Seattle, WA · Member since 2014 · 307 posts · 170 votes
I saw an interesting interview on CNBC today of Colony Capital CEO Tom Barrack whose firm has $34 billion under management. He spoke about the many changes in housing but touched on a real interesting point. He compared realtors fee`s to brokerage fees and said its days are numbered. He states that these fee's are the last of this type of fee left in the market place. I have to agree. I think its only a matter of time before this goes away. As a stock trader it would have been unheard of and impossible to have traded without a broker. Now you still have brokers but they are for a select few that need some hand holding or large portfolios. I can certainly see this evolving the same way with Zillow and Auction.com. I know the brokers went away kicking and screaming as all those good paying jobs went away. I would expect the same reaction here but times do change. Some may pop up oh we will need them to open the door and show the homes and all the other things a realtor does but again the same was said of brokers. I for one would like that 6% in my wallet. Some may feel different.
Here is the link to the video if you care to view it.
Residential Real Estate Agent · Tierra Verde, FL · Member since 2013 · 276 posts · 130 votes
12y
Most Realtors do just 4-5 transactions per year and make about $20k. Many, including me, practice real estate in their spare time. My goal is to do 4-5 transaction per month. My goal is to provide a level of service that makes my clients feel comfortable, proud and grateful for choosing to use me as their Realtor. I think that goals separate the 4-5/year, just get by crowd from those that choose excellence.
Many of my investor friends deride Realtors, sometimes even in good humor. The fact of the matter remains that 9 out of 10 houses are sold using Realtors. I don't see this changing any time soon. A good agent is more than just a robot that enters information in the MLS. A good agent can tell a tale of your home that will interest the internet viewer to want to come by and take a look. A good agent can take photos or hire a great photographer to highlight your homes best points. A good agent can steer you to deals, whether they are on the MLS or wholesale. A good agent looks out for your best interests before their own.
In a world where many folks are more and more overworked I don't see people wanting to take the time to show their home, or figure out contracts and disclosures. I don't see people relocating to new cities driving around aimlessly trying to find a good home in a good neighborhood.
As far as the fees I will just quote a friend of mine who introduced himself at a REIA meeting immediately after a $295 listing service guy, he said; "I am a Realtor and I charge 6%, because I am worth it.". If you don't value your Realtor's service, fire them.
Realtors are not essential, but neither is your car. You can buy a home without a Realtor just like you can get to work without your car but both will make the journey a whole lot easier.
Mobile, AL · Member since 2014 · 18 posts · 8 votes
12y
I haven't watched the video yet, but I do agree with the direction things are going with realtors. I, for one, am wasting my time with one on a property that I'm currently under contract. Both my agent and the selling agent are simply forwarding my emails and the sellers' emails back and forth...even so far as forwarding the emails so that I can read extensive chains of information that the seller and their agent have discussed. And vice versa. The seller and I may as well be conversing entirely with each other. So far, between the two of them, they've brought zero value to the table. If anything, they've made things a little more tense with negotiations simply because the seller and I know, verbatim, what the other is saying about the property. I mentioned that I wanted to have the electrical further looked at because the inspection came back unsatisfactory. The selling agent tells the seller to "not panic, and that we'll get through this, etc. etc...", but I see that as them showing me that the seller is now nervous. Tacky mistake if you ask me. I simply decided to use one because I'm still new to the game, but I am noticing a trend toward them becoming less of an asset and more of a $ waste.
Residential Real Estate Agent · Tierra Verde, FL · Member since 2013 · 276 posts · 130 votes
12y
Most Realtors do just 4-5 transactions per year and make about $20k. Many, including me, practice real estate in their spare time. My goal is to do 4-5 transaction per month. My goal is to provide a level of service that makes my clients feel comfortable, proud and grateful for choosing to use me as their Realtor. I think that goals separate the 4-5/year, just get by crowd from those that choose excellence.
Many of my investor friends deride Realtors, sometimes even in good humor. The fact of the matter remains that 9 out of 10 houses are sold using Realtors. I don't see this changing any time soon. A good agent is more than just a robot that enters information in the MLS. A good agent can tell a tale of your home that will interest the internet viewer to want to come by and take a look. A good agent can take photos or hire a great photographer to highlight your homes best points. A good agent can steer you to deals, whether they are on the MLS or wholesale. A good agent looks out for your best interests before their own.
In a world where many folks are more and more overworked I don't see people wanting to take the time to show their home, or figure out contracts and disclosures. I don't see people relocating to new cities driving around aimlessly trying to find a good home in a good neighborhood.
As far as the fees I will just quote a friend of mine who introduced himself at a REIA meeting immediately after a $295 listing service guy, he said; "I am a Realtor and I charge 6%, because I am worth it.". If you don't value your Realtor's service, fire them.
Realtors are not essential, but neither is your car. You can buy a home without a Realtor just like you can get to work without your car but both will make the journey a whole lot easier.
Investor · Western Montana · Member since 2014 · 110 posts · 36 votes
12y
Maybe this new wave of information will weed out the lazy real estate agents and encourage those that really do bring value to the table. Seems positive to me!
Real Estate Broker · Raleigh, NC · Member since 2014 · 2k+ posts · 1k+ votes
12y
I definitely think the role of the real estate agent has changed over the years. Not everyone. NEEDS an agents, but my clients seem genuinely happy to have me in their corner. I'm typically working with people who have never bought a home, or maybe are on their second or third home. They are not savvy RE buyers. They appreciate my advice on what to offer, what to expect during negotiations and what steps to take from contract to close. These are all things people can learn on their own, but they won't ever have the same market knowledge an experienced, local agent will have.
An analogy that comes to mind - I am currently in the process of hiring a Wordpress developer to build me a new website. I know how to make a Wordpress website myself, but he is an expert where I am not. I could fiddle with it for a few days or weeks and learn more, but I will never know what he knows. Therefore, I made the decision to pay him 500-600 to do the work instead. He will be much more efficient, get the site done faster, and it will look better than anything I could have made.
RE agents who learn new technology and who are not stuck in the 1990's ways of transacting business will go much further as times change. You have to be open to the new environment and accept change, not fight it.
Bear, DE · Member since 2014 · 178 posts · 65 votes
12y
@Jay C. The reason you feel this would happen is because like a lot investors, you want everything cheap (free) but you want full profits! As a business owner, investor, and Realtor I learned a long time ago. You have to evaluate what is money well spent, what will I spend that will generate me more profits. Just like when a car accident happens, you can file a law suit without a lawyer but if you have a lawyer you would have a better chance at winning.
Zillow was created by a savvy business man that took some information that was not available to the public, and provided access. It's not perfect and doesn't have all the information. It's a good starting point for a consumer.
I guess you forgotten what happen a few years ago that caused a crash in the economy? The result of that experiment brought on new and strict regulations in the industry. Housing is the biggest financial decision of most people lives. Do you really think a website will be the facilitator of this transaction? So you would trust a website to sell you home because you think your saving money? I guess next you would not want to pay closing cost? That includes a fee to the lawyer for filing. Roughly $600 to $1000.
I once spoke to a respected business guru and he said expenses are not loses but ways to create more money without having to deal with headaches in areas. He has an accountant, lawyer to take care of legal issues that he never hears about, advisory board, driver, etc.
You can not compare the stock market brokers to Real Estate. That's an entire different animal.
Oh whenever you watch CNBC the guest has an agenda - Tom Barrack has an agenda and since he received a law degree, it's something that will benefit his pockets.
Investor · Long Beach, CA · Member since 2014 · 56 posts · 12 votes
12y
Buyer's agents are going to be replaced by discount agents who just process paperwork and like Redfin. Everyone will just browse houses online and schedule viewings online either with discount agents or directly with seller agents.
Sellers agents are here to stay because selling a house has a lot of esoteric paperwork, health and safety codes, staging, open house, etc.
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
12y
I want everyone to realize something. Do you think FSBO is new?? Do you think flat fee is new?? Do you think discount agents are new??
We have been hearing the sky is falling for decades. HASN'T HAPPENED people. You must understand that for every do it yourself investor or buyer the whole population doesn't think like you do. There are many different type of buyers and sellers.
I do commercial real estate and let me tell you business has never been better and I am setting records every year for myself.
There are people out there that see minimal or no value to brokers or agents. I say to that GREAT and do what works for you. I do not need all the business and frankly I am selective about who I take as a client. I qualify them which I believe is one of the biggest things brokers and agents need to be doing and most do not. They accept a warm pulse buyer or seller and hope something happens. That's NOT how you run a successful business. Residential agents do fadeout more quickly and commercial is more specialized.
Discount companies have been funded hoping to be the next big thing and they last a few years and then go out of business or contract.
I have seen tons of them churn and burn over the years. Some people want to eat at Taco Bell for 1.00 and other will always want Ruth's Chris. There is business for everyone.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
Well, I didn't listen to the link. My opinion is that there is a successful guy in what he does attempting to branch out his business experience in an area he has no knowledge of seeking more fame and influence. Why didn't he speak to the cut a bookie takes on a bet?
Realtors have been working by the hour, on a salary, by consultation arrangements and for discounted commissions as well as under full commission arrangements for over 50 years. They have become more specialized.
I agree that today, you need to be more tech savvy than we were in the 90s, that doesn't throw out the techniques of the 90s, or 80s, or 60s or even the 50s. The reason the kids don't get it is that they have no clue as to the basics of RE as they begin on the third floor of the building of knowledge and then struggle to get up to the 4th floor.
Turning bits into atoms is not as easy as the techies believe.
In chapter one of the book of RE basics, it mentions that real estate is unique, no two parcels on the face of the earth are identical, this is mentioned before location, location, location. In the same subdivision there can be a 40K difference in lot prices, lake front to lake view to no frontage an no view. Techies want to convert these atoms to bits and there is not enough data to produce a reliable analysis.
Hang in there, I'm getting to Realtors.
Real estate has an emotional element unlike any other market, I may love a stock but a stock should not be based on an emotional response. Remember, RE is unique and a round lot of GE stock is pretty much the same as the next 100 shares you might buy.
Realtors are more than widget sales people, the are social workers, they are personal financial advisors, they are community representatives introducing new comers to a new area, they inform of social, business, religious, health care and educational systems within a community. They employ psychological assumptions about people as to preferences, their expectations, how they live, work and how they recreate in their life style.
There is much more to it than opening a door and letting people walk through a house.
I have had techies calling me for several years, wanting to develop an app for that, build some software program to revolutionize the industry.....I tell them they can't do that until we have artificial intelligence!
As to Zillow, good for them making money, but the product is crap, not worth any seasoned real estate professionals time using the site.....maybe they have pictures, that's nice. Valuations are subjective and objective, we can't get the subjective side until we have artificial intelligence! And, then, that will only be one opinion.
So, where are Realtors going? To the people to serve the public to facilitate real estate transactions.
How do they get compensation? Anyway they can that is socially accepted and legal.
What that guy was predicting was predicted in the early 80s, with Real Estate Consultants!
Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
12y
Everything everyone said above about a good Realtor or agent could have been and probably was said about good booksellers. And those good booksellers aren't all gone, but Amazon sure as hell changed their business model.
Technological change is disruptive. Comparing current changes to a change in the 70's isn't a useful comparison. It was certainly possible to sell books buy mail in the 70's, and people did it, but that didn't threaten the corner bookstore until technological changes brought it to scale.
I don't think Realtors will disappear. I do think their business will change radically in the near to mid term. Does that mean the next 3-5 years? Probably not, since as Ben mentioned they have a lot of political clout. But I would be pretty surprised if 20 years from now anyone were collecting a 6% commission for selling another cookie-cutter Toll Brothers house.
I am in the process of changing my home owners insurance policy. While talking to an All State agent, they mentioned that I have a swimming pool with my house. Now I wish we had a pool, and I will probably add one at some point, but currently I do not have one. The agent informed me they received the information from Zillow. Zillow, Redfin, and Trulia are all good generic sites, but any seller would values his or her house based on a Zillow estimate is going to be giving away value.
Real Estate Lender and Broker · Dallas, TX · Member since 2013 · 966 posts · 500 votes
12y
Joel,
It is wishful thinking that the real estate broker's days are numbered. They have been saying that for the 25 years I have been a broker. The reality is that real estate agents have gotten better. I think a few people on here need to search for better agents. They probably don't know the 20/80 rule. That rule states 20% of the agents do 80% of the business.
Real Estate Investor · Cheyenne, WY · Member since 2014 · 71 posts · 37 votes
12y
I think this is a fascinating topic that opens a lot of potential for thought.
I agree with both Bill and Richard above. I think we will see a major shift away from the standard 6% commission we see today, mainly because with all the resources and information available today, people are realizing that selling a house yourself isn't all that complicated. Couple that with the fact that most people seem to rate realtors somewhere between used car salesmen and lawyers, and I think you have a recipe to send people looking for an alternative.
However, as Bill mentioned, realtors have several things in their favor that stock brokers do not. Each house is unique. Houses are fixed, you can't up and take it with you when work transfers you halfway across the country. From my own experience trying to sell a house while buying a new one and settling into a new job was the last thing I want to do. Not that I believe the seller provided 6% worth of services either, but options are limited.
Technology is changing things though. I am impressed to read about investors landlording from long distances and some of the things they are doing to make it happen. I think at some point there will be a major shift in the way homes are sold. Maybe it will be as simple as someone creating a service that packages up everything a person needs to do for fsbo along with technology to show homes over a distance, teams with zillow and does a good job of marketing the product?
Interestingly enough, I find the best use of a realtor is as a buyer. Even this has changed though, twenty years ago I relied on the realtor for every bit of information about a community. Today you can find out most things with a little research on the internet, but that never tells the whole story. I find it ironic that the biggest service a realtor could offer me as a home buyer (or investor) is to be straight up honest about neighborhoods, but they are limited as to what they can tell you. Instead you have to ask the right questions and decipher the answer. I would much rather pay for solid information as a buyer than for the work performed as a selling agent.
As with stock brokers, there are people who still use real live ones rather than discount internet brokers. Realtors will always have a place, but I remember in the late 90's when I first heard about online brokers and the thought was foreign, today I cannot conceive using a real live brick and mortar brokerage. I don't see how the change can happen as fast or even to the same scale for realtors, but I do believe the change is coming.
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
12y
Another thing worth noting is that the majority of people who come onto this website & post on the forums are different than the majority of people.
The people who regularly post on this site are generally looking to be hands on investors and have an "i'll do it myself" mindset........which is great, more power to you.
What you do not get to see a picture of is the ones in the background. The ones who are not on a site like this & the ones that are on this site who come onto this site, create a profile & have never made a bp forum post. Maybe they have not even made a profile maybe they just read the blogs....These folks are doing deals ALL THE TIME & they are happy to have RE professionals do their jobs.
I'd say I have about 40 or so properties under management for bigger pockets members & almost all of them are from members who NEVER post on the site.
That is just from the investor side. Joe homeowner who has made 1 real estate purchase in the last 15 years is going to be even more hands off when it comes time to sell & then eventually buy.
Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
12y
[Settling into the armchair]
My perspective is not so much that the Real Estate agent shall become extinct, but that the role will change - they will become a more specialised - boutique if you will - service provider. Gone will be the day of simply listing properties on MLS and collecting commission as viable way to earn a living - this part is easy for the Vendor to do her/himself.
It is also very easy for the Buyer to search MLS and produce a list of candidate properties. For a seasoned investor, the agent then becomes a tour guide with access to the lock-box. For Dick & Jane homeowner, who buy 1-3 properties in their lifetime, they can provide more value around negotiation, financing options, etc.
Both of the above scenarios signal the need for fewer agents and a devaluation (or realisation depending on your thoughts about realtors) of the service they provide.
However, those agents who can take a set of criteria and bring back a handful of viable candidate properties - many of which are not yet on the market - will continue to add value to Investors and will earn their commission (or consultation fees). It is this type of realtor you should already have on your team.
The same was said about brokers. Let me remind you the amount of money in Real Estate pales to what changes hands on Wall Street. It was technology that changed the marketplace and the brokers were powerless to change that.
I have read some really good comments. I hope you all saw the video. Tom Barrack really is a Bigger Pockets kind of guy. Beyond his investment fund he is also the Chairman of Miramax studios. A really diverse guy. He understands that things are the same until they change. You can go thru so many job titles that are gone due to technology or other sea changes that happen. The people in those careers never in a hundred years thought their jobs would go away but they did. I would imagine their comments were much like the realtors who have posted here. At the end of the day like the title suggested its a "what if". Realtors are here today and although some of the things they do are threatened they are nowhere near being displaced.
Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
12y
I have heard this conversation many times as a Realtor. In hear realtors compared to travel agents and stock brokers, but there is a big difference. Stock brokers and travel agents sold fixed price assets. The entire market knew what they were worth and there was no 17 page contract involved, lender involved, title company involved and possible attorney in some states. A real estate agent is dealing with a different asset on every deal. No house is the same because they all have a different location. Since nothing is the same, a new valuation must be done every time and a computer algorithm wont be accurate.
A real estate agent is more like a lawyer. There have been many cheap services pop up for legal services but lawyers aren't going anywhere. You pay a lawyer for their knowledge, expertise and education. Its the same with agents and in most states agents are actually practicing law on a limited, very regulated basis with contracts.
The stats from NAR showed FSBO sold for almost 20% less than MLS homes an take much longer to sell. Buying a house is the biggest purchase most people ever make, it is not the same as buying a stock that is easy to value and easy to sell.
My friend recieved their realtors license after a few months of study compared to 6 years for an attorney. I am not sure if your comment was a pump for realtors or a slight for attorneys.
You also dropped a state that FSBO sold for 20% less? Well first off you need to drop the 6% comish right off that and I really question that 20% #. I just dont buy all the extra work. In fact as I read your post the more it looked like a stock trade. No two companies are the same and to do proper due dilligence you need to pour over tons of information.
Its an interesting debate to say the least. I enjoyed the comments.Thanks
My friend recieved their realtors license after a few months of study compared to 6 years for an attorney. I am not sure if your comment was a pump for realtors or a slight for attorneys.
You also dropped a state that FSBO sold for 20% less? Well first off you need to drop the 6% comish right off that and I really question that 20% #. I just dont buy all the extra work. In fact as I read your post the more it looked like a stock trade. No two companies are the same and to do proper due dilligence you need to pour over tons of information.
Its an interesting debate to say the least. I enjoyed the comments.Thanks
I'm not comparing the education to a lawyer, that is obviously more involved. The business is similar. In the stock market you have a market price, everyone knows that market price for that stock because thousands of shares are traded for that company. The company may be overvalued or under valued by the market, but you know the market price. If one house had a thousand shares of stock and you could see the price of what each share bought and sold for then it would be similar. Every house is different and I you underprice or overprice a home you can kiss that 6% you saved on your agent good bye.
In most Fsbo or limited service listings one party ends up with an agent. If one side has an agent and the other does not who has the advantage? Who knows the customary costs each side pays and how to navigate the 17 page contracts plus addendums. Many states have larger contracts.
The due diligence you speak of with sticks is public information as well as market value. With houses the mls is not public information and just knowing a sold price does not tell the entire story.
Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
12y
Another thing to remember is to get the most money as a fsbo your selling to owner occupied buyers who don't know how to buy a house. They will want an agent and that agent will get a commission. Plus the fsbo will want to be in mls. That's another fee. How much are you saving to get the most money? It's not 6%. That's why fsbo sell for less, they don't have the exposure.
Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
12y
Lawyers spend 7 years in college and law school and well into six figures becoming lawyers. And while they may work on contingency, they don't work on commission, they work on hourly billings.
Mark you bring up many valid points that are based in the here and now. The same was said for other ocupations that were altered by technology or other factors. As I write this now I see nothing I would lose sleep over if I was a realtor today . As my initial post points out from a very succsessful real estate investor point of view in the video changes do infact happen. To think any job is imune to it I think is not reality. Its food for thought. Your opinion is appreciated and since your in that field adds depth to the conversation.
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
12y
The majority of people buying and selling a house are homeowners. They do not keep up with the ever changing real estate contracts and differences from when they bought. There are also first time homebuyers who have never purchased before.
There are many people who want the relationship and it's not about trying to save a buck.
I can show you where they said 5,10,15 years ago blah, blah company is going to revolutionize the industry with technology and brokers/agents need to shake in their boots. It hasn't happened.
There was a software company I believe a year ago that pitched to Shark tank about eliminating agents etc. They deferred to Barbara Corcoran for thoughts on it and she ripped it apart. What the system couldn't produce is having connections to properties for first looks, knowing info block by block, etc. For that you needed an area specialist to give you the inside scoop and deep level data. Sticking it on the MLS isn't where brokers and agents earn their money. It's getting the property to closing. There is a lot behind the scenes that people do not see. Many hurdles to getting a deal closed.
When brokers/agents see a discount listing broker on a property many will shun the property. The main reason is they get put in a implied agency role. The discount listing brokerage is nowhere to be found except for providing putting in the MLS. So the seller is looking to the buyers broker/agent to help guide them to closing and pick up the role the discount brokerage is usually not providing. The buyers broker/agent doesn't want extra liability and doing the job of two brokers for the price of one commission side. Here the state commission came out with rules after many complaints about discount companies that says they have to stipulate line by line what service they will be providing for what fee. This keeps discount companies from taking a fee and then disappearing or over offering and changing their story. Once this was implemented many of these discounters went by the wayside because they didn't want all that work to do for their cut rate fee. FSBO and flat fee many get their fee upfront. Ask a seller why is that?? It's because when they have gotten that fee they are paid already so they do not have to perform. They can list at an inflated price that harms the seller because they already have payment. I know one flat fee company that lists and if it doesn't sell they send them onto a regular brokerage and take a referral fee! lol
Most FSBO's do not sell or if they do it's for way less than what a seller would net after covering a commission. The reason is the buyer sees the seller isn't having to pay a commission so says to themselves " Hey the seller is saving these fees so I will only pay a lower price. " Sellers do not think about these things.
I can go on and on with examples of why they haven't taken over the market but I have had this conversation so many times in forums over the years. If you are driving business just on how cheap you are in fees charged then there will always be someone trying to do it cheaper. The coupon clippers tend to go from place to place with buying or eating the cheapest thing. Then there are customers that want the relationship, experience, and quality for what they want to buy or sell etc.
I am in commercial real estate which is different than residential by miles but I have heard this conversation for decades.
