Clash of Empires
From our northeast, the mighty Long & Foster. From our southwest, the mighty Allen Tate. These two titans have been on a collision course for years. And wouldn't you know it, they finally meet - in Raleigh! Happy Day - Lucky for us! Pull up a chair and enjoy the show.
Now the buzz in the Triangle real estate community is that Allen Tate will be led by the hyper-competent, Phyllis York Brookshire. This reminds me of a Warren Buffett quote:
Our predicted winner: The Independents!
The Broker Imperative
While we are on Buffett, aficionados will be familiar with his comments on the "institutional imperative." Just for fun, let's apply this to the real estate business:
Let's call it the Broker Imperative:
Ritholtz's Rules for Real Estate Agents
If Crack Dealers Took Lessons from Traditional Real Estate, They Really Would be Rich
I have never seen a better explanation for how some agents and firms continue to charge six or seven percent.
Nice Cooperation, Deadly Paperwork
We love cooperating agents. They bring buyers to our listings and they increase inventory for our buyers. Hey, let's be honest, they are primarily responsible for selling our listings and they are the source of almost all of our inventory.
Fact One: Without cooperating agency, we would be out of business.
Fact Two: In today's market, this is true for all firms.
Question: Given facts one and two, how should we interact with cooperating agents?
Well, nicely of course. As sellers, we certainly appreciate their offers! As buyers, we certainly appreciate the opportunity to make an offer on their listings. And, what's more, the next time (and there is always a next time) that any particular agent has a client that might "fit" with one of our clients, then we want that agent to view us positively. Cooperating agent, Jane Doe, has a buyer in the car, out scouting houses in Cary, and they see one of our signs: "Yes, I know that outfit, they are first-class to work with."
We want that. We do, we really do!
So we do everything we can to facilitate a good working relationship and a smooth transaction with our adversary. Yes, we never forget, that the cooperating agent is our adversary. I don't want to make too much of this. In theory, the goals are the same, the buyer wants to buy as much as the seller wants to sell. And most often, both sides get what they want. But, as agents, we have a duty to our clients to protect their interests and further, to secure the best possible terms for them. Right? I mean, that is why they are paying us.
How to do this?
Like it or not, real estate is a legal driven business. And, we are not lawyers. So, how do agents play nice with other agents and fight for their clients? With paper, of course. An agent can be the absolute nicest, "easiest-to-work with" cooperating agent on the planet and at the same time produce the most deadly paperwork ever seen. And, let's face it, with so many non-business-savvy real estate agents running around out there, this often goes totally unnoticed. So much the better.
Savvy cooperating agency maxim: He who has the best paperwork wins.
This is a two-step process. One, be smart using standard contract forms. The forms are designed to be party-neutral, as they should be. But, that is only before we start filling them out. How each agent uses the standard forms plays a large role in which party gets the best terms. Two, have good firm-proprietary forms. Just like, "Builder Contracts," these forms do not have to be party-neutral. They are produced by each firm for the sole benefit of that firm's clients. What, your firm does not have a form for that? Too bad.
Our Blogging Platform
Or, lack of blogging platform....
Many readers have urged us to consider moving this site to a more mainstream blogging platform. I have looked at, and tried out, both the TypePad product and the WordPress (online) product. Frankly, both did nothing but limit what we wanted to do here. Greg Swann swears by the full WordPress product, and I believe him. But, the technical expertise needed to make that switch is beyond my limited capabilities. Not to mention the time commitment.
Why use a blogging platform? Well, I think, it is primarily to encourage an interactivity that this site surely lacks. But, who are our target readers and what are they looking for this site to do? Clients, prospective clients, customers, other agents, competitors, neophytes, etc. Actually, we address all of those readers on this site. Are they really seeking, yet another online water cooler?
Maybe. But we mainly use this site to discuss real estate issues that don't really fit on our firm's primary site. A place to really let our unique approach to real estate, and contemporary real estate issues, come to light. Anyone who reads this site will have little doubt that we are much different than the herd. And, let's be honest, this is a herd business. Responses, comments, feedback - Great! We will post them. But, there are much better online water coolers out there - in fact, we have an excellent list in the right margin.
Orwell & Associates Traditional Realty, Inc.
Real Estate Today: Is it 2007 or 1984...?
Entry Only and Limited Service Listings
Today we are seeing an ever-increasing number of sellers who are hiring discount real estate firms to enter their property into the multiple listing service. $499 and we "list" for you! Of course, that's all they do. Everything else is handled by the sellers, themselves. Sounds okay, right?
Well many of these sellers know precious little about real estate, and even less about the logistical details of a real estate transaction. Further, they are often unrealistic negotiators and cumbersome to deal with - do not answer their phone, no fax, at work, out-of-town, no Property Disclosure Statement, and nobody told them to get out of the house when I show it! And, do they really expect me to explain the contract to them?
So, who ends up cleaning up the mess and doing twice the work? Well, the buyer's agent of course. Look, the sellers are simply taking advantage of the buyer's agent because they can. A friend of mine likes to say: "There are no victims, only volunteers". Yes, it is the buyer's agent who allows this nonsense.
To all you buyers' agents out there, I say: Wake Up! Ask yourself, are you willing to do twice the work for what the seller is paying? If not, just don't show the sellers' property. Oh yeah, if handled correctly, perfectly legal! Yes, yes, of course, you can seek additional compensation from your buyers. But, if the sellers are paying, say 2.4%, are your buyers really going to cough up more? Besides, you represent the buyers -force the seller to pay for your extra time and effort.
Seems to me there are two ways to approach this problem.
One, don't do anything for the sellers that you would not do for a listing agent. I think this is a pretty simple, straightforward, and preferable approach. But, many buyer's agents have told me it is naive. Personally, I think it is all in how you handle the situation - just never forget that you do NOT work for the seller - how hard is that? Deliver the offer - absolutely. Explain it? I think not.
Two, charge more. If this transaction is going to take more of my time and effort, my attitude is that they (the sellers) are going to pay me more than what I might agree to from a knowledgeable, experienced listing agent. Let's face it, many sellers who employ this strategy are on the lower end of the price range. And, I just might not be happy with what they are offering. So, they are going to sign a fee agreement to that effect before I show their property! I do not begrudge them the right to pay what they see fit. But, I will charge what I see fit!
Have a nice day.
Reminiscences of a Real Estate Search Operator
Jules Bertillon [J]
I work for an employee placement and recruiting firm. I specialize in computer programmers in the California market. I guess you could call me a headhunter, of sorts. Anyway, about a year ago I get a call from one of my clients, a prominent California-based internet search company, looking to hire programmers with experience in multiple listing service software. Well, I knew what a MLS system was, but I had no idea how the service was deployed. Turns out, there are companies that specialize in this arena – it is basically just a specialized set of database programs. Also turns out that often these companies are not very well managed, do not treat their people very well, and most importantly, do not pay them what they are worth. Consequently, low morale is rampant, and as we say in my business, the pickings are easy. We ended up finding a core product group of ten programmers, but the group has grown to about twenty-five.
It’s actually pretty interesting how this all came together. Seems one of the higher-ups decided it would be a good idea to include real estate data in their search system. So he approached several MLS systems to set up feeds. Well, to make a long story short, he was rebuffed. Strongly. Which of course, he did not understand. In his mind, property sellers would love the increased visibility that his company was offering. Just like any other market, the idea is to promote the product. He also believed that the real estate agents and their firms should like the idea because, again, increased visibility would lead to more and faster sales, and these guys typically do not get paid until the property sells.
You have to understand, this guy is extremely successful. I guess for many reasons, one of which is that he is doggedly determined. The first thing he did was to try and understand the problem. Seems the business side of real estate is a bit of an enigma. So, he hired several contract real estate agents as consultants. Again to make a very long story short, he learned three things. Well actually much more than that – but anyway. One, sellers do in fact want the increased visibility. Two, real estate agents/firms also want the increased visibility but on a larger scale they are extremely change-resistant and are worried about their own obsolescence. Three, the real resistance to the idea comes from the MLS organizations, themselves, often owned or controlled by the various Realtor associations.
The MLS organizations argue that if everyone had unlimited access to the data, why would anyone need to hire an agent. Well, this executive does not buy it – he argues that searching for property is only the start of the transaction process and one that desperately needs to be simplified. Let the buyers do more of this on their own, they are still going to need an agent to help them with the transaction. He contends that the real reason behind this stonewall is that MLS organizations are scared to death of losing control, money, power, etc. So, they simply say, no, you cannot have our data, it is proprietary, even though their principals (the agents and the sellers) would benefit from the distribution.
Well, this is a complicated story, and of course, there is more to it. You need to understand some background on this search company exec. Evidently, he has had quite a bit of experience buying and selling property in the California market. Early on, he used an agent – who, he thought at the time, was very effective. But after a while, he realized that a big piece of “marketing” real estate was simply adding the property to the MLS system – so that potential buyers had one place where they could find enough properties to choose from and make a decision on which ones to see. At about the same time, the “discount” brokers were coming along and offering to add properties to the exact same database for a flat fee – with the same marketing result. Anyway, the point is not that his guy is sold on the discount end of your business – well, he is, but that is just the start. The real point is that he is smart enough to understand that it is the data and the consolidation of the data in an easily searchable format that drives real estate marketing. He also knows that he who has the most data (the most searchable properties) has an immediate advantage.
At first he just wanted access to the MLS data – but he now understands why that is never going to happen – monopolies do not go away voluntarily – they have to be crushed. That is how his company decided to get into the real estate database business. I can tell you this, they have a strong, exceedingly well-paid team working on this. I do not know their timetable, but this outfit does not typically make big product announcements – they are more likely to just add the this to their list of services at some point. As for financing, given the number of real estate agents and firms already paying this company, this new venture will make them a lot of money.
My understanding is it will be open to agents and the public. It will include every imaginable search field – and remember, to say these guys have a competitive advantage in that area is an understatement of the first order. These guys are extremely smart and extremely thorough. They are paying a great deal of attention to the mechanics of your business. For example, regardless of whether a property is added by an agent or an individual seller, there will be a field asking if the seller is willing to pay a buyer’s agent and how much. Unlike many MLS systems, this information will not be hidden from potential buyers. In fact, all information will be open and available to all users. Property access is also a high priority. If an individual seller enters the property, how and when can the property be seen. If an agent enters the property, how will access be granted and by whom.
I am sure that I do not understand the nuances of your business, but surely buyers and sellers will continue to need representation. The real estate business is incredibly inefficient. No doubt, this is the reason it is so expensive. Agents and their firms will actually benefit from this system - it will cut their overhead. The real goal here is to beat the MLS systems at their own game. Produce a better, cheaper, more open, and more comprehensive system.
A Manifesto for Independent Thinking Real Estate Agents
This "mini-manifesto" was inspired by the work of Hugh MacLeod.
Psst, want to buy The Bookshop?
Typically, we are not business brokers, especially where there is no real estate involved. But due to impending retirement, the best book store (no exaggeration) in the Triangle Area is for sale. No, no, we are not involved and do not want to be. Contact Bill or Linda directly.
If you ever dreamed of owning a bookshop, this is a golden opportunity. Note, they are offering, "any reasonable amount of consulting from the owners to the purchaser." Check it out, the place is a Chapel Hill institution. We have known the owners for a long time. And, the shop has been a staple on our vendor page from day one.
Okay tell me, how many real estate websites sport a recommended book store?
In our ongoing effort to bring our readers the very best in real estate blogging, we offer:
Read the whole "little bloggie".
And, don't miss the classic post: Today's action.
To Make Money
Dual Agency Smack-Down
Ladies and Gentlemen we offer free tickets to the Smack-Down in the Desert.
Our firm will be paying close attention to this important discussion.
Listing Agent Must be Present to Show
So, Mr. & Mrs. Seller are moving to the South of France. They have a $2.5 million mansion here in the Triangle, which they still occupy. The house has $250,000 worth of furniture and roughly the same amount of art on the walls. Obviously, this property needs to be handled with a certain amount of finesse. One thing the seller might very well insist on is: If we list this house with you, Mr. Agent, we expect you to personally attend every showing. You will give our property the appreciation it deserves and we will have piece-of-mind that our home is secure. By the way, you will not release our keys or security system access code to anyone.
So, the agent may or may not place the property in the MLS, but the showing instructions are clear: Listing Agent must be Present to Show. For an appointment, call Listing Agent.
Fair enough? Of course.
This makes sense for a $2.5 million, occupied property. And, it might make sense for properties worth much less. Of course, as with everything in real estate, it all depends.
The facts: Not long ago we had buyers interested in a $500,000-range property, new construction, never occupied, MLS-listed. Showing Instructions: Listing Agent Must be Present to Show. For an appointment, call Listing Agent. Well okay.... So, we did, repeatedly. Maybe a dozen times or more. When she finally deemed to return our call, it was one excuse after another as to why we could not see the property. In the meantime, our buyers found and purchased another property.
The Speculation: Here the facts end and we enter the world of speculation. True, there could be any number of reasons behind this. But, being cynics, we would like to offer one possible hypothesis. Could it be that had we been actual unrepresented buyers, not agents, that the listing agent would have found time to show us the property immediately? If the listing agent scares up a buyer on her own, without the benefit of a cooperating agent, she makes more money - a lot more, often double. Do you think that just maybe that is what happened on this unoccupied property? Mind you, this is pure speculation.
Now, who does this hurt? Well, everyone, other than the listing agent, but I will spare you a list, save for one. If this is what happened, the party suffering the greatest injury is who? The seller! That is, the client of the listing agent. Mr. Seller, your listing agent has greatly reduced the pool of potential buyers for your property. Odds are overwhelming, you will make less money.
And how would the seller know? Odds are not high that he or she would find out. 'Discovery Risk' is low. Like so much in this business, it is quite easy to injure your own client, often to your advantage, and the client never knows.
Sellers should make sure that any agent they hire is both available and willing to, in fact, be present for showings. If there is any doubt, the seller should prohibit dual agency for the property. And if using a small real estate firm, the seller should prohibit designated agency as well. That way, the listing agent will be forced to work with a cooperating broker. On the off chance she does find the buyer, she can refer the buyer to another broker (and yes, get paid for doing so) AND continue to represent you exclusively.
Note to Sellers: Be careful who you hire! Yes, yes, we know that there are all sorts of reasons to hire any given listing agent - just be aware of the cost.
We are REALTORS®
Everyone affiliated with our firm is a member of the National Association of REALTORS® and it's state and local affiliates. We are members of this organization because it serves our interests, and more importantly, the interests of our clients, in three primary ways.
Offer: We will buy lunch, at the restaurant of your choosing, if you can convince us to add a fourth item!
You might also want to have a look at this.
When the typical Triangle Area real estate agent goes out on a listing appointment to pitch their services they tell the potential seller client what they will do for the seller and why the seller should become their client. The list of services offered by the agent will vary from firm to firm and from agent to agent. In our business, there may or may not be a correlation between service level and price, but that is another post. But there is one service that costs the agent and their firm almost nothing, and therefore, it is almost always included – no, promised, to potential seller clients: Feedback.
“Mr. or Ms. Seller, if you hire me and my firm, we will solicit feedback from any and all potential buyers and their agents. And, we can use this information to help market the home.” [Note, it's always a 'home' to these agents.]
But feedback is more than this. Often listing agents will use buyer feedback to help them (the listing agent) tell the now seller client something the agent does not want to say themselves or something the seller does not want to hear or something the agent has, in fact, told the seller, but the seller did not believe.
So far, so good. Actually, sounds beneficial – and it is!
A buyer and his or her agent are out scoping properties. The buyer(s) is in town on a business trip and has one afternoon free to see as many properties as possible. Yes, the buyers and their agent narrowed it down greatly on the internet and back and forth with email. But, there are still multiple properties that they want to see in two different areas. So, they skip lunch, start at 12:30, grab a bite at four, and don’t finish until dark – right? Right!
They might see eight or more houses. Now many agents will limit how many properties they will show, both daily, and in total. But a good agent, especially one working with savvy buyers, will try to maximize his or her buyers’ selection, and in a case like this, maximize the productivity of the limited time they have on the ground.
And, this is on top of the two properties that this particular buyer’s agent previewed for other out-of-town clients on that particular morning.
Sound pretty common? Absolutely.
Now, are the buyers and their agent taking notes. Well maybe. It depends - on the buyers’ reactions, the accuracy of the MLS data sheet, the style of the particular agent and of the particular buyers, etc. If the goal is to further narrow the list of properties, it is highly unlikely that they are going to take the time to write notes about properties number four and five. Four and Five are out – really nothing further to discuss – let’s move on.
Look, at this point, any number of things might happen. One thing the buyers might say is, “Hey, let’s go back to your office and write up an offer for our Number One.” Great! So they do that – first a little research (CMA, taxes, etc.), but then the evening ends (late) with a glorious offer! Or, Number One might be hopelessly overpriced, so the agent repeats the process for Number Two. Or, the buyers might say any number of other things, like for example, “We’d like to sleep on it.”
The point is that the buyer’s agent has been rather busy! Good busy, but busy. So regardless of the outcome (for that day), later that night the buyers’ agent finally gets a chance to check or answer email – and, what does he or she find? Well, an inbox full of Feedback Requests.
What?, You thought I forgot the topic?!
Well, remember what we had to say below about how most real estate agents believe that it is very important to be well-liked by their peers. (See our post, blackballed) Quick review: For most real estate agents in this market, it is more important to be well-liked by your peers (other real estate agents), than it is to take care of your clients. So, most agents will sit down and accommodate those requests.
Yessiree, they will sit right there and say things like, “My buyers did not like the wallpaper in the hall bath” or “We thought that the factory right behind the house was a wee bit loud” or even, “Gosh, the price seemed a little high to us, but thank you ever so much for letting us see it”. Or, they might say: “Golly gee wiz, my clients just loved the place”.
Believe it or not, this is Standard Operating Procedure for real estate agents in our market! Question in passing: Is it SOP to inform buyers of this practice?
Now, what do we do?
Let's set aside the whole question of time-commitment. (Does the buyers’ agent really have time to provide information to the seller, promised by the sellers’ agent? Well maybe, maybe not. By the way, they call it a courtesy.)
Typically, we do not provide feedback. In the rare event that we do provide it, we must be absolutely positive that it will not affect our buyer client in any way. Besides, what was it we learned about information back in Negotiations 101?
Savvy Buyer Feedback Maxim:
This is so obvious! It is testament to the intellect of the typical real estate agent that this needs to be explained at all.
Now, I wish this was the end of the diatribe, but no….
If and when we fail to respond to the first email Feedback Request, yes, we get another, and another, etc. And low and behold, if all those emails fail to do the trick, the seller’s agent, or one of her minions, starts calling. Yes!, on the phone! My phone! After all, she promised her seller clients feedback. And, usually it is the agent from un-noteworthy house Number Seven, and usually this is two or three days later, and always when I am in the middle of something terribly, terribly important. And, they say, do you remember my listing….?
The conversation goes downhill from there….
How to Decide Where to Live [Penelope Trunk]
American Housing Survey: 2005 [US Census Bureau via BlueRoof Blog]
Sunset in Durham [Endangered Durham]
Why do people live in cities? [Marginal Revolution]
Brick and Garden is an independent real estate and investment firm based in Cary, North Carolina. We operate in the Greater Research Triangle Area of North Carolina.
Search the Triangle MLS
Some media outlets may require registration.
Raleigh & Taipei Development Corp.
Galt, Rearden & d'Anconia
Brick and Garden Real Estate
Post Office Box 3882
Cary, NC 27519