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LENN HAD AN EPIPHANY TODAY! SHOPPING FOR A HOME IS JUST LIKE GOING TO THE MALL!

"Let's go to the mall. I need a new casserole dish."

"Let's go look at some new cars. The new models are coming out."

"Let's go visit the boat marina. I've got my eye on a new Bass Boat."

"Let's go to the grocery store. We are almost out of apples and cereal."

"Let's go look at some homes today. I've got some Open House listings."

Hey, what's the difference? Shopping for pots and pans, apples, shopping for a boat, shopping for a home???

Shopping is shopping, isn't it??

cash Why do we need an agent to shop for a home? We have photos of the inside and outside. We have a map showing the location. We can compare the neighborhoods and schools. We can see the prices for other homes in the are that have sold. Maybe we'll save some money. A Buyers Agent will cost a lot of money, won't it?

Shopping is shopping, isn't it? Mom and Dad bought their home. We can get some advice from them. For Sale By Owner

Owners sell their homes without an agent all the time, don't they? We should be able to buy a home without an agent. Maybe we'll save some money.

How hard can it be to buy a home? If we find a home we like, we can just let the listing agent do the paperwork. After all, they have to be fair, don't they. I'm sure they'll let us know if the price is good. We'll look carefully when we see a house and if something is wrong, I'm sure we'll notice. How hard can it be??

Shopping is shopping, isn't it?

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988, E-mail.

About Buyer's Agency

How a Buyers Agent Helps

Things Home Buyers May Need To Know

Posted by Lenn Harley, Real Estate Broker, Maryland & Virginia on 04/17/2009 07:28 AM

Comments (46)

Buying a Home in the Home Buying Channel

shopping for a home

Originally posted at: MD, VA Foreclosures, First Time Buyers Grants, CDA Loans MD, Rehab Loans MD & VA: LENN HAD AN EPIPHANY TODAY! SHOPPING FOR A HOME IS JUST LIKE GOING TO THE MALL!

Post is included in group: The Ninety-ninth Percentile
Post is included in group: Realtors®
Post is included in group: Real Estate Trends
Post is included in group: Club Chaos
Post is included in group: Buyer Information - What Buyers Need to Know in Today's Market

46 Comments on LENN HAD AN EPIPHANY TODAY! SHOPPING FOR A HOME IS JUST LIKE GOING TO THE MALL!

APR

That really is the mind-set many times. Ignorance is bliss....

Lenn, reading between the lines, I sense a little frustration! Time for a vacation.

Lenn, Having some fun this morning? I have been working with a do it yourself seller even though he is listed with an agent. Having my own fun!!!

LOL @ Barb. Got one of those too, do ya? Oh my word (LMAO).

Lenn, you certainly know how to put a smile on my face. Too funny! A lot of people do shop for a home like they are going to the mall, don't they? (LMAO).

Mark. Indeed. Until it rains and . . . . . .

Gabe. Perhaps. Reading a memo from my IDX provider about the enhanced features to help consumers "shop for homes".

Barb. I always have fun. I suspect that you do too. We all should.

I love this post, unfortunately some do think that buying a home is as simple as buying a shirt they will toss next season or a car they will toss out in a couple of years, not realizing it could be their financial future in the price of that home.

C. Those folks I leave to their own devices. Not on my dime. That said, I'm sure Barb will get some insight.

Gail. Thanks. I agree. The sad thing is, they often pay $Thousands for their bad decisions.

Lenn...

Very nice "angle" for this train of thought. Then there are those that think buying a house is as complex as sending a man to the moon.

Lenn - but I hate going to the mall. Lowe's or Home Depot, maybe, but not the mall. Oh crap, Home Depot, that's another do it yourself place. I have in-laws, that even though they know that I am a Realtor that still think they can get a better deal going directly to the listing agent.

Hi Lenn, I think these buyers should just skip "the mall" and buy online.

Lenn, very funny. I use to love to go to the mall. But, notice as I get older...it is not so much fun. I also like Mary's comments above..

Wow. That is really sad... ignorant, and sad. Perhaps the people of this mindset should start their search with the actual laws of how agents represent their clients, before they treat such a huge investment like a trip to the mall.

Oh my, I hope no one thinks you are serious!:) I have been struggling through three physical inspections this week which have reminded me how hard Realtors have to work and the expertise we need to best represent our clients!

Lenn, they really don't get it. It's painful to watch.

Lenn, sounds good to me, and maybe while they are at it they can do the loan themselves also. Lenn the two of us should just go on vacation the rest of the year :) :)

APR

George. Funny you should mention that "do the loan themselves too".

I just got an inquiry from a prospective buyer this a.m. wanting to "intereiew" me about representing them in a home purchase. He then proceeded to tell me that they have not yet determined whether they should opt for the "expert" lenders with Lending Tree or take their chances on someone local. He wanted to make sure that he would have the "hassle" of paying points.

He then went on to tell me how much of our commission he would expect to be rebated to him.

I believe I'll just let this prospective buyer go to the mall and do his house and loan shopping.

Laurie. I don't expect them to "get it", which is why our closing rate is so high. We do not let the buyers lead us around. We guide them.

Diane. The best thing about your statement is that it is WE who have the expertise. Once a buyer understands that, we can do a fantastic job for them.

Lisa. You mention something very important. The laws. How many prospective home buyers or sellers have ever read the license law of their state?

Rebecca. I'm not much for malls either. I will admit that I'm an impulse shopper, but not malls.

Mary. Indeed. Depending on what you're buying, the Internet is a great place to shop. I use it regularly.

Mike. That's halarious. TOTOH, you may be better off. Keep peace in the family and stay out of their real estate transaction and keep your mouth shut.

Richard. Indeed there are, and they too are likely to want to try to "do it themselves".

Oh well said Lenn ! ... we Buyer's Agents bring no real value to our clients, and we just confuse most buyers right ?

....in fact I dont know why I bother at all to continue to stay on top of changing laws, local news, buyer trends, negotiating tactics, listings as soon as they hit the market, costs of renovations and previewing homes ??? ... because a regular buyer can do all of that themselves lickedy split right ????

lol ...

Cheers Lenn !

Sheldon :o)

Sheldon. As hard to believe as it is, many consumers have not the foggiest idea about buyer's agency.

When I tell them, they are amazed.

Lenn, I fully appreciate buyer agency. Buyers often find themselves initially either with an agent of a listing company, having inquired on a home, or with the listing real estate agents themselves as the first contact (in some areas, certainly in NY). If it isn't explained to them at that juncture, it's unclear. Undefined lines by the real estate community as a whole (as per their disclosure, by state) creates the problem for home buyers, not the buyers agent that they encounter after it's too late.

There really needs to be a huge push on the part of the NAR but, more importantly, LOCAL boards and department of states along with ourselves. If they don't "get it" until it's too late, as many do too late, I'd suggest that required disclosure providing the benefit (fiduciary in NY) falls to the listing companies in many, many scenarios. In other areas, the lines were made clear a long time ago, and it's status quo to get your own agent. Participation in anything but BA on the part of a buyer is often so detrimental- can of worms.

Laurie.

Never going to happen. The mega listing companies will never agree.

The entire industry focuses tremendous resources to send buyers to the listing company

Lenn - I tell them that even if they are not using me they should have someone representing them, and the listing agent represents the seller and is going to work to get the best deal for the seller.

It's all fun and games until something goes wrong... We have all seen it and heard it before.

Lenn - You're right. I don't see much of a push to educate consumers about the benefits of buyer agency. As a listing agent, I get calls all the time to show my listings. I always ask them why they aren't having their agent call me to set up the appointment. Most say they don't have an agent and when I ask why, the answers run along the lines of - not ready to buy yet just looking (oh, good, then come to the Open House next Sunday), I was told that it's best to work with the listing agent as I can buy the house for less (oh, really, and how is that going to happen?), and my personal favorite...I I do have an agent I plan to work with, but I don't want to bother her until I know what I want to buy as she's very busy (how did you know I have so much time on my hands?).

Great post Lenn! It is easy until you figure out you over paid, or the listing agent did nothing to represent your interests as the buyer.

APR

Jim. Sadly, the consumer doesn't usually realize that until after they own the property.

Gail. Quite the contrary. The benefits of buyers agency are objuscated and disguised and misrepresented by the NAR, the media and the industry.

James. Indeed. The home buyer usually "sees" it after closing.

Mike. What far too many listing agents do it promise to be "fair".

Hi Lenn! If it really WERE that easy, most of us who represent real estate buyers would be out of business! Even though we know the value we bring to our buyers, it can get frustrating when you run across someone with this attitude, but if they will not see the benefits of working with a good Buyer's Agent, you just have to wish them well and let them go...

Debra. You are 100% correct. In fact, in my initial conversation with prospective buyers, when I identify a consumer who believes that just because they have previewed homes on the Internet, they have market savvy, I am inclinded to revert to "realestateese" for a minute or two to completely throw them off their game and let them know that it's not as simple as shopping for a car or shoes.

Lenn, you've already said I'm your hero.

You must have run across the "edumacated" buyer who trusts the listing agent recently

APR

Andrew.

Indeed. I have had two calls recently asking for the name/phone of the listing agent. I ask "Why on earth would you want to talk to the listing agent?"

To which they day that they can (not that they think that they can) get a better price if there is only one agent.

To which I cannot help myself but to laugh out loud.

Tis a frustrating situation in a crustrating profession - one that most of us encounter.

Call me naive, but as my wife and I look for a home we're beginning to question the value of our agent. I mean 3% for what? We're in the $500k price range so that's $15,000 for one sale (almost half my take home pay). We're finding the places we like online and she takes us through the place pointing out the obvious (great neighborhood, granite counter tops, updated appliances, etc.). The actual inspector is the one who's alerted us to serious problems... and he only charges $650!

John F. Thanks for stopping by. In my experience, finding the home is the easiest part of the home buying adventure.

While your agent's pay may appear high, the fact that you have a contract, that things are going smoothly does say something. Of course, it's the inspector's job to find defects. It's the agent's job to get them repaired through the home inspection contingency protection in your contract. The inspector has worked about half a day. The agent may, with travel, previewing, contract, etc. worked weeks or months by this time.

Often buyers don't realize the benefits of having a good buyers agent unless something does go wrong. Real estate contract management is a very complicated process and as long as things go smoothly, few notice the many things that happen "behind the scenes". For that, the real estate industry has, over the last 60 years or so developed systems to protect consumers from bad practices. These systems that benefit the consumer so much are part of why we charge what we charge.

Of course, real estate practice is a risky business for agents and brokers too. If the sale never closes, our fee is ZERO, $0.00. Few others will commit time and resources on a contingency. This is one of the reasons our fee is what appears to many to be high.

Good luck with your purchase.

Thanks for the reply. I agree, there is a lot that goes into this and it's NOT like going to the mall and buying an appliance.

It is also worth noting, as you do, that while the upside is big, so is the downside for Realtors: ZERO!

But going through this process I'm beginning to question whether the business model is flawed. Realtors must make a sale to get paid, so they obviously are going to be biased towards pushing your towards a sale (who wants to work for free?). Wouldn't a more stable model be to charge a flat fee or by the hour?

To give an example with our current situation we keep hearing from our agent and others "now is the best time to buy" because "interest rates are at historic lows". There is this pressure to act now.

But I pointed out to my wife that if interest rates go up, what we're going to be able to sell the house for will go down. Looking at it another way... we're never going to be able to refinance into a lower rate. I almost think it would be better to wait and use our down payment in a year or two when rates are higher and prices lower. But the Realtor not only disagrees, I felt she was offended I even suggest that it might be better for us to wait. I wonder if her reaction would have been the same if we were paying her by the hour (no threat of her not getting paid for the work she has done.)?

On another note, if any Realtors could comment on this 60 Minutes video I'd be interested in their feedback:

http://www.cbsnews.com/stories/2007/05/11/60minutes/main2790865.shtml

Thanks again for the reply Lynn.

make that:

Thanks again for the reply Lenn.

(Sorry, I'm new here.)

John F.

You wrote: To give an example with our current situation we keep hearing from our agent and others "now is the best time to buy" because "interest rates are at historic lows". There is this pressure to act now.

Goodness, you can't be suspicious of every word from your agent. This is not pushing you to buy. This is just a fact. You can wait and buy later, but if the price is right, taking advantage of low interest rates just makes sense.

As for the "fee for service", it simply doesn't work. The buyer will not and often cannot pay up front for real estate services. Don't forget that the contingent fee that pays the listing and buyer's agent comes from the seller's net. If a buyer must pay up front for real estate services, few would use the services of a buyer's agent and be at the mercy of the listing agent who has a contract with the seller to get the best price, terms and conditions for the SELLER. Few buyers can pay up front. I've had a few buyes who preferred to pay my fee because their employer was reimbursing them, but that's rare. Then of course, there was the $5 Million buyer who netogiated for my time 100% for 3 months and he paid half of my fee up front.

It also appears that your motivation for buying a home is not necessarily a wonderful home for your family. The nexus between interest rate and market value is not necessarily as you believe. Higher interest rates do not mean lower home prices.

I'm afraid that the only agent you are not going to be suspicious of their motives would be someone who tried to convince you that you should NOT buy a home. Whether or not to buy is the buyer's decision. The agent's job is to get you the best house for your price range in the location of your choice.

Great post Lenn - as a buyer's agent I always provide a market analysis for my buyers so they are not blind-sided as to where to start their initial offer and where to draw the line on negotiations. That is one of the biggest advantages to the buyer and one that can save my buyer 10's of thousands. To not see value in this alone is a big mistake many buyers make. It amazes me when I meet with sellers a few years after their purchase and they want me to justify a higher price than I am comfortable with, and then I find out that they never had representation when they purchased and perhaps overpaid. They seem confused about why they cannot seem to gain a large profit on the resale and that's when they finally have to understand how waiving their right to representation has cost them. There are some buyers who think buying house is just a matter of negotiating a few thousand dollars off the list price, without actually knowing that the list price can sometimes be inflated but 25, 50, 75 thousand - especially the most unique properties which are hard to place value on. In addition to paying the right price, we are the facilitators of the transaction when most buyers haven't a clue of what processes to follow. The process of buying a home can in no way be compared to buying a bunch of apples or even a car for that matter.

APR

Carol. You are right. However, while it takes an experienced agent to prepare those market reports, it also takes an experienced agent to help their buyers understand the numbers, trends, etc.

Lenn, Lots of great points brought up in the post and comments. I thnk you made an excellent point, buyers don't realize how much time we spend to prepare for showings, preparing the contract, market analysis, working out problems, etc., the fact we actually do work for the buyers while they are not with us. There is value in the service we provide.

Jen. Indeed. My buyers appreciate the services I provide. Sadly, every buyer's agent has to prove their value over and over again on every single transaction.

Thanks for the reply Lenn. Good points on the "fee for service" model.

However, when you wrote "Goodness, you can't be suspicious of every word from your agent. This is not pushing you to buy. This is just a fact. You can wait and buy later, but if the price is right, taking advantage of low interest rates just makes sense." I think you are missing my point.

The key here is that the agent seems offended at the idea it might be better to wait. If she was not facing the risk of working for "free" I suspect her reaction might be different.

Also, I don't know if you were active in the real estate market in the early 80's but higher interest rates certainly do affect home prices. When the 30 year rate was about 20% in 1982 housing definitely felt the effects. It was simply impossible to afford higher priced homes at those rates so those who were forced to sell had to accept lower prices.

Now we've had 25 plus years of declining rates which has made real estate a great investment (people can refinance every few years and afford higher priced homes). If rates head back up from their currently low levels, monthly payments will increase, and that will affect the demand for higher priced homes.

If someone finds a home they love and plan on staying there for the long run then sure, take advantage of the low rates. But if you're like us and plan on moving in the next 5-8 years higher interest rates could very well affect your home's value. At the minimum it is a risk buyers should be made aware of.

APR

John F.

Sorry, we're never going to agree on agent motivation.

By your thinking, every word out of the agent's mouth is predicated by their fear of losing a commission.

If their information is positive about buying, they are only thinking of their commision.

If it is not a good time to buy, they will keep their mouth closed for fear of losing a commission.

Nonsense.

What I read here is a consumer who has preconceived notions about agent motivation and is never going to appreciate the fact that an agent/broker who understands the real estate market can offer helpful information to help buyers make informed decisions.

The belief that agents only serve their own wish for commissions is one of the factors that send home buyers to deal directly to the seller's agent thinking that they are smart enough to represent themselves in an expensive real estate transaction, when, in fact, the buyer doesn't know what he doesn't know and a smart listing agent will guide them straight to a contract that gives the seller everything the seller wanted and expected and often more.

If a prospective buyer believes that every word out of the buyer's agent's mouth is biased by their wish for a commission, why ask them anything in the first place?

If a consumer has no trust in the words out of an agent working on a commission basis, they can use the services of a "fee for service" agent and pay up front.

Hi Lenn,

Well it will be interesting to revisit this post later on in the year as we see what happens to interest rates and home values.

For the record I do not believe that "every word out of the agent's mouth is predicated by their fear of losing a commission". Agents have a wealth of knowledge and most of it is very useful.

What I question is open hostility to dissenting opinions. To me that points to insecurity in their assumptions. If interest rates are heading up (as most agents seems to be saying) then home prices will be heading down.

If you're planning on staying in the home for the long haul, then yes, it is a great time to buy.

But, if like me, you might need to relocate in 5-8 years there are definite risks in this market. It is simply a fact that Realtors don't highlight the risks, while they do highlight the reasons to buy. Take a look at the majority of posts on ActiveRain for proof.

Thanks for the lively discussion. I'll admit, I may very well be wrong. Rates could head up and home prices could head up too.

That said, there is nothing wrong with pointing out that there seems to be very real risks given the economic environment. Agents should make their clients aware of those risks as they are supposed to represent their best interests. "Now" is not always a great time to buy. The past few years should make that crystal clear given the amount of people in this country that have negative equity thanks to no down loans in a declining real estate market.

Realtors missed the boat on that one, highlighting the importance of different opinions.

John F.

Not all Realtors missed the boat on "that one".

I have just begun to sell to active duty military in the past 6 months. Prices are not low enough that they won't lose their shirt if they are transferred and have to go in 2-3 years. I've been recommending that they rent.

Further, you focus more than many do on the investment of real estate. Some folks just want a home. A nice home for their family in a neighborhood where they want to live near schools where they wish their children to attend school, near activities of interest, friends, etc.

There ia a lot more to real estate than the numbers. There is HOME.

Seeing first hand people unable to relocate because of negative equity makes you realize the dangers of leverage, whether you view a home as a place to live or an investment.

Great job w/ the advice to active duty military. That's the exact type of advice I'm talking about.

Thanks again,

John

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