Fred Sands to Realtors: Go back to what you were doing before

NEW -> Contingent Buyer Assistance Program
<p>IrvineCommuter,</p>

<p>I see your point. Very good point. I read both of the links. I have no disagreements.</p>

<p>NAR is a business, just like any other business...to generate revenues for itself. Period. The more members, the more revenues. To practice real estate, you HAVE to join NAR and pay an anual fee. Then you pay an anual fee to have access to the MLS. Then you pay an anual fee to activate the keys to open the lock boxes. Then E&O fees and so-on... NAR does nothing for my business, and I pay it yearly, how do you think I feel?</p>

<p>Once you pay all the fees, then you can put anything on the MLS, no one can stop you. The agent who puts a listing on the MLS controls which public web sites get uploaded, not NAR.</p>

<p>REDFIN should be thankful for the MLS, that enables it to operate on such a LOW capital investment.</p>
 
<p>Welcome Cupertino both to this board and to the area. I grew up in the East Bay and spend a short period of time in Mountain View. I for one am glad to hear your side of the story.</p>

<p>As for the NAR, I understand that it is a trade group and thus does more advocacy but it is not doing a good job of it. Like the AFL-CIO (which once had a good reputation), the NAR has now become largely irrelevant. People mock their data and laugh at their propaganda. I for one would take them more seriously if they were more in line with reality. In my opinion, the NAR fails to present their side of the story. It remains stuck in the good old days when people knew nothing about real estate. Now, most people can get on the Internet and find a lot of information about schools, neighborhoods, previous sales history, and crime rates. Looking for a house these days is similar to buying a car. It used to be that you would have to trust the salesperson to give you a good deal but now, there is no need. I can shop around without any leg work and get one dealership to go against another. People still buy cars but the salesperson has to work harder for it now.</p>

<p>I do not want the NAR to defend the 6% as if it is justified. It is not always justified.. . If you believe that your work is worth a certain amount, then bill at an hourly rate or charge a flat fee with upfront duties and obligations. Charge more if more work is required. I think people would appreciate that. As a lawyer, I understand that clients always complain about the bill but if you do a good job, most people are satisfied. To hold every buyer/seller to a 6 percent does not reward the good agent from the bad. </p>
 
There are more and more folks like me who find that they can negotiate a better deal with one less commission involved.<p>


If you think about it, the most successful realtors are those who can close the most deals. They are the realtors who can get the seller to sell for as little as possible and can get the buyer to pay as much as possible. So actually, the most sucessful realtors are those who are the least likely to work for their client's best interest. The most successful realtors are those who are best at looking out for their own best interest.
 
What does a Realtor spend?



Much of the consternation about Realtors from the public comes from the fact that are salaries are very public and easy to calculate. However what is not often looked at is the fact that most Realtors are basically a small business in and of themselves and thus have to pay almost all of the expenses that a full-time employee takes for granted. Most realtors who work for a brokerage will have to pay the following each year with no guarantee they will make any sales.



Fees to join local real estate board, NAR, CAR and the MLS - $2,000

Errors and Omissions Insurance and other fees to brokerage - $4,000 ( may be lower at some brokerages)

Health, Dental & Vision Insurance - $5,000 + (if not covered by someone else's health plan)

Gas & Car Maintenance - $4,000

No paid vacation

All of these expenses are in addition to any expenses for Agent marketing (usually 10%-20% of our gross income), payments to assistants, property marketing not covered by the brokerage and client retention marketing.



Once a sale is made a the realtors commission is then split with the brokerage (anywhere from 10%-50% is paid to the brokerage). In addition a Realtor will pay a 7.65% self-employment tax on their net real estate income at tax time.



Also, like any entrepreneur, some of what a client pays to an agent is commensurate with the financial risk the Realtor takes in operating his/her business. Being a Realtor is a high risk business and those who succeed rightly expect to be compensated for taking that risk.

Another unseesn expense for a Realtor is the bad debt (ie bad clients) expenses of the Realtor. Like a store where shoplifting raises the cost of the goods to their customers, some of the work a Realtor does will not be compensated for (ie showing 20 homes to a client and then having that client goto Uncle Bob who has license to write up the offer) and such a result is cost to be born by the paying customers.



To be clear, I am not complaining about the structure of our business. I went into this career understanding the pros and cons of the profession and have thus have been very happy with my choices. A good Realtor takes this financial risk knowing that if they do their job correctly, they will be well compensated in the end. That's why we get upset when we see someone taking advantage of the system without taking the same risks.



So the fact that a Realtor might earn 25k-30K by selling a million dollar house is not a true reflection of what ultimately ends up in their pocket and paying their bills.
 
"To test that theory, Levitt and a University of Chicago colleague, Chad Syverson, studied 100,000 home sales, and report that when agents sold their own property, they kept their houses on the market almost 10 days longer, on average, and made 3.7 percent more money."



How many of them didn't get an order at all?



How many of the FSBO's were done by realtors or former realtors or individuals like myself who have a great deal of commercial sales business?



I don't paint my own car or do my own lawn, but I can. Does that make me a bad guy because I want to farm it out to a professional who I think can provide me a better result at a cost effective price point?



People can accuse me of a lot of things, but being reasonable isn't one of them. I don't hate on bankers, I don't hate on the IRS, or Police, or Accountants, or Sanitary Engeneers, or Stationary Engeneers, or Structural Engeneers. I certainly don't hate on realtors and will absolutely use one in my next transaction. If you think it's in your best interest to skip the realtor, there certainly are enough avenues you can get around it if you like.



I'm using an agent. The only time I wouldn't is if I was dealing directly with the Special Assets department of a bank on a pre foreclosure property trying to make an end run around them listing it. (You can't do that right now. You'll be able to in six months, when the banks have REO stacked like cord wood).
 
Realtors expenses maybe $8.00 or they may be $80,000. Neither indicates that realtors are necessary, working in the best interest of their clients, or negotiate any better than the client.
 
Awgee



I am not trying to convince you that you should use the services of a Realtor. If you don't value the services of a Realtor, then you should not pay to use one. People hire Realtors because they either lack the time or the interest in doing what we do. I would say a large portion of the home buyers hate the negotiation process and would prefer for us to be the negotiators. Of course not all agents are good negotiators and if they are not then I wouldn't want to hire them either. Like any other contractor, the consumer needs to carefully screen their agents to make sure they have a history of doing what's best for their clients. They need to ask to speak to their past clients and then ask those clients how well the agent represented their interests. Its not a perfect system but usually if you do your homework, you fill find a good agent.



I agree that many agents do not necessarily have their clients best interest at heart. However the good agents who develop a reputation of serving their clients interests are typically the most sucessful over the long term. The agents who take the "pump and dump" approach to their clients will find it hard to sustain their business. Referrals from past clients is the lifeblood for any good agent.
 
Irvine Commuter



I agree with you that the typical commission does not work in every situation. If you are a homeowner who has the time and knowledge to get the highest possible price for your home, then you do not need the services of a full service broker. There are plenty of limited service agents who you can work with for less than the standard commission. I do believe NAR works to justify the compensation its members earn but I am not aware of an instance where they are trying justify any specific amount (ie 6%). NAR does not promote that any agent charge a specific commission. Just like any profession, it is difficult for the organization to weed out the bad apples who spoil it for everyone else. One other observation about NAR: no one seems to question their stats when we are in an up market.



As for the flat fee or hourly fee structure, there is nothing preventing any Realtor from operating in this manner. I have chosen to work with the traditional structure. If consumers decide they want to pay someone by the house, then I am sure someone will start that business model. On the sell side, we already have that model in the flat fee/ ala carte brokers. However if consumers want to have a Realtor work for them on an hourly basis , they need to be ready to pay the Realtor whether the transaction is successful or not. In this case since the Realtor is taking less risk, then they should be paid less.
 
<p>Awgee,</p>

<p>You have given great tax advices, and I truly appreciate your sharing of professional knowlege as I personally benefited from it.</p>

<p>Great advice on gold too. Thank you.</p>

<p>You do not have to use real estate agents for your transactions if you think you can do a better job. In reality, you can by far, can do, much better than some, and much worse than some. It's logical because you are not a realtor as your profession, and any one can be a realtor.</p>

<p>I am sure you know, the laws protect buyers more than sellers. Say as a seller, if you fails to disclose ONE thing, the buyer can sue for breach of contract, and can make you pay dearly such as buy-back if escrow closed, or put a lean on your house if not closed. Scamming buyers are mixed in with regular buyers. That being said, I would use an agent as cheap insurance.</p>

<p>On the buy side. Your only risk is you pay too much. </p>

<p>There are down-sides to use a real estate agent as well. One example is the agent allows seller to participate in one of these 100% financing cash back. When loan defaults, seller is part of the illegal scheme.</p>
 
<p>I would like to add a little to this discussion. </p>

<p>As in all professions there are good honest, well educated, competent people and there are the others who fall short in one or all of these catagories. There are the fast buck types and there are the folks in it for the long haul. Being a broker since 1985 and having a clean record with the Calif DRE I would like to think that I am the long haul type. I also have to deal with the unethical, incompetent, non experienced types when they are on the other end of a deal and it is not a pleasure.</p>

<p>I would suggest that when you select a real estate professional to represent you, (not all real estate types are REALTORS) along with speaking with their past clients you should look up the license history at: <a href="http://www.dre.ca.gov/">http://www.dre.ca.gov/</a> </p>

<p>It amazes me that family members get a license, have no experience, and try to represent another family member for a reduced cost to help them buy or sell. I see this often and it brings up the addage of "getting what you pay for". The newly licensed person usually costs the family member due to inexperience or incompetence.</p>

<p>As far as commissions go they are negotiable. A set amount or percentage based on a menue of items to be performed is a fair way to go. The commissions stated in the MLS paid by a seller are not negotionable but an agent representing a buyer can legally credit a portion of the commission to the buyer usually through closing costs.</p>

<p>The other advantage of using a real estate professional is that the transaction is covered by errors and omissions insurance. A principal should make sure that the RE person has coverage. It protects both the seller (or buyer) and the agent unless there is clear fraud or misrepresentation. Usually their is more risk to a seller.</p>

<p>I have acted as a Transaction Coordinator at a set fee to make sure the paperwork, disclosures, and timelines were met with FSBO's. I sat down at the table with both parties and explained contracts, disclosures, and offered suggestions to both parties. It helps to have a third party that is non emotional involved to get through some of the rough areas that arise. They signed a disclosure that I was not representing either party but acting as a TC. (It was not "practicing law")</p>

<p>Creativity is needed in this business as it changes. Buyers and sellers have much more access to information than in prior years and are much better informed . But there are still ways that a person with industry experience call help both parties. Example if a client uses the internet to review properties, research schools, area demographics, then does drive bys to weed out the homes they are not interested in and narrows it down to 3 homes to see then has representation on the offer a lower commission is fair.</p>

<p>Another area that might surprise some people here is that I did not represent people that I did not feel a comfort level with. The majority of my resale transactions were by referral so I had a deeper interest than "just a commission". I do not like to represent people who are unethical, dishonest, or just plain old whiners. I have a saying that "Sometimes the best deal is the one that you don't make." This also goes for clients.</p>

<p>Enjoy!!</p>

<p> </p>

<p> </p>

<p> </p>
 
<p>The site to check RE licenses is:</p>

<p><a href="http://www2.dre.ca.gov/PublicASP/pplinfo.asp">http://www2.dre.ca.gov/PublicASP/pplinfo.asp</a></p>

<p> </p>

<p>Thanks</p>
 
Thanks, that's a good link. Used it to look up a place for sale that I thought was a little squirrley, came up Licence Status: Expired when I looked up the listing agent. Was going to stay away from it anyhow, but it's good to know about the tool.
 
Checking the license status is just the beginning in my opinion. We hired an agent to sell our house who had a clean record and had been in the business for quite a few years. Of course the references she provided us were for people who were happy with her. Later, after we started having serious issues with her I started doing more research. I found out that she had been sued a number of times and that she had quite a reputation. Needless to say, it was a NIGHTMARE.





A simple check to the <a href="http://www.occourts.org/caseinfoapps.asp">OCCourts.org</a> website would have let us know that she had multiple lawsuits against her (some even pending). Also, I would make sure I obtained my own list of references knowing what I know now.
 
<p>HOC</p>

<p> </p>

<p>Sorry to hear that you had a bad experience.</p>

<p>Great idea. to check for lawsuits.</p>

<p>Sometimes if you go with the big names you only see the actual agent at a presentation for a listing. The assistants then conduct the business and a transaction coordinator handles the paperwork. Asking the agent how they structure their business model is also a good idea if you want to know who will really be representing your needs.</p>

<p>Maybe the biggest name in the area does not provide true personal service but has high name reconigtion.</p>

<p>Enjoy!</p>
 
xsocal





Actually I am thankful for the horrible experience as it turned out well in the end. I think it was a great learning experience. As it turned out, we were happy in the end because we ended up not selling the house.





We were going to sell the house and use the equity to move to a different area but I had always hoped that we could keep the property as a rental. Once a bunch of short sales started popping up in our area, the prices started to tank (no new news to IHB readers). We figured that we could keep the house as rental, rent ourselves in the area where we wanted to move, and buy again in a few years. If the market goes down we win. If the market stays flat or goes up, well we still have our house. Realtard (true in this case) gets no commission--we win again!





Besides, I was so emotionally tied to that home it was embarrassing (first home and all). I would have stayed there forever but that is another story .
 
Am I reading this right?? "540,000 registered realtors and brokers in California"???





That's like 1 in every 50 people.





A quick Google turns up we only have 300,000 public school teachers though.










<img src="chrome://piclens/content/launch.png" style="position: absolute; width: 35px; height: 29px; z-index: 1000; display: none;" alt="" />
 
<p>Comment pasted from http://thehousingbubbleblog.com/?p=3747#comments</p>

<p><cite>Comment by AZ-IT<a href="http://thehousingbubbleblog.com/?p=3747#comment-1053551"></a></cite> </p>



2007-11-18 19:09:02



<p>Have a friend who has been doing the hiring for two sales positions for a local company. We were there Saturday looking at a car for my son. He pointed to the stack of apps he had sitting on the table and told my son “if I see anything involved in real estate I throw it in the no chance pile – they’re all parasites and we don’t need any parasites…”. I think many of them are going to find changing jobs very difficult. To say the sullied their reputation would be an understatement. Everyone has pretty much figured out all they cared about was their paycheck – the thought of what they were doing to another rarely, if ever, entered their minds.</p>

<p>Karma can be rather intense when your on the wrong side. </p>


 
<p>My Schadenfreude cup runneth over. Just a touch of sympathy, I admit. I've been turned down for all jobs I've applied for these past few weeks. </p>

<p>On further thought, there is good irony here. Car salesfolk by and large don't exactly have a stellar reputation, yet here's one that won't touch former real estate folks!</p>
 
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