Today I had lunch with a friend up in
She is also an accomplished Realtor working for a competing brokerage in a
fickle resort market. More importantly, she’s ex-high-tech, which means she’s
one of the few people I know locally with whom you can have a meaningful
discussion about how things in this backward business of real estate should
really be done.
Realtor, when you show up at a listing appointment, it’s typically just you.
You’ve done your analysis, you bring the comps, you have marketing ideas, you
connect with the seller, and if all goes well, you take the listing. Maybe you
even take digital pictures while you’re there, and hopefully the house is
clean and clutter-free.
into the MLS, upload the pics, write some amazing copy, coordinate the virtual
reality tour, design and print a bunch of flyers, create and mail some
postcards announcing your new listing, do an agent tour, enter the listing in a
zillion vertical websites, send an email to your client database, send a spam
email to the entire MLS, hold some open houses and pray that people show up,
write and place a few magazine ads, maybe do a Google ad campaign, post the
listing on your own website, call your clients that might be interested, do a
YouTube video if you’re really creative, talk it up at the weekly sales meeting
and pray for buyers.
activities entirely on their own. But Realtors don’t get paid for these
activities, we get paid for closings. So we constantly multi-task, always moving
forward in several different directions hoping that at some point, our efforts
will result in an actual paycheck. Taking calls from new clients, doing MLS research
for buyers, coordinating the details of current escrows, negotiating counter
offers, prepping for a buyer tour, building a custom property website, responding
to email inquiries… all of this typically happening on the same day.
everything else on hold, glue the cell phone to your ear, and do whatever it
takes to keep it together. It’s a definite challenge keeping everyone happy.
are experts at all of the following? Photography, copywriting, internet
marketing, search engine optimization, market analysis, graphic design, office
administration, email marketing, database management, pay-per-click
advertising, open house people skills, sales skills, escrow coordination,
contract negotiation, diplomacy, telephone karma, and the ability to talk
sellers out of their fantasy prices…
I doubt it. Can you see the dysfunction?
more like an ad agency. The Realtor becomes the account executive. They build
relationships, explain the process, and take the listing. Then the team comes
in: a stager who can make the house look great, a photographer who knows how to
take professional pictures that display beautifully on the internet, a
copywriter who can portray a property that creates the desire to buy, and a
team of support experts to handle the internet marketing, graphic design,
advertising campaigns, and subsequent escrow activity. The account exec is in
the loop at all times and communicates back to the client every step of the
way. That’s how it happens in corporate
licensed sales people answer the phones, respond to email, answer questions,
qualify incoming clients, put them on the appropriate track depending on need,
and introduce them to the account executive as they get closer to a decision
point… 24/7.
the beef tartar (we went to Moody’s… so fabulous) and my friend immediately
agreed. The traditional brokerage model is highly inefficient, at least from
the agent point of view. You hire some agents, give them a few weeks of
training, throw them out there, and if enough survive you’re golden. If a bunch
fail, oh well, just hire more.
opening up the information food chain, but technology is changing the
landscape, and our business models need to adapt.
doctor check you in at the front desk, fill out your insurance forms, escort
you to the exam room, take your blood pressure and do all that other pre-work
that assistants typically do prior to the actual consultation? What an
incredibly inefficient use of his time! Sure, back in the 1800’s in rural
country doctor probably did it all, but times have changed.
doctor’s office. Meaning, the agent does it all. Some agents are great at
negotiation yet awful at writing good copy. Some agents can write fabulous copy
but couldn’t take a decent picture to save their lives. Some are magicians when
it comes to talking sellers down from their dream prices, but they may be awful
at escrow coordination. Why aren’t we organized around teams of highly trained
specialists?
teams. It’s an emerging trend in real estate, and we have several in
producer in
entire business around a team, and it seems to working well for him. But
there’s no real formula for this, his broker isn’t likely providing some team
success template… so these folks are pioneers, just figuring it out on their
own by trial and error.
industry could do better. What’s interesting about Redfin, Assist-2-Sell and
other so-called discounters is that they are at least trying to systemize,
leverage and create more efficient use of resources. Yet they still have to
operate within the MLS fiefdoms. But that’s a whole ‘nother rant, probably best
left for another day.
7 comments
How would all these folks survive financially?
Sure, the seller could hire a “team” of a negotiator, a stager, a copy writer, a marketer, a graphic designer, an ad campaigner, and a couple other support folks to make sure that all the copies get made. And then they could all split, in some equitable fashion, the seller’s side 3%, or, $12,000, of a $400k deal?
How can there possibly be enough deals to be made to support all that? Or are you talking about raising the standard commission to 20%? Good luck.
Your post inherently raises the question of what are people willing to pay for the value they perceive they obtain from a realtor. Yes it is true that doctors don’t waste time weighing their patients. They pay others to do that. They can hire others to do that because they charge enough for their services. They can charge enough because people perceive they get value for the fee.
Doctors make it work because they effectively charge thousands of dollars an hour for their time. Lawyers make it work because they charge several hundred dollars an hour. People will pay these fees to a competent professional, with years of education and training, and who have passed signficant barriers of entry into a true profession. I’m sorry, but with all due respect, people are not going to pay equivalent fees to a so-called “profesional” often with no more than a high school diploma, six weeks of formal “education” and with essentially no barrier to entry at all. It is more difficult, in terms of education and training, to get a cosmetology license than a realtors license.
It may just have to be that if people without the education and training of a true profession want to earn anything like the members of the real professions, they will just have to do it all without the
support that real professionals can employ.
Diane, none of my comments are in any way directed at you personally. They are directed to the realtor business as a whole.
Lindie, I think Diane’s point is that the real estate profession needs to be taken up a few notches. From the way it’s being described, the industry has just grown up this way, throwing barely educated agents into the fire. The industry sounds inefficient and backward, and it needs to improve to do a better job at helping people buy and sell homes.
You raise a good point about how a team of folks would survive financially. Simple. Specialists specialize and work on many transactions to support themselves. Maybe with specialized talents, the Realtor as account rep has less risk and is therefore paid less, but all people involved earn part of the commission.
I think the bigger question or problem is the commission risk. Why should Realtors work their butts off with a real risk of losing deals? It’s crazy. It’s a 100% commissioned job. No base pay. I hear some savvy agents ask for upfront marketing fees to offset the risk, but probably just the really good ones when sellers are desperate. Most realtors will just take a listing without asking for a non-refundable marketing fee, so why should a seller pay up front? And buyers and sellers are so flakey. They can back out for almost any reason. Sounds like Realtors put a lot of “faith” in buyers who will eventually buy (with them) and sellers who are motivated to sell.
I’ve heard horror stories from my realtor friends of Realtors investing $25,000 and up on marketing expenses only to eventually lose the listing 6 months into the term for whatever reason. And they generally don’t get reimbursed, right? It really seems crazy. And readers of this blog (and others of course) complain about the “high” 3% commission fees. That’s not a lot. It’s the sellers that are cheap. Boy, look at FSBOs and how poorly they do—eventually having to go to a professional Realtor to get the house sold. Sellers are generally clueless, right? Don’t they have better things to spend their time on than handling their own home sale? I digress…
I’m glad I’m not a Realtor. What a tough, thankless job! I think they should be well paid for the risk and work they incur. People seem to demean Realtors (your post included wrt lack of education). I submit that they are some of the hardest working sales folks on the planet. The really good ones (like Diane) shine. Seems like there is an opportunity to shake thing up. Diane, I hope you find a way.
The real estate business is not that complicated that specialization is needed for the median transaction. Sure, in the commercial market and the very top-end, out-sourcing some of the tasks makes sense. But in the typical home selling process, the main role of the realtor is to provide expert advice about the process/market to people who rarely buy or sell a house. In a seller’s market, the houses sell themselves. In a buyers market, the realtor has to have the personality/skill set to convince any potential buyer to pull the trigger. That’s why the same agents are the “producers” year after year, they have the right personality and savoir-faire to gain the trust of the buyer and to close the deal. I would say that the chief attribute of a top-notch real estate agent is a keen understanding of human psychology as it applies to the biggest investment that most people make in their lives.
I am a nurse and multi task every day on my job! I am expected to not only do “nursing” but play secretary, transport, telephone operator, food service person, and anything else that needs to be done. There are many jobs where people are expected to function in a variety of roles and perform those roles well. Sorry but you sounded a little whiny and I have had a hard 12 hr. shift and feel a littly whiny myself! To the point, I became interested in all things involving real estate because we placed our home up for sale about 2 months ago–I found your blog on my searches and it is very informative. My husband is tech savvy and I in addition to being a nurse am a videographer who has produced commercials.Practically all the things you were talking about doing to sell a house, we have done ourselves. We do not have an agent but paid a discount broker to place us in the MLS. We wrote the copy which is pretty good–read a lot of listing descriptions and pretty soon you get the hang of it. We made a web site, took pictures and have video. Advertised in the paper and had open houses each wknd. Sent flyers to real estate agents although I have a feeling those were probably tossed. Bought signs and had flyers out. We cleaned our house from top to bottem and read articles on staging and did that with no help. In other words we researched out how to sell a house and did everything that made sense. Truthfully, it wasn’t all that hard.
We even offered 3.5% to buyers agent just to get agents to bring their clients. We did the research and spent the time and in less than 2 months in this market have an accepted offer. Want a change for the better? Start offering paid services that run the gamut of just MLS listing to full service. Let people choose how much they want to do to sell their house and then reap the profit. The agent who listed our house just put it in MLS and made money for just doing that–as I said we filled out the form and wrote copy. I think the so- called discount agents are on the right track. Well, this has been long and I hope somewhat coherent. This has been my little rant.
Way too many agents came into the business after the bubble was already inflating and the funny money liar loans were heating up. Way too many agents came to believe that this was the best gig going. Put a listing in the MLS and wait for the phone to ring 6 times in the first hour. Get a little bidding war going and consider yourself a marketing genius. They never even knew they were standing in the middle of the biggest speculative bubble in history. They thought they were that good. They will spend the next 3-4 years coming to understand just how wrong they were, and just how hard it is going to be to survive.
I had started a reply when CB’s comment went live. I have to start over because she has it so right on target.
As a seller, what do I need in an agent?
- MLS exposure. Local and national.
- Recent comps and listing price advice.
- Tour the suckers through the house.
- Process the offers.
Not a huge list. CB is right that it isn’t too hard to take a few good photos (or hire a pro for about $100 - a good investment). Even little brain me can set up a decent, free web site in a couple hours. I could even host my own tours, but I’ve got other things going on and don’t really want to be involved with the proscective bidders. Legal paperwork? Escrow companies take care of it. Most of the paper is realtor cover your ass stuff anyway.
As a buyer, what do I need from an agent?
- Neighborhood information if I’m not local.
- Comps, although I can do that myself. A little touchy feely and in the trenches knowledge helps me.
- Coordinate inspections.
Sort of a short list, and I don’t see it as worth 6% of transaction cost. Not in this connected age. Is there still a place in the new world for the real estate professional? You bet! But the roles and the areas of expertise are changing.
I think real estate is going to become more of a professional service industry rather than its current sales industry status. Pay as you go for the services you need - on both ends of the transaction. And paying up front for the property’s marketing expenses seems fair to me.
I actually have a lot of respect for the real estate professionals I have dealt with over the years, both on the buying and selling sides. They protected my interests, provided good guidance, and fulfilled their responsibilities (but I hear my good friend Jaded is working up some contridictory evidence in the Reno market). In the old world, I had no problem with 5-6% commissions. And there may be people for whom that model is still appropriate, but not for me. I’m totally behind Diane that the industry has to change. The question is how to carve out a profitable niche in what is going to be left in the wake of the NAR world.
Diane- any figures on what percentage of houses sold in Reno are closed by say the top 10 agents? I would love to see it if there is.
In my opinion the best agents survive because they do whatever it takes to sell a house. They will continue to thrive, all the while wearing many hats, while those who did nothing more than get a listing and wait for the sale to happen for the past few years will be Walmart greeters by the end of the year.