Consumer Guru Clark Howard wrote a few days ago a blog post to ask the question whether real estate agents are needed. He began by pointing out, “with all the technology out there for home buyers and sellers, do real estate agents really matter anymore?” He continued, “For buyers, the research you can do online and with your phone is amazing. Apps like Redfin and HomeSnap will let you drive down a street, pull out your smartphone, aim it a house and snap a picture. Based on your GPS coordinates, the apps will tell you almost everything about that property. You don’t even need to know which street you’re on!”
Let me start out by offering a little real world experience. Sure, you can use these apps to find out “what’s online via public records” about a given property. There are numerous other apps I could throw in the mix, but what Mr. Howard does is throw out generic information and it makes it appear as if he is someone who has never actually used these apps and seen the flaws in online data and housing. MOST of the time I see data on Zillow, Trulia, even Courthouse records that can be skewed and in error. For example, let’s say you took Mr. Howard’s advice and downloaded Homesnap. Then you aimed it at a random house and hit the button. What I see with every online app and sites showing online valuation information is that square footage information can be very wrong. It is done quite often where a builder permits a house plan (years ago) and ends up finishing a bonus room or a home owner adds a bathroom or finishes a basement without permitting with the County in which the property is located. This means the data is skewed and off online. An outbuilding is added, pool, or something else that adds value. This means that without a real evaluation of the property and what it entails, anything from the size of the home to valuation estimates are way wrong.
Yes technology is amazing, but it is amazingly wrong at times. I have seen houses that after looking at comps in a neighborhood showed online estimates too high. I have also seen them substantially low based on actual sales and what the market would bare. This means if you as an unrepresented Buyer walk into making an offer with a listing agent (who represents the seller) you might make a low offer that is not taken seriously and you miss your dream home because you were working off facts that were not correct. The listing agent has no obligation to give you advice. I have seen Buyers before who were hurt because they missed a house after making an offer on their own and couldn’t understand why! It is because they didn’t have all the details or anyone working to make sure their offer was realistic based on what a property truly entailed and was worth. Would you as a Buyer with just an app have contacts to trusted lenders that offer some of the better financing packages? Would you have home inspectors that could be trusted to do a thorough job? Would you know based on where you are buying if you needed a radon test or not? I have had recent situations where as a Buyer’s Agent I was able to negotiate repairs, reductions in sales price in the thousands, and other perks to my Buyers after negotiating the deal and during the inspection period.
The author then states that agents have to “be part shrink and part salesperson to shepherd a deal across the finish line. Maybe times you may feel like an agent is not there for you because they try to get the deal done.” How much of a stereotypical comment can you make? All agents are not the same and to imply just because one is in a “sales” job that they would not act for their client’s best interest is simply wrong. Everyone in business is effectively in sales to some capacity. They are selling something. The attorney, CPA, local newspaper owner, and I could go on, everyone is selling something. The key is to find people who represent you in any field and make sure their qualifications, experience, and reviews show you that they are the right kind of people you can trust. I even noticed that Mr. Consumer Expert is also selling something. Noted “books” for sale. Again, everyone in business is selling.
My concern for the Buyer that looks at this advice of “go get a HomeSnap app” is that you still would have to speak to an agent at some point on most occasions. The other funny thing is why Mr. Consumer Expert would not encourage Buyers to have their own representation as it costs them nothing to do so! Do you think the average listing agent that represents a seller will take a cut in half their commission just because a Buyer comes to them unrepresented? Not normally they wouldn’t. So why not have a Buyer’s agent who is getting paid out of a split in the commission which was agreed to be paid by the Seller to the listing broker and let your agent tangle with the listing agent if it costs the Buyer nothing? This is the biggest no-brainer smart idea of all time! Would be like going through a divorce and your soon to be ex-spouse is also paying for “your attorney…” Grant you, not the best analogy, but you get my point.
Not to mention that it is much easier for a Buyer to call one agent who can line up 5, 10, 20+ listings over a period of days and weeks as you move through the process as opposed to talking to 5, 10, 20+ individual listing agents to meet each of them and line up showings with each! Wow how much of a pain is that?! Also, those listings agents legally can offer the Buyer no help or advice whatsoever. Once again they are legally obligated to represent only the Seller’s interests and not yours. So they get paid the entire commission paid by the Seller and they are tasked with smiling at the Buyer at the showing while trying to get the most lopsided deal they can in the favor of the Seller, and yet the author feels in a situation where a Buyer would be working with a salesperson representing the other side that a Homesnap app will suffice? Are you kidding me? Technology does not negotiate terms in a contract. Technology does not negotiate anything! People do and what works in a home buyer’s interests is having an agent they can trust who is used to negotiating contracts and has the reputation of being a good agent and a person who represents their clients’ best interests.
One recent study in our market noted that roughly 96-98% of all sales are going to be listings in MLS. This means that like it or not, the Buyer will be working with a salesperson and an agent no matter what anyway. Might as well use one to help you work in your advantage too … oh in case I forgot to mention, because it costs you nothing!
The author then turns his attention to Sellers. This I have less of a problem with, but he says that at times he is asked, should you sell your house yourself or hire an agent. He responds, “My answer depends. If you have the personality of a merchant and can embark on a well-planned sales and marketing campaign; if you can drop everything to sell the home; if you can have thick skin when a potential buyer looking at your house disses your decorating or whatever it may be, then maybe you’re OK to try to sell your home yourself. But selling your home yourself is more than just getting a “HOME FOR SALE” sign in the yard. You need to have a sales plan. And be smart about it: Even if you’re trying to cut the commission out, always put ‘Agents Protected’ on your sign.”
Once again, it is called “Sales and Marketing” for a reason and I have found that at times I need a CPA. At times I need a doctor. At times you may need a Salesperson who is good at sales and marketing if that is not your niche. As a listing agent I play salesman, marketing expert, SEO expert, scheduling coordinator, marriage counselor, and try and keep emotion out of the sale when things don’t go the right way to keep things on track and keep my client’s overall goal front and center. When you are handling a matter for yourself that is the hardest thing to do. This is why doctor’s don’t operate on their kids and attorney’s hire someone else to handle an issue many times. Most probably don’t have the personality of a merchant and don’t know how to orchestrate a well-planned sales and marketing campaign. Just not in most people’s skill set. Hey, being a CPA is no in my skill set so I hire one. Being a stock broker is not my skill set so I hire one. Good example, I went to Marketwatch online with one of my kids to have some fun and set up a game with a pretend stock trading account. They gave me $100,000 in imaginary money, and I picked my group of stocks as best I knew how. Call it “Fantasy Stock Picking” or something. Today some 3 months later I am down to $98k! On the flipside, I have a mutual fund account that is up over 20% in the past year. What am I saying? It can save you money to hire those that are good at doing what you may not have the experience to do yourself and even after paying them for their time you are further ahead than you would have been otherwise.
One thing I would disagree with him on is where he says, “And be smart about it: Even if you’re trying to cut the commission out, always put ‘Agents Protected’ on your sign.” Okay, well the very nature of the words “agents protected” means you are not able to cut the commission out when selling FSBO because you are still paying as a Seller a 3% commission (generally) when saying this to a Buyer’s Broker. I encourage you to consider the benefit of an additional 2, 2.5,3 for your own listing agent and have someone who actively markets and sells dozens of listings a year for a living. Someone who negotiates with Buyer’s Brokers all the time every day.
Think about it. What it is costing you the Seller to have your own Listing Agent is that 2-3% to truly have someone in your corner. I think I am worth it for example. I have had situations where due to a little less experience on the side of the Buyer’s agent I was able to negotiate more for my Seller. I have had times when due to the emotions of the Buyer we were able to get a few thousands of dollars to five figures in additional money in negotiating a deal because you could tell just how emotionally charged and how badly the Buyer had to have that particular house.
Am I better than my Seller would be in negotiating a deal when this is an emotional and a personal experience for them? I think so. Hey, it would be for me if I were buying for my family. I had a Marketing Executive locally one time tell me, “oh I handle negotiating deals all the time…” Yet he came back and acknowledged just how different real estate transactions were and how much harder it was to negotiate a deal on a house for himself and his family as opposed to negotiating a contract at work. I was just working with a new agent in the business recently. I asked him, as he had just retired from the Navy where he had responsibilities dealing with inventory on an air craft carrier, what was more challenging, the Navy or being a real estate agent. In about two seconds he said, “real estate because there is always something going on you have to handle or some fire to put out…” So why would you, if paying a Buyer’s broker 3% to bring a Buyer not have your own agent to try and negotiate with the Buyer’s professional negotiator?
As far as for sale by owner sites referenced by Clark Howard, Google the favorite FSBO sites and you will find them littered with posts showing CEOs of forsalebyowner.com to buyowner.com using brokers to sell properties because of how time intensive selling your own house can be. I actually closed a house in Gwinnett County, Georgia this past Spring for one of the kids of a founder of buyowner.com from Florida who listed this particular home through a local real estate company. They laughed at closing at how they owned buyowner.com, but didn’t have time to sell this one themselves!
Hey getting back to home buying and apps one more time, I have an H&R Block app for my iPhone. Why do I need my CPA? I want to sum up by saying that bad advice or a lack of details in the home buying process simplified down to an “app” can make nightmares happen and disillusioned buyers in the end.
Author: Hank Bailey
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