Sunday, April 8, 2007

Five BS Real Estate Myths - # 1-You need a Realtor to buy or sell your home

I have not posted anything for over a week, but the dry spell is over. I just read in Parade magazine an article entitled 5 Biggest Real Estate Myths that is full of male cow excrement. Sometimes I am really amazed at the audacity of a reporter to write on a subject where they know little, and interview people who know even less, but have an ax to grind. And since Parade is an insert in major newspapers around the country, I wanted to reach as many people as possible, and the blog seemed like a good approach. Please feel free to circulate this if you agree with me.

I will list all of the myths from the article and then go through each of them and let you know the reality.

  1. Only a licensed real estate broker should sell your home.
  2. Your broker wants to get the highest price for your home.
  3. A low credit scored means you won’t qualify for a mortgage.
  4. The advertised rates are what you’ll get from a lender.
  5. Your home must be turned into a showplace before it’s listed.

1. Only a licensed real estate broker should sell your home. There are so many flaws with this one it’s hard to know where to start. First, let’s get the terms correct, you will most likely work with an AGENT, not a BROKER. An agent does not have a broker’s license and cannot run a real estate office. You can work with a broker, but most real estate sales people you would meet are agents, not brokers.

This is NOT a myth, but reality. The person quoted in the article is a CEO of a company that supposedly helps sellers sell homes by themselves. The reason stated in the article on why people are afraid to do this is because they do it so infrequently. It goes on to say they have access to all the demographic data they need. Yes, they do, but so what! If you had access to all the data to pull an infected tooth, does that mean you should do it? Data and information does not provide experience or skill. Just think of the expression about an attorney that represents himself; he has a fool for a client.

As I continue down this one point, I realize this could get to be so lengthy, that you could be reading for hours. What I realize I will have to do is cover these points in separate blog posts. And to finish off this first point, I’ll provide some quotes from an email I received from Mollie Wasserman, the author of Ripping the Roof Off Real Estate. The points Mollie makes are valid:

1. The end of the Multiple Listing Service (MLS) is on the horizon. This service contains all of the data regarding houses for sale, sold and specific data, all of which is, or will soon be, available to anyone with an Internet connection.

2. Because someone has data, does not mean they have the expertise to interpret the data.

3. The value a “real professional Realtor” (not someone who got their license in the glory days and only made three sales in their career) brings to the table is the skill to interpret data and NEGOTIATE on behalf of their client, whether it’s a buyer or seller.

4. There are now a group of Realtors who have been trained to be consultants. They do not have to rely on making a sale to get paid. They can be paid for the expertise that the buyer or seller needs; negotiating, determining the financial qualifications, or managing the escrow so that the sale actually closes.

Even if I was not the publisher I would highly recommend Ripping the Roof Off Real Estate: How a Multi-Billion-Dollar Industry Came to Have an Identity Crisis by Mollie W. Wasserman

Here are the comments from an email I received from Mollie that was directed to other real estate agents on an author forum:

The MLS, as we know it, is terminal. Whether you believe that our MLS's sold us out or it's just the natural consequence of the free flow of information in the Internet age, the MLS, as THE place for property information is ending. To try to make it be like it used to be is like putting the toothpaste back in the tube. As much as we dislike the thought, I believe that buyers and sellers, armed with information that they got WITHOUT going through an agent, will find each other more and more. Many sellers who have time will do their own marketing activities and buyers will do more of their own hunting.

Now, a warning, I am going to go into partial sales mode now: this is why, especially during down periods like right now, that it is vital that we learn how to do real estate consulting. Because consulting is where our future is. The Internet is a wonderful thing and as we are seeing, can provide and distribute information like no human ever could. But what it can NEVER do is interpret what that information means - only a real estate professional with years of experience can do that. We know that most people lose money when they try to buy or sell on their own but where they lose it is not in the marketing and searching but from contract to close.

A seller finds their own buyer easy enough but doesn't have the foggiest idea of how to negotiate the contract, and even more importantly, how to troubleshoot the transaction to close. They get a pre-approval from a buyer and don't know if the lender is reputable or a scum-bag that will hold up their closing. They don't understand commitment dates and get hammered on inspection issues. Ditto the above for buyers.

Worse, because we have stubbornly stuck to the commission-only-sales model, there is no framework for hiring a real estate professional to provide this important contract to close counsel. Most people hire attorneys and attorneys cannot do what we do because they don't know what we know. They don't know property values so it's hard for them to negotiate a good contract, they don't know the good lenders from bad and they certainly will not babysit a transaction, making sure the dates are adhered to and everything goes as it should.

Again, it is not about finding a property to buy, or finding buyers for a house you have to sell, it is everything else that has a quality Realtor earn their commission. And to find a quality Realtor in the southern part of the San Fernando Valley, go to