Realtors have competition??

[Cork On the Ocean]

2005 National Association of Realtors? Profile of Home Buyers and Sellers

Nine out of 10 home buyers use a real estate agent in the search process

7 out of 10 homebuyers use the internet to look for a home
81 percent of buyers who use the Internet to search for a home buy from a real estate agent.

The number of US internet users has just passed the 100 million mark (half of the adult population.) Just one year ago, that figure was 69 million.
The wealthiest Americans ($100K or greater per year) are the largest group of online users.
Baby Boomers and seniors are the fastest growing segments of Internet users.

Also, 63 percent of non-Internet users buy through an agent.

The level of FSBO's is on a sustained decline and is now at a record low. Only 13 percent of sellers conducted transactions without the assistance of a real estate professional in 2005, and 39 percent of those FSBO transactions were ?closely held? between parties who knew each other in advance.

8 out of 10 FSBOs eventually list with an agent.

The median home price for sellers who use an agent is 16.0 percent higher than a home sold directly by an owner; $230,000 vs. $198,200. While many unrepresented sellers are motivated to save on paying a commission, the commission is significantly offset by the sale price difference.

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From personal experience, negotiation skills are crucial in purchase or sale. ie: I recently sold a home in which the first offer that came in was a ridiculous lowball offer. My seller was insulted and didn't want to counter but took my advise and put the ball into play. The home closed at full price. The emotional attachment of many FSBO's is their downfall.

In Walton county and many other resort areas with low resident populations, people are here for a week, sometimes a day. They don't have the luxury of driving around looking for FSBO's for 3 months. Also, many high end buyers and sellers are sucessful people with limited time as MackBayou mentioned. In areas with high populations of full time residents and lower socioeconomic demographics, I would think that FSBO's would be more effective. It's certainly everyone's right to do a FSBO and some are successful but the stats look like they're gonna have to put a lot more effort and creativity into it in the future.

Shelly's post: "Owners got fed up paying 6% to someone who would "sell" their home within 30 minutes of listing"

I felt exactly the same way before I was in the business but understand the other side now. First only half generally goes to the listing broker and then as little as half of that to the listing agent so 4 entities are usually getting a piece of the pie.

The information that Joe, myself and other realtors post on this forum cost us a lot of money. I'm a member of 3 different Florida associations and MLS systems which cost me over $3,000/yr just to get access to this data. This doesn't include trend reports, advertising, office overhead, transportation, lunches for clients etc. which is tens of thousands. (or the 60-80 hrs a week of my time)

Don't misunderstand, I'm not complaining because I love what I do but there are justifications for the commission for many agents who work real hard. Yes, there are some that pay their mls fees, have the gift of gab, dump your listing into the mls and that's it. The unfortunate part of it is that a recent NAR survey reports that most real estate sellers and buyers perceive no difference in realtors. I used to be a pharmacist and someone once told me they didn't understand why I was "degrading" myself selling real estate. To me it's a sad state that many people place so little value in the professional guidance available when making decisions that could make or break them financially.

 

[Smiling JOe]

... It seems technology may be at odds with an entire industry here. Or is it?

Sorry, Bob, I misunderstood your original question. I love technology and encourage its use to buyers and sellers as often as I can. I recall my first home purchase in SoWal. The agent involved did not know how to scan and email me the offer to sign. ...and this is a well respected, well known top producer, and we are living in the technological age. Ever hear of digital cameras? I was so pissed off when I was searching for photos of listings when I moved here that I thought about starting a business taking photos for Realtors, but I didn't know if it would work. I've seen more photos trying to sell one glass jar on Ebay. I guess Kurt showed us that it would for the luxury properties with the virtual tours, but was thinking about just some drive-by shots. To this day, I am still amazed at the number of agents who don't want to show off their seller's home by adding at least 5-10 photos, much less one which is required. I think doing so, assist other agents preview the listing without leaving their desk, thereby reducing the idle time spent with an interested buyer. They do not want to spend their entire vacation looking at properties that do not meet their satisfaction. If the photos were posted, a buyer could easily sort through and weed out the homes that were not of interest.

One big plus of the internet and technology, is that when most customers come in the door looking to narrow their search choices, they already have
have a good understanding of what they like or want in a house or property. I am dealing with more and more sophisticated buyers, and this is a real pleasure for me. Buyers may need more information to help them with the +/- of the different communities rather than just finding a home. Currently, the internet still lacks the ability to give a comfort factor (feely touchy) to neighborhoods and communities. A good Realtor can assist with many things outside the scope of finding a buyer a house, and bringing a contract to a seller. So far, I have not seen the internet fill in that big gap.

 

[Bob]

Cork on the Ocean, No ax to grind....just a question so that I may understand trends, but 29 percent FSBOs in Orlando '05 does not seem like a fall to a record low, but vice versa. Also, if the seller recieves a higher price at closing with a Realtor versus FSBO, how is this possible? Aren't the vast majority of Realtors choosing not to be the seller's fiduciary, and instead being an evenhanded transaction broker? Is this because the seller has a better idea for asking price, has a better buffer during negotiations etc.? Also, the one topic no one is discussing is the attempt by the Feds to open up the MLS to discount internet based brokers like Help-u-sell,buy owner etc. What's going on here? Is the exclusion of brokers willing to take a flat fee or greatly reduced commision illegal because, competition is stifled? I'm not sure of the answers, but it seems to me that the internet is quickly changing the real estate business in ways most folks aren't aware of.

 

[SHELLY]

"Death of a Sales Commission"

During the past "hot" housing market there were plenty of buyers to go around and the real estate industry was able to absorb double the number of agents they had 5 years ago. But with buyers drying up, houses hanging on the market longer and agents getting desperate for sales, I think we'll see more instances of the claws coming out between the "traditional" real estate agents and the "discounters."

 

[Cork On the Ocean]

Hi Bob,

You have excellent questions and admittedly I don't have all the answers to the findings.

Regarding Orlando, I don't know much about that market but we do know that it has long been a vacation destination which has over time grown tremendously in the the area of full time residents. If the FSBO numbers are upside down there, it would support the theory that FSBO's have a better chance as more people begin to take up full time residence. I'm not aware of any studies done that separate FSBO data in various geographical areas. Perhaps a good study for one of those cut rate brokers.

Regarding how a seller can net more money while paying a commission, the data shows that represented sellers get higher prices than FSBO's. One might then say, why would I buy from a professional if I'm going to pay more than buying from a FSBO.

-Keep in mind the data found that 39% of FSBO's sold to someone they already knew which means that they weren't "at arm's length transactions" and are inherently lower. You might cut your dad's friend a break, listen to a coworker or friend when she says homes like yours are selling for x amount of dollars etc. You trust these people. You would rather sell to them than give a complete stranger (a professional) 5% of your money.

- FSBO's are generally overpriced. The seller is emotionally involved and thinks that all the love and care they've put into that home makes it more desirable than others. I have a very good friend that has a B&B that she thinks she can $299K for when the developer is offering larger and newer units for $199K. She says that a good realtor could get that kind of money by focusing on the merits of her unit which kind of hurts my feelings but I understand the emotions behind her property. Realtors can't work miracles. Yes professional decorating has value but not 100K for 1 room of furniture. So if she does it FSBO and overprices it by 100K, sits their all season, the data shows that 8 out of 10 people like her will then engage the services of a professional. There are also realtors that will tell you they can get what you believe it's worth. Would you pay $100K more for that unit because it's beautifully decorated and would you want to go to a realtor that

- Lastly that seller that doesn't respond to a lowball offer because they got insulted, just lost a sale because a good negotiator will offen get that lowball buyer up to reality. A good negotiator will communicate more effectively to the buyer. Knowledge of closing costs, capital gains, seller carrying costs etc and communication of such to the buyer sometimes makes the price less painful to the buyer. For example, had a buyer that that was looking at 399K homes thinking they could get it for $335K because the seller had bought it 2 months before for $320K. When I explained that the seller probably paid up to 8K in closing costs, is paying a minimum of 14K in sales commission, has been paying 2 months of mortgage payments which are primarily interest and
may have to pay 25% on the profit for short term capital gains - he'd be a moron to sell it to them for $335K. They understood but how many FSBO's have the knowledge or communication skills to explain all that?

Regarding agency, If a broker has any agent working for him/ her that lists a property, the broker could not have any other agent or that listing agent sell your home unless they become a transaction broker. When someone chooses a listing agent based on their sales performance, they are choosing someone who can't be a single agent for them. The rationale is that the agents are just that, agents of the broker and the listings and the sales belong to the broker, not the agent so even if they assign 2 different agents to work each side (which is required in some transactions) , how can they perform all of the duties to you that is required as a single agent because both the seller and buyer are their customer There is a vehicle set up where your broker can be a single agent when he/she llists and then if his/her company brings a buyer, they can transition to a transaction broker for you.

Is this because the seller has a better idea for asking price, has a better buffer during negotiations etc.?

Not quite sure what you're asking there since it was after the question about transaction brokers but if its related to the FSBO data, the vast majority of represented sellers do have a better idea what to ask and if they listen, they'll price it right even if it's not what they want to hear. Regarding a buffer. Not sure what you mean there. Many sellers will price it a little higher than what they want to allow for negotiation which is probably a pretty good idea because most buyers want to get a "deal" and if you don't go down they feel like they didn't. Even when a property is price REALLY low compared to comps, buyers will pick that one out and then want to bargain it down even lower. I tell them if I had a presidential rolex with a certificate of authenticity in pristine shape and wanted $500 for it, are you going to try to get me down to $400? No. you know it's bargain. Same with real estate. Most buyer's don't care how good the price is, if they can't "get you down", they'll lose the deal rather than let you win. That's another where a professional can help. Lower your price, have them pay for primary title insurance and/or doc stamps on the deed. They "got you down" in their minds and you net the same thing.

Regarding discount brokers, I don't find them a threat in this market. They've been around for ages. Consider this, you pay somebody $500 to put your home in the MLS. If you offer 1% to other realtors to sell it, who's gonna show your property for 1% when there are so many other properties out there where they will make 2-3%? They simply never show your lowball commission property.

Also, exposure is key . For $500, will the cutrate broker pay $2500 to get your listing to the top of the thousands of properties in your area that are on realtor.com? Are they going to sit in your house all day at an open house on memorial day when we are jammed with potential buyers in town?

I just did an online course where they said that homes with extensive descriptions and multiple photos get 299% more exposure! I just listed a watercolor property that was with another agent for a year. When I looked at the old listing, the property description was input under the driving directions. (Didn't tell client but noted it.) Another condo we just listed, the seller had his mom decorate it and even though they are quality furnishings, it looked like a 70 year old lady decorated it. When we photographed it, it looked terrible - all beige with little brown flowers . We "gently" told him that we'd like to perk up his place a little. After about 3 weeks with no calls, he listened and gave us $300 to punch it out. We bought some bright colored accessories, moved some furniture around to make it look more open and roomy and rephotographed it. Got a call the day after we uploaded the photos to show it Saturday. What discount broker would or could do that for you? Also, gotta put a plug in for Kurt. I'm sure he has the figures but listings are also viewed a lot more often when they have a virtual tour.

Using a good professional truly has it's benefits. It's unfortunate that anyone can take a course where too much info is crammed into a one week course, pass the state exam and hit the ground running with little or no daily guidance from the broker. There are good ones and bad ones and unfortunately, the bulk of people will spend a day with a very competent realtor who does have their best interest in mind and then call up the agent their neighbor used and list with them. It's the nature of the beast, I guess and now and then, you do find consumers who get it.

 

[Cork On the Ocean]

"Death of a Sales Commission"

During the past "hot" housing market there were plenty of buyers to go around and the real estate industry was able to absorb double the number of agents they had 5 years ago. But with buyers drying up, houses hanging on the market longer and agents getting desperate for sales, I think we'll see more instances of the claws coming out between the "traditional" real estate agents and the "discounters."

Shelly, I love reading your take on things sometimes. Would you go to somebody in an under developed country for a face lift (not that I'm implying you need one ) because it's cheaper. Depending on what's important to a person, they place more value on getting the best they can. If you were a full time real estate investor, that discount broker might have about as much value to you as the plastic surgeon in who knows where.

 

[SHELLY]

Depending on what's important to a person, they place more value on getting the best they can. If you were a full time real estate investor, that discount broker might have about as much value to you as the plastic surgeon in who knows where.

Top-'o-the-line full-time real estate investors don't need full-service real estate agents. Many already have their own license (in state) or have connections in other areas to take care of the details.

In the upcoming real estate shakeout and correction, I expect some of the full-service agents will convert to discount agent status to service investulators (refusing to listen to sound real estate advice to lower their price to market price) who are attempting to squeeze every last shekel they can get out of their investment.

 

[Bob]

Cork on the Ocean, Thank you for your answer. As with all professions, good Realtors will always be needed for the way they facilitate transactions. Local knowledge is critical in SoWal. I have found this out the hard way. Personally, I think the rise of the internet coupled with a strong market produced so many FSBOs here in Orlando...it was just all so easy. Discount brokers are at war with traditional brokers now for access, and it will be interesting to see how it plays out. I think there is unlimited opportunity out there for skilled communicators. There will be many niche players.

 

[goofer]

Everyone Who Contributed To This Thread, Bravo. This Was An Especially Interesting And Educational Exchange Of Ideas !!

 

[Cork On the Ocean]

Top-'o-the-line full-time real estate investors don't need full-service real estate agents. Many already have their own license (in state) or have connections in other areas to take care of the details.

Shelly, I have to disagree with you on this one from experience. I have a developer that actually is giving me 1% more than I asked for to market his property. He doesn't have time the time nor the inclination to get his own license. He truly is "full-time" investment and has lots of pans in the fire.
He understands his strengths and weaknesses and has been doing it so long that he's had lots of different realtors and takes very good care of all of his subs including his realtors (has stuff going on in many areas).

Also that new NAR survey of sellers noted that only 2% of FSBO's said they had RE licenses. I think that full time investors who actually market their own property are not the majority. Unless they are a megacorp employing people to sell or a small time investor doing a few properties a year (which I guess could be full time), the most successful ones are too busy traveling, scouting out properties, doing their due diligence, dealing with lenders, builders, attorneys and accountants to spend their time fielding calls and showing their property. Do we have any large full time investors here that find it's worth their time to sell their property on their own? I don't know, just have never really met any.