Whose client is it, anyway

Scenario: buyer says that they will be buying in 3 months. You say, perfect, let’s get you pre-approved so you’ll be ready by then. You believe the buyer until they call you 5 days later with the great news that they just bought new construction from a site agent! Aren’t you happy for them? 

But before you get really mad [photopress:mad_face.JPG,thumb,alignright]and start telling your clients they didn’t have representation, consider the following and you’ll see it’s not black and white. 

Most buyer’s agents hate new construction sites, especially those with site registration policies since they could lose their clients to the site agent. A few builders (notably an ex-agent on the Eastside, name will be supplied upon request!) will only pay the buyer agent 1% if the buyer goes to the site the first time without the agent (whether or not the buyer says they are working with said agent). But normally the site agent, if they are getting paid by the builder will be agent friendly and not give you a bad time and if you write it up, you’ll get paid.

The question is, can a site agent adequately represent a buyer?

The answer:  It Depends.  Here are the different models that I know about 

1. Builder can hire an in house team, where the agents work for the builder, sometimes on salary and are generally the listing agent and are privvy to all the deals that have been written.

This is the best scenario for the builder since the agent can not go elsewhere to earn money. The agent isn’t paid if the site doesn’t sell.  This agent is not able to represent a buyer. 

2. Builder can sub-contract to a marketing team, say “company A”, where the listing agent again can not pick up clients and take them off site under any circumstance. If there is a buyer for whom that product does not fit, then the listing agent is encouraged to refer that buyer to one of the team of agents who is associated with Company “A” but not a site agent. The site agent, the builder and “company A” each share in the referral portion of the commission if the referral agent sells the client. These agents are labeled buyers agents and are often on site to meet with buyers, but first the listing agent must be thoroughly convinced that their site is not a fit for this buyer. This can be a great source of buyer clients for the referral agent although there is a stiff referral fee Not as good for the builder, except for his 1/3 share of the referral fee since there’s not any incentive to sell the builder product especially if the client wants to come back to the site, the referral agent will not get the sale.  Can this work for the buyer? I’d say, maybe but there’s the big problem with going back to the original site to buy in which case the referral agent won’t get paid and may try to talk the buyer out of this.

3. Builder can sub-contract to a marketing team, say company “B”.  Here, the listing agent is not the agent that puts in time at the site. The listing agent represents the seller and hires a staff of agents out of company offices that are buyer’s agents. These agents may get a couple hundred per door, but they say they are buyer’s agents and in general are not privy to insider information.  These agents will likely have a sign, “buyer agent” on their desk and should advocate for their buyer in any discussions with the seller.  However, if this agent continues to work the seller for price considerations, etc, you can be pretty sure the builder will ask for the removal of that agent.  So, I still see a conflict of interest here.  If the agent consistently works on one builder’s site, then I’d wonder to whom loyalty is given.

4. Builder can sub-contract to a single listing agent.  In this case, the listing agent is probably too small to have much of a program in place for a team of site agents. They might casually bring other agents in to the site just to pick up buyers and to work when the listing agent doesn’t.  If the site is small, this is often the case. The listing agent in this case is often the agent that brought the builder the land. The buyer’s agent rarely know anything about inside information and are on site simply to help buyers. I call this Site fill in work:  This is a great avenue for prospecting for a buyer but I’ve never understood why a builder would want to have his site full of agents who earn an SOC either off or on site. At the first negative hint that a buyer might not like the builder product, the agent whips out the computer and starts showing buyer other properties. If I were the builder, I would be looking for 2 person listing teams to cover all shifts.  Does this work for the buyer? [photopress:j0400346.jpg,thumb,alignright]If the buyer meets the fill in buyers agent and connects, I believe this is a great situation for a buyer without an agent already, otherwise you’ll be working against the site agent for this client.  The site agent can represent the buyer possibly better than a non site agent because they know the plat and product better and presumably know new construction better. That agent owes no allegiance to the builder and can very well advocate for that buyer.  For instance,understanding how a builder addendum and limited warranty really affects a buyer isn’t something most agents are familiar with. Did you know that one very prominent builder requires the first buyer to hold the builder harmless if there is a sale before 4 years and the second buyer is part of a class action law suit? Would the average agent understand those 12 pages of builder addendum well enough to read this and have their buyer consider the repercussions? and to realize there is often an automatic removal of the financing contingency in 2 weeks?

So before buyers or other agents decide how bad it is for a buyer to choose to work with an agent they met on site, first you have to know the relationship of that agent to the seller and in some instances, I think the site agent makes a very strong buyer’s agent.  So best move is to tell your buyers ahead of time what will happen when they go to a new construction site without you and study those builder contracts.  I used to give out a blue “buyer passport” book that had a spot for my business cards and a place where the buyers could write down each site they visited. That way, you’ve gotten a step ahead of them and it makes a great opening for the “watch out for the site agent” speech. 

Get Creative


We lost IT. We use to have IT and now we lost IT and now you can get it on ebay! This IT is that huge chunk of our commission that used to come from being the gatekeeper to the multiple. At a listing presentation our competition was only another agent that charged the same fee (there were a few reduced fee offices but it wasn’t a trend).

But they don’t need us anymore for that. They can get it on ebay. And they can get listed for under $400! Of course, taking and uploading the listing in the multiple is just the beginning, but if we’re going to separate out tasks like the actual listing going into the multiple, why not separate out all the tasks and see what they’re really worth. I agree that uploading the listing is a pretty simple task and a lot of agents just fax it in so it probably is only worth $400 (you have to be registered with the mls for this, plus it involves contracts and accuracy of the listing information)….. if that’s all the service a seller wants.

So, last summer I decided to address all of the things that agents do by breaking up the tasks and establishing a monetary value to each. It’s the ala carte menu of listing services and I googled and googled but couldn’t find anyone with anything complete enough online. I even took the coursework to get licensed as a consutant from the National Association of Real Estate Consultants (NAREC) so I could see if someone had already done all that work.

I separated out the tasks ranging from $20/hr for real estate data input, filling flyer boxes, dropping off keys, etc. (a high school kid couldn’t do all of this) to $300/hr for negotiation and problem solving. Wow, I was surprised at how often I worked for $20/hr. I tried to figure out what I’d be charged by different people doing different levels of work and then added a profit margin.

The $300 work i assumed would be done by the senior agent taking the listing and running the team but personally doing tasks that take a lot of experience and skill like price opinions, market timing, the totally important negotiations with both buyers and the buyer’s agents and solving all those problems (I had a list of 88 things that can go wrong with a transaction). Personally, this is where I’d prefer to spend my time.

The results are on the LTDre.com website if you want to see how it works. My slick computer tech even built it to automatically compute based on different packages and house price.

What got me thinking about this was today’s Inman article on bloated commissions and how much I agree with it. The article suggests, “consumers would benefit most from fee-for-service real estate companies that base compensation on flat fees, hourly fees and other specific payments for services rather than relying on a commission rate that is based on a percentage of the sale price of a home.

A New Kind of Real Estate Company Visited

A couple of weeks ago I blogged on a new real estate model where I try to match real estate agent strategies to the agent’s personality.  I call the different strategies “games” (www.getstrategic.com/agents).  I’m going to share my progress with you, the highs and the lows to let you know how it is going since there’s no other company that I know of doing this sort of model. It may be like picking a carrot to see how it’s growing. But this carrot is an unknown species. Sticking with this metaphore, the only way I can observe it is to grow it hydroponically in a glass beaker to watch it grow, the glass beaker being this blog!

Here’s what I can share with you so far:

I’ve had the poorest results with the 3 experienced agents I had to let go because they wouldn’t put time into activities that they’d never done before. I think they must have joined because of the word “free leads

It may be broken, but here's a plan to fix it!

Ah, finally get to catch up on reading some RCG posts. What a prolific group this is! Makes you wonder just how important a degree in creative writing might become to the average agent in the future. I’ve been busy cuz I’ve been doing alot of recruiting these days.  So, when Eric, in a recent post  wonders about the mega agent model works I can’t help but commenting that it works great for the mega agent and not so great for the mini agents on the team and especially not so great for the customers of said Mega Agent who may not want to be foisted off on a newbie. Ardell says that the industry is broken because agents don’t help train newbies anymore. Couldn’t agree more. Fact is, there are agent training programs within offices, called Mentor Programs, but they cost the newbie a lot. I just heard about one such program that offers the mentoring agent 70% of the commission! No wonder its broken, but I have an idea of house to fix at least a part of it.

I wonder if people outside of this industry know that 85% of all new agents have left the business within 2 years and that average agent income is around $32,000 below the average household income of $34,000! When we talk about the industry being broken, how could it not be when out of every 100 agents, 85 of them have under 2 years of experience practicing in an industry that demands a high level of legal education and an equally high and complicated knowledge base. I’ve blogged before about the need to raise the bar for new agents. But I don’t see it happening unless I want to get on the Real Estate Commission which I don’t want to do. Untrained agents are like driving over a train track with the train coming. Shoot, I once had a seller move out a month early because his agent misread the financing deadline for closing of the transaction! Like Ardell, I could tell thousands of other stories. Isn’t the fact that there are so many newbies who are inadequately trained but allowed to handle any kind of transaction greatly affecting the quality of service to the clients? Doesn’t this create most of the problems with transactions?

So, now I’m in a position to make a difference. I can’t affect the other agents but I can sure affect the ones at LTD. There is a huge fault with the traditional business model for a real estate company, starting with recruiting.  When recruiting, brokers use the same practices to recruit new agents that you find in multi level marketing. They point to the super agent making all kinds of money and driving the ego car and hold them as the example of what the newbie can become. It’s enticing and makes the mouth water. The newbie can hardly wait to get a piece of that fortune and so eagerly joins the firm with all the zeal and ambition that should make them succeed. They are given the standard goals: take forms classes, establish a farm, knock on doors, do open houses, develop a sphere and take floor time.  But sadly, they don’t usually succeed with this advice. At least not 85% of the time.

Part of the problem is the upside down business model in the traditional company. This model and the model taught in broker training, is that once an agent has earned enough, typically $50,000 and splits this 50/50 with the brokerage, then that agent no longer earns money for the company, and is, in fact, a drain on the office, supples, training, etc.  Instead of being tied to the ongoing success of the agent, the office does just the opposite and depends instead on recruiting new agents instead of developing what talents they already have. Why, because their model is make $25,000 from as many agents as they can. Thus the revolving door.  Agents that carry heavy listing farms are also recruited but not for the reasons many might think. The heavy listing agent is sought after by almost all companies because they get the companies name on the streets with signage and have listings advertised to get the phones to ring. Do sellers know that their home isn’t advertised in the paper to necessarily get it sold as much as it is to take up print space and serve as image marketing? Plus the phone rings at the office to give the ‘up’ agents leads thereby providing a way for a new agent to get business.The newbies often do the open houses, not to sell the home, but to develope clients.

But what I think is an even greater cause of this failure are the many, many hats an agents wears, all requiring a different personality, skill and intelligence level. They must understand and implement all of the forms used in listings, sales, Federal forms and laws (asbestos, lead paint, fair housing) without which they can look at jail time and/or fines, disclosure subleties, etc. A typical agent must also learn how to read people, how to know just when to push and when to hold back. They must be strong enough in a listing presentation to sell themselves as the best while empathetic enough to work with buyers and understand their points of view. A good buyer’s agent must know how to perform a buyer consultation.and know how to find the exact right house out of the many thousands that are on the market, and not have buyer’s remorse.   A typical agent must know geography, house styles, demographic trends, know how to price, employer information, school information, church and communtiy information, transit information, structure and design.  Additionally, this practice requires a high level of negotiating skills, assistance during the inspection where many deals take a nose dive, plus the ability to stay on good terms with other agents in the market place without which they are doomed.   Agents are asked for advice on mortgage progrmas, title issues, need to understand and explain builder addendum (if that’s possible) and warranties, understand the escrow process and data base management, etc.

This is but a small list of the knowledge and skills an agent must have or fail. But, as if that weren’t enough, they have to be able to wear a marketers hat, as well. What is the best way to attract clients? How do you ever set up those lucrative programs aimed at building a referral base. Do you advertise in magazines, newspapers, online, do you buy lead sources like House Values, do you blog, do massive mailings, do you establish a farm?  Who will build a web site and teach how to make it a useful lead source. And on and on.

Do you see why it is ludacrous to ask all these skills of one person? How could any well balanced individual know all of this stuff and still have a life. Even the mega agents who scale as Eric has suggested might be a good real estate model, these agents must be even more talented since now they must also be managers, and, worse, they are ultimately responsible for errors made at any level by the team, any lawsuits, ommissions or mistakes by the assistant will be born also by the mega agent.

What we see in other companies in America are several different departments with different specialties and responsiblities.  When I owned two restaurants, a nightclub and a boatyard and marina, as you might imagine that I had 10-12 departments reporting to me at any one time. And I certainly didn’t know how to repair a twin screw diesel engine nor could I entertain as well as the All Male Revue! I contracted out marketing, I hired bookkeepers, I paid well for department heads that were specialists in their fields. Why not have a real estate company set up the same way, i.e., with different departments doing what they each do best. The agent should be the person who is face to face with the clients, not the person who is mailing out postcards or doing the research on the different lead generator sources. Even deciding how to outsource the different parts of the job is time consuming.  Each agent should work with the PART of the business that best suits his or her personality style, and you determine this with a personality assessment and lots of coaching, i.e., if you want to work at night and you are not shy and have a commanding presence, you’d probably like being a listing agent. If you get your kicks out of assisting someone in finding their dream house, you’d probably love working with buyers. If numbers fascinate you and you love the work of high finance, you’d probably prefer investment real estate and if you can’t tear yourself away from watching a home get built, you’d probably love new construction. For the well connected, whether by church, networking groups, family, and all kinds of social groups, and you love to give parties, then a referral based practice might work best for you.

Agents need to know themselves and find their own best fit in the business, then I firmly believe that they will succeed at a much higher level and make it through the first two years better than if they follow the typical one size fits all advice of their broker. Or, worse yet, take every referral coming from the relocation department and only make about 30% and lose belief in themselves.  As the agent grows, learn the ropes and learn what they love to do best, then migrate throughout the different departments within the company and take on more challenges.

We need a new model. We need to create companies where the agents are treated as individuals and trained as such. Where it’s acknowledged that they can not wear all the hats at once.  We need to have all the effective marketing in place and offer assistance with implementing it. We need to provide FREE leads to our agents. We need to create an economic model where the agents continuing success is directly tied to the continuing success of the office.  We need to give agents the reason to stay loyal to the company and to take away all the stumbling blocks to success.

It’s a huge order, but doable. I know and it works. Start out with bright, likeable and agressive people, have programs set up in the different fields within real estate so there is enough diversity, have the marketing materials and programs researched and implemented so that the agent can be with the client and do what they do best.  Have the negotiation, legal and transactional support to augment the knowledge base of the agent, and mentor and coach as long as necessry. This is no Walmart model, nor is it a Costco model. It’s not the super agent model where only the super agent makes a good living, it’s a Super Office model where all can do well, all are supported, teamwork is highly regarded and there is incentive to grow the company, too. A happy and successful and nutured agent will cure this industry of what ails it. 

MOVE.com – a strategic shift

We, here in the Seattle area, are in the unique position of seeing first hand, the coming of change. There is no place in this country on a parallel path with technology and the future, like the Seattle area. The hiring of Dustin Luther by Move.com is as significant as Realtor.com BECOMING Move.com It is a sign that the butterfly may finally be springing from its cocoon. MOVE hiring Dustin Luther as the Director of Consumer Innovations, is the starting bell we have all been waiting for, announcing the metamorphosis to come, in an industry long overdue for change.

Back in October, when Realtor.com hired Allan Dalton as President of Realtor.com http://www.realtor.org/realtororg.nsf/pages/realtorcompres?OpenDocument it appeared to be simply another dose of “same old; same old”. I attended Allan’s recent “seminar” in Bellevue earlier this year, and left with the feeling that he was somehow chastising the industry at large and its professionals in the room. It was as if he were screaming “embrace change or BE changed!”

I am sitting here with my signed copy of “REAL ESTATE TECHNOLOGY GUIDE” authored by the “Tres Amigos”, Saul Klein, John Reilly and Mike Barnett of Internet Crusade. These three men have almost “single handedly” moved the real estate industry into the present with regard to technology, since they met one another in 1995. And yet it would seem that they too are screaming “embrace change or BE changed!”

The hiring of Dustin Luther by “MOVE” is a huge pendulum swing from the hiring of Allan Dalton by “REALTOR.com”

It is a sign that the movers and shakers of this industry may be attempting to “moult from their skins”. For too many years they have lain constrained in the hardened cocoon they themselves have weaved. Like the “constrainedness of the caterpillars and chrysalises, their range of activity and movement has been very little as they have been cumbersomely tied to their food source”, the REALTOR organization.

[photopress:dustin_1.jpg,full,alignright] Time and again we have seen the cocoon harden around the “would be” innovators. Will the industry escape? Is the hiring of Dustin Luther and the Title: Director of “Consumer Innovations”, a sign that the largest and most powerfull conveyor of national home listing info, may be willing to shed its REALTOR shackles and MOVE into the consumer’s long awaited public venue? With the hiring of the white butterfly, instead of another caterpillar needing a food source, I am hopeful. I am very hopeful.

Who is Trulia Serving?

It was wonderful to have some quality time with the Trulia last night and I had a blast chatting about real estate search with them.

Sami and Kelly were great sports and the group ended up spending about an hour and a half discussing Trulia’s business plan and how others (like RCG!) might plug into their “platform”.

Seeing as how I posted the invite to the “chat” a few hours before the event, I didn’t expect too many people and was pleasantly surprised at the turn-out:

Interestingly, we dived into some questions I had about their business model pretty darn quickly and because I would completely fail if I tried to articulate the opinions of each of the participants. Instead I’ll only give my take on the Trulia’s place in future of real estate search (and welcome other participants to write up “meeting notes” if they are interested).

Most of my questions revolved around how Trulia planned to serve these four main groups (I’ve also included the ways they might serve these groups):

  • Brokerages: with (1) exclusive listings and/or (2) enhanced placement.
  • Agents: with (1) great branding opportunities and/or (2) tools to increase the agent’s internet “presence”.
  • Buyers: with (1) the most comprehensive listings, (2) the cleanest search interface, and/or (3) connections to the best real estate professionals.
  • Sellers: with (1) reasonably priced listings and/or the (2) widest possible exposure.

In talking with Trulia, it became clear that these guys have every intention of serving the brokerage community very well. They’ve opted to sign agreements with many of the largest real estate brokerage firms in order to get a live version of their feeds. In return, they’ve agreed to limit the type of listings they show (read: No FSBOs) and they’ve agreed to send people to the listing brokers website for detailed information on a home that is for sale. From what I can gather, they definitely have won over the largest brokerage firms and seem to be serving them well.

For agents, they offer some tools like one that allow agents to put a Trulia search on their site and another tool that allows real estate sites to list the most recently added homes. While the tools are interesting, I do not see anything that would make most agents jump at the opportunity to work with Trulia, especially since their search results will send potential buyers to the listing broker’s website if they find a home they are interested in. We discussed how a few forward thinking brokers realize that they best serve their clients when they give them the maximum amount of information, I don’t see that logic prevailing in the industry any time soon.

Trulia logo
Exmpl: “Palo Alto”, “94114”, (but not Seattle yet!) 🙂

It is with buyers that I’m seeing the largest weaknesses in their business model. They have no plans to get a complete listing of “MLS” data (actually, it sounds like they may have completely ruled out the opportunity through contracts they’ve signed with large brokerages). In somewhere like NY where there is no “one” MLS, this strategy allows them to include listing data from a majority of the brokers and will quite possibly allow them to have the largest database of listed homes. However, in somewhere like Washington (and Oregon, California, and I think most of the country), this strategy means that they will never have the most complete database of homes (at least not under the current MLS system). Maybe I’m missing something, but I simply cannot see how this is going to win buyers over… Even an ugly search interface is better than a snazzy Trulia search if it includes a larger selection of homes that are on the market. In other words, if I’m interested in a home in Sunset Hill and there are three homes available in my price range, I want to see all three, not just the two that are represented by brokers who have signed agreements with Trulia.


So, that addresses the issue of the most comprehensive listings, but how do they fair in “(2) the cleanest search interface”, and “(3) connections to the best real estate professionals”?

They definitely have the cleanest home search interface around and considering they put a lot of effort into making their searches lightning fast, they definitely serve the buyers best interests in this respect!

In terms of the issue of connecting the buyers with the best real estate professionals, I think they are missing the boat. Sure the listing broker’s website may have the most information available about a listing, but if their set-up encourages buyers to contact the listing agent (as oppose to a buyer’s agent), I do not think they are serving the buyer very well. To give an example, imagine if Google sent everyone who was looking for information on a iPod to Apple’s website (it is an Apple product after all). Sure Apple might be the best source of information on an iPod (assuming they share all the good and bad that they know), but is Apple’s website really the best place to research (let alone buy) an iPod? To bring this back to real estate buyers, the best way they could serve buyers would be if they could hook them up with an agents who had their best interests in mind (as oppose to an agent who has the best interest of the seller in mind).

One of the weaknesses in my Apple example is that Trulia includes a vast amount of awesome stats available directly on their website so that a buyer can find out information like comparable homes on the market without ever turning to the listing agent’s site for more detailed information on the listing itself. However, that doesn’t change the fact that they don’t plan to have the most comprehensive database of homes (at least not in areas with one functioning MLS) and they do not offer a way for a buyer to hook up with a good agent, but rather, they guide them to the listing agent.

For Sellers, they mentioned that they do not offer much. They are focused on working with brokerages, so the best they offers sellers is that if they use a real estate professional, they will indirectly benefit from the exposure on Trulia.

In reading over my text, I can’t help but notice just how negative I sound on Trulia. In reality, they are a great group of people and I’ve enjoyed EVERY interaction I’ve ever had with them. Along those lines, I decided to go back and remind myself of why I found Trulia so inspiring when they launched:

  • The search interface is as simple as entering a city name or a zip code! The UI is beautiful.
  • The filtering by other features like Price, Bedrooms, Bathrooms and Price is fast and very intuitive!
  • When clicking on more detail for a listing, you get the VERY useful information like the price per square foot, the days on the market, as well as details for other recently sold homes and similar homes in the area!
  • The color coded recently sold homes is awesome!
  • I really like that the the location of my search is stored in the url. This allows me to easily save and or send an area of interest. For example, here are the homes for sale in the part of Los Angeles where I grew up: http://www.trulia.com/CA/Eagle_Rock/90041/. (Also notice that it has neighborhood facts on this page.)
  • It has RSS feeds so that I can subscribe to my zip code and be updated each time a listing comes on the market.

All of these points are still valid and represent reasons that I still think Trulia is a fascinating and innovative company. My hope is that my comments in this post, especially when negative, will provide some food for thought to the people I’ve grown to really like over at Trulia. Their UI (user-interface) is a beautiful thing and blows away the UI of any other home search tool that I’ve seen. It is Trulia beautiful thing! 😉