I'll tell ya what - how 'bout you guys shout down people who make personal attacks "the other Greg Perry looks like a douche," and we can then see who's a sensible blogger and who is, in fact, a scrub.
To me, because of the anonything, you're all one voice. I know you don't like to be seen that way, so I'm asking, for the sake of civility - if you want to be seen as the intelligent, educated person that you are - then I challenge you to call for civility on your own playfield.
Otherwise, SeattleBubble is going to be known as a haven for namecallers. Over at the P-I site, everybody knows that the only namecaller is me.
BTW: Thank you all who think I'm funny. I'm not trying to please everybody, and so far, I'm succeeding!
I wish I had more time to spend here. But, if ya wanna rip me, you know where to find me.
To me, because of the anonything, you're all one voice. I know you don't like to be seen that way, so I'm asking, for the sake of civility - if you want to be seen as the intelligent, educated person that you are - then I challenge you to call for civility on your own playfield.
And I feel like all realtors are one voice because they have a national association of themselves. They get talking points from this association, which most of them tend to repeat like parrots.
OK, I really don't feel that way, but I still cannot understand why Mack cares so much about anonymous posts. If I ran a business under my own name, I would also be self advertising every chance I got. But I don't, I work for someone else. So why should I post my name everywhere. What if one of my managers disagreed with something I said? We're talking a different world, get over it. Besides, if I always use the same handle, how's that different than going by the name John Smith, which 10,000 people in America have?
For the record, we've had a number of times people make blanket statements about realtors which have been corrected within the blog. They usually aren't corrected if they are business statements like "all realtors are trying to sell a nightmare." But if it's something like realtors smell bad, it usually gets called out.
rcc--this is one of those areas where you will find realtors don't speak with one voice. I know I don't care if you're anonymous or not. I think that is an individual quirk of Mack's. I've been involved in blogging for some time and what I've learned (and I think most of us who do this eventually learn this) is that there are different kinds of posters. Trolls, we are all familiar with. Lurkers who read and don't comment, or only comment once in a blue (I'm usually a lurker here). And then the "community members" who are your core commenters. Certainly on Seattle real estate blogs, the community members cross over quite a bit between this blog, RCG and SREP. So in a sense you have an online persona even if we can't track your identity and egg your house on Halloween.
I bet quite a few 'full service' travel agents pre-2000 thought it was a nice biz to be in, profiting from what is basically information asymmetry. Until the market and the consumer changed, and they got pinched.
You dudes are going to get your lunch eaten, and you don't even realize it. You think you're such wheeling-dealing experts. This "skillset" is not as rare as you think, the market got pretty crowded, and the sands of technology/communication/society are shifting underneath the house that NAR built. Not to mention a few shining examples of complete hubris, defensiveness, and creepy infighting.
I wish you a lot of luck, you are going to need it. People are on to the scam.
Certainly, much of the value a RE agent provides does come from the information asymmetry that full access to MLS services provides. But their is real value in knowing details of a specific market, having good negotiation skills, and knowing how to grease the wheels of a transaction.
The information asymmetry allows any shmoe to provide value without having those skills and get paid the same per transaction as someone who does have those skills. As that information asymmetry erodes, the agents who really know what they are doing will continue to do well. In fact they might even do better since the barrier to entry into the field will be higher and there will be less competition for customers.
Travel agents operated in a completely different market. Alternatives travel options are highly substitutable. The cost is easy to calculate since you do not have to predict future prices. There are fewer places for a travel agent to add value in the chain.
it's amazing how new comers read a week full of blogs and think they know who lurks here and who tim is....
bubbleheads = uneducated....????
if you search long enough there was a post here on who's who and what they do...
the consensus was there was a high percentage of professionals here with real jobs...
there's more than a handful of lurkers/posters here who make double the median income...
when people call others names and label them children... it shows who the child is...
Greg,
you seem to be a very smart guy. Please continue contributing your thoughts. I'll just filter out the rest. Amazing how somebody keeps saying they won't post here but keep coming back to drive traffic back to their site...
it's a lame childhood method of getting people to play in your ballpark by calling them names so they will challenge you to a game... not enough real friends? (lurkers)
Certainly, much of the value a RE agent provides does come from the information asymmetry that full access to MLS services provides. But their is real value in knowing details of a specific market, having good negotiation skills, and knowing how to grease the wheels of a transaction.
Hmm, I think you do have a point here. I was being a little bombastic in stating my case, but I think the central question I'd like to raise is "are these skills worth 6%?"
The information asymmetry allows any shmoe to provide value without having those skills and get paid the same per transaction as someone who does have those skills. As that information asymmetry erodes, the agents who really know what they are doing will continue to do well. In fact they might even do better since the barrier to entry into the field will be higher and there will be less competition for customers.
It's a long way from here to there. And I think it will be painful for a lot of people who are not in the top 10-20% of the profession (in terms of ability and ingenuity). I think that explains some of the insane self-hype and blogging-for-dollars that we're seeing that industry go through right now.
Travel agents operated in a completely different market. Alternatives travel options are highly substitutable. The cost is easy to calculate since you do not have to predict future prices. There are fewer places for a travel agent to add value in the chain.
This is a valid counterargument, and I concede that the comparison isn't that accurate. I submit that there IS a similarity in that technologically/data savvy consumers and the services that cater to them erodes the information advantage that each type of broker provides.
Also, in some segments (condos, townhouses, cookie cutter subdivisions building ever farther east..) I'd argue that there are more substitute goods than this market has ever seen. (Basically, I'm going to lean on the excess-supply argument here.)
Markets with excess supply are precisely the place where you want a guide with expert local market knowledge. If an agent can guide you to a property that loses less (or gain more) than the rest of the area, then that could easily be worth a 3% commission.
By the way, it has taken me two purchases and nine years of watching other areas in town appreciate before coming to this conclusion.
There is also the problem of finding an agent whose opinion you are willing to trust. In the current environment, where mediocre agents can lean on MLS access to provide value, that can be difficult.
There are two sides to this coin, not one. There are buyer agents and seller agents. Even if some agents act on both ends, the transaction can still be broken up this way.
I predict buyers agents will go away almost completely. They may still help families moving across the nation, but for local transactions (family moving up/new owners who have saved for down payment), the buyer agent will disappear. The seller agent will probably remain, but their margins will be squeezed.
Think cars here. We still have car salesmen even in the internet age, and they probably aren't going away. But they represent the seller and not the buyer. Meanwhile, buyers have more information than ever before, which probably impacts sellers bottom line.
I predict buyers agents will go away almost completely. They may still help families moving across the nation, but for local transactions (family moving up/new owners who have saved for down payment), the buyer agent will disappear. The seller agent will probably remain, but their margins will be squeezed.
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RCG,
Yes the landscape will change, but buyer agency won't go away.
Some people may have the knowledge, but don't want to (or can't) devote their time. They want someone else to do the work and will gladly pay. I've had a client once tell me that he thought I was underpaid for the help I gave him (a $35,000+ commission.) I helped him find the land, the architect and the builder for his custom home. His commission fee was a line item on his HUD settlement statement, not built in to the purchase price.
Some people just love to pay top dollar for everything (goods and services)--why? because they can!
Some people will never research the information. They want to buy, but don't even know what questions to ask.....and they don't want to be bothered.
Perhaps the client is elderly.
Some people think they have the knowledge, but do they? Do they know the effect to pricing of a functional obsolescence or economic obsolescence problem? Have access to regional, area and neighborhood absorption rates? And how about a litigation after the close? Few things are litigated more than real estate.
Tax software impacted the CPA field. I still pay top dollar for my CPA, because he's worth it to me. My taxes are complicated. I would rather devote my time to my occupation.
Some people may have excellent knowledge, but are terrible negotiators. Frankly some of my best "wins" for clients are negotiating against unrepresented buyers or sellers.
Every market has unique problems. Most people need a buyers agent in a super heated market. Most people need a buyers agent in balanced markets. Most people need buyers agents in buyers markets.
Some people like to shop at WalMart. Nordstrom doesn't freak out when WalMart has a "blue light special". They just don't care. Why? They know their clientele. They've created service levels that allow them to command higher prices for the same goods. Some people like buying coffee at the donut shop, others will pay $5 a cup at Starbucks. Starbucks created an environment and an experience. The donut shop uses styrofoam cups, Starbucks uses a nice logo on a paper cup and serves it up with a "java jacket". Yup, we all pay more for Starbucks.
On the other hand, some people will work hard to learn as much as they can to do the transaction themselves. If enough people do this, the market may need fewer agents. This is just fine by me.
I'm am a full service agent that's fine with any way a particular person wants to buy. Discount? Rebate? Full Service? It's all good by me. They can't use me, however, unless they want full service.
Here's the point that rarely gets discussed, however. For the sake of saving a few dollars on a commission, I've seen the real cost much higher for many, many people who think they save, but end up screwing themselves.
Everybody has different needs and desires. For those who want to research, or have experience--if they can save some $$, and hope they stay out of litigation after the sale -- GREAT! For the others who are involved in a real estate transaction for the first time, or once every 15-20 years, having a good buyers agent my be the best.
And BTW, the analogy of selling cars. Most car buyers would do a lot better with some kind of agent. Most people get royally screwed when negotiating a purchase or a lease.
I'll agree with Greg that buyers agents will still be around, but I think the number of full service buyer's agents is about to take a steep decline. The basic problem is the compensation model. Buyers are paying for advice while realtors are getting paid for transactions. This creates a fundamental misalignment of incentives.
The travel agent metaphor is raised frequently, but I think a better comparison is investment advisers/stockbrokers. You can still work with a full service stockbroker who gets paid every time you buy and sell, but they are a dying breed. If you need the advice, it generally makes a lot more sense to work with a fee-based financial advisor to help formulate an investment plan. Ideally, the advisor has no interest in any brokerage commissions, so there's no incentive to churn your account. Alternatively, you can also choose to do it yourself with an online brokerage account and/or mutual funds.
I think a similar model will happen with fixed fees or lower commission rates for buyers agents. Redfin may not be the winner, but the pressure to discount is going to climb as the numbers of transactions continues to dry up.
I used a buyers agent to buy my car. I paid $250 (to a non-profit organization) and bought a Honda Civic for around $1700 less than I was able to negotiate on my own. The buyers agent contacted the fleet sales of five local dealerships and got binding sales offers. The best one was $1000 less than the 2nd best but I had to drive around 60 miles to pick it up. Even if that particular dealership would have given me that price, I never would have visited them to give them that chance.
Yes the landscape will change, but buyer agency won't go away.
Actually, I said "go away almost completely". I agree that certain high end transactions will still include buyers agents, as well as more complex transactions. Your example sounds like it falls into one or both of these categories.
Some people just love to pay top dollar for everything (goods and services)--why? because they can!
I'd recommend using a different argument when making a sale, but other than that I do agree those people exist. However, very few of them like to pay top dollar to anyone they consider a 'middle-man' (more later).
Some people think they have the knowledge, but do they? Do they know the effect to pricing of a functional obsolescence or economic obsolescence problem? Have access to regional, area and neighborhood absorption rates?
Does it matter if they know these things? Let's assume that I agree with every single reason a buyer should use a buyers agent, does it matter? What you are fighting against may not even be truth, but rather perception. If the average buyer ever decides they don't need an agent, it will put a lot of buyers agents out of work. If most decide, then only those who provide niche services (like those you listed) will still be employed.
Some people like to shop at WalMart. Nordstrom doesn't freak out when WalMart has a "blue light special". They just don't care. Why? They know their clientele.
No, but Circuit City cares. Nordstrom was never in the same market as WalMart, and may never be. A better comparison may be Windows. Right now MS owns 90% of market share in operating systems. And guess what, they go insane every time they lose a little more share. Because it's share that is probably never coming back.
I'm am a full service agent that's fine with any way a particular person wants to buy. Discount? Rebate? Full Service? It's all good by me. They can't use me, however, unless they want full service.
I heard this somewhere: "The Customer Can Have Any Color He Wants So Long As It's Black". -- Henry Ford
And BTW, the analogy of selling cars. Most car buyers would do a lot better with some kind of agent. Most people get royally screwed when negotiating a purchase or a lease.
I think the definition of a successful transaction is one where both the buyer and seller leave feeling it was fair. No screwing over necessary. Could the buyer have left less money with the seller? Absolutely, and it even might have been enough to pay off the buyer's agent as well. But I have never seen any study that proves the majority of people are royally screwed over when buying a car. If you know of one, please share.
Yet even if such a study exists, what does it prove? It proves that people evidently prefer to get "royally screwed" rather than put even a thin dime in the pocket of a buying agent. That's an incredibly powerful statement. In your words, people knowingly sacrifice their own well-being to make sure no buyer agent gets rich off of them. YIKES!
Greg, you don't need to worry about us. I'm not trying to take your job or anything. But for a lot of less skilled/qualified agents, the writings on the wall.
Lax,
80% of agents are part time or hobbyists. Less than 20% are full time, working professionals. A fundamental problem we have in this industry is that a brand new, part time real estate agents earns exactly the same commission amount as a 15-20 year, experienced full time vet. The public is confused on value.....and why wouldn't they be?
That being said, when a consumer recognizes good value, they're almost always happy to pay. It's a value proposition.
But think about this......on the Eastside, the agent count has almost doubled since 2001 and the transaction count has declined. The local agent pool has become mediocre
This is a subject that spirits debate, but I feel that the entry bar to become an agent is too low.
I read where there was a bill just submitted to congress regarding loan fraud and loan originators licensing (federal) requirements. Much of what ails the real estate model could be cured in higher licensing and entry standards.....but that would throw a lot of brokerages out of business.
There are many agents in the region that bring the value to be paid extremely well.
Alan,
Interesting that you used an agent to assist you with your auto purchase. Leases are an area particularly, that people get hurt with. Not many people use an agent to purchase a car.
RCG,
Where we'll probably never agree is the premise that the "average" consumer will get the point where they won't be using a buyers agent. The average person has incomes to make and hobbys to persue. They will never devote the amount of time to think about real estate as you.
I belive that those who don't use an agent to make a purchase will always be the minority.
RCG,
You also ask if functional or economic obsolescence, litigation issues really matter?
Yes, it matters to greatly to the person who makes the wrong decision because an agent wasn't there to guide them. It is not perception, it is real world mistakes that can cost the buyer thousands.
I"m not arguing that agents have to leave. I wish many of them would.
RCG,
You also ask if functional or economic obsolescence, litigation issues really matter?
Yes, it matters to greatly to the person who makes the wrong decision because an agent wasn't there to guide them. It is not perception, it is real world mistakes that can cost the buyer thousands.
Actually, what I asked is whether those issues matter in the creation or deletion of jobs for agents. To the person who gets hit, it matters regardless of how they got there. But the decision to use an agent is based on the perception of whether or not one is needed.
The way people form those perceptions is based on a combination of general news weighed against personal news. By which I mean, if a few people are going without agents, the MSM will publish their stories if they are 'interesting'. On the flip side, if I know a guy or two guys or five, who have bought without an agent and it went down without a hitch, I may form a perception that it's a safe and reasonable thing to do.
This is how most people function. It has nothing to do with real estate knowledge or lack thereof. It's more like a coping strategy when there is too much choice.
RCG,
Where we'll probably never agree is the premise that the "average" consumer will get the point where they won't be using a buyers agent. The average person has incomes to make and hobbys to persue. They will never devote the amount of time to think about real estate as you.
I belive that those who don't use an agent to make a purchase will always be the minority.
I don't want to beat a dead horse, but I will point out that the amount of time people are willing to spend on a transaction depends on frequency of said transaction category and monetary investment in said transaction. In other words, I spend 30 seconds deciding which fruit to buy, hours figuring out which new TV to get, days deciding which car to purchase, and weeks on a housing transaction.
Much of what ails the real estate model could be cured in higher licensing and entry standards
I very much doubt it. In the face of an asset mania, high standards or regulation don't mean a thing. Look at all the lenders who were willing to turn a blind eye to fudged income statements and outright lies from borrowers? When everyone is getting rich from rising prices there is little concern for flouting rules.
The same phenomena played out with the .com crash. Investors didn't care that companies cooked their books so long as the stocks kept rising, and accounting firms allowed standards to slip because they wanted the juicy fees.
The good news is that this downturn is going to burn so many fingers that we will have a new era of probity and ethical real-estate dealings. However, give another couple generations, and the time for people to forget how bad things can get, and we'll be right back in another real-estate bubble. It's just human nature...
By the way, I am not one of those people who rails on the real-estate profession for the bubble. I don't blame realtors, mortgage brokers, or lenders. I just view the bubble as a normal course of the human condition which will play itself out accordingly.
Sniglet, you write,
"I very much doubt it. In the face of an asset mania, high standards or regulation don't mean a thing. Look at all the lenders who were willing to turn a blind eye to fudged income statements and outright lies from borrowers? When everyone is getting rich from rising prices there is little concern for flouting rules."
I agree with this to a point. I heard it said that high liquidity in the hands of the public results in inflation. High liquidity in the hands of institutions results in a lack of risk aversion.
This lack of risk aversion set up a situation that incubated rule bending, lies and fraud.
When I suggest that a higher bar will help in both real estate agents and lending I believe it will help keep both professions in the hands of a greater number of professionals.
For instance, in lending, some the biggest abusers where companies like Merit, who hired hundreds of young 20 somethings with the promise of big money and parties. No experience, no qualifications necessary. We had a company that was taking in big $$, unqualified, poorly trained LO's that were making huge money, and they celebrated a good month with crazy parties including alcohol and harder substances. Who was the big loser? The consumer who the company preyed on who is now having a hard time coping with a sub-prime loan he had no business being in.
The state now is making it harder for this environment with background checks, education and licenses.
At the same time Merit was operating, we had honest, ethical LO's who would never put their clients in harms way.
To be hired in most real estate offices, the candidate must invest less than $1000 and 60 hours of time to get a license (on line, corespondent or through a school) and fog a mirror. Brokers have an unquenched thirst for bodies, and as long as the state makes it so easy to get in, they'll keep adding desks go accommodate them. This sets up an environment of low standards and low supervision. When twice the agent count hustles after fewer deals corners get cut, and supervision is loose. The state does have oversight (DOL auditors), but I believe their total number to be less than 10 to cover the entire state.
Of course your point that LO's and agents are somewhat market driven is valid. That being said, I still believe that higher standards will make a better industry for both the professional and consumer.
Congress is presently looking into federal standards for LO's as a result of the recent mortgage crisis. Perhaps best left in hands of states? At any rate, no reform in sight for newly licensed agents.
Yeah, the guy who compared Tim and other bubble bloggers to whining petulant children has decided to brook no further criticism:
Going forward I will post to you, and to the many in the first and relevant to todays market, those looking for their treasure. You folks I can help. My wife and I have a mortgage company, a real estate practice, and a real estate blogging network we are managing. They are prospering and need my attention. I therefore will post my future articles with comments turned off. Comments to date have fueled conversations that are mostly not valuable. If you want to have my opinions beyond my posts, you can email me at larry(at)realestateundressed.com and be sure I will respond to you. To those hyping that a bubble will come for own selfish reasons, your bubble with me has popped. There are better ways to succeed in life and more useful uses of your time.
The weird thing is that the main point of his post was that a house is for living in, not for flipping - a point most people on this board would heartily agree with.
Good luck with the "real estate blogging network" with that attitude towards comments other than sycophantic ones...
I guess he wasn't able to "smash" opinions he didn't agree with (from an earlier post):
My take on this blog, is that the noisy ones here wish to make a buck (actually a ton of bucks) by having the market tank. That is pretty selfish. I resist letting them speak without rebuttal because of principle and because their voice can influence others voices and the combined voice can move the market. So - selfish voices deserve being smashed.
My take on this blog, is that the noisy ones here wish to make a buck (actually a ton of bucks) by having the market tank. That is pretty selfish. I resist letting them speak without rebuttal because of principle and because their voice can influence others voices and the combined voice can move the market. So - selfish voices deserve being smashed.
So he's going to let himself be the only voice that can speak and he's not going to allow rebuttal on his blog posts. It seems to me that he's arguing for his own selfishness and for his own voice to be smashed.
Wow, maybe there should be a new index to measure: how bubble blogger's combined opinions move the real estate market.
That seems to be a not uncommon mentality in the RE blogging world, from what I've seen. If you can't control the conversation, don't allow comments. Just look at the Friday rate posts on RCG. What they don't seem to understand is that the comments are usually the most interesting parts of the posts. But that's assuming you're interested in actual discussion, not just having your say and being done with it. Why on earth would I want to read that?
Now I care even less what he has to say, and I didn't think that was possible.
That last post by Larry was great. Thirteen paragraphs rambling on about how bubbleheads are like day traders. Its too bad he closed comments because I'd like him to explain how not buying something is analogous to day trading.
He could have saved some time and just typed: "This is not fun anymore, so I'm taking my ball and going home."
A few years ago, one of our more popular classes was called "Conflict Resolution" and we taught this class to RE agents as part of their continuing ed.
Many people do not like conflict. In fact almost 100% of the students admitted to not enjoying conflict. It was rare that a real estate agent admitted to enjoying the process because, he said, it gave him (usually this person was a man) the opportunity to learn more about the other person.
So it is no surprise that many re agents would not enjoy conflict on a blog. !! The conflict is there for all to see!
I find it fascinating to watch conflict that can develop within the comments and then I like to watch how the blog post author conducts himself/herself. Call me a psychological voeyuer but it is interesting to watch the psychological group dynamics play out. Sometimes as a blogger, I get caught in this trap and find myself emotionally reacting to something a commenter has said.
Either way, there's always something to learn from another person, even when we disagree.
I didn't see the blog post we're referring to but maybe there were a lot of personal attacks? If so, the blog author can ask the commentor to attack the argument, and then proceed to delete that person's comments if they keep up with the personal attacks, while leaving comments open for others.
I think the reason Rhonda shut down comments on the Friday rate posts is because they were getting out of hand and commenters were going off on personal agenda tangents. Having to corral 100 + comments every week can become very time consuming.
However, the blog is still somewhat entertaining - I am particularly amused by Lar's strange obsession with getting the priced-out-forever Seattle masses to move to Indianapolis (or, as it is popularly referred to, "Naptown").
I write with a team of real estate professionals on a local newpaper real estate blog. It is evident by some that hang out there and comment, they feel priced out of the real estate market.
As I discovered how much home you can buy in West Indianapolis by searching for homes on Paul Henry'sIndyWestUndressed blog. I was stunned. You can't buy much of a condo for $197,000 in my town. I suggested to our readers they consider relocating. Some responded they may have to.
and
I am surprised at the difference in home prices from city to city. There might be hope for you in West Indianapolis.
and
I decided to mention living elsewhere an an option last week as I was searching on the MLS search of our new West Indianapolis Blog, IndyWestUndressed.com.
I was astounded at the prices there. I called our agent - blogger, Paula Henry, and wanted to know more about Indianapolis. She loves it there, says it is a great place to live. The economy is diversified, a lot of jobs relate to the pharmaceutical industry and the many colleges in Indianapolis.
...
Paula says Indianapolis is also a sports lovers paradise.
...
Indianapolis is a conventional city, has an awesome downtown that has been revitalized. For those who love our Seattle trails and bike paths, Indy has those too.
No wonder he has an investment in talking up Seattle real estate prices - how is he going to get everyone to move to Indianapolis if he acknowledges that Seattle RE prices might decline?
Comments
Best of luck, Greg.
I'll tell ya what - how 'bout you guys shout down people who make personal attacks "the other Greg Perry looks like a douche," and we can then see who's a sensible blogger and who is, in fact, a scrub.
To me, because of the anonything, you're all one voice. I know you don't like to be seen that way, so I'm asking, for the sake of civility - if you want to be seen as the intelligent, educated person that you are - then I challenge you to call for civility on your own playfield.
Otherwise, SeattleBubble is going to be known as a haven for namecallers. Over at the P-I site, everybody knows that the only namecaller is me.
BTW: Thank you all who think I'm funny. I'm not trying to please everybody, and so far, I'm succeeding!
I wish I had more time to spend here. But, if ya wanna rip me, you know where to find me.
Go back to Larry's corner, Mack. You can count your three hunred' thou together.
And I feel like all realtors are one voice because they have a national association of themselves. They get talking points from this association, which most of them tend to repeat like parrots.
OK, I really don't feel that way, but I still cannot understand why Mack cares so much about anonymous posts. If I ran a business under my own name, I would also be self advertising every chance I got. But I don't, I work for someone else. So why should I post my name everywhere. What if one of my managers disagreed with something I said? We're talking a different world, get over it. Besides, if I always use the same handle, how's that different than going by the name John Smith, which 10,000 people in America have?
For the record, we've had a number of times people make blanket statements about realtors which have been corrected within the blog. They usually aren't corrected if they are business statements like "all realtors are trying to sell a nightmare." But if it's something like realtors smell bad, it usually gets called out.
Not that we would.
http://en.wikipedia.org/wiki/Disintermediation
It's a beautiful thing.
I bet quite a few 'full service' travel agents pre-2000 thought it was a nice biz to be in, profiting from what is basically information asymmetry. Until the market and the consumer changed, and they got pinched.
You dudes are going to get your lunch eaten, and you don't even realize it. You think you're such wheeling-dealing experts. This "skillset" is not as rare as you think, the market got pretty crowded, and the sands of technology/communication/society are shifting underneath the house that NAR built. Not to mention a few shining examples of complete hubris, defensiveness, and creepy infighting.
I wish you a lot of luck, you are going to need it. People are on to the scam.
Certainly, much of the value a RE agent provides does come from the information asymmetry that full access to MLS services provides. But their is real value in knowing details of a specific market, having good negotiation skills, and knowing how to grease the wheels of a transaction.
The information asymmetry allows any shmoe to provide value without having those skills and get paid the same per transaction as someone who does have those skills. As that information asymmetry erodes, the agents who really know what they are doing will continue to do well. In fact they might even do better since the barrier to entry into the field will be higher and there will be less competition for customers.
Travel agents operated in a completely different market. Alternatives travel options are highly substitutable. The cost is easy to calculate since you do not have to predict future prices. There are fewer places for a travel agent to add value in the chain.
bubbleheads = uneducated....????
if you search long enough there was a post here on who's who and what they do...
the consensus was there was a high percentage of professionals here with real jobs...
there's more than a handful of lurkers/posters here who make double the median income...
when people call others names and label them children... it shows who the child is...
Greg,
you seem to be a very smart guy. Please continue contributing your thoughts. I'll just filter out the rest. Amazing how somebody keeps saying they won't post here but keep coming back to drive traffic back to their site...
it's a lame childhood method of getting people to play in your ballpark by calling them names so they will challenge you to a game... not enough real friends? (lurkers)
Hmm, I think you do have a point here. I was being a little bombastic in stating my case, but I think the central question I'd like to raise is "are these skills worth 6%?"
It's a long way from here to there. And I think it will be painful for a lot of people who are not in the top 10-20% of the profession (in terms of ability and ingenuity). I think that explains some of the insane self-hype and blogging-for-dollars that we're seeing that industry go through right now.
This is a valid counterargument, and I concede that the comparison isn't that accurate. I submit that there IS a similarity in that technologically/data savvy consumers and the services that cater to them erodes the information advantage that each type of broker provides.
Also, in some segments (condos, townhouses, cookie cutter subdivisions building ever farther east..) I'd argue that there are more substitute goods than this market has ever seen. (Basically, I'm going to lean on the excess-supply argument here.)
By the way, it has taken me two purchases and nine years of watching other areas in town appreciate before coming to this conclusion.
There is also the problem of finding an agent whose opinion you are willing to trust. In the current environment, where mediocre agents can lean on MLS access to provide value, that can be difficult.
I predict buyers agents will go away almost completely. They may still help families moving across the nation, but for local transactions (family moving up/new owners who have saved for down payment), the buyer agent will disappear. The seller agent will probably remain, but their margins will be squeezed.
Think cars here. We still have car salesmen even in the internet age, and they probably aren't going away. But they represent the seller and not the buyer. Meanwhile, buyers have more information than ever before, which probably impacts sellers bottom line.
RCG,
Yes the landscape will change, but buyer agency won't go away.
Some people may have the knowledge, but don't want to (or can't) devote their time. They want someone else to do the work and will gladly pay. I've had a client once tell me that he thought I was underpaid for the help I gave him (a $35,000+ commission.) I helped him find the land, the architect and the builder for his custom home. His commission fee was a line item on his HUD settlement statement, not built in to the purchase price.
Some people just love to pay top dollar for everything (goods and services)--why? because they can!
Some people will never research the information. They want to buy, but don't even know what questions to ask.....and they don't want to be bothered.
Perhaps the client is elderly.
Some people think they have the knowledge, but do they? Do they know the effect to pricing of a functional obsolescence or economic obsolescence problem? Have access to regional, area and neighborhood absorption rates? And how about a litigation after the close? Few things are litigated more than real estate.
Tax software impacted the CPA field. I still pay top dollar for my CPA, because he's worth it to me. My taxes are complicated. I would rather devote my time to my occupation.
Some people may have excellent knowledge, but are terrible negotiators. Frankly some of my best "wins" for clients are negotiating against unrepresented buyers or sellers.
Every market has unique problems. Most people need a buyers agent in a super heated market. Most people need a buyers agent in balanced markets. Most people need buyers agents in buyers markets.
Some people like to shop at WalMart. Nordstrom doesn't freak out when WalMart has a "blue light special". They just don't care. Why? They know their clientele. They've created service levels that allow them to command higher prices for the same goods. Some people like buying coffee at the donut shop, others will pay $5 a cup at Starbucks. Starbucks created an environment and an experience. The donut shop uses styrofoam cups, Starbucks uses a nice logo on a paper cup and serves it up with a "java jacket". Yup, we all pay more for Starbucks.
On the other hand, some people will work hard to learn as much as they can to do the transaction themselves. If enough people do this, the market may need fewer agents. This is just fine by me.
I'm am a full service agent that's fine with any way a particular person wants to buy. Discount? Rebate? Full Service? It's all good by me. They can't use me, however, unless they want full service.
Here's the point that rarely gets discussed, however. For the sake of saving a few dollars on a commission, I've seen the real cost much higher for many, many people who think they save, but end up screwing themselves.
Everybody has different needs and desires. For those who want to research, or have experience--if they can save some $$, and hope they stay out of litigation after the sale -- GREAT! For the others who are involved in a real estate transaction for the first time, or once every 15-20 years, having a good buyers agent my be the best.
And BTW, the analogy of selling cars. Most car buyers would do a lot better with some kind of agent. Most people get royally screwed when negotiating a purchase or a lease.
The travel agent metaphor is raised frequently, but I think a better comparison is investment advisers/stockbrokers. You can still work with a full service stockbroker who gets paid every time you buy and sell, but they are a dying breed. If you need the advice, it generally makes a lot more sense to work with a fee-based financial advisor to help formulate an investment plan. Ideally, the advisor has no interest in any brokerage commissions, so there's no incentive to churn your account. Alternatively, you can also choose to do it yourself with an online brokerage account and/or mutual funds.
I think a similar model will happen with fixed fees or lower commission rates for buyers agents. Redfin may not be the winner, but the pressure to discount is going to climb as the numbers of transactions continues to dry up.
I'd recommend using a different argument when making a sale, but other than that I do agree those people exist. However, very few of them like to pay top dollar to anyone they consider a 'middle-man' (more later).
Does it matter if they know these things? Let's assume that I agree with every single reason a buyer should use a buyers agent, does it matter? What you are fighting against may not even be truth, but rather perception. If the average buyer ever decides they don't need an agent, it will put a lot of buyers agents out of work. If most decide, then only those who provide niche services (like those you listed) will still be employed.
No, but Circuit City cares. Nordstrom was never in the same market as WalMart, and may never be. A better comparison may be Windows. Right now MS owns 90% of market share in operating systems. And guess what, they go insane every time they lose a little more share. Because it's share that is probably never coming back.
I heard this somewhere: "The Customer Can Have Any Color He Wants So Long As It's Black". -- Henry Ford
I think the definition of a successful transaction is one where both the buyer and seller leave feeling it was fair. No screwing over necessary. Could the buyer have left less money with the seller? Absolutely, and it even might have been enough to pay off the buyer's agent as well. But I have never seen any study that proves the majority of people are royally screwed over when buying a car. If you know of one, please share.
Yet even if such a study exists, what does it prove? It proves that people evidently prefer to get "royally screwed" rather than put even a thin dime in the pocket of a buying agent. That's an incredibly powerful statement. In your words, people knowingly sacrifice their own well-being to make sure no buyer agent gets rich off of them. YIKES!
Greg, you don't need to worry about us. I'm not trying to take your job or anything. But for a lot of less skilled/qualified agents, the writings on the wall.
80% of agents are part time or hobbyists. Less than 20% are full time, working professionals. A fundamental problem we have in this industry is that a brand new, part time real estate agents earns exactly the same commission amount as a 15-20 year, experienced full time vet. The public is confused on value.....and why wouldn't they be?
That being said, when a consumer recognizes good value, they're almost always happy to pay. It's a value proposition.
But think about this......on the Eastside, the agent count has almost doubled since 2001 and the transaction count has declined. The local agent pool has become mediocre
This is a subject that spirits debate, but I feel that the entry bar to become an agent is too low.
I read where there was a bill just submitted to congress regarding loan fraud and loan originators licensing (federal) requirements. Much of what ails the real estate model could be cured in higher licensing and entry standards.....but that would throw a lot of brokerages out of business.
There are many agents in the region that bring the value to be paid extremely well.
Alan,
Interesting that you used an agent to assist you with your auto purchase. Leases are an area particularly, that people get hurt with. Not many people use an agent to purchase a car.
Where we'll probably never agree is the premise that the "average" consumer will get the point where they won't be using a buyers agent. The average person has incomes to make and hobbys to persue. They will never devote the amount of time to think about real estate as you.
I belive that those who don't use an agent to make a purchase will always be the minority.
You also ask if functional or economic obsolescence, litigation issues really matter?
Yes, it matters to greatly to the person who makes the wrong decision because an agent wasn't there to guide them. It is not perception, it is real world mistakes that can cost the buyer thousands.
I"m not arguing that agents have to leave. I wish many of them would.
Actually, what I asked is whether those issues matter in the creation or deletion of jobs for agents. To the person who gets hit, it matters regardless of how they got there. But the decision to use an agent is based on the perception of whether or not one is needed.
The way people form those perceptions is based on a combination of general news weighed against personal news. By which I mean, if a few people are going without agents, the MSM will publish their stories if they are 'interesting'. On the flip side, if I know a guy or two guys or five, who have bought without an agent and it went down without a hitch, I may form a perception that it's a safe and reasonable thing to do.
This is how most people function. It has nothing to do with real estate knowledge or lack thereof. It's more like a coping strategy when there is too much choice.
I don't want to beat a dead horse, but I will point out that the amount of time people are willing to spend on a transaction depends on frequency of said transaction category and monetary investment in said transaction. In other words, I spend 30 seconds deciding which fruit to buy, hours figuring out which new TV to get, days deciding which car to purchase, and weeks on a housing transaction.
I very much doubt it. In the face of an asset mania, high standards or regulation don't mean a thing. Look at all the lenders who were willing to turn a blind eye to fudged income statements and outright lies from borrowers? When everyone is getting rich from rising prices there is little concern for flouting rules.
The same phenomena played out with the .com crash. Investors didn't care that companies cooked their books so long as the stocks kept rising, and accounting firms allowed standards to slip because they wanted the juicy fees.
The good news is that this downturn is going to burn so many fingers that we will have a new era of probity and ethical real-estate dealings. However, give another couple generations, and the time for people to forget how bad things can get, and we'll be right back in another real-estate bubble. It's just human nature...
By the way, I am not one of those people who rails on the real-estate profession for the bubble. I don't blame realtors, mortgage brokers, or lenders. I just view the bubble as a normal course of the human condition which will play itself out accordingly.
"I very much doubt it. In the face of an asset mania, high standards or regulation don't mean a thing. Look at all the lenders who were willing to turn a blind eye to fudged income statements and outright lies from borrowers? When everyone is getting rich from rising prices there is little concern for flouting rules."
I agree with this to a point. I heard it said that high liquidity in the hands of the public results in inflation. High liquidity in the hands of institutions results in a lack of risk aversion.
This lack of risk aversion set up a situation that incubated rule bending, lies and fraud.
When I suggest that a higher bar will help in both real estate agents and lending I believe it will help keep both professions in the hands of a greater number of professionals.
For instance, in lending, some the biggest abusers where companies like Merit, who hired hundreds of young 20 somethings with the promise of big money and parties. No experience, no qualifications necessary. We had a company that was taking in big $$, unqualified, poorly trained LO's that were making huge money, and they celebrated a good month with crazy parties including alcohol and harder substances. Who was the big loser? The consumer who the company preyed on who is now having a hard time coping with a sub-prime loan he had no business being in.
The state now is making it harder for this environment with background checks, education and licenses.
At the same time Merit was operating, we had honest, ethical LO's who would never put their clients in harms way.
To be hired in most real estate offices, the candidate must invest less than $1000 and 60 hours of time to get a license (on line, corespondent or through a school) and fog a mirror. Brokers have an unquenched thirst for bodies, and as long as the state makes it so easy to get in, they'll keep adding desks go accommodate them. This sets up an environment of low standards and low supervision. When twice the agent count hustles after fewer deals corners get cut, and supervision is loose. The state does have oversight (DOL auditors), but I believe their total number to be less than 10 to cover the entire state.
Of course your point that LO's and agents are somewhat market driven is valid. That being said, I still believe that higher standards will make a better industry for both the professional and consumer.
Congress is presently looking into federal standards for LO's as a result of the recent mortgage crisis. Perhaps best left in hands of states? At any rate, no reform in sight for newly licensed agents.
Hmm, I think I'll dress up as a broker this halloween.
Looks like someone doesn't like getting told that they are wrong...
The weird thing is that the main point of his post was that a house is for living in, not for flipping - a point most people on this board would heartily agree with.
Good luck with the "real estate blogging network" with that attitude towards comments other than sycophantic ones...
I guess he wasn't able to "smash" opinions he didn't agree with (from an earlier post):
http://blog.seattlepi.nwsource.com/real ... 123556.asp
So he's going to let himself be the only voice that can speak and he's not going to allow rebuttal on his blog posts. It seems to me that he's arguing for his own selfishness and for his own voice to be smashed.
Wow, maybe there should be a new index to measure: how bubble blogger's combined opinions move the real estate market.
Now I care even less what he has to say, and I didn't think that was possible.
He could have saved some time and just typed: "This is not fun anymore, so I'm taking my ball and going home."
Many people do not like conflict. In fact almost 100% of the students admitted to not enjoying conflict. It was rare that a real estate agent admitted to enjoying the process because, he said, it gave him (usually this person was a man) the opportunity to learn more about the other person.
So it is no surprise that many re agents would not enjoy conflict on a blog. !! The conflict is there for all to see!
I find it fascinating to watch conflict that can develop within the comments and then I like to watch how the blog post author conducts himself/herself. Call me a psychological voeyuer but it is interesting to watch the psychological group dynamics play out. Sometimes as a blogger, I get caught in this trap and find myself emotionally reacting to something a commenter has said.
Either way, there's always something to learn from another person, even when we disagree.
I didn't see the blog post we're referring to but maybe there were a lot of personal attacks? If so, the blog author can ask the commentor to attack the argument, and then proceed to delete that person's comments if they keep up with the personal attacks, while leaving comments open for others.
I think the reason Rhonda shut down comments on the Friday rate posts is because they were getting out of hand and commenters were going off on personal agenda tangents. Having to corral 100 + comments every week can become very time consuming.
http://realestateundressed.com/
However, the blog is still somewhat entertaining - I am particularly amused by Lar's strange obsession with getting the priced-out-forever Seattle masses to move to Indianapolis (or, as it is popularly referred to, "Naptown").
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No wonder he has an investment in talking up Seattle real estate prices - how is he going to get everyone to move to Indianapolis if he acknowledges that Seattle RE prices might decline?