Why Real Estate Agents Have Such a Bad Reputation

I know why real estate agents have such a bad reputation and it has nothing to do with reality and everything to do with perception.

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Many years ago when I was a salesman, I called on a small technology company. Over the years I developed a good relationship with the business owners there and apparently I must have impressed them because one day they said they wanted to hire me. At that time I was making a solid six-figure income and had been for some years. I did not think the small company could afford to hire me and my feeling was confirmed when they offered me $70,000 to join their firm.

I explained to them my compensation history and told them I could not work for them for less than $100,000. It was more than they were comfortable spending, but they must have wanted me bad because they offered to meet my salary demand.

To make a long story short, I was gone in less than a year. Why? It turns out the answer to that question is the same answer as to why real estate agents have such a bad reputation.

What I did not know then, but I do now, is that my $100,000 salary established a perception of me that set me up for failure. Since I was making more, much more, than the owners were comfortable paying, every time I walked in the door all they saw was someone making too much money. It did not matter what I did or how I performed. I was just an expense that had to be reduced (or eliminated). And I was.

When you charge more than what someone is comfortable paying, all they see is someone who costs too much. Their perception of you is that no matter how your perform, you can not possibly be worth what you charge. Everything you do is a letdown. Your expense has set the bar unreachably high.

The opposite is also true. Had I accepted that position with only a $60,000 salary they surely would not have let me go. At that salary, every time I walked in the door I am sure the owners would have thought to themselves, “wow, that guy is a steal.” There is almost no way I could have let them down. I would have been a bargain at that price, which would have dramatically impacted their perception of me.

It is the same thing with real estate agents. When a real estate agent confidently tells a home seller there is no way they can possible sell their $500,000 home for anything less than a $30,000 (6%) fee, all the home seller sees is someone who is making too much money. Their perception is the agent is overpaid, and everything they do is bound to disappoint.

Of course the path to improving agent perception is something no agent would ever consider: charging a fair price to sell a home. But that is okay. The day is quickly arriving when they will no longer have a choice: they can charge a fair price to sell a home or find another profession. But just think how it will improve their reputation.

To learn how to keep more or your hard-earned equity when you sell your home, check out The Intelligent Home Seller eBook and The Intelligent Home Seller eCourse.

Someone Agrees With Me About the Future of the MLS

Having just written the article Do the MLSs Need to Exist Anymore? ten days ago, I was delighted, and a little surprised, by the article that just appeared on Inman: The sun is setting on the era of the MLS. Make a note that there are now at least two people who believe the days are numbered for the MLS.

Creed Smith, the article’s author, summed up things succinctly with the article’s subtitle: Buyer’s don’t need it, so why would the seller? That is the question that would scare the heck out of me if I were in the industry.

MLSs have always facilitated broker-to-broker cooperation, but when the MLSs were first created, they also benefited buyers and sellers. In the absence of anything else, a central repository for home information was an excellent way for sellers to get the word out that their home was for sale and it was an excellent way for prospective buyers to find out about it.

Unfortunately for the industry, buyers and sellers no longer need the “central repository” feature offered by the MLS because they have Zillow and Trulia and Redfin and… The MLS still facilitates broker-to-broker cooperation, but at what cost?

Once enough home sellers figure out that they do not need the MLS to attract buyers, they will cut it out of the home marketing process completely and solicit brokerage services only after they have attracted buyers. What will be left for the brokerages at that point is transaction management. That is still a very important part of the home selling process, it is just not 6% important. It is more like $3,000 important. And the more expensive the home, the faster you can expect sellers to adopt this approach.

How much longer can we expect the MLS to be around? After all, something that is paid for by someone who does not need it cannot expect to survive forever. It is difficult to answer that question because at the end of the day it depends on sellers believing they no longer need it. And that depends entirely on home sellers. If you are a home seller who believes they no longer need the MLS to attract buyers, visit ReaListing to find out how.

To learn how to keep more or your hard-earned equity when you sell your home, check out The Intelligent Home Seller eBook and The Intelligent Home Seller eCourse.

Realtors Beware – Walmart is Coming

There is no doubt about it. The real estate industry is under siege by the Rise of the Discount Brokers. Everywhere you turn there is a new start up or brokerage trying to win over buyers and sellers by offering their services at lower fees or with rebates. It is a win for consumers and a true threat to the status quo.

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Many years ago I saw a 60 Minutes piece on how when Walmart moved into a town, it put all the mom and pop stores in the area out of business. People would lament the loss of jobs at these small companies. But these companies did not go out of business because Walmart was evil. They went out of business because people could buy the same things at Walmart for less. Nobody was forcing shoppers to shop at Walmart. They shopped there because it was in their own best interest. And oh by the way, Walmart replaced those lost jobs.

If you think about it, these new discount brokerages are the Walmarts of the real estate industry. They are leveraging technology and economies of scale to offer the same services for less money, and consumers are taking notice.

Naturally the “traditional” brokerages feel threatened by these discount models. And how are they responding? By using technology to become more competitive themselves? Nope. They just roll out the same siren song they have been for last half century: you get what you pay for. Really?

If you really do get what you pay for, then there has to be some justification. The justification trumpeted by the traditional brokerages typically takes one of two forms: 1) the threat of reduced service or 2) the threat of inferior service.

The threat of reduced service posits that if you pay less, you must be getting less service. But with the technology available today, that threat is no longer a threat. The truth is that informed, proactive buyers and sellers NEED less from their agents and brokers today, and the lower fees are therefore justified. The threat is like telling someone who does not want Bose speakers in their new car that if they do not pay full price they won’t get Bose speakers.

The threat of inferior service suggest that if someone charges less, they must not be as good. But how would you know? You could hire what you believed is the best realtor in the world to sell you home and at the end of the day you would have no way of knowing whether some other realtor might have done a better job. So the inferior service threat is just that: a threat, unsupported by facts and forever unverifiable.

So, traditional brokerages, welcome to the new world of Walmart. They are coming to town with low, every-day pricing and with the products and services consumers desire. You can get on board or you can get out of town, because you can be sure these Walmarts are not going away.

To learn how to keep more or your hard-earned equity when you sell your home, check out The Intelligent Home Seller eBook and The Intelligent Home Seller eCourse.

Do the MLSs Need to Exist Anymore?

Ask 100 real estate agents and 100 will answer that question yes. That is because MLSs exist to serve agents, not buyers and sellers. But what if you posed that question to a home seller? The chances are they do not know the answer to that question, and more importantly, they do not care. They just want to sell their home.

But wait, you cannot possibly sell a home without putting on the MLS, right? Oh yeah, ask any real estate agent who has ever done a pocket listing if that is true. The frightening truth for the real estate industry is that the MLSs are no longer needed to market homes for sale. Buyers do not go to the “MLS” to find homes to buy. They go to Zillow and Trulia and Redfin and Realtor.com and Homes.com and… The MLSs exist primarily as a channel of communications between brokers and agents. How does that benefit sellers? It doesn’t.

Now it is true that all those websites mentioned above get their information either directly or indirectly from the MLSs. But that is just an artifact of a bygone era. When you market a home today, you take photos, a description and a price and upload it to a web server. That web server could belong to an MLS, or it could just as easily belong to Zillow. Every buyer who uses Zillow to search for homes—and that is a big number—will see the home either way. The MLS is just a relay point in a communication link.

If you want to sell your home today and you take some beautiful photographs, figure out an entice asking price and post it to Zillow directly (which is free), buyers will see it, they will want to view it and they will want to buy it. And all of that will happen outside the confines of the MLS. So, again I ask: Do MLSs need to exist anymore?

In a hot seller’s market it is not uncommon to hear about a lot of pocket listings. Sellers are few and far between while buyers are easy to find. And a pocket listing is the fasted route to the double dip. Clearly agents have no problem “bypassing” the MLS when buyers are easy to find so they can get both commissions. That poses an interesting dilemma: If agents can keep it off the MLS to get both commissions, then sellers can keep it off the MLS to SAVE both commissions. You have to ask yourself of what use is a real estate agent in marketing a home when their primary benefit is access to the MLS and they do not use it to market the home?

Even at a time when there is talk about creating a nation-wide MLS, it would not surprise me to see the MLSs begin to slowly fade away. The only thing keeping that from happening is buyer and seller education, and that is about to get a big shot in the arm. Stay tuned.

To learn how to keep more or your hard-earned equity when you sell your home, check out The Intelligent Home Seller eBook and The Intelligent Home Seller eCourse.