Why Bother Working with a Real Estate Broker?
This chapter will probably generate heated emails and phone calls to us from colleagues, for revealing these ‘truths’ I will share with you about our industry. However, it is these ‘truths’ that have contributed to the mistrust from the public in choosing real estate brokers, something our industry must work hard to correct.
Knowledge is power and for us to have a 'meeting of the minds' and trust each other, I want you to know I have been on your side of the sales pitch and know what most likely irks you, if you are searching for real estate. No clearer was that pointed out to me than when I was in a discussion with a client whom I had worked with for years. She was a single woman planning to relocate to the America's Happiest City. Within 50 miles of Asheville North Carolina, there are hundreds of master planned communities with all types of amenities and traditional neighborhoods non-gated. After she realized the diversity of communities on her first trip, she was smart, she went back, rented a home for a few months to narrow her focus and not be rushed.
After listening to what was most important to her, I recommended a number of master planned communities for her to see and a local MLS agent. I knew she wanted to see everything, as most buyers do. She narrowed her decision down to two places, one gated community and one not. As her and I talked about the benefits of a gated community over not, she said everyone was providing her lots of 'advice'. Then sharply added “frankly, to me, when choosing a real estate broker, all are like used car salesman – who can I trust?” Ouch!
What she did not comprehend, the gated community she liked best had a team of people who would truly look out for her, especially during the building process – a stressful and complicated time. I knew and trusted this team. They would guide her, control her construction costs and be there for her every step of the way. She didn't believe it and why should she?
A used car salesperson – how did real estate brokers get bundled into this group? Nothing against used car salespeople, but most of us have had an experience at some time in our life of being pressured into a decision by a fast talking salesperson at a car dealership, so it's possible to relate to the labeling. My favorite example of what I call ‘snake oil salesman’ is portrayed in the 1992 movie Glengarry Glen Ross starring Alec Baldwin, Jack Lemmon and Al Pacino. The movie portrays how difficult it is to be a real estate salesperson and at what length a salesperson may go to feed his family.
What my client was expressing to me in our discussion was, she did not trust any real estate salesperson and here’s why I suspect she and many other people feel this way:
BAD REAL ESTATE BEHAVIOR
Motivated by the Highest Commission: Buyer’s have the advantage of accessing a licensed real estate broker's knowledge for free - meaning no out of pocket deposits in advance, retainers or hourly fees. Real estate brokers are paid on commission. If a Real estate broker spends 80 hours showing you properties, driving you all over town and taking you to lunch, if you don’t buy, you owe the real estate broker nothing.
Commissions are generally paid by the seller. Commissions range from 1% on a MLS listing, to at times over 10% of the sales price. It would be natural for a real estate broker to notice the most rewarding commission payouts and make sure a buyer sees those listings first. Higher commissions paid by sellers are smart for the sellers, but bad for the buyers because these showings could be a waste of your time, not fitting your criteria. You may miss seeing a home that is perfect for you because of a low paying commission by the seller your broker may not be interested in.
Relentless Phone Calls and Emails: The public has become reluctant to share their phone number and email address with anyone, to avoid being bombarded with solicitations. It's no wonder why. In the past, in an effort for show companies to encourage vendors to exhibit at trade shows, some show companies promise to share attendee lists with all the exhibitors. If 50 exhibitors attend, 50 exhibitors now have all your contact information, if you attended the show. We have seen buyers disconnect their phones after attending shows like these, to end the solicitous phone calls.
Point two: If you asked for information or a brochure, the correct assumption is you are interested. By requesting a brochure, it is likely your contact information is shared with third parties, unless the website has a policy about not doing this. This could result in even more phone calls and emails to you. A good real estate broker will not call you every week or send you emails twice a day. When choosing a real estate broker, a good broker will follow your cue and timeline.
Real Estate Brokers Have a Tendency to Push Their Own Listings : Why have one side of the real estate commission offered when you can have both? Each home sold has a buying and selling side of a commission pool offered to brokers, typically 6% in total. Under the breath of the real estate industry, real estate brokers are taught to make ‘big money’, obtain as many listings as possible. Why? Because real estate brokers are guaranteed to be paid commission on the selling side, by controlling the listing. If the home you are being shown is your real estate broker's listing or his/her brokerage firm, I would wonder if the broker is hoping to gain the entire commission pool and/or is 'pushing' his/her own listings.
Real Estate Brokers May Have an Ulterior Motive: Does your real estate broker own in the community? While a real estate broker may say a community is the best thing since sliced bread, I have seen real estate brokers recommend communities which are not the best options in the marketplace. Why? My guess, the real estate broker wants to protect their investment driving prices up. They may tell you because they bought there, it is a great place. Do your own due diligence and do not rely on the broker's recommendation just because they own there. They may have an ulterior motive. Ask lots of questions before choosing a real estate broker.
GOOD REAL ESTATE BEHAVIOR
Why bother working with a real estate broker?
#1 - A good real estate broker will protect you. It takes years to become a licensed real estate broker and meet the continuing education requirements mandated by the state. Your real estate broker is forced to be highly educated. This is important when you make an offer or go into contract on the purchase or sale of property. Would you go to court without an attorney? You want a good real estate broker on your side.
Choose an active real estate broker - a broker who works the real estate business full time. Active real estate brokers are continually researching properties and pays particular attention to the best homes and real estate communities for the benefit of their clients. Active real estate brokers will have quality connections you will need such as lenders, home inspectors, moving companies, etc. These quality connections take years to accumulate, while real estate brokers are being paid nothing for it. On the flip side of the coin, some real estate brokers just keep their license active – in case someone they know is selling or buying a home. This may earn them a referral fee just by having a license.
So much information is available on the internet, which is great. However, we caution you to not believe everything you read. Why? A story: In 2006, we visited a community in coastal Georgia requested by a buyer. First, I visited the community's website which was informative and attractive. Then I visited the community itself. The community was completely abandoned, sales center had broken glass windows and it was clear to us this project was shut down. This could have been a pure waste of time for our buyer from the Northeast to go see, if they relied on just the internet.
We visit and score over 100 master planned communities a year in Florida, Georgia, North Carolina, South Carolina, and Tennessee. Buyers ask us all the time to visit specific communities to provide our opinion. This is why Real Estate Scorecard has evolved, providing community reviews to help you. When you find a real estate broker you trust, the more you open up and share what’s most important to you, the more likely your broker will connect with places you will be interested in.
Many buyers think by avoiding a real estate broker, they will save the commission during negotiation. We have seen through years of experience, this is not true. Sellers will not lower their price below what they already have in minds, even if it makes sense.
Please know each time you contact a master planned community direct and request a brochure, your real estate broker will not be paid a commission, even if they recommended it to you. The real estate developer considers you ‘registered already’ and many keep the full real estate commissions themselves.
If your real estate broker is not licensed in the state you choose and your real estate broker refers you to another agent in that state, generally your broker is paid ¼ of the 3% commission, which can at times be very little. So why would a real estate broker make the effort to help you with relocation out of state? Because it is the right thing to do, if your real estate broker really cares about this business. So don't be offended if your real estate broker asks you for a Buyers Registration to protect their compensation big or small, fees which is not coming out of your pocket.
Choosing a real estate broker is choosing a relationship, trusting someone to be there on your side - especially in the most difficult and confusing of times. A good real estate broker also chooses you and trusts you will understand how they are paid giving them the chance to be paid for a job well done by honoring protocol, so everyone lives happily ever after.
Bother working with a good real estate broker.
Warmly, Margie Casey Founder