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Open House

Power Struggle; Underpaying Your Real Estate Broker; Small Steps

Aired October 21, 2006 - 09:31   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

GERRI WILLIS, HOST: The temperature heads south and your heating bills go up. If you're like me, you're wondering, why won't energy costs come down?
We'll take a closer look, and you'll learn how to winterize your home and save money.

OPEN HOUSE starts right now.

It's that time of year again, time to start thinking about the cost of heating your home this winter. Energy prices should be coming down, but they're not, at least in some cities. And that has some saying the electric companies need to be regulated to protect you, the homeowner.

Tyson Slocum is the director of Public Citizens Energy Program in Washington.

Tyson, welcome.

TYSON SLOCUM, ENERGY DIRECTOR, PUBLIC CITIZEN: Thank you very much for having me.

WILLIS: All right. Let's start with what our viewers care so much about, how much are prices going to go up this winter, and where?

SLOCUM: Well, we're -- we've definitely seen already over the last year that those states that are deregulated, which are now 14 states, have seen prices rise far higher than those remaining states that are fully regulated. And so electric prices in those deregulated states like Pennsylvania, New York, New Jersey, Illinois are going to see potentially very big price increases, as much as 50 percent.

WILLIS: All right. Well, that's not good news. I don't like to hear that, Tyson.

But tell me, I thought deregulation was supposed to bring down prices. What's going on?

SLOCUM: Well, that was the theory. The problem is, is that this whole experiment of deregulation hasn't worked out as planned.

The problem is, is that it has been close to impossible to foster truly competitive markets in electricity because we're finding out that electricity is not like any other product in the U.S. economy. Electricity is very unique, and it's very difficult for a number of reasons to foster truly competitive markets. So, as a result, when we removed all of these government oversight over electricity and just replaced it with competition, what resulted was just a handful of companies controlling regional markets.

WILLIS: Right.

SLOCUM: And they were able to charge much higher prices than they would be able to under a regulated market.

WILLIS: Well, and, you know, we're actually sort of in between now in a lot of places, half regulated, half unregulated. But I've got to tell you, the real problems in the system, as you're alluding to here, some utilities aren't buying the cheapest electricity they can find. They're actually buying from sister companies, so they're paying more, and in the end we're paying more.

That's not deregulation.

SLOCUM: Yes, that's right. I mean, that's what we've seen in Illinois and Maryland, for example, two deregulated states where the former utility has a parent company that has all of these unregulated power plants. And those unregulated power plants are basically controlling the local markets in Illinois and Maryland and selling that overpriced power to itself, to its -- to the retail utility that's distributing that power to households and to businesses at very high prices.

WILLIS: All right. One of the things I'm worried about, I keep seeing reports that companies are not building enough power plants to satisfy demand. We know demand is going up every single year.

So I'm thinking we're going to face blackouts, brownouts either this winter or summer. So, yet again, we're going to be up against it and we're going to be the ones who suffer.

SLOCUM: Yes, that's definitely a concern. And again, deregulation is a major culprit here.

You know, before deregulation happened a decade ago, for 100 years we had an orderly planning system where utilities would sit down with state regulators and plan power needs accordingly. The states would order the utilities to build power plants.

Now states can't do that. It's up to the market to build power plants. And as we've seen, the market is not getting the job done.

WILLIS: All right. And I've got to ask you this question. You remember Enron. You remember market manipulation in California five years ago. Well, I know there are some concerns that this is happening again, and I don't believe we have the tools to stop it.

Is it a problem? Are you concerned about market manipulation?

SLOCUM: Oh, we're very, very concerned. Electricity is a -- is a commodity that's very easy -- it's very easy to manipulate. And what we've seen in these deregulated markets is that it's very easy for these big companies that control a lot of power plants to game the system.

They're not doing it to the degree that Enron and other companies did back in California in 2001, but manipulation is going on. And until we re-regulate electricity, we're going to continue to see consumers being price-gouged.

WILLIS: Well, Tyson, I don't see big changes in policy, at least at the national level, happening any time soon. Given that, what is your outlook for this winter? What are people going to face in their electricity bill?

SLOCUM: Well, unless states step up on the challenge and start, you know, strengthening protections for consumers, we are going to see higher rates. And right now consumers have been helped a little bit that natural gas and oil prices have been low, but I think they might shoot up in mid-November or early December.

And so, consumers may face a double whammy of not only high electric bills, but potentially high home heating oil costs and high natural gas bills. It may be a tough winter for consumers unless we restore some regulatory oversight over these energy markets.

WILLIS: All right, Tyson. Not good news, but we will have some solutions for people out there.

Thank you for joining us today.

SLOCUM: It was my pleasure.

WILLIS: With home energy costs rising, we have some solutions for keeping the cold chills and high bills outside your home.

Get your heating system inspected and cleaned right now. Dirt can collect inside the ducts and your furnace won't be as effective.

The best thing you can do is keep the warm air in. Check for drafts around all of the windows and doors. You can find air leaks by lighting a stick of incense or a candle near the edges of the doors and windows to see if the smoke waivers. A good caulk sealant will fill the gaps.

And if curling up by the fire is on your winter agenda, you'll want to install tempered glass doors that can cut heat loss and improve your fireplace's efficiency. It's also a good idea to have your chimney cleaned once a year by a professional.

Now, you can find one at the Chimney Safety Institute of America. Their Web site is csia.org.

There's lots more ahead today on OPEN HOUSE.

Keep thinking those warm thoughts. Winter is almost here. Home improvement guru Bob Vila will have more on exactly how to winterize your home and save you lots of dough.

And just because realtors charge six percent commissions doesn't mean you have to pay that. It's a whole new world out there. We're going to tell you all about it.

But first, your "Tip of the Day".

(BEGIN VIDEOTAPE)

WILLIS (voice over): Knowing how to read your electric meter could pay off big time this winter. Start monitoring the meter yourself. This will help you get a better idea of when you're using the most electricity and where you can cut back. Most electricity bills only show the breakdown by month.

OK. So, most electric meters have five dials. The unit of measurement is the kilowatt hour. Read the dials from left to right, and if any areas fall between two numbers, record the lower of the two. Be aware of rate fluctuations between day and nighttime hours, and plan your energy consumption accordingly.

That's your "Tip of the Day".

(COMMERCIAL BREAK)

WILLIS: OK, so it used to be that to sell a house you'd bring in a real estate agent and pay the traditional six percent commission. However, the times are changing. Thanks to the Internet and some innovative ideas, the six-percenters could be going the way of shag carpeting and the lava lamp.

Brad Inman runs inman.com in San Francisco.

Hey, Brad. Good to see you.

BRAD INMAN, FOUNDER, INMAN.COM: Good to see you.

WILLIS: So, OK, I know everybody out there wants to pay less than six percent, but you've noticed what's going on in the market. Is now the time to underpay your broker?

INMAN: Well, you know, right now it's a tough time to sell because we have an 11-year high of home listings around the country. We've definitely shifted from a seller's market to a buyer's market.

The bottom line is the consumer should have choices here. And compare realtors, check out the discount services, and resolve the best way to go.

But the number one question you need to answer is, who can represent me and get top dollar for my house? Who can market it? Who can make sure it's distributed on the MLS, on the Internet, and will aggressively help me market that property? Because it's harder to find buyers today.

WILLIS: Well, it is harder to find buyers. How do you answer those questions, though, Brad? I mean, it's really tough for people who don't spend all of their time thinking about real estate to pick somebody who is really going to represent their interests. INMAN: Well, my recommendation is you go on the Internet and see what your options are. There are now online discount services. There are full-service brokers. There are brokers that are giving back certain things to the consumer in exchange.

But the most important thing is interview several, online and offline. Bring a few realtors into your -- into your house and interview them rigorously, like you'd interview someone for a job.

And the important thing here with the commission. The commission should not be first in this market. The first thing is getting top dollar and having someone market your property.

However, when it comes time to discuss commission, remember, by law commissions are negotiable. And don't be afraid to negotiate. Because at the end of the day you want top dollar, but you don't want to pay too much for the services.

WILLIS: Well, obviously it's pretty tricky. Let's talk about some of the discounters and what you can get for less money. You can pretty much shop any part of the equation you want, right?

INMAN: Well, you know, it's still limited in terms of the services that are out there. There are a lot of new companies online. Some traditional companies are advertising lower commission rates, but they're hard to find, and it's hard to determine who is credible and who isn't. Someone will say, I'll discount my commission or I'll offer a low commission, but they won't put it on the MLS...

WILLIS: Right.

INMAN: ... or they won't put it on all of sites on the Internet. And that's the thing to be careful of.

WILLIS: Well -- but Brad, didn't a bunch of companies just get into trouble for not allowing people who paid discount prices to get on the local multiple listing service? Because let's face it, that is the primary marketing tool.

INMAN: Yes. The good news is the Department of Justice and some other agencies, state and federal, are cracking down on real estate firms that are interfering with competition by these alternative services. Like not showing properties that are represented by these discounters.

The good news, they are cracking down. And I really believe that, you know, most of the companies out there, the full-service real estate brokers, are not engaging in this behavior.

WILLIS: OK.

INMAN: But they have cracked down. They've also opened up the MLS to other types of real estate firms other than the full-service brokers. And that's important as well, giving the consumer choices.

WILLIS: Well, isn't it possible -- OK, let's say I'm not going to go with a discounter. You say it's difficult to tell who is legit in that area, typically. Can't I just go to a regular real estate agent and say, hey, I don't want to pay six percent. The national average is below that now, right?

INMAN: Yes. A big secret in the industry and, you know, I think in the eyes of the public is it's all six percent. If they all charge six percent, by the way, the government has said that could be price fixing. If it's you know -- they have this informal agreement.

So the first thing is, by law, it's negotiable.

WILLIS: Well, I mean, is there information I should bring to that conversation and say, hey, I'm only paying you five percent or four percent?

INMAN: I think the important thing is to interview several so you can have leverage. You want the best realtor in your neighborhood or your forming area, but interview several. And then say to them, hey, I've got an offer here to do it for five percent. Will you consider that?

Some full-service brokers will turn you down, but I think you'll find a good realtor if you -- and also at a better commission if you're willing to negotiate.

WILLIS: All right, Brad. Thanks for the help today. We appreciate it.

INMAN: Thank you, Gerri.

WILLIS: Straight ahead on OPEN HOUSE, small steps towards real estate recovery on the Gulf Coast. We'll show you why these itty- bitty homes are a hot trend.

And don't be left out in the cold this winter. We'll check in with Bob Vila on winter-proofing your home in "Weekend Project" when we come right back.

(COMMERCIAL BREAK)

WILLIS: Welcome back.

Whether you like it or not, winter is closing in on us. The folks in Buffalo have already seen over two feet of snow, and it's only October. But don't wait any longer to winterize your house.

We enlisted home improvement guru Bob Vila to show us how to just do that and save money at the same time.

(BEGIN VIDEOTAPE)

WILLIS: So, Bob, if you were going to winterize this house, what's the first thing you would do?

BOB VILA, HOME IMPROVEMENT EXPERT: Insulation. That's the first thing I would consider. It's not easy to insulate the walls of a Tudor. There's brick, and then there's not that much of airspace in between.

WILLIS: So you just don't have the room.

VILA: No. But you've got attics, you've got roofs. You want to make sure -- heat rises, remember. And it wants to escape right through those roofs. So you want to make sure they're well insulated.

WILLIS: What about the windows here?

VILA: Well, when you have steel crank-outs (ph) like this, casement windows, there's not much you can do. You can add a vinyl strip insulation inside the pocket here where the casement closes. And that will help to cut away drafts.

The best thing that you can do is to have inside storm sash (ph), wooden ones, preferably, that create a thermal barrier between the two layers of glass. And to make sure that these old windows are cleaned up, painted, properly caulked and glazed so that they're in good condition.

WILLIS: So you're sealing everything. No holes, no leaks. How would you fix this place right here?

VILA: Well, you know, determining whether there's a function attached to this, you know. This doesn't look like it's still working, and it was some sort of vent.

I would say that the easy fix is to put some fiberglass insulation in there to keep the drafts out. But in the long run, if it -- if it's obsolete, you want to stucco over it and cover it up with masonry.

WILLIS: Bob, you say this is a bad idea, we've got the air- conditioner wide open here.

VILA: Yes, you've got a window air-conditioner in a situation where somebody has kind of installed it permanently. And so, I'm not saying take it out for the winter, but buy a jacket for it. You can buy an inexpensive...

WILLIS: A jacket for an air-conditioner?

VILA: ... insulating jacket for an air-conditioner that will keep the drafts and the cold from going there. It will not also extend the life of the appliance by not allowing the ice to build up in there.

WILLIS: Bob, you say this is a problem, too?

VILA: That is your -- yes, your laundry room and your dryer situation, where you have an old dryer vent. And often the buildup of lint that you've got there will cause the situation -- not so much here. And you can, you know, cut this stuff away easily.

But back here there's a baffle (ph) that when it's not in use it's supposed to be closed to keep drafts out. This one just pops back open.

WILLIS: It's open all the time.

VILA: Yes. So you're getting to get cold air coming in through there all the time.

Of course, this going straight into the dryer. And when the dryer is not in use it just means you're kind of getting cold air into the machine that eventually makes its way into the home.

WILLIS: More cold air coming into the house all winter long.

I can just replace this, right?

VILA: Yes. It's a very cheap replacement.

WILLIS: What does the average consumer need to know about their furnace? As winter approaches, what should we be doing?

VILA: Yes. The source of heat is another important consideration, because that's where you're really burning your dollars. And if you have an oil burner or a gas burner, you want to make sure that they're highly efficient machines.

If it's a 10-year-old affair, you might consider replacing it. And one way to figure out the efficiency of it is to have your utility company or your oil company come out and test it for you.

But remember, that's not as expensive as changing the whole furnace. We're just talking about the burner. And that can save you a lot of money.

(END VIDEOTAPE)

WILLIS: Great ideas from Bob Vila.

As always, if you have an idea for a weekend project, send us an e-mail to openhouse@cnn.com. And you can watch past weekend projects on our Web site, cnn.com/openhouse.

Straight ahead on OPEN HOUSE, why living in a little house is a big deal for many folks on the Gulf Coast.

But first, it's time to go "Trendspotting".

(BEGIN VIDEOTAPE)

WILLIS (voice over): Something new is happening in the kitchen. And it doesn't involve a new diet or appliance. The kitchen table is getting some height.

STEPHEN DRUCKER, EDITOR IN CHIEF, "HOUSE BEAUTIFUL": Americans are living a lot more casually. Everybody knows how much fun it is to sit at a kitchen island, at a barstool, and grab a quick meal. So the (INAUDIBLE) industry responded to it.

WILLIS: These new tables are by definition at least three feet tall.

DRUCKER: The kids love it because it's fun to sit up high. Old people -- older people love it because it's easy to get in and out of these chairs.

WILLIS: High dining tables are said to get bigger, rounder and become available in a wider range of styles.

That's this week's "Trendspotting".

(COMMERCIAL BREAK)

WILLIS: There is a hot new trend along the Gulf Coast. It's not about building big houses. It's about bringing in little ones that serve a purpose and can withstand the force of a hurricane.

(BEGIN VIDEOTAPE)

WILLIS (voice over): FEMA trailers, cramped, ugly. They could blow right over in a hurricane. Not exactly the ideal place to live after losing your home in Katrina. But designers have come up with something new, something more attractive, something safer. And something that feels a little more like home.

MARIANNE CUSATO, KATRINA COTTAGE DESIGNER: It's about dignity, and it's looking at the buildings that were there before.

WILLIS: They're called Katrina cottages, smaller versions of the houses traditional to the Gulf Coast. And designers and community leaders are hoping they will become permanent replacements for FEMA trailers.

Connie Moran is the mayor of Ocean Springs, Mississippi. She says the cottages are a better solution for housing after a disaster.

CONNIE MORAN, MAYOR, OCEAN SPRINGS, MISSISSIPPI: With the government paying millions of dollars into FEMA trailers, why not spend that same money into something that appreciates in value rather than just goes on the trash heap at the end of the day?

WILLIS: Starting at about $25,000 for building materials, plus construction costs, these home can be built for about the same money as a FEMA trailer, and they can be put up quickly, within just a couple weeks in some cases. Even the federal government sees potential. Congress has approved $400 million for a pilot program who would move some of these living in FEMA trailers into Katrina cottages.

And this small yellow cottage isn't the only style available. Ocean Springs is planning a Katrina cottage square right here on this lot. It will feature 17 different styles of houses. Families will be able to come out and kick the tires to decide which house is best for them.

One style families could choose from is this one on display in Chalmette, Louisiana. Its architect, Steve Oubre, designed this model to be especially resistant to hurricanes. He says it can withstand 200-mile-per-hour winds. That's a Category 5. And he says it's virtually flood-proof.

STEVE OUBRE, COTTAGE ARCHITECT: These buildings are set up now where everything is treated material. So if it got wet and stayed inundated for quite a while it would not rot. And two, when the water subsides, the interior -- this particular building has cement board on it. There's no wood on it at all other than the joists. So you wash it out and it's ready to go.

WILLIS: But you don't have to live in hurricane country to appreciate these downsized houses. They might soon be available to everyone. Cusato is working with Lowe's home improvement to offer the cottages in a kit. And Mayor Moran says she's gotten a lot of interest from outside her community.

MORAN: Many people just would like to have one as a home office, or a place for their kids, or a guest cottage, mother-in-law cottage, lots of other uses.

WILLIS: So, whether you live on the Gulf Coast or some other coast, you might see these cute cottages cropping up in your neighborhood.

(END VIDEOTAPE)

WILLIS: Those are adorable.

Before buying any kind of prefab home, though, like the Katrina cottages or a larger size house, know this: getting the perfect foundation is crucial. Now, if one of the joints of the foundation is just a centimeter off, you're in for a whole host of problems. The project could end up costing you a lot more time and money if you get it wrong.

Also, using prefab components means you won't have total control over how the house looks. That means limits to where windows can go or how high your walls can be.

And make sure the designers are legit. This industry is not regulated. Ask to walk through a modular home they built for somebody else.

As always, it's buyer beware.

We'd love to hear from you. Send us an e-mail to openhouse@cnn.com. And you'll find more on today's guests and topics on our Web site, cnn.com/openhouse.

As always, we thank you for spending part of your Saturday with us.

OPEN HOUSE will be back next week right here on CNN. And you can always catch us on "Headline News" every Saturday and Sunday at 5:30 p.m. Eastern Time.

Don't go anywhere. Your top stories are next in the "CNN NEWSROOM".

Have a great weekend.

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