Real Estate Agents Endangered Species ?

[Joe ( Cold Spring on Hudson )]

Now I know most of you are going to jump on the bandwagon with this article. Cause nobody likes real estate agents, except when they are the one that sells there home above listing price or when they find the couples dream home, then we are there best friends. But before you agree with this article think about something. The comparison between travel agents and stock brokers is made through out this article. Do you think that people in the higher end market book all their travel online and day trade without a broker? Also do you honestly see the time when you just allow anyone to come waltzing into your million dollar home and look around, cause they saw your self listing on Craig’s list? Are you willing to give up a huge portion of you life advertising and booking appointments and fielding emails from potential buyers? Are you willing to distance yourself to look at the bank finances of a potential buyer and determine if they are worth the risk? There are sooooooooooooooooooooooooooooooo many thing a real estate agent does that are not even highlighted in this article that it makes us look like we do NOTHING for our commission. I can tell you the strait up truth. I owned a business that was sales driven and mark up's were my bottom line, 30% was my mark up and I can tell you I WORK a hell of a lot harder for my commissions as a real estate agent than any other sales job, and I made MORE money when I had my company. Do people hate jewelry stores because they have 300% mark ups? Or do people stop buying wine at a restaurant because they know the wine is marked up 200%? Ya know you can buy wine over the internet now, is that going to stop you from running into your local wine store and picking up a nice bottle for a dinner party?

All I have to say is the general public has no clue as to how hard we work and how much money goes into a successful real estate agency. My firm spends over $20, 0000 a month MOST OF IT IN THE NEW YORK TIMES !!!!. Add to that I sell over 12 homes a year and make far more than the averages in this article.


March 5, 2006
Freakonomics
Endangered Species
By STEPHEN J. DUBNER and STEVEN D. LEVITT
The Boston-Minneapolis Hypothesis

It is hard to think of an occupation that garners less goodwill these days than the real-estate agent. More often than not, agents are portrayed as hustlers or sharks, unimaginative opportunists who, for not all that much effort, pocket a significant chunk of the sale price of your home. A great many of these agents and brokers, more than 1.2 million, belong to the National Association of Realtors, which the Department of Justice accused in a recent lawsuit of behaving like a cross between a cartel and a mafia, hoarding access to home-sale databases and harassing competitors who dared to offer discounted commissions.

Even if you believe all these terrible things about real-estate agents, however, you should try to find in your heart a bit of sympathy for them. There are two reasons for this.

To examine the first reason, ask this question: Who has prospered during the recent real-estate boom? Home sellers, to be sure, along with developers, mortgage brokers — and also, you would assume, your average real-estate agent. These agents have rung up millions of sales while home prices have been doubling and even tripling. Since an agent's commission is usually based on a fixed percentage of the sale price — typically 5 or 6 percent, of which about half goes to the listing agent and half to the buyer's agent — agents' fees have climbed along with home prices, even though they probably don't have to work any harder to sell an $800,000 house than they do a $200,000 house.

A listing agent really only performs four main functions: setting the price of your home, finding potential buyers, prepping and showing them the house and handling the negotiations and contracts. Just for fun, let's put a value on each of these functions. Setting a home's asking price requires a few hours of work at most, studying the house and the data on comparable sales. Showing the typical home might take 20 or 30 hours, with negotiations and contracts taking maybe four hours. Attracting potential buyers is of course the trickiest task — which is why, as the Justice Department alleges, Realtors have tried to block access to the for-sale databases. But it's now easy to find independent or discount agents who will list your house on the Multiple Listing Service for a fee of about $750.

So in sum, we are talking about perhaps 40 hours of work. Let's be generous and say that's worth $100 an hour. Add another $750 to list the home. That's a total of $4,750, which makes the 6 percent commission that you would pay on the sale of a $500,000 house — $15,000 each to your agent and the buyer's agent — look pretty steep. It would seem obvious that being an agent during a real-estate boom is a great way to earn a good living.

As it turns out, however, most agents don't make very much money during a boom, because of one simple fact: the boom attracts way too many of them. Over the past 10 years, membership in the N.A.R. has risen by more than 75 percent. And why not? Compared with most professions, becoming a real-estate agent is quick, cheap and relatively painless. In economics, this phenomenon is known as free entry.

In a 2003 paper titled "Can Free Entry Be Inefficient?" Chang-Tai Hsieh and Enrico Moretti, economists at the University of California, Berkeley, examined the income of real-estate agents in various markets under various conditions. Relying on data from the Census of Population and Housing in 1980 and 1990, Hsieh and Moretti compared home sales in 282 metropolitan areas. But their story can be told using just a pair of cities: Boston and Minneapolis, which are similar in size and demographics — but quite different in the price of their real estate.

In 1990, a typical house in Boston cost roughly twice as much as a typical house in Minneapolis. Since commission rates were fixed, an agent would earn twice as much selling a house in Boston. But the Boston market, with so much more commission money up for grabs, attracted many more agents than Minneapolis did — even though it turned out that more homes were actually being sold in Minneapolis.

The result? The typical Minneapolis agent sold twice as many homes (6.6 per year) as the typical Boston agent (3.3 per year) — which left the Boston agent, despite the higher prices in her market, no better off than her Minneapolis counterpart. What should be a competitive marketplace — which would inevitably lead to lower prices — is not, since the price of the agents' service is essentially fixed in place.

The N.A.R.'s own figures show the same dynamic at work today, nationwide. From 2002 to 2004, during one of the hottest real-estate markets in American history, the median income for Realtors actually fell — to $49,300 from $52,200. This is not to say that some agents haven't become rich. As in most sales professions, whether the product is diamond rings or crack cocaine, the people at the top of the pyramid make an awful lot more money than those down below. It's just that the base of the real-estate agent pyramid grows significantly during a boom.

And because hungry new Realtors are discouraged from undercutting their competitors by lowering their commission, they compete instead by frantically trying to obtain new listings. This would explain why your mailbox is jammed with postcards from Realtors exhorting you to sell. Most real-estate agents seem to spend 95 percent of their energy chasing clients (for which they are paid nothing) and 5 percent actually serving them (for which they are paid way too much).

The second reason to feel bad for real-estate agents is even more dire: their very profession is about to join the endangered-species list.

Think back for a moment to 1999. Travel agents still roamed the earth in vast numbers. So did stockbrokers. But their business models were being blown apart, largely by the Internet. The new market for do-it-yourself online securities trading lowered fees so drastically that a full-price stockbroker could simply no longer earn a living. Travel agents were shoved aside once the Internet gave customers the ability to book their own trips — and when, perhaps more damagingly, the airlines decided to stop paying the travel agents' commissions.

The Internet is a natural repository for the sort of data that drive the real-estate market. New sites like zillow.com let anyone try to figure out (if imperfectly) what his home is worth; sites like craigslist.org allow buyers and sellers to easily find each other. As those services and ones like them become more popular, it is hard to imagine that the market will allow Realtors to maintain their hefty commissions.

There will always be some home sellers who prefer full-service, full-fee agents, and a handful of these high-end agents will undoubtedly thrive (just as some full-service travel agents and stockbrokers still thrive, except they are now called "travel counselors" and "financial planning specialists," respectively). But more and more home sellers, armed with data from real-estate Web sites and facing a variety of pricing options, will surely choose another route.

In addition to discount and flat-fee brokers, one likely successor is the fee-for-service broker. Cary and Barbara Chubin, a married couple who just relocated from Chicago to Oakland, started up this kind of business in Chicago. They charged $750 to list a home on the Multiple Listing Service, $50 an hour for showing the home and $250 for negotiations and closing. Younger home sellers flocked to the Chubins' pricing model; but older customers, Cary Chubin recalls, were leery. Chubin understands. "People can't believe it could be so much cheaper than they're used to paying," he says. "Plus, a home is the most valuable asset most people have, and you're afraid to death of making a mistake."

Fear may be a great motivator for maintaining the status quo, but the Chubins say they believe they have found an even better one: money. That's how Barbara Chubin plays the game in her advertising: "Do you want to go to the Caribbean? Or would you rather give the money to your real-estate agent?"

Stephen J. Dubner and Steven D. Levitt are the authors of "Freakonomics: A Rogue Economist Explores the Hidden Side of Everything." More information on the research behind this column is at www.freakonomics.com. (http://www.freakonomics.com.)



[ 03-05-2006, 11:03 AM: Message edited by: Joe ( Cold Spring on Hudson ) ]

[Paul Pless]

All I have to say is the general public has no clue as to how hard we work... And that's any different from any other occupation. We all think we work hard and are under appreciated.

[Joe ( Cold Spring on Hudson )]

Originally posted by Paul Pless:
</font><blockquote>quote:</font><hr />All I have to say is the general public has no clue as to how hard we work... And that's any different from any other occupation. We all think we work hard and are under appreciated.</font>[/QUOTE]Agreed and that in itself is no big deal. We all feel overworked and under appreciated. But when you get articles in the New York Times bashing your profession that takes it to a whole new level.

[Leon m]

I saw that article and wondered how it may affect you.I think that you are right about "letting people wonder around your million dollar mansion...".I think the higher end realtors will be safe .

And for what its worth, I have no ill will towards realtors, I've found them to be very helpfull in the past.

[Paul Pless]

But when you get articles in the New York Times bashing your profession that takes it to a whole new level.
Only if you let it bother you. Almost all 'professionals' are maligned in some way. Think about what you read and hear about lawyers, doctors, and scientists that work at pharmacuetical companies. What kind of misplaced opinions do you think I read about my vocation.

[ 03-05-2006, 10:51 AM: Message edited by: Paul Pless ]

[uncas]

Just out of curiosity...what is the ratio of lawyer jokes and Real Estate agent jokes...?
Heard about the school bus with one empty seat going over a cliff...
Or
Why don't sharks attack lawyers.....? ummmm...

[Katherine]

Heck, you guys like to hold me responsible for every bad automotive design out there.

[Wild Dingo]

Only if you let it Joe... relax its only an article the world will still turn tomorrow and houses will still need an agent to sell them so the storys just that a story... life mate it do continue to turn smile nod yer head knowingly as though a bright light has been lit in there and just move on... easy as!

Every industry has its pros and cons... its good and its bad... publicity can only enhance your options even negative publicity... use it to your advantage!

[Leon m]

Well you do work for Nissan... your bound to take some flack. ;)

[Katherine]

Originally posted by Leon m:
Well you do work for Nissan... your bound to take some flack. ;) I'll remember that when I get my yearly profit sharing bonus. :D

[Joe ( Cold Spring on Hudson )]

Originally posted by Paul Pless:
</font><blockquote>quote:</font><hr /> But when you get articles in the New York Times bashing your profession that takes it to a whole new level.
Only if you let it bother you. Almost all 'professionals' are maligned in some way. Think about what you read and hear about lawyers, doctors, and scientists that work at pharmacuetical companies. What kind of misplaced opinions do you think I read about my vocation.</font>[/QUOTE]Yes but this article is sandwiched between two $50,000 plus full page real estate ads. Think about it ;) The NYT makes a pretty penny off our industry.

[botebum]

I feel your pain, Joe. Time and again, I have been accusingly questioned as to why it costs $140,000 to upfit a 3000sq. ft. office shell into a high end group of lawyer's or mortgager's digs. The general public equates it with an average ground-up tract home price in this area. They don't realize the hoops I have to jump through for the building owner, managing co. and building services dept. All these cost money and have to be passed down the line. All I can tell them is, "Buy a home in a county regulated zone that can be rezoned to commercial. I can do the job for less. You have more control on overhead. County regs. are less strenuous than City of Myrtle Beach regs." They know that location is important to their business so they balk at the idea but continue not to fathom the reasons for cost.
The hidden costs in any service industry are so often missed by those requiring the service.

Doug

[Wild Dingo]

Well then!!! There you go mate! Theyre bein fair to your industry... heck 2 big buck adds and a slam good for them!! who said the media wasnt fair? ;)

[Leon m]

Originally posted by Katherine:
</font><blockquote>quote:</font><hr />Originally posted by Leon m:
Well you do work for Nissan... your bound to take some flack. ;) I'll remember that when I get my yearly profit sharing bonus. :D </font>[/QUOTE]If you worked for Toyota your bonus would be much bigger. ;) :D

[Joe ( Cold Spring on Hudson )]

Oh yea and then you start getting people coming into our office with lots of tude cause they read in the NYT how we are worthless. My broker owner mentioned how in the RE bust of the 80's how because of the NYT people were coming into the office offering 1/2 price for listings cause they read it was a sellers market and they could name their price.

[Wild Dingo]

:D Joe... mate... relax!! everyones gonna try it on if they think they can get away with it right? But eventually reality bites and they pay the piper... your jobs secure

[Leon m]

Originally posted by Joe ( Cold Spring on Hudson ):
Oh yea and then you start getting people coming into our office with lots of tude cause they read in the NYT how we are worthless. .So wright to the NYT times and give them some Sh!t back.Thank them for making your job that much easier.

[ahp]

Having sold two houses fairly recently I do think that SOME real estate agents earn their fee. For a seller the key seems to be, in our limited experiance, the agent's enthusiasm for the house. In both cases we started with an agent that wasn't very enthusiastic, and after a very ho-hum experiance we switched agents. The houses were sold within a week.

In the first case the agent brought her office staff through the house. They didn't like anything. The wall paper needed to changed. The carpeting needed to be changed. The room flow was wrong. The only good thing was a shuffle board court in the back yard built by a previous owner 40 years earlier and currently used as a landing strip for mosquitos.

Agent number two was very enthusiastic. Suggested an asking price $50,000 higher than Agent number one, and sold it in a week for only $10,000 less than her asking price.

[Larry P.]

"But when you get articles in the New York Times bashing your profession that takes it to a whole new level."

Joe I can empathize but I used to work for the DEC we were not popular I heard many government worker jokes, now I want to be a teacher they aren't so popular around here either.

[Paul Girouard]

Joe Out here a bank ran a ad on TV . Showed a builder with the new home owner , sort of a comic type ad . the builder went over the pit falls of building , cost over runs , misorders etc all the common stuff that goes on , then he sez , "When where all done you'll want to kiss me on the lips !"

It put builders in a bad light but put the banks as wonderful :(
It didn't run to long , I thought it was quite funny , but I'm sure the builders who where bring clients to the bank , taking out const loans , got it pulled by letting the bank know they didn't like the way it "Put the builder as the putz" so to speak.
Your realator's ass. could try the same pressure's but MTL won't.

Hey I don't like realators cuz most are pushy, ego driven , critics who could build a dog house let alone a real house. But they are part of the building industry :( and do earn some of the money they make , I guess :rolleyes: For the effort they put in ;)

Paul

PS How about a photo of Tid Bit's newly oiled fore deck?

[botebum]

ahp- Were these houses on St. Simons? Seems to me IIRC that older, less "fringed" homes on SSI have been bought at or near the asking price, torn down, and newer, modern homes erected in their place. Sounds like the first agent you used was a f-up.
I visited Davis Love III at his place on SSI years ago. (great guy) You couldn't pay me to live in an elitist area like that. God!!! What snobs some of them are!!!

Doug

[Victor]

List it on Craigslist - good idea!

[Joe ( Cold Spring on Hudson )]

Originally posted by Victor:
List it on Craigslist - good idea!Get ready to change your home phone #

[George Roberts]

Joe ( Cold Spring on Hudson ) ---

My last almost dealings with a real estate professional:

The local assessor, an acquaintance, had told me what a fair selling price would be. A price that would lead to a sale within a month.

Real estate person comes in with comparable recent sales. Suggests a low ball selling price. Claims he can sell the property in a couple months. Never says a word about commission.

After inquiring about the commission and costs, I observe that the net is only 70% of the local assessor's selling price.

I tell the sellers I will pay 75%. Cash. Next morning.

---

$1 million dollar home. For the $60k commission I expect full time effort to sell my house.

There are some real estate people who are worth the money. Most are not. That goes for all professions.

[Joe ( Cold Spring on Hudson )]

In my short time as a broker I have sold 4 of my own listings. In this market that is unheard of. It is similar to hitting a hole in one four times out of 10. Needles to say I'm one of the few people who make the full time effort to sell my client's house.

But that is not the issue there are good and bad in every profession. The NYT article goes out of its way to malign a profession and gives very sketchy hourly wage comparisons. #1 thing missing in that Hr wage is the amount of time wasted taking people with no intention of buying anything around on a Sunday. Or worse people that you take around go down the block and buy from another broker because they did not want to bother you again. :rolleyes:

[ssor]

Joe, Have you ever calculated your hourly rate of earnings? Eight hours per day five days per week for fifty-two weeks per year is what most wage rates are based on. Take out four weeks for vacation and two weeks for sick and personal. Now you have a work year for most employed people. So, do you actually work forty hours per week for forty-six weeks per year? I have great regard for people that can be successful in the selling business but like farmers they always complain that something went south and drastically cut into their income potential. But they seem to always have the where-with-all to do those things that they want to do.

[Paul Pless]

#1 thing missing in that Hr wage is the amount of time wasted taking people with no intention of buying anything around on a Sunday. Or worse people that you take around go down the block and buy from another broker because they did not want to bother you again. This happens to all of us. How do you think I feel when I fly, on short notice to meet a prospective research client in say, Chicago, spend hundreds of dollars at restaraunts, plus the time and money spent in preparation for the presentation, to have the project be either reduced in scope or even abandoned at the last minute?

You mentioned, your office spending $20,000 dollars a month, compared to my monthly overhead that's a bargain. Where do I begin to calculate my 'wage'? A seventy hour work week sometimes isn't unusual. Plus its all wrapped up the capital investment of my business. How much capital investment does the average realtor have in his occupation?

I'm just trying to say we've all been there.

You think your maligned in the press, me too - directly, by name. Plus I've had death threats, been spit on and had rocks thrown at me. How ' bout you?

[ 03-05-2006, 01:34 PM: Message edited by: Paul Pless ]

[George Roberts]

Joe ( Cold Spring on Hudson ) ---

You wrote "client's house." I believe you real meant "clients' houses."

If my belief is correct, you cannot work full time for a single client. More important you and real estate people, in general, have a conflict of interest as to whose house to show and sell.

In the distant past real estate professionals brought their knowledge of willing buyers to the table. They provided the service of matching a willing buyer to a prospective seller. I would suggest that you like most real estate professionals usually don't have a list of willing buyers. (There was a thread about buying distressed properties doing a bit of cosmetic repair and reselling. Those types of deals are assisted by knowing those types of buyers.)

By the way: Around my house we work 12+ hours/day 7 days/week. Vacations are job related. There are no sick days. About 4000 work related hours/year/person. And the 12-16 hours/day driving on trips - most is spent talking/reading about business.

[ 03-05-2006, 02:04 PM: Message edited by: George Roberts ]

[Paul Pless]

By the way: Around my house we work 12+ hours/day 7 days/week. Vacations are job related. There are no sick days. About 4000 work related hours/year/person. And the 12-16 hours/day driving on trips - most is spent talking/reading about business.
George, that's a little sick, don't you think?

[Joe ( Cold Spring on Hudson )]

Originally posted by ssor:
Joe, Have you ever calculated your hourly rate of earnings? Eight hours per day .Eight hours per day :D Bwaaaaaa ha ha Eight hours per day :D :D

I work 24 hrs per day with big gaps of nothingness in between. Im mobilized at a moments notice. I have had customers call while I have been out sailing saying they will meet me in my office in 20 minutes. I say I will meet ya there. I Have a change of clothes in my office for just such an occasion. I sail back and tie up and run to my office change and ready to work in 20 minutes or less. EVERY SINGLE DAY EVERY SINGLE HOUR OF THE WEEK. I have taken listing over dinner over breakfast, in the playground of my daughters school. Im ALWAYS working. Always networking. You put an hourly wage on me I make about $20 per hr with a 24-hr per day 365 day per year schedule. :D

And Paul that $20k is just on ADVERTISING mostly in the NYT not basic business overhead.

[ 03-05-2006, 03:05 PM: Message edited by: Joe ( Cold Spring on Hudson ) ]

[ssor]

Joe, I am sorry that you don't get any sleep or time to play. But those big gaps of nothingness can't be counted as work.

[Joe ( Cold Spring on Hudson )]

FWIW ssor I'm working NOW. I worked and sold a home while sailing on Uncas. I'm currently posting on this forum from my phone as I take photos of a new listing I have. It's all how you manage your gaps in life :D

[Paul Girouard]

Multi tasking , eh Joe ;)
Paul

[Joe ( Cold Spring on Hudson )]

Originally posted by George Roberts:
Joe ( Cold Spring on Hudson ) ---

You wrote "client's house." I believe you real meant "clients' houses."

If my belief is correct, you cannot work full time for a single client. More important you and real estate people, in general, have a conflict of interest as to whose house to show and sell.

In the distant past real estate professionals brought their knowledge of willing buyers to the table. They provided the service of matching a willing buyer to a prospective seller. I would suggest that you like most real estate professionals usually don't have a list of willing buyers. (There was a thread about buying distressed properties doing a bit of cosmetic repair and reselling. Those types of deals are assisted by knowing those types of buyers.)
.No offense George but you have an incorrect perspective on the business, it's OK many of the general public share your incorrect opinion.

You can work full time for a single client. It's called time management. All corporations that have more than one client do it. I have no conflict with who's house to show and sell. Unlike popular wisdom I can not make anyone buy or sell a home. I can however introduce people to home that suit their guidelines and budget. So I show them EVERY house that suits their needs and budget. I have sold more of my own listing NOT because I pushed anyone toward a particular home but more importantly I LISTENED and brought the correct people to the correct home and THEY made the decision that the home was perfect for them. I maintain a list of over 50 willing buyers at any one time who are waiting for the perfect combination. When one of those is listed with me or ANYONE ELSE I make it my business to inform them. THATS how the game is played bubby :D

[Bob Cleek]

No question that realtors serve a necessary function (as do lawyers and doctors and so on.) However, I think people are becoming skeptical because of two significant issues which I've never heard the real estate industry (which fills the weekend papers with business propaganda) address straightforwardly.

One, what relation does the price of a home have to the amount of work involved in selling it? A $100,000 brings maybe a $6,000 commission. A million dollar house a $60,000 commission. Is the ten times more expensive house ten times more difficult or costly to sell. Of course not. In many instances, the higher priced nice home will sell faster and easier than the beat up crack house. Why doesn't the industry, which has as much of a near-monopoly as any, offer pricing structures that reflect this?

Secondly, realtors have a bizzarre interpretation of loyalty, which they call "dual agency." Not saying they aren't honest, but rather than in some instances they cannot be. How can a realtor be both the listing and selling agent and do justice to both buyer and seller? The seller wants the highest price possible and the buyer wants the lowest, and the conflicts simply multiply from there. Don't say, "Well, since the realtor is on commission, they will naturally get the highest price." because once the realtor is representing both buyer and seller, they have doubled their commission (not having to share it with the other realtor and agent) and thus have a greater incentive to sell the house to their own buyer, even at the expense of the seller's price.

The real estate industry has to get honest with itself and everyone else. If their pricing structure reflected something other than a "flat rate tax" on everything that sells, there wouldn't be thousands of gum-snapping divorcees in leased Mercedes' trying to sell one house a year to make their nut. The cream would rise to the top and fewer realtors would be fighting over the product on the market, while making more on the volume. Everyone would benefit.

[George Roberts]

Joe ( Cold Spring on Hudson ) ---

I never take offense.

I think your words prove my "perspective." While you deny it, you even point out at least one conflict of interest.

I don't mind a person having conflicts of interest. But I don't allow it, when they are selling my home.

---

As I read your words it appears you are acting like a buyer's agent not a seller's agent. I have no problem with that. I simply don't think the seller should be paying for that.

---

Foot traffic gets a house sold. I would expect a person who is selling my house full time to run every customer through my house. That customer might not buy the house, but might know someone who might. (You can prescreen customers for the ability to pay.)

---

Your business practices, and we agree on what they are, are what is usual in real estate.

I don't understand why so many would pay so much and allow those practices. But they do.

[Joe ( Cold Spring on Hudson )]

Secondly, realtors have a bizzarre interpretation of loyalty, which they call "dual agency." Not saying they aren't honest, but rather than in some instances they cannot be. How can a realtor be both the listing and selling agent and do justice to both buyer and seller? Wrong. an agent can be a sellers agent (working for the seller) OR a buyers agent (working for the buyer ) You can never be both. Under NYS law you have a prospective buyer or seller sign a Agency Disclosure. This informs the buyer or seller exactly what your fiduciary loyalty lies. If I have a customer come in and they are interested in one of my listings I explain to them that I will only be able to act as a sellers agent and my obligation is to the seller. I inform them that I am to treat them fair and professionally but not to disclose to me anything that they would not want the seller to know. In the end I tell them you have to like the house and then the negotiations go through me but essentially its the buyer and the seller that agree on a price.

There are very strict laws on agency. So you can NOT have that kind of dual agency at least not in my firm or in the state of NY.

As for the amount of work involved in selling a $60,000 home VS a $6 million dollar home ( we just listed one for $6.7 million ) There are a million little intangibles that can not have a price put on their head. there is networking and style that allows you to sell in that rarified air. There are skills and subtle ways that need to deal with such a client buyer or seller. These can not be taught and are not for everyone. but these skills are priceless and make it appropriate to charge what we charge. Our office maintains after 30 years of business a stable of close personal contacts in this rare air that can be called upon to sell or to buy a home in this range. This skill has no price and is MUCH MUCH harder and costly to acquire than selling $60K crack houses to renovators.

[ 03-05-2006, 04:29 PM: Message edited by: Joe ( Cold Spring on Hudson ) ]

[Joe ( Cold Spring on Hudson )]

George I have turned down a listing - yours would be one. No offense but you have a outlook of the industry which is contradictory to the successful marketing and sale of your home.

FWIW 75% of the time I work as a sellers agent. I make this perfectly and legally clear in my agency disclosure conversation with prospective buyers.

[brad9798]

I hear you, Joe.

But like I've said before, as with 80% of mortgage folks, 80% of real estate agents are useless and/orlazy and/or incompetent and/or crooks.

After all, the average RE agent income in the US is around 26,000 per year ... (or a good month for a GOOD/VERY GOOD agent and/or mortgage person).

It won't disappear ... just like paper money won't disappear ... just like GOOD travel 'agents' won't disappear ...

What it is ... is Darwinian ... 80% of agents and mortgage folks end up doing something else six months into their newfound carrer.

The effective ones continue to make good/great money-- the ones that are honest, hardworking, and see the longterm gameplan. Others, just as in ANY other industry are destined for mediocracy or change in career path.

Don't worry, Joe, PRODUCERS are ALWAYS in demand. And as you know ... sure, you are on call (as am I) 24/7 ... but actual hours worked? Well, let's say it's don't ask, don't tell.)

I'll fiddle around for a few a day ... ;)

[Meerkat]

If you love what you do, it's not work, no matter what it is.

[Paul Girouard]

Guess we can't shootum any more neither , seeing theys endangered , HUH :(

Jee all the fun is gone now :D
Paul

[ahp]

Botebum,

The first house was and is in Andover Massachussets, 25 miles north of Boston. Andover has had some teardowns but this wasn't and won't be for a long time.

The second house on a one acre lotis here on the Island. A young couple bought it and there is no sign of a bulldozer going through it. However, there were a couple of nibbles from people thinking about tearing it down and putting in six or so townhouses. When they found that the zoning was half acre, no sewer, and inadequate county water, they lost interest, for which I am glad.

There are houses here on the Island that are ripe for teardown. Some of these are in a few old, small, black neigborhoods with substandard houses.. Of course we can have a discussion of what is substandard. The developers have been waving money at them and we see signs "Won't sell. Don't ask."

One of our assets is little old trailer park down by the airport. It keeps the Island from looking like Hilton Head, which I and others detest.

The Sea Island Company owns most of the north end of the Island which has been largely undeveloped till now. Now they are building two golf courses, a lake, a monsterous riding stable, and selling 500 home lots. The lots are multiacre and intended for megahousee. Around here the Sea Island Company is the 700 pound gorilla.

[Meerkat]

Bummer ahp...

When those 500 lots are sold, the retail outlets will upgrade to serve the more affluent clientelle and property taxes will climb to the point where the "sub standard" homeowners will be forced to sell. Then, the new residents will elect their own to government and find a way to zone out the trailer park. Viola, another Hilton Head. :(

[ahp]

Not likely. The Islands are a cash cow for Glynn County, and Georgia has some strange laws making it very difficult to incorporate a new town, city or county.. Down here the county is the effective unit of government.

In Glynn County about 70% of the tax revenue comes from real estate taxes from the the Islands, St. Simon's and Sea Island. The Islands are residential populated by a lot of retirees like me. Hence we send very few children into the public school system, which accounts for 72% of the Countys budget. They aren't going to let us get away!

[Garrett Lowell]

I seriously doubt Realtors are an endangered species. It's always good to have a trusted professional on your side when you're doing a land transaction.

[botebum]

ahp- sounds like what Myrtle Beach wants to be.

Doug

[Matt J.]

It wouldbe a shame if realtors weren't an endangered species...

5% for coordinating efforts of the people doing the work and taking the liability... title companies, lawyers, inspectors, surveyors, and banks do 99.9% of the work and liability.

Yet, realtors want 5-6% standard. Only organization I'm aware of that can fix pricing nationwide without being subject to prosecution under antitrust laws. Perhaps it's that huge lobby in DC making sure their friends keep them safe?

On the other hand, I do a survey, costs 0.025 to 0.25% of the value of the property and I hold liability for the boundary of the property for 12 years or so!? I somehow don't think that makes sense. Further, if I or any members of my profession are found even discussing what we charge, let alone coordinating it to be 2-3% (as I've argued repeatedly in the past) we're likely to lose our license and face prosecution resulting in at least heavy fines.

It'd be good to have realtors be subjected to the same requirements... Perhaps they'd get to charging what it's worth, say 0.01%?

Joe, here's the thing... I hear this "realtors work so hard, they have to charge 5%..."

Well, in most businesses, if the finances don't work, the business fails. Instead, realtors have the protection of congress to charge 5-6% so they can stay in charge. I think it's unfair protection. If realtors had to be competitive, they'd be charging a lot less, but since they know no one really charges less, they can get away with the 6% crap. It's bad business when a monopoly takes over and protects crappy practices.

[Joe ( Cold Spring on Hudson )]

Matt J, we are regulated and licensed by the Department of State. We share in what is called vicarious liability and have to have huge errors and omissions insurance. We are very liable and have huge exposure. Think about it, in your industry if an inspector from another firm were to inspect a property that you inspected would you be liable for his errors?. In vicarious liability a broker you may never have met shows your listing to a customer and lies cheats of acts in any way unprofessionally. Due to the fact that he is acting as a sellers broker he is in essence acting as a sub-agent to your firm and to your client the home owner. You and your firm through vicarious liability can be sued for the actions of an agent you have never met and have no relationship with, except allowing him/her to show the house.

Further, if I or any members of my profession are found even discussing what we charge with anouther agent, let alone coordinating it to be ANY % (as I've argued repeatedly in the past) we're likely to lose our license and face prosecution resulting in at least heavy fines.

Additional there is no price fixing, when I had my business as I said I would routinely charge a 30% mark up and I never had to discuss it with the client I bid on the the job with my mark up in place. Sometimes if I could get a better deal from a vendor I never passed that savings off to the customer I pocketed the profit. You do not get to do that in this business. You have to tell the seller what your mark up is going to be on the house, and should you sell the house for more than the listing price you do not get to pocket the difference LOL. There are discount brokers willing to take a listing for much less. But it's generally a scam they take a listing for 2% that gets you a sign on the lawn, 3% gets you on THEIR website, 4% gets you an ad in the local paper, 5% may get you on the MLS, 6% gets you full service.

Hell now with buyers agency you can conceivably have the buyer chip in for part or more of the %. I would love to have serious buyers retain me like a lawyer. Pay me a retainer of lets say $2,500 to find them and work with them to find the perfect home and work all the negotiations. This would cover my expenses gas and insurance and overhead. This would also limit the amount of lookers from serious buyers. Then we can negotiate the commission, and conceivably a broker can make as much % as he can. Now thats capitalism. :D

AS far as how the system works now yea its flawed. But every industry is flawed. I think the publics persona is tarnished because unlike every other industry our rates are out their for the general public to criticize. Every business plan works in some way on mark up or commission or a percentage, Its generally an unwritten rule that waiters get a 20% tip. Ooooh my where is the waiters lobby in congress? Why should waiters get 20% of the cost of the meal they didn't cook it, or buy the food or run the place they just serve it to you. Oh and what if you choose a $200 bottle of wine the waiter still gets 20% of that ???? The OUTRAGE the unmitigated gaul of the waiting industry to try to price fix 20%

Truth is and I have seen it happen a home owner can refuse to pay a commission. Just flat out refuse. What's the broker gonna do sue the client? Na a way to build a business, oh they are the agency that sues their listings.

[ 03-06-2006, 08:56 AM: Message edited by: Joe ( Cold Spring on Hudson ) ]

[Matt J.]

Joe,
Realtors are not professionals, let's not compare a weekend class and test with requirements for university years of experience, vouching by current professionals, and then exams - and not a couple hours, but up to 24 hours of exams (just for my surveyor's license, an additional 16 hours for engineering).
And engineering/surveying is the easiest profession to enter. Law and medicine require much more schooling and medicine in particular requires a heck of a lot more practical experience before being allowed to practice.

Realtors can be nice folks (and I've met a few who are good people, Joey meboy ;) ).

Comparing a recommended gratuity to a contractual fee which is actually fixed (hence the common reference to 6%) nationwide is apples to oranges.

Licensure doesn't make professional. What realtors do is assist in a sales transaction; to do that they have to have a minor license.

What they do with price/fee fixing should be illegal - or the professionals ought to be allowed to do the same.

Your argument concerning liability is a red herring. I'd like to see how often the listing broker is sued because some schmo showed a house and misrepresented something. If the listing broker screwed up they ought to be sued.

If another surveyor surveys a property we've previously done, he's a professional, and will likely be on his own liability if he screws up. If he can show that he followed our survey and we badly goofed, then yes, for 12 years I can be sued personally and the company. Can you say that? if you suggest a room is 12x12 or 20x24 can you be sued 10 years later if it's found to be 10x13 or 21x22 later on? I doubt it very much. And what would you risk? A license that took a couple weeks at most from start to finish to acquire? I'd lose a license that took 10 years to acquire as well as serious fines and, if found to be criminally negligent or incompetent, then possible imprisonment (as any criminal act ought to be punished).

I don't buy the realtors work hard, spend a lot stuff. Not a reflection on you, Joe, but on your industry.

[Joe ( Cold Spring on Hudson )]

Mat I love ya but ya got it all wrong. I went to engineering school I know about licensing procedures. You are incorrect about the requirements for NYS licensing. n order to qualify for licensure as a real estate broker, an applicant must have at least one year of experience as a licensed real estate salesperson or at least two years of experience in the general real estate field (e.g., buying and selling your own property, managing property owned by your employer), have satisfactorily completed both the qualifying salesperson course of 45 hours and an additional 45 hour real estate broker course as approved by the Secretary of State, and have passed a qualifying examination administered by the Department. Additionally you need to maintain 22.5 hours of continuing education during my license term? Thats 112.5 hrs Not exactly a weekend. I have my brokers license and I am going for my appraisers license and then my inspectors license. I want to be as educated as humanly possible in this industry I treat it as a profession and It is a profession wether you choose to acknowledge it or not. We do a hell of a lot more than just assist in a sales transaction. But yea in the end it's a freakin sales job and the burden of the Stae required paperwork is crazy.

There is no price fixing % are negotiated all the time and you get what you pay for like any industry.

The liability is NO RED HERRING at all it is pervasive through out the industry lots and lots of litigious people. Some firms are unable to get E&O insurance because of one bad apple in the organization. Oh and VICARIOUS LIABILITY is a big archives heal. That seriously affects the industry. I'm not making this up it's a fact.

[Andrew Craig-Bennett]

Since Martin has started a line in British English/US English puns, let me add one.

I quite agree that REAL Estate Agents are an endangered species! ;)

[George Roberts]

Joe ( Cold Spring on Hudson ) ---

I don't know anything about real estate licensing exam but ...

Real estate CPE is a joke. Not because it is real estate CPE, but because all CPE is a joke.

...

My wife tells a story about a CPA who was representing both sides and being paid by both sides in a divorce settlement. That CPA could not see the ethics problem or the conflict of interest problem.

You suffer from the same blindness.

...

Andrew Craig-Bennett ---

smile.gif

[PatCox]

Joe, that article doesn't bash realtors. I think it was just an attempt to explain an economic phenomenon, which is, why do commission rates stay the same even when rising home prices dramatically increase the amount of commissions paid. From the economic perspective, these guys just pointed out a reason for this, which is that when commissions increase, the number of agents increases, and the increase in agents means they individually sell fewer homes, because the high commissions allow more marginal performers to stay in business, and therefore, there remains no fat to trim on the part of the realtors, and thus they really cannot lower the commission percentage.

Its interesting.

Supply and demand dynamics are not so simplistic as the chicago school theology would have you beleive. Here we learn the counter-intuitive lesson that sometimes a lack of barriers to entry into a market can make the market more inefficient.

Taking that one step further, they predict the demise of the profession, as happened with travel agents. You could view that as the ultimate lack of any barrier to entry, its not that realtors will disappear, rather, the number of realtors will expand to the limit, as everyone in effect becomes their own realtor.

[ 03-06-2006, 12:33 PM: Message edited by: PatCox ]

[Nicholas Carey]

Originally posted by PatCox:
Taking that one step further, they predict the demise of the profession, as happened with travel agents. You could view that as the ultimate lack of any barrier to entry, its not that realtors will disappear, rather, the number of realtors will expand to the limit, as everyone in effect becomes their own realtor.I think the rise of the 'net will ultimately result in the demise of most mediated transactions (stock and commodity trading, etc.) The mediators used to be necessary when trading was done in a pit, but if trading in something like a stock merely requires is a 'puter, a 'net tap and the ability to fill out data entry screen, why pay someone for a trivial task?

I don't think real estate agency will go away, though, at least good real estate agents. Houses aren't commodities. Finding the right house for a buyer and connecting that buyer and seller is a fine art and a good real estate agent earns their keep. "You gots to kiss a lot of frogs to find your prince", so to speak.