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How do the 2-3 hourly rate contracts stack up against the commission based ones? Do these sellers end up saving money or losing money? If they saved, why was it that they saved, and if it cost more, was that because of something they did or was it the market?
I understand the risk/reward - but some markets there really is no risk at all...there can be so little inventory and so many buyers fighting for a particular area that it really does not matter if you drew the house with crayons and magic markers - its going to sell.
Well in hot markets then, sellers will jump to flat rates because it is cheaper for them. Really this isn't rocket science. Less risk means lower fees. In a hot market the seller may realize there is less risk for them so they take a flat rate instead. The problem is one of bad business sense. The large flat rate brokerages ran at the all or nothing model or only asked for a small upfront fee, like $500. Even in our boom here, 85% of what was listed sold, we are at about 50% now. So even in the boom there was a 15% loss built into the all or nothing model and the flat rate companies apparently didn't think about that. They failed to shift their model and increase their upfront compensations when the market tanked and closed. I am one of two brokerages in my are that does full service for a flat rate.
As for the 2-3 hourly contracts. They have all been FSBO's that the buyer and seller were already together and one party called me to take it from offer to close. I haven't had a seller or buyer agree to do hourly from the get go. Too risky for them. For the sellers that have done that it has been about 1/4 the cost of a traditional commission model but there was no advertising involved with them either. I had zero carrying costs.
A hot market also doesn't guarantee that a home will sell. Especially in the higher price ranges because in the higher ranges there are fewer buyers who can afford the price. And if there are other homes in the price range that have better layouts, and/or better locations, they will sell slower. And a seller may decide to pull out of the market.
One house in a sub community near me has gone through three Realtors, and is now cancelled. It's a million dollar property, which was upgraded by the owner who is a quality custom builder.
One problem could be the marketing, although the first agent usually does a good job on the high end homes. Another problem could be that people are looking only at price/sf and not at the quality of the upgrades and the buyers agents are not familiar with high quality amenities. It isn't a case of over built for the neighborhood; I think it's that people don't see the quality, and the agents are not marketing strong enough so that the quality and the "benefits" of the quality show off the house in it's best light.
My position is still that the agent is paid for their knowledge and skills for marketing, market knowledge, negotiating skills, and risk management through escrow, and a premium for risking the pay on contingency.
As I mentioned, and Markus didn't seem to understand, by the time I've got a home on the mls, I have 10-15 hours invested, which includes preparing the pre-list presentation; meeting buyer for the listing presentation; studying the home for the features and amenities to focus marketing on, studying comps, and viewing some of the comps; professional staging and photography; and I'm there during that process. Advising on what repairs, paint, curb appeal, etc should be done. Then building virtual tour, and web site. Write up a summary for my professional copy writer to write an 800 character mls description, plus a 500 word blog from my blog summary. Then I have to sequence the photos properly in the mls, sequence photos in the web site and blog, then get them to all the web sites that the mls doesn't propagate to. It's time consuming to do a high quality marketing job.
As to market knowledge, it's knowing at what price a home should be listed for best results. On a recent listing, I had comped at $204 after the seller performed the updating I suggested. I advised listing at $199,750 slightly below comps because I knew we would get multiple offers and stood to get the highest price. We accepted an offer of $210k and it will close in 2 weeks.
Had we listed at $204 or a little over, the buyers would have suspected that we aren't getting multiple offers, and would probably would have offered less. The buyer psychology being "I want a bargain below that comp price". Whereas by being slightly lower, the "competitive urge" sneaks in and the people who really want that house now know they have to compete, and they will go above where they would have gone before.
We had an acceptable contract within 2 days and accepted it on the 5th day after looking at the others. There will be "minimum time" spent on this total job, but I'm not being paid for my time; I'm being paid for my skills, which "netted my seller more money than he expected".
As an appraiser, I have the opportunity to work with Realtors on an almost daily basis. I have to say that it's really a mixed bag. I'd say 10% or less are really top notch. The next 40% are able to muddle along and the last 50% are absolutely dreadful. My biggest complaint is that most realtors do not know anything about the house they're selling. Is the family room addition permitted? "I don't know". When was the roof replaced? "I don't know". The termite report came in last week, any problems? "I don't know". On the other hand, the top brokers will know all the answers and more.
With all due respect, aren't you supposed to research those things, yourself? I almost never talk to appraisers. They do their thing completely apart from what we do.
As an appraiser, I have the opportunity to work with Realtors on an almost daily basis. I have to say that it's really a mixed bag. I'd say 10% or less are really top notch. The next 40% are able to muddle along and the last 50% are absolutely dreadful. My biggest complaint is that most realtors do not know anything about the house they're selling. Is the family room addition permitted? "I don't know". When was the roof replaced? "I don't know". The termite report came in last week, any problems? "I don't know". On the other hand, the top brokers will know all the answers and more.
Most agents don't pull permits on their listings because the due diligence falls to the buyer. Since making an erroneous disclosure has huge implications for real estate agents, many choose to take the path of "I don't know and if you want to know look it up yourself." While it isn't what I do, I totally get agents that take this path and I don't fault them for it. The system is set up to force this behavior.
I also understand an agent not sharing a termite report with you. You would be required to document any issues and a buyer might be totally fine with those issues or have dealt with closing costs. Agents are put in this odd position of helping their clients negotiate a contract that works for them while making the lending work in a streamlined fashion. Buyer agents that say "I don't know" to inspections probably do know but don't want to tell you. Listing agents don't want to know because if a sale fail occurs they have to disclose it. Again, the system is set up to encourage this type of behavior.
Originally Posted by LAappraiser As an appraiser, I have the opportunity to work with Realtors on an almost daily basis. I have to say that it's really a mixed bag. I'd say 10% or less are really top notch. The next 40% are able to muddle along and the last 50% are absolutely dreadful. My biggest complaint is that most realtors do not know anything about the house they're selling. Is the family room addition permitted? "I don't know". When was the roof replaced? "I don't know". The termite report came in last week, any problems? "I don't know". On the other hand, the top brokers will know all the answers and more.
Any room additions may have occurred prior to the new seller owning the home, therefore this seller may not know. The listing agent should ask the seller to get this information, or get it himself, because it may make a difference. If the room was not permitted, then the appraiser must make an adjustment for the cost of removing the addition. I'm not sure of the appraisers procedure if a permit is not produced, but I do agree that the listing agent should know.
Listing agents should know if and when a roof, and other major appliances, such as AC have been replaced, and any upgrading, because they can all be selling features.
I believe a listing agent should know enough about the house to be able to determine if the house is a C2 or C3 condition, and be prepared to provide that information to the appraiser. With that information the listing agent can provide better comps, and it helps the appraiser to better compare the house with the comps and arrive at a better valuation.
The more the listing agent knows about the house, the better job s/he can do in developing a price range, and marketing the amenities and condition of the home.
The buyer owns the termite and home inspection reports. The lender and appraiser should get information from those reports from the buyer.
Most states require that the seller sign a Disclosure form at the time of listing the property. Even for sale by owner properties require a Disclosure form be given to prospective buyers. In some instances, when a home has been inherited from an estate, and/or never occupied by the seller, a Disclosure form will either not be required or will have a place to check off "no representation".
One of the most prevalent issues here in the mountains is whether or not the property is located in a FEMA flood zone. It is incumbent upon the appraiser to get that information from the town hall or city clerk's office etc., and provide up to date FEMA flood zone docs. (Whether or not it is a cash sale or a financed sale.)
We recently had an agent who represented the buyer and the seller on a property. He went with the appraiser to the appt., learned that a small part of the driveway was in a flood zone, and literally raced to the town hall to verify the information. The agent did not disclose that to the buyer; but let the buyer learn of it only 9 days before closing (the due diligence period had expired). It didn't kill the sale, it could have. Disclosure to the buyer and seller at that point (imho) should have come from the agent. Banks now are taking credit card information from buyers applying for mortgages so that the appraiser is guaranteed payment in the event the deals crashes.
Appraisers shouldn't be lazy about their findings, they are being paid by the buyer.
My position is still that the agent is paid for their knowledge and skills for marketing, market knowledge, negotiating skills, and risk management through escrow, and a premium for risking the pay on contingency.
As I mentioned, and Markus didn't seem to understand, by the time I've got a home on the mls, I have 10-15 hours invested, which includes preparing the pre-list presentation; meeting buyer for the listing presentation; studying the home for the features and amenities to focus marketing on, studying comps, and viewing some of the comps; professional staging and photography; and I'm there during that process. Advising on what repairs, paint, curb appeal, etc should be done. Then building virtual tour, and web site. Write up a summary for my professional copy writer to write an 800 character mls description, plus a 500 word blog from my blog summary. Then I have to sequence the photos properly in the mls, sequence photos in the web site and blog, then get them to all the web sites that the mls doesn't propagate to. It's time consuming to do a high quality marketing job.
I fully understand how long it takes you - I just think you are inefficient....You outsource too much which drives your costs way up. Its not hard to do many of the things you do, especially photos, captions, blogs, etc...if you put even a fraction of the amount of time that you do on this web site into learning photography with a great camera you could save yourself thousands of dollars per year.
I honestly do believe you are a good agent, the type that gets results, but I also think that you spend too much money getting that result, and that you use your time inefficiently. There are lots of things being done that you could pay someone else to do and would be money well spent, and there are others that you do pay people to do that you could be doing yourself...but your business is just that - your business. I don't by any means want to tell you how to run your business...
When I sell my house Ill let you know how long it took me to do the process of gathering the required information. I already know what needs to be done to get it ready for sale, its just a matter of getting it all done now.
I fully understand how long it takes you - I just think you are inefficient....You outsource too much which drives your costs way up. Its not hard to do many of the things you do, especially photos, captions, blogs, etc...if you put even a fraction of the amount of time that you do on this web site into learning photography with a great camera you could save yourself thousands of dollars per year.
I honestly do believe you are a good agent, the type that gets results, but I also think that you spend too much money getting that result, and that you use your time inefficiently. There are lots of things being done that you could pay someone else to do and would be money well spent, and there are others that you do pay people to do that you could be doing yourself...but your business is just that - your business. I don't by any means want to tell you how to run your business...
When I sell my house Ill let you know how long it took me to do the process of gathering the required information. I already know what needs to be done to get it ready for sale, its just a matter of getting it all done now.
The Captain can certainly speak for himself on the above; but I'd like to jump in here and add that most of the tasks required of the Realtor can only be done by a licensed agent. A sole practitioner must wear many hats. A full fledged assistant must be licensed (according to each state's requirements) in order to give basic information over the telephone. Otherwise the assistant is merely a clerk. In most states, an unlicensed assistant has no access to MLS or lock box codes and is not allowed to fill out any real estate forms, listing agreements, changes to listings; cannot sign any documents in their own name or that of the agent, and so forth.
An unlicensed assistant could take photographs if proficient, but could not upload or make changes to them in the MLS system. An unlicensed assistant is only allowed to answer the most basic of buyers' or sellers' inquiries. A good licensed assistant working 35 hrs. per week at minimum, would be worth at least $35,000 per year as wages, some even receive separate bonuses. They require E&O insurance, the Board of Realtors' fees, licensing fees, and MLS fees, lockbox fees etc. and possibly health insurance and other employee benefits paid by the Realtor; they are not considered independent contractors and must abide by a strict employment agreement containing a non-compete clause prohibiting the licensed assistant from soliciting buyers or sellers or giving referrals.
The biggest problem I see with our industry is that we don't police each other. We enter into transactions and experience incompetence first hand, but instead of turning the offenders in, we make excuses not to work with those agents again. I think the brokerages we affiliate with are also to blame. I remember when I first became licensed and had a problem in a transaction. The agent had never presented the contract to his client...HE signed it (because that's how they did business in his native country) and the buyer simply showed up at closing. I literally raised hell about it...but my Broker told me to 'calm down and think about my and the brokerages reputations'. I felt like I was punched in the stomach. I am no longer with that brokerage and I don't defend incompetence. This is a serious business that could ruin us or our clients financially. If you do something that violates the code of ethics or demonstrates incompetence, I will report you. I expect other agents to do the same if I screw up.
Quote:
Originally Posted by tomocox
Ok, Realtors, time to take a good look at ourselves. Just look at so many posts on this forum and many others. People look at working with Realtors with the same attitude as a dentist, "don't want to use one, but I better."
How do we, as an industry, change the buying and selling public's perception from getting a root canal to that of a Starbucks and celebrating friendships and value?
What do you think?
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