Rain City Guide

1. Comment from Michael
Time June 8, 2007 at 8:04 am

you got that right!

we had an incredible agent who sold our loft in san francisco and she directed us around to do this and to do that like we were children. we were a bit put off by it at first, but it was so obvious she knew her stuff and we ended up receiving 30 offers initially that all made us disgusting gobs of money…she held out and negotiated for a better deal and got us even more money with no inspection. it was amazing.

then, we moved to seattle and had a pretty good agent who did a fairly good job of getting us what we wanted for the price we were willing to pay and we sold it with her a year later for a nominal profit.

because we were moving to wallingford and our seattle agent was based on the eastside, we used a ‘referral’ from my wife’s co-worker for an agent who knew the downtown market cold…well, she was a very nice young woman, but she got eaten alive by the selling agent. such that, even when our initial full price offer with a contingency to sell our other place fell through and decided to take the contingency off, she advised against lowering the price from full because she thought it was in bad taste (despite my perspective that since we were exposing ourselves significantly there ought to be some kind of negotiation on the seller’s side…nope.). also, she got us killed on everything about the house i wanted the seller to fix. she sold us down the river on how much of a seller’s market it was…you could argue she was right, but we were in the room when she presented our offer to the seller and she got killed by their agent. she even insisted we come over and meet the sellers to present the offer despite my concerns that it was an hour drive each way and i had to take time off of work. what a colossal waste of time trying to convince a seller that you’re “worthy” of buying their house. just show them the money and it’s done.

i would never put her name here, but i can tell you that i am seriously investigating my next agent because i’m still p-o’d about the lack of negotiation this agent could do…oh, and we were the only offer.

uggh.

2. Comment from Mike Elliott
Time June 8, 2007 at 8:18 am

Nice blog, I will be sure to return. Feel free to visit mine too:
http://mikeelliottsblog.wordpress.com/

3. Comment from Bill Waters
Time June 8, 2007 at 9:09 am

Back a few years ago my dad FSBO’d another one of their homes. It took FOREVER to sell, as did all the other homes he FSBO’d over the years. It was on the market 8-12 months from what I remember. The house next door went up for sale shortly after theirs closed (similar specs: age, same builder, unremodeled, same sq ft, and on a lot 13,000 sq ft larger) with an listing agent. The neighbors house sold alot quicker but for 24% less…

4. Comment from ARDELL
Time June 8, 2007 at 9:43 am

Galen,

I’m enjoying this flip side story. Seems the stats we see mostly come from NAR over the years.

Recently I saw a newer agent post on her blog “we’re going to offer full price, because the house is priced well”. I’m thinking, why would anyone offer full price if there are no other buyers and the property has been on market for awhile? Made no sense to me.

I do think the industry is going to have to make some massive changes for agents to stop working WITH each other and work more for their respective clients.

In the last 48 hours I received a message on a counter offer “look forward to making this deal happen” and a flyer that said “We’ll pay you $35,000 for a full price offer from a buyer”. It’s clear to me that many still don’t get that it’s not “us against them”, us being the agents and them being the consumers.

Thanks for the article, Galen, and the link to the underlying article. Very interesting. I was wondering though if the difference was that the For Sale By Owner sold to a buyer who wasn’t represented by an agent. Maybe the seller achieved the higher sale price because the buyer didn’t have an agent either to help them negotiate with the seller better.

I wondered where the buyers willing to pay more came from, and why buyers without agents were willing to pay the For Sale By Owner more than buyers with agents.

For every seller that gets more; there’s a buyer who pays more.

5. Comment from Greg Perry
Time June 8, 2007 at 9:52 am

Galen,
You make a nice point.

The consumer is confused as to the value of an agent. How many industries can you think of that the newest person in makes exactly the same money (commission) as a productive, professional 15 year vet. of the business? In the last 2 months alone, I’ve seen horrendous examples of contracts, practices and negotiation by brand new or hobby agents.

A great agent can do amazing things and provide amazing value for their clients. Agents that NEED THE MONEY (live from transaction to transaction) at times may work against the interests of their client (they need the sale to close more than their client does).

I think reform of the RE industry need to start with basic licensing requirements and make it more difficult for the hobby / part time agent to muck about. We confuse the consumer….and ourselves.

6. Comment from Galen
Time June 8, 2007 at 10:12 am

Greg,

Ugh - licensing requirements. I say go the other way - remove all the licensing requirements. You’d have a little mayhem for a little while, but consumers would no longer put their trust in the state to certify quality and good agents could more easily differentiate themselves. Right now all the requirements do is certify your ability to continue through a long, boring (very boring!) and faintly informative class and pass a test. I can’t imagine that stricter requirements wouldn’t require more busy work.

7. Comment from Galen
Time June 8, 2007 at 10:15 am

Ardell, I wondered the same thing when I saw the study. Saying that when rookies negotiate with rookies they result in the same deal as pros versus pros is a little misleading. What happens when one side is a pro and the other isn’t? I demand more research!

8. Comment from Russell Shaw
Time June 8, 2007 at 10:36 am

EXCELLENT post!

9. Comment from Greg Perry
Time June 8, 2007 at 10:53 am

Galen,

The biggest benefit to expanding the license critera would the physical time and monetary commitement that the agent to be would expend earning the right to practice. Part of the expanded hours could be working as an intern.

For instance, a massage therapist needs 650 hours.
I believe a skin care specialist takes 2000 hours. Both learn in classroom and workshop environments.

If it took between 6 months and 2 years to earn the right to practice real estate, it would weed out quite a few new hobby agents.

For the sake of the consumer,the state does need a way to monitor licensees. Because of the huge $$ invovled, the potential for fraud is enourmous. Believe it or not the state does “crack” down on licensees when caught in license law violations. The state will always feel the need to license real estate agents.

I agree 60 hours of boring content……let’s make it 600 hours of boring content!….and make it expensive!

10. Comment from ARDELL
Time June 8, 2007 at 11:05 am

I’m with Galen on this one Greg. It’s the MLS and fees that need revamping, not license requirements. Right now we have all kinds of people getting licenses that don’t represent consumers at all, on a first hand basis. Increasing requirements is not the answer. Decreasing the need for so many to want a license, who have no intention of representing anyone but themselves ever, is where this problem will get solved.

Maybe there should be a referral license, vs. an Active Agent license, vs. an Investor who represents only themselves ever license. Three tiers of licensing, would make more sense, so the consumer can distinguish between a private investor with a license from the rest, and an agent who only refers business to active agents from the rest.

Or maybe a license should only be required for those who interact with consumers directly. Clearly if investors had alternatives to not needing a license to represent themselves, it would make life a lot simpler. In my experience, agents who are not really agents and only represent themsevles as parties in interest, have added a lot of confusion to the marketplace.

11. Comment from Michael Rahmn
Time June 8, 2007 at 11:35 am

The hiring practices (or more accurately, *not* hiring) of RE companies can go a long way towards this end. Inasmuch as companies refuse to create an environment where part-time and inexperienced agents are acceptable, the quality curve will shift to the right and float all boats higher.

12. Comment from Galen
Time June 8, 2007 at 12:03 pm

Greg and Ardell, I’m not adamant about the licensing thing like a to-be-unnamed fellow in Phoenix, but I do think more of the same would not be helpful. Maybe internships…

13. Comment from Greg Perry
Time June 8, 2007 at 12:04 pm

I dunno the answer….

I do see the problem.
Ardell, in areas 500-600 we’ve seen agent counts run up from 2,798 to 5,380 for a net increase of 2,582 NET agents since 2001 May 31 to May 31). The scary thing here is we know the churn factor is huge….these are NET figures. Yes some are investors, some are licensed assistants, but the majority are out there working with the consumer!

Ardell, perhaps you have an idea. A “limited” licensed agent for assistants and investors. And the full meal deal for practiciing agents.

Most agents don’t like file a complaint against another. Since MLS and licensed law violatons are complaint driven, we don’t clean up issues all that quickly

It may not be the answer, but I still come back to what I believe to be the source of the problem, and that’s a too low entry barrier. Of course we’re dealing with the body and not $$, but why should an massage therapist have to take 650 hours for a $60 massage and a real estate agent have to take only 60 hours for a $10,000 commission?

Michael, you’re right. As long as there is a place to hang a license, we’ll have a problem. But some companies make their living wholesaling inadequte agents. Unless somehow they get whacked by the state, how could it chage?

14. Comment from Greg Perry
Time June 8, 2007 at 12:14 pm

I wish these comment boxes had “spell check!”, lol I type the answers to these things out too fast for my own good!

15. Comment from Ken Whitney
Time June 8, 2007 at 12:33 pm

As they say, there are lies, damn lies, and statistics.

While we are members, we have been shocked at NAR’s apples and oranges use of sales data. Our customers’ properties sell for more than other brokers’ properties (13% in 2005 and 16% in 2006). That is a measure of demographics, not results (MLS4owners.com’s customers tend to be upper end, and their homes are intrinsically worth more).

16. Comment from Geordie
Time June 8, 2007 at 3:06 pm

I am a fan of increased licensing requirements. Here’s my suggestion:

1. Require a 6 month waiting period to re-take the test if you fail the first time. The folks who really want to be in the business will study harder and those who are dabblers will dabble someplace else.
2. Increase the renewal hours. 30 hours every two years!!! Are you kidding me. I probably get 70-90 hours every two years. Continuing ed is important with the ever changing legal and technological environment we live in.

As far as Unrepresented Sellers getting more or less money than those represented by licensees I have noticed a trend in my market. (Anecdotally.) In most transactions without a licensee involved (or an attorney), one of the parties gets taken advantage of in a horrible way. My favorite is the house sold for cash (without an appraisal) for hundreds of thousands above “market” value. I guess that buyer thought they were getting a deal - certainly the seller did better than I thought they would. Other times it is the seller sitting on a property that isn’t getting showings because of marketing and eventually sells for less than the market value.

Are agents a magic factor that prevents this? No, of course not. But it does seem like the MLS system makes for better informed buyers and sellers who can better informed decisions.

17. Comment from ARDELL
Time June 8, 2007 at 3:18 pm

Greg,

I have full edit priveleges and would be happy to correct your spelling anytime. I can’t change content, but spelling and grammar is my specialty I don’t use spell checkers.

18. Comment from ARDELL
Time June 8, 2007 at 3:29 pm

Sorry Guys,

Sounds more like you want fewer agents for the benefit of the rest of the agents. Haven’t seen any suggestions that really improve the situation from the consumer’s standpoint up there.

Everytime I hear these “raise the bar” theories, it allways sounds like “less agents equals more business for me”.

Until training includes actual workshops TO HOUSES, it’s all a bunch of hooey. Even my 3 day staging class made us stage a real house. Where’s the class that tests one’s ability to price a house? Until the classes offer real course material that benefits consumers, more of it is not going to help. Never, ever I have a seen a class that includes visiting a real live house. Now THAT would be a class worth teaching. We can do “roof math”, “hot water tank math” LOL…would be fun.

19. Comment from Geordie
Time June 8, 2007 at 4:12 pm

If there were 500 ARDELLS in my MLS my job would be easier. I could do so much more business if I was working in a field full of competent professionals. I am not afraid of competition (ok I kinda like it)

If you have a way to weed out incompetence let me know. My suggestions are based on the lazy and incompentent agents I know or have seen “pass through” in the past few years.

20. Comment from Greg Perry
Time June 8, 2007 at 4:52 pm

Ardell,
I do have the consumer in mind. I’m with Geordie on this one. I’m seeing too many deals by incompetent agents. We have such a mix in this industry of top flight professionals and lazy and incompetent. That alone confuses consumers. Maybe raising the entry bar isn’t the answer, but there needs to be weeding. Education isn’t the only answer because the best get more than required, the problems wait until the last minute and take meaningless online classes to fullfill their requirements.

21. Comment from ARDELL
Time June 8, 2007 at 5:12 pm

Guys,

Often my client is BEST served when the agent for the other party is a lightweight. My favorite was the agent who brought me/my seller a full price offer because she was leaving for vacation and didn’t have time to negotiate. The seller and I actually gave the buyer some of the staging furnture to balance things out a bit.

I’ve even helped two or three buyer’s agents write the offer as the agent for the seller. That was fun. And they thanked me for it )

You are both still losing me on this one. How does a BETTER agent on the other side of the table help YOUR CLIENT? I find the opposite to be true. Bad agent on the other side of the table is a gift for my client, I just have to wrap it up and put the bow on it.

22. Comment from Jillayne Schlicke
Time June 8, 2007 at 5:41 pm

Hi Ardell,

Regarding comment 18, in my career, we have taught home inspection classes by an inspector AT a house, and a title insurance class, taught by the title claims attorney, at a house, and a land surveying class, taught by a surveyor, at a house. We have had a mock-signing with an escrow agent and Realtors role-playing buyers and sellers, and lately, we make Realtors create a blog in the classroom (while earning continuing ed) and create and record a podcast as part of their in-class assignment.

I agree with you that a certain percentage of agents wait until the one to two months before their renewal date to get all 30 clock hours in. They show up for a class they’re not interested in, cross their arms and legs and tune out until the class is over, which is far easier than an online class in which an agent has to sit there and click on things and maybe take a quiz to see if the student was paying attention.

One way of combating continuing ed burnout is to make classes dynamic, interesting, relevant, and cutting edge. Many schools and instructors just don’t try that hard and the instructors end up lecturing……AHHHH!!!!! Lecture mode is not the way the majority of adults learn. 600 hours of lecture is my own private version of hell.

If the bar is to be set higher, then the Dept of Licensing could also consider setting the bar higher for real estate schools, instructors, instructional methods, and course material.

I also agree with Michael Rahm from comment #11. Years ago (maybe this is still in place at some companies) brokers use to have sales managers whose job entailed TRAINING the new recruits on all the things they don’t teach you in the prelicensing class such as negotiation skills. It seems now that many agents are on their own. If the quality of available live continuing ed leaves much to be desired, no wonder agents are taking online classes.

23. Comment from Jillayne Schlicke
Time June 8, 2007 at 6:03 pm

Massage therapists and also cosmetologists do have higher requirements for PRE-licensing education. However, there is often zero continuing education required. A massage therapist and a cosmetologist can do severe bodily damage to a person, which is why the requirements are so high; cosmetologists work with lots of different chemicals.

If real estate agents and Realtors want to raise standards, as I blogged about here:

http://www.raincityguide.com/2007/03/24/professional-status-perceptions-and-reality/

I recommend:

1) Doing away with dual agency. In any other professional group, no professional could ever adequately represent both parties who have opposing interests.

2) Raise standards across the board: more and/or higher quality pre-licensing and post-licensing education.

3) Higher ethical standards with sanctions for violations. A code of ethics not enforced is not very helpful for the professional group who would like to be respected in the eyes of consumers.

4) Within each state, change your agency law duties from statutory to a clear fiduciary level.

5) Create a tiered licensing system and manadory supervision so baby real estate agents can be differentiated from the pros. Arguably, highly seasoned agents will be worth more in the eyes of consumers.

Now a consumer can choose: baby Realtor for fee X or seasoned vet for fee Y.

The appraisal industry has a tiered approach to licensing, escrow (in WA state) has the designated escrow officer position and the highly coveted L.P.O designation. We are the ONLY state in the US that allows escrow closers to obtain this designation. The test is extremely hard and Limited Practice Officer closers can command a far higher salary.

I see a future with tiered licensing.
I do not see Galen’s future with no licensing. In the narrative history of any profession, there’s always movement toward requiring more rather than less education, testing, and so forth.

So how does this happen? It is up to all of you. If the industry wants it, it will happen. HOWEVER, let’s not forget the economic and political factors. If it will make corporations more money, it will happen.

The company that can figure out a way to put the consumer’s interests first AND make a profit is where we are today.

There will always be that tension between what is best for the consumer and maintaining profitability.

24. Comment from ARDELL
Time June 8, 2007 at 6:42 pm

Jillayne,

Now match all that against consumer demand for lower fees. There should be a simpler way for consumers to get better for less. Maybe you are correct that the only answer is for the broker to make more, for change to happen. But I don’t think so. I think licensing is more concerned with the consumer getting more for less, than Brokers making more.

If government officials are bending to brokers vs. consumers…there’s something rotten in Denmark.

25. Pingback from FSBOs in Charlottesville? : Real Central VA
Time June 8, 2007 at 7:42 pm

[...] I debated writing about this New York Times article, mainly because all the big dogs are already picking it apart (notably BHB and RCG) and the vitriol against Realtors (some valid) is flowing. But, a couple of readers emailed me the article, so I feel obligated to comment (and I am grateful for that obligation - thank you for reading) [...]

26. Comment from Jillayne Schlicke
Time June 8, 2007 at 8:40 pm

Hi Ardell,

Licensing law officials are charged with balancing the needs of the industry with the needs of consumers. Licensing officials are only concerned with bringing the business practices of individual agents and brokers up to and in line with state and federal law. Going much beyond that is not on their radar, nor should it be. It is up to the individual and collective members of a professional industry to take it from there and move the industry forward.

As it is now, a consumer can still choose to sell his or her home by owner. A buyer can choose to buy the home from the listing agent and negotiate the listing agent’s full fee downward and pretty much be on his or her own when it comes to representation.

A consumer can ask any real estate agent to take a lower fee for the same service. I would bet that if we took an anonymous survey of a wide range of agents from experienced top producers to brand new agents, we would find that all agents negotiate their fees up and down at one point or another. Some folks don’t like to use this as a selling point or remind consumers that fees are negotiable. If a consumer doesn’t know that fees are negotiable, the consumer looks for other low priced options!

Another (better?) way of doing this is to definitely give the consumer several options on different pricing structures and what the consumer will receive at each price level. All duties required by state licensing laws are discharged, but the manner in which they are discharged varies.

The broker/agent combo with the best service at the best price wins. HOWEVER, it’s not the broker/agent who decides the definition of “best,” it is the consumer who votes with his or her dollars. That is how the consumer wins.

Right now consumers are discovering, some for the first time, that the price they paid for the best service they ever received from an agent was negotiable.

The way the industry wins in all this is to raise the standards across the board for ALL licensees.

27. Comment from just_checking
Time June 8, 2007 at 8:56 pm

As long as agents get paid via commissions they will always be
working to “get” clients rather than working “for” clients.

Change the way they get paid - to salary instead of commissions
and see how the industry cleans up magically

28. Comment from Jillayne Schlicke
Time June 8, 2007 at 9:46 pm

Hi just_checking,

I’m not entirely sure this would clean up the industry. I do believe broker/owners would clean up in profits.

What do you think about the idea of an hourly rate?

29. Comment from ARDELL
Time June 8, 2007 at 10:44 pm

just-checking,

I’m glad that there are several models testing that now. So far, I don’t see it working well, but it hasn’t been tested for very long yet.

I was a salaried fiduciary for many years before I switched to real estate, so it’s hard for me to say. But I’m watching the salaried models.

So far it has the same employee issues as most companies. A few are great. Many are not. Doesn’t work for sellers as well as buyers, and the employees are about as good as new agents for the most part. So there are times when a salaried agent and newer agents are pretty much equivalent.

But employees get judged and get bonuses based on volume, so the pressure to “get” clients is probably about the same. In fact salaried agents can have more pressure to produce than many commissioned agents.

30. Comment from Greg Tracy
Time June 10, 2007 at 10:22 am

I believe the difference is working with a real estate agent or working with one of the best agents in your market. The best agents do not under-price homes to get a quick sale, but rather help determine the best plan to reach the client’s objectives, which is usually to make as much as possible.

I think the licensing process should include a year-long intership, or aprentice program, along with one year of formalized schooling, afterwhich the student earns a two-year real estate degree and license to sell.

The challenge is that the states’s are making a lot o fmoney licinsing people, but I look at it like this- if we really want to protect the consumer and earn our designation, we can’t continue the revolving door- if it takes two years to get a license to cut hair, why not to sell people’s largest investments?

http://blueroof.wordpress.com/2007/01/25/real-estates-revolving-door/

Here’s a post from a while ago, which speaks more about this.

31. Comment from Phil Hoover
Time June 11, 2007 at 12:01 pm

A big part of the problem is that the public cannot differentiate between a good agent and a bad one.
And, they often select their agent based upon criteria that is laughable at best ~ like the son of their third cousin, the daughter of their best friend, a nice young man they want to help, etc.