Wednesday, October 24, 2007

Why Use an Agent ?... Why Wouldn't You Use a Agent?

On my post a few days ago... South Bay-Beach Cities: Buyers Vs Sellers ... the comments turned out to be very interesting... It's funny how sometimes comments take on a life of their own and become almost another post.

I found it fascinating that questions about using or not using an agent were posted on an agent blog. I don't think you pose those questions if you are not looking for answers. As I read and responded to the comments a few things struck me that seemed worth writing about.

Unless a buyer plans to buy directly from an owner (FSBO)... at some point they are going to be dealing with an agent as most real estate that is for sale is listed by an agent. This means that if you don't have an agent you will either wind up having no representation or using the seller's agent as your agent. Yes... an agent can represent both parties in a sale as dual agency is not illegal in CA. In California, agency is not determined by who pays, but rather by how the parties choose to be represented.

I have acted as a dual agent. It is not easy to guarantee equal levels of service while maintaining complete neutrality and still uphold all fiduciary responsibilities to both parties. preference is for each party.. buyer and seller to have their own representation. There are many aspects of today's real estate transactions that work better if both parties have their own agent.

The question isn't so much why use an agent.. but rather why not use an agent. Why wouldn't you want to have someone represent your interests in negotiating an offer? Why would you accept someone you don't know to represent you rather the finding the best agent you can to represent you. You are being lazy and not taking a pro-active stance about what may be the largest financial transaction of your life. Claiming that all agents are bad is nothing more then a cop out.

I know the standard rhetoric ..... all agents are crooks and liars... who are greedy and only care about closing the transaction.. so it doesn't matter if I have an agent... Yes.. there are some lousy agents, but most agents truly care about their clients and go out of their way to be sure their interests are protected. You don't receive referral business from past clients because you did a rotten job. There are a number of not just good.. but great agents in every community. If you are using someone who doesn't fall into that category then it's your own fault!

That's right.. stop blaming all agents and start taking responsibility for your actions. It is your responsibility to find the best agent available to help you whether you are buying or selling. Once in awhile you will get lucky and stumble upon a good agent but truthfully if you want a good agent you will have to look for one. The best agents are not going to show up at your door with a blinking neon sign saying I'm the best in town.... use me! Nope.. you have to actively find the agent that's right for you. That means that you may have to actually interview agents. You will have to talk with them and ask them questions. If you are uneasy about the agent or not feeling comfortable with them.. don't use them. Keep looking until you find someone you feel confident about.

The agent you choose should match your needs. If you like a lot of personal service then a high volume agent with a number of associates who actually handle the transaction is not going to be a good fit. On the other hand if you are a person who delegates decisions then you may not want someone who checks every detail with you. Far too many consumers pick an agent based on how they look or the car they drive... then complain in a month about the rotten agent. Hey.. you picked them.. agents can't just start writing contracts without your active cooperation.

Picking a good agent takes some work... however you will be glad you took the time to make a conscious choice. Talk with your family, friends, attorney or accountant about the agents they used. Many people have agents they have worked with over long periods of time who are trusted advisers. Buyers and sellers have been conditioned to think that they should try to avoid talking to an agent... garbage.. how can you get to know someone if you don't talk with them. Go to Open Houses... you don't have to leave your information.. tell them you are interviewing ... and take their information. Set up a free e-mail account just for real estate information and sign up for online newsletters from a few agents to see what they are saying.. most of them don't require a phone number or name.

Read agent blogs.. you will learn a lot about someone from what they write over time. Google real estate in your town.. then Google agent names and see what pops up. Check out Realty Times.. a number of agents post information about a particular market. Is the information accurate and informative about the real estate market in your community? Trulia and a number of other sites have places where consumers can ask questions. Read the questions and answers.. you will be surprised at what you will learn. Ask a question or two about your neighborhood.

Finally...I was amazed that while people complain about an agent's veracity.. they have no problem with either lying to their agent or withholding material facts. Whew.. it's OK for the consumer to lie to their agent and then complain about the agent not being trustworthy. Does the term double-standard ring any bells? Has it occurred to anyone that a good agent won't work with someone who isn't honest with them? Real estate transactions are complicated and there a lot of things that can happen during the course of a transaction... a lack of honesty shouldn't be in the mix. I won't work with someone who doesn't tell me the truth. I will not put my reputation on the line for a person who isn't truthful.

Stop gripping about bad agents. Don't settle for an agent you can't or don't trust. If you expect honesty from an agent then you need to reciprocate and be honest with your agent. Be pro-active and find an agent who will represent your best interests. Great partnerships don't happen magically.. you have to work to achieve them.


Anonymous said...

Sorry Kaye.

Your article did not persuade me to use an agent to purchase a home. You ask "Why not use an agent?" Well, you can negotiate that into the price because the seller will be saving on commissions. I'm sorry Kaye, but these are big dollars. Our agent earned a huge amount on the sale of our home. I don't believe our agent earned it. I did shop around for agents and also interviewed a couple. I think most of them tell you what you want to hear.

The home we sold was a home we purchased without using an agent. As two working professionals, I think we did just fine on the purchase.

With the help of blogs and MLS I believe I have just as much knowledge about the market as most agents. I've been keeping a close eye on the market and am able to decipher between good and overpriced properties. If I was shopping for an A+ location ($3 million or higher), I would reconsider. But that's over my price range.

Most people I've spoken to don't have good experiences with agents. I don't mean to be insulting but you don't even need a college degree to be a real estate agent. I think a lot of people are capable of handling most of these residential real estate transactions.

Kaye Thomas said...

Anonymous 4:44..
First..I appreciate you taking the time to respond and I appreciate your courtesy even as we disagree.. I learn a lot from those who choose to comment.

I don't doubt that you are capable of purchasing a home without an agent. I wish you had a better opinion of the agents you have met. I know some really wonderful agents who I think might change your mind.

I also agree that by reading blogs and keeping tabs on the market you have an idea about what is happening in general.

I know you won't( don't) agree with me on this but an agent who truly knows the market provides a major advantage to the consumer.

I don't think price should be a consideration in deciding to use an agent. I think a good agent brings value to any price range. Not long ago I saved a client $75,000 because of specific market knowledge that I had that their accountant and attorney didn't know. Once in awhile we are good for something...

I absolutely agree with you that we need higher standards for licensing. I think the current rules are terrible. I am all for agents having to have, at a minimum, a two year degree and then some type of apprenticeship or mentor program... somewhat like student teaching. Too many companies still turn agents loose with out any real time training.

As an aside... in most states the commission is an agreement between the seller and his broker and many brokers won't allow it to be negotiated as part of the sale. I know some listing agents will give a break on commission if you also use them as your agent.

Anonymous said...

Kaye, get off your high horse. Buying a house is a business transaction. If I choose not to tell an agent how I would go in a purchase, that is my business. Not the agents. If I choose to not disclose how much money I have, that is my business as well.

What should you tell the realtor? Where you want to buy and how much you are willing to pay for the house.

Probably good for more people to do tell the agent how much you make, next thing they are teaching you about "affordability products" and referring you to their mortgate broker cousin (with a kickback for the referal).

Kaye Thomas said...

Anonymous 8:39
You are correct buying is a business transaction but it is also an emotional one. You may have all your ducks in a row but a lot of people don't.

Most buyers don't realize that they need to have proof of funds in a seasoned bank/stock.. etc account for 60-90 days. Many have no idea that they need to be in the same line of work for at least two years. It can come as a shock to buyers to find out that the big bonus they get three times a year may not be allowed by a lender as part of their income. Grandma may have told you that she will give you the money for a down payment but her idea of money to buy in Ohio may be a lot different then to buy in Redondo Beach.

Let's talk about what I need to know and why. I don't need to know exactly what you make.. but I do need to know you can qualify for the loan you want. As far as how much money you have.. again I don't need to know what you have over and above what you need to purchase. If you have $1m sitting in the bank.. I don't need to know that. . but I do need to know that you actually have $300k in a form that can be used as a down payment and for closings costs if you have indicated that your price range is $800000-$1.1m. Just telling me you have enough isn't always sufficient.

A lot of very smart people don't understand the buying/lending process. I'm going to share two stories. I had a couple with great jobs who said they would be putting 40% down on a property. I asked them about the source of the money and they assured me that they had the cash and were ready to go.. one small problem.. the cash was coming from an insurance settlement.. that hadn't quite been settled. The attorney had the check but there was a little more involved. After finally getting that information and speaking with the attorney it was decided that they were still months away from purchasing and probably wouldn't wind up with as much money as they had hoped. This is information I needed to know as it changed their house hunting plans substantially.

I had anther buyer who had a decent chunk of money in the bank. He started out in one price range but eventually decided to spend a bit more as he wanted a larger home. One small problem.. he kept most of his money in gold coins.. and only wanted to sell them off a little at a time. It was all legal as he had purchased the coins over a long period of time. He didn't realize that he couldn't just throw a bunch of money in a bank account without stating the source of the money to the lender. Lenders don't like the idea of coins in a safe deposit box.. they want seasoned money.. 60+ days in some type of financial institution. This is also true for people who have money in a safe deposit box. You can't just throw undocumented cash into a transaction. Had I known this upfront I would have told him how banks worked and he would have made his decisions accordingly.

Did you know that if you have your business structured as a corporation and keep money in the corporation for tax reasons while paying yourself a salary that your salary isn't the gross amount you contribute to the corporation but the salary you have chosen to draw. You may have a gross income of $300,000 but if you only pay yourself $100,000 you may not qualify for as much as you think you do. Did you know that you can't just automatically take that money out of the corporation for a down payment? Did you know that a lot of lenders/bankers have no idea how to deal with someone who has retained corporate earnings?

I have tons of stories I could recite but they all come down to the same thing.. there are things I need to know to make the transaction work for the client. It isn't being nosy.. it's being practical. Most people are involved in 5 or less real estate transactions over their lives. I've been involved in thousands. I've seen situations that you would never think about or hopefully have a reason to know about. Dismissing my knowledge could be costly. I may know things you don't that can help you structure the way the transaction is drawn to your benefit.

Here's something for you to ponder.. You seem to consider yourself to be smart and honest but guess what.. not all buyers are upfront and honest people. You would be surprised at how many "buyers" are out to scam sellers and play the system. Often they target For Sale by Owners, older people or those they believe are gullible or desperate.

One final note... I have never nor would I ever take a referral for a loan. I give my buyers a list of local lenders who have been in business a long time and tell them to pick one based on fees and programs. If they have a lender they like that's fine.. unless it's their cousin who went into business last week.. then they have to double app the loan.

So.. that said...I'll make you a deal... I'll come off "my high horse" if you will consider the fact that all agents are not the scum of the earth...You may have had a bad experience but most agents are decent people who work hard for their clients. No question there are lousy agents but believe me there are also lousy clients. Interestingly enough they usually find each other.

Pat said...

What about discount agents like Redfin, Zip, or Catalist?

Kaye Thomas said...

It depends on what you want from an agent. Redfin offers slightly more help to buyers then it does sellers.. but not by much.. Neither really get much help from the Redfin agent. You rarely meet with a Redfin agent. Almost everything is done via computer with minimal if any personal contact. They either charge you to see homes or want you to try and get the listing agent to show property.. when that is their job as a buyer agent collecting a full fee. As I understand it they don't go to inspections or offer much beyond helping you fill out contract.. but they do take have a decent MLS search.. Rumor is they are now finding out that their business model may not work in today's market and I'm betting you will see them charge more and possibly have to offer more to consumers.

Catalist does a pretty good job for buyers and sellers.. but they also are not doing as well in this market. They proclaim that they only charge 3% but the reality is that they often charge almost a standard fee if a seller wants the property sold quickly. Also their listings tend to expire unsold more then other companies.

As far as Zip Realty.. I don't know much about them as they don't have a big presence in our market but I understand they are having a tough time in this market.

I think there is a place for different business models. My only objection is to companies who try to proclaim that they are more then they are. Nothing wrong with discount.. just be honest about it. I think Help U Sell is great.. they tell you exactly what they will and won't do.. they are very straight forward.

In most instances you get what you pay for.. if you are willing to accept minimal service then a discount agency may be just fine. The problem is that most people want full service at discount prices. Also consumers don't realize that the companies are going to push them very hard about using their auxiliary services.. which is where many try to make up for their lower fees.

Truthfully many full service agents wind up putting cash into a transaction or taking a lower the agent's discretion. I've bought more appliances then Costco.. and often my participation in a transaction makes the difference for buyers. and sellers.