RE Agents, are they worth it and are there other options?

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edyang_IHB

New member
First off, I do not intend to imply that I am bashing realtors (*wave to nirvinerealtor*), but rather am starting this discussion because I honestly do not have enough information and am seeking answers.

My wife and I listed our home in La Puente a few weeks back, about 6 months too late in my opinion. The primary reason for selling is that the commute from La Puente to Fountain Valley is too stressful for me on a daily basis. We are looking to sell, stick whatever profits we get somewhere safe, and rent in Woodbury for the next one or two years.

Our RE agent is an acquaintance of my wife, and thus is charging us "only" 2% commission.

On a listing price of $569k, let's say we sell for $529k best case, that's $10,600 gross commission.

I'm curious as to if the services an RE agent offers warrants paying out $10k. So far she's stuck a sign in the ground, listed us in the MLS, ran a small classified ad and shown our house to only 3 parties. Let's say our house sold in the immediate near future. For the amount of hours the agent put in, does that warrant $10k?

So my questions are:

1. Are RE agents overrated and overcompensated?

2. What are true value-adds that they bring which I couldn't do myself?

3. Are there other options to marketing/sell the house ourselves effectively, bypassing the agent?

I do consulting and charge about $100 per hour. To earn $10k (or $15k if 3%), I'd have to do 100-150 hours of work. If our house sold quickly (I may be dreaming here), that means our RE agent might have earned a few hundred an hour based on the "work" they put in.

Maybe I'm not seeing all the hours RE agents put in on the backend that I'm not taking into consideration, but that's why I'm posting this :)

Any thoughts would be appreciated.
 
nirvinerealtor ought to react to this thread...

Personally, I think realtors are overcompensated, and I think you will see 2% commissions become standard soon. We are on our way toward that now with buyer's agent kick backs like ZIP Realty and the large number of MLS listing services that only charge 1%.

Beyond that, it boils down to a very simple question: if realtor can sell your house faster and for more money, they are worth every penny you pay. 10% is not too much if they sell it quickly and for more money. If they don't, they are worth nothing. Those that think they are worth nothing try the FSBO route and usually have little or no success. Realtors are worth something, the question is how much.

I suspect you will see 2% commissions become standard, but certain agents will be able to command larger commissions because they are better. Just as some architects can charge more than others, some salespeople can too.

I also think you will see marketing packages and programs be contracted for and paid by the seller. If you want the full-page color ad and an agent sitting in your open house every Saturday, you will pay the cost whether your house sells or not. If sellers paid the "hard costs" of sales and the realtor got a small commission if a sale occurs, I suspect you would have far less "wishing price" inventory. The houses for sale on the market would be from serious sellers because they are actually spending money on marketing their property.

That is my 2% worth.
 
edyang,

I am glad you brought this subject up. My past compensations ranged from $1 - $50K/hr. Hm, something to think about. I have to go now. Will pick up this subject later.
 
I know this is going to come as a surprise to many especially NIR but in this type of market I recommend an agent to sell a home. Now I haven't always had kind words for agents but there are some really great ones out there. The problem is there have been too many schleps who would stick a sign in the ground, take some crappy pictures with their cell phone and put the home on the MLS and expect the buyers to come. You can usually find these agents sitting alone on an open house reading David "bottom calling" Lereah's lastest book "How the Bubble Bloggers Made My Mom Cry". Agents who have been around for a while and actually know the neighborhood and the people who desire to live there are usually a good start. They have good listening skills will have a database of names a mile long and a memory like an elephant who remembers that Jimmy's cousin wanted to buy a condo in La Puente. Even with sales as down as they are homes are still selling and these are the agents that are selling them. I do not know what agent in La Puente this is but maybe NIR could check the MLS to see who is selling homes there and give you some names. I would interview them and see what they say for how long they think it will take to sell at what price. I am not sure if you could structure the contract this way but you could have it state that their commission would be lowered by a certain amount or percentage for the time that exceeds the time that you were told it would sell in. I don't agree with this but it is a fact that if you are not offering a decent commission to a buyers agent then they won't show your house. In my neighborhood I have seen homes sit for months and months that are FSBO or with a lazy agent that get picked up by a pro and sold in 60 days.
 
Open listings, which few people know about, give the sellers the flexibility to work with whoever is the procurer of a ready and willing buyer. If homeowners sell the home themselves, they pay nothing because they are unrepresented. In a hot market, even monkeys can sell homes (no offense to NIR). In a down market like this, it may not work because you will need the marketing exposure that is being offered through Multiple Listing Services (MLS).
 
IrvineRenter,

They say the grass is always greener on the other side! It is so true with the public perception of Realtors that we are overpaid. Many people entered the business, invested their own money, then quietly left the business and never looked back. You will hear the words "I used to be a realtor". Do you hear this phrase anywhere else?

If you look at www.salary.com, the average salaries for Real Estate agent is about $40,000/year. Is this overpaid?

I made huge mistakes in the past for doing FSBO. That was when real estate was simple. I would not even try FSBO in this modern age. I am not trying to promote realtors at all. Eventually, you will realize that you need trusted doctor, dentist, lawyer, and realtor for your well being. You will need a lot of luck to find all.

I think many people are clueless about what a realtor really does; therefore, people tend to put very little value for realtors. This is very understandable. Companies like Redfin capitalizes on this public perception. I say all of you on this forum are intelligent enough to understand this marketing concept.

I can spend all day talking about how great a realtor is; I do not think it does any good. Unfortunately, you will have to make many mistakes in real estate to understand the value of a good real estate agent.

And a bad real estate agent is a liability.

Case in point:

1) There is a big agent in Newport Beach who usually handles 100 - 200 home listings. His listing fee is only .5%. All of his homes took 3 times as long to sell, and the final selling price is 10% below comps. Yes his fee is low because he realizes on "ultra-cheap" pricing to move homes. Can you imagine the pain and suffering the sellers had to go through?

2) Agents who helped sellers to sell homes to fraudsters (inflated pricing to defraud banks into foreclosure) implicated sellers in criminal investigations.
 
Realtors are overpaid, simply put, and why NAR is adopting a cartel approach to protect its interests, lobbying against discounted real estate services, anti-competitive if not down right anti-trust policy (i.e. restricting MLS listings from discounted brokers, etc.).
 
NIR - What no reaction from my comment? I'm disappointed since I promoted using an agent. You would think that from someone who has been so harsh to agents that you would say something.

IIIrvine - I hope there are many changes to come from the industry. I do think there is value to the ones who have worked hard and have become a professional who deserve their compensation. The only problem is that equals about 5% of the agents. The industry refuses to adapt and could use the changes to their advantage but since they choose to fight them they only hurt their own. Until they do they will continue to look arrogant and looked down upon people like you and me.
 
It depends on your point of view. Do you see the glass half full or half empty? And I take it from your writings; your answer is half empty, Right?

Then our opinion really does not matter. Remember, the first rule of capitalism: A service or product can not sell or evolve unless there is tangible value to it. Certainly not to the extent as realtor services industry has. On the other hand pet psychiatry is a different story.
 
nirvinerealtor,

Being a real estate agent is a funny business because the ones who do well do really well, and a great many just hang on. The commissions are just too high relative to what you get. Since it is a business with almost no barriers to entry (how tough did you find the exam?) when times are good, a great many people become realtors. Most of the newbies don't know anything and are simply hoping to cash in on the bonanza. If the business had fewer realtors who worked harder (smaller commissions) many of the less talented would leave the business through lack of income. Those that remain would be there because their skills warranted their commissions, and they would still do well.

I see realtors today very similar to stock brokers 20 years ago. Stock brokers used to have exclusive access to market data and execution. Once that monopoly was broken, commissions dropped significantly, and only the best remained in the profession. If you want to see the future of realtors, look no further than the past 20 years for stock brokers.

"You will hear the words "I used to be a realtor". Do you hear this phrase anywhere else?"

You will shortly for mortgage brokers...
 
IR,

I barely remember the RE state exam was very easy if you can memorize the answers. RE sales biz is very low cost to get in. Some crooks even obtain the license to comit frauds.

Many realtors are leaving the business due to low pays. IMO, to make good money in this business, you have to be either very intelligent and completely ethical, or you have to be very crooked. I do not see anything in between.

I do not anticipate much changes in the Real Estate profession in the near future. You only can automate the mechanics portion, not the psychological portion of the business. May be I will be proven wrong.
 
graphrix,

NIR - What no reaction from my comment?

Oh, of course, I think you are starting to be very kind to me. Thank you.

I do not feel rates are going lower. I believe rates have to stay same for a while. If rates go higher, the market will temporarily come to a complete stand still, then everyone will turn into bears.
 
graphrix -

I strongly believe in freedom of choice and let the people be held accountable for their own business judgments. Who is NAR to say that people are too stupid to handle their own RE transactions, that there is a need to be represented or the consumer will be hurt? And why should it be restricted to realtors, or whoever willing to pay the dues to NAR membership? THAT doesn't sound too much like capitalism to me, sort of more like socialism which irks me. I want competition because competition benefits consumers. Let the banks compete, allow the individuals have the freedom to contract.
 
IIIrvine,

Real Estate business is all about PERSONAL RELATIONSHIP. The paperwork is just "paperwork". Home Data are readily available. Everyone has access to public sites that pull data from the MLS almost to real time; therefore, agents and non-agents have access to the same data. How do you compete when it comes to personal relationship?

Agents act as mediators. And mediators are crucial to get any deal closed satisfactorily.

You will get hurt badly if you do not use a competent realtor to represent you. In addition to pay too much or sell to cheap. You either get sued if you do not fully understand Real Estate Law, or you get taken advantage of by crooks; I can almost guarantee you.

I found Real Estate Law to be so overwhelm. It took me 2 years of daily studying to command only about 20% of the real estate laws. It amazes me every time I am in a Real Estate Lawyer's office. 30 3" thick volumes! Yeaks!

How much am I worth? I always think I am undercompensated; therefore, something else has to make up for it to make it worth while to stay in this business.
 
NIR -

For what you are being compensated, up to 6% commission on a $1MM home (according to what you say your targeted market is), that's $60,000 for a few hours of work. For this amount of money, even if I were to pay a lawyer $500/hour, I know I wouldn't be paying anywhere near that much, and I know that my lawyer has the competence I need to represent me. Not a cursory read of a Real Estate Law, but in the face legal analysis on a daily basis.

What's more, the required education or continuing education to be licensed is a farce, and realtors can accomplish this through correspondence courses. Representation can't get better than that.

"You will get hurt badly if you do not use a competent realtor to represent you. In addition to pay too much or sell to cheap. You either get sued if you do not fully understand Real Estate Law, or you get taken advantage of by crooks; I can almost guarantee you."

I can also guarantee you that some of the bloggers on this board are a lot smarter than you give them credit for. Hats off to them! Do I think realtors should be obsolete? Let the people make the decision to be represented, or not.
 
IIIrvine,

What you said sound very logical in regard to Realtor compensation and existence.

OK - I am a straight shooter so I will say what I think. I think this group of bloggers are very intelligent (but not quite yet

Now that I have seen somewhat enough, my outlook on things are very different. I go to the expert for everything because I do not want to risk making any wrong move. My clients feel the same and therefore, my referral base keeps getting bigger.

I think you will appreciate a good realtor in years to come.
 
My $0.02, FWIW.

I think a realtor can be useful depending on your situation. In the same way that some folks outsource their housekeeping, others may wish to outsource their homefinding. I think the hunt is half the fun, so I wouldn't want a realtor for that. If you're looking in an area with a lot of pocket listings, I think having a realtor may be useful, as they will find more options than a quick run of the MLS will give you.

For the transactional aspect on a new home, I probably wouldn't use a realtor, unless I did not have the time or want to make the effort to educate myself on how to get the best bargain.

With respect to the transaction on a resale home, although I have the legal background and hubby negotiates lots of contracts in his job, we would get a realtor. When we found a home somewhat recently that we really like and was in our price range, we contacted our Zip agent to do the initial calls to the other side. We asked to get a feel for the demand on the house, if the sellers were desparate to get out (e.g., were they FBs?), find out any issues that would need to be disclosed ("How's that roof holding up?"), and do all the opening incantations and intelligence. The realtor may have more info than I do on comps. From all of that, we would set our max price. Assuming we came to an agreement on price and opened escrow (we didn't), we don't have enough experience with the remainder of the process to feel confident in going it alone - nor do we really have the time to search the inspection for all the possible credits and negotiate them. We would outsource much of the transaction process.

One thing I am adamant about, though, is that I will never use a dual agent relationship. In the same way you wouldn't want your lawyer working for the other side in an adversarial matter, I wouldn't want my realtor representing both sides either.

All that said, I would recommend getting multiple referrals for your realtor and interviewing many of them. Some figure if they can "talk the talk" and drive a MBZ, that's all they need. In the most recent sellers market, a lot of people who had no business being realtors got into the game for the easy money. Like any other professional one would hire, look for someone who is experienced and who has learned how to become a better realtor from that experience.
 
ELS,

I am glad you understand the dual agency concept. I do not want to be a dual agent because I can not represent both side equally, just like you said about lawyers represent both plaintiff and defendant. I think dual agency should be banned.
 
NIR - "I think that dual agency should be banned." Glad to hear that from someone in RE, I couldn't agree more. Is there any statistic (from NAR, etc.) that might show the % of dual agency purchases?... I just wonder how prevelant it is...
 
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