When I first started this blog on a Saturday morning in September, 2005, I thought I needed to hurry up before every agent was blogging. Wouldn’t this be a great vehicle to educate consumers and demonstrate our expertise? Certainly, every agent will be doing it!
Instead, what blogging has exposed is that agents either have nothing to say, or transparency isn’t their friend. You rarely see much more than their recent successes – advertising of the properties they just listed or sold, with focus on how great the agent is.
Why doesn’t transparency catch on?
What do listing agents have to fear?
Exposing how sales are put together is like the proverbial sausage factory. Realtors don’t want you to know how the sausage is made.
Once an agent has a signed listing, how they procure a buyer is what makes the difference between a legitimate open-market sale, and an insider job. Even those agents who initially plan a legitimate open-market sale can get duped into an off-market quickie. How does that happen?
We operate in a desperate environment, and the most-desperate agents are making the market. Even the agents who AREN’T desperate, have to operate as if they ARE desperate, just to keep up. Unethical or illegal actions are commonplace, and with no enforcement whatsoever of the rules or laws, they continue unabated.
It’s always been like this, but after the fleecing of the banks during the short-sale/foreclosure era, we have become numb to the fraud perpetrated by realtors everywhere. Agents have brought their off-market fraud practices into the tight-inventory era, and expanded upon them.
Here are a few of the tricks being used by listing agents to deprive their own sellers of a top-dollar open-market sale. The most incredible part is that every agent implicates themselves by inputting these listings directly onto the MLS for all to see what happened:
Coming Soons that never come. Instead, the listing agent finds a buyer from just placing a ‘Coming Soon’ sign in the front yard, and once procured, they input the listing directly into the pending section of the MLS.
Sold Before Processing. We now see a few of these happen every day in North San Diego County’s coastal region. The listing agent takes advantage of the MLS loophole that states every listing to be inputted within 48 hours. It make take longer than that – but who will know or care when there is no enforcement of the rule – and office managers encourage the practice in order to keep both commissions in-house.
The listing agent prevents showings the first few days on the market.
The listing agent says house will be auctioned in three weeks, but then accepts an offer before then. Either auction the house, or don’t auction.
The listing agent provides lousy MLS input – bad or no photos, etc.
Instead of lowering the price publicly on a listing that has languished for months, the listing agent lowballs his seller with a buyer he has procured.
The listing agent gives the appearance of an open-market sale, but then plugs in his own buyer at the last minute.
The worst part about this situation is that we accept it.
Other agents who see these tricks happening on the MLS are subconsciously thinking that it must be permissible, so they set out to do it themselves. After all, who wouldn’t want to make two commissions, instead of one? It is a self-perpetuating cycle that no one is talking about, let alone doing something.
We are racing towards the end of broker cooperation as we’ve known it.
By joining the Association of Realtors, every agent has agreed in writing to share their listings with other agents, and adhere to a strict Code of Ethics – to cooperate with each other. But the opposite is happening – it is cool to NOT share listings, and round-trip the commission instead.
The disrupters are taking full advantage of the opportunity, and capitalizing on the greed of agents by designing vehicles to perpetuate this vicious cycle of self-serving off-market sales, in spite of seller and buyer fiduciary duties.
Examples of how this has evolved are the listings inputted as ‘Sold Before Processing’, but then the listing agent DIDN’T round-trip the commission; instead, a different agent represented the buyer. They don’t recognize the harm being done to their own seller by not exposing the home to every buyer and agent. Yes, I’m sure there is an occasional instance that warrants an off-market sale, but not as many as we see today.
Because we see all of these listings on the MLS without explanation, it makes unsuspecting agents believe it’s all legit. Our buyers see listings come and go in five seconds, and they get more desperate:
Even the real estate maverick (who has been promising to StopZillow and save real estate for months), rolled out his answer last night. Incredulously, it is a mobile app designed to funnel all buyers directly to the listing agent within minutes (I skipped the first 20 minutes of backslapping):
This is my series of blog posts to address the situation, and my final installment is coming next.
Redfin publishes their commission rate on their website, and it makes sense. All brokerages should make it easier for the consumer to evaluate the choices.
Here are my commission plans for home sellers:
Full Service – Expert (2% to 2.5%)
I handle all of the critical details that result in a signed contract. Preparing the house, guidance on attractive pricing, effective marketing, and implementing bidding-war strategies are the key categories. More details HERE.
The exact percentage is determined by price point, condition of home, and my involvement in the seller’s next move.
Kayla has been a realtor since March, 2014, and has been an active participant in our 122 sales since then. She possesses the best skill in a realtor – she is a natural salesperson – and I have been training her myself. For those who demand less commission but still want top-notch, quality representation, Kayla is an excellent choice.
Transaction Coordinating – Included in Both Above
For the last twenty years, Donna has been our expert in making sure your sale closes successfully with as little disruption as possible. To make sure everyone involved does their job correctly (escrow, title, lenders, and all other supporting cast), Donna tactfully tracks and encourages the 50+ people involved on every sale.
Limited Service
I don’t offer a limited service plan. The buyer-agents resent having to do both sides of the deal, and will penalize a seller along the way with lower offers, and heavy repair requests. Better to pay a reasonable commission to get adequate or expert representation.
Buyer-Agent Commission (2% to 2.5%)
Sellers also want to offer enough money to the buyer’s agents to be competitive with other listings nearby. A house listed with a below-market commission for the buyer’s agents will still get shown, but it will be used to sell the house down the street. Offer a ‘bounty’ that incentivizes agents to give priority to selling your house.
In all cases above, no money is required up front, and commissions are only payable if a transaction closes. The commission rate charged by an agent is a direct reflection of how serious they are about helping you, and their effectiveness. I will pay for myself every time!
Typically, if you want to know what a realtor does to sell your house, you have them over to make a listing presentation in person. Because of antitrust laws that ‘promote fair competition for the benefit of consumers’, the commission rates charged by realtors are rarely seen in public.
Until the discounters came to town.
They advertise their rate because they want to appeal to the price-shoppers. Consumers who shop for the lowest rate are attracted to this ploy, and don’t ask enough questions about what they get for the money.
Because the real estate industry refuses to publish any minimum standards, the discounters can get away with statements like, ‘full service for less’. Today, you can ‘hire’ a realtor for $100 or less – but what do you get, and is it what you want and need?
Let’s start by outlining the levels of service available.
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The Different Types of Realtor Service
Full Service – Expert
This is where you get a long-time veteran realtor – a full-timer who has closed hundreds of sales – to handle every aspect of your transaction. Any assistants involved have a similar level of experience, and together they produce a smooth, seamless sale at the absolute highest price possible.
Full Service – Trainee
Every agent learns on-the-job. Consumers deserve to know the differences, but because of the lack of transparency, there is no qualifying of how helpful an agent will be – you are taking a chance. Agents can claim to be in the Top 1%, and say their assistants are ‘experts’, but there are no official standards. As a result, team leaders are prone to hiring lower-cost employees with less experience to fill the gaps. Because it is a fast-paced and complicated business, the trainees struggle to deliver the same results as the real experts.
Limited Service
This is one service that is clearly defined here, because of everything the realtor doesn’t do for you. It is primarily for MLS entry only, where the realtors cash your check, input your listing onto the MLS system and hope you can figure out the rest on your own.
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Consumers – and realtors themselves – would be well-served if the real estate industry had a definition of the services provided, and then had every agent publish the specifics of what they do to serve clients.
Zillow does allow agents to list their sales history, but there is no instruction for consumers to properly use the information. Their agent profiles are full of fluff, with at least half of them promising to deliver your ‘dreams’.
If every realtor published their actual services provided (with fees) and a detailed profile of every team member’s experience, then consumers could make an educated decision about who they are hiring.
Do you think that technology has helped the more successful agents to the detriment of the lower half of the agent pool who have less $ to invest in things like Zillow’s premier agency and what not. And if the haves continue to take share of industry sales, do you think that ultimately increases their leverage over the brokerages/allows them to get better splits?
I work in the investment management industry and have been looking at Realogy as a potential investment but can’t quite wrap my head around what technology ultimately does to the brokerage model over the longer term but guessing it at a minimum drives commission splits higher in the favor of the agent.
My answer: The top agents have always spent more on their business, and ‘technology’ is just the latest shiny object. As agents get better at generating their own clients, then yes, they will insist on better splits or go to other brokerages that offer a more-profitable package.
There is a push for all brokerages to offer an ‘improved technology package’ to their agents, in an attempt to retain them – and it will be the recruiting tool for the foreseeable future.
Realogy survives just on their sheer numbers – they have 272,300 agents working in 14,100 offices around the world. It would take years to disrupt it, and in the meantime, they will offer technology to their agents at a reduced commission split.
But will that technology make a difference? Will those traditional agents implement this ‘technology’ effectively, and be able to out-run the barrage of disrupter advertising?
The hot technology topic today is AI; artificial intelligence. Several programs are in the market now that can predict (allegedly) who is thinking of selling their home, based on the homeowners’ Facebook patterns and other internet use. Those who are searching for homes on the internet are bound to be moving soon, right?
I am extremely skeptical of this AI being just the latest junk to sell realtors who are notorious for blowing money.
I was a brief customer of SmartZip, who promised to use their advanced technology to predict who will be the next homeowners to sell in my designated area. They gave me the list of the Top 20%, and I went to work. Of the people I spoke with, none of the Top 20% were thinking of moving, and the four people who were thinking of moving weren’t on the list. I cancelled my subscription.
It might be worth it for you to look at it from the consumers’ perspective. Will they believe the lies and deceit they are being fed through disrupter advertising, or will they thoroughly investigate all of the choices available?
And then a more hypothetical question is do you think a buyer’s agent fees would be 2-3% of the purchase price if the buyer was forced to pay it out at the close? Been looking at the UK real estate market and there is no such thing as a buyer’s agent in that market – everyone finds their properties on Rightmove.
Thanks as always for your thoughts/opinions!
My answer: No, I don’t think buyers would pay 2-3% themselves when they think all they have to do is follow their favorite real estate portal to find a home. But no attempt is made to explain why the sellers should pay a hefty ‘bounty’ or reward to a buyer’s agent for bringing the buyer.
The trend is to reduce commissions, but incentivizing agents to sell your home for top dollar is worth considering, because the highly-motivated buyers – those who pay top dollar – find a realtor to assist them.
There is a notion – pushed by the disrupters – that houses sell themselves, and every agent sells them for the same price. But there is a 5% to 10% range for every house, depending on who is selling it.
I’m just getting started. More posts coming on the future (i.e. Redfin, etc.).
Here is some insight on the truck sale, plus a curiosity check on why the West Bistro closed in January, which was very unusual, given who the owners are. Was it an indicator of the local economy?
I hope they don’t mind some blog attention, because the owners look like they are doing great things here:
When you find the right home, don’t lose it. Get Good Help!
NAHB regularly conducts national polls of American adults and home buyers in order to understand new trends and preferences in the housing market. This is the third in a series of posts highlighting poll results, as presented during the 2018 International Builders’ Show in Orlando, FL. See previous posts on tiny homes and driverless cars.
A recent poll revealed that most prospective home buyers actively involved in the search for a home have been looking for a significant amount of time. In fact, 61% have been trying to find a home to buy for three months or more, while the other 39% have been looking for less than three months.
The natural follow-up question to those who have been unable to find a home after searching for three months or longer is why?
Forty-two percent say they ‘can’t find a home at a price I can afford,’ 36% ‘can’t find a home with the features I want,’ 34% ‘can’t find a home in the neighborhood I want,’ and 27% were able to overcome all these obstacles but ‘continue to get outbid whenever I make an offer.’
This result shows there are several important reasons why prospective buyers haven’t been able to pull the trigger, but the most important one is lack of affordability – not being able to find a home at a price point they can afford.
I found a blog post by Styled, Staged, and Sold that I thought I should share! There were a couple points that were made on what you can do with your stager but I found the design trends to be the most interesting part.
Gray is slowly becoming more and more dead. We are going back to warmer neutrals like creamy white and beige but some also like to include a pop of color. A bold color can definitely add a upscale design element to your home. They say that the new pop color will be dark teal and millennial pink, which I LOVE! It doesn’t have to be the whole house covered in pink or teal paint but you could add some accessories! I don’t think anyone could say they saw a pop of pink and didn’t smile – trendy colors could also be very appealing to a younger crowd!
Here is our Pinterest board to see some ideas of how to use these colors!
A lot of people are getting rid of carpet completely and using wood or faux wood floors. They say that it should at least be on the main floor. An example would be the golf-course house where we changed the flooring to a luxury vinyl wood after a month of not selling. BOOM! We got a full price offer the same day we put it back on the market with the new floors.
3. Countertops
It’s either going to be quartz, quartzite, or granite. The quartz trend is becoming increasingly popular, which means the price of granite is becoming more reasonable. Quartz is man-made and more predictable, where granite is more unique. I have seen many variations of both and they really increase the sale-ability of a home and make it look current and more upscale.
4. Glam
Some people can mistake the word “glam” as an over-the-top look, girly, or LOTS of sparkle and gold. I go back and forth between this trend but one thing I do like about it is how clean and crisp you can make your home look. You could also make it look extremely expensive with just adding some glam barstools or glam side tables. I personally believe when you have too much “glam” in your home, it’s too much. But I think if you can add glam in a tasteful way, you can really hit the ball out of the park!
The graph above shows that we’re heading into multiple-offer season, and whether you are buying or selling, you should work with an agent who is an expert in handling a bidding war.
In a monthly survey of REALTORS®, seller’s agents who closed a sale are asked “How many offers were received for the most recent property you sold in the past month?
Among seller’s agents who closed a sale in December 2017, the respondents reported they received 2.2 offers (which means sellers received between two to three offers) on their most recent sale, according to the December 2017 REALTORS® Confidence Index Survey.The number of buyer offers on a home has remained unchanged in the past two years. Why so?
On the one hand, an improving job market tends to prop up the number of buyer offers, assuming the same level of homes listed for sale. Yet in reality, the number of homes being offered for sale have fallen to their lowest level since January 1999 (3.2 months’ supply in December 2017), and this has pushed up prices, dampening demand. Since January 2012, the median home price of existing homes sold has increased by 60 percent.
The number of buyer offers exhibits a seasonal fluctuation, with the number of offers tending to peak in April through June, as households plan their move/relocation around the school opening in August/September.
It was about a year ago when the steering gave out, and it took me this long to get it fixed. The mechanic told me to spend some real time and money to upgrade it while it was still salvageable, or sell it to somebody who would.
So I replaced the rims and tires, added a new steering wheel, and finished it off with my Raider paint job:
