buyer agent Archives - Real Estate News and Commentary

August 23, 2022August 23, 2022

Real estate agents have a role

Last year, at the height of the latest sellers’ market, I talked to a friend about selling his property. He gleefully quipped “Haven’t you heard? Nobody uses a real estate agent anymore [to sell a home].” To be honest, I hear that every seller’s market…and it’s a false statement. In fact, most home sellers hire a real estate agent to sell or buy a home. So, in response I asserted that Real estate agents have a role in the real estate transaction.

The National Association of Realtors’ 2021 Profile of Homebuyers and Sellers indicated that 90 percent of home sellers hired a real estate agent. The reasons for hiring an agent to list your home apply in any market, and include assisting you to set the list price, to prepare the home, and to facilitate the sale process.

Setting the right sale price is important in any market. During a sellers’ market, it may be tempting to set a high sale price. But the fact is that you can still turn off home buyers with an unrealistic price. A real-life example comes from a listing appointment I had last year. The seller was disappointed in the price range I suggested for her home (her home was smaller than other homes in the neighborhood). She was clearly dissatisfied with what I shared and said, “In this market, all homes sell for more than the last one that sold.” This is also a false statement. In a market where homes sold on average 7 days, she wasted 30 days on the market only to sell for a price that was in the range I suggested based on comps and adjustments.

Home preparation is also a key factor in any market. Home preparation entails decluttering, staging and sometimes repairs. Let’s face it, the better the home presents, the quicker it sells. In a seller’s market, a well-prepared home can elicit a bidding war, raising the sale price above list price.

Hiring a real estate agent is not for everyone. But the stats revealed by NAR’s 2021 Profile of Homebuyers and Sellers indicate that real estate agents have a role in the real estate transaction. Real estate agents are housing-market experts, recognizing and anticipating trends. Agents can provide detailed market analyses to assist in formulating a home’s listing or sale price.

Furthermore, from the time your home is listed to the day of settlement, agents are facilitating the transaction. Starting with marketing your home, the agent will work to procure offers on your home and assist in negotiation. They will also assist in helping completing the sales contract and follow up on contingencies. They will also work alongside other professionals to ensure any bumps in the journey to settlement are worked out.

By Dan Krell
Copyright © 2022

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

July 16, 2022July 16, 2022

Back to the future for residential real estate

If you consider the roots of brokerage in residential real estate, you can imagine how much the business of selling homes has changed. Unlike today, the first real estate brokers were independent. Their “listings” were exclusive and proprietary. Buyer agents didn’t exist until well over one hundred years later. And at the beginning, there was no broker cooperation on listings and commissions.

Of course, everything changes over time. Brokerage cooperation began with loose networks of brokers who agreed to help sell each other’s listings. Early multiple listing services evolved out of those local networks. And as the real estate industry adopted emerging technologies, the MLS concept evolved into the listing service we know today.

The MLS framework promoted the evolution of real estate brokerage as well. Centralizing and standardizing listed homes made home searching easier for brokers and their respective buyers.

Brokerage cooperation allowed agents and brokers to sell others’ listings to buyers. Up until the early 1990’s, all agents and brokers represented the home seller. However, it’s likely technology and a robust MLS fostered buyer agency and dual agency.

It seems as if it wasn’t until the advent of buyer agency when people began questioning agency and compensation. Prior to buyer agency, the commission was negotiated between the listing broker and the home seller. Selling agents (those who brought the buyer) were a subagent of the seller, so it made sense that the commission would be shared with subagents.

The commission structure of today’s listing agreements seems to be an antiquated carryover, where commissions are “shared” with sub agents and exclusive buyer agents.

As an aside, it’s common, if not required, for a buyer agent to disclose to their clients their compensation amount. If the coop commission is less, they will likely collect it from their client.

Currently, real estate agent and broker compensation is undergoing a meticulous and exacting scrutiny inside and outside of the industry. During the last two decades, there have been legal challenges to the industry’s status quo on residential agent and broker compensation. However, recent legal proceedings have gained traction such that a growing number of real estate brokers are embracing a possible future with “decoupled” commission.

When change is afoot in the housing industry, there is a lot at stake for real estate brokerages. Although the outcome to the current challenges of real estate compensation is uncertain, the result may be that residential real estate brokerage comes full circle, where buyer and seller compensation are respectively exclusive.

By Dan Krell
Copyright © 2022

November 28, 2020December 13, 2022

Real Estate Agent Personality

Many home buyers and sellers don’t give much thought in choosing their real estate agent. They may decide to work with an agent after meeting once or a phone call. But having the right agent by your side can mean the difference in having an event-free home buying or selling experience, or one that is full of pitfalls and non-communication. Besides professional expertise and experience, is there a real estate agent personality trait that gives you an advantage?

Lee Davenport conducted a groundbreaking study comparing real estate agent personality differences (Home Sales Success and Personality Types: Is There a Connection?; Journal of Real Estate Practice and Education; 2018; Vol 21, No 1; p29-57.) The study investigated the question whether there is a connection between successful real estate agents and their personality type. Success was measured through lead generation (e.g., meeting new clients). Although you might think there is a personality that is better suited for real estate, the study concluded that there wasn’t one specific personality type that correlated to real estate success. However, he suggested that there should be further research to understand why there is no difference in the success among real estate personality types.

Back in 2014, Graham Wood wrote an article for NAR that also questioned if there was a perfect agent personality (Are You Sure Your Agents Have the Right Personality for the Job? nar.realtor; April 11, 2014). Although the article was not a study published in a peer reviewed journal like Lee Davenport’s, it does provide food for thought and an obvious conclusion.

Wood, like Davenport, questioned which personality dimension on the DISC test was better suited for real estate. After testing himself, Wood believed his personality traits were not suited for a people-skills intensive field (such as real estate sales). However, after interviewing several brokers, he learned that there is place in real estate for pretty much any personality type. The DISC (discprofile.com) is a behavioral assessment tool that helps people be more self-aware, and increase productivity.

What should you look for when choosing your agent? First, make sure they are licensed in the area you intend to buy and/or sell. I can tell you that there are agents who try to do business over state lines where they are not licensed. It happens more than you think.

Second, what’s their experience and expertise? In today’s market, most agents don’t confine themselves to specific neighborhoods. The idea of “neighborhood specialists” is antiquated. Information is abundant to agents and consumers, and can easily be applied to any neighborhood. You can learn more about an agent by how they handle adversity. Instead of asking about how many sales they have or neighborhood experience, ask about specific transactions where they overcame obstacles.

Other considerations include getting a referral from a friend or relative. But referrals should be vetted. Just because your friend had a good experience with their agent, doesn’t guarantee success for you. Sometimes agents and clients connect and work well together, and sometimes they don’t. Just in case, make sure you can walk away from your agent by ensuring your buyer or listing agreement provides for termination without a penalty.

Also, it doesn’t hurt asking the agent for a couple of references from recent clients. You can get insight into the agent’s business by calling the references and asking about their experience with the agent.

By Dan Krell
Copyright © 2020

Original located at https://dankrell.com/blog/2020/11/28/real-estate-agent-personality/

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May 24, 2019November 23, 2021

Buyer agent commission controversy

One of the hottest controversies in real estate that you have yet to hear about is who should pay buyer agent commissions. Agent commissions controversies have been around in one form or another for decades. The commissions issue typically becomes front and center when the housing market is doing well. This time, however, the buyer agent commission controversy is gaining steam and has the potential of changing (and possibly upending) residential real estate and online real estate platforms.

The debate is center in an anti-trust class action law suit filed against the National Association of Realtors and a number of major real estate brokerage brands. As I reported last month, the law suit alleges that the defendants engaged in “anticompetitive practices.” Among the alleged issues listed in the law suit, includes a “Buyer Broker Commission Rule” that requires buyer agent compensation for a home to be listed in the MLS.

Regardless of how a listing agreement “structures” broker commissions, the perception and general acknowledgement is that the (buyer broker) buyer agent commission is paid by the seller. The seller typically pays the listing broker a commission, which is shared if another broker represents the buyer. This commission “pass-through” is responsible for the growth of online platforms selling home buyer leads and contacts. It has also been responsible for the growth of real estate groups that act as “buyer mills,” which rely on high volume leads generated via online platforms and other means. It can be argued that because of Buyer Broker Commission Rules, the billions of dollars that are generated and spent on home buyer leads (as well as buyer rebates) can be traced back to the home seller.

Home sellers are not the only victims. A study (jstor.org/stable/24887258) conducted by Joachim Zietz and Bobby Newsome (A Note on Buyer’s Agent Commission and Sale Price; The Journal of Real Estate Research; 2001, Vol.21 No.3 p.245-254) revealed that buyer agent commissions had a positive effect on home sale price, but only on lower-priced homes. The conclusions suggested that buyer agents “do not act in the best interest of their clients because of the institutional structure of sales commissions.”

Is it possible that the MLS perpetuates steering and anticompetitive behavior? A recent study by Barwick, Pathak and Wong (Conflicts of Interest and Steering in Residential Brokerage; American Economic Journal; 2017, Vol.9 No.3 p.191-222) has shocking conclusions that resonates with those who are wary of the residential real estate industry. The study pointed out that real estate commissions are higher the US than other industrialized countries. The authors concluded, “Properties listed with lower commission rates experience less favorable transaction outcomes…they are 5% less likely to sell and take 12% longer to sell. These adverse outcomes reflect decreased willingness of buyers’ agents to intermediate low commission properties (steering)…” They “provide empirical support for regulatory concerns” because the data indicates buyer agents will steer their clients towards homes paying higher commission.

Home sellers can learn from home builders about marketing and agent compensation. Home builders figured out buyer broker commissions a long time ago. They will not pay advertised compensation to buyer brokers who don’t show up with their clients. And during hot markets, they pay a modest referral fee in lieu of commission.

All things considered, the issue of buyer broker commission is a complex issue that depends on multiple factors, including market conditions. However, increasing awareness is inventing new business models and lower buyer broker compensation expectations.

Original located at https://dankrell.com/blog/2019/05/24/buyer-agent-commission-controversy

By Dan Krell
Copyright © 2019

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September 23, 2016July 13, 2019

Notice to home buyers and sellers

I have always found it curious that area agents feel a need to be licensed in three state jurisdictions (Maryland, DC, and Virginia) as if there is never enough business in any one area. I get the idea that it potentially helps them make more money. Maybe they are putting home buyers and sellers at risk. Home buyers and sellers should be on notice.

Being a competent real estate agent requires more than just a license. It also requires more than an understanding of the neighborhood housing market nuances. A competent agent knows the jurisdiction and local statutory requirements where they are doing business. They should also be knowledgeable of and use the latest contracts and disclosures.

It’s more than a full time job to be a local expert; following sales trends, knowing the latest home listings, and keeping up with specific statutory requirements. It’s very difficult (maybe almost impossible) to be a local expert in more than one county, let alone three states! And as more state and local legal, zoning, and disclosure requirements for buyers and sellers become enacted – Home buyers and sellers at risk from incompetent agents.

For example, the statewide requirement of licensees to ensure home improvement contractor referrals are licensed is a consumer protection that many are unaware. The requirement ensures that consumers can go to the MHIC if the work is faulty and/or there are issues with a licensed contractor. If your agent unwittingly recommends an unlicensed contractor for home inspection repairs, (besides any potential action against the licensee), a home buyer could demand you make additional repairs and/or obtain certification from a licensed contractor that repairs were completed properly.

And effective October 1^st, Maryland is altering its agency law again. Among the requirements, agents conducting an open house must conspicuously post a notice from the Maryland Real Estate Commission. The notice (sounding like Miranda Rights) states that any information provided to the open house agent is not considered confidential and buyers are “entitled” to representation. What would your reaction be if your agent was unaware of this and the buyer is now seeking to void your contract because they were not given their “Real Estate Miranda Rights?”

Recent home seller requirements in Montgomery County are further example where you could be at risk if your agent is unaware of the local statutory requirements and ordinances (such as utility costs and radon test requirements). Non-compliance and/or non-disclosure could possibly result in a fine. And of course any future ordinances (such as a sign ban) furthers the risk. Who knows? Maybe the County Council will devise a local registry of agents doing business in the county to promote real estate agent competency and protect consumers.

Do yourself a favor and hire a competent real estate agent who is not only aware of sales trends and neighborhood values, but the local practices and regulations as well.

Increasing statewide and local regulation is making local real estate sales a specialized endeavor. And as a home buyer or seller, you should bear this in mind when hiring real estate agent. If you’re not being advised properly as a home seller, you’re at risk of non-compliance with statutes, regulations, and/or ordinances – which has potential for fines and a contract dispute. If you’re not being advised properly as a home buyer, you’re at risk of missing specific local disclosures and notices that could affect you financially and/or physically as a home owner. You’re on notice.

Original published at https://dankrell.com/blog/2016/09/23/home-buyers-and-sellers-at-risk/

By Dan Krell
Copyright © 2016

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