In a world that is moving evermore toward the internet, industries are having to adapt at an accelerated rate, and this is true in the realm of real estate as well. Many sellers are moving toward internet real estate brokers, who promise results for a flat fee, eroding real estate commissions, but perhaps eroding equity as well.
Copyright (c) 2007 Jesse Moore
Is there anything in your experience that has prepared you to expect something for nothing? No? What a revolting revelation! But it seems to be universally true-you get what you pay for-nothing more, nothing less. Well, sometimes much less. Occasionally more-maybe the folks from "Antiques Roadshow" can provide a few anecdotes-the $5 garage sale find that should be insured for $17,000, for example. However, I think we all know that these are the exception rather than the rule.
So why is it that when it comes to real estate, for many there is an overwhelming compulsion to believe they may be the one beat the system? Maybe it's because the perceived rewards are potentially great, and this is the primary niche that most of the discount brokerages seem to have targeted their message to. Realistically, I believe there will always be a segment of the market that has a need to maintain control, regardless of the costs in time and money. And they certainly earn that right-paying dearly in reduced sale prices relative to the market.
According to the NAR, FSBO (For Sale By Owner) sales were down in 2006, from 13% of sellers in 2005 going it alone to 12% in 2006. This would suggest that the shifting market has persuaded some sellers that the rewards of an unrepresented sale are diminishing as the requirements of marketing a home, negotiating the transaction, and shepherding all parties and paperwork through escrow has become more time and resource intensive.
Based on this and the fact that nationally the housing market has slowed relative to the past five to six years of a decidedly seller-slanted market, I have begun to wonder what the draw could possibly be for those sellers who elect to go with a discount or limited-service brokerage. I realize we're pushing a very large rock up a steep and slippery slope, but it seems to me that the disconnect starts with a misconception about the job of an agent.
Granted, years of comparison to the crusty used car lot crowd hasn't helped our image, but the latest divergence in business models from limited/discount to full-service and the range of options in between has served to further cloud what were already murky waters.
However, what seems to be getting lost are the definitions of an agent. According to Webster's, an agent is:
1. One who acts for, or in the place of, another, by authority from him; one entrusted with the business of another; a substitute; a deputy; a factor.
2. An active power or cause; that which has the power to produce an effect, such as a physical, chemical, or medicinal agent; as, heat is a powerful agent.
To my mind, these two are inseparable: an agent should both execute the business of another, acting in his place, with his authority, and producing a physical effect-in this case resulting in the sale of a property.
To use the term ‘agent' in any other context regarding a real estate transaction is misleading. While a limited-service brokerage may have access to the local multiple listing service (MLS) and is authorized to enter properties, its value ends once the property has been dutifully added to the list. Frequently, they offer no representation-leaving the seller to negotiate his own transaction. And as an agent of change, they don't market the property, because once it's on the list, their job is done. So in both measures of agency, there is no connection between its actions and the title.
But truly this is just the beginning of my concern. The term ‘marketing' is used generally to refer to the activities of making a product visible to a market. Whether it's widgets or wigs, pumpkins or property, the concept remains the same-in a free market system, the greater the exposure, the more likely a true value will be determined by a public acting of its own free will, given access to comparable information about the specific products and available competing ones. Note that ultimately the value of a product or property is determined by what a buyer is willing to pay for it. The larger the potential market, the greater the need for a diversity of marketing channels to ensure that exposure is maximized. And here's where the limited-service model loses traction: just adding a property to a list is not, by definition, marketing.
Even if all the property data has been input correctly, enabling comparison to competing properties, and assuming there is at least one photo of the property, the reality is that a multiple listing service is just that: an ever-evolving, growing list. It is a set of data regarding the particulars of properties within a market. Granted, the Internet has made it possible to distribute those lists to a wider audience, but this assumes again that all the information has been input correctly, that there are multiple, useful and appealing photos, and that a modestly competent copywriter has taken the time to write some decent lines about the property so that the average prospective buyer might be at least compelled to take a look. My experience says otherwise.
I was introduced to a property three weeks ago by my partner when he recommended I take a look at "this awesome piece of real estate." On the way back from another appointment, I stopped by to see what he was talking about and was fortunate to find the sellers home. They gave me a tour of their beautiful grounds and the spacious, if somewhat dated, home. The property was to die for. The home needed some attention to bring it up to current decorating standards, but the primary issues were flooring and paint which are easy fixes. The sellers acknowledged they had been banking on the appeal of the property and were slowly realizing that our current market is not the ‘run and gun' model many sellers have come to expect from the past few years.
When I got back to the office, I pulled up the listing and was surprised to find that the home had been listed originally for 27 days with a single photo-shot from 1/2 an acre away-slightly blurry and not at all descriptive of the park-like grounds. When the property was canceled and relisted with the same blurry photos, the sellers gave me a call to ask if I would be willing to meet with them to discuss taking their listing. We set a time to meet, and I began assembling a customized listing presentation book, specific to his situation and property. The morning we were to meet, he left a voice message saying he wanted to postpone as they had decided, after receiving feedback from a few folks, to replace the vintage red shag carpets and needed some time to get that done. We rescheduled for the following week.
Meanwhile, the new issue of the book hit the stands, and my partner received a call on this property, requesting a showing. His new client expressed sufficient interest in the property that they ultimately viewed it three times-no offer yet. Meanwhile, I had stopped by after vacation to refresh my memory and take a few photos. While there, a couple of agents stopped by, doing comps for a new listing they would be putting up. I eavesdropped on their conversation, as they echoed the speaking points I had begun outlining for my listing presentation-dated interior, fabulous grounds, need for staging, etc.
We met to discuss listing his property (the original listing agreement had expired three weeks prior to our meeting, but was still showing as Active on the MLS), and while he appeared interested in my presentation and seemed to agree with the final analysis, the fact that he had seen some traffic recently (two agents previewing and my partner's three showings) led him to believe he should stick to his current course. (Did I mention we met on the 80th day of his listing?)
The most telling thing happened later that day when my partner called to schedule his last showing; as they were preparing to hang up, the seller told him, "Just let your buyers know we're not expecting a full-price offer!"
Had I been representing this seller, I would have lost my mind! Imagine giving up that vital piece of information-to the guy you're going to negotiate against. Worse yet, imagine that they paid their ‘agent' $1000 for the pleasure of his services.
What was it Cicero said? "Men decide far more problems by hate, love, lust, rage, sorrow, joy, hope, fear, illusion or some other inward emotion, than by reality, authority, any legal standard, judicial precedent, or statute." It's still true today.
