Why do you need a licensed real estate agent?

Many people see the current market as just setting a price and waiting for the offers to roll in. Because of this, there are more sellers trying to sell their own home or believing that this is really easy. Perhaps they are looking for a deeply discounted agent to simply do the paperwork. In fact, good agents will tell you that they are spending far more time on each transaction now than ever before. The knowledge required to sell and CLOSE a home in this market is much more than the normal market of two years ago. We’ll explore how a licensed real estate agent can more the process go smoothly when selling your home.

Pricing a home

Typically, sale prices are based upon closed sales that are comparable in size, location, and features. Those comparables help determine the amount that you can expect to be borrowed. Today, comparables often only reflect what we can expect an appraisal to look like but not necessarily a purchase price. When you hear homes are selling “above listing price,” it is not that the agent or seller did not know the proper price, but rather listed it at what they expected it might appraise for.

Until we catch up with actual closings on homes, there truly are two prices:

  • what the home will appraise for
  • what the home will sell for

Does it make a difference?

Buyers not properly represented may offer whatever they think it takes to get their offer accepted. They believe they can still borrow based upon sales price or believe that they can talk the seller into reducing the price if the appraisal is less than the purchase price. As a seller, it is important that you know if your buyer is capable of closing the purchase even with a lower than hoped-for appraised value. The question becomes, can it close?

If not, you took your home off the market for 30-45 days just to find out you have to go through everything to sell it again. Worse yet, you now know what it appraised for and therefore exactly what other buyers can get in maximum loan value. That means fewer qualified buyers.

So how else does an agent help?

In this market, they have to prepare to coordinate a multitude of showings in a relatively short period of time. With more Realtors® than homes for sale, every agent with a prospect that can afford your home (and many who really can’t) is going to try to be first to see and first to offer.

Your agent must then receive any and all offers and transmit them to you. Each offer should be analyzed for:

  • price
  • loan to value ratio
  • type of loan
  • likely appraised value, and
  • the likelihood the buyer can close.

Oftentimes, the highest price is not the best price.

Your agent may have to juggle all these offers to request from each agent submitting an offer to resubmit with their “highest and best.” Then the process of analysis starts anew. For buyers, we talk about losing home offers here.

When Your Offer is Accepted

Once you accept an offer, the fun really starts. Agents have to verify that Earnest Money was received and escrow (title) was opened. There are time limits to provide paperwork to the buyer and to negotiate on whether repairs will be made. Next, there is coordinating the inspection, analyzing the inspection recommendations and the buyer’s requests.

After that, there is tracking the loan officer of the buyer. It is important to make certain that there are no surprises in timing. Has that appraisal been ordered? Will it get to the lender on time to close? Did the closing disclosure get out timely to assure a timely closing? We haven’t even discussed getting the inspectors and appraisers in and out of the home.

Now, how about the title commitment? Anything to worry about there? Does the escrow/title officer have everything they need to close? Will they get paperwork soon enough that your agent can review your closing statement before you go down to sign?

Then, there is the fact that many states only allow the contracts to be put together by the regulatory people to be used by agents licensed through them. Will a seller know what has to be covered and where they will get the contract? Will you know what all the elements of this agreement mean to you?

The Bottom Line: You Need a Licensed Real Estate Agent

More than ever, this market requires an experienced, knowledgeable, and educated team of agents to assist sellers in maximizing their bottom line. You need licensed real estate agents to guide you through this challenging and detailed process. Going at it alone could result in the sale resulting in significantly more time, stress, and fewer dollars to take home.

Recession, depression, or compression in the Real Estate market? It doesn’t really matter!

Many of the economic pundits are predicting that our economy will weaken over the next couple of years. Many more have said we will see a recession that could impact the Real Estate sector. I actually heard one of the popular analysts compare what he thinks is coming to a depression like 1929! Does any of this really impact you as a real estate professional? Let’s examine this a little further.

The Housing Market

First, mortgage rates are at a historic low. Under 4% for a 30-year loan and the Fed says they will cut further which could cause a slight additional drop. Second, housing demand is at a low compared to housing availability. We simply aren’t starting enough new homes to have enough available to the new entrants into the housing market. That means that supply is low and demand is high with more people able to qualify with lower loan payments! Sounds like a solution, not a problem!

How to prosper

That means even if only the same number of houses sell next year, the agents that set a business plan in motion to let people know that they can purchase first time, move-up to something better, or capture their equity and down-size easier than at almost any time in recent history will continue to succeed. If the market drops off a little, those who aren’t consistently pushing their relationships and marketing are the ones who will decline in the number of sales. Don’t let the market have any effect on you. Set your target, figure out the best approaches to hit your target and break down each approach to the little things that need to be done consistently to succeed in each approach. Once you have done that, track what you do for each of the little things and the approach becomes successful and the target gets hit, regardless of what the economy does!

Carpe Diem!!

Today, more than ever, buying or selling real estate is like trying to win a football game. To win the game, every player involved must do their part. There is the offense to move the ball toward accomplishing the goal of scoring. There is the defense whose job it is to keep the game going toward our goal, not the opponents! Then, often overlooked, there are the special teams. Designed to provide strategic positioning on the field these are specialists whose job is to do one thing extremely well.

Change is inevitable, except from a vending machine! The Real Estate industry is changing rapidly and dramatically. Tech companies are invading the space and capturing the supply of buyers. Now they are working hard on capturing the supply of Sellers. What’s next, go after commissions as well?

Whats happening now

That’s exactly what is now happening! There are as many as 9 major law firms in the US that have joined in a lawsuit challenging our system of commissions. They have sued the major MLS systems, NAR as the Mothership, and all the major Franchise firms as co-conspirators. Those firms believe that a firm, the MLS, or the Mothership requiring a listing agent to “offer” cooperative compensation is anti-competitive and artificially increases the cost of selling a home. To help with their claim, they note that this system “prevents” Buyers from negotiating with their agents for the services they provide.

The Dept of Justice is now looking into MLS data to determine how many agent searches begin with or include cooperation commissions. This is to determine how anti-competitive cooperative commissions really are. Results could be that sellers save the cost of paying commissions to the buyer’s agent and leave the Buyer to negotiate what his/her agent will be paid. That becomes an additional cost for the Buyer that would need to be built into the loan system or will increase out-of-pocket cash costs to the Buyer.

Here’s how it could change…

Do you know a few buyers who won’t seek an agent’s help if they have to pay cash for services? I certainly do! More importantly, what amount will Buyer’s be willing to pay for the services we can provide?? How many will willingly pay $6,000 for your services to purchase a $200,000 home? Unless I miss my guess, and I haven’t missed many, how Buyers agents get paid IS going to change, and probably dramatically. The very least of changes will be total full disclosure from the agent to the Buyer of how much the agent is being compensated. This will be only if there is some sort of Seller participation. If not, you will have to negotiate your compensation with your Buyer before beginning your representation. Are you confidant enough in what expertise you bring to a transaction to set across the table from a first time home buyer and tell them they will be responsible for paying you 3% of the cost of whatever they purchase?

Many firms have tried to avoid these pitfalls by having their agents negotiate with their buyers at the beginning of representation and complete a Buyer’s Representation Agreement. That is a significant step but how many of you have managed to get a buyer to sign a Buyers Representation Agreement only by telling them they don’t have to worry because the Seller will pay it? I’ll bet many of you have even told Buyer’s that if you collect less than what you agreed to on the Buyer’s Representation Agreement you will settle for whatever the Seller paid!

Conclusion

The results of these lawsuits are going to at the very least require significant disclosures of what you get paid to represent the buyer (no more cloak of invisibility because the Seller paid it) and more likely will require both front end negotiation and full disclosure. If you are primarily representing Buyers, ask yourself if you would willingly pay for the services you provide to a buyer what you want them to pay. Should you answer yes, get what you provide down on paper so you can build upon that with other buyers. If you wouldn’t pay for your services, you need to re-think how you represent buyers and discover what you would want to make it valuable enough, then implement it! Don’t make it about what you get paid, make it about what your buyer needs and wants!   

After 34 years of operating in and around real estate, I believe the future of real estate is bright in spite of the coming changes to real estate! The housing market is such an economic driver that many will try to disrupt and change, but no one will defeat it.

Right now, the primary change in the market is toward consumer choice. It will start with compensation. The broker co-operation model as we know it will disappear in the next 3-5 years. No longer will Sellers dictate what Buyers agents will be paid. Buyers agents will have to negotiate with their Buyers for what they get compensated and what services they provide.

Consumer focused:

Other coming changes to real estate are that consumers will want all services coordinated in a cohesive single environment including contracting, title, escrow, mortgage, and inspection. These services will need to be digital, accessible, and coordinated. This requires fewer people and thus less cost as the industry moves forward.

The Industry will evolve to a single nationwide (worldwide?) database that will replace local MLS’s. That provides greater access to knowledgeable brokers/agents and will erode the “local knowledge” advantage currently enjoyed.

As all of this comes into play, it will hasten the entry into the industry directly of at least one of the mega players; Amazon, Google, or Facebook. Not as on-demand or iBuyers but as full-fledged integrated real estate services companies.

Last, but far from least, the Independent Contractor model that we are familiar with is going to be replaced with an employee/employer model. That’s right, the one with withholding, job descriptions and requirements, and social security!

Are you ready:

All of this bodes well for those agents who have exceptional knowledge, refined negotiating skills, and understand the true nature of customer service. They will have access to the nationwide MLS and be able to coordinate the process from scheduling showings, writing contracts, and obtaining mortgages to closing the transaction digitally! They will need to be exceptional at creating, building, and maintaining relationships with consumers.

New mortgage advances, more employment, and greater opportunity are going to make home ownership more accessible to more people. More customers and a reduction in the number of agents competing for their business, what could make the market any better? The future of real estate really is bright if you are ready, willing, and able!!

 This is the time of year that we first start looking to see where we stand on our production goals. Statistics show that we should have closed or have in the pipeline as much as 40% of our entire year. Many of us suddenly have to wonder why we aren’t on pace to reach our goals. Others will say they are on track if they can simply continue as they have. For both, the determining factor is really the same, can we make the decisions to take the necessary action to pick up the pace and finish out the year strong. What actions are you willing to do to finish the year strong. Will you take the time to do those calls? How about getting out to do a pop-by to those important contacts? This time of the year sees many agents taking it back a notch because it is the beginning of summer, graduations are near, and summer vacations are at hand. While few are out there in our space, the time is ripe to make noise and make up ground. However, the point is if you aren’t prepared to take action, you won’t make up any ground and hit your goal. If you are still waiting to get it just right or still trying to figure out what you should do, don’t wait any longer. Make the decision to take action, move forward and find food. That’s right, it is a conscious decision that only you are in control of. If you don’t finish the year the way you wanted to and you didn’t take action each and every day, you have no one to blame but you. Remember, the legs feed the wolf and like the wolf you only eat if you run towards the prey. It is even better when there are fewer wolves to compete with.

The Claims

I love getting new real estate recruiting ads. I continue to see claims of providing 1 to 1 support and a whole laundry list of support services while paying out something near 100%. When I look to find out how many ” employees” these companies have to provide the services they claim to their real estate agents, I find the number to generally be 1 or 2 support personnel. Really?

The reality

That number of support personnel works if there is less than 10 agents. Otherwise, they must be super talented employees, have many years of experience in real estate and thus must get paid well. If that’s the case and you receive 100% of your commissions, how is this payroll covered? As a matter of fact, how is the rent, internet, copier, and utilities paid? Now ask how many real estate transactions the broker does in a year? That governs how much time he or she has available for thee. Without a reasonable split from the real estate agents, related service providers from which they profit, or a large number of agents the math simply doesn’t work. If you have a large number of real estate agents and a fixed fee, how many “people” are there for you to ask real estate questions of and get specific real estate advice from? You can’t expect specific advice from a video and you can’t get specific advice from an out-of-state “broker” as they have no knowledge of local laws and forms.

Fuzzy math?


You get what you pay for, regardless of how much business you do. Nothing more, nothing less, even though they will tell you they can give you more for less. One model even claims no franchise or tech fees of any kind. So, am I to believe the real estate Franchise company gave the right to use their name and resources to a real estate broker that gives all his real estate agents 100 % of their commissions for no compensation? Either capitalism or math has dramatically changed. In my 34 plus years as a real estate agent, broker, lender, and developer, I have met few real estate brokers that will take on liability for no return and even fewer real estate franchisors that provide name recognition and services without charging a fee. There is always a “but” in these arrangements. Don’t let the “butt” be you! Ask questions. Get fully informed. If we as agents made these representations in selling a property, we would violating the rules in most all states, yet they just keep recruiting with the same old promises.

A great Real Estate agent is like a great Caddy! A professional golfer’s caddy is trying to help his
employer navigate the golf course, to give him the opportunity to use the right clubs to make the right
shots to make the right decisions, and win the round. Caddies have enormous “local knowledge” as they
walk the course making notes on distances from the tee to the green. They need to know from
landmarks on the course how far a shot must go to help the golfer select the right club. It is their job to
know intimately the slope of the green to or away from the pin and to be fully aware of the terrain. A
great Caddy accompanies their pro to the driving range to study the distance the golfer gets consistently out of each club.

That helps the Caddy offer wisdom to the Pro on the course. More information gives more knowledge which when combined with the Caddy’s experience allows the Caddy to help the Golfer make the proper decision based on good judgement. The Golfer still has to make the final decision!

Are you like the Caddy? Have you properly prepared to undertake representing your client knowing
everything about the playing surface, the rules, the course, and about your clients wants and needs? A
good agent knows what is available in a neighborhood, what has sold, what hasn’t sold, and details
about the neighborhood. A good agent will advise the client on the real condition of the property and
the things that add to or detract from the price of the home and provide multiple looks at pricing. They
provide proper documentation, communication on every hole, and try to keep ther client in control of
the process!

Great agents have learned enough from the client to understand their expectations and
their real needs to help them apply experience, knowledge, and good judgement in making their
decisions. Perhaps you should watch the Golf channel and pay particular attention to the caddies. They
depict the great “Realtor” we all want to be and you can learn a great deal about properly serving your
clients and participating in their “win.” Or… you could just carry the clubs and be replaced by a golf cart.

The choice is yours.

One of the greatest lessons I learned at an early age was “fishing” was not as simple as throwing out “bait” and waiting for the fish to find it. I hiked in a full day to a beautiful lake in the Sierra Mountains where “golden Trout” were said to be abundant. Stayed a cold night waiting for dawn to get my chance to catch these gorgeous fish. As dawn came, I was out at the water’s edge, baited my hook, slip weighted the line to get the bait to the bottom where I believed the biggest fish were hanging out and tossed my line in. After some time and no real activity I figured I was fishing in the wrong spot. Moved to another promising spot and tried again. Still nothing. Did I have the right bait? Changed bait and moved again but to no avail! This went on all morning. With nothing to show for the morning’s push, I decided to try the top of the lake and began using top water lure’s hoping that the big ones would be coming to the top to get food and I would attract them with my lure. Still nothing. By now I am getting nervous as what I was to eat for dinner was to be what I caught. Then a fellow fisherman passed by with a stringer full of beautiful Golden Trout. I asked where he caught them and he said “in this lake in doesn’t really matter where you fish”. I told him of my poor results and explained all I had done. His response is one I will never forget. He asked me if I had tried using a bobber and fishing the middle water? Puzzled, I said no and asked if that’s how he got his catch. The answer, “yes!”, he said “In every body of water there are fish. You just have to try different depths and different baits until you get it right and right today may not be right tomorrow as fish, like people, have different experiences every day.”

The lesson here is that to keep consistently helping people buy or sell homes, we have to “acquire” them in different ways with different tactics. There is not one way, one bait, one place, or one depth that universally works. Pay attention to the other fishermen, particularly those who have had success, and learn from them. Then, remember, tomorrow is another day and what worked well today might not be right tomorrow. That’s why fishermen take tackle boxes and different types of bait and lures. You just never know what works on any given day in any given environment. Be prepared to try and adapt- success will come. Yes, I ate well that night because I expanded my knowledge and tried something new, will you??

What exactly is it that we as real estate professionals provide that keeps us relevant? For many, nothing that can’t be replaced by technology, is the answer. Those agents, unfortunately, will be the agents replaced by the current set of disruptors in our business. If you believe your responsibility to a client is to simply help locate a property they find acceptable, write up a “standard” contract for its purchase, and then be available to help them qualify for the loan and close on the property you are at risk of being disintermediated (being irrelevant and out of business). Why? Because a machine can do all of that more efficiently than you. What keeps us relevant is what we add to each stage of the process. For almost every person buying or selling real estate the primary elements of a transaction actual revolve around the person’s emotions. Computers aren’t yet very proficient at understanding and navigating the tide of emotions in buying or selling a home. This is where the “true professional” agent becomes not only relevant but irreplaceable. How? By providing wisdom into every level of a transaction!

Wisdom is defined as “the soundness of an action or decision with regard to the application of experience, knowledge, and good judgment.” In other words, we don’t help make decisions for clients logically, we guide decisions by applying our experience, knowledge, and good judgement to the client’s emotional goals. They then can use our input to shape their decisions and the soundness or lack thereof is theirs- not laid at the feet of their agent. For example, did your buyer consider the neighborhood only because of the price of the home? Should we not have advised them to consider the resale value of the neighborhood in the coming years? How about the schools, the safety, or the density of the neighborhood? Was the financing merely the most for which they could qualify? Did they consider the number of years they might be in the property and what that might do to their ability to resell? These represent items the professional agent is aware of through experience and knowledge and by asking the right questions can help impart good judgement into the process.

To be relevant and of value to the buying or selling public you need to be selling “wisdom”! The public isn’t generally aware for example that the purchase or sale of a home could have three complete and distinct set of negotiations, each of which will require them to make an emotional decision. Those decisions could have consequences they aren’t aware of, but you should be. You have the obligation to inform them of consequences your experience and knowledge tell you could affect their “judgement” and thus their decision!

Want to remain relevant and never be replaced by an I or E broker? Stop thinking of your commission and provide your wisdom to your clients at every stage of the process. They will become your raving fans and tell others. It could cost you a sale now and then but that seems a small price for remaining relevant and continuing in business with a sales force of raving fans!