Discounted

The last time there was a boom market, discount brokerages started slithering out from under their rocks enticing sellers with such rhetoric as "You don't need to pay those high fees" and "Do you really need a real estate agent to sell your home?" When the market went bust, so did those brokerages. There was still work for agents who stuck with the business. Not much, but some.

As we all know, history happens. Often. And once again the discount brokers/open door/offer pad/zillow (yes Zillow) are all competing for the unsuspecting buyer or seller's business. They use the same techniques as, "Why pay all those fees?" and "Do you really need an agent? What does that person really do for you anyway?"

Those "fees," by the way, are for such things as advertising and getting other agents to show the seller's home. Buyers (at least ones who work with scrupulous agents) don't tend to pay real estate commissions, so they don't have the "realtor fees" these commercials scare buyers into thinking they have to pay. What is really going on, at least for discount brokers (like the one whose name rhymes with purple sticks) is these are licensed agents, just like me, who are either agreeing to work for less money (I checked a couple of listings, the buyer's agent is still getting a reasonable commission). Or, the sellers are being told by the selling agent, "I usually charge $X but for you, I will make it $Y."  When in truth, they charged $Y all along. Why would these agents want to work for this company? Leads. Or at least perceived leads.

There are other companies who are asking the sellers to bypass using an agent all together and just saying "here is my price." Those are well and good for a seller, if they know what they are getting into. Typically "my price" changes once the negotiations start. "Oh, I see you have a broken stove knob: I need to ask you to take $2000 off the price or we have no deal." I have been told an Open Door/Offer Pad buy closes for about 25 to 35 percent less than what a seller would have gotten using a real estate agent. When they flip the property, the price tends to be higher than market because the house is now all fixed up and fancy-looking.

Plus, the owner of one of these brokerages just happens to owns a solar company, so every listing now comes with a solar panel lease--whether the buyer wanted it or not. And if there are solar panels, has the roof been certified since the panels went up? Please tell me these companies mention this to unsuspecting and unrepresented buyers. They may want to have this information before a buyer drops a quarter-million on their new home.

For a buyer to use these companies--especially an unsuspecting buyer who doesn't know anything about real estate law or local building practices--I don't see this going so well. Does the buyer know they (by law) have a ten day inspection period? Oops... not aware? Bummer. Does the buyer know that there are some building products in specific homes they should avoid? Darn. Does the buyer know about expansive soil? Superfund sites? Oh well. Did someone bother to ask if the home was actually insurable? Drat. Does the buyer know Arizona isn't a buyer beware state? That might be an interesting tid-bit, don't you think? How about the home builder? Some home builders are more equal than others. A buyer takes risks buying into some subdivisions built by questionable builders. No matter, the buyers love the kitchen and they think they saved thousands!

I am waiting for a lawsuit that will inevitably come from some lack of disclosure. Because, it is going to happen.

I am told next month I am supposed to give a listing presentation to someone who is thinking about using me or Zillow (Zillow now has a nifty feature where sellers can list their home by themselves and wait for a buyer to put in an offer. No fuss! Someone--presumably at a title company--writes up the paperwork and both parties sign). I have given this a great deal of thought, and I am not sure how to respond to this listing presentation. Yes, I have references. Yes, I know what I am doing. Yes, I can write a contract and negotiate in my client's best interest. Yes, I can keep my seller from jail and yes, I can advise my buyer from hopefully making a terrible mistake. No, I am not some world-wide database with a bunch of "how to" stories written by those who don't do this for a living for the seller to skim. Instead, I pay for my data on the multiple listing service (which Zillow steals) and I have a blog.

The general perception is agents don't work for their commissions. Or, they are overpaid. The last sale I had (the tenant in place sale), if I had been paid weekly would have come out to $6.37 an hour, before I calculate my expenses. It just so happens I saw one payday at the end of the sale instead of a weekly pay check (which also includes working nights and weekends, babysitting a passive aggressive tenant as well as negotiating contracts during funerals and convalescing with the worst case of strep throat I have ever had). I made a bit more than that hourly on the Margarita sale. I am not complaining. When I get a few homes to close in the same month, my bank account smiles and I write a check to the IRS for their take. Otherwise, the money goes to feed my teenagers.

The real issue as I see it is that real estate agents have no perceived value in today's world. Anyone can go to the Internet and gaze at pretty homes. Anyone can Google "how to negotiate with a seller" and cross their fingers the sellers didn't read the same story. But the true practice is different. Yes, I show people homes, but I also explain the laws. I share with them which home builders to avoid and why. I tell them what I know and what they should know. My job is to help my clients spend their money wisely. I am to be a good steward with their investment. But at the end of the day the market is demanding change. And change is what they are getting. At least until the next down market.