Comments on: FSBO will not take over the world http://raincityguide.com/2006/01/04/fsbo-will-not-take-over-the-world/ Seattle's Leading Resource for Real Estate Information Sat, 20 Mar 2010 05:05:28 -0700 http://wordpress.org/?v=2.8.4 hourly 1 By: Jessie http://raincityguide.com/2006/01/04/fsbo-will-not-take-over-the-world/#comment-1312 Jessie Thu, 05 Jan 2006 23:41:36 +0000 http://raincityguide.com/?p=284#comment-1312 This piece has struck a cord with so many people because real estate is such a hot topic and the comments of the agents quoted in the article don't make you exactly want to go out and hire them. For example, many agents talk about (even in this article) that they know the market, they know prices trends, etc... but the agent quoted is stating that they he does not even "know who they are"... hmmm, if a competitor had 20% market share, I would know them very well. Also, buyers look towards their agent to provide them with information to "all available" homes for sale and to represent his or hers best interest. I don't think they would feel that their agent is representing their "best interest" if he or she is neglecting to show 20% of homes available for sale in the area. Again, real estate agents do not look good in this circumstance as not in their "be$t intere$t". The real issue for most agents is that they cannot justify the cost of the service they are providing. Considering that everyone (1 of 300 people are realtors according to the NAR) knows at least one or two friends that are REALTORS, they know that many (of their realtor friends) have no clue or have become "professionals" the moment they became licensed. The real problem is that real estate community made a big mistake in marketing their services as "free" to buyers because now it is difficult to back-track and tell the buyers that need to pay 2.5% to get shown a house, write a contract, etc. This is reason why they cannot ask for commissions directly from the buyer and why they won't show FSBO's. The real estate community now needs to start a new spin campaign to educate buyers as to the value of their services to buyers (especially in a turning buyers market) and that they (the buyer) will now need to pay a commission for the realtors services. If this happens, a large portion of buyers will also want to save the "commission" and try to go direct to the owners or look for cheaper alternatives. Even the NAR's own data which states that 70% of buyers select the "agent" based on who call's them back first. This tells you the buyers don't really care who they use, they just need someone to let them in the home and if they happen to love it, they will use that same agent to write the offer because it’s convenient and “free”. Once buyers begin to understand that the buyers agent services are not free (and why they are not being show “FSBO’s”) and in fact, they are paying 2-3% for the agents service they too are going to be looking at alternatives to save money, just like the seller. Understand this… buyers will not pay 2-3% out of pocket for buyers agent services. Ask mortgage brokers how difficult it is to get 1-3% for their services and what the impact of alternative models like "lending tree" and "lowermybills" was on their business. The traditional real estate model is broken and antiquated and cannot continue to function for much longer in it's existing state. So the FSBO / Al la carte services (like ours) are here to stay and will only continue to grow until the traditional real estate model can start to justify their costs or re-invent the cost structure. Good agents who can communicate the value of their services will continue to succeed but the 80-90% who just get “lucky 7-8 times a year” and can afford to stay in the business because they made 60-70K a year are in for a rude awakening. This piece has struck a cord with so many people because real estate is such a hot topic and the comments of the agents quoted in the article don’t make you exactly want to go out and hire them. For example, many agents talk about (even in this article) that they know the market, they know prices trends, etc… but the agent quoted is stating that they he does not even “know who they are”… hmmm, if a competitor had 20% market share, I would know them very well.

Also, buyers look towards their agent to provide them with information to “all available” homes for sale and to represent his or hers best interest. I don’t think they would feel that their agent is representing their “best interest” if he or she is neglecting to show 20% of homes available for sale in the area. Again, real estate agents do not look good in this circumstance as not in their “be$t intere$t”.

The real issue for most agents is that they cannot justify the cost of the service they are providing. Considering that everyone (1 of 300 people are realtors according to the NAR) knows at least one or two friends that are REALTORS, they know that many (of their realtor friends) have no clue or have become “professionals” the moment they became licensed.

The real problem is that real estate community made a big mistake in marketing their services as “free” to buyers because now it is difficult to back-track and tell the buyers that need to pay 2.5% to get shown a house, write a contract, etc. This is reason why they cannot ask for commissions directly from the buyer and why they won’t show FSBO’s.

The real estate community now needs to start a new spin campaign to educate buyers as to the value of their services to buyers (especially in a turning buyers market) and that they (the buyer) will now need to pay a commission for the realtors services. If this happens, a large portion of buyers will also want to save the “commission” and try to go direct to the owners or look for cheaper alternatives.

Even the NAR’s own data which states that 70% of buyers select the “agent” based on who call’s them back first. This tells you the buyers don’t really care who they use, they just need someone to let them in the home and if they happen to love it, they will use that same agent to write the offer because it’s convenient and “free”. Once buyers begin to understand that the buyers agent services are not free (and why they are not being show “FSBO’s”) and in fact, they are paying 2-3% for the agents service they too are going to be looking at alternatives to save money, just like the seller. Understand this… buyers will not pay 2-3% out of pocket for buyers agent services. Ask mortgage brokers how difficult it is to get 1-3% for their services and what the impact of alternative models like “lending tree” and “lowermybills” was on their business.

The traditional real estate model is broken and antiquated and cannot continue to function for much longer in it’s existing state. So the FSBO / Al la carte services (like ours) are here to stay and will only continue to grow until the traditional real estate model can start to justify their costs or re-invent the cost structure. Good agents who can communicate the value of their services will continue to succeed but the 80-90% who just get “lucky 7-8 times a year” and can afford to stay in the business because they made 60-70K a year are in for a rude awakening.

]]> By: Galen http://raincityguide.com/2006/01/04/fsbo-will-not-take-over-the-world/#comment-1300 Galen Thu, 05 Jan 2006 00:13:01 +0000 http://raincityguide.com/?p=284#comment-1300 Yes, it might make sense to hire a lawyer. I figured that for the simple stuff, a real estate agent is probably cheaper and sufficient. However, I don't mean to give lawyers short shrift. Yes, it might make sense to hire a lawyer. I figured that for the simple stuff, a real estate agent is probably cheaper and sufficient. However, I don’t mean to give lawyers short shrift.

]]> By: craig http://raincityguide.com/2006/01/04/fsbo-will-not-take-over-the-world/#comment-1298 craig Wed, 04 Jan 2006 22:10:24 +0000 http://raincityguide.com/?p=284#comment-1298 Nice post. Here's the address for the Levitt piece that examines the dynamics of the agent/client relationship: http://pricetheory.uchicago.edu/levitt/Papers/LevittSyverson2004.pdf. I'd add that, rather than hiring a real estate agent to "do the paperwork," you should consider hiring a lawyer. While agents can engage in the limited practice of law by filling in blanks on a preprinted form, a lawyer can handle any legal issue that may arise. If you want assistance with the real estate market, it makes sense to hire a market professional. However, if you only want help with legal issue, why wouldn't you hire a legal professional? Nice post. Here’s the address for the Levitt piece that examines the dynamics of the agent/client relationship: http://pricetheory.uchicago.edu/levitt/Papers/LevittSyverson2004.pdf. I’d add that, rather than hiring a real estate agent to “do the paperwork,” you should consider hiring a lawyer. While agents can engage in the limited practice of law by filling in blanks on a preprinted form, a lawyer can handle any legal issue that may arise. If you want assistance with the real estate market, it makes sense to hire a market professional. However, if you only want help with legal issue, why wouldn’t you hire a legal professional?

]]> By: Osman http://raincityguide.com/2006/01/04/fsbo-will-not-take-over-the-world/#comment-1297 Osman Wed, 04 Jan 2006 19:31:48 +0000 http://raincityguide.com/?p=284#comment-1297 Great post. I agree with many of your comments. The role of agents is changing. I wrote a related response to the New York Times piece on my blog. Also linked it to your post. Best, O Great post. I agree with many of your comments. The role of agents is changing. I wrote a related response to the New York Times piece on my blog. Also linked it to your post.

Best,
O

]]>