The desire to bust up the realtor cartel has a long and lengthy history, and each year it seems to take on a new twist.
Now it is the realtors themselves who talking about the Big Dismantle:
http://www.inman.com/2013/11/09/mlss-at-cliffs-edge-over-pocket-listings/
We saw the distressed inventory dry up as banks turned off the foreclosure machinery. It has left buyers scurrying for deals, and eventually they were scrambling to just buy anything.
San Diego County Attached and Detached Sales, Jan 1 – Oct 31
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It had a similar effect on realtors, especially those who were short-sale or REO ‘specialists’. When their inventory dried up this year, they were left with big teams and half the business – or less.
These agents have a choice.
Try to compete with the rest of us legitimately, or develop a new gimmick.
Most of these REO/Short-sale specialists enjoyed having full control of the transaction. With short-sales especially, they were able to steer the deal to their flipper buddies who brought them back for re-listing.
Just earning one honest commission isn’t good enough after you’ve become accustomed to making 2-3 commissions in a package deal.
Benefits include more than money – these agents also want to control who buys your house. Hence, you can look forward to more gimmicks built around pocket listings and off-MLS sales as agents try to convince you that their new trick is going to change the real estate world.
Don’t fall for it.
What Sellers Want, Need, and Deserve:
1. Open Market Exposure – In the hotter markets, some buyers have been paying prices that are completely unhinged from the comps. Any agent that discourages you from listing on the MLS in order to quietly steer the deal to their buyer is doing you a disservice.
2. Shock and Awe – Redfin and others want potential sellers to identify themselves so they can shop your property around their stable of buyers. The sellers will bask in the attention, but would only sell at full retail price. But WITHOUT OPEN MARKET EXPOSURE these potential buyers will feel no pressure to step up that high.
Worse yet is the over-saturation. When you do finally list your property on the open market, the urgency has already been diminished because you’ve been passed around already. The highest urgency is reserved for those who surprise the market with a hot new listing – and that urgency is what drives the crazy-high sales prices.
3. Listing Agent With Good Reputation – These gimmicks are intended to build databases, with hopes of a lucky sale here and there. The primary goal is to get you into the database so they can constantly ping you about how cool they are, and how many millions of homes they sell. When you are finally ready to list, they hope you give them the listing. But think of how other agents feel about these tactics – the agents who represent the potential buyers of your house.
It has always been a dog-eat-dog business, and it will get worse before it gets better. It’s likely to splinter into “expert teams whose unique marketing skills” are promising to provide that dreamy lucky sale – at your price – by pulling a buyer out of their pocket, rather than from the open market.
Until the industry has a leader who insists on reputable, ethical dealings with the public, this business will be full of hucksters.
Sellers beware – get good help!
There is no reason sellers should have to pay Realtors $30,000 to sell a freaking $600k house! That is so ridiculous & backward! It is robbery. The only reason this outdated, antiquated system is still in place is because how well funded, organized and powerful the National Association of Realtors lobby is. It shows once again how our Government is run by the power and wealth of lobbyists, not really what is good for consumers or the people. The Internet should have disinter-mediated Realtors long ago just like Expedia.com got rid of travel agents. But travel agents didn’t have a powerful lobby like the NAR buying the Government
My thoughts:
1. It shouldn’t cost more then say $995 flat fee to say have an attorney draw up the paperwork for a house sale.
2. There should be a publicly accessible list like Craigslist where buyers can list their houses (just like they sell their cars).
3. Buyers should be able to pay a flat fee to “real estate consultants” to consult them on finding the best investment for them if they so choose. Then these consultants would be real professionals and able to tell buyers the real truth and not be bound by stupid rules like they can’t “steer” buyers away from certain neighborhoods.
4. Getting rid of real estate agents would make the market so much more healthy. They create so many issues with how they try to “control” the sale, the crookedness with pocket listings and short sale flopping, only presenting certain offers, etc…
Another thing I would add to my comment is many sellers with little equity can’t sell only b/c they don’t have enough equity to pay real estate commissions. Getting rid of current real estate system of commissions would help more people be able to sell.
Hello hj, and welcome to bubbleinfo.com!
I cover this topic regularly here, so stick around.
Craigslist, Zillow and many other websites are happy to publicize your house for sale without a realtor, feel free to give it a go.
I think you are probably right that eventually we will morph into more of a consultant role, and I won’t mind. You wouldn’t mind paying up front for my service, would you?
NAR might have some clout in Washington DC, the corrupt cesspool that it is. But NAR has no influence with realtors, and what commission we charge.
It is highly competitive, and there are multitudes of discount agents available if saving money is all you care about. Shop around! Compare the services provided too, because most agents don’t have much, if anything, to offer besides filling out the forms.
hj,
So you believe a good realtor (or should we say buying agents and selling agents) has nothing at all to offer home buyers and sellers? It’s sad that all the crooked and lazy realtors are giving the good ones a bad name…you’re right, the internet will kill them off eventually if this gets to be the public’s perception. This is also a reason I have never gotten my Realtor’s license…I’m don’t want to join a unregulated profession that is likely to die if nothing changes with the NAR.
The good Realtors like Jim need to propose a new subset of NAR with a higher standard…call it NAR Platinum Realtors. Have rigid experience and satisfaction requirements and a posted signed pledge to always practice full market exposure, always put their clients interest first, etc.
I have bought and sold many properties with a Realtor and also without. Unfortunately, most added almost nothing, but the good realtors have definitely earned their 3%.
Moving to a new city, or even a new part of a city, do you know which neighborhoods, schools, amenities, are the best in the city regardless of cost? Which neighborhoods offer best value for your price range? Which roads/freeways to avoid commuting to your new job? Which housing tracts are stable and which are headed downhill?
Selling your house…do you just price it at the Zillow estimate and hope for the best? A good agent knows his neighborhood values, can suggest high value fix-ups and staging, and can price it right from the start. You also have to ask yourself how much your time is worth…I usually sell my flips myself, but don’t kid yourself, it takes a lot of time and hassle! Are you going to take a vacation day to meet an eager prospect at your house during work hours? Spend your weekends holding open houses? Holding costs for empty houses are very high too…mortgage, utilities, taxes, risk for appliance thefts and vandalism, . The average person who doesn’t study Zillow and Redfin and comps everyday is going to get their best price using a good agent, and even at 3% will come out ahead in time and money. There’s no way to run this statistic, but I’ll be those who have sold with Jim have fetched at least a 3% premium and have saved a lot of time and hassle.
Good Realtors need to trumpet these advantages of using an agent. This ain’t a $500 inclusive Cancun vacation, this is the biggest purchase of your life! Like Jim says, people need to get GOOD help!
The problem is that there is a perception in the market that someone won’t be able to sell a house if it isn’t listed on the Realtor controlled MLS. You know as well as I do agents will not show a house that is not on the MLS and they are not going to make a commission on. There is a “system” that has been in place for a 100 years that sellers and buyers “think” they need to use a Realtor to buy and sell a house, so enough people do not look for property on FSBO.com or Craigslist, so they don’t get the exposure they need. There is no reason someone should pay $30k to sell a house period. That is crazy. What in life costs you $30k??? I think it’s the same way in the mortgage business. I think prospective borrowers should be able to go on a site like Expedia.com to look for rates and lock their own loans and upload their documents. Closing costs in a real estate transaction are so ridiculous with lender fees, escrow fees, title insurance, etc… Title insurance is another huge scam. It has the lowest rates of claims of any type of insurance, but it is very expensive. But it is also protected by powerful wealthy lobbyists. Richard Shelby a Alabama Repub. who used to chair the Financial committee in congress for many years himself had ownership interests in title companies. That industry needs reform too. It is antiquated. In the end, consumers lose big time. The transaction costs for buying and selling real estate are too high. Especially in the Internet Age.
Also Jim I think you have an awesome blog and you seem to be a really top agent and it would be worthwhile for someone to hire you and negotiate a price. But I think it should be more of a choice for consumers to hire an agent or not. Where as right now there is a “perception” by a lot of people who are not knowledgeable that they have to hire a Realtor. And properties that are not on the MLS just won’t get the exposure. It would be great to see the industry completely change and CAR and NAR are eliminated and Realtors just become indepedant individual professionals like attorneys, CPA’s, or other consultants that buyers and sellers can hire if they so choose and negotiate a rate for their services. And that Realtor can then be a true consultant that can give the client their expertise and won’t be bound by DRE rules. I have always found it really bizarre that a Realtor can’t tell you to “avoid this neighborhood” or “go to that neighborhood” b/c of steering issues. When that is exactly why you a hiring them!!!
I’ll come back to address your points but check this in the meantime – from NAR!:
http://www.inman.com/2013/11/11/errol-samuelson-realtor-com-experimenting-with-agent-matching-tool-powered-by-mls-data/
Hi Jim, I think it says a lot about you that you let my comments post. You could have easily deleted them. Keep up the awesome work on the blog. You are very fair in that you offer both sides of the coin. You are a gem of a resource and a fountain of knowledge for San Diego real estate:)
HJ,
One of the reasons why the costs are this way is because Realtors work solely off of commission. If Jim spends the next six months with a client and they end up not buying a house, he worked for six months for free. The nice part for the client is that there’s zero up front costs and zero costs if no house is bought or sold.
As for the mortgage business, closing costs tend to be cheaper if you go direct with the lender. There are websites out there that do exactly what you are talking about. I also don’t think title insurance is so much the government, as a lender trying to protect a $500K+ loan. Who in their right mind wouldn’t want to protect themselves that way?