I thought I’d write about this and one other closely tied topic because of my experience as both a Real Estate Agent and a Real Estate Broker (in Massachusetts).
Although I’d like to briefly address the changing industry, in that it is self-imploding, the real reason I’m writing is, in the interim, to warn homeowners from hiring the wrong Real Estate Agents and Brokers and, also, possibly relying on a false and meaningless label.
I’ve read the “typical” articles written by people who usually have very limited experience in real estate or even home-ownership, for that matter. These articles are written from, what seems like, old rehashed content because they, generally speaking, all say the same thing. It seems like the latest writer does some research, finds a few articles, pulls out some key points, and rehashes the same old content re-written in a different form.
Many articles usually have a section somewhere in the article about “This is what to look for when hiring a real estate agent,” “a good agent should have lots of listings,” or “how to hire a good Realtor (TM).” (Did you notice anything? I’ll come back that point later…) But, the point I’m trying to make right now is that they rehash all the old same ole information rather than looking for an agent’s or a brokerage’s review or actual testimonials from real live people who have used their specific services.
Ratings For Sale
No, you’re right, there aren’t, or weren’t, many places to go to actually look for unbiased or unsolicited types of review or testimonials from actual people who have hired or worked with an agent or their brokerage. Further, no seller or buyer is required to provide any type of feedback, nor are there really any benefits offered for doing so. I’ve seen “rating” systems, but they are usually offered on the very same web-site the person is on to find an agent, and often-times (and without any type of notification), the biased “rating” is dependent on how much money the agent or broker spent on advertising.
In addition to that, some “ratings” being collected after a successful closing give the “other agent,” otherwise known as the “selling agent,” a say in the Official and very Public Rating of a list agent. Consequently, the more biased and unfair the agent, the more biased and unfair the “rating.” Obviously, many of these selling agents believe that it is not in their best interest to provide an honest, good, and/or fair review. They’d be giving “points” to a competitor! I know this because I have personally lost out on “points” simply because the selling agent refused to respond to the survey sent by the online Real Estate service (Trulia, in this particular case.) So, overall, no, there weren’t any places to go to – to find valid, unbiased, and/or fair feedback. But, there may be now!
But, before I discuss further, allow me to back-track just a bit because I’d like to address this so-called advice people are doling out to would be sellers or buyers.
Myth 1: “Hire a Good Realtor (TM).”
First of all, many people, in fact, most of the people I’ve dealt with do not realize that being a “Realtor” (TM) has nothing to do with being a Licensed Real Estate Agent. They are NOT the same. I know that the “Realtor Association” (TM) does an extremely poor job of making this distinction stronger in the public’s view, so I’m addressing it here. The “Realtor” (TM) designation is a Trademarked Name, and it is “supposedly” only reserved ONLY for those who have paid a membership fee to this independent group (who lobby Congress, by the way) known as “The National Association of Realtors” (TM). I admit, I was a member myself for a time, but that has since changed.
Here’s what the Realtor Association (TM) WON’T tell you or the agents and brokers who pay their fees.
There is absolutely no way to “police” their members in terms of violations or ethics, nor do they really care to anyway. This organization simply emphasizes the “Golden Rule” (Do unto others as you would have them do unto you.) along with “Ethical Practices.” That’s how they sell their “memberships” to licensed agents. But, as a former member, a former Agent, and a current Real Estate Broker, I have personally overheard, and have experienced, many – quite unethical – behaviors and unethical outcomes conducted by – Realtors (TM). In short, many “Realtors” (TM) do not follow the Golden Rule, nor are they ethical.
Even if people were aware of the distinction between Licensed Agents and Realtors (TM), they shouldn’t be fooled by the Association’s label. Independent Agents and/or Brokers who are not “Realtors” (TM) are, or can be, more than ethical in their dealings. All Agents and Brokers must pass Licensing exams in their respective state, and being ethical, professional, courteous, and legal are all addressed on the exam. Practicing these qualities has nothing to do with being a paid member of a private group.
Myth 2: “Hire Agents Who Have Many Listings.”
The inference, along with actual articles, have stated that many agents with many listings are most likely going to show a prospective buyer their listings first. Well, sure they are. That’s a given, but if they are unethical, does it really matter anyway? (See Myth 1.) Let’s just say they have a prospective buyer in front of them, and yes, they have listings that would suit this buyer, but the buyer wants to see other listings as well. How often do you think that listing agent, who represents the seller because of a signed contract, will be honest and ethical to this prospective buyer? Or, will he or she lie about that other house “just going Under Agreement” with another buyer? It happens more than you care to know. Why? I am not saying all do this, but, if an agent can get both sides of the commission, many do throw their “ethics” right out the proverbial window to do just that.
In addition to that, the theory of “if an agent has multiple listings, they are probably good at what they do” is also false. Think about it, the more listings an agent has, the more that agent has to service them. The agent has to: answer daily calls and questions; provide showings; provide updates to the seller; actually check the property from time to time; provide maintenance and/or cleaning if vacant, etc., and the less time the agent has for yet another listing. The theory is also shown to be false when the agent has somehow landed an exclusive agreement with a bank or the Government to be the only agent or broker to list the pre-foreclosure homes. I knew one agent who use to be the sole agent for the entire state of Massachusetts. At that time, there was only one Real Estate Brokerage that could list Government HUD homes. Do you really think this Broker provided any type of good service? Hell no, he simply listed them, sat back and waited for other agents to bring in the buyers. The number of listings have nothing to do with the quality of service from a listing agent, and has even less to do with anything remotely similar to ethical behavior.
From a seller’s perspective, hiring an agent who has many listings is not necessarily a good thing. It could actually backfire as well. I knew an agent who had over 75 bank listings all across the state. How well do you think he serviced those listings? It was obvious to me that it wasn’t in the seller’s best interest since he was of no help to me when I tried to preview the property for a potential buyer. The property did not yet have a key box, and the selling agent who was literally on the other side of the state absolutely refused to drive even half-way to meet me with the key to “view” the house at yet another far away location.
Other agents have done something similar. One time, my buyers were actually buying the house, but the listing agent had me do his work. In this case, it was a plumbing repair that was required by my buyer’s mortgaging bank prior to the sale. I had to attend and be present on the property, as the Licensed Professional, while the plumber conducted the repairs on the seller’s house. The listing agent “was too busy.” Had it not been for me to agree, the sale would not have gone through – which was also in the the best interest of both the list agent as well as his sellers. There are other examples as well, but I think I’ve made my point. In short, did the amount of listings for the list agent help to determine the quality of service? …No, not at all.
I’ve actually been in the first scenario – as a buyer. I saw a house up for sale that I wanted to renovate and flip. I went to the house alone because the selling agent (a different agent than the one in the above scenario) was also “too busy.” I spoke with the wheelchair bound home-owner myself. I told her that I liked her house, and that I would be sending in a written offer that night. I asked her to please wait should any offers come in while I was writing mine so that she could weigh them all before signing anything. She agreed, and I left.
When I went back to my office, which was only about two blocks away, I filled out all the paperwork and called the listing agent with a full-price offer just prior to faxing. Do you know what he said to me? He said “Don’t bother, it’s already Under Agreement, and the seller already signed the paperwork.” I said, “I was just there, I’m writing up a full-price offer now.” He didn’t care, said the paperwork was already signed, and hung up. His office, by the way, was on the other side of the City, and no, the owner did not have a computer or a fax machine. After it closed, I found that she sold her home for far less than what I would have offered. Ethical? I don’t think so, and, oh, by the way, he was a “Realtor” (TM).
The house changed hands, then changed hands again after it was renovated. I’m more than sure the investors made over 60K or even 80K – easily.
In another scenario where the list brokerage had numerous Government Listings, I also found extremely unethical practices. I attended a pre-foreclosure home with my buyer. She liked the house very much. So much, in fact, she had decided right then and there to put in a full-price offer. Of course, I checked all doors and windows, made sure all were locked, and we left. After going back directly to the office to write up the offer, I faxed it in along with her Mortgage Approval letter to the listing agent that night. The next day, we went back to that same property to get another look, get some measurements, etc. Guess what we found?
There were new holes not only cut in the walls of the kitchen, but the entire ceiling in one of the bedrooms had been pulled down. There was wallboard everywhere. So, I immediately called the list agent to ask who was the last person who entered? I knew I had made sure all doors and windows were locked, and there were no broken windows or doors. So, I asked “Who asked for the code and key?” I told him “you have a problem, the property has been vandalized…,” etc. He initially didn’t respond, but he didn’t seem alarmed at all. He seemed totally oblivious… even though he knew that my buyer was now disqualified from buying this home as she was not a “cash buyer.” He mumbled something about a contractor trying to find a leak, and added nothing more.
He would not tell me who the contractor was or why he allowed a contractor to enter without a licensed Real Estate professional. He eventually said “Oh well, the house is Under Agreement anyway.” Funny, he didn’t mention that yesterday when I asked for the code to get in. He thanked me for the offer and my time, and that, was that. This house was purchased and “Closed” within two weeks by cash buyers who renovated it, and I have absolutely no doubt, they profited big time. In my estimation, the investors, who were, by the way, other “Realtors” (TM), renovated that house and profited at least 100K – if not more. Yes, the listing agent was also a “Realtor” (TM), and yes, he too had “many listings.” But, Ethics? …Please stop… you’re killing me…
Myth 3: “Review the Ratings before you Hire An Agent.”
See the Section “Ratings For Sale” above. After re-reading that section, you should realize that the ratings being offered on many sites are, shall we say, biased, bought and paid for, to say the least. It kind of reminds me of our many politicians currently in office..but, I digress… Sellers need to be aware that some of these “Ratings” are totally biased, and are not entirely “Independent Reviews.” But, there is hope, as you’ll see below…
Myth 4: “Ask the Potential Agent How They Will Market Your Property Before You Hire Them.”
Well, when I was a new agent, I fell for that one too. Yes, I used to sit down with the homeowner and tell them all the things I was going to do. I even provided them with a full written report, the Comparative Market Analysis, and don’t forget the expensive stationery, folders, business cards, etc. – all of which costs money. Not only was that a mistake, it’s a costly mistake.
I quickly learned not to answer that question, and if the homeowners were reading articles that told them to ask for this information, then I was obviously not hired because I would decline. And, that’s OK with me. I learned the hard way. Every time I shared my marketing plan or methods, the homeowners would take note of it, and, in many instances, they told the next agent what I, the previous agent, was going to do. Many homeowners even shared my report with the next agent because the agent requested to “review” it. This is why many agents now ask the potential client whether they’re “interviewing” other agents. If the seller says yes, disingenuous agents have quickly learned to always be “the last agent.”
So, no, I stopped providing my marketing details a long while ago. I disagree with this notion that sellers need to ask for marketing details and that they should then base their hiring decision on who’s going to do the most, value the property the highest, AND charge the least. If I were a “Discount Broker,” my materials would have simply stated all of that up front and no-one’s valuable time would have been wasted. In short, just because an agent declines to share their specific marketing plan with a homeowner, it is not a valid reason to eliminate that agent. In fact, that agent may be your best bet!
Myth 5: “Hire An Agent Based on Highest Valuation, But Lowest Commission / Price.”
Well, I’ve save the best for last, and no, sellers should definitely NOT base their hiring decision on who’s going to value the property the highest, but charge the least. Obviously, this is an important point, but, in Real Estate, you “get what you pay for.”
When I have gone to listing appointments, I used to bring my very well researched Comparative Market Analysis (CMA). This is the market research report that shows current market conditions, similar size homes within a certain area of the subject property. I have been, basically, dead on when pricing a home. The only exceptions are when sellers sometimes ask for a desk top valuation. These are done without actually seeing the home, so they are not entirely accurate because much depends on the condition of the home through an Agent’s experienced eyes.
There were many times that I lost out on listings simply because the seller “went with the agent who valued the home higher,” only to find out later on, after numerous and negative price changes, that I was right in the first place. Simply put, I won’t lie to get a listing. I never did, never would. But, the final decision rests with the seller. If the seller chooses the higher valuation just because it’s the “higher valuation,” then the seller isn’t really interested in hiring the best Agent after all.
One time, I went on a listing appointment in a neighboring well-to-do town. Both owners were there, and the husband stressed that the most important thing to him was that it be priced fairly so that he could “sell asap.” You see, he had already accepted a new position in Florida, and he already bought a new condo for him and his wife – in Florida. He was adamant about not paying two mortgages, but he was also worried about one other thing. A few of his neighbors in that same development started experiencing septic system failure, and his house was built by the same builder at around the same time. Although he didn’t have any septic system issues, he certainly didn’t want anything to go wrong either. So, that was another reason to sell sooner rather than later.
I went on the whole house tour, took in all that I could, took pictures, and we agreed to meet again in two days with the full CMA. I priced his property at $509K. Two days later, we met again at his house. He ended up telling me that he was going to go with another agent. His reason was because the other agent valued his home higher. He also said he had already signed a list contract, and that pretty much ended our conversation right there. So, I left.
I followed that listing – online. It was listed considerably higher, and it eventually did sell. It sold for $509,000… nine – months – later. He not only paid two mortgages for all nine months, but he also paid nine more months of property taxes, property insurance, and maintenance along with airfare going back and forth to check on the property – not to mention the stress for all involved. Soooo, who’s the fool?
Sellers should really check their greed at the door because, yes, sometimes hiring “the agent who valued it higher” does backfire. Sellers should be more open to an honest Agent who is simply telling them what they think it’s worth, as long as it’s backed up with solid and current research that should also tell them how quickly it should sell. Yes, the seller can disagree, and yes, the seller can ask the list agent to start at their “wish” price. But, don’t blame the agent if it doesn’t sell either in time, or if at all.
Conversely, if a seller wants their wish price instead of the recommended market price, it’s now up to the Agent to decided whether to agree. Depending on the disparity in price, sellers need to understand that interviews go both ways, and sometimes, a good Agent is now “interviewing” the seller. Sellers should understand that sometimes a good Agent can and will walk away if the terms are not in the potential client’s best interest not to mention that the likely negative outcome will also reflect on that Agent simply because the property was overpriced to begin with, and it’ll just sit on the market for days on end until it “expires.”
Lowest Commission / Price
What many sellers don’t know, or don’t care to know, is that out of the “listing commission,” the list agent (in Massachusetts anyway) pays out a percentage to a buyer’s agent should another agent bring in a buyer. Of course, if the list agent sells their own listing, they keep their portion of commissions on both sides: the sell side and the buy side.
The entire commission that the contract was written for is apportioned out at a Closing. Some of that money goes to the Brokerage. Massachusetts law requires that all Agents work under a Broker who oversees the sale. So, yes, the Broker does get paid. It’s called “overhead.” The remaining portions are doled out, according to the contract, to the list agent and the buyer’s agent in a “normal” real estate transaction. There are anomalies that sometimes occur, and these things may require negotiation on the part of all involved. But, this is the typical scenario.
The Agent’s portion, whatever that amount, becomes part of the Agent’s “Gross Income.” Many Real Estate Agents are “self-employed.” This means that they pay for their marketing materials, stamps, web-sites / domains, online ads, social media efforts, hosting plans, their gas, lock-boxes, their “professional” clothes, car maintenance, required renewal Licensing fees, ongoing and state required “Official Training,” “Errors and Omission Insurance,” health insurance, car insurance, etc., and don’t forget, SELF-EMPLOYMENT TAXES which include both state and federal Medicare and Social Security (FICA).
So, How Much Do Agents Receive? …Whatever’s left.
So, while many people are of the belief that Real Estate Agents make lots of money at the sale of each house, that is only part of the equation. There are many costs associated with each sale as well. And, the more an Agent allows their commission to be “whittled down” in order to be the “lowest price,” is, quite truthfully, cutting their own proverbial throat in the long run. That thought process of competing on “price” instead of “service,” along with online efforts to share proprietary MLS data without the use of “Licensed Agents,” is only adding to the imploding industry.
In fact, in the past few years, many Agents had to go out and supplement their income elsewhere. I’ve run into many Agents and Brokers who were either working part-time or full-time jobs during these last eight or so years. I’ve also seen those who have left the industry entirely in these recent years. Many had left by 2010 and more by 2014. I’ve seen many homes listed with the state required notice “seller is list agent” stated on the listing. So, while I stood my ground when it came to commissions, it’s unfortunate that many others did not because it has only added to the self-imploding problem.
It is also unfortunate that the online real estate companies, the ones that seemingly came out of nowhere, are undermining the very industry that is supposed to be providing good legal and ethical services to clients. And, yet, the professional organization, complete with its TradeMarked name, has done absolutely nothing to protect the industry or to help the very people who pay its membership dues. It seems to me that they were only interested in lobbying efforts at the Federal level and not looking ahead for the good of the industry as a whole. Yes, we had a huge mortgage melt-down, we had a real estate bubble that popped, we had banks bailed out with taxpayer dollars, but now we have online websites that are undermining our services. Why is that?
Why is proprietary data being shared with the public? Why should I continue to abide by state licensing laws, pay exorbitant fees, licensing fees, insurances and other professional fees when the information is now publicly available? For many of these reasons being discussed, I believe the industry is self-imploding. But, as mentioned, that’s another article altogether…
So, How Does One Hire An Agent?
But, getting back on point, how, then, should a seller actually go about hiring an Agent / Broker?
Well, let’s circle back to agent or broker interviews along with researching actual testimonials of home owners who have worked with the agent or broker. Sure, interviewing an agent, if you don’t already know one, is one method to use. But the most important question should not be about price or about marketing. The most important question really should be about “agent availability.”
As mentioned, I’ve seen many many Agents and even Brokers who are simply not available to take a call from another agent who has a buyer. That was one of my major pet peeves when I was active. Why do Agents and/or Brokers take listings that they cannot, or won’t, service? …Because they have “other employment” while trying to stay active in Real Estate, that’s why.
“Oh, you’re not available… …you get out of work, when?”
I’ve seen it and experienced it time after time. I’ve seen houses languish on the market simply because the agent is not working that listing, and they’re not available by phone, email, or text. There are no “open houses,” no “Broker Open Houses,” no call backs, no ads, no online work, no signs, no mailings, no showings, no nothing! Some even with no key! It’s just “listed.” Some agents have even stated specific days and hours or “limited showings” or they state the “list agent must attend, but only on weekends” right on the listing – which only harm their seller. And, the poor seller doesn’t know a thing about what’s really going on because they are relying on the professional who is listing their house. So, at this point in time, and as far as I’m concerned, the most important question is not about price or marketing, it’s about whether the Agent is even “available.”
Sellers should find out whether that Agent is available or whether that agent is also working a part-time job or even a full-time job. Sellers need to know whether that agent is or is not around to provide good “service” to the seller never mind respond to other buyer’s agents and brokers who may even have a ready, willing, and financially able buyer. That question would be my number one question if I were interviewing a list agent. Then, I’d even call them during the day to see if they even pick up the phone. More often than not, they won’t…. They’re too busy being employed elsewhere.
Those Agents and/or Brokers who are not available during “normal work hours” are doing a disservice to those who have entrusted them to sell their house as well as the industry as a whole, and, that’s a fact.
What Can Home-Owners Do?
As for conducting research or trying to find information on Agents or Brokers, the home owner should check with the State Licensing Commission / Department to find out if there are any possible complaints or violations against a particular agent or broker. They may also find out if they are still fully Licensed in that state, or if their License has expired. Although it’s true that many state Real Estate Boards have no teeth and no interest in “policing” their state licensees, they do usually list those who are, at least, up to date with their Licensing fees and Licenses. There are also some agents who have joined the Better Business Bureau to try to gain trust among prospective home owners, but to my knowledge, that membership hasn’t really resonated with home owners.
As for Ratings – the only potentially “unbiased” ratings that are available to homeowners are the services currently provided by Angie’s List and Yelp! Although there are some concerns, these two web-sites are, as far as I know, not involved or tied in with advertising, and the ratings come directly from consumers. They are, basically, providing a means for people to leave actual reviews. So, there should not be a “conflict of interest” in favor of any Real Estate Agents who have paid for any type of zip code or regional advertising area similar to such practices that sites such as Trulia, Zillow, or others, offer. In fact, Angie’s List and Yelp also allow for Consumer Ratings of many different types of professionals – including “Closing” attorneys… which is yet another whole article left for another day… 🙂
I began this article thinking I was going to write about professional investors, some of whom are Realtors, who purchase homes from uneducated home owners, and who knowingly take advantage of the seller’s ignorance, but it turned into more of a “How to Hire a Real Estate Agent” article. I guess I got a little carried away, so, I will have to write a follow-up to address that specific issue on another day.
In any case, I hope you enjoyed this article, or, at the very least, found it very informative, and I ask that you please check back for more. Please know that I also welcome comments from my readers. So, please feel free to leave me a comment or two below. If you prefer, you can also leave a specific request or comment on my profile page over at Wealthy Affiliate. I look forward to hearing from you!
To Your Wealth!