BACKGROUND Active Rain went down for maintenance while I was checking my blog this morning. Not a problem. However, when I am thwarted, I do what any full blooded American woman will do, I SHOP. A quick trip to the super market would get me back to my home office before the phone started to ring. Not too many good calls this time of the year, but a good buyer can call any time. So, I stick around as much as possible. I have approximately 1,750 hours of work on my "TO DO" list and that includes no house cleaning.
Most of my Saturday telephone calls are folks who call me on their cell phone calling for addresses of homes for sale. They are backing out of their driveway and realize that there are no addresses on the listings that they printed from my web site. I don't have addresses on my IDX site. So they call with the worthless excuse that they just want to "drive by and if we like the neighborhood, we'll call you". HA!! How many times did I hear that before I got wised up about 2 weeks after I got the IDX site up in about 1998 and took the addresses off. Actually, I got a complaint call from a home owner when a guy knocked on the front door and wanted to walk through the house for sale. The owner/seller asked if his agent was meeting him there. "No, I don't have an agent, I got this off the Internet." He gave the owner/seller the page on from the IDX site that he had printed. Of course, it had my name, photo, telephone number, etc. right there on the flyer. The seller called his agent and his agent called me outraged that I had sent a person out to tour the home without an agent. I explained that I don't know who the person was. After explaining to the listing agent WHAT HOMESDATABASE.COM was, she calmed down. I don't believe that she even knew what the Internet was.
I immediately removed addresses from the web site and never put them back. Folks can find the addresses on other web sites if they want to go to the trouble, but they'll never get it from my IDX site. Once I took the addresses off the listings, most of the telephone calls I get on Saturday and Sunday are people who want to "drive by" or "check out the neighborhood". Or, one of my favorites, "I'm doing my own research, I'll select an agent when I'm ready". O.K. Fine. These prospective buyers can call anyone, if they don't already have an agent and they often do. So, until they are ready to be seen in the company of an agent, they can just, as I've suggested, drive around until they find what they want. On Sunday, they call for the address to visit the Open House that the listing agents put in the PUBLIC/INTERNET REMARKS, WHICH IS AGAINST THE MLS RULES, RULES THAT ARE COMPLETELY UNENFORCED. I'm digressing, but the background is important because it's Saturday and the calls I get will probably be from folks who DO NOT want to work with an agent. So, on the way to the super market. . . . . .
LENN HAD AN EPIPHANY It came to me that one of the reasons buyers and sellers often do not appreciate what we do is because we persist in presenting the wrong image. Prior to the Internet, real estate agents and brokers found success much easier than today. You got your license, started to learn about real estate markets, documents, real estate law, CMAs, tax records and the rest of the research that new agents did if they had guidance from a good broker. You spend many hours on phone duty because there were buyers and sellers calling on signs and walking through the front LOOKING FOR AN AGENT TO HELP THEM. You might have developed a farm area to begin to walk, send information, brochures, perhaps even telephone to introduce yourself and get your name out there. In the mean time, if you were lucky, you helped your friends and relatives with their real estate needs. You attended classes to learn what you didn't learn in real estate licensing classes, that YOU NEED MONEY TO ESTABLISH a real estate practice. Most new licensee's employment world had been in a 9-5 job or military where the environment was structured. Real estate sales and brokerage is a very unstructured business. Real estate, however, is a business and the investments of time and money must be made to succeed as in any business.
From the 1950s, real estate information has been accessible through the MLSs. Few residential brokerages even tried to exist without this critical tool. The MLS was the repository of active listings of homes for sale and SOLD information and it was closely held with stiff fines for agents who disgorged listings to folks not entitled, meaning they paid their dues. Up until the early 1990s, the vast majority of agents were sub-agents of the listing broker and buyer's agency was just waiting for some smart brokerages to realize that there was money in them there buyer's agency agreement. It was, indeed, a cozy little world with success depending on the luck of location and capital to invest until your real estate practice was profitable. The only brokers who charged less than 95% of all the rest were a very few HelpYouSell offices and FSBOs which were treated like lepers. What a nice little world we lived in. Home inspection?? Who ever heard of them? Leaking basements not disclosed?? To bad.
ENTER THE INTERNET - AND A REVOLUTION IN REAL ESTATE PRACTICE Now, rather than compete with each other, real estate and brokers trying to practice real estate brokerage must compete with NON REAL ESTATE ENTITIES for access to buyers and sellers. The basis upon which real estate agents promoted themselves in the past, personal promotion, now have little relevance in a world where 70% and growing of buyers use the Internet to begin their home buying adventure. In the electronic world, listing agent must compete directly with on line aggregators of seller leads for the first contact with prospective seller / clients. Buyer's agents must compete directly with on line aggregators for the first contact with prospective home buyers. If the aggregators' web site is more prominent on the Internet page than that of real estate practitioners, the aggregator will get the consumer's first contact and the first contact is often the only contact a buyer or seller will make. Sellers provide their contact information in order to get market value information about selling their home. The aggregator sells that information to a subscribing agent or broker willing to pay the fee rather than have that buyer or seller go to another agent or broker who relies on buying leads for their business. Agents who do not garner a sufficient share of buyer or seller leads from their own resources or advertising, must pay lead fees or referral fees for the buyer or seller contacts.
Agents and brokers who are not Internet savvy or have resources to buy these services have little chance of succeeding in this very competitive atmosphere. In fact, one of the ways these aggregators succeed is by giving the false impression to buyers and sellers that by using their services, which are FREE to the consumer, they will be introduced to experienced agents who are somehow better than agents who are not a part of their particular network. Additionally, by offering simple home valuation information and access to homes listed for sale, the real estate practitioner is relegated to the last step in the buying or selling process. Once the real estate practitioner loses two of their most valuable assets, LISTING AND SOLD INFORMATION, we MUST begin to promote skills and abilities that ONLY experienced agents and brokers have. We MUST go back to the basics and start promoting our services and demand payment based on WHAT WE KNOW, not on what we do. We need to sell our experience and knowledge.
WE CAN EASILY JUSTIFY OUR FEE Why are our fees under attack? I believe that one reason is because too much focus has been on the reliance by many agents and brokers on the MLS. The MLS is a wonderful tool. But, it is a tool developed, maintained, propagated and disseminated by licensed agents and brokers who pay fees to participate. But, it's just a list and that horse has left the barn. Once the listing information was disseminated through the Internet, the perceived value of real estate practitioners was diminished. Further, now that non-real estate entities have access to buyers and sellers often before the real agents and brokers, our value is further diminished because we often no longer have that important "FIRST CONTACT" with the consumer. There is a lead aggregator assuming the role of "EXPERT" in the agents selection process before real estate practitioners have actual personal contact by phone, e-mail or in person.
IF YOU DON'T ADVERTISE MUCH, YOU CAN'T CHARGE MUCH. I just reviewed about 50 Maryland real estate web sites and they are all very close in their personal promotion. Paramount in what the site owners are promoting are: 1. High level of service. Agents claim to offer a high level of service, but don't say what the services are. 2. Know the neighborhood Tout knowledge of the neighborhoods without outlining what the neighborhoods are. With keywords for vast geographical areas, this is confusing for single area sites. 3. Honesty, Integrity, Care If I were a consumer, I would be very glad to find an agent who is honest, has integrity and will work with care, since if this agent is touting themselves as honest, have integrity and will work with care, the implication is that other or most agents are not honest, do not have integrity and will not work with care. 4. Accessibility A single agent can only be accessible to one person at a time. There are only so many weekend hours. 5. Competence In what?? The sites don't really say how they are competent. No mention of education, training or continuing education. 6. Value For buyers, they tout no fee. For sellers, they tout "reasonable" or "competitive" fees. WE CAN EASILY JUSTIFY OUR FEES. What these web sites do is neglect the skills and experience of most agents. These same promotional claims could have included: 1. Our agents participate in higher skill training and broker training to make sure that they have the latest skills and experience to serve you in a professional manner. 2. Our agents live in and sell in the areas of your search, know the neighborhoods, the schools, shopping, transportation alternatives and more to help you select a home that meets your needs. 3. I WOULDN'T TOUT HONESTY, INTEGRITY AND CARE because it is an insult to every other agent and broker in the business. I have known honest but incompetent agents. How much can an agent or broker charge for HONESTY and INTEGRITY. 4. Our agents work hard to be available for tours during the weekdays and weekends. We work with only a few clients at a time and will work hard with you until you find the best home for you. 5. Our agents have training and experience to manage your real estate transaction. Our goal is a smooth transaction from home selection to settlement. We have extensive training in the correct forms, license law and federal, state and county regulations that would affect your home choice. Our agents have the training and experience to work through complicated contracting, home inspection and other transaction management matters to get you to a successful settlement. 6. Our fees reflect the degree of training and experience to serve your needs. Understanding your real estate needs is important and our fee is based on your individual real estate needs.
GRANT ME ONE PREMISE I submit that even an agent right out of real estate school will generally have more real estate knowledge and experience than the average home buyer or seller. Of course, experience will make a newer agent better and better with each closed (or not closed) transaction. But, I operate on the premise that our agents, most agents and brokers have VASTLY more knowledge and experience than the average buyer or seller. WHY DON'T WE PROMOTE OUR KNOWLEDGE AND EXPERIENCE. An experienced agent is worth every penny of the fees that they charge even if it is high. What is high??? Personal service fees are based on what the market will bear. There are no controls and no limits on our fees except that which we implement ourselves because competition is very stiff. Agent to agent, one agent will justify and charge a higher fee because they have the experience and knowledge to be able to SELL THEMSELVES AND THEIR FEES. Agents with less experience simply cannot compete and will, by necessity, charge less. They will also make less than the experienced agent on the same number of contacts simply because they will have more failed transactions, lose more buyers, have fewer listing sell timely (or even sell) and their advertising dollars will not go as far because they must present their services to more buyers and sellers for business than the experienced agent who can talk the talk and walk the walk. Experience sells real estate services. Tell buyers and sellers why your fees are higher than some. Compare the servcies and the level of experience with that of the fee for service or MLS only broker. I'll compare my experience to any discount, fee for service or MLS only broker in the Maryland or Virginia real estate market any day of the week. I had a Maryland home buyer ask me last week if we rebated any of our fee back to the buyer. They had just spoken with an agent who rebated a full 1.5% back to the buyer. I suggested that IT IS THEY WHO CANNOT JUSTIFY THEIR FEE. When she found out that they do not attend showings, home inspections or settlement, things looked a bit different to her. One of our agents is taking her out tomorrow. We can justify our fee. WHY DO MY BUYERS THINK THAT I WALK ON WATER? Because I tell them so. Well, not in those very words. However, through every step of a real estate transaction, from first contact to post settlement, I am a problem solver. Real estate transactions are fraught with problems and pitfalls. Experienced agents know how to overcome them and get to the next step. For one thing, if an agent or broker has settled a fair number of sales, they will have experienced so many actions on the part of buyers and sellers and other agents, inspectors, appraisers, lenders that we can usually avoid problems. When a situation comes up with a contract, do we solve it and learn from it?? Of course we do. So, the next time an agent with experienced may do things a bit differently from the average unexperienced agent who is still in the trial and error state of their real estate career.
Experiences go into our memory banks and we draw on them when a situation arises where we can give advice to resolve differences in our clients' best interest. From the first meeting to the settlement table, we should be touting our knowledge and experience so that buyers and sellers are comfortable with our representation and will rely on us for advice. That is the role we should always play manage smooth transactions. When we can assure prospective buyers and sellers that, through our experience and knowledge, they will have a smooth transaction, we CAN charge good fees and our clients will be HAPPY to pay them.
The nicest thing a real estate practitioner can hear from a satisfied buyer or seller is THINGS WENT VERY SMOOTHLY. JUST AS YOU SAID IT WOULD.
FOR THAT, WE CAN CHARGE A LOT OF MONEY
41 Comments on WE NEED TO CHARGE FOR WHAT WE KNOW, NOT WHAT WE DO
Amen Lenn,
Wonderful post. Thank you for the generous glimps of the real estate world. I couldn't help to notice the intricate similarities that REAs and LOs have in common. Have a great weekend!
I have to admit that I was one of those weekend lookers. I was not comfortable with the idea of having a chaperone breathing behind my back, pushing me to make such an important choice on the spot (that is how I saw it back then)
However, one real estate agent took the time to find out what was important to me about finding a home and one day he called me and said. I think I found it, so I agree to go with him to see this house. When we pulled into the front of the house I was not very impressed, I had already driven around the neighborhood and the houses didn't seemed to fit what I was looking for. But the minute I walked into the house I was in love and I purchased it with his help!
The moral of the story is: I would have never purchased this house just driving by. I think it really made a difference to have a real estate agent that took the time to find out what was important to me about the home I was looking for and he found it for me.
Excellent information. Not only did you give me some new ideas, but I'm going to use this information in training classes with the newer agents. I also checked out your website to see how you've implemented the ideas in this blog. Again, very informative.
Lenn, Excellent well written post. And 100% correct. Experience is everything in this business. Actually, I should rephrase that, "Experience that we have learned from is everything in this business." One of my best listing tools I have is a printout of my sales. Since I work one particular area and can lay in front of the potential seller a list of 100s of closed transaction, it is very difficult for another Realtor to get that listing from me. As I like to say, "the proof is in the puddin" No other Realtor in my area can even come close to the amount of transactions that I have done. That list is my ace in the hole. It never fails to work in securing the listing. If for some reason they can't decide I suggest they call the other Realtor and have them bring over their list of successful closings.
I haven't figured out yet if we should just ask for a signed copy of the next book, if we should send you a check or impatiently wait for you to get riled up about another topic. Great post. Always enjoy hearing/seeing your point of view.
Thank you for this post. I will definetly make sure my site includes th "experience and ongoing training" part. I appreciate your vast knowledge and what you share with all of us.
Bravo! Everything you say is 100% true. Time knowledge expertise that should be valued.
We never really had a true MLS in NYC so there never was this sacred information that only brokers had. The brokers faxed each other listings to cooperate. Many listings were not sent out to other brokers for a few days. I would work really hard being a dectetive finding a property for a buyer. The information was out there but from multiple sources, a buyers agents had to be really aggressive and push to get a buyer a showing.
Finding the property is maybe 10% of the work. 90% is from the accepted offer to the close. Most of our properties are coops so we have to do a board package total financial disclosure and get the buyer to pass the interview.
As far as having to justify my commission to a seller. It's the bottom line. How much they will net from the sale. I've never had an unhappy seller.
AMEN! I love the title... and further you ask: Why don't we promote our knowledge and experience? Exactly. Here is my fairly new auto signature that has been going out on every e-mail:
With the "information age" blaring out of every computer and PDA- touting our services is a fast dying trend. You are right. Our knowledge is what is justifying our commissions. We CAN'T keep the information from the general public (on a need-to-know basis) anymore- why would we want to? We would seem like greedy dinosaurs.
WIIFM ... What's In It For Me?
That is what the consumer cares about ... themself. Offer them something that they CAN'T get on the internet. Experience and knowledge.
Here are two other points:
Our MLS automatically "drops" addresses from anything but the address fields. Fancy, huh?
I agree with the whole IDX minus address thing. Why give up the farm?
Thank you for all your thoughts. Very, very good points- especially in this day and age.
Lenn.... well, I will say it again, since so many others said the same.... great post and some great pieces of information for thought.
And I like what David Spencer had to say: Those that don't charge for what they are worth soon fall by the way side, because working for less catches up with your pocketbook.
Lenn...curious, is that what you look like when shopping? ;o)
And Bryant made it more clear, even though you did state this. Experience from everything that we have learned from... well said.
I agree with you all the way. We have schooling of hard knocks on our side. They may have one deal I have thousands. I learn from many of them to this day.
Lenn, you are so clear and fabulous about what you post. Oddly enough my brokerage tries to do everything they can to get agents to promote their experience - it seems that Realtors® are a tad opposed to change at times (!) like everyone else I guess. Finally, our Brokerage started handing out verbiage to use I guess (after reading your post) because not a lot of people were doing it!
It makes me think that being an expert in a neighborhood and in negotiation, and in marketing is one thing; it's almost like some people feel uncomfortable SAYING it. In this business, you have to get over that quickly I would say. Thank you for posting this I also got some new ideas from it, thanks for sharing.
OUTSTANDING post, Lenn!! I always look forward to reading your posts, and as with previous posts, this one is full of education and great ideas. I got several ideas on ways to tweak my website - thank you for everything you said in this post.
You're not going to believe this one; I can't find any "academic points to argue" .
Seriously, folks. If you aren't reading Lenn Harley on Active Rain, you're wasting time here.
The best quote:
WHY DO MY BUYERS THINK THAT I WALK ON WATER? Because I tell them so. Well, not in those very words. However, through every step of a real estate transaction, from first contact to post settlement, I am a problem solver.
Let's start telling our clients what we do! One of my favorite analogies is that my job is much like an airline pilot's. Eveyone knows that a pilot doesn't fly the jet; the computer does. UNTIL...the proverbial s$!t hits the fan. When that happens, do you really want the lowest-paid pilot?
Lenn, Excellent, thought provoking post. I find we are going into a time where the brokerages are getting larger and larger with little or no supervision for the new agents. Agents get time in the business but never get any better...they can't defend their fees so they charge less and less. Finally they just fade away.
We need some old fashioned tough brokers to make agents toe the line and learn the trade. Then they will be able to justify their fees!
I would like you to know that my Takeoffs and Landings and most of the time (except cruise) I was hand flying, especially in the 727. I used to do flights in the 727 up to 2 hours in length without the autopilot. It was much funner that way. While I like the gadgets and cool graphics of these new cockpits, I still don't like them having "too much" control. But that is a whole other subject.
Lenn: What a great read and reminder for us all. There is also the information shared by "connected" agents that never hits the aggregator's sites--and that is the "rumor factor."
More than a few times, we have connected buyers to properties that were whispered to be soft in pricing, negotiable in terms or had some feature that was not advertised on the internet.
You couldn't have said it better: We are paid for what we know.
Knowledge is power - who said that? I agree with Lenn that the vast majority of websites out there are much of a sameness - not surprising since many are templated sites - of which we have two - in the process of being replaced!
We need to charge for what we know - I agree with that - however - we won't get paid unless we do something in conjunction with what we know - and the challenge will be if someone knows as much and has a different business model to compete with.
Lenn, As always a great post. I read all the comments and was surprised that no one mentioned your comment about not sharing the address of a given property and how this is against MLS rules.
I certainly can't speak for other states but in CA the address is not only on MLS and the emails generated from our MLS system to potential buyers with absolutely no availability to disregard them. This same information is fed to the local newspaper, Realtor.com and of course IDX sites. Only in IDX would a Realtor have the ability to negotiate the address not to be shown. So, in CA this becomes a mute issue.
Learned experience with validation is key to our business and our ability to continue in providing the best service to each of our clients.
I'm with Broker Bryant in his emphasis "Experience that we learn from is everything in this business." What the public doesn't know scares me to death when they try to "do it yourself".
Awesome post Lenn! I missed it the first time around, and I'm so glad MF nominated it. It is a long read, but SOOOO worth it! Congradulations on your win!
Wow! Thank you for beating my drum! The internet will quickly make us obsolete if we see ourselves as nothing more than tour guides. We are experts and there are many many legal and financial pitfalls to be avoided in every real estate transaction. It is our job to get our clients safely to the other side. No matter how accurate Zillo ever becomes it cannot and will not ever be able to compete with my expertise. Thank you so much for saying what was on my mind!
Erik Wecks--Windermere REALTOR, ABR, Vancouver Washington
Providing the information you need to make great decisions
Thanks for an excellent post. For several years, I have had a list of items that I include as a part of a listing presentation for homeowners and FSBO's which they sign. It has about 30 points. The few times, I have had someone request a lower fee, I ask them what services they would prefer to undertake for themselves. As they read the list, they invariably decide that they would prefer full service. Of course, it is incumbent upon us as practitioners to actually do what we state and say.
I've always THOUGHT of how our fees are broken down.
Not that fees are set nor am I discussing them here but JUST for example:
6% - 3% to Coop = 3% to me (ONE SIDE) =
1% for Marketing, advertising, Tours, Open houses, ACCESS to our database (realtor.com / remax.com), scheduling, showing and feedback-followup.
1% for Producing an offer, Negotiating, pre-qualifying, preparing contracts, securing deposits, delivering executed copies, and seeing thru, negtiating and finalizing the Inspection contingencies.
1% for followup for other inspections, surveys, title reports, payoffs, pre-inspections, repairs, and attending closing.
The OTHER SIDE of the transaction has the same duties and responsibilities.
Each and every part is important because something could come up in ANY one of those 3 areas (Marketing, Negotiating, Followup) that could cause the sale to fall through.
Remember, if you allow the Owner to handle some critical aspect of any of these 3 areas, he could blunder the sale and you won't even get paid. You'll have worked the other area or two for nothing. That is the other consideration, which is we are PAID UPON SUCCESS; not per deim, or per item. There is considerable more RISK in 'Payment Upun Success'. Redfins fees were EXTRA if not paid in advance. Redfins fees for SHOWING properties were hundreds of dollars per sesion, paid in advance.
Another SIMPLE way to look at our fees are:
1% for our KNOWLEDGE, SKILLS and ADVICE
1% for our SERVICES actually performed
1% for our ACCESS to OUR Members - Coops - Database.
The trend toward "do it yourself" EVERYTHING started a long time ago in this country. We need to explain to the consumer the complexities, emotions, and stress of exchanging real property, which for most people is only done several times in their lifetime. We need to protect the public "from themselves" sometimes.
There are many times I've saved someone thousands of dollars in either cash outright or aggravation from what would have been a problem.
Finally, since we are discussing SKILLS, I think it is appropriate to discuss FEES for providing those skills. Sellers seem to have a problem with paying for 2 sides of the (i.e 3% + 3% = 6%) transaction. What the Sellers do not realize, is that the Buyer's closing costs and prepaids also run around 5-6%. Expecting a Buyer to pay 5-6% PLUS his own Agent's FEE (+3%) requires the Buyer to have 9-10% CASH for closing, in addition to the down payment. I believe Sellers need to understand the dynamics of appreciation, and that fees are paid mostly from market forces (that we help drive) in way of appreciation.
I once heard a Real Estate Trainer named Don Bryant (from Florida) say "Explain to people WHY you charge WHAT you charge". I have and for most people they understand and appreciate the explanation.
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Amen Lenn,
Wonderful post. Thank you for the generous glimps of the real estate world. I couldn't help to notice the intricate similarities that REAs and LOs have in common. Have a great weekend!