An article came out late yesterday that caught our attention. Big time. We think it is subject for much AR comment and debate.
This is one where we think a writer about our industry might appreciate hearing from our industry.
The article is on MarketWatch by Chris Pummer entitled: “Shades of Green - Extraordinary Measures - Here’s a surefire way for home sellers to get Buyer’s attention.”
- Sellers need to sell their homes themselves, and list it on the MLS for a few hundred dollars.
- Sellers should offer the full 5% or 6% commission to the Buyers agent.
- Sellers should suggest that the Buyers agent cut their commission to the Buyer.
- The Strategy is certain to attract the attention of Buyers agents because they would make more money.
- Buyers shopping on the internet could contact the Seller directly, and bypass agents altogether, and save even more money.
Read the entire article here.
We’ve got an opinion on this one, naturally. But before we post that later, but we thought it would be cool to get an array of AR thought beforehand.
An Email to and from the Writer:
As a sidebar, we wrote Chris Pummer an email. Here’s that.
Great Article Chris,
A bit beneath your usual standards though.
About what we expect from a non real estate professional these days.
Suggest you sell your house this way... and see how good you do.
cheers,
Richard Bolen
Lake Tahoe
PS. We don't march better for higher commissions. And very few good agents ever do. Any agent who does, well we avoid those types, and we encourage the public to do so as well.
And here's Chris's repsonse:
Hey Richard,
No one's suggesting agents are greedy -- but can you honestly tell me you and all other agents wouldn't start looking at the buyer's agent's commission on every listing if it read 6% vs. 3% (instead of a dismissable 3% vs. 2.5%). If not, you'd be guilty of breeching your fiduciary responsibility -- if it meant you could get a 3% price break for your client.
NAR says 18 percent of all sales conducted through the MLS last year were limited or minimal service listings. I can guarantee you in the vast majority of those cases, the seller wasn't ponying up the full, traditional commission. I think I'm doing the industry a favor suggesting this approach for sellers sharp enough to pursue it.
Thanks for the feedback,
Chris
I can't take this seriously. The last thing that's going to interest me is a media writer giving me advice about "fiduciary".
He's like most folks on the outside trying to peek under our skirts, he still thinks that finding a home to buy is difficult. It isn't. It's what happens afterward where agents, buyers' and sellers' agent earn their money and keep folks out of the courthouse.
There are a couple of things here. The first is that people that don't sell houses have no idea what it costs to market a home... or what is at stake when one doesn't sell... from the perspective of an agent. So, whether a seller is signing up on a limited service brokerage that gets them in the MLS cheap and then offers up the savings to the buyer's agent, or gets the listing agent to work for a small portion of the total fee, that money has to come from somewhere... and it will end up coming out of the marketing.
Even free marketing isn't free. If you are paying someone to input info on Craigslist, you can spend a lot of money for something that is free... even if you aren't paying, time has a cost. And Craigslist isn't the only place... there is a lot of expensive "free" advertising.
I follow his logic, but the problem is that it gets derailed just out of his sight.
This is a featured post here. If he has a google alert on his name, he should see this.........someone break it down for him. What is it about Marketing, Fiduciary responsibilities and negotiating that he doesn't get? How does a listing agent add value in those areas? Specifically what do you do to add value there?
There have to be TONS of posts about this out there. Someone find one and link to it here. Anyone?
Yet another commentator who really have no idea of what he is talking about,but... it is a free country anyone have their opinion., my take on this is I don't really care how some Real Estate agent conduct their business, be it discounted, flat rate or deal with the FSBO directly selling his own property. The point is I am more concern how I do my business and getting paid well... I am out here to do my very best to let sellers out there know my service are more valuable that what they are paying... so brave agents out there just show the consumers that we are valuable.. without our services they could portentially loss a lot more that the commission..
The reality is, until this industry can succintly present the added value of the expertise of a real estate agent for intangible, hard to quantify, things like 'Marketing' (not as hard to quantify), 'Fiduciary Responsibility' and 'negotiation' on a broad basis so that all consumers are getting the same message, we will continue to see articles like this.
There are no doubt many people on AR and agents on the web in many places presenting this information extremely well. But until the industry as a whole can make this the prevailing tone of why you should use an agent in a manner that is easy for people to understand, there are a lot of people that won't get it.
Ask five agents in your office to quantify or explain to you why a consumer needs marketing, fiduciary assistance and negotiating and how they add value in those places and I bet most of them can not explain it. Every agent should be able to spout those things off at the drop of a dime...........(or maybe I'm wrong, maybe four out of five could explain it and the message is somehow being lost on the way to to the consumer, but I don't think so)
There is an Excellent debate on how much more an agent gets than a FSBO here.
It's from 2006, but the concepts and principles are all the same. The discussion is based on NAR's article about REALTORS getting 16% more on average than a FSBO.
Going to post this too... because we think the discussion is relevant to us, our industry, and "reporters" who think they know our industry better than we do.
Richard, Folks have been spouting this stuff for years. It means nothing to me. Folks hire me because they trust me to get the job done and to protect their interest. They are not interested in doing it themselves and in fact wouldn't even know where to start.
Bob, I am not a fiduciary and I don't spend a ton of money on marketing. My value is in my experience and my ability to get the deal closed. I am also a trusted advisor and a calming force. Buying and/or selling real estate is a very stressful thing to do. My value is in be able to keep folks focused and being able to guide them into making good decisions that are not based on emotions. I make selling real estate easy.....for them.
I say if you can get the required results and do things yourself God Bless!
The reality is in todays market selling without an experienced Realtor in near impossible. There are so many properties and unless you know the area where you are going to purchase you are asking for problems. Commissions are always negotiable! There is more required of the Realtor in the current market to sell the property and most are reluctant to take a listing without full commission. Many are willing to pay higher commissions to attract Realtor attention.
Homeowners made enormus profits when the market was going up and cut the Realtors commissions to make even more. And now the market is declining and homeowners are again trying to cut the Realtors commission. Realtors need to make a living and need to generate a profit advertising and general cost of doing business continue to rise. Realtors have families and bills same as everyone else. You can look on line and locate a property but you need a real estate agent to show you the property and the cost of driving potential clients around has risen considerably, and the unpaid hours to research and locate properties for clients goes unrecognized!
If you really wish to help homeowners in distress encourage Bankers to cut rates and begin lending once more. Have our elected officials consider a proposal to excuse taxes on 401k or IRA withdrawals to help families in need of cash.
The only help given to date by the Federal Reserve is direct assistance to Wall Street Bankers and the Banking industry in general.
This problem was created by the Federal Reserve, ala Alan Greenspan who cut rates and allowed then to stay too low for far too long! The Bush Administration relaxed lending standards and cast a blind eye when abuse was taking place. If you want to place blame start there, and leave the Realtors out we only work to serve our clients and making a living the same as any other American! I don't care for the commission rates myself, I think they should be higher, same as everything else!
DB
Bryant,
You sir have no problem communicating that value added component to your clients, it's obvious. As an industry though, I really think there is a lack of a clear message regarding the value proposition of using an agent. Every Realtor should be able to clearly state their value proposition so that it is easy to understand in their clients mind and in the minds of consumers in general.
Look at the NAR campaigns (dragging up a well beaten horse). The adds running don't really tell people WHY they need an agent. There should be clear messaging from the top as to the value proposition. Telling people it's a good time to buy or sell using a Realtor doesn't get to the core of WHY they need one.
The members of AR are ahead of the curve in knowing how to communicate that value proposition, but the industry as a whole needs to focus on it, IMHO.
Rich, That's an excellent point. We should not be so quick to call folks names just because they don't understand what we do. It's our job to educate them on where our value is.
And REALTORS(R) that try to justify their fees by the cost of gas, advertising, paper or whatever are truly missing the oopotunity to educate folks. The consumer could care less about our expenses or how commissions are split, nor should they. Everytime we defend our fees by "costs" we our the ones being foolish.
Becaue Bob Stewart is asking for documentation, I went back to one of my old, old posts. Yes, 2006 and found one that might relate generally to the writer's post about fiduciary. I'm reposting it now.
Lenn
Unfortunately, the Marketwatch writer is not the only person who feels this way.
As Rich and Bob say, in their comments, we have failed to communicate our value to consumers. We train extensivley and work long and hard, so we can make home selling and buying a pleasant experience for our clients - and that leaves many of them thinking it was easy. If only listing and selling were as easy as some people mistakenly believe - I'd be rich and wouldn't need to do it any more!
Another factor is that the barriers to entry into this profession are nearly non-existent (and the DOJ would have them go away completely), so there is always a fair percentage of ineffective agents out there in the marketplace misrepresenting the professionalism of our industry. Even though my dentist makes it look easy (ha ha), I know he has several years of professional training under his belt to become a dentist - not 45 or 90 hours of online license training. Yet, it does take years to become GOOD at this business.
Ahhh... I'm rambling. Preaching to the choir....
Our job is to educate... the consumer and each other if needed. We do so much more than just open the door! Service is the key...but what does it really mean to service your client? What do you really do? If I asked you to explain it to me...could you?
Recently I asked that in a class and the response saddened me. You're right Rich the "justify my 'costs' versus explaining my 'value' thing is all the rage!
My attitude for the seller's out there reading this is give it a shot. What Chris forgot to read is the NAR statistics on the number of FSBOs who would go FSBO again. Most would hire a Realtor the second time around. Why, because it was way to much work, headache and liability to do again.
2 years ago the "talking heads" were telling consumers to ask their agents to cut the comission to 4 or 5%, now they are telling consumers to offer the buyers agent 5 or 6%.
Someone should pull a random sampling out of the "18%" minimal or limited service listings and see how the sale price came in relative to comparable transactions. Furthermore, a survey of buyer and seller satisfaction regarding the other areas Realtors handle i.e. home inspections, repairs, final inspection, escrow services, communication, etc. should be done to establish the "cost" of using an absentee agent or no agent at all. Then, rather than opinion, the truth will set us free.
i guess regardless of the market, there will always be some goofy idea for the consumer to try to lower RE commissions.
Bottom Line
If there were a better and less expensive way out there (other than the right way), everyone would be doing it.
It just doesnt end.....
Okay -- here it goes -- I think our national advertising has missed the mark in that it does not educate either sellers or buyers -- They want to know "what is in it for me?" Our advertising just says -- I am the top producer, I am the top marketer, I am the most knowledgeable, WE adhere to a code of ethics (the public doesn't believe this one),we do good things in our community! In my opinion we need to re-educate the consumer! We need to become more consumer-centric! I
t is not about US, it is about them.
I spent 2 hours with a new prospect tonight simply "educating" them. I told them that finding the property is the "starting point" not the ending point! Then I told them what was in it for them --When they undertsood the complexities and the risks, they were ready to sign on the dotted line.
I have known many who have gone the FSBO route, including my parents, and then ended up listing with an agent to save their sanity and get their house sold.
Who has the time to do all of the things an agent does. I certainly don't. And the headaches, no thank you. I follow Bob's line of logic in that as an industry, there is fragmentation, and there is always another business model that comes out that seems to sell short the traditional full service model.
What is at the heart of the matter is the expertise that the individual agent can offer that the consumer Just cannot get anywhere on their own, or at least very easily. Almost all professions specialize, I truly believe it is the professionals that chose a niche and stick to it that will survive. " top producer" tags might just not cut it in the future.
That being said, the whole MLS issue is always there, it needs to be resolved. Maybe we can take a hint from our Canadian friends. They publicly opened up their MLS, under protests and fear from real estate agents, and you know what, they are doing just fine there. The consumers still come to the real estate agents for help.
Joan, you bring up the answer. The real answer, that is advertising correctly. Image, branding, bringing back the integrity. We are all in a similar struggle. The mortgage fallout of so many lenders closing and foreclosures at an all time high, has dilapidated the consumers trust in all aspects of purchasing and selling real estate. Those of us on the real street, not Wall-street, have not asked for the uneducated and inexperienced comments that come from media, or marketers interested in seeping into our sphere of expertise.
We did not deserve this treatment, but it is the right time to advertise the correct image and reveal the costs involved with lawyers and bankers. We really have a limited cheering section in the main stream media. I am speaking for mortgage company owners/brokers and real estate brokers.
We bring experience and value to our clients. We have the years of successful closings in all types of markets. What is the value to the seller? There is value in a successful track record in the same way as when you want to hire the best surgeon or the best attorney. I will pay more for the better attorney, the better surgeon. And sellers will pay more for our services.
We don't do fiduciary duty. We do not do print ads, the sellers can do those themselves.
We bring marketing and networking experience that the seller does not have time to do. We bring value to the seller in who we know and our experience in position marketing. Companies pay high retainers for this type of expertise and the seller does not have to pay us for this unless we have a successful closing. When I do a marketing plan for a company, they pay up front not if and when it works.
Some of our value is in us knowing the agents in our area, most of our listings are sold through networking with other agents. There are so many listings on the MLS; the listings just get lost in the shuffle. The agents in our area that we know even will call us to let us know they have a certain buyer looking for a specific property. Agents have the largest buyer pool of buyers and I don't see sellers going to Realtor meetings, Agent social networking gatherings to pitch their house for sale. Agents who just do the 4 P's cause this reaction from the consumer. They need to step up and do more than what a seller can do himself.
We also offer paying an hourly fee. In most cases when I show a sample billing statement, much like an attorney's billing statement, the seller sees that he is getting a much better value paying us what is considered a higher percentage in the industry than choosing a monthly billing for consulting and marketing.
The sellers we have are very educated and know what highest and best use of their time is measured and they know that selling their own home is cost prohibitive in relation to their income.
This model that limited services advocate attracts the lower income and middle income brackets of sellers where their net salary is closer to the gross commission on a sale so they are in a totally different paradigm and can not relate to costs and expenses. But they can relate to liability and disclosure. So agents must educate the seller on what happens after they get a buyer.
Just as there are those who want to do their own stock trading there will be those that want to sell on their own. Just as there are those who will always use a professional stock broker, a trusted adviser, so shall those always use the full services of a professional and experienced real estate agent.
I would like to see an inexperienced seller trying to complete a short sale on their home with an inexperienced buyer! Katerina
In regard to commission-- I always told my clients that they were buying my REPRESENTATION. Any dingleberry can fill out forms... but ... what happens when (god forbid) something goes wrong in their transaction.
They are not getting my services because of any Flyer, Yard-arm-sign, or photograph (and yes I did provide all this and more) but that said they needed my expertise.
Thanks for posting!
Warm Regards,
Lise McCleerey, TL
Keller Williams Realty Bellevue, WA
425-454-0911
So many good points already made but I want to add a few of my own, to my peril:
We need to raise the standards of who should be a realtor - a bachelor's degree, an associate's degree, in marketing, business, even English/Psychology would do it - that would lend credibility beyond the 40 hour course required in Michigan, for starters. I want to see this be a profession, not a job. Degrees matter and I am not talking designations here. Life experience should have a place in the process too, with discretion.
Yes, let there be freedom to FSBO, and let them fail, perhaps so arrogant to think they have succeeded - do you want that sort as clients anyway? Likely they have not succeeded as they might have. Let's not even address the stress they have added to their lives as a result of the effort. Realtors are a service provided, like any other profession. The only difference is that we give away our services until the property sells. Try that with your attorney and see how far you get. If we charged for billable minutes/hours, there would be a lot more esteem for this profession
Let it be broadcast when an unrepresented buyer or seller really screws the deal up, illegally, fraudulently, and scare the pants off people so they know what they do not know, and are liable for anyway - where is our media when we need them? Let's have unlicensed people go to jail. Yeah!
The public has no idea what we do; I agree with previous comments - the NAR ads are better than nothing but the focus should be on legalities, not about warm fuzzies. I am not particularly warm and fuzzy but I will protect a client's interests. And I know when I am getting no respect. I know when I am viewed as the person who schedules an appointment and opens the door, nothing more. I deliver far more than that.
Who Benefits??? In the article, the author alternately changes the beneficiary to suit his argument it that particular paragraph. However, if you read it closely, no one really comes out any better financially and the seller may come out worse.
I'll keep score on a step-by-step basis: (SA) Seller's Agent, BA (Buyers Agent), S (Seller), B (Buyer)
Note: For purposes of this discussion the normal transaction is (SA +3%, BA+3%, S-6%, B--)
1) List with a Flat-Fee Service on the MLS (SA +$500, S -$500, BA --, B --)
2a) Drive traffic by offering the full commission to the BA. (SA +$500, S -$500-6%, BA (6%), B--)
In this scenario, the Seller pays $500 MORE than he would have traditionally and only the BA really benefits.
2b) Ask the BA to cut commission and split it with the buyer. (SA +$500, S -$500-6%, BA+3%, B+3%)
Now the seller is out an extra $500 and the Buyer is happy. But, the point of the offering the higher commission (according to the author) was to get attention from BAs. Now the BA is getting the same commision and the 'motivation' is removed. Why not simply price the home appropriately??
3a) Offer the buyer full commission if they do not use a Realtor. (SA+500, S-$500,-6%, BA --, B+6%)
This is just FSBO. Nothing revolutionary here.
3b) Offer the buyer 1/2 commission if they use a BA. (SA+500, S-$500-6%, BA +3%, B+3%)
Same as 2b.
In none of the above scenarios does the seller come out ahead. In fact, I completely ignored the cost / time involved in additional advertising, document prep, etc that is not covered by a flat-fee listing. These costs will further reduce the Seller's 'savings'. For purposes of being fair, I also assumed that the seller described in the article who had been through at least 3 transactions could negotiate against a professional real estate agent who may have been through 3 transactions that week.
So, here is my 'novel' solution for driving traffic and selling your home.
1) Interview agents to actively work on your behalf to promote your property. Make sure that they have a written marketing plan that you agree with and that they will follow-up with you on a regular basis to make sure that the process is proceeding smoothly.
2) Work with the agent that you select to position the house properly.
3) Make sure that the house is properly prepared (cleaned, decluttered, staged, etc) so that when buyers do come, they can get emotionally attached to the house.
IMO the reason for his article is to gather different views from the inside to somehow persuade or attract the listeners on the outside. There are alot of things we do behind the scenes to get the job done correctly. The reason they would like to know what we actually do for that money.
It's a good tactic on his part. Not saying that a transaction could be done with just a buyer and a seller but that would not be the norm. The courts would be clogged with suits (actual and frivolous). The attorneys would have a field day.
Silly me, but when did offering a 6% commission to the buyers agent ever mean: really 3%, rebate the rest to the buyer. Actual real estate professionals know that rebates on agent commissions are not allowed in certain states at this time.
Since the topic came up, I'll add to it: I'm a bit frustrated with people stating the bar is set too low for those obtaining licenses! We've got a guy in town who's growing his company by sharing some pretty scary, stacked up, wrongly presented & possibly COE violating statistics on the radio every day. You'll find losers in every profession, no matter what little initials they may have earned in Graduate school. For example, didn't #9 have an education and still goof up? Honestly, you can study real estate for 10 years at a university and never grow the people skills it takes to remain Steady Eddie when the underwriter throws out conditions that'll make any man puke or a home inspection turns the seller into a mad man?! Brokers work hard to get their credentials. Owners trust their brokers. Brokers and owners hire agents and fire them, too! It's easy to get in, but difficult to stay!
The public's perception of our profession is low and until that changes we will have these types of outside suggestions. Let's face it most people think we are greedy and don't do anything for our pay.
BTW, hello neighbor. Thanks for visiting my site and commenting on my Referral Exchange post. I appreciate the time and effort. Julie Jalone in Sacramento
The public's perception of our profession is low and until that changes we will have these types of outside suggestions. Let's face it most people think we are greedy and don't do anything for our pay.
BTW, hello neighbor. Thanks for visiting my site and commenting on my Referral Exchange post. I appreciate the time and effort. Julie Jalone in Sacramento
Great comments from the best this industry has to offer. However,I have been reading most of the comments and it seems to be like a train running off track as soon as Susan said -We need to raise the standards of who should be a realtor - a bachelor's degree, an associate's degree, in marketing, business, even English/Psychology would do it - that would lend credibility beyond the 40 hour course required in Michigan, for starters.
I agree with Nector & Katerina comments as well. I don't think you need a bachelor's degree,associates degree,in marketing,business,even English/Psychology. If I have all these degrees,I need to be COO to Warren Buffet's Berkshire Hattaway Company,Steve Jobs's Apple Company or some Fortune 500 Company. Should more training and education be required to be a real estate agent besides the 40 credit hours and successful passing the real estate examination? ( 60 hours in DC - At least it was three years ago- I think )That's not for me to call. But if real estate professionals want to succeed in this business,they sh bUTould know that it is going to take more than just passing the state real estate exam.
But everybody is entitled to their own opinions. Oh,and one thing - Chris Plummer needs to stick with picking hot stocks. Making comments like the one he made should not allow him to say or write anything about the Real Estate Market. He needs to be put on time out.
Even though I can understand every sentiment here, I think we are still missing on a major shift, which is affecting the way people are buying and selling.
The minute we do not control relevant information, people can do everything themselves. Talk to experienced brokers and they would tell you that their own kids go and do it themselves. Yes, they do. I have a few nerds, and they don't need me in the process at all, however, the only way I am working with them is that I am taking upon myself the functions, that they do not have time to do, or choose to subcontract to me.
I have to admit that those nerds know the field better than many many professionals, as their eyes are open wider. The shop nationally and internationally, and we work locally. It has a benefit, but only when they decided to do something in your area.
While we keep patting ourselves on the back, the new way of buying and selling is proliferating, changing the landscape, and cutting first our commissions, then us out of this process.
Not that there is no value in using a real estate professional, but because this value is not obvious. We can be saying that our value is keeping you out of courthouse, but in reality, how many deals end up in courthouse? What is the chances of buyers and sellers end up in courthouse? We can tell them that with us they would spend less money, but how do they know that they have spent more money without us even when the did spent foolishly more?
A big developer in our area did the assemblage in 2003 and paid $3.4 MM for it while I could negotiate it for him for $2.6 MM (I had it for another client who bailed out). But the big developer does not know that. He was very happy then, he is even happier now, when he sold the entitled project to another big developer from Orlando for $34.5 MM. I am pretty sure that I could have negotiated that deal and save the Buyer $9.5 MM, but they do not know that. Both are professionals, and even they do not and did not see any value in using a real estate agent. And you are talking about average Americans.
Get real. This is simply the sign of changes. Of course, we can choose not to see them.