Realtors are abandoning a listing ship

Los Angeles Times ^ | May 25, 2009 | Peter Y. Hong

[Lorianne]

The housing crunch and Internet are shrinking the ranks of agents. __ Huerta and Youngmin Bae bought their Burbank home without ever meeting their real estate agent. Instead, they scoured listings for their favorite neighborhoods, haggled over prices and even wrote their offer using Marco's cellphone.

There was no housewarming plant on the porch when they moved in, but the couple aren't complaining: They received a $10,000 check as a "rebate" from their agent's 3% commission.

"It's a great incentive," said Marco Huerta, 32. "This is what capitalism's all about."

Experiences like these are leading some to wonder whether Realtors may soon go the way of travel agents. Already weakened by the sour housing market, the profession faces increasing challenges from Internet-based services that help people save thousands on a home purchase.

The number of agents typically declines in a housing slump and rebounds when the market recovers. But this time, "when we see an upturn in the cycle, any recovery in the ranks of residential real estate brokers will be limited by a reduced need for their services," said Stuart Gabriel, director of UCLA's Ziman Center for Real Estate.

"The real estate brokerage industry is not going away, but the combination of efficiency gains via the Internet and the cyclical downturn will both be significant forces to their rapidly shrinking ranks," Gabriel said.

The National Assn. of Realtors reports a 13% drop in membership since 2006.

In California, which has been hard hit by the housing downturn, just 2,030 people took examinations for broker and agent licenses in March, down from more than 18,000 in March 2005, according to the state Department of Real Estate.

[Yossarian]

If there's any silver lining to this clusterscrew of a situation we're in, it's that the maggot-infested “profession” known as “real estate agents” is taking it in the shorts.

I've never met a group of more disingenuous pompous snake-oil salesmen. They're like used-car salesmen, but worse, as a house is for 99% of the population the biggest monetary deal they'll ever do in their life.

And in the era of the Internet, where you can research and find properties that meet your search criteria 1-2-3, what's the need for them? Have a basic home buyers or home seller's kit that goes over criteria like inspector's reports, mortgage insurance and the like, and let the buyers and sellers deal directly with each other.

The idea that what little honest help agents bring to a transaction being worth 3% each way (which would equal about $20K on townhouses I'm looking at here in the Silly Valley) is beyond asinine.

[GOP Poet]

bookmark

[packrat35]

Lawyers and bankers are up there too, but I agree with you although you'll probably get some flack from the Realtors on FR.

[bornred]

Does it make sense to hire an experienced salesman to market your product and get top dollar for it? Well, quite often it does. (Not to imply that most of the clowns in the real estate industry are worth 3%, but some of them definitely add value.)

But how often does it make sense to hire a “buyer’s agent” who doesn’t really give you anything special, and takes home an even bigger commission if you get a raw deal on the transaction? And if a raw deal falls through, they don’t get paid. Would you even consider hiring such a person for other major purchases, like buying a car or a business?

Salesmen, appraisers, lawyers - yes, they serve a purpose. But the buyer’s agent is going the way of the dodo bird.

[Hoosier-Daddy]

I hope everything work out for the best, real estate expert.

[Myrddin]

My son is a broker in both Idaho and California. His $395 transaction fee covers checking all the paperwork and making all the calls to push the transaction through the lenders. Most of what he makes today is from "short sales" or "loan modifications". The banks really hate this kind of transaction. It takes lots of phone calls, offers, counter-offers and haggling to get the transactions completed. Three to six weeks is a common time frame. Gone are the days of quick sales and fat commissions. My son never enjoyed "commissions". It was always that flat $395 broker's fee. He had 60 agents working for him. Transactions closed fast enough to keep him financially solvent at $395 each. When the market crashed, so did the rapid fire closings. The agents were turned loose. It's a very tough business now. My son needs another full time job to provide income as the short sales aren't fast enough or plentiful enough to manage a steady income stream.

[JeepInMazar]

Sounds like these guys will be busy without agents.

[McBuff]

Good agents will always be needed. . .selling or buying a house is far more than mere paperwork. . .the number of people that are willing and able to take over the whole process themselves will always be few and far between. Most good agents are using the internet to their advantage. . .give me a break. . .so a few people start to think they can do it all. . .go ahead. ..be my guest. . .save your $10,000 if you want. . because there is a sh*t-load of things that can go wrong that will eat that $10,000 and more.. .yes sir. . and don’t forget. . there is always two sides to the deal and the the other guy will have an agent. It’s a bit like a defendant handling his own case. . .the district attorney just sees red meat when that happens. . .I’m not saying it can’t be done but its like anything. . .you can bake a cake or you can go to the bakery. . .in that everybody needs a place to live. . .good agents will always find the business no matter what the market is. Good agents see the drop in agents as a plus for the industry. . .its just the rif raft that jumped on board the gravy train during the boom. . .back then. ..a house would hit the market in the morning and have 5 offers by evening. . .anybody could sell. . .and just about anybody did. . .those are the people that are gone now. . .now its about doing the work to get a property sold. . .networking and getting referrals. . .having a reputation for integrity and service. . .and a consistent, effective marketing plan. . .only the strong survive.

[GeronL]

"It's a great incentive," said Marco Huerta, 32. "This is what capitalism's all about."

... argh.. never mind

[j-damn]

My wife have viewed a few homes in two different states in the last couple of years and we always get a kick out of the realtors. When we’re supposed to meet them it’s easy to know where to look because they always show up in a Lexus or Benz.

The best one was the lady who didn’t know half of the home’s features that we found out just by casually browsing Redfin. She didn’t know the house had Central AC even though there was a massive AC unit on the east side of the house. Total embarrassment.

[Yossarian]

His $395 transaction fee covers checking all the paperwork and making all the calls to push the transaction through the lenders.

Flat fee - that's great. You know what? I'd even support paying them if the deal doesn't go through. What's best yet is a system where anyone helping out a buyer gets paid their fee no matter what - because then they don't have incentive for a sale -and perhaps a bad sale - to happen.

Anyone helping me out, giving me valuable information on the biggest purchase in my life, is worth paying. It's the lying, the backwards loyalties, the attitude, and the insane amount of money they're demanding that sickens me.

[Yossarian]

I hope everything work out for the best, real estate expert.

I'm a chip designer. It's a hard line of work. There are plenty of times when it is dreary, ugly, and maddening.

But through my career, I've been a part of projects to build things like servers, and trancievers, camera systems, and the whatnot. And when you add it all together, through what I've done myself - or through my projects spurring on the competition - I've been a part of building this here internet thingie.

The days are long, the coworkers nuts, the women few - it is frustrating. But when I pause to think how I've helped permanently kill your real estate profession as it currently exists? I BEAM.

[DB]

Rarely are “experienced salesman” interested in getting “top dollar” for the seller.

They want to make the sale and move on. The lower the price the faster it sells. The more volume they sell the more they make.

Their interests aren’t the seller’s interests.

[nathanbedford]

The realtors have done only what humans do whenever they can, they formed a guild and enlisted the government to grant them a monopoly.

Here in Germany the system over the centuries has been perfected on several levels. For example there is a tourist ferry service on our local lake which brings tourists back and forth to attractions and has been in the same family for well over a century. No competition permitted. If I want to open a bakery here I cannot just secure a permit and the health inspection, I must become an apprentice for years and be certified. Even then the town fathers might well conclude that the village has enough bakers and for that reason alone not grant me a license to open a bake shop.

Some towns are granted the right to conduct open-air markets on a given day of the week while that franchise is denied neighboring towns. These examples of protectionism come down from feudal days.

So the realtors in America organized, cloaked themselves with a plausible arguments that they should be licensed to protect an innocent public from charlatans and incompetents, and because there was an intensity on their side, they managed as a minority to impose their will on the majority and got the legislation they wanted. We see this pattern repeated over and over. Every trade and quasi-profession seeks to have government bar their competition.

Perhaps the most realistic hope to overcome the liberal bias at the university level is too have resort to technology. Why should lectures by one professor to 200 students which often repeat word for word the material presented one year ago by the same professor to 200 different students, not be available online? Only because the professors are protecting their brand. Sooner or later, the Internet will triumph over tenure.

Realtors have been done in by technology which simply runs around them. Much the same has happened to attorneys. Even doctors today face more intelligent questions from their patients who have been informed by the Internet. Stockbrokers will go the same way as realtors and for much the same reason.

We have an interesting tension developing in America. On the one hand we have put in place an administration that proposes to rule over us based on whether we are members of a favored group such as the United Auto Workers or members of a disfavored group such as bondholders. The administration grants these favors to other group judgments based on race, class, party affiliation, etc. On the other side, we have technology overcoming the barriers to freedom but directed by a government which is so ponderous and old-fashioned that it often cannot keep up.

[DB]

Specifically what chips do you design?

I wonder if I’ve used any of them (I’m a hardware engineer).

[Yossarian]

Specifically what chips do you design?

I've done a Sparc, a couple of PowerPCs, an embedded DRAM, some reusable IP (high speed transceivers), some display driver work, and right now I'm working at a (still stealth mode) company doing an undisclosed mixed signal chip.

I've written some commercial EDA programs, as well, but I shouldn't give out the names of the companies, to help keep my nature a bit anonymous.

[DB]

Interesting observation.

The Internet is changing the world in a lot of ways and is far from done. Traditional telephones connected to analog lines going to a CO day’s are numbered. Eventually all forms of communications, USPS mail, newspapers, printed magazines, telephone, TV, DVD/movies and data will be entirely IP based. It all falls under a basic law of nature - adapt or die.

[Proud_USA_Republican]

I’m sure most realtors are back where they belong.
Doing 20 dollar lapdances, trophy housewives, flipping burgers, and living in their parents basements while praying for housing prices to start moving up again.

[DB]

I understand.

I’m more on the embedded/controller type CPUs and DSPs end of the spectrum as far as processors go. My primary work is in satellite communications equipment design (RF, analog and digital).

[Yossarian]

Thanks for the long and thoughtful reply.

The role of all professions in the wake of the internet is something serious to ponder.

Sometimes it is quite unfair when you see talented American tool & die companies bite the dust because CAD files can just be sent overseas to a cheap slaveshop and prototypes flown back. Other times you really appreciate the massive distributed and retained knowledge available - provided it is actual knowledge and not misinformed lore. (And provided the search engine isn't being manipulated - I'm talking about you, Google.)

I guess it will come down to "what legitimate good or service are you providing me, and is it in line with what others are charging?" on one side, and "do I have the discipline as a customer to not use the low-ball supplier if they're slave-labor scumballs" on the other.

Based on this, I suspect we'll have to reintroduce some kind of tariff system before the "race to the bottom" decimates freedom loving countries. Freedom and reasonable health, safety, and environmental standards cost overhead.

[gigster]

There was an excellect dissection of real estate agents in the book “Freakonomics”.
Almost everything in the world, decision-wise, has to do with “asymetrical information”.

[I see my hands]

I could be convinced to sell a property I rent to a chicken wholesaler/retailer, Caputo’s, by the right Century 21 agent.

[packrat35]

Ouch you hit the mark there.

[Proud_USA_Republican]

Rarely are “experienced salesman” interested in getting “top dollar” for the seller.

Puh-leaze.....

They are when their commission total increases with the sales price. The more that goes up, the quicker they can call the mercedez dealer and tell them to upgrade them to an AMG model.

What I saw as the standard M.O. for seller representatives in the pre-collapse markets was instrucing the seller to agree to put their houses on the market right at current market prices or slightly lower, drop hints to any buyer reps that the sellers wanted to move quickly. Knowing full well it would trigger a bidding war between all the flippers, investors, and people actually interested in buying the house to live in.

Voila! Both seller and buyer reps get a bigger commission. The sellers had their eyes rolling in the back of their heads from the profit. The buyers are high fiving themselves believing they just purchased their lottery ticket and in a couple month/years, they would be the ones doing the Meg Ryan orgasm imitation "Yes, Yes, Yes!!!" when they sold it for a profit after the next set of buyer/seller reps collected their commissions.

Ofcourse, now that the credit fueled housing ponzi scheme has completely collapsed in all the bubble markets, its almost impossible to do that, but that was standard operating procedure by the sellers reps. Only now that its become a buyers market, the "experienced salesman" are telling their clients to accept lowball offers and motivated to work for a sale.

[Proud_USA_Republican]

whoops. I almost forgot.
Not only would sellers reps instruct the sellers to trigger a bidding war by first listing slightly below typical market asking price, but then really get their greed juices flowing, by telling them to re-counter after the first wave of buyers offers came in at or above asking price.
These are some of the most basic tricks a seller will pull in heated markets. And they aren’t doing it because they are trying to get in and out quickly and move on. They are chasing a maximum payday themselves. A payday that can equal or exceed most peoples entire salary, even upper middle class earners, for a year or more.

[nathanbedford]

It is interesting how the Internet tends to commoditize goods and services. For example, the computer I am using right now to communicate with you was purchased as a result of shopping online. In fact, I got a very good deal because a FReeper had posted about it. So as goods and services become commoditized and the vendor has very little to offer me apart from price.

I will not buy a car from a dealership because I like the salesman. Nor will I fly a more expensive airline with equally uncomfortable seats and equally wretched food. I no longer trust my travel agent but verify everything they produce with independent research on the Internet. The poor travel agents have been so beaten down by the commoditization of their service, that many will not book flights or they charge the consumer for the service.

When I have a glitch with my new computer I call the manufacturer under the warranty but I am now speaking with someone in New Delhi. So the problem you describe is ubiquitous. More, it is gobbling up the very guts of the American economy.

The temptation is for the government to do something about it. But I question whether even the anointed Messiah is smart enough to put in place tariffs which will not ultimately be a new kind of guild system. That presumes that he would act in good faith out of the desire to protect the whole nation rather than just one of his favorite interest groups. It will further presume that Obama, or who ever imposes these tariffs, thinks of his constituency as individuals and not as members of a group. No matter who does it, no matter how white his heart, some will be favored and some will be disfavored by the government.

Unfortunately, history suggests all the wrong answers to these concerns. History shows that once government grants a group protected status, the protection never stops even after its original justification no longer exists. For example, can anyone make sense out of our sugar quota laws and subsidies? Biofuels?

The new technology makes us unquestionably more efficient if efficiency is defined as producing for the lowest price. But that efficiency comes at a cost, it makes the economy Darwinian. Politicians are in business to interfere with that efficiency in exchange for our votes. The process is called compassion. In a straight contest between efficiency and compassion, compassion will always win. But technology is like electricity or water, it will find a way around.

I do not know the answer to the dilemma you pose. I instinctively think that you are right, that we must somehow take a closer look at the German model when it comes to supporting domestic industries. It is almost unbelievable, but Wal-Mart could not make it in Bavaria because of resistance from the government and the people. But Germany is-or was-a homogeneous culture and America is not. Since Bismarck, the Germans have understood their guild system works well because the training which supports it is so thorough. We have not the training in America and we have not the cultural consensus.

But I do know that my kids cannot compete with PhD's in engineering in Beijing and Delhi and live the kind of life I led so long as the current trends continue.

[Lancey Howard]

You have no clue.

It wouldn’t cross my mind to sell a house without the assistance of agents and brokers.

What, I want to screw around with open houses, and inspections, and qualifying potential buyers, and making sure all the paperwork is in legal order?

I want to COMPETE with all those agents and brokers who will obviously show only normal broker listings to their buyers and AVOID driving them past my house?

I don’t think so.

[Caipirabob]

And in the era of the Internet, where you can research and find properties that meet your search criteria 1-2-3, what's the need for them? Have a basic home buyers or home seller's kit that goes over criteria like inspector's reports, mortgage insurance and the like, and let the buyers and sellers deal directly with each other.

There's a big advantage when you have an experienced realtor. First of all, chances are the other party will have one or a lawyer representing them. Next, negotiations handled via the agent can take a big edge off what could become a highly emotional situation. That buffer under stressful situations can make the difference between heaven and hell for the parties involved.

Kudos to those who can do it all on their own. For the rest of us, it's nice when we have professionals available. Sure, we can do the research, but I'd just as soon send someone else into the trench.

Cheers!

[Yossarian]

First, let me say that my primary objection with agents is from the purchaser's point of view. But let me still address your points:

What, I want to screw around with open houses, and inspections, and qualifying potential buyers,

All things that need to be arranged. But worth a sizable fraction of $20K on a $650K sale?!?

and making sure all the paperwork is in legal order?

If you leave the checking of legal paperwork to someone who has a massive financial incentive to move the deal forward, it's you that has no clue. That's what lawyers are for - to answer to me and only to me.

I want to COMPETE with all those agents and brokers who will obviously show only normal broker listings to their buyers and AVOID driving them past my house?

Offer a discount over other properties and potential buyers will beat a path to your door - agents be damned. It's called the internet, and more and more buyers are using it, for all the obvious reasons. Check out, just for a quick example, valueMLS. They claim a flat rate option for getting your home into the listings, starting at (quick look) $175, with options that look like it could take that up to roughly $500.

That's just one site, and who knows, maybe I picked one that's unreliable or such - I don't know. Also, I'm not saying that everyone should go For Sale By Owner - we're all busy people with other things to do.

But what I am saying is that this shows just how utterly out of whack the realtor approach is - and that's just looking at it from a money angle. You get to then add the lies and the attitude on top of that. Those same lies and attitude did a lot - not nearly all of it, to be sure, but a LOT - to get us in the mess this country is in today.

You want to call that "having no clue"? Go right ahead - it doesn't matter to me.

[Jimmy Valentine]

"bankers are up there too,"

Don't like bankers? Guess you will be paying cash for your home, car, boat or what ever. Good for you.

[exnavy]

You are a short sighted bigot. Try putting your brain in gear before engaging your mouth(or in this case keyboard).

Your vile remarks show that you would make a wonderful nazi jackboot under Obama.

[packrat35]

House is paid for. And I’m not in the market for a rape, so I’ll pass the bankers by!

[packrat35]

Aha, the ole calling someone a nazi ploy! Just proves you automatically LOSE the argument!

[Yossarian]

I'm a bigot and a Nazi?

But how will anyone see my snazzy SS uniform underneath my white sheets?!?

[beaware]

But when I pause to think how I’ve helped permanently kill your real estate profession as it currently exists? I BEAM.

My primary work is in satellite communications equipment design (RF, analog and digital).

My dear FRiend,

You may not realize it, but you probably did more to get unqualified agents who wanted part time income on the side into the Real Estate business than to kill the profession... Now a housefrau could sit watching TV waiting for her cell phone to ring.

I have to chuckle sometimes. A well known professional musician friend of mine just lost $20k in escrow because a deal didn’t go through- He had one of those agents that must have been needing a side job more than having a need to protect a client- Shucks, that was the entire commission plus on the deal.

You’re right, it would have been better that he didn’t have an agent...

I shake my head aas I think of the some car mechanics whose customers would be better off if the mechanic went into another line of work... or community organizers for that matter...

Love the discussion my FRiends!

[Rum Tum Tugger]

You are a short sighted bigot. Try putting your brain in gear before engaging your mouth(or in this case keyboard). Your vile remarks show that you would make a wonderful nazi jackboot under Obama.

You must have intended to send that to yourself. If not, you should have.

[NoControllingLegalAuthority]

What a misunderstanding.

I tried using real estate agents twice when I sold two different homes. I ended up selling both homes myself by posting photos of the houses in descriptive classified ads.

The closing documents are not prepared by a real estate agent.

Title searches, inspections, mortgage documents and other legal work are done by professionals other than real estate agents.

To say selling it yourself is a lot of trouble is not to fully understand the process.

The Internet is full of tips on how best to market and show your home to prospective buyers.

A lot of those tips are simple, common-sense ideas. For example, if you can't paint the front of the house, paint the front door. Take half of your furniture out and store it to make the house look more spacious. Clean the carpets. Bake some fresh bread in your kitchen for a wonderful aroma before showing your home. There are many more tips.

You are the one with no clue as to how much money you can save by selling your own house.

[raybbr]

I am with you on this. A couple of years ago the realtors tried to get a mandatory 6% commission passed by the legislature here in Connecticut.

Now they tell you that six percent is "standard" and they don't negotiate. How is it that the whole process of buying and selling a house is negotiation EXCEPT when it comes to a realtor's commission?

They tell you it's six percent as if that's the law which it isn't.

[gridlock]

Real Estate, like travel agents before them, were worth the money because they had access to information and specialized knowledge. But information and knowledge are becoming more and more available to the general population. Inevitably, the time will come when real estate agents are no longer worth the money, and they will go the way of the Dodo Bird.

PS. We may already be beyond that point, and they are continuing out of inertia...

[DooDahhhh]

Well, do not put your place on the market right now genius, because you will be competing with all the foreclosures and short sales. Also, dealing with the new appraisals.

[Graybeard58]

Aha, the ole calling someone a nazi ploy

And "bigot" too! I thought that one was reserved for Romney worshipers only.

[Leisler]

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”

Adam Smith, 17??

[BluH2o]

They want to make the sale and move on. The lower the price the faster it sells. The more volume they sell the more they make.

Our home is currently on the market with a deal pending. We had a offer early on, in fact two. The initial one was about 12% below our asking price, the second 25%. We're talking an asking price close to $500, 000. The asking price was competitive, not pie in the sky stuff, in fact Zillow.com had our home valuation at well over $600,000. Bottom line, the second offer in my opinion didn't exist, it was a tactic by the realtor to get us to lower our sites (expectations) on the initial offer. We accepted the offer at 6% below our asking price.

[DB]

Lets see...

Reduce the price off market value by 10% and move 20% more property or go after market value and move 20% less property...

I wonder which makes the “experienced salesman” more money...

Not tough to answer...

In addition, the less time it takes to sell the less it costs the salesman in time and resources.

It is rarely in the interest of the “experienced” salesman to go for “top dollar” - especially in a slow market where it makes the difference of sale or no sale.

And yes, they would like a bidding war, just cream on the top, but they are still happy to sell it if only one bid comes in. A sale is a sale.

All of which comes back to - the salesman’s interests are not the sellers interests.

[DB]

I sold my old house in July of 2007 in California (a year after the market peaked) without any Real Estate people involved. Didn’t have to look for a buyer because word of mouth sold it. All the “paper work” was handled by the escrow agent. If I remember correctly all the fees were less than around $1500 for over a 400k sell. I also sold it “as-is” without repairing anything greatly reducing any liability (I disclosed all the problems I was aware of). The profit penalty for selling as-is was less than the Real Estate agent fees so it was a win-win.

I’m very happy I didn’t use a Realtor. Both the buyer and seller were winners. The only losers were the Realtors.

[nathanbedford]

Adam Smith, 1700 on your a.m. radio dial, America's new libertarian talk jock.

[Rebelbase]

A manufacturing control system engineer’s tale:

Guy took job 2 states away put his home on market via internet, no real estate agent. Gets bid, contract signed, buyer finds out couple of weeks later he may lose job, backs out of deal. Engineer retains lawyer, sues buyer for specific performance on the contract and tells everyone at the plant about it. New buyer comes along, makes slightly better offer, engineer decides to drop suit, gets release from prior buyer and enters contract with new buyer. Home inspection reveals $20K of repairs necessary before lender will approve loan. Engineer tells co-workers who laughed their arses off.

[relictele]

I will miss the Lexus cars with SELL4U license plates though.

[Toespi]

Won’t bore you with details, but after selling RE for many years, I can think of at least five transactions off the top of my head where my contract and the way it was written, protected the clients from warranty, structural, and defect issues. These are just the ones where the loss to the buyer or seller would have been over $10,000.00. Be assured that in each of these if they had done it alone, or had an attorney write the contract, they would have not been protected. I assure you the “basic home kit” would not have done the trick. It was my snake-oil experience that saved the day. The thing I loved to watch the most was when two maggots, (you refer to them as buyers and sellers) got together to screw each other without a Realtor.