Wandering through the DoJ website

What is it going to take to make them happy? Did someone at the DoJ have an unsatisfactory experience with a real estate agent? Or is it simply that they know our approval ratings are down there with our Democrat led Congress (which would love to have even the dismal ratings of George W. Bush), so we are an easy target?

There is an interesting report called "Competition in the Real Estate Brokerage Industry" that is a pretty interesting read... ok, not that interesting as a read, but interesting to look through because of the way things are presented. I'm going to give my personal impressions after spending the morning looking through it online.

• They really don't like full service brokerage. At every opportunity the report bashes full service brokers.
  
• The data that they use often contradicts what they are trying to point out. Some examples of this would be that there isn't sufficient competition in the industry either at the brokerage level or at the sales agent level. But, the report begins by stating that there are no significant barriers to entry to the sales agent level, and few barriers to entry for the brokerage level. It also states that there is a lot of fluidity in the industry. Finally, it states that competition is fierce... but apparently not fierce enough, because it says that competition is needed to bring prices down for consumers.
  
• More and more consumers are choosing to utilize full service brokerage models... even though there are more brokerages offering other than full service options.
  
• There are very few mentions of limited service brokerages offering fewer services for consumers... but plenty of mentions of consumers saving money by utilizing flat-fee or limited service brokerages.
  
• Commission rates have been going down, but not fast enough for the DoJ. Because home prices were rising, average commissions were still increasing. But, because of the low barriers to entry, the increased competition led to the pie being split more ways. One has to wonder if the DoJ wouldlike to see more agents (more competition) or fewer agents (less competition, but perhaps ?more reason to cut commissions?).
• The DoJ asserts that the MLS is imperative to consumers, but decries the fact that it is owned privately.
  

I was really disappointed. There are so many contradictions, yet in EVERY case, the DoJ asserts that the real estate industry is flawed. The price that is agreed, even though there is fierce competition from many players, must not actually be fair... and is a result of a restraint of competition. The restraint of competition is because there are too mazny competitors...

It goes on...

I think there is someone at the DoJ that dealt with a crappy agent and has decided to go after the entire industry.

Z is for ...

Z06 Corvette, Nissan 240Z, Z28 (1LE!), Zamboni, Zagato, Zonda, some other fabulous car beginning with Z....

No.

Zillow. I mean really, this is a real estate blog. How could I go through the alphabet and not hit Zillow for Z? If you don't know what Zillow is, go ahead and Google it... we'll wait...

Got it, ok.

There is a whole language that has sprung up around Zillow. The valuations that they provide are called Zestimates. But, most interesting is the use of the word zillow and zestimate as verbs... comically.

Zestimate: to provide a wildly inaccurate valuation. "The zestimates for the neighborhood were all over the map, with some being $20,000 high, and others being $50,000 too low."

Zillow: to price a house too low. "That poor guy got zillowed when he sold the house for $400,000. The buyer sold it a year later for $500,000."

Truthfully, I can't speak to the accuracy of the valuations from Zillow. They don't seem to have much data here in the sticks of Atlanta. I will say that the house next door to me sold for $10,000 above the Zestimate in just a couple of days on the market this summer.

Lane... what's the point?

The point is that the internet is a wonderful tool. There are great websites that can be used to find all sorts of information. Information is a tool. Craftsmen (and Craftswomen) are the ones that know how to use the tools. Just because someone can buy a TIG welder doesn't mean that they are a TIG Weldor (despite Mozilla giving me a spelling error, a Weldor is a person that welds... according to the welder manufacturers).

So ends my A-Z journey. It's been fun, and I might take it on again with slightly different focus. Now I can get to the list of 15 posts or so that I have thought up while writing these...

R is for REALTOR(R)

I know I'm being picky, but this needs to be said.

All REALTORS(R) are real estate agents, but all real estate agents aren't REALTORS(R).

One becomes a real estate agent by passing a test. One becomes a REALTOR(R) by joining the National Association of REALTORS(R). In order to join the NAR, a REALTOR(R) must attend special ethics training, and agree to abide by the NAR Code of Ethics. As a consumer, if interested in what this means, feel free to look at the NAR website for more info.

Not only are all real estate agents not affiliated with the NAR, according to the NAR, only about half are. And yet, the very vendors we deal with, as well as consumer experts (like Clark Howard) use the terms REALTOR(R) and real estate agent interchangeably. I'm just picky, personally. However, I have been through the NAR ethics training, and I feel that it is my duty to deal with ALL others in a transaction in an ethical manner. I pay my dues (one reason that many choose not to join).

To be sure, I want to state for the record that there are MANY fine real estate agents that are NOT members of the NAR. Their personal ethics are as good as any member of the NAR. There are also REALTORS(R) that are far less ethical than the NAR Code of Ethics require. (At this point I would like to say that any consumer should get to know their real estate agent, whether they are a member of the NAR or not, and make sure that their agent is really working on their behalf). A big advantage of working with a REALTOR(R) is that there is an extra layer of accountability. Not only am I accountable to the the state real estate commission, but I am also accountable to the local and state associations.

I am a member of the DeKalb Association of REALTORS(R), as well as the Georgia Association of REALTORS(R), and the NAR (it's a package deal, really).

Are we our own worst enemy?

I think in many cases the answer is yes... we are.

I recently signed up with a site called Hungry Agents. It was recommended to me by another agent. But, as I looked over the way they do business, something occurred to me. Their business model commoditizes real estate agents. They also don't seem to be aware of the difference between real estate agents and REALTORS (R), but that is another post (one day).

For those that aren't familiar, the basic premise of the business is that sellers sign up for the service. They put out the selling of their home to bid by real estate agents. There is a form online that real estate agents fill out stating what percentage we are willing to take the listing for, as well as the percentage that we suggest be passed along to buyer's agents. There is a minimum level of service required for the percentage we quote.

All of that is fine and good. The problem is this...

All that the seller sees is the percentages that the agent quotes. They don't see the agent, their prior performance, what else they might do (the minimum standards are pretty slim by my standards) or anything else. The listing is reduced to only being about the percentage.

My firm offers an "unbundled" service option for $3100 plus buyer's agent commission (we always recommend 3%, but the sellers have the option of making it higher or lower). With the exception of a CMA, the unbundled program offers the minimum basic services required by Hungry Agents. But, for a traditional listing, we offer a lot more services. I would bet that just about ANY full service agent offers way more service than is required by Hungry Agents. But, the problem is that sellers using a service like this see EVERY AGENT as offering the same level and type of service, and EVERY AGENT as being an interchangeable cog that functions the same. We are a commodity. Our service is nothing more than the service of our least capable competitor. Like gasoline.

As I said in Do you have a Unique Selling Proposition, if we don't differentiate, we are a commodity no different than gasoline or concrete. And, for commodities, the only way to set one provider apart from another is price. That is it. The worst thing we can do is turn our service into a commodity.

Final note... I don't really mean to pick on Hungry Agents. I am sure that they are not alone. In fact, there are a lot of companies that are also commoditizing our service. They don't separate themselves from the crowd, and so all they do is cut price. The only reason I highlights HA is that they were the unfortunate souls that sparked the thought.

Do you have a Unique Selling Proposition?

I touched on this in another thread, but I think a lot of people thought it was actually about cars, so I am going to go into a little more depth, and be a little less cryptic. But, the main point of the thread was...

They are saying that they specialize in EVERYTHING. If one specializes in everything, they really mean that they specialize in nothing. I mean, really. How can you specialize in everything?

Now, let's tie this back to real estate.

Have you ever seen an ad that said "I specialize in Buyers and Sellers"? I guess that means that they will deal with anyone but lookers... But, isn't that what everyone else does? Are you truly a specialist if you think you do EVERYTHING? The short answer is NO. the long answer is No, you are a generalist.

Why not just say that you generalize in everything?

So, for agents, in order to separate you from the crowd, you have to separate yourself from the crowd. Was that repetitive? Take a look at the little house books (Hobbs/Herder calls them little house/little head books). Look at all of the agent pages. Almost everyone is using the same template. Almost everyone says the same thing. To look at one of those books, you would think that EVERY AGENT IN THE MARKET is #1 for integrity, service, and production. For the vast majority of agents, they put out nothing that makes them any different than any other agent. And, 20% of the agents out there do 80% of the deals. So, if what you offer is no different than what the next person offers, you are a commodity. There is only one way commodities can compete, and that is by being cheap. If you think all gasolines are the same, will you buy the more expensive one, or will you go across the street where it is ten cents cheaper? If you think your car runs better on Brand B, will you still buy it when it costs a little more? If the Kraft Mac & Cheese tastes the same as the Kroger store brand, will you pay 50% more for it? But, if you family says that the Kraft is better, you'll put that in the cart.

But, we tell prospects the same thing that all of our competitors say, and then we wonder why they put the cheaper agent, or the one that happens to be standing next to the Mac & Cheese, in the cart and list their home or buy their home with them.

But, we tell prospects the same thing that all of our competitors say, and then we wonder why they put the cheaper agent, or the one that happens to be standing next to the Mac & Cheese, in the cart and list their home or buy their home with them. Yes, I said it again on purpose.

Now, the next phase of this little game is this.

Why should someone buy the house that you just listed? If it is just like the 6 other houses just listed in the subdivision, the only way to compete is with price. If you do GREAT marketing to drive buyers to finding it, as soon as they visit, they will see that there are 6 other houses that look just the same. I guess you might be able to creatively route them through the neighborhood so that they don't see anything that is cheaper.

Instead, maybe it would be better to make the house different from the others. Proper staging may make it prettier. (yes, there were three different Atlanta stagers linked in the last sentence...) Having a kitchen that is just a little more modern and stylish or usable may set it apart. Or (my favorite) having a garage that is well laid out for a car person, with epoxied floor, and great cabinetry will also separate this house from the others in the subdivision.

BTW, if you are a builder in the Atlanta area, and want to set your small upscale community apart, contact me. I have a GREAT idea for you.

As always, I'd love to see your comments. Thank you so much.

Maybe it's time to bury Dual Agency

First, let me say that I work for a brokerage that does NOT allow dual agency, but does allow designated agency. Dual agency is when an agent have contracts for representation with both the buyer and seller. In other words, the agent is bound by fiduciary responsibility to represent the needs of both the buyer and seller above all other.

Second, let me say that I work in a state which does allow dual agency, if it is disclosed on the contract to all parties.

But, as I look at the landscape, I see something I don't like. I don't like the idea of dual agency. And, further, I think it is time that the NAR step up and stop the practice among its members. I don't want to see the government take the lead, and I don't want to see any law passed. I want OUR trade organization to voluntarily stop this practice, and then tell the world that they have done it, and why.

As a person with of the libertarian persuasion, I don't like to see the government constantly stepping in to the relationship between service providers and the clients/customers. In fact, I think that licensing requirements for real estate agents should be relaxed or eliminated... but that is for another blog post (please save the comments on licensing for the post I'm sure will follow soon).

But, as a REALTOR, which promotes the ethics of its members, I can't see a way to reconcile dual agency with fiduciary responsibility. How can we represent two opposing parties and keep both of their best interests at the forefront? Obviously, we can work towards a win/win situation, and personally I try to do that anyway. But, when push comes to shove, and when a problem arises, what is good for one party will often be bad for the other. If there is a financing problem, and the buyer needs more time, but the seller may be better served to move on, or there is an inspection problem, and the buyer should move on, but the seller needs THIS buyer, the agent WILL be in a position that requires them to pick which party they are going to truly represent.

Obviously, we go through many transactions that don't have these issues. In fact, the majority don't have issues. But, the point is that I seldom get a memo at the beginning of a deal saying that I am entering a troublesome situation. Usually we only know we have a problem when we are in the midst of stepping in it. At that point, if we are "representing" both parties, we already have a problem. What does one do then? Pick a side and call another agent in to help? But, the original agent already knows more than they should about the other party. Not a good solution.

The bottom line is that if we, as REALTORS, are to truly serve our clients needs above our own, we need to begin by not allowing dual agency among our ranks. Then we need to spread the word that REALTORS are leading the charge for ethics in real estate transactions.

Walk the talk.

I look forward to your ratings and comments.

We specialize in American, Asian and European Cars and Trucks

I've seen several shops with that very "slogan." But, what does it mean?

Nothing.

It doesn't mean a thing. Aside from cars and trucks made in Asia, Europe and America, what are there. I suppose there could be some cars made in Africa (ok, I just checked, and aside from cars that are also manufactured in other countries {Toyotas for example} there are VERY few made there... but Superformance is a VERY cool company) but not in a high enough quantity to be of issue here in Atlanta. There isn't anything happening in Antarctica... or Greenland... and not many Australian cars come here.

Back to the point.

They are saying that they specialize in EVERYTHING. If one specializes in everything, they really mean that they specialize in nothing. I mean, really. How can you specialize in everything?

Now, let's tie this back to real estate.

Have you ever seen an ad that said "I specialize in Buyers and Sellers"? I guess that means that they will deal with anyone but lookers... But, isn't that what everyone else does? Are you truly a specialist if you think you do EVERYTHING? The short answer is NO. the long answer is No, you are a generalist.

Why not just say that you generalize in everything?

Maybe we should try a little truth in advertising. Sam's Club here in GA had to change their name. They had called it Sam's Wholesale Club, but they sold to the public (that would be the definition of retail, BTW). Even though they argued that they only sold to members, it was determined that since they were selling primarily and by a wide margin to non-resellers, they were a retail outlet, and not a wholesaler.

I think that people who "specialize in everything" should be held to the same standard.

The "Dirty Little Secret" that FSBO companies won't tell you!

I keep seeing and hearing about "dirty little secrets" that real estate agents won't tell their clients. Most of them turn out to be pretty stupid points. However, today while going through my morning routine (dead-heading, so my brain needed something to do) I thought of the dirty little secret that FSBO companies don't tell their customers. We all know what it is, but many of us just might have never thought of it this way.

They don't care if you sell your house using their service.

That's it. It doesn't affect their business plan if you sell or don't sell your house through them. They only care if you list your house through them. Their business model is only dependent on you paying $499 (or whatever amount) upfront, and then going on your merry little way. They need as many people as possible to pay the $499 and go on their merry little way as possible.

Sure, they need somebody to actually find a buyer through their service occasionally, but as long as they have enough sales for a few testimonials, they'll be OK. And, they don't care if you sell in 6 days, 6 weeks or 6 months. In fact, some of the companies would prefer that you not sell right away, as they'd love to get another $499 out of you to list again.

Let's compare that to a traditional full-service, commission based real estate agent. No sale = no money. That's right, I don't get paid if you don't sell your house. Let me say it again, I don't get paid if you don't sell your house. I talk with you about pricing, we prepare a marketing plan, and we market your house. After we find a buyer, we help you negotiate the sale, and then we make sure that the buyer follows through. We also make sure that you (the seller) don't run afoul of any rules, or mistakenly breach the contract as we move from contract to closing. We are there to protect you, and help you. We are there to make sure that everything runs smoothly.

Where is the FSBO marketing company? They cashed your check, and they are hoping that you don't call, because it takes time away from getting $499 from someone else.

Please don't forget to rate this post. Thanks.

Pictures are the first (and maybe Last) impression you will give a Buyer

So, don't screw it up.

Do you feel like you should rush out and buy this house?

This particular house isn't listed with an agent (to my knowledge), but is FSBO. But, this is the foot they are putting forward to try to get a buyer. Unfortunately, I have run across NUMEROUS examples that were as bad, or worse, that WERE listed with agents.

In some other cases, there are problems when moving away from native resolution.

Normally, when one clicks on the picture, a full sized image pops up. In this case, it doesn't.

Make sure that when you present your listings, you do so well. The NAR tells us that 84% of buyers begin their search on the web (If I recall correctly). When they see pictures that don't inspire them, they don't look at the house.

Customer Dis-Service, Part I

There are a few things that have my shorts in a bunch... so, here they are. Careful. They've been brewing for a little while.

There is a house in my subdivision that has been under contract since February... that's right, February. It will six months if it closes on time. This house is listed with a flat-fee company. The listed price was reasonable (I'll be curious what it actually sold for). When it went up for sale, it was a well kept house. Of course, now it looks pretty run down. The grass was cut once or twice, and is LOADED with weeds. It is actually a fight to get to the front door.

I didn't really know the seller. His family was transferred out of town, and they had to sell the house. Of course, they didn't want to "pay the commission" to have a full service brokerage. The seller called me and asked if I would show his house if he had a call from an unrepresented seller. I told him that I would, and he could either pay me ($50) to show it, or I could take them as a client and he could pay me 3% if one of them bought it. He told me his friend that lived and worked about 30 minutes away was doing it for less ($20). Ummm... no. Then, he actually told a prospect to drop in on me if I was home and ask me to show the house. Because I am a nice guy, I showed them the house. They had a lot of questions, and took almost two hours. (Think I got paid for that?)

Anyway, he emailed me after I showed the house and asked if I could give him any feedback. I told him that the grass needed to be cut, the bushes made it difficult to get to the front door, and that the house really needed staging. Boy was that a mistake. I got torn into for the grass and the bushes. He didn't want to spend the money to stage.

Remember, this isn't my listing. I'm not making any money here. And, he asked.

Anyway, the folks that looked at the house were somewhat interested, but couldn't write an offer yet. Then, I find out that the house is actually pending. The flat-fee company didn't actually add the kick-out portion on the sale contingency to the contract when he did the contract for the folks that tied it up for the last 5 1/2 months. Someone forgot. Ooops.

Do you think that four or five months of mortgage payments are more than the other 3% commission (he's paying a 3% fee to the buyer's broker)? I might have been able to get the house sold for him and closed a few months ago, but no chance. I wonder if it'll close on time, too.

But Wal-Mart Does!

I promised a continuation of my last blog, and here it is. In the last entry, I talked a bit about limited service and discount brokerage. This time, it will be more about eliminating agents from the picture.

OK, here is the shocking statement to start off with. Buyers and sellers don't need us in order to complete the transaction. That's right, we are not a necessary ingredient. Obviously, the buyers and sellers need each other. They need a real estate attorney to complete the transaction. Usually, they need a mortgage broker. That's pretty much it. They don't need a real estate agent, they don't need an inspection, and they don't need the MLS or other tools that we bring to the table.

But, did you notice the "need" theme that ran through that? Would you ever tell your buyer not to get an inspection? Of course not. But is an inspection a required part of the transaction? Of course not. Need and advantageous are very different things. We need to not lose sight of that. It is advantageous to deal with an agent, for both buyer and seller. It is advantageous to get an inspection. It is advantageous to use the MLS, for both buyer and seller. It is advantageous to the buyer and seller to have access to our tools, our contacts, our knowledge and our counsel.

That is the crux of it. We (industry groups like the NAR, and our broker parent companies e. g. C21, Re/MAX, etc.) are telling our prospective clients that they need us. Meanwhile, the limited service and FBSO organizations are telling our prospective clients that they don't need us. And they're right. What we should be telling them is that it is to their advantage to hire us. We will make the transaction smoother, easier, and less stressful. We will keep the time wasters at bay, and keep the transaction on track. That is what we do, and that should be our focus.

Since I'm a car guy, I have to sum it up like this.

A Ford Crown Victoria and a Lincoln Continental are built on the same platform. They both come with power seats, power winders, A/C, and a V-8 engine. They both hold the same number of people, and about the same amount of stuff. But the Lincoln costs way more. Why should someone pay the difference? Because it is smoother, easier and less stressful. It is quieter and a little more comforting.

We are all of that, as well as knowledgeable. We can save our clients money, maximize their sales price, smooth out the bumps, and hold their hand when they need it.

What do YOU think? I'd love your feedback. Thanks.

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.