Ah, the good old days, where have they gone? The days when you confidently told a seller you are the cat’s pajamas when it comes to real estate; the days when you got the listing, put a sign in the yard, placed the info in MLS, put a little ad in a mag, went to the golf course, or home to lounge by the pool, and waited for the phone to ring, then met the prospective buyer, talked real fast, signed all the bottom lines and didn’t budge an inch on price – heck, there were others right behind them, get it now or lose it.
The days when buyer’s agent seemed like jackals because the market was so strong you could turn your nose to their little representation games with a take-it-or-leave-it stance as you smugly snickered over their offers.
Of course, I am using hyperbole here to make a point, but there is more than a little truth here.
Strong markets make it easy on a real estate agent. Tough markets make it tough. Now everyone is, or should be, re-visiting the meaning of real-estate broker.
I recently checked Wikipedia to see what they have to say:
http://en.wikipedia.org/wiki/Real_estate_agent
I found the following passage interesting. Nothing new, but it’s food for fresh thought:
Potential points of contention for agents
Real estate commissions are becoming a point of controversy. Home values in many areas have quadrupled over the past 20 years. This may be contributing to the increased number of licensed agents and growing competition between them. The number of real estate agents in areas tends to rise when home values do, and the productivity of existing agents goes down. The rewards have increased, but so have the demands of clients and business risks faced by agents. In North America, agents have had to become familiar with marketing through the internet as well as traditional print and other media. Additionally the law is complicated with issues such as defects in housing, grow houses and other issues of which the agent is the front line defense for his client. There is more liability than ever in advising buyers and sellers.
Another controversy exists for the commissions to real estate agents. If a listing agent sells a property for any amount above the listed price, he in turn will make additional income. In theory, this will motivate him/her to get top dollar price for his client, the seller. However, if the agent representing the buyer attempts to obtain a lower sales price for his client, then he/she would make a lower commission. Thus, it could be considered to be in the agent's best interest to advise his client to purchase the property at a higher price.
In practical terms, there is rarely a great enough difference between the listing (asking) price and the negotiated selling price to make a significant difference between the commissions generated on each side, and certainly hardly enough to justify an agent failing in his fiduciary duty to obtain the best terms for his/her client.
Another potential conflict of interest exists when a listing agent in a very active real estate market has incentive to sell properties quickly at unnecessarily low prices in order to benefit from a high volume of sales.
In any case, agents who create satisfied clients and develop subsequent referrals are likely to do far better in the long run.
Years of upward movement brought success to many, but also as success created a false sense of long term security, many people fell asleep and coasted on the strength of the market, some even became arrogant, believing success was solely the product of their extraordinary selling skills. Many new people came into the real estate profession because that was where the money flowed like a heavenly honey.
Then the market began to change and the internet crept in, then busted in like a drunk sailor at 2 in the morning, and the concept of representation became more than just a small piece to be learned for a license exam.
I’m going to post a few follow-up posts to this one in order to help clarify my own thinking about the industry, especially as it relates to representation and commissions, but feel free to take this set-up and post your own thoughts.