were willing to cut their commissions from the 5-6% norm to 3-4%, and that home buyers who negotiated lower commissions were just as likely to be satisfied with the service they received as those who paid more. Those who paid the higher commissions were only slightly more likely to receive services such as competitive market analyses or open houses. This would seem to run counter to industry arguements that defend higher commission rates on the basis that they enable brokers and agents to provide a higher level of service. The data suggests otherwise – that most brokers and agents are committed to their clients and will provide the level of services required, regardless of the commission rate.

Somewhat surprisingly, those who paid 6% commission rates or more were more likely to have regrets about the selling process. Chief among the regrets was that 1/3 said they should have been more aggressive in negotiating the commission rate. An even greater surprise is that while almost all of the 17% who sold their homes without an agent said they received their asking price, those using an agent received an average of $5,000 less. If this data is accurate it would mean that a home seller would not only get $5,000 more if they sold without an agent, but would net an even greater amount since they didn’t have to pay a real estate commission.

This independant study certainly proves that real estate brokerage industry studies concluding that home sellers will yield a lot more by selling through a broker are biased and flawed. More than anything else, the Consumer Reports study begs additional independent research in a number of areas. Logic suggests that supply and demand would affect both home sellers and buyers. In a sellers market like 2004, there was a shortage of listings in many markets, and home sellers often got multiple offers in the first few weeks of the listing. Since there was little additional sales work required after entering a listing in the local multiple listing service, home sellers should have easily been able to negotiate lower commission rates. In today’s market it is much harder to sell a home. Are sellers today having to pay higher commission rates than in 2004, or are Internet marketing economies or other factors working to continue to reduce commission rates?

Conversely, home buyers have the power today. Are buyers finding it easier to negotiate commission rebates in those states where the state real estate broker associations have not yet succeeded in outlawing commission rebates? Are those buyers also getting larger rebates?

Also, the Consumer Reports study doesn’t shed light on whether those homeowners who sold without a broker usually got the full asking price because they were more effective than real estate agents in marketing their home, or were there other factors involved? How many of them used “list only” brokers, who for a few hundred dollars will list a sellers home in the local multiple listing service (MLS) thereby assuring widespread Internet exposure, but provide few additional services? Did those FSBO sellers purposely set the initial asking price of their homes much lower, deducting the typical commission rate and/or typical negotiated price reductions during negotiation, in order to try to sell their home faster? If so that would reduce or eliminate what this study shows is a significant advantage to a (FSBO) model. It is also possible that some of the FSBO sellers seriously underpriced their home and netted even less than if they had been using a broker and agent.

Nevertheless, Consumer Reports has contributed much to the body of knowledge about home selling. Previous industry studies have usually been so biased and self serving that they offer little useful insight into questions raised by the Consumers Union magazine. It would be wonderful if Consumers Union or other truly independent sources could take this study to the next step and find the answers to some of the fascinating unanswered questions.

A death watch is on for the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. They are chartered by the federal government and charged with the public mission of supporting affordable mortgages. Because they offered lower mortgage interest rates the GSEs grew larger and larger until the current housing crisis. Currently they back about half of the $12 trillion in mortgages in the United States.

As the GSEs have helped both homeowners and traditional mortgage lenders by buying up packages of subprime loans during the housing crisis, the financial stability of the GSEs has also become threatened. Homeowners who currently have GSE-guaranteed mortgages wouldn’t be affected even if the GSE’s collapsed, but the GSE’s ability to help stabilize mortgage markets and help lower income and first time buyers in the future is definitely threatened.

In order to prevent their collapse and the dire threat that it would create for financial markets, homeowners, and the entire economy, the federal government’s implied intention to backstop the GSEs was made explicit in the recently enacted housing recovery legislation. The Administration’s support for the housing recovery bill was a turnaround from its prior backing of mortgage banking industry efforts to reduce the GSE’s market presence.

The challenge facing the Administration now is how to intercede if the GSEs are unable to affordably refinance about $225 billion in loans that are coming due in September. While the holders of common stock may be wiped out, the Treasury Department might have to buy preferred stock in order to prop up its value. If it didn’t, major holders of preferred stock – banks, many of whom are already in precarious financial situations – would be threatened. While the Administration would prefer not to put federal money into these companies, from its perspective keeping them as stock-based companies would be better than having the government take them over. Other options for the government include buying bonds from the GSEs in order to help their liquidity, and creating a new class of preferred shares that would guarantee repayment of taxpayers’ money before that of other shareholders in a bankruptcy.