Please vote in this poll using the sidebar.
Will the role of a real estate agent be mostly replaced by technology 10 years from now?
- Probably. (30%, 47 Votes)
- Doubtful. (17%, 27 Votes)
- Hopefully. (48%, 75 Votes)
- Who knows? (5%, 7 Votes)
Total Voters: 156
This poll will be active and displayed on the sidebar through 10.10.2009.
My questions are:
a) “what exactly do Realtors do that technology cannot replace?”
b) “Do Realtors need to see me face to face to perform their tasks?”
c) If b’s answer is no, then “why can’t we outsource thier job?”
A combination of both but the role of the Agent will be greatly diminished. As I stated on previous blogs we will all look back and laugh at the insanity of the 6%.
3% to LIST your home is a joke!!
3% to represent a Buyer in purchasing a home should be a crime!!
Every Agent knows it! Every person who has sat at an Escrow signing knows it!! Everyone with a pulse here on Bubble knows it!!
Come on Google! Roll out what you said nearly 8 years ago!! I’m still waiting………..Collapse of the MLS and NAR is a given in due time with the emergence of an entirely new data base for Buyers and Sellers to purchase residential and commercial real estate in a far more cost efficient manner.
Just a simple concise:
Transaction Coordinator-Facilitator-Closer*********Bank on this model in less then 10 years!
A continuation of yesterday’s discussion!
And hereβs the $200,000 question:
Also at our recent seminar, Eric Campbell, president of Cam West homes showed examples from the early β60βs where a buyer could buy a home in the Lake Hills area of Bellevue and Fairwood in Renton for virtually the exact same price. Today, that Lake Hills home is worth about $200k more. Why? Both are good areas.
As I stated yesterday, real estate frustrates those no end who have made technology work for other industries. Real Estate will never be reduced to a “simple” transaction. Here is a partial list of reasons why:
1. Real Estate is too litigious. These lawsuits result in:
2. Real estate transactions get more complicated every year.
3. Casual buyers do not understand value especially as it relates to economic and functional obsolescence.
4. Buyers do not understand value in relation to location.
5.. A body will always be required to let someone into homes for the comfort and safety of the seller.
6. There will always be professionals negotiating on behalf of one or the other party. A professional negotiator loves negotiating with amateurs. Real estate agents also serve as an emotional buffer between highly charged buyers and sellers.
7. There are too many CONSUMER issues past, present and future for the average person to understand and keep up with.
8. Transaction management. Because real estate is so litigious, it is way to easy to lose a contingency AND OR earnest money.
9. Problem solving. Often it takes the combined skill of two top agents to make a deal happen that both parties want.. The agent often assumes the role of Chief Problem Solver.
10. TIME. The vast majority of buyers are working and experts in their own fields and do not have, or want to make the time to gain expertise in real estate.
11. People get in trouble when the don’t know what the don’t know. Technology gives some a false sense of expertise in any given subject.
“Finding” a home is just a part of the process. I could come up with another dozen or so reasons but I’ll cut it off here.
Technology has worked wonderfully in simple transaction projects, but is having a difficult time gaining traction in real estate.
In addition, since the markets have tightened, full service traditional companies are gaining in market share, here and all across the country, and many of the alternative models have been forced out of business. Real estate innovation and market shares are market driven, just as median prices are market driven. When arkets improve, more innovations and choices will be created.
I have stated many times that consumer choice is important and good Some buyers and sellers are very knowledgeable and have the time to devote to a real estate purchase. As Ray and I discussed yesterday, we look for and attract a different client profile.
The Tim, a fun future discussion that should have a post heading of its own would be where are the up and coming (best bets future value) locations in the region?
My income has never been dependent on Real Estate commissions. I admire people who keep a pipeline of business, because it is very hard work. It takes a lot of time. Real Estate is a twenty four hour a day business. You don’t have complete information because the very vast majority of people never come in contact with a working Real Estate agent.
Most people use a person we in the business called “Uncle Morty,” or they know somebody who knows some body and they use them.
You need an appointment to talk to a working Real Estate agent and many times that appointment can take some time to get. You usually have to go through an assistant first and be interviewed. Then you get a consultation, and if there is a working relationship to be had, great, if not, thank you, but we have other people in the office who can help you. You might be referred by some one. In that case you are accorded some time depending on the strength of the relationship to a prior client.
No matter what you will sign paper work outlining the working relationship.
6% is cheap for the amount of time Real Estate takes. An agent may get to a celebrity status where lead generation is taken out of the time commitment, but the advertising dollars still need to be allocated. It costs a lot to get the leads in the door. Once you stop your business dies.
This is where the internet comes in. The internet can promote a business twenty four seven. The internet is a lead generator.
Now I think Ray is a great guy, with good ideas, but the problems we are facing today is because everybody thought buying a house was so easy any one could do it. In the beginning i was as guilty as anyone. People would tell me what Real Estate was all about and I would nod my head, and do the paper work. My wife, all the time, would say for me to keep my opinions to myself. Just do the deal.
People I know in the business were all saying this was unsustainable in 2006 and many kept doing the deals. I concentrated on listing property for sale, but as soon as you start telling people they should sell at any cost to get out from under the mortgage, they stop listening. They know so much more about it than I do.
So here we are and people are still speculating about real estate. What will happen? What’s going to be next? You’re screwed no matter what. The Real Estate business is going back to normal and the big institutional investor dollars will move on to energy, education, and health care.
As investor dollars move so will web site search for homes for sale. redfin and Zillow are looking for buyers for the business models as sure as I’m sitting here. Everybody is looking for the back end of the Real Estate business, but if you take the almighty Real Estate commission out of the equation, there is no money.
RE: Greg Perry @ 3 –
Good comment.
I’ve always felt the Real Estate Agents will probably experience something like what’s happened to Tax professionals.
The bottom of the market, where the paperwork is simpler and the total amounts of money is less, will be taken over by technology, or assisted with it to the point that there are only low cost, low skills workers present (Think of a model like TurboTax).
The middle mixed, with more advance software (and higher usage cost) as well as a mix of traditional agents.
The high end I expect would stay with high cost, full service human agents. As someone else said somewhere, when your dealing with multi-million dollar transactions it’s worth the extra cost to hire a experience agent or two, maybe a lawyer, etc…
(note: I have no idea what percentage of people use TurboTax / other tax prep software.. I simply assume it’s heavily used based on it’s continued existence and apparent growth..)
RE: Everett_Tom @ 6 – I agree and you can see that same stratification in other investment types already. I see commissions only surviving in the high end product, of which maybe 5% of current agents would be working. I don’t know the numbers but I would guess even during the bubble there was only 100-200 $1m+ sales a month.
Greg – I think your misunderstanding is the strawman you always provide that pretends the technology will just be RedFin with a shopping cart, click a few times and they will overnight you the keys. There are many ways to handle these transactions, even the complicated, that do not require a 1:1 agent with commission structure.
By b @ 7:
–
Not at all. Redfin is barely a player. The shopping cart you suggest is not a factor in my mind.
So, what are your solutions to:
1. New national, state and local consumer issues? (King County has a new “darling” issue — what is it? and what does the county now require?)
2. Time (for the principals –buying and selling) who are developing their expertise in their own field and earning their own income.
3. Functional and economic obsolescence issues?
4. Understanding of contingencies?
5. Inequity in negotiation?
6. Past, present and future consumer issues? Keep in mind home inspectors do not negotiate on behalf of the client, they just point out deficiencies — and all inspectors are not equal)
7. Valuation
8. Oh, and how about those relo buyers who need to buy a house quickly with little knowledge of neighborhoods, stats and trends?
Make an attempt to get out of fantasy land and suggest real possible solutions with technology.
Keep in mind, If you are bullish on the overall real estate market, chances are enhanced. if you think real estate will continue to struggle in the marketplace, your efforts will be severely handicapped.
I imagine that there will be some needed changes in the real estate industry, with maybe more flexible compensation available for agents, such as getting paid by the hour for the services they provide instead of a commission,…and maybe there will be a weeding out of illiterate incompetent agents, but I doubt it.
So, yeah, I think there will be less agents out there in ten years than there are now, but I’m not sure I’d go as far as saying ” mostly replaced”. How can you replace someone who opens doors and says ” Cute house. You should make an offer. This house won’t last.”?
RE: Ira Sacharoff @ 9 –
Now thats funny…………..!! How much longer do we have on our bet? Was it Feb 2010?
There will only be a handful of agents left. Half will be working for the upper end or those buyers who like and can afford to have their hands held throughout the entire process The rest will advise companies that write code, tweaking the process to keep it efficient, relevant, and accurate.
I don’t think the change will come so much from Redfin and their like as from the major players seeking to reduce costs, a situation that should provide some amusing conflicts. Remember when Nordstrom’s first went on-line, under-cutting their commissioned sales force? There will be some bugs to work out, but it will happen. And while some think that tough times will put the damper on innovation and change, I think the opposite is true. There’s nothing like rising costs and falling revenue to force change. Labor is expensive, always has been, and has always been the first place to look when costs need cutting.
Those who don’t think their job can be done by technology are going to be rudely surprised. Instead of Redfin, let’s look at Legal Zoom as a model. The website gives you the forms and some guidance, a lawyer later reviews what needs to be checked, and away you go. It is a complicated area involving 50 states and even more city/county specific issues, but it works. My apologies to the resident geniuses, but real estate is not as complicated as you would like to make it seem. If robots can do surgery and software can do taxes better than the IRS, then we ought to be able to come up with some code to track, value, and sell houses. Buyers, through the decision process will fill in for what the sales side may lack. Those very few transactions that fall outside the boundaries of the technology can be handled by consultants on a fee basis. Six percent will be gone.
The real impediment to change is the MLS. Once their monopoly on gathering and holding listing information is broken, the game is over. My guess is that one of the major players will surprise everyone by “going rouge” in the pursuit of the almighty dollar. Like the oil cartels in the past, there has been much to gain by playing with “the team.” But when things get tough and survival is an issue, everyone heads out on their own. With the national economy headed nowhere but down those days are coming.
I suppose the real question is why wouldn’t the real estate agent go the way of the travel agent? We can talk about what an experienced agent may or may not bring to the table, but in the end money talks. If an agent can’t sell a house for more than 6% higher than a free/cheap alternative (or at least faster so the extra morgage payments offset the added cost), then the agent’s days are ultimately numbered for the majority of Realtors out there. Certainly they will still exist, but in lower numbers.
On the buy side, it’s pretty stacked against a Realtor. As a buyer, I know what I’m willing to bid and how much I’m willing to go up to. With places like redfin or 500 realty out there, why wouldn’t I use them? I can find houses myself, I just need someone to get me in the door to look at them. The money back is much better spent on other things like closing costs or a RE lawyer. So, unless a Realtor can show me that they can save me more money in the negotiation process than I’m going to get back from a discount broker, I’m not about to use a full service Realtor.
Argue all you want about how litigious real estate may be, but Realtors aren’t lawyers and they aren’t home inspectors. An offer is a pretty standard form and it doesn’t take a lawyer to show me around a house.
RE: Ira Sacharoff @ 9 –
” How can you replace someone who opens doors and says β Cute house. You should make an offer. This house wonβt last.β?
I hate to be snarky, but isn’t that part of the neighborhood info and tour guide you download to your ipod before viewing the home? Or maybe it just plays along with the YouTube tour.
If we have to hear it, could we at least get a perky blond or buff surfer-dude to say it as we enter (For $15/hr.) ?
By shawn @ 1:
They open doors.
Yes, to open doors.
n/a
In short, it costs you 6% of your home’s value to have the NAR control your lockbox. That’s one expensive little device.
It seems to me someone could start a company that charges a nominal fee for showing houses (like $30/hr including commute time from the office). The company would have a website with stock forms, research tips, etc. that could be used for a nominal registration fee. More services could be purchased, if necessary, for a nominal fee.
RE: Greg Perry @ 8 – I’d gladly pay someone an hourly, market-based rate for these services. They should have no vested interest in my final decision of what or when to buy. Tens of thousands of dollars? Forget it. #8 will probably always use a full service agent, so I don’t really even find that relevant.
RE: Jonness @ 14 –
The pronlem with the hourly base is like hiring an attorney who makes problems rather than solving them.
I do see that there will be a cost per service in the near future. I can not afford to work for free.
I like this site and spend time here to read what people, like you, have to say. There are many people here who have good insight and information. There are people who are here to manipulate,
I don’t buy from ebay, amazon, or etrade. I have to use the online travel rip offs because we are forced to by the air lines. Hotels and air lines refuse to pay commissions so we have to do extensive research to make the most mudane travel arrangements and pay far too much for that inconvenience.
With the amazon rip off I have a choice. craigslist and ebay are for my children to play with and I warn them not to. The internet is a vast waste land of petty cons and manipulation. I prefer to do business face to face.
Buy a house on the internet? Did you know that the Brooklyn Bridge is the most traded property in the United States? Did you know you can buy raw land on both coasts for pennies on the dollar? How about some prime waterfront in Florida?
I sense that there is a number of people who may neglect to understand that the buyer is financing the transaction. The “system” in which we work is not necessarily perfect or efficient or without room for improvement. With that said, I think it is important to keep in mind that lenders allow this system to function because it is the best we have at this point–tradition or not.
When our office submits our funding request and move to “balance” our funding figures with the lender staff, the total amount to fund the transaction allows for payment of all parties:
1) Real Estate salesperson commissions
2) Escrow, Title, recording fees, work orders, dues, loan closing costs, etc.
3) Payoff of existing loans/encumbrances, excise tax, etc..
4) Other proceed disbursements, etc.
Although Settlement Statements (HUD-1 Form) prepared by escrow divy up the total funding amount into a Seller column and Buyer column showing all debits and credits on the HUD-1, the money is squarely hitting our IOLTA Trust Account from the funding amount solely generated by the buyer.
So, buyers, with that in mind keep your eye on the ball and get yourself the most value you can by working with an agent that is consumer centered vs. commission driven. You are paying for it.
To change the system would require lender involvement and the movement away from a buyer financing the entire transaction. It would require the buyer to come up with and pay their agent out of their own pocket, plus down payment and closing costs. Traditionally, this has not been able to be accomplished as most first time buyers are not walking around with 20% down plus closing costs, particularly in our region where housing is expensive. This is a reason why the system is structured the way it is; to allow the financing of the transaction without undue burden placed on the first timers and some second timers that are the fuel that drives the real estate engine. Could this work? It is plausible, but probably not practical unless our country changes it’s culture away from consuming with debt vs. making purchases with earned income and savings.
RE: Tim @ 17 -
I always find these discussions about who is paying for what entertaining. While in a strict legalistic sense one can track funds, attributing expenses and payments to the various parties, in reality it’s impossible to properly assign the costs to either the buyer or the seller. Who’s to say the buyer didn’t willingly overpay and in effect “pick up” some portion of the seller’s costs? Or perhaps the seller gave a greater discount than needed to an already committed buyer, thinking it was imperative to close the deal? So, in a purely theoretical analysis, it’s impossible to really say who paid for what. But the one thing we can be sure of is that both the buyer and seller favor reducing the cost of conducting the transaction. Pressure to reduce total price paid and increase the net funds to the seller will always be in the background.
With the value of the central asset (home prices) falling against a backdrop of decreasing or even potentially negative equity, transaction costs are more important than ever. This is part of what Greg Perry misses- commission costs disappear in a rising market and are more easily overlooked. When prices fall, the pressure is on. Clever salesmanship isn’t enough to overcome deflation where aggressive pricing is your best tactic. But it’s hard to convince sellers that losing more now is better than losing lots more later- it just seems to go against the realtor’s creed, where prices always go up and now is the best time to buy.
I have loved this discussion topic for the past few days (just catching up on reading now) and I have some observations.
1) Most people who have defended the role of the Realtor have given reasons on the buyer’s side. Do people agree that most of the layman’s risk is on the buyer’s side?
2) I don’t think that realtors will go away, it just isn’t possible right now. While you can draw some similarities with online travel as far as the discovery process, it falls apart b/c of the magnitude of $. Some professional help is needed in the process.
3) As technology enters any given profession/industry, it allows *less* skilled people to compete for the same jobs. Applied to real estate, the automagic distribution of data makes a lot of advertising unnecessary that may have differentiated a selling agent before. When this happens, invariably commissions/salaries/rates go down.
RE: Tim @ 17 –
I always enjoy your posts.
It is true that the steady march of appreciation has ensured that sellers are always the ones with enough $ to keep the transaction process going forward smoothly. If home prices where to keep pace with inflation over the next 10-20 years, then I think that the model would have to change and they buyers would certainly need to pay for their overhead in a fair transaction.
RE: Scotsman @ 18 – “But the one thing we can be sure of is that both the buyer and seller favor reducing the cost of conducting the transaction.” -Scotsman
No doubt about it. I recall reading about all these “efficiencies” in technology leading to faster, more efficient closings. For example, our office is able to do online signature closings via Flagstar Wholesale lending platform for closers. It is supposed to speed up the closing. Wrong. It has not. Clients still like hard copies of all they are signing. So we print out everything anyway and get it all in order that escrow likes (as apposed to following an online signing format that may be the way it is done in non-escrow states vs. here.) A lot of automation in the title business was supposed to lead to more “streamlined” and efficient workflow leading to decreasing costs for consumers. Costs have not decreased one bit.
Real estate commissions take up the majority of the fees as well as mortgage broker fees (that are turned over much more frequently than that of a home sale—selling once every five years or so vs. needing money more frequently). And your points regarding increasing prices and picking up closing costs speak to the inefficiency of what I mentioned. On a personal note, watching the 100% loan borrowers ratchet up sales prices to offset seller paid closing costs in that scenario just completely floored me. And, of course, seeing how it ratcheted up median sales prices based on nothing but a loan program, in my view, was one of the primary reasons the market crashed.
This boils down to a buyer being as informed as possible about how the housing business works. Sellers (the buyers of homes recently) are receiving their own education right now.
RE: Tim @ 21 –
It will be interesting to watch the effect falling prices have on the entire selling/closing process. With everyone looking to salvage the last dollar there’s now a stronger incentive than during the last 5 years to review and perhaps change the whole system.
Another aspect that hasn’t been discussed yet is the increasing level of governmental involvement. With the government ,and hence tax payers, taking a hit on every failed loan, sale, etc, either directly or through backstopping via FDIC, the banks, personal tax write-offs, et al there may be a push to restructure the whole process. National standards, anyone? Limits on loan fees and other costs where the government is in any way involved or at risk? They certainly don’t seem to be shy about stepping into new areas. Who knows?
Another question, if Realtors are vital to the buyer, then how did so many buyers get into the mess they are in today?
Shawn is correct. Realtors have failed most buyers in the past 3-4 years.
Only in the case where a Realtor had advised their client about the high risk of downside, and the buyer asked to press on, could they have succeeded in their role as the buyer’s trusted advisor.
RE: Scotsman @ 11 –
When my family was getting ready to move to Bellingham from New England in 1988 I wrote several letters to RE offices about homes in our price range. One realtor just up and mailed me a current MLS! I knew this was probly not kosher. It was an amazing help to me to hunker down and study it. It allowed me to make an informed decision. The MLS should be available to everyone in the same way libraries are today. In Europe before the Enlightenment (and even after) libraries were only available to the wealthy elite.
Knowledge is power.
RE: shawn @ 23 – a good question that is probably going to be debated for a long time.
RE: shawn @ 23 –
Very good question.
By Packet @ 12:
Once again, you don’t know what you don’t know. It’s not just finding the house.
Using a recent example, we have a client who “found” a place he was interested in. If he’d gone to a limited service broker (not necessarily the ones mentioned) they probably would have written him up.
I pointed out to him that the complex was not FHA approved, and what that would mean to him short term.
http://blog.seattlepi.com/realestate/archives/180084.asp
Beyond that, the unit they were interested in was a short sale. Short sales are problematic, but condos and short sales particularly so (for reasons never addressed here–but real estate is easy–so I’m sure everyone here knows what I’m talking about) so I started looking for other options for him–options which included non-listed properties.
So I guess if you want a half-assed job where the person really isn’t looking out for your interest, but just trying to process a transaction, limited service is the way to go.
By Scotsman @ 18:
Actually, it’s the reverse. There are far more FSBOs in a hot market than a weak market. In a hot market a sign will draw attention. In a weak market even a good listing might not draw enough attention.
By Tyler @ 19:
Again, depends on the market. In a weak market the risk is total failure, or getting caught in a transaction unlikely to close that wastes time while prices fall. In a hot market the risk is merely under-pricing.
By Scotsman @ 22:
Well, again, until recently (Homepath) the problem has been the banks poorly listing properties. That really hasn’t worked out so well for them.
By shawn @ 23:
Well first, agents don’t make buyers want to buy. They come with that intent.
Second, I would argue it was mainly financing. And I don’t just mean availability, although that was a big part of it. Even before the bubble I was warning clients about 80/20s and suggesting that a single loan would be better. I don’t think a single client listened to that advice. It was all about the lowest monthly payment. People don’t tend to think about worst case scenarios.
So I guess if you want a half-assed job where the person really isnβt looking out for your interest, but just trying to process a transaction, limited service is the way to go.
God Kary..You are truly clueless………
RE: Ray Pepper @ 33 – Hey, I’m not the one advising sellers to go limited service, when clearly that is a horrible model for sellers.
But thanks for reminding me I need to update my series on limited service vs. full service.
Hey, he sees what he wants to, nothing more.
RE: Scotsman @ 35 – Actually, I know a lot more than just about anyone here, so I can see a lot more. But if you want to go into a dissertation about condos and short sales, go ahead. I’m sure you’re fully aware of the issues involved. Either that, or just admit that you don’t know what you don’t know.
Also, nice job failing to refute a single thing I said.
RE: Kary L. Krismer @ 28 –
Any limited service real estate agent should have been able to tell a buyer the same thing.
What exactly are you bringing to the table that I can’t get from a limited service real estate agent and lawyer for a lower cost and much more accurately? All I’ve heard so far is a single anecdote that another Realtor probably would have written up anyways. During the bubble years Realtors were more than happy to write up any offer that came their way, so I’d say buyers didn’t get much more out of the extra $10k or so they spent on a buyer’s agent.
By Kary L. Krismer @ 36:
well, that might be one of the most arrogant things I have ever read…
I’m sure you don’t mean it how it sounds taken as a stand alone statement.
By Packet @ 37:
Should have, but the question is would they? If they’re making $500 processing transactions, they don’t have a lot of ability to turn down making $500. I used to see the same thing in the bankruptcy area where the mills wouldn’t address the issue of when a bankruptcy should be filed. They would just file them because their business was based on volume, not quality.
There’s a Conglomate Opinion Here
RE is going down in price, requiring more frugal efficiencies in the buying process.
Many websites have replaced old fashion businesses, why look at eBay.
The personal touch doesn’t always get the buyer a cheaper or good investment deal.
Having listened to all the blogs, I’d throw one bone to the realitors….if they’re really good, they’ll negotiate sellers’ prices downward, way downward folks. I had a very entertaining time with a realitor and his family [although it was a bit spooky, the husband and daughter we're trying to push the wife/mother off on me like a blind date]. The realitor was a very nice gentleman though, and agreed with me; to make it in the RE game today….ya gotta get the sellers to drastically reduce them thar prices….
To put it in perspective, if RE prices are down 15% today, why not sell the house for -25% today….rather than not selling it at -15% and then having it plummet to -40% a year or two from now? Win for the realitor, buyer and seller….
“What exactly are you bringing to the table that I canβt get from a limited service real estate agent and lawyer for a lower cost and much more accurately?”
Please translate that. I’m not sure what you’re trying to say. Limited service brokerages depend on sales just as much as full service agents, don’t they? Just because they’re charging you less, what makes you thin they’re going to be more accurate and/or honest?
I’m not saying they will or won’t be, but I’ve dealt with full service and limited service agents who were both full of BS…..And lawyers? Oh yeah, they certainly have the reputation of being honest, upstanding citizens :)
RE: Kary L. Krismer @ 36 -
Kary, I’m more interested in your ability to look ahead and think things through than I am in the parts of your knowledge base that are easily replicated by a flow chart in a computer problem. Sorry but short sales or condos don’t have an infinite amount of associated issues waiting to trip up the unsuspecting.
As for my response, how can I counter your post #31, for example, when it’s a complete disconnect from what I was talking about? Do you ever read posts all the way through and think about them, or just consistently “shoot from the hip” as they say? What do bank marketing efforts have to do with government standardization of closing costs and procedures?
RE: deejayoh @ 38 – Well, I’m an attorney and a real estate agent. So I actually know how things work. The nuts and bolts.
For in the P-I forums, on FHA financing, I commented on 10/3/09 that a mortgage person could give better information on something than what I could on a topic that involved financing.
http://blog.seattlepi.com/realestatenews/archives/180811.asp#comments
People who are educated in an area and work in an area know more about things than people who merely follow an area.
RE: Scotsman @ 42 – I wasn’t disagreeing with you in 31. What I was pointing out is that banks by not following the existing process (properly listing properties with an agent), have lost a ton of money. Rather than restructure things, they only need to follow the established structure. That’s what Fannie Mae has seemingly done with Homepath. That was restructuring, although it was restructuring toward the norm.
RE: Kary L. Krismer @ 39 –
And what exactly is the deciding factor between a full service agent providing this service? An extra $9500 doesn’t appear to be a huge motivating factor other than to push a buyer to make a sale so they can get that much more money. The fact that the barrier to entry is so low to the industry should be a very good indicator that it isn’t any extra protection.
RE: Ira Sacharoff @ 41 –
The point is that I can get the same thing for a significantly reduced cost, so why should I go to the higher priced option? Certainly, just because you go to a lower priced option, it’s not always going to be better. The part about more accurate is more in reference to a few Realtors I’ve talked to that seem to think they’re lawyers.
Unless the full service real estate agent is bringing something significantly better to the table than the limited service option, why exactly should I pay the extra cost for it? If they claim to have better knowledge about the market, how exactly can you quantify that and why shouldn’t I just hire one at an hourly fee?
Kary, in all do respect you truly need to go to Ikea today and get the 5 Meatballs in a Cup. I suggest 2 cups. I had them on Saturday and I see things alot more clearly now.
Not only that, I scored my 1st goal EVER at Starfire at 916pm Sunday night in my Coed League and I attribute it to the meatballs.
Kary…………..remember 2 cups.
I don’t have as much time as you to read all these posts and respond but I will GLADLY debate you anytime on real estate in ANY public forum. I will engage you in Laws, Practice, Investing, Short Sales, Foreclosures, and Finance. In fact, I will be at REBAR tomorrow in Bellevue from 830am-12noon.
Bring it on!……….I may have to get some meat balls first though…………
BTW..I cant argue with this statement…….It is so profound………Well thought out as well.
“Either that, or just admit that you donβt know what you donβt know.” from 36….
I admit it I truly don’t know what I don’t know. If you know what you don’t know, then you just maybe able to out debate me about Real Estate knowledge of laws and all other aspects of real estate. BTW I would like to broaden the topic out to not just Washington State but also Nevada, Arizona, and Texas where I have been trained.
Your not just a 1 trick pony in Washington Are you! See you at Re Bar!
RE: Packet @ 45 – Most agents don’t make a living selling real estate, and that’s at full rates. If they’re charging reduced rates they have even more incentive to push a deal through, because they need more deals.
True the full service agent may need that sale too! It would depend on their personal finances. But an agent working for reduced fees is more likely to need the transaction simply because they’ll need more transactions no matter what their personal finances.
RE: Ray Pepper @ 47 – I’ve never gone to rebar, nor do I plan on ever going. Not my thing.
RE: Kary L. Krismer @ 43 –
Kary, I happen to think maybe only a Realtor who is also a lawyer may be able to command such high commissions in the future. When you provide your services, are you actually practicing law and take on the additional burdens that providing legal advice can carry?
When this topic arises and real-estate agents defend their indispensability in large part by pointing out the body of knowledge that laymen and “casual buyers” (?!) can’t understand, won’t take the time to learn, can’t possibly keep up with, are too emotional to keep a clear head about, etc., there is a segment of their potential client base among whom they sure aren’t winning any friends. This condescension and/or paternalism is a bit rich.
Also, anecdotes? We all know anecdotes. Some friends of ours, a few years ago, were pressured by their agent (full service, many many years of local experience) into submitting an over-asking-price bid that waived inspection on a house they liked. The agent said that if they didn’t get this house they would never find anything as nice in their price range again. They got the house and shortly thereafter learned that it was not connected to the sewer line, an ugly $30K fix that even their agent conceded an inspection would have brought to light. And property values in our friends’ neighborhood have since tumbled. I wonder how highly they value the expertise and awareness their agent brought to the transaction.
RE: Tyler @ 50 – I try to practice law as little as possible–actually not at all if possible. And often my clients don’t even know I’m an attorney.
The problem is that it’s not entirely clear what constitutes practicing law. Whenever you stray from the forms, or even strike a line, you’re arguably practicing law–the case law is not clear. The difference is, I’m not violating the law if I cross that line.
What I will do is issue spot, and advise people to either see an attorney (or accountant) about an issue, or stay way from the property. For example, there was a WAMU listing where the bank’s counter-offer documents were so poorly drawn that I advised the clients simply to walk–that seeing an attorney about them wouldn’t be practical because they were such a mess.
By Civil Servant @ 51:
Well, people who think they know what they don’t know are hardly what I would call good clients.
Turning again to the legal area, in 20 years of practicing law I only saw one person who did a good job and one who did a decent job representing themselves in a courtroom. In the one good case the judge actually thought the person was an attorney! Usually watching those going pro se is painful.
Oh, and I did once have a client actually come up with a good legal theory of which I was unaware. I’m not sure how they found it–it was pretty obscure.
Anyway, back to real estate, the client can sometimes be right and me wrong about something like pricing. That’s why I’ll give clients a lot of leeway on pricing issues. But when it comes to procedures and methods, they’re more often asking questions than suggesting solutions.
RE: Civil Servant @ 51 –
There are far more examples where these supposed ‘”experts” acted in their own best interests and not in their clients best interests. Has this changed over the years? Have real estate agents always been slimeballs?\My experience says yes. I was dealing with sleazy agents as a homebuyer 20+ years ago, but maybe in a fast rising market they just come out of the woodwork, or the laminate.
I revisited the comments here. They pretty much go the way that all the “real estate agents aren’t worth it” diatribe. What I don’t see here is any specific solutions that technology will solve from the list in comment 3 or comment 8 (and interesting comments in 17).
I’ll make it easy. Take showing the house completely off the table. How will technology solve the other issues?
How do you explain that since markets have tightened the first casualties are the alternative models and traditional models are gaining market share?
Also, someone said the contract is easy and pretty much standard. What does that mean, exactly?
PS for those who don’t want to pay agents….. do it yourself, or find a discount agent! It’s OK! We know you’re capable of locking out the agent and saving those nickels. Let’s refocus and come up with the specific technological solutions that replace real estate agents? Isn’t that the question at hand?
RE: Ira Sacharoff @ 54 –
Agreed, Ira- it’s the person, NOT the compensation plan that really makes the difference. Some folks have standards and stick to them, most just “go along” with the herd. Whether the realtor is paid $500 or $5,000 makes very little difference as to how they handle the issues that come up.
Much like the financial planning industry, fee for service from an adviser with no financial interest in the outcome is the best way to go.
Most of the agents responding to this post seem tense- I think they see the handwriting on the wall, but fight the good fight anyway.
By Kary L. Krismer @ 28
So I guess if you want a half-assed job where the person really isn’t looking out for your interest, but just trying to process a transaction, limited service is the way to go.
Kary – how is an agent whose pay is proportional to the size of the transaction looking out for my interest? The agent is better off if I pay $400k for a $350k property than if I pay $300k for the same (priced) property. Agents have a financial interest in me spending the absolute maximum amount of money, even if that’s not in my best interest.
I will admit there are good, honest agents out there who rely on referrals, and are thus more likely give maximum value, but that is not universal. Agents rely on volume just like a limited service agent does.
RE: Greg Perry @ 55 –
“How do you explain that since markets have tightened the first casualties are the alternative models and traditional models are gaining market share?”
That’s easy. When transaction volume falls, so does revenue. Smaller businesses are the hardest hit since they don’t have the established infrastructure that gives the larger firms a reduced fixed cost per transaction. When you’re growing and establishing a reputation you need the marginal dollars to buy advertising, etc. It’s a well known business principle.
But don’t make the mistake of assuming that’s the end of the story- there’s a big difference between a temporary drop in revenue and the reshuffling it brings and a continuing revenue decline that forces entire industries to reorganize. Lower revenues, especially when seen as permanent, will force a re-evaluation of the whole real estate model. Add in advancing technology, an increasingly tech-savvy public, and a bit of government meddling and you have a recipe for major change.
RE: WestSideBilly @ 57 – Well, since you admitted there are good agents, I’ll admit there are bad ones! Even bad full service agents. But I would like to make it clear I’m not saying you need to be an attorney and an agent to be a good agent.
At some point though, compensation has to affect service. It probably doesn’t at 2.5% or 2.0%, but at some point to get by you need to be processing so many transactions that you need virtually every one. Actually, from what I’ve seen the lowest priced ones need about 400% of what they’re doing, but whatever.
This really has nothing to do with the compensation model, other than amounts. If you pay your doctor by service, you still have to worry about why they are suggesting the service. Is it really necessary, are they just covering their ass for malpractice concerns, or do they need to make the boat payment. Oh, and note there in that situation there are plenty of barriers to entry too.
By Scotsman @ 58:
So higher fixed costs are somehow a benefit to the established firms? I would agree name recognition helps, and perhaps the ability to borrow, but I don’t see how higher fixed costs help at all with survival.
I’ll say this again. Most agents are not making a ton of money selling real estate, and that’s at full commission. The belief that agents are raking in money hand over fist at 6% is largely a false belief. As noted, there are low barriers to entry, and that means that if firms could make it in all markets charging a lower rate, that would happen.
The subject of real estate commission has been addressed better in other countries. In Canada, the first $100,000 is at 7% commission rate, after that rate declines to 2.5%. On $500,000 sale, this comes to $17,000 paid to agents (buyer’s and seller’s). In UK commission is about 2%. It’s a matter of time before such structures take hold here.
On subject of of the real estate agent’s use and need for — roughly the same as a need for a stock broker. A good one is worth every penny, a bad one deducts value.
By David Losh @ 16:
I prefer to do business with companies that don’t charge a premium for access to information. Travel agents went out of style because they charged a premium for a service that had little value once the information was readily available. Both my former and current employers required us to use travel agencies with contractual arrangements, and we routinely paid 50% more for flights and hotels with no improvement in the fare class or convenience. I can call Alaska and sit on hold just as well as I can call the agent and sit on hold, and the former gets results quicker. So what value is the travel agent offering you for their commission?
I don’t know that the parallel of real estate agent to travel agent is 100% right, but the opposition to easy-to-use technology is not likely to get you anywhere.
By Greg Perry @ 55:
The other thing that’s happened is the technology available to consumers has improved greatly over even the past two years. So I guess we’re supposed to assume that even though traditional models have done well with that improvement, further improvement is going to somehow hurt them?
By Scotsman @ 58:
Yet, even in this “buyer’s” market, the “buyers” models are not making gains in market share, which is actually easier to do with reduced volume.
The recession also claimed many of the big box retailers who rely mainly on volume.
The battle between discount for volume and providing service for more is age old and spans many industries. This is NOT anything new in real estate. Even with technology in tax field, there are thriving professionals making big bucks providing service in this world of turbo tax and H & R Block.
I agree the government will continue to meddle, and every time it does, I smile because the “need” to provide professional assistance to marketplace increases!
Back to the task at hand. Any specific ideas on individual solutions provided by technology for this “tech savvy” public?
RE: Kary L. Krismer @ 60 –
“gives the larger firms a reduced fixed cost per transaction”
Kary, do you read? How is “reduced” higher?
And your final paragraph is just more proof that opportunities for change exist. Who benefits from the existing model? The NRA and MLS services are consistent money makers. The brokers are next, although their profitability isn’t insured, followed by a minority of agents, and then the buyers/sellers. It’s a system ripe for a better solution.
RE: Scotsman @ 65 – You said reduced per transaction. I was dealing with totals. That should have been obvious, but I guess not.
Whatever, with the possible exception of Redfin, probably all the limited service brokers have lower total fixed costs than the traditional brokers (even comparing only one office of say a Windermere to an entire limited service firm).
RE: Kary L. Krismer @ 60 –
Kary,
What would you say is the biggest obstacle to you gaining transaction volume? Another way to put it: How do you spend most of your time? (besides SeattleBubble.com!)
RE: Tyler @ 67 – I don’t aim for high volume. I advertise very little and plan on doing even less. I didn’t aim for high volume when I was an attorney either. I aim more for personal service.
I’m pretty sure the RE agent will go the way of the full-service stock broker. Some folks will certainly need or want to use their services, but most Joes and Janes will decide to use the ETrades of Real Estate. Less service, lower fees. The body to show you around the house is a bit of a hurdle however. But probably the only one.
RE: Bill @ 69 –
Great Bill.
What about the full service stock brokers who still are in business?
At any rate, your comment is the same as many. Any specific ideas on how technology will solve the complexities of a real estate transaction? (See 3, 8 and 17).
By Greg Perry @ 70:
They’re the ones that deal with the large portfolios. People with large amounts of money know better than to handle it themselves. (But again that doesn’t guarantee a competent broker–or apparently even an honest one!).
But as I’ve said before, buying a stock is easy. Select and click. It’s no harder than transferring money from checking to savings on-line. Buying real property isn’t even comparable. Stocks are probably an even worse analogy than the travel agent. A share of Intel is fungible–not so with a vacation trip to Disneyland.
RE: Greg Perry @ 70 –
How many of those full service brokers are still in business now verses 30 years ago- that’s the relevant question. And how many full service realtors will still be in business 10 years from now? The answer to both queries is… a small fraction of the original number. Will you be one of the “survivors”? Perhaps- good for you! But the point is most will be gone, just like most of the full service stock brokers are gone, many of the tax accountants are gone, and many lower level lawyers are on their way out too.
Technology will “solve” the complexities of the real estate transaction the same way you do, and the same way turbo-tax and many other programs work- by asking a series of questions and then proceeding through a range of possible solutions. Flow charts and decision trees have been around for decades and work beautifully in situations with a fixed range of possible outcomes. Think about it- you probably get your “expertise” from asking a familiar set of questions about each transaction, then following up with appropriate actions. Twenty or thirty questions probably handle 90% of the homes you sell. Another 8% are unusual, but not unknown. The last 2% require some real creative thought and problem solving skills- maybe even some outside guidance. In sum, the program handles 95% of transactions with ease and sends you to a consultant or in-office expert for the very few unique issues that come up. A few efficiently utilized specialists and a bunch of clerks replace the “full service” broker, all at reduced cost to buyers and sellers.
If it’s cheaper and more efficient, it will win out in the end, just like economic fundamentals finally overcame all the hype during the tech bubble, and just like fundamentals will eventually win out over the government’s efforts to keep kicking the current economic crisis down the road. The piper gets paid, or the music stops. Just because it hasn’t happened within our short time frame for expectations doesn’t mean the reality underlying has been dismissed. For the vast majority, 6% is dead. Maybe the body isn’t in the casket yet, but the disease has certainly taken hold, and the patient is feeling a bit ill. How’s that for the overwrought analogy of the day? ;-)
RE: WestSideBilly @ 62 –
I’m going to call you on that.
The airlines stopped paying commissions. Corporate travel was given an incentive to use expedia based on the promise of a price reduction, which they got. If you worked for a Fortune 500 company airlines gave good discounts, to start.
When expedia hit main stream the discounts went out the window.
RE: Scotsman @ 72 –
Thanks! Finally an answer with some thought behind the basic premise of the question! Not real specific on the actual issues, but some thought, none the less.
In the mean time, I’d like to see the agent force about 1/2 the current size, myself! :) …….
An old retail rule:
Great Product
Great Price
Great Service
A company can pick two to focus on, but cannot focus on all three with long term profitability. You can have a great product at a great price, but personal service suffers. You can have a great product and great service, but price suffers, etc.
So what happens when you have a complicated product like a complex federal tax return and Turbo Tax? You get Tim Geithner!
Most good companies openly state their goals so the consumer understands what to expect. Nordstrom doesn’t freak out when K mart (whoops Wal Mart took them out) Wal Mart has a sale. Nordstrom invests in personal service and personal shoppers, Wal Mart has a greeter, stockers and cashiers.
The “discounters” in real estate are referred to (and refer to themselves) as “limited service” companies. WHEN, however, a company stakes their business on price, there is only so much room to maneuver before the price gets too low (or FREE). The lower the price, the lower the service.
At any rate, principle based business are the businesses that thrive over time.
Frankly, I see room for many models. I do not see a time in the future that technology will ever take out full service real estate companies. Real estate is and will always be a complex, not a simple transaction. Some limited service companies may build a model that not only survives, but thrives. Perhaps there is a day in the future where full service companies actually raise their rates – with increased guaranteed service offerings…..and get it. It’s all good. There is room for diversity and choice, which I will defend.
Agreed, but a couple of points:
Geithner flat out cheated on his taxes- he knew the tax was due, but delayed paying it, then offered excuses. There is nothing wrong with the Turbo-Tax programming.
Nordstrom may offer high end products and great service, but they also undercut their own commissioned sales force with online sales and access. Sure, it screws over the sales force and their relationship with their “clients”, but it’s good for the Nordstrom bottom line- it cuts costs by reducing commissions paid.
Exit question: Will Coldwell-Banker or Windemere be the next Nordstrom, offering some combination of service levels including an online experience that cuts out the realtor? That’s my guess- not Redfin, etc. but one of the big boys or perhaps some as yet unknown startup that builds its own name recognition (Amazon) and goes around/excludes the MLS entirely.
RE: Greg Perry @ 74 – A company can pick two to focus on, but cannot focus on all three with long term profitability. You can have a great product at a great price, but personal service suffers. You can have a great product and great service, but price suffers, etc.
Since you use retail as an example, I have to respond.
I remember marketing professors trying to drill this idiom into my head. I do almost all my shopping through amazon.com. Last purchase? Six NGK spark plugs and a Denso O2 sensor. They are even stealing business from my local NAPA. In my book, they are indeed hitting all three, with long-term profitability looking better than just about any retailer. Needless to say, technology is playing a very large role in this.
Can you still walk into a Best Buy and get “personal service”? Sure. You can have a commission-based sales rep assist you. For me, I find user reviews to be 100 times more valuable.
Circuit City and Tower Records would still be in business today if I were the only one who felt this way.
RE: Scotsman @ 75 –
Shoot, and I thought I penned a great Geithner joke! :)
At this point, I think it is safe to believe that Windermere will work to preserve the full service approach for its business model. Market share is growing. As you look at the the rest of the top 10, many of them are there because they are high service “niche” or “boutique” companies. Who knows about others you mention. Necessity is the mother of all invention.
I think good competition can work in the current system, which is constantly refining. I don’t agree with everything about the MLS, but in my mind the positives far outweigh the negatives.
RE: wreckingbull @ 76 –
I don’t know if you’re supporting my point or arguing with it, but online operations work under the same laws.
I do a lot of online shopping. I do it for price and having it shipped to my door. I HATE the returning via mail or warranty issues that have to be returned to the original vendor. Online pricing is cheap, convenient at the time if I don’t need it at the time. The process is clumsy if it has to go back, especially warranty claims. But that lure of CHEAP prices keeps me shopping online.
Some of the biggest losers in this recession have been the big box brick and mortar stores with selection and cheap prices. The carnage is littering the landscape. It’s always the guys in the middle that get smacked down when the going gets bad.
I have an S corp and have a good accountant prepare my yearly tax returns and quarterly returns.
There was a time I thought I was a genius at investing in stocks and the markets, until I lost thousands dollars due to my own stupidity. Now I have a team of advisors helping me. They are worth every penny they earn if they keep my best ideas out of the way :)
For me its about risk management. A simple purchase, not so risky. I get advice and seek service for complicated purchases and transactions.
Hell, I even spend close to $500 /month for a personal real estate business coach (for over 12 years) to help me with perspectives, and to stay on task to my own goals. No question the current downturn has affected my income, but prior to the downturn I socked 6 months of personal AND business expenses away.
It’s all about choices.
RE: Greg Perry @ 78 – Funny, I shop at Amazon since I find their return policy and procedures to be better than just about any retailer, save Costco. That is the point I am making. If my post confused you, they are delivering Price, Product, and Service. Your old rule of 2/3 is not good enough anymore.
RE: David Losh @ 73 –
Airlines still give corporate discounts. For a fortune 500 company it is on the order of 20-40%. Expedia and Travelocity put travel agents out of business because it was cheaper, easier, and faster for the public to use.
By wreckingbull @ 79:
Amazon doesn’t have deep service…it has a RETURN POLICY.
Online returns suck if you need the product. Frankly online shopping sucks if you need the product right now.
Amazon has a good return policy, and the experience is fine for some, very simple products, but terribly inconvenient if something goes wrong.
Amazon is very good at what they do. Great prices (not always the best), great shipping policies, great return policies. Deep service? No.
Maybe this is the crux of the problem. The online generation may not understand service.
In real estate, to sell a house, a limited service broker will slap a lock box on the house and put it in the MLS. The marketing is up to the seller. A few bad photos are put in the MLS. The seller then is responsible to negotiate for himself. The listing office commission may be set at 1% or 2%. Fine for the limited service broker with volume. During the escrow process the poor seller is in the dark, has to take advise from the buyer agent on the other side and is riding an emotional roller coaster.
The full service broker may work with the client for weeks lining up interior and exterior painters, landscapers, stagers and house cleaners. Change out dated cosmetics and light fixtures. They work hours on the CMA, and take the seller to visit the competition. They may even negotiate with the next door neighbor if his house is an eyesore. I’ve actually paid to have adjoining properties cleaned up. Professional photos are taken and online and print exposure campaigns are created. THIS JUST GETS THE LISTING STARTED! The listing commission here may be 3%. Next comes the weekly updates, communicating with buyers and selling agents, holding open houses, and if the market continues to regress, working on a new price positioning. THEN the offer comes and expertise in the inspection process kicks in. Details are attended to. Contingencies are met. Lenders, escrow are communicated with. Refer moving company AND, when it’s all done, I often PAY for the move out cleaning so my client can just move the furniture without the torture of cleaning the house up after.
Funny thing is after the house is put together, We may be able to sell it for 5-6% MORE after modest expenses than the limited service company, but only get 1-2% more commission of the purchase price vs. that limited services broker.
Some people are so cheap they jump over $100 bills to pick up nickels. That’s why we need choice! I like working with people who appreciate and find value in services!
Services are things done to enhance value. Not a return policy.
In retail, its a personal shopper. A relationship with a phone call about an upcoming sale. Free delivery and set up. How about baby sitting services while mom and dad shop? Or the auto body shop that has a service that picks up and drops off the car for the convenience of the customer and leaves a rose in the front seat?
BTW, in my past life, I was Director of Operations for a large retail chain and earlier a store manager of a large volume retail store.
.
RE: Greg Perry @ 81 – Maybe this is the crux of the problem. The online generation may not understand service.
For those who use personal shoppers, life coaches, and demand a rose on their front seat, I am sure, they ‘undersand’ service as you see it.
For the 99% of us unwashed mouth-breathers, we very well may have a different definition of service than you. We want a fair shake, and from what I see, most don’t think they are getting it.
To use the amazon example, service to me means:
- Online community to help me make my purchase decision
- Cross referencing other products purchased by those who viewed the current product.
- Notification of upcoming text releases, very helpful for those of us in the software engineering field.
- Products delivered to my door
- Replacement products delivered to my door, with a prepaid shipping label for related return item
By the way, I probably have about the same number of miles on the clock as you, so I really don’t see this as some sort of generational conflict. You don’t need to prove that you are a great Realtor. If you are, fantastic, you will do well in your niche. This post is not entitled “Will Greg Succeed?” It is asking a broader question about the viability of the current model.
RE: wreckingbull @ 82 – Amazon sells homogeneous products, in that every copy of a given book is the same. You know what will arrive at your door. Each house is unique, so I am not sure it will work quite the same. Also the value of Amazon’s products is fairly low comparatively speaking. It’s easy to purchase a book without too much thought or consideration.
Historically speaking, agents have had much greater success than the FSBO crowd. Why? If it’s strictly based on information, then all those REALTORs better watch out!
RE: AMS @ 83 Please read my prior posts. I never compared buying a home to buying a book. Is your browser cache still stuck with a 1997 version of Amazon’s website? You can use quite a few words to describe their product mix, but ‘homogeneous’ doesn’t really come to mind.
RE: wreckingbull @ 84 – Milk is homogeneous, even if some of a stores other products are not. Buying a gallon of milk is a low effort task.
You speak of Amazon’s refund policy–again making the necessary effort required to purchase lower.
If we could bring that same level of effort down in a home purchase, we’d be all set.
http://www.amazon.com/Horizon-Organic-Reduced-8-Ounce-Aseptic/dp/B000LKVB52/ref=sr_1_1?ie=UTF8&s=grocery&qid=1254799123&sr=1-1
;)
RE: Packet @ 80 –
Not true, airlines wanted to book direct to save the commissions. That’s what you do now. It was the airlines who wanted it to make more profits.
Yes corporate travelers get better discounts but we have no idea if the discounted price is actually full retail and if consumers are paying inflated prices.
The internet can make anything seem like a bargain; even Real Estate.
I’m too lazy to Google it, but are books even Amazons main product these days?
RE: wreckingbull @ 86 –
Those milks sell for $18 retail and $14 on sale. You pay more for the inconvenience of shopping at home.
RE: David Losh @ 89 –
Those milks sell for $18 retail and $14 on sale. You pay more for the inconvenience of shopping at home.
Hmmm…. You would not by chance be paraphrasing the “MOST POPULAR REVIEW” at the very top, would you? I don’t think I have ever had a commissioned sales rep give that sort of insight on the product they are selling.
Fabulous product- very yum and convenient= however, $25 for a case is highway robbery. If you have a whole foods near you- it’s 5-7 dollars cheaper by the case, and 2-3 dollars cheaper even if you purchase individually.
Thank you, you just proved my point. Service delivered.
RE: wreckingbull @ 90 – How about an example of a product that requires the consumer spend more thought. People don’t spend much thought on milk. They purchase the same product they purchased last week, for the most part.
By wreckingbull @ 79:
I bought a monitor that turned out to be defective. Returning it was easier than if I’d bought it at a B&M store, and they had a new one to me before I had to return the old one.
Scotsman–would Kindle and it’s electronic downloads be considered books in your stats? I bought one for the wife and she loves it.
RE: Kary L. Krismer @ 92 – It is much harder to return a piece of real estate!
I can’t believe this is a discussion.
My policy has mostly been I charge 3% going in and 1% going out. That’s 3% to be a buyer’s agent and 1% to list a property for sale.
If you want the property prepared for sale we charge $30 per hour per person. If you want to direct my activity I charge $60 per hour for my supervision. If we do it my way, the right way, I give you a discount. I charge $200 per hour to consult on Real Estate matters. All fees are due at the time of service.
I think my business model has worked well over the years. My fees haven’t gone up in about eight years. They will be increasing this next year. We keep about four to six people busy every day, and take Sunday off. I could do some Open Houses on Sunday, but it’s a family day.
My problem is that there has not been a deal to do in the past year and a half. People should sell but I make more money preparing properties for sale for a variety of agents than doing lead generation activity.
This is an interesting discussion, but what you don’t know would fill a book. Even if you read the book you would need the experiences to understand it. By that time you’re in my business, which a lot of people think they are.
I’ve been in this business since I was fifteen years old, bought and sold houses, been involved in fifty or so transactions, and helped other people do real estate transactions. My companies have prepared more properties for sale, repaired more rot, and consulted on more properties than maybe ten other companies put together.
So when I sit there across the desk from some one who has those computer print outs, charts, and graphs, I’m thinking I would rather be……
RE: AMS @ 93 -
Really? How hard is it to make a phone call, leave the keys on the stairs, and walk out the door?
RE: Scotsman @ 95 – Like Paul Simon’s “50 Ways to Leave your house?”
RE: David Losh @ 94 – “We keep about four to six people busy every day, and take Sunday off. I could do some Open Houses on Sunday, but itβs a family day.
My problem is that there has not been a deal to do in the past year and a half.”
What?
RE: AMS @ 97 –
The money is in buying, selling, and trading property. I know people who are doing it, but it’s risky. I have a wife and kids.
The alt a news of September 15th which was widely anticipated was over shadowed by all the recession is over talk. The news is still out, but there is a sense of euphoria.
All it would take at this point is for Bernanke to say something stupid in a press conference for the euphoria to be over. Something like unemployment is going to hit 10% and stay there through the end of the year.
In June it was touch and go for sales this year, then the selling season got extended to July, August, and September due to, in my opinion, the $8K give away. There is a sucker born every minute.
So for you, today, I’ll make a correction that there are deals to do, but from my perspective they are more risky than my stomach can handle. I like sure things.
RE: David Losh @ 98 – No one has been able to answer my question of how all that “buying, selling, and trading property” adds value to the property. In other words, where does the money come from when you say, “The money is in buying, selling, and trading property?”
RE: Greg Perry @ 70 – Greg, you make your arguments well and debate your view very professionally and I applaud you for that. You are obviously a stand up guy, but I do however respectfully disagree with some of your points.
Looking at services that require special knowledge or training there has been a trend of moving to faceless interaction over a computer with a customer service hotline at your call should you need it. Look at taxes over the past 50 years. In the past 10 years the people using the turbotax software and filing taxes which I would consider no more difficult study learn and understand than real estate has increased significant amounts each year. Just last year they had 18% more people using turbo tax according to CNN. The government wants to reach 80% electronic returns and turbotax is the easiest way to do it. What happens when turboestate software comes out to cover all your closing needs via the world wide web?
All information a real-estate agent has is either taught to or learned by the agent. That means anyone that wants to take the time and effort to learn can be just as well educated. This means that if I take classes and read books I can have the same info you have it just depends on if I am willing to do so. As education (my field) moves more and more to the electronic venue I don’t see how it wouldn’t be possible for real-estate to do the same.
As far as putting value to a house that is subjective to how much value society puts on it. Right now people are willing to pay more. 5 years from now that could go up or it could plummet no one can call it 100% for sure no matter how good you are because there are always unknown variables. If housing in Seattle reaches 10-20 dollars a square foot (rediculous I know but just for making a point) it would make more sense to just handle the transactions and showings via the web for efficiency. Anyone who has taken high school level algebra could figure it out as well as any real-estate agent given the right tools the local value of a home so that to me just means we need to educate the population.
As to the agent need to be physically there to show the home why not have owners do a podcast of thier home? Now the real estate agent is no more than a interior design consultant to let the owner know whats trendy or how to make thier home bigger. This information is also in books so it can be self educated by the public.
Your argument of time is somewhat valid but thats due to cultural lazieness. As far as education goes our current culture thinks that one field could not apply to another though there are very significant similarities. I think that argument also works against you in some degree. As people start to make themselves worse at time management and goal setting why wouldn’t they move to internet software based real-estate to save even more time?
I am curious to hear your thoughts!
RE: Costco Mike @ 100 – “What happens when turboestate software comes out to cover all your closing needs via the world wide web?”
Taken one step further, what happens when we all just live on the world wide web?
RE: AMS @ 101 –
Some appear to live there now. ;-)
RE: Scotsman @ 102 – Won’t You Be My Neighbor?
RE: Costco Mike @ 100 – People go to law school for three years, but that doesn’t mean when they get out they know how to practice law.
Also I’d add, what technological barrier exists to this thing you thing might exist in the future existing now? There is none. The reason it doesn’t exist is it’s simply not possible.
RE: Kary L. Krismer @ 104 – True Kary, but someone who has practiced law for 20 years doesn’t mean they know how either it all depends on the person. Just like someone who has a PhD does not mean they are more knowledgable than someone with a diploma.
“All education is self education” – Louis L’amour
How do you know there is not technology to use in the way I suggest? Does that mean something couldn’t be applied or adapted to real-estate? Just as you argue it doesn’t exist I argue it does exist we just havn’t applied it yet because socially it hasn’t been called upon. Nor you or I can say that it doesn’t exist nor can we say it will or will not exist. It is a mere hypothosis I presented as a counterpoint. I guess I could ask some programmers from turbotax if they could adapt thier technology? Your hypothesis of the idea of that it is not possible is just as valid as mine that it is possible. Thank you for your input though as always.
RE: Kary L. Krismer @ 104 –
I don’t think it’s a matter of what technology is present or not present. That’s a bit of an old paradigm. It’s whether someone has come along and put the right plan and pieces together to do it successfully. The technology for Google was there but nobody was making billions off of it until they got the right plan and product in place.
I think part of the disconnect between RE professionals and many on this board over displacing agents is whether you believe technology is going to exactly replace what agents do today or if technology can make the process more efficient and thereby reduce the need for full service agents. Ebay’s value is not in running an auction it’s in the fact that it brings buyers and sellers together in an efficient way and makes the transaction safer. Amazon doesn’t try and recreate the B&M experience of a personal shopper or having a salesperson walk you through the purchase they provide you a wealth of information about products, an abundant choice of products and a lower price and better return policy on most of those products then a regular store.
The disintermediation of RE agents isn’t going to come from robotically replicating what they do it will come from valuing real estate and making the transaction more efficient. Let’s suspend the fact of how you do it for a moment because if any of us had that exact recipe we would be writing a business plan not a post on seattlebubble, but if you could value your home as quickly and efficiently as you can your used car on kbb.com how much easier would it be to buy and sell it? If homes for sale were all listed in more standard listing available to all buyers how much easier would it be to bring those buyers and seller together, it worked for the original MLS and it could work even better with a more open system. There will always be some full service agents, there are still full service travel agents, stock brokers and tax accountants but ask yourself the question about whether the RE search and buying process can be made more efficient? That value is where a technology and better model come in.
RE: per_se @ 106 – One problem I can see popping up is the unauthorized practice of law, or if authorized, malpractice. Offering general advice and information is one thing, but when you get specific to the individual, expecting them to follow it, it’s a lot more of a problem.
I’m not sure whether Redfin or similar firms have run into trouble with any bar associations in other states, but I can see that as a potential issue. It would probably be an issue in Washington state, but for the fact that not that many attorneys are really that interested in writing up real estate contracts, compared to apparently some other states.
RE: Costco Mike @ 105 – Using your TurboTax scenario, they do have programs for all the states with income tax (I think). With real estate they’d need to have it specific to each county, in many situations. For example, King County has very specific rules on septic tanks and sales. Snohomish has a smoke detector form.
Oh, and if it’s just forms, you can actually get access to those:
http://www.nwmls.com/statewideforms
There is an entity ( http://valueappeal.com/ ) that does property assessment appeals, but only for King County. There I think that limitation is more a data related issue, not a process issue. But it does show how local real estate can be.
RE: Kary L. Krismer @ 108 – Yes so new software would have to be released/updated each time there was change. They could do that easily enough. There would need to be an office or firm in each state with representatives or experts on each state and county with knowledge of thier local areas as well as state laws. Real estate agents could become the new designers of that technology. Maybe the role of the real estate agent will then be on making that technology as informative and user friendly as they can. Some might even go back and learn programming to handle that aspect.
Turbotax works with each state as well so we can make a program that updates with any changes to local, state, federal laws. I think it would be very possible for this to happen if the consumer wants it. The real question is who has the capital to start up a company of that magnitude?
RE: Kary L. Krismer @ 107 –
That doesn’t necessarily have to be a problem. If you can streamline the transaction process so that every transaction is not individualized but standardized you can hire yourself some great attorneys and spread the cost out across all your deals. The current lack of standards for valuation, the transaction process,etc is where RE agents are deriving their value from. I think you and other have said as much but RE agents understand the little nuances and intricacies of the RE process. They don’t hold some special knowledge about real estate or the real estate market. It’s all about the transaction.
RE: AMS @ 99 – RE: per_se @ 106 –
My area of expertise is in investment properties. Some are called do wanters. People, the public, buyers, don’t want some properties for a variety of reasons, mostly it is condition.
No two properties are the same. I worked in repairing new construction for about four years and you can have side by side properties where one is failing and the other is fine.
RE: Costco Mike @ 109 – OMG! You have never worked with many different jurisdictions!
Speaking about updating to specific jurisdictional requirements, “They could do that easily enough.”
If you can figure out a way to “easily enough” solve this problem, maybe you could explain that to all those sales tax people who cannot figure out how to get the information to online sellers, and that’s just one well-defined issue.
RE: David Losh @ 111 – My questions is how do the transactional costs add value to any property?
Here is another way of thinking about this, if you could take the very best real estate agents and lawyers,give them the tools necessary to service 10,50,100x more clients what would happen to the other agents? what would happen to the costs of those agents? They would be able to undercut the pricing of their competitors and drive them out or those competitors would need to lower their prices also.
RE: David Losh @ 111 –
And no two used cars are exactly the same and no two bushels of corn are exactly the same and no two diamonds are exactly the same. You don’t need them to be the same to standardize valuation and the process. You have to have agreement over standards so you can categorize and grade the items being sold. You keep standardizing until the value from efficiency in the transaction outweighs the value in differentiation.
RE: AMS @ 112 – That sounds to me like a badly kept not fully electronic database, though I don’t know enough about it to really comment. If every jurisdiction kept an electronic database of infromation needed you could easily write a query program to funnel out what you specifically needed. But, again I don’t know enough about it to make that assumption.
I could tell you more about brain development and differentiated learning and how to teach to different types of minds than I could about tax, local regulations regarding real-estate. But turbotax seems to keep up with changes in state and federal laws why couldn’t they for real-estate? Just depends on if they have the resources and a standard way of keeping the information needed at the local level. But this would require all jurisdictions to go to an electronic system of some kind for the information.
RE: Costco Mike @ 116 – “If every jurisdiction kept an electronic database of infromation needed you could easily write a query program to funnel out what you specifically needed.”
If the jurisdictions had database structures that could easily be merged. What about those who use Object Oriented databases versus those who use a Relational structure?
Who is going to do all the work?
RE: Costco Mike @ 116 – “I could tell you more about brain development and differentiated learning and how to teach to different types of minds”
Could you tell me about how “different types of minds” probably value a given property differently even with the same set of information?
By Costco Mike @ 100:
This thing is still going?
My thoughts……
Actually you somewhat make my case. The main thing that separates anyone from expertise in any subject is TIME. Those who are working professionals in their occupation or industry of choice normally invest their TIME in pursuit of becoming experts in his/her field. What about free time? Too many interests. Too many ways to play. When one employs another in a service industry they are buying expertise and TIME.
And here is the dirty little secret…….because so much in society is becoming formless and faceless, people actually crave a personal touch. In the old days we loved to see the mail. Today we sort over the waste basket. But NOBODY fails to open a personal note. The phone call was exciting. We felt we couldn’t not answer a phone. We bought answering machines so we didn’t miss a call. Now we use answering machines to screen calls. But make someone feel special and good about themselves, they’ll always make time for your call. Good full service companies and agents will always thrive if they instill a high sense of appreciation.
Oh, and the customer service hotline? Really? I like to call it customer NO Service.
I see two areas that technology can make a dent in RE processes. Exposure of inventory and valuation.
Valuation will never be accurate because valuation models can’t see upgrades, deterioration or economic and functional obsolescence. Valuation models can give relative value, but someone will still have to spend time and expertise establishing market value.
Exposure is easier, but stalls when we get to the point where we can open homes safely to outsiders. Safety and peace of mind is a huge reason to spend money. It is one of our primitive driving forces.
The rest of the problem is where it gets sketchy. We average 2 or more “forms” changes/ year. Why? A lawsuit somewhere. Contract deadline and contingency violation by amateurs — who dunnit and who gets the earnest money (but Turboestate said…..) Possession issues. Post possession issues. Inequity in negotiation. Consumer issues from siding, to roofing, to mold, and dozens of issues.
So, yes, anyone can devote the TIME to learn. No question. But we DON’T KNOW WHAT WE DON’T KNOW!
Remember, there is also a huge difference between one who has a real estate license and one who actively works in the real estate market. The vast majority of real estate agents are PART TIME. Maybe 20% are full time with the “breadwinner” attitude. An agent who is doing 1-4 deals/ month understands the pulse of the market, nuances in negotiation and the timely issues of the day.
There is no question in my mind that full service firms will always be around and thrive. Even in the industries that technology has substantially changed, the full service model thrives. The question to me is how many will bypass the full service experience with a hybrid developed with a technology. Will these technologies actually save money and create value? Or in the end hurt the consumer. A miscalculation on location can be a $200,000 doozy. Not understanding the drivit siding product that was installed in the mid 90’s could become a $60,000 OOOOPS.
What is the real value of having a good real estate agent who becomes their past client’s “trusted advisor”? Instead of the “customer no service” hot line, they can call their agent to ask a question, get a referral for a good service provider. This is the kind of relationships that good full service agents establish. With the right kind of agent and relationship, that paltry 2 percent difference in transaction costs can be leveraged for thousands of dollars created or saved over years.
Not saying the industry is perfect because it’s not. The low entry barrier drives me as crazy as most here. Why the heck should an agent one year in the business earn as much per transaction as a productive, seasoned vet who has a CRS designation. Many improvements can be made. Some of our problems will flush out with weak markets.
I am not one who worries too much about alternative models. They serve a needed function in the marketplace. There’s enough out there for everyone who wants to work it. The full service firm, however will thrive.
RE: per_se @ 115 –
I had a section in my comment about that. Diamonds are bought and sold without brokers, the same for used cars, a bushel of corn is perishable so that’s not a good comparison.
A used car can be fished out of a lake, dried out and repaired, but it will never be the same. Diamonds are graded by carat, cut, and clarity, that’s easier to grade.
For about four years I worked for a developer repairing new construction. Side by side structures built at the same time can be very different. Cars are made on an assembly line with direct supervision, construction sites can be chaotic.
So a sub runs out of something and makes do with what he has, or the supplier of materials changes, or the entire crew went out drinking the night before and really who cares, it’s new construction.
Way too much is hidden behind the walls or in the concrete pour to standardize construction. There again, with experience, you can kind of tell how the end product, you’ll like this, “feels.”
Let me add that every investor I have ever worked with will disregard the numbers if the property doesn’t feel right. There again some people have a talent for picking the right place.
RE: AMS @ 113 –
It’s the cost of doing business. It’s a separate debate, but 6% is not enough money for the work a Real Estate agent does.
If you want to present a business plan that involves the lead generation, time spent with clients, time spent on product knowledge, or time spent on the paper work that every body is so concerned about, I’m happy to listen.
I have made millions of dollars for my clients for the price of a few commission checks. They made money and I covered some expenses. In other words they help feed my Real Estate habit with some nickles and dimes of commissions.