Compass And The Future

The Future of Real Estate Belongs to Compass

With a strong foundation built on agent expertise, innovative technology, and a customer-first approach, Compass is well-positioned to overtake Zillow as the most influential real estate platform. As Zillow continues to struggle with profitability and data limitations, Compass is thriving by embracing the reality that real estate is not just about listings—it’s about relationships and local market knowledge.

As Zillow continues to struggle with profitability—marking its twelfth straight year without earning a profit—Compass is poised for continued growth. Real estate is inherently a local business, and Reffkin’s strategy of leveraging a strong network of agents gives Compass a significant edge over data-driven platforms that lack a personal touch.

With Robert Reffkin at the helm, Compass is not just competing with Zillow; it is redefining the real estate experience and paving the way for a more efficient, agent-focused industry future.

As the industry continues to evolve, buyers and sellers will increasingly seek platforms that offer not just data, but also real, tangible support from experienced professionals. With its unique model, Compass is set to lead the future of real estate, leaving Zillow struggling to keep up.

Read the full article here:

https://www.openhausrealty.com/blog/why-compass-will-overtake-zillow-as-the-most-popular-real-estate-platform/

Handling Multiple Offers

This guy suggests that the listing agent should skip the highest-and-best round, and instead, select the offer written by the buyer-agent that they think is most likely to close the deal – after trying to bump them another $5,000 or $10,000.

I like to do the highest-and-best round first to establish a new floor, and then go around to each buyer-agent and give them the number to beat in my slow-motion auction. Selecting an offer written by a buyer-agent who you think can get to the finish line is a critical part of the equation, but not as important as being the highest price.

Why? Because my contest is very specific – the buyer who submits the highest price wins the home. We vet the buyers and agents initially to ensure they are real contenders, and I will take my chances that Donna can get anyone to the finish line.

 

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Buyer-Agent Commissions, Nov

As of August 17th, home sellers are not required to pay the buyer-agent’s commission. Listing agents are forbidden from mentioning any compensation being offered to the buyer-agents in the active listings, but the CRMLS requires that the amount that was paid is posted in the listing at closing.

CRMLS runs the MLS for north county. Agents can also belong to the San Diego Association of Realtors which does not require posting of the buyer-agent commission paid.

I’m adjusting the timing to show these reports on a monthly basis so today’s data is for the 201 sales between October 16th and November 30th.  There were 83 of the 201 who posted the commission paid to the buyer-agents by the seller. We can’t assume that the other 118 sellers (201-83) didn’t pay a commission because reporting isn’t required.

I haven’t heard of any buyers yet who got stuck having to pay their buyer-agent because the seller refused to pay. Undoubtably, there are buyer-agents who were paid a partial fee by the seller and then the buyer made up the difference – that’s the intent of the buyer-broker agreement being required now.

These are the reported commissions paid to the buyer-agents between La Jolla and Carlsbad:

Erosion is underway. It’s because some agents are weak and desperate, as I mentioned in April, and the buzz in the realtor community is that agents are quiting en masse. I’ll be nice and call it ‘retiring’. So those buyers who want an agent who charges less can certainly find them – and they will get the quality of service that they deserve.

But virtually all of the sellers are paying some commission to the buyer-agent, and about half are paying more than 2%.

This isn’t the world we wanted. This isn’t the world we asked for. This is what 12 jurors in Missouri thought you deserved (as did the attorneys who charged $100,000,000+ for prep work and a week in court).

Becoming A Realtor Today

A reader asked about my thoughts on becoming a realtor today – my response:

I’ll start with the basics to see what you think.

Being a real estate licensee is one thing. Being a successful salesperson is something different, and what I’ll address here.

Sales has its own skill set. There are things to learn and practice to be successful at it. People tend to wander into real estate sales because it is so easy to get a license. Nobody tells them to get sales training, and as a result, most leave the business within 1-2 years.

To know if you can be a successful salesperson, consider the following:

A. Are you comfortable talking to family and friends about their housing needs?

B. Are you comfortable talking to strangers about their housing needs?

Everyone likes talking about real estate. But people are more guarded and private than ever, so approaching them and getting them to talk about THEIR real estate needs can be uncomfortable for many agents. If you are a good-looking charismatic type, then you have an advantage but it still takes guts to continuously talk to people every day about their needs, and how you can help them.

Everyone knows at least three realtors already, so you can expect rejection. Can you live with that? Do you want to be successful bad enough to power through and not let rejection bug you?

Still feeling excited about being a successful salesperson? Then consider the downfalls:

Paydays are inconsistent, and you can go months without earning a check. Having financial stability besides your real estate pay is helpful.

It is a 24/7 market, so most of the time you will be on duty seven days a week.

Failure is part of the learning curve. Being warm and cuddly with failure and rejection is a real plus.

Other agents will screw you over, and many times it’s their own blundering incompetence that causes it. Accept that tensions are elevated and quick decisions are being made by principals and agents without thinking through all the variables.

Being motivated by the money helps. If you want/need to earn a big income every year, then it’s available and you can let it drive you.

Still interested? Ok, great – I suggest that all agents do the following:

1. Get Sales Training.

I did the Dale Carnegie sales training early on, and it was the best thing I ever did. They teach you the basic skill set for sales, and also have you go practice the techniques as part of the course.

2. Work with a Mentor.

All of the big brokerages offer a mentorship program where you work with an experienced agent. Most of the mentors have given up selling themselves, so they tend to be in the background to answer questions, not to give hard-core training. If you can find one that does, then your learning curve will be expedited.

3. Identify How and Where to Get The Business.

It isn’t going to come to you – at least not until you have a lot of experience. This is an active, not passive, job and being a smart go-getter is required for maximum results.

4. Work Effectively with a CRM.

Client Relationship Management supported by a robust software system is vital. Compass is spending $100 million per year on our platform, and I think we can say that we have the best in the business.

I think the home-selling business will shrink steadily from here on out. There are at least twice as many agents as needed and many will just age out over the next 5-10 years. Those who are left will be smart to utilize all of the internet tools as our society continues to put more faith in their hand-held device than the experts in the field. Being tech-savvy will be a requirement for all agents!

As part of our succession plan, we are going to add more agents to our group. If everything above sounds fantastic, contact me today and we can discuss you joining our team!

Buyer-Agent Commissions Paid, Second Month

For two months we’ve been settling in with the new arrangements for paying the buyer-agents.

I haven’t heard of any buyers yet who got stuck having to pay their buyer-agent because the seller refused to pay. Undoubtably, there are buyer-agents who were paid a partial fee by the seller and then the buyer made up the difference – that’s the intent of the buyer-broker agreement being required now.

Some buyers (especially cash buyers) may prefer to pay for their own agent and take a lower purchase price instead, but that has always been the case.

Strangely, the CRMLS – which provides the MLS for the North SD County Association of Realtors – cannot allow any mention in the active listings of seller-paid commissions being offered to buyer-agents. But now when marking the escrow as closed, they REQUIRE the listing agent to disclose the commission amount the seller paid to the buyer-agent.

Agents who are members of the competing San Diego Association of Realtors are exempt.

I culled this data from the NSDCC sales closed between August 17 and September 18, and between September 18 and October 15 from those that did mention the specific commission amount:

There has been erosion this year. It’s because some agents are weak and desperate, as I mentioned in April.

Is that who you want in your corner?

It is much more important to sell your house for retail, or retail-plus, than save a point on the commission.

Same on the buyer side. If your agent can make a strong case why they are worth it to the seller and listing agent, they are also making a good case for them to take your offer too.

This isn’t the world we wanted. This isn’t the world we asked for. This is what 12 jurors in Missouri thought you deserved (as did the attorneys who charged $100,000,000+ for prep work and a week in court).

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Of the 139 recent sales, nine were marked with zero days-on-market (6%), which are the off-market sales typically. They aren’t as widespread as everyone wants you to think, at least not yet. In 17% of the sales, the listing agent also represented the buyer too, though there isn’t a box to check for unrepresented buyers (the listing agent must input a buyer-agent). I predict that both of these percentages will increasing.

Newer Agents

It’s going to be tough on the newer agents going forward.

The commission lawsuit stuff isn’t the big concern. Sales are likely to keep dropping, and at the same time the better agents are picking up market share. There aren’t enough sales to go around for every realtor to pick up an occasional sale, let alone make a living.

If you’re an agent and you find yourself saying to prospects, “Let me know if you have any questions”, then there are things you can do to up your game.

The best thing you can do is immerse yourself in the Dale Carnegie Sales Course. I completed it early on, and it made all the difference.

Embrace your only job, which is to say the right things, the right way, at the right time.

It never fails when I’m doing open house, and I’m talking it up with attendees.

When I ask them, “Would you like to buy it”, it gets a chuckle every time because they have never heard that before at an open house. We are supposed to be professional sales people, yet consumers have never heard an agent ask them if they want to take action.

If you catch yourself wanting to say, “Let me know if you have any questions”, just know you need to be more creative. Try out my two favorite open-house questions, and use them early on, not once they have seen the house and are heading for the door:

  1. Have you been looking around much lately?
  2. Have you seen anything you liked?

Their answers to those questions will send you down a natural path of other questions that reveal where they are in the process.

If they say, “Oh, we’re just neighbors”, that’s fine.

Resist the urge to hit them with, “Are you thinking of selling?”

A consultant would say, “Have you thought about moving?

Every homeowner has thought about selling, and getting their hands on the money they have tied up in the home’s equity. But when they think about moving, it thrusts them into the Big Three: Going through all the stuff, fixing up the house, and where to go.

Listen carefully to their response, and then say, “If you could get assistance with all three of those things, would it be helpful?”

Come work with us – I’ll teach you the ropes.

Owning Manhattan

The other real estate reality shows are so full of drama that they are barely watchable. While they do pack some drama into Ryan’s new show, Owning Manhattan on Netflix, they mix in a few examples of him doing a masterful job of negotiating between agents and principals to make deals. Specifically, listen to his verbal discipline when talking on the phone – Ryan says very little, and keeps all the attention on the price – no stories or verbal vomiting.

He demonstrates a realtor’s most important job:

Say the right things, the right way, at the right time.

And he could give you the list of the things to say – it’s saying them the right way, at the right time that makes the difference between highly productive agents, and the rest.

He makes it look easy, but the mental discipline to gently yet succinctly assist people with making the right decisions is an art form and extremely uncommon.

I watched the eight episodes that have come out and thought Ryan’s negotiating was the most accurate representation of high-level agent deal-making that has ever been documented. Ryan also loses three key agents during the first season, which is another part of the business – agents are known to move around, and aggressive recruiting (particularly by Compass) is a constant threat.

This is just the trailer – if you are an agent or big fan of real estate, watch the whole series:

Floyd Wickman said it best. Don’t sell with blah blah, when you can sell with blah.

Oh, the 5-offer bidding war with my buyers? After a week of kicking it around, the listing agent finally called last night. Her sellers decided to not conduct a legit bidding war (even though the listing agent had promised it all week) and instead they sold the house to a neighbor at an under-market price.

It was a great example of how most potential bidding wars get botched by amateur listing agents. The realtor doesn’t take control of the situation and it just goes where it goes – and buyers get screwed.

Buyer-Agent Commission Solution

Hat tip to Carl Streicher, mortgage broker, for sending over this handy chart on allowable concessions, also known as seller contributions. This is how the buyer-agent commission can be included as a part buyer’s mortgage package, even if the seller didn’t sign the optional form with his listing.

If the buyer-agent writes the offer with a 3% or 4% seller contribution to the buyers’ closing costs, then the commission can get paid plus cover some or all of the buyers’ other closing costs too. Sellers typically want to offset with a higher price to compensate, which can make the appraisal more challenging, but once the home has been on the market for a few weeks maybe the seller will take less?

This is the reasonable solution that can solve everything.

Prior to the Frenzy, seller contributions were more common, especially with first-time homebuyers who were tight on cash. But concessions all but went away once bidding wars started breaking out everywhere. If there are multiple offers now, the ones without a request for seller concessions will probably float to the top of the pile.

Why am I skeptical?

Three reasons:

  • Sellers will have already been told that they don’t have to pay for the buyer-agent.
  • If there is another offer that doesn’t request a concession, then it will likely be favored.
  • The seller and listing agent will want to negotiate the amount.

You would think that sellers could just focus on the amount of their net proceeds, but some get weird about paying concessions. If the listing agent is experienced/strong and wants to stand by his fellow agents, then he will explain it in a way that the sellers see the obvious benefit – it gets your house sold.

But it’s not a slam dunk. At least not yet, though a solid advertising campaign by NAR and CAR could go a long ways to making it the palatable solution for everyone in America to transact the same old way that we’ve been doing it for 100+ years.

Read the Contract!

This business used to be civil.

It was probably obvious that the contracts were drawn up by the realtor attorneys to protect realtors, but there were adequate protections for buyers and sellers too.

This commission lawsuit has changed everything, and now they only care about the realtor associations.

When Docusign pioneered the electronic signature, it was one of the best advancements in the history of real estate. But it causes clients to whip through the signing process without having to read anything! The attorneys make it worse by originating new forms every year, and currently a seller has to initial or sign 18 pages to list their home for sale, and a buyer who makes an offer to purchase has to sign or initial 28 pages!

The coming changes are going to add another half-dozen pages to each, and you better read them now!

BUYERS – You have to hire an agent to see homes for sale, which means signing a contract. It sounds ridiculous, which it is, but we are going to have to get used to it. The key part is how long the buyer is obligated to the agent.

If you don’t read the contract and just sign it real quick, you could be obligated to pay this agent a commission whether they represent you or not when buying a home. Buyers should only agree to sign any buyer-broker contract if it includes a cancellation clause so you can get out of it if things don’t work out.

SELLERS – The basic listing agreement won’t allow you to pay an incentive to a buyer’s agent. Your listing agent will have to include a optional form and have you agree to pay “concessions” which can go towards any buyer expense. I’m guessing that this form won’t be used much, and instead the listing agents will want to be heroes and tell their sellers that they get to save money now because they don’t have to pay buyer-agents any more – even though it’s going to kill the business as we’ve known it for 100+ years.

It may sound like a good idea to not pay buyer-agents in the beginning, but if your house hasn’t sold for weeks or months, you might reconsider. Paying incentives to get what you want is an American tradition.

AGENTS – You better be committed to getting paid, because everyone is going to be looking to screw you out of a paycheck – especially the other agents. The MLS used to protect buyer-agents because once a commission rate was entered onto a listing, the seller had to pay it. The rate was protected, and it became accepted as part of the package.

But it’s going to be different now, and the buyer-agents who include their commission in their offer to purchase will be under attack. If you make an offer that is less than the list price, the first thing the seller will want to do is pay you less, and I doubt that the listing agent will stand up for you. I can imagine it already from listing agents – “Ok, we accepted your buyer’s price but we’re not going to pay you anything!”

It means that any buyer-agent who wants to be paid will have to get it from their buyer. It will be another huge burden loaded onto the buyers, and only the most motivated will endure paying the same fees to which we have become accustomed.

So hey, maybe agents won’t get paid as much, but selling homes is going to be a mess – unless buyers can find a way to Get Good Help!

Realtors Fleeing The Business

There will be fewer agents, which is a good thing. There are 20,000+ realtors in San Diego County, and last month there were 2,113 sales of attached and detached homes. Hat tip to Greg for sending in this article!

When real estate broker April Strickland looks at her local housing market in Gainesville, Fla., she sees a mismatch. Industry data shows that only a few hundred homes are sold each month, she said, yet there are more than 1,500 local Realtors.

Strickland has seen the ups and downs of the housing market since 1995, when she started managing her parents’ rental properties as a teenager. But she says the business environment of the past two years is the most challenging she can remember — slower even than the years following the 2008 financial crisis.

“Quite frankly, Realtors are running out of money,” Strickland said.

An industry that swelled with newcomers in 2020 and 2021 has recently experienced a harsh slowdown — leaving the field no choice but to downsize, experts say. One widely cited analysis predicts that as many as 80 percent of the country’s real estate agents could find a new line of work.

“Many industry leaders think there are way too many agents and would like to reduce the number so the professionals can service more clients, thus allowing a reduction in commission levels in order to maintain current incomes,” said Steve Brobeck, a senior fellow at the Consumer Federation of America.

By some measures, the exodus has already begun.

The Bureau of Labor Statistics recorded 440,000 full-time real estate agents and brokers in 2023, about 72,000 fewer than the year before.

Realtors will soon face new rules that could result in sweeping changes to how they do business and how they get paid.

Under the new rules starting in August, real estate databases no longer will include offers of compensation for buyers’ agents. That means those agents can no longer count on a cut of the seller’s windfall. Investment bank Keefe Bruyette & Woods has estimated that as much as 30 percent of the total U.S. commissions revenue might be lost as a result. They forecast that changes to the commission structure could cause 60 to 80 percent of U.S. Realtors to leave the profession.

CUNY Baruch College’s Sonia Gilbukh and Yale School of Management’s Paul Goldsmith-Pinkham estimated that about 56 percent of agents would exit the market if one side’s commission remained at 3 percent while the other became competitive, Gilbukh said in an email describing the study. A 2015 paper in the Rand Journal of Economics by Panle Jia Barwick and Parag Pathak predicted that a 50 percent reduction in commissions would result in 40 percent fewer agents.

Experts see a silver lining in a potential exodus of Realtors: Those who remain might be more experienced and competent. “This will be good for consumers because agents on average will be better at their job and will charge more competitive commissions,” Gilbukh said.

A “Realtor glut” has persisted since the industry’s pandemic high point, said Brobeck, who also sees a departure of real estate agents as probably a good thing for home buyers.

Gilbukh, the CUNY researcher, believes that only the most experienced agents will be able to keep charging high commissions.

Agents that survive the upcoming transition are likely to be better connected within their industry, having deeper relationships with professionals such as contractors, electricians, plumbers and appraisers, and “overall better poised to advise their clients,” Gilbukh said.

The proposed NAR deal was met with fear throughout the industry when it was announced in MarchStrickland said. But the panic has given way to a “wait-and-see” attitude, she said.

She characterized the NAR deal as a positive thing overall:

“It will eliminate people who quite frankly aren’t up to snuff, who can’t do the work, who don’t want to educate themselves and learn new ways or working. … This will be a good pivot for our industry.”

Link to free article

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