Sunday, July 22, 2007

Mercedes Doesn't Discount...

The world has changed. The question is, "What are we going to do about it?"

Wal-Mart, Target, Harbor Freight Tools, and scores of other discounters are thriving. But, is that the model that we should pursue? Is that what our customers really want? Are we headed for extinction? With all of the various avenues for information available from valuation websites to transaction advice, are buyers and sellers going to cut us out of the picture? Should they?

Obviously, the real estate agents among us have opinions about most of these questions. And they probably line up pretty well. There are a lot of cliche statements I see whenever a few of these questions are asked. I'm going to try to steer away from those, and look objectively at these questions. It will take a few blog entries to get it all sorted out, but while I have my opinions, I'm going to try to present supportable and reasoned positions.

Let's start with the most controversial of the questions. "Are discount brokerages really serving the needs of their clients?" While my first inclination, and I would guess the popular answer among real estate agents, would be to sat "Of course not," I am not so sure that is true. There are a lot of sellers that are very experienced. They have been through the experience before, and they might not feel that they need as much help, advice and direction as a full service broker (should) provide. We all know that a home that is well staged, in top condition, and priced appropriately and competitively for the market WILL generally sell in a reasonable amount of time without other extreme measures. Now, be honest, we've all been out on those appointments where we know that the house is going to sell without too much fuss. The price that the sellers were willing to accept, and the condition of the house were good indicators that we weren't going to have a lot of work getting it offers.

Did you notice that I didn't say "sold"? I did that on purpose. Now we need to import a different set of rules. There are sellers that are capable of handling the next major step as well. Negotiations. Face it, regardless of the type of market, there will usually be a negotiation over the price and other considerations for the purchase of the home. Whether it is a buyers market, and they are looking to beat up the seller on the price, or a sellers market, and the sellers might be able to juggle multiple offer situations, there will be work getting the property from offer to contract. I would say that most sellers are not well prepared to handle this themselves. It's difficult to step back from the emotional investment in one's own home and objectively handle the negotiation. But, there are certainly some folks out there that are well able to do just that.

But it isn't "sold" yet... And the real estate agents reading this will identify with this. Inspections, financing, contingencies, re-negotiation and closing don't just happen. How many times have we had to re-enter negotiations after the inspections? Or how many times have we had to ride a mortgage broker to get to the closing on time? Or how many times have we had to deal with contingencies in the contract, and keep things on track? The point is that while all of these don't happen in every transaction, they can, and they happen enough that it doesn't take us long to learn how to work through these mini-dramas.

The point of all of this is to say, and bear with me... Many sellers are very well served, and have their needs met perfectly with discounted limited service brokerages. However, many more aren't well served except in a more full-service environment. And, oddly, in my experience, I've found that the clients that are most able to handle all of these aspects themselves are often the ones that would rather hire a professional to do it on their behalf. They feel that it is more efficient for them to pay an expert than it is for them to do it themselves. Just like it is working smarter for us to pay someone to run our mailings, or handle our accounting, or repair our roof, it is a more efficient use of their resources to tell one of us to "Just deal with it."

I'd love feedback from agents and non-agents. Leave a comment. Thanks.

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