Yesterday, for the first time in months, I didn’t have a project to work on or hold open. It was a Sunday, nice weather, and there was a crop of open house signs everywhere. While visiting with Real Estate agents it began to sink in why a redfin business model can take a market share.
Without going into detail it’s hard to make a point, but there are agents in the market place today who don’t have a very firm grasp of the business they are in. Real Estate is a product that is packaged for sale. Aside from the packaging, advertising, and sale, there is a product involved. That product is impacted by global market conditions as well as how new the equipment is in the play ground across the street.
The fact is that Real Estate agents today don’t have to know anything about the product in order to represent it. I heard from two people that offers would be reviewed on such and such a date. Don’t mind that no offers had come in; there is a dead line for those offers to be presented. How out of touch are these people? There are two houses I looked at this week that were way under priced, they can review offers, but retail pricing should take what they can get.
These past few years any one who had a circle of freinds could put a property on the market and have it sell quickly. Thousands on people got Real Estate licenses and began “selling Real Estate.” It was a time of incredibly easy money. People bought whatever they could that seemed like a reasonable deal. It seemed I was advising people to wait to buy because the market place was so insane before I began giving in and representing people in the purchase of a property. In hind sight most of the people I worked with did OK, some did not, but we’ll get them out of those purchases without a loss, I hope.
Today the market has cooled. It should be evident that low interest rates, media hype, and uninformed buyers pushed pricing on some questionable products beyond reason. I saw a million dollar home in Billings Montana that sold in a development that now has two or three partially finished homes and a half dozen foundations. A million dollars is a lot of money for a house in Billings.
At the end of the day I went over to my little project on North 145th to find a gentleman and his girl friend in the back yard. He was calling me when I walked up. He liked the house and wanted to see inside. I let him in, he began talking about buying the house and I told him I already had an offer. As we talked it was clear he had found my property online. he wasn’t opposed to working with an agent, but thought he could find a place on his own.
While we talked it was also clear that he did not have a firm grasp of the market place. He was quoting the same internet propaganda that the market was tanking and will do so for years to come. It was the Real Estate bubble blog statistical summary. It did turn out he worked for an actuary company so those statistics were very tempting to believe. They are believable given a certain set of circumstances over a broad area, but not for the city core of Seattle Washington.
Enter the redfin. redifin would have people believe that all some one has to do is write an offer on a property, have it inspected, get a loan, and sign papers at escrow. In the paper last week end there was a picture of a couple who paid $440K for a split level home in Woodinville through redfin. It’s believable. I wouldn’t do it, but I now know that there are people who will.
Where’s the product knowledge? The article talked about negotiating skill. The claim was that because redfin agents work on salary they were more apt to carry a low offer. In reality they went on to prove that claim by quoting that thier clients were paying 99.23% of list price. Doesn’t sound like a low offer to me. Sounds closer to full retail. The thing is you can always manipulate data.
The gentleman looking at my little project on North 145th truly believed he was in the drivers seat. He didn’t understand the product he was looking at and kept harping on the product negatives. He was attempting to negotiate with me. I’m a pretty soft touch, but jaded.
A redfin agent has no clout in a transaction. What do they have to bargain with? They represent a client who is questionable from the beginning. A discount or arms lenghth brokerage is less apt to have control over the buyer. When I, as a seller, ask about the buyer an internet brokerage is less likely to know that buyer or what they can or can not do. That internet broker is asking me, as a seller, to go along with some assumptions the internet broker is making about that buyer. OK, I get the buyer in front of me, or my Real Estate agent does, and I fully expect my agent to represent that the buyer is not just jacking me around. If that buyer is in front of me, and they surely would have to be, I’m going to want to know if they can, or will perform, if I take an offer. I’m not buying a book, or making plane reservations, I’m taking my property off the Real Estate market based on some assertions by a buyer. That buyer has no representation. That buyer and I are being told from the get go that the person writing up the transaction is a voice on the telephone, or a series of e-mails.
That buyer’s agent isn’t having the buyer in the car looking at properties. The buyer’s agent may not have seen the property the buyer is interested in. That buyer’s agent will in most cases rely on a third party, such as a mortgage broker to be the sole qualifier of the buyer’s ability to perform. For that, as a seller, this internet brokerage business model wants me to take my house off the market and what? Am I as a seller, or is my agent then going to qualify the buyer? Are we going to determine the buyer’s intent to purchase?
AH! It just occurred to me that most people don’t understand the Real Estate business. Sorry to make that assumption; I do know you are bright capable people, but let’s look behind the curtain for a minute.
As a low ball investor buyer I am always looking for bright eyed new agents to carry offers for me. Most agents won’t touch me. I can make one hundred offers a day to be presented. I can make those hundred offers through a hundred different agents. The law says that the offers have to be presented. Now I’m not going to buy a hundred houses, I’m looking for a deal. I may tie up ten of those properties with a financing contingency. My lender is not going to make me ten loans. I may then market those ten properties to investors that I work with to resell the property in escrow. Out of those ten one or two may be viable deals so I perform. If nothing pans out I go onto the next set of one hundred offers.
That is an extreme scenario, but is one of the get rich quick systems some people spend thousands of dollars to get. On a smaller scale a shopper may look at hundreds of properties online over months and months. They can make a dozen offers that don’t work out. You can see the same people over and over again at open houses. It’s always been that way.
Enter the redfin. The redfin makes money by having people believe that they are just as capable as the Real Estate agent. I’m sorry to say, sadly, that may be very true. There are a million Realtors. People don’t shop for agents. They are told to use some one referred by a freind, or look at statistics. They are told by the Board of Realtors to keep the million person memebership of Realtors busy so they can generate more members. The Board of Realtors are telling the public that all a person needs to look at is the certifications the membership provides. The consumer is lead to believe that Real Estate can be learned in school and that’s all you need to know. School for Real Estate agents can total maybe five hundred clock hours or three months whichever comes first.
Given those circumstances, why not redfin? Why not use an agent who is a voice on the telephone? The Real Estate business, and the Board of Realtors, have encouraged people to join the ranks of agents representing buyers and sellers in a very difficult business enviorment with little or no experience. Unlike doctors or lawyers who at least have several years of education, with practical application of thier craft, Real Estate agents are routinely ushered out the door and told to ”go get ‘em.” Consumers routinely turn to thier friends who were a hair dresser last year to represent them in a Real Estate transaction.
Real Estate agents, in my opinion, are less prepared than any time I can think of in the past to deal with a Real Estate transaction. It used to be that you had brokers in split offices interested in getting agents to perform. Today most agents can hit the split by simply doing about five or six transactions a year. The owners of Brokerages have made millions of dollars in the past few years. Most owners could easily retire today without regret.
The bottom line is that in the easy squeezy real estate market we have had for these many years have made agents and brokerages lax. The consumers are paying for misinformed representation in many cases. Even though a transaction closes it doesn’t mean that the consumer was served. So why not be served by a voice on the telephone who hasn’t met the buyer or seen the property?
