The Difference

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In case anyone was wondering, “Why no blog posts from Steve lately?”, I have an admission to make. I think I am the father of Anna Nicole Smith’s baby daughter. It has been quite distracting (for me, not Kris).

Okay, now that I have the attention of at least one (or two) of you out there…The point is – many make the claim, but few actually perform. I’m talking about real estate agents, of course. There has been a lot of dialogue recently on this and other Blog’s regarding the different real estate business models. Many comments about lousy agents taking advantage of their clients and spirited arguments about which are the better models; old traditional vs. the myriad of new-wave. The sheer number of recent variations to the traditional model is mind-boggling.

There are brokers who will:

  1. Place your home for sale in the MLS for a nominal fee and walk away. The seller is completely on their own from there;
  2. Provide you with a “menu” of fees. If you want an open house held by an agent, that’s an extra fee. If you want the agent to help in negotiations, it’s for an extra fee. If you want your home advertised anywhere, beyond the sign in your front yard, you guessed it, you pay; and,
  3. Rebate you a portion of their commission but, of course, you are responsible for first finding the home and determining an offer price. 

Now add all of this empowerment provided by the internet, where you have access to almost as much raw data as any agent has, and what’s a buyer or seller to do? 

Over the past few years there has been an explosion of new ideas and new resources to enable people to do many things that they could not, until now, even attempt. You can go on-line to self-diagnose a health condition or you can find the Blue Book value of your 10-year old family car (retail and wholesale). You can control your entire investment portfolio of stocks and make trades for pennies on the dollar compared to using a traditional stock broker. The internet has driven up productivity and forced efficiencies into business and the people who conduct business. It’s free enterprise at its best.

So why should real estate be different? Well, from the examples I provided earlier (right after the paternal announcement), in many ways it’s not. The act of purchasing or selling real estate is evolving into many different forms. But each of these forms remain fundamental variations of the two primary methods that have been around since the first cave was sold to Fred Flintstone – You may hire an agent or you may do it yourself.  In selecting the traditional model you, in theory, gain the advantage of experienced representation in every aspect of the process and the transaction. The new post-internet empowerment choices are many, but they all sprout from the same seed – the “For Sale By Owner” type individual. This person does not feel the need for full, or maybe any, representation and therefore does not want to pay for it. They have access to all the information they need. On Amazon.com, alone, if you search for “How to Sell Real Estate?”, you will get about 425 results.

So, why wouldn’t most people just buy a book or do their own research on-line and represent themselves in a transaction? Better yet, why wouldn’t they select a brokerage whose agents offers to do some, but not necessarily all of the work and pay a reduced fee or get a rebate? You are now empowered to confidently and competently buy and sell your own cars, you can trade your own stocks, so why not save that commission or get a rebate for the purchase or sale of a home?

The Difference

It’s simple, really. The problem has been too many distractions resulting from the almost endless marketing of “better mousetraps”. We are bombarded almost non-stop by ads on TV, in the newspaper, on the internet, on radio, in the mail. There is nothing wrong with better mousetraps (or the original mousetrap, for that matter). It’s free enterprise at its best, IF it delivers results. The problem is that it doesn’t, at least consistently. And it is not necessarily the business model that’s breaking down. Remember, in the old days, a handshake was often enough to seal the deal between two trusting people (like when Fred sold Barney his cave in Bedrock). But absent the old fashioned way of doing things, it now generally takes three to tango. The buyer, the seller and, yes, the agent. Nothing against selling stocks on-line yourself at a discount, but real estate is different than any commodity out there. The stakes are generally much higher. The asset (your home) is generally much less liquid, not to mention the fact that you run little risk of getting sued during or after your stock trade. And, maybe of greatest importance, it is your shelter, one of the primary needs of we humans. And we have evolved. The agent has an enormous responsibility to ensure that many things go right and that your best interests are protected. After the purchase is complete, it’s not an easy thing to undo. In California it has been said that people move, on average, about every four years to six years. Unlike a stock, it’s not easily traded.

So how does a “consumer” protect themselves? Well, it’s not necessarily the business model. We have had too many SOS (Save Our Sale) calls recently to know this. Sources of the SOS calls are client refugees from just about every business model; traditional, discount, rebate, you name it. The difference is the agent. We have heard ’em all: “My brother is a mortgage broker and he was selling it for no commission.” Well, the results were commensurate with the fee. Or, “I felt obligated to use our neighbor”. Same result. Failure and a waste of time. While they failed to sell, the market declined. How much did they lose in value during the six months they were uselessly on the market? It’s okay to try to save selling costs. That’s why commissions are negotiable. So, too are mortgage fees, escrow fees and title fees. It’s a very competitive business. A good agent will assist their clients with all of these.

While there is all of this conflict among the competing models and the many clients trying to dial in the very best bang for the buck, the one most important ingredient to a successful transaction gets lost in the shuffle…the experienced and professional agent. I’m tired of hearing complaints about failed transactions due to sloppy agents, regardless of who they work for. If a buyer or seller took just 10% of the time that many spend scouring the internet to determine the right price at which to buy or sell and how much they can possibly save on comissions and, instead did their due diligence properly when selecting their representation, everyone would be a lot better off (except, of course, the bad agents). We just went through a grueling interview process conducted by a very nice couple who wasted eight months trying to sell their home with the help of an agent who was a “friend”. Now they are taking responsibility, interviewing several top agents and asking many tough questions. We respect that. It is the difference between success and failure.

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