The New Real Estate Paradigm
About a week ago, I received a comment on my blog post “The Real Estate Brotherhood”. Here’s my response (you can read the original post below):
Dear Mr. Smith,
I appreciate you taking the time to review my blog and follow up with your comments. My comments and opinions are not based in my real estate sales or brokerage degree, but simply on my 27 years of experience in the field watching how this game is played out. As a managing broker, I understand how your interests are to represent one side or another of a deal, yet they are also best served by “making the deal happen”. It is this dynamic I am witnessing today more than ever. I readily admit I am not familiar with “Cap Rates” or “ROI” Illinois brokerage licensing laws, yet I am deeply steeped in the sales tactics so commonly used in the real estate profession.
Your comments appear to assume that the real estate market is complete but static, simply waiting for banks to loosen their criteria for lending for the market to be active. I could not more completely disagree. There has been a fundamental loss of faith and serious breach of trust in the market which is causing a new paradigm to emerge. Here it is:
1. Real Estate agents often work very hard to “outlast” their buyers. When a committed, qualified buyer comes to the market and I get a chance to meet them, they usually complain of their agent’s failure to listen to what they want, and being pushed into a transaction. A significant percentage of my buyers simply drop out of the market due to real estate buyer’s exhaustion (REBE). The new real estate paradigm will listen to and serve buyer’s needs, not frustrate them.
2. It is common knowledge that real estate attorneys in the Chicago marketplace who serve the industry are referred by real estate agents and they are stuck to a flat fee. Have you heard their complaints? After long conversations with these attorneys, and at least one presentation for the Chicago BAR association Real Property Committee, I have learned that the attorneys are frustrated. They want out of the market and far away from taking instructions given by agents who refer them work. These attorneys feel obligated to help their referring agents and obligated to help their clients. They are left in dual agency. Attorneys will begin to charge hourly rates for their services.
3. The 11,000 or so clients I’ve met are not concerned with whether the house has two or four bedrooms. They want a good location, a good school district and a house free of major structural, electrical, mechanical and plumbing problems. The market is shifting from location, location, location to condition, condition, condition. Buyers deserve this.
4. Home buyers don’t know their rights, and this is changing. All you’ve got to do is look at what’s happened in the real estate market in the last six years to understand that. We recommend that you and all professionals in the field teach buyers their rights. Ninety percent of the condominiums that I’ve inspected are represented either on the buyer or seller side by real estate agents who refuse to provide access to the common areas or roof. These are areas that belong to the homeowners and must be inspected. Tomacor says teach your buyers about how important the common areas are. Will you take that on?
5. Buyers are rethinking their notion of what a “good experienced agent” is. Of course their agent should know the market and the value that an inspector brings. Professional inspectors always include budget figures for repairs. We know this kind of information will be helpful to buyers. After 27 years in the inspection business and 10 years in the construction business, I know, and certainly you do too, that contractors’ proposals are all over the market, and buyers don’t have time to get bids. Repair budgets are available from any home inspector that is interested. Simply look up R.S. Means or Neighborhood Housing for budgets. Tradesmen do not provide accurate budgets or contract figures for homeowners and they shouldn’t. They don’t know what’s behind the walls. That’s why R.S. Means is helpful. Home inspectors are licensed and follow a code of ethics. Our opinions are professional. Buyers will demand budget figures.
6. You mention my desire to stereotype agents. They stereotype themselves. Restoring faith and integrity in real estate includes “raising the bar”. This means going to work for home buyers and sellers to provide the best possible service with the clearest information to help them make a choice, without sending them an inspector, a mortgage broker, or telling them they can’t go on the roof. This cannot be done when we hide behind the notion, as you have, that “numerous others have helped cause the real estate meltdown.” What are you going to do? Responsibility needs to be taken. Buyers want commitment from their agents. They’re looking for a commitment that exceeds the law because they demand it. Buyers are looking for agents who can spot problems that are major and suggest that they look at another property. At Tomacor we are committed to working with buyers who are treated fairly and humanely in the business marketplace, not just another check.
Of course there are good real estate agents out there; of course there are good inspectors. We do respect agents as human beings that work hard. Given what we’ve been through as a country it’s time to raise the bar and hold real estate agents accountable on both the buyer’s side and the seller’s side for their honesty, their ethics and their integrity to provide a high quality, informed, practical service for their clients.
- Here’s Mr. Smith’s original comment:
- There are some very gross inaccuracies and generalizations in your article. You state: “their common everyday advice is “buy as much property as you can possibly afford.” While this may be true for some agents the vast majority do not adhere to this policy. As in any profession, including inspectors, there are good ones and bad ones. Only the good agents are surviving because they value their clients and are not in a position to force them to buy at the top of their affordability ladder.
- “There are many ways to sell property and one of them is to outlast the buyer.” This may have been true for some agents when it was a sellers market over 5 years ago, but in today’s market agents are spending more time interviewing clients and less time hopping in their cars showing property. In many cases clients are calling their agents and asking to see specific properties that they have seen on the internet. Your narrow perspective of how the market works in the current environment is evidence of your lack of knowledge of today’s buyers and their specific and unique needs.
- “Get an independent attorney – not one recommended by your agent.” Your implication that agents, attorneys and the banks are in collusion is ridiculous and dilusional. Agents recommend attorneys, inspectors and mortgage brokers based on a variety of characteristics none of which include an attempt to circumvent the rights of the client in order to collect a commission. Real estate companies do not select appraisers and to imply so is wrong.
- Perhaps you should focus your vast inspection history on pre-listing inspections. This would be a more proactive approach. Align yourself with good, experienced agents that know the market and the value an inspector brings. Help sellers prepare thir homes for the market by proving good advise on the front end rather than finding fault with most sellers on the back side.
- “Home inspectors must provide budget figures for repairs or their services are not helpful.” Actually the opposite is true. Inspectors that supply estimates are doing the same thing you are accusing agents of, providing information best left to a professional tradesman or a general contractor.Independent estimates for repairs vary while inspectors tend to give the “worst case scenario”. One could even assume that by scaring the buyers away from a particular property inspectors are creating a revenue stream that leads to multiple, needless inspections.
- Stereotyping agents and perpetuating the idea that the real estate industry has somehow caused the current conditions is one dimensional. If you convey this type of info to your clients please include the numerous others that have caused the real estate meltdown, the least of which is the real estate agent or companies.
- Just like all professions there are good and bad agents as well as inspectors. I only hope that you find a way to respect those agents that are hard-working, honest, knowledgeable and provide a valued service to their clients.