One more note on the nomination – Inman News is the sponsor, which publishes an e-newsletter sent twice a day to agents around the country. Their mission is to help agents, and while I’m a daily reader, I don’t cover realtor-centric topics here. I figure that they have it down pat.
But with their attention possibly sending a few new readers this way who are realtors, I’d like to take the opportunity to give you something to think about – and comment if you’d like.
Running a real estate blog leaves me wide open for blasts from people who figure I’m like all the other realtors, so they take their shots. A couple of days ago this post-and-video was re-published on www.calculatedriskblog.com, which drove a few newcomers my way. Here is a comment left by Robert:
(I worked for two years as a full-time marketing assistant for one of the top 20 agents in Chicago.)
You don’t provide us with an address so we can’t determine whether this property was overpriced at $3.2M. I’ll go out on a limb and guess that was the case with this exceptionally bland joint.
As a result, this post comes across as whining, Mr. Mercedes. Most people have been priced completely out of the market by the bubble, which needs to deflate. In 2010 realtors who prop up prices are the scammers.
On your youtube page you complain that this sort of behavior undermines public confidence in realtors. There is no public confidence in realtors, precisely because you refuse to recognize a)the bubble b)your near-irrelevance in the Internet age.
My girlfriend recently made an offer on a house that was in line with local rents, in line with fiscal responsibility (and she makes 50% more than the zip’s median household), in line with the tax assessor’s value. Her buyer’s agent laughed (literally) at her offer. He declined to write the offer up but agreed to pass it on verbally. He got fired. The listing agent failed to return a phone call for two weeks, and finally had someone else call us back. Result? We looked up the owner in the online tax records and sent him the offer directly.
Realtors are superfluous from a buyer’s perspective. As of now, all the stupid buyers have been squeezed through the system. The rest of us know the only thing we need you for is to open the lockbox. That’s worth $20 I suppose.
My point is that only an idiot would buy at market value at this point. If you’re not an idiot, you’re going to find your way around a system that is currently set up to scam you.
If realtors want to regain some sense of integrity, how about starting with some honesty as to where the market is going. And how about changing your fee schedules to reflect your actual social function in the year 2010: taking photos, uploading listings, opening lockboxes, babysitting inspections, and filing paperwork.
The bank is not being scammed. The bank is a scam. Let me wipe away my tears for Bank of America. Oh wait… I have none.
The neighbors, I have more sympathy for. Not everyone was after unearned bubble cash, and owners have suffered large losses. But owners need to understand they were scammed out of their hard-earned money when they bought the overvalued house, not when a legit buyer makes an offer that reflects reality.
I think there are a lot of consumers that are fed up with the realtor community, and are increasingly frustrated that they don’t see much improvement. If you are a realtor wondering how you can better serve the consumer, re-read the above. Then go start a blog and use video to share your expertise – please!
P.S. The video above put the spotlight on a very shady short-sale deal, where the agent deliberately did not expose the property to the open market. As a result of the exposure on Calculated Risk, I received two phone calls from Bank of America’s upper management. They were very interested in the details, so I sent them my entire case.
You could make a living as a whistle blower. I’m surprised BoA didn’t pay you an “Awareness Fee” for their poorly performing agents.
As for the person sending you that message…well they really need to read a book called “How to Win Friends and Influence People”. You don’t get someone on your side by calling them an idiot.
As a buyer making probably the largest purchase in their life I can not see how you should not have an agent working on your behalf. This is not like daytrading a stock where you could loose a few hundred dollars if you choose poorly…this is a house!!!
As long as there are thieves, scam artists, and regulations they’ll be a need for an agent to navigate the dangerous jungle.
Hah, Thaylor, that is rich!
Other than for a few (and I do mean “a few”) really good real estate sales transaction and local market experts (our gracious host included), most consumers rightly think that the “Realtors” *are* the “thieves, scam artists, and regulation[sic?]”.
pot, meet kettle
(and congratulations, Jim, on getting BofA interested in helping skim some of the scum off the pond)
Good work. What does it say about the quality of BAC’s system that this can happen on a multimillion dollar property. Friends who are trying to purchase properties are amazed at the lack of experience and knowledge they encounter in the real estate, finance, and escrow process. I’m afraid the system is broken and I’m just not sure how its going to get fixed. How about looking into your crystal ball and writing a post on the future of the industry.
The author says a whole lot of things in this rant. Well written bravo for voicing your opinion! And bravo Jim for having an open mind and reposting. I think a little transparency would help the cause. Especially when it comes to negotiating the final seller concessions a buyer’s agent is most useful. But everything in between seemed very boilerplate to me as a first timer.
Future of the industry? I’ll take you up on that, and add it to the other topic I’ve been pondering, selecting an agent. Give me a few days.
I wonder what the outcome would be if a wall street quant took some time away from modeling derivative strategies to write a computer back-testing model on real estate. He/She could then run multiple “what if”‘s on the last 10 years of real estate transaction history.
One “what if” model would be to remove Realtors and appraisers from the transactions the last 10 years as well as the “easy money” flippers and wholesalers and the sub2 folks etc etc. and replace them with fixed fee consultants. Implement a government regulated inspection the same for all homes so the buyers could compared each home based on objective data. List homes on an exchange with all past closing prices, number of bids etc. There is no moral reason to hide information that is hidden today by NAR. Perhaps an exchange like eBay. Let true supply and demand decide where the price should be. Just like autos on eBay. I bet the outcome to the above “what if” model would have been a much healthier financial system then the one we have today.
Your commenter makes some very valid points. Many Realtors continue to live up to their sleazy reputation of putting commissions before the interests of their clients and consumers in general.
I saw the video you referenced, and I am happy to hear that BofA has responded. Of all the banks handling foreclosures and shorts, they seem to be the most out of touch and least responsive. They could definitely use a shot of reality from professionals who experience the kind of stuff you document.
Did you guys see the article in the sacbee about ron artest doing a short sale in loomis, near sacramento.The bank let him off the hook for 475k.When you make millions and are able to do a short sale the system is all screwed up.
“Mr. Mercedes” I love it. If you were in the truck, you could have dodged that bullet–but the next Benz-Driving Realtor might not have been so lucky!
The only issue with that guys argument is that after the loan holder is scammed the unit will go back on the market. I guess he did not think of that.
When will the processors start hiring their own agents on short sales? If a short sale was handled like a foreclosure sale it would be such a better process. More importantly why shouldn’t it be handled like a foreclosure sale.
Link to Sacbee article tweeter referenced. WOW, there are no words to describe how wrong everything is on so many levels.
http://www.sacbee.com/2010/06/18/2831518/ex-king-artest-joins-long-list.html
“Mr Mercedes” ha ha ha
Sure glad he didn’t notice your Louis Vuitton shoes!
Listen “Mr. Mercedes”……………lol Obviously the gentleman from Chicago is very unfamiliar with Rancho Santa Fe real estate prices. A 4374 sq ft home on 2 acres in the Covenant “picked-up” for 1.575 mil..? I can only say Mr. Chicago marketing assistant get a grip.
As a buyer I understand where Mr/Mrs Rant is comming from. I’ve have buyers agents that won’t send in my offers. I’ve also had sellers agents tell me they wont forward my offer to the seller. I’ve been screwed out of short sales by someone else who has an inside track or is willing to grease the deal. Overall I view most realtors on the sale level as a used car salesmen.
I’m a potential buyer that is very frustrated with the state of real estate. But what is the point of making an offer substantially under the listing price? The poster Robert didn’t indicate how far below list price his girlfriend went on her offer, but from the reaction of the parties involved it seems like it is substantial, perhaps more than 20%. What is the point in doing that and then getting frustrated about the outcome? All you can do is rent until the prices get to a reasonable level and vote for politicians who aren’t corrupted by the financial industry. With the end of the housing stimulus, maybe the prices are going to fall 20% to get them reasonable again.
Glad to hear that BofA will be asking that shady agent some really uncomfortable questions soon.
As you mentioned about a future post Jim, your thoughts on how to choose an all-around honest agent would be very interesting. (I didn’t have much luck on my last attempt in finding one as a buyer, and I thought I’d done my homework.) How do you spot someone determined to do the right thing among all the questionable agents out there?
Here’s a genuine question for any realtors out there:
When you represent a buyer or seller, do you TRULY BELIEVE, deep down inside, that you’ve provided $20,000+ worth of service? (Assuming the average pile of crap in North County goes for $700k.)
BTW, my question above isn’t so much directed at Jim. The information on this blog is invaluable. Of course, that’s not to say I wouldn’t be interested in his answer also.
I think anyone who wants to see realtors justify their commission income should first state what they do for a living, state their level of compensation, and whether they believe deep down their compensation is justified. Turnabout is fair play.
Last I heard, commissions were negotiable.
“Turnabout is fair play.”
I don’t see how this is relevant if I’m the one paying the commission. Now if I were asking someone to pay ME a commission, then, yes, I should justify why they should.
As a result of the exposure on Calculated Risk, I received two phone calls from Bank of America’s upper management. They were very interested in the details, so I sent them my entire case.
ALRIGHT!!! Way to go, Jim!
p.s.: Ignore the buffoon; he obviously didn’t take any time to research you personally.
The realtor I work with does all the things the ranter describes but that’s not the hard part of the job, she also is the psychologist, confessor, mommy figure, and evil nun with a ruler to buyers and sellers who are utterly unable to a) keep a house in show condition or get it there in the first place, b) evaluate whether something on the appraisal is a drop dead issue c) emotionally deal with selling a house in the middle of a divorce, while their kid has to wear a court ordered ankle thing, and their mother is dying in a nursing home. d) all manner of other completely insane things that I would never ever agree to deal with for any amount of money.
Yeah, there are legions of agents who can’t even take a decent picture of a house and somehow get listings. They aren’t going to be closing many deals. Because closing deals is what good agents do well, not opening a bloody lock box. The ranter has no clue, really, and shows it with flying ignorant colors. Like the producer of a play, a good agent has personal connections to get to closing curtain successfully. That’s a soft art, not a commodity as he believes.
The problem with so many buyers/sellers experiences is that the RE system chews through the 98% of agents who have no idea what the job entails (or delusionally think the job entails same as what this ranter does), but there are always thousands more suckers willing to believe getting a license is the path to easy money.
Susan asked: “One “what if” model would be to remove Realtors and appraisers from the transactions the last 10 years as well as the “easy money” flippers and wholesalers…I bet the outcome to the above “what if” model would have been a much healthier financial system then the one we have today.”
Unfortunately, Susan, the buyers are not that smart.
But let’s broaden that. The American consumer is not that smart.
Let’s broaden it further. American’s are not that smart.
Look around at our world. Things are broken, systems don’t work as promised and most still believe the promises.
A little over a year ago we “bought” a new government on a general promise of “hope and change” but no specifics. Bought a storyline, short on details.
Sounds like the typical homeowner.
Thanks emmi, a wonderful start on how the good agents can handle a wide range of situations and keep moving.
Just the condition of the property alone is where the agent can earn every penny of the $20,000 mentioned. To be able to identify everything that’s wrong with the house, and arrange for a satisfactory result can be worth the commission alone.
But while we’re on commission, let’s start with the fact that it’s not guaranteed pay.
Would anyone go to work on their same pay scale, with no weekly or monthly paychecks and only getting paid after getting to the finish line successfully?
There deserves to be a nice bonus for only getting paid at the end, and maybe not at all.
The people who harp on changing realtor pay to fee-for-service haven’t been looking for homes much. I regularly have buyers take 6, 12, or 18 months before finding a house – want to pay me hourly for that? Think of the pressure that puts on the buyer to hurry up the purchase.
Jim–Some very valid points–I am sure you earn your commission and sleep very well at night! However, the true condition of property is usally determined by a home inspector’s report (not the agent’s visual), which is most always paid for by the BUYER. Properly correcting the items in that report (IMHO), could be successfully negoitiated by the buyers with or without the help of an agent.
I don’t post but always read. Here is my story, two years ago there was a property on socorro in Carlsbad (92009) asking 450k we made very low 400K all cash offer and never heard from them again. Inside the house was completely guted, fast forward two years and the property had a for sale sign but was not on MLS. I had an agent call but the listing agent did not want to work with a buyers agent but we found out that “as is” price will be low 400’s or fixed 500K (their estimated cost of remodel close to 100K). My wife called and he made sure we were not working with an agent and we said we are not. He said right now we are fixing inside and he would let us know, well few days later it came on the market at 499K and went pending within days, two weeks later he calls us 8 a.m. and says are you interested because buyer could not get financing and we said yes but we need to see inside, he said ok let me see if the termite tent is removed and he will call back and take us there. He never called back, so my wife called back end of the same day and he didn’t even remember makeing the call to us in the morning and he said that he sold it to an investor for 501K. Less than 10 days later the property came back to the market at 597K, investor owned and listed by the same agent. He is from Encinitas and according to him he had sold 325 properties last year. He screwed the bank for the first sales commission and turned around and sold it again, it is in escrow right now. Jim thanks for what you are doing.
He has closed 69 transactions himself since 1/1/09.
He’s one of Bank of America’s primary REO listing agents, yet he had his own house foreclosed on by BofA.
Was it a strategic foreclosure? How can this happen with 69 transactions? He seemed like he was doing us a favor by talking with us, not that he spent more than total of 3 minutes with us, he was too busy.
Robert, one thing your Mr. Mercedes did not tell you was this particular closing on the same street Lago Lindo just last week.
6275 Lago Lindo
Beds/Baths: 5 / 7
Est Square Feet: 7,478 sf
Lot Size: 88,426 sf
Acres: 2.030
the property closed for $4 million.
So let’s just take 6060 Lago Lindo for example. The buyer of this shady deal could simply tear it down, and spend say a cool additional million to produce something similar to 6275, and would still be $1.5 million ahead of the game, or flip for $1.5 million in profit.
Now can you see how $1.5 million was way below market value?
I’ve been an avid reader here for a while. I love the info and insight you’re sharing with the community, Jim, but I just had to take the bait and post a response to this quote:
“The people who harp on changing realtor pay to fee-for-service haven’t been looking for homes much. I regularly have buyers take 6, 12, or 18 months before finding a house – want to pay me hourly for that? Think of the pressure that puts on the buyer to hurry up the purchase.”
Sure, I’d choose to pay hourly for that. Just like given the choice between a divorce attorney who takes a commission on what I end up paying for alimony, or one who charges by the hour, I’d go fee-for-service there too. If someone is taking the role of my advocate, I don’t want a conflict of interest.
You say how there would be pressure on the buyer to “hurry up the purchase” but the current system pressures the buyer’s agent to hurry up the purchase – and to invest the minimal amount of effort into doing so.
I’ve had agents not return my calls so they could focus on higher-price sales (with their higher commissions), I’ve had an agent send me lockbox codes so they could save themselves a trip, I’ve had an agent try to talk me out of doing permit research on a suspicious addition, I’ve had an agent fake my signature on a repair request I’d never seen so that the transaction could close faster. At the end of the day, even ethical agents like yourself have to deal with the simple truth that you’re paid for us to close – and anything else we buyers need is overhead. So how, exactly, would we buyers lose out if it were fee-for-service?
You’ve been dealing with lousy agents.
I don’t think buyers would lose out on fee-for-service. Somebody will take me up on it one of these days and my guess is that it’ll come in slightly less than the regular commission-only route.
My point is that few will feel comfortable writing checks when the finish line seems so vague, and so far away.
OC Renter – Your comment is so out of touch with reality and reckless that it should be deleted.
After a 1 minute look at the photos of the closing you referenced at $4mm the cost to rebuild a house of that size/quality, on acreage such as that, is easily $400/psf including pool/landscaping/grading/palms/etc. Thus you are a MIN of $2.8mm so lets call it $3mm+.
This does not include plans, permits, 1+ year of RSF art jury approval, interest carry, school fees, etc.
So add $3mm for costs plus the $1.5mm of dirt and your cost is a min of $4.5mm (likely closer to $5mm).
You now just spent 2-3 years of your life, and lost a million dollars….nice.
Sounds like the advice of a good agent who knows the market would have saved you millions by not letting you do that deal with your flawed knowlege/plan.
Thus, by your naive view of the marketplace you actually demonstrated the value top tier agent can provide….telling you NOT execute your ‘can’t lose’ business plan to make $1mm+ and stearing you to a property that will be profitable.
This is how the pros eat the newbys for breakfast. Remind me to call you when I have an overpriced lot to sell that cannot lose!!!
By Cearfund’s estimate, Real Estate in San Diego (at least RSF) is priced WELL below replacement cost–time to buy???
Local boy, could be successfully negoitiated by the buyers with or without the help of an agent.
Many transactions don’t need an agent. But a stunning percent of buyers and sellers, despite wanting to buy or sell a house, sure don’t act like it when it comes down to playing their efficient role in the process. Trouble for me in deciding whether to go with an agent or not is there is no telling what kind of party you will be dealing with until it’s too late.
I could go on for pages about how screwed up the commission system ends up being to the industry, but I’ll just summarize with I have no good suggestions for fixing it, but it sure leads to some weird behavior on the part of many agents. Fixing that and making it more like a salary job with rewards for quality performance would be hugely beneficial to the entire sector.
Local Boy – yes, newer homes are valued below pure replacement value given current land values. The key is to view a product and compare the apples to apples cost to replace.
The home that was referenced above was built in the recent period in 2003 so the home is very easy to price/compare quality, finishes, etc. Probably $300/sf plus another $100/sf for the acreage work/landscaping and upgraded finishes.
My real time to buy is when you can buy a newer home for the cost of construction alone, and get the land for close to $0. That is when you have hit a golden moment…not yet there. Land values are still a bit sticky in RSF, etc.
At $400psf that house as you approach a $3mm purchase you are buying at true bottoms…and it might just get there.
What’s key is learning how much replacement cost of the structure/finishes is for all the various levels of homes for the various markets.
Commodity buyers rarely appreciate the advice of a trained professional. Regardless, Robert’s rant was condescending and rude. I feel sorry for any realtor who comes across him and his girlfriend.
Hi All,
Same Robert here (Jim can verify the email address).
Jim replied to me in that post and I replied back. It wasn’t my intention to come across as condescending or rude, and I mentioned that in the followup. I found this page on patrick.net the other day, first time to the blog… and even a cursory look at the blog (named bubbleinfo.com!) tells the first-time viewer that Jim is someone who’s genuinely concerned about providing a good service to his clients and concerned about unethical practices in his profession. My “rant” certainly wasn’t aimed at him.
On the other hand I’ve received nothing but condescending treatment from the very same agents who claim their services to me are worth tens of thousands of dollars — when I found out much, much more about the property and the market from the Internet than they were willing to share.
To Emmi specifically, I worked day in, day out for one of the top 20 RE/MAX agents in the Chicagoland area for two years in 02/03. The three of us in that office closed 130 properties a year. I know all about the occasional emotional/counseling/babysitting aspect of the transaction. That’s worth something. Is it worth her seven figure income, compared to the income of a social worker, who does that stuff (except for real), all day every day? No.
My point was that, from the perspective of a buyer, this “shady” transaction looks like a victory for a buyer, and a return to normalcy from hyperinflated values.
My question about whether this is a scam or simply a huge loss for the bank remains. If you look up the property on Zillow, you’ll see a more complete listing history:
05/26/2010 Sold $1,575,000
01/20/2010 Listing removed
10/21/2009 Listing removed
07/11/2008 Price change $2,595,000
04/21/2008 Listed for sale $2,895,000
05/22/2007 Listed for sale $3,475,000
05/13/2005 Sold $2,587,500
People had two and a half years to make an offer on this house. They could have offered the $2M Jim says it’s worth. Why didn’t they?
Apparently important people at BoA want to know what this place is really worth too. Maybe we’ll find out!
What does it say about the real estate system that the system had to be gamed to make a sale?
Anyhow, apologies again for anyone offended by my direct language. It’ll be interesting to follow this story and see where it ends up.
Oh, and GameAgent, it’s true my head might have popped off my shoulders 😉 A Mercedes is at least a well-engineered luxury vehicle… from what I can tell, Louis Vuitton shoes are very average shoes with a logo slapped on. (Next time try http://williesshoeservice.com/ Jim, I want you to get your money’s worth 🙂
For the record, I’m on my second used MB of my life, and never had a Louis Vuitton anything. I’ve worn Santoni shoes for years, they made a cameo a few months back when I was walking along the beach.
The “listing removed” entries in the listing history are what are the most disturbing – a blatant move to circumvent the system.
I would ponder a guess that in 2008 the RSF market was still in disbelief, and no buyers were lowballing 20% yet. The listing removed in 10/09 was that of the culprit.