Are Realtors days numbered?

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.

http://video.cnbc.com/gallery/?video=3000311073

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Doug Merriott

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.

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Sean Brooks
Bear, DE · Member since 2014 · 178 posts · 65 votes
11y
Here's another area that most people that never became a realtor doesn't understand. We're one the biggest organization in the united states, we have political power and when I mean we have, we protect consumers from legislation that may harm them like flood insurance. The total increase was going to happen by the law makers and then we forced change. See the value in having a realtor represent you is big! The good investors know they need a Realtor, Lawyer, Contractor, Electrician, Accountant, etc in their power team to do many more deals. See a savvy investor will implement this strategy and make their lives easier.
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John Hamilton
Real Estate Transaction Engineer · Jacksonville, FL · Member since 2014 · 271 posts · 74 votes
11y
They are here to stay, though they actionable strategies will have to stay current with the latest technology standards and demand from the people (sellers and buyers). If I owned a house and went into a realtor's office and told them what I wanted done for this transaction, showed me all they were going to do, and did it, and got me a reasonable offer and quickly closed with little fuss, why would I want to do all that work myself?
I, for one, am not a realtor and have no immediate plans of getting licensed as such. I want to be an investor. However, I view realtors as someone that I can rely on to perform certain duties. I may have to interview a few and go through a couple to find one that fits my needs. However, eventually, I will find one. I don't mind spending the money if they do a good job. It's like paying a mechanic to fix my car. I can do that myself as I have extensive schooling, training and experience in fixing most everything in a car (rebuilt engine, replaced tranny, suspension and shocks, etc). However, I don't have the tools, time, place, nor the interest in saving myself the money. Will it be done right and quickly? That remains to be seen. But, once they perform, I know I can start putting trust into that mechanic to repeat his performance on future repairs.
Same with realty. I know what needs to be done and can do most of the work myself, but don't have the time, tools, space and interest in doing that, so I'll leave it to a licensed professional.
By the way, I used to think that dealing with realtors was a necessary evil or was overrated. However, I suppose if you find one that performs and build that relationship, that would be priceless.
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Yoochul C.
Financial Advisor · Glendora, CA · Member since 2015 · 209 posts · 94 votes
11y
Lowes just invested some money in a company called SoloPro where you buy a home and 3% commission is refunded.
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
11y
Yep this stuff doesn't bother me one bit especially Lowe's.
I just hired a FULL TIME worker to do nothing but back office stuff. Business is awesome.
The best can demand what they want. The rest work for peanuts as they are seen to have little to no value.
I don't do residential but commercial so larger numbers. A friend of mine does residential and just hit 10 MILLION this year for closed sales already.
I have been hearing the sky is falling for decades by over 100 different start ups. 90% of them are gone today and what is left does not have near the market share they anticipated.
People want relationships and not robots for a cheap price. Excellent representation and customer service is worth it's weight in gold and comes at a premium.
People can read all of the doomsday stuff or actually get out there and crush it. I turn off all the noise and focus on my goals.
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Chris Martin
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
11y
Originally posted by @Bill Gulley:

The only thing insurance covers as to land is the liability, I've never seen a lot destroyed by fire or land blow away in a tornado. 10% of the home value may be set aside for trees, shrubs and seeding destroyed but the land nor it's value is part of a homeowner's policy. Let's get back on topic. :)
I'll try to stay on topic... next post;)
Most people don't live or have property on a barrier reef... but if you do, you may realize that you can have a lot destroyed by mother nature. Technically, it's not "destroyed"... just like the lava extensions, as they are called legally, belong to the State of Hawaii... your "parcel" will fall under condemnation (if an improvement exists) and eventually your "land"... well, it just isn't. It's not yours... and it's not land...
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Kelly Sennholz
Denver, CO · Member since 2012 · 268 posts · 164 votes
11y
It's all over when the fat lady sings.
Who is the fat lady? Greater than 50% of online searches now done on phones. Rapidly advancing technology, including connection with court house records, ability to grossly price homes online, lender's increasing influence on pricing, etc etc etc. The fat lady is in back warming up.

It is true there may still be realtors but they will make flat fees in the range of $1000 per sale, not a percentage. They will be service technicians and the show-ers will be individual companies (again, already happening, breaking off from the basic realtor model).

These changes will occur rapidly.
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Andrey Y.
Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
11y
Originally posted by @Mark Ferguson:

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.
Mark, could you provide those NAR stats on FSBO? Muchos gracias!
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
11y
Kelly I have been hearing that stuff for decades. Hasn't happened. I have seen a bunch of companies try and fail.
Some people want to step over dollars to save pennies but a majority want service.
On the residential side most sales are now by home buyers. These are not professional investor buyers. Everything is about the emotions to close the sale and find the right property. These types of buyers need a lot of hand holding.
I do not perform residential only commercial.
The human component of real estate is not going away.
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Mark Ferguson
Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
11y
Originally posted by @Andrey Y.:

Originally posted by @Mark Ferguson:
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.
Mark, could you provide those NAR stats on FSBO? Muchos gracias!
http://www.realtor.org/field-guides/field-guide-to-quick-real-estate-statistics
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Greg H.Pro Member
Moderator
Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
11y
Originally posted by @Kelly Sennholz:

It's all over when the fat lady sings.
Who is the fat lady? Greater than 50% of online searches now done on phones. Rapidly advancing technology, including connection with court house records, ability to grossly price homes online, lender's increasing influence on pricing, etc etc etc. The fat lady is in back warming up.

It is true there may still be realtors but they will make flat fees in the range of $1000 per sale, not a percentage. They will be service technicians and the show-ers will be individual companies (again, already happening, breaking off from the basic realtor model).

These changes will occur rapidly.
I am a Broker who flips houses and sometimes lists properties with other agents but even on occasion uses flat fee companies. That was a big sentence !
Realtors are not going away anytime soon. The vast majority of people have zero clue about real estate as they purchase a property every 7 years or so and have no idea of the process. I flip houses and I am not a mechanic on my cars. I kinda of have an idea what is wrong with my car, but have no idea how to fix it. Same principal
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Jack R.
Flipper/Rehabber · Las Vegas, NV · Member since 2014 · 124 posts · 35 votes
11y
Originally posted by @Ben Leybovich:

Realtors are going nowhere. This is one of the strongest and well-funded lobbies in Washington...
I agree! The general population or citizens will and do, need realtors. There are laws and regulatory codes set in place to protect consumers from unscrupulous groups and individuals. Publicly traded Stocks can be and are purchased in great frequency even multiple times a day by companies and individuals. How many home transactions does a consumers participate in during their lifetime?
As a professional investor of residential and commercial property, there have been many occasions where I have requested a meeting with the sellers and negotiated directly, even kicking the real estate agents out of the room, until we had a deal. The agents were only around to paper the deals.
My general experience with realtors, has been not that great, you have to work to find the diamonds, where they become an asset to the process, especially when you are presenting low ball offers. But I am sure we have all eaten a bad restaurant meal from time to time. You don't stop going to restaurants, You just stop going to that restaurant.
Although just this last week, a realtor did tell me that 2.5% is the new 3, and with my favored realtors we do have reduced commissions on a sale if they handled the purchase.
Realtors are good for the general public and they are here to stay. As to individuals like us who make a living buying, selling and holding, property; find a good realtor and negotiate!! We have completed close to a 100 transactions over the last two years. They make money from repeat business, not from one deal every how many years.
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Will R.
Residential Real Estate Agent · Austin, TX · Member since 2015 · 105 posts · 23 votes
11y
@everyone read this: http://www-siepr.stanford.edu/workp/swp07001.pdf
it is more informative than my babble.
@Joel Owens I think there is a major difference between commercial and residential. None of the residential protections exist on the commercial side and the product is more complex. I also think property managers are distinct from the sales folks. My following comments are mostly directed at the residential sales side because the transactions are all pretty homogenous.
At least in Texas, contracts are promulgated for residential. In most residential deals, agents are tour guides. They cannot:
- Appraise
- Give legal advice
- Inspect the property
- Work with the lender
- Check the title
I am not saying they are lazy and do nothing. Most agents work really hard. But the hardest part of being a residential agent is finding and keeping clients. Most agents I know spend much more effort on that than actually serving those clients. Open houses are the epitome of this. Agents do open houses to recruit clients, not to sell the open house. Half the open houses I go to are not even listed by the agent doing the open house.
The best agents are project managers. Some are much better than others of course. But even the best are not making a 6% difference. Check out this study:
http://www-siepr.stanford.edu/workp/swp07001.pdf
It shows pretty clearly that the value is not there for residential (assuming you discount the monopoly of the MLS).
Will residential agents go away or reduce commissions? I do not know. Should they? Yes, in my opinion. However, the systems and laws in place would have to adapt first and that will be slow. The public will also have to be retrained. The substantial agent marketing out there has lead to many people being afraid of FSBO.
I myself am an agent because the system is stacked against those who are not. I was at a board training meeting recently and one of the lobbyists was there. In his own words he said this: "Does anyone in here ever use a travel agent? No? Do you know why? It is because there was no one like me watching their backs." Much like real estate, there is expense and risk in travel. But only a few people use travel agents or a tour company. It is because there is now more information available about travel and the systems are in place to make transactions happen smoothly. Those systems are not in place yet for real estate largely because of the MLS monopoly and the lobbyists.
I know this post is toxic. I have steered clear of posting on it because of the number of agents on this forum. For those of you who are awesome agents, this is not about you. But even you know what I am talking about. 90% of your co-workers need a different profession. Any agent who can be replaced by a website or a security guard, should be.
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
11y
The human interaction component and the relationship value is what is being undervalued here in my opinion.
You can create systems and try to make everything robotic but at it's core real estate is a relationship business.
Some investors post the sky is falling for brokers/agents because they represent a few percent of the overall buyers and sellers. They might buy & sell tons of properties and consider themselves an expert In the trade.
Lot's of brokers/agents are mediocre but that can be said for ANY PROFESSION. There are those who fail miserably, those who eek out a living, and those who are superstars at what they do.
The key is to create a deep network for properties and owners. Then you can decide how you want to run your business. Most do not have the capital to implement such a plan consistently.
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Roy N.Pro Member
Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
11y
@Joel Owens
In the residential space, my experience has been that 70 - 80% of the agents are mediocre (or less) and their bread-n-butter is selling pretty houses to Dick and Jane.
In the commercial space, you still have your poor, better, best agents/brokers, but the base level of knowledge and competency is higher across the board.
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
11y
I would tend to agree with that assessment.
Roy that shows my point.
Regular homeowners it's about the relationship and referrals. Investors are more looking at numbers and competency to conduct business. First time home buyers drive a lot of sales and go through a natural progression in life.
Starter home, larger home for family, luxury house, sell down to retirement house. So most through life cycle have 3 to 4 houses purchased staying in the same area. If they move around then more times are possible.
Occasionally someone will buy one house and that is it but not common as their wealth and family increases their needs change over time.
For a majority of the transactions in the U.S now and in the future I do not see the handholding and assurance component going away.
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Will R.
Residential Real Estate Agent · Austin, TX · Member since 2015 · 105 posts · 23 votes
11y
@Joel Owens To be clear, if you were in my market I would probably hire you to do multifamily purchases for me. However, your level of expertise is not required (or usually available) on the single family side.
I am not arguing that residential single-family agency will go away soon but that it would be better if it did. These relationships are not necessary on the residential sales side. They hurt the consumer in most cases. Middle america would be better off with that 6% in their pockets.
The other aspects of residential agency that I do not like: the over-leverage of personal relationships, the broker pyramid structure, and the compromising commision structure. Those things make the industry feel like multi-level marketing. It is hard to stay honest in your fiduciary duty when you are incentivised to close a deal whether it is good or bad. If the objective were to have an honest system, we would pay agents hourly as we do with many other professions. Giving a commission based sales person a fiduciary duty to a client who may not need a transaction is just not a good system.
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
11y
"It is hard to stay honest in your fiduciary duty when you are incentivised to close a deal whether it is good or bad."
Not for me it isn't. I don't slam deals. I have clients for the long haul. We don't buy the first thing we see.
My deals take longer from initial client introduction to closing. The time period might be 6 months on average. Clients are putting down millions as a down payment. My checks are in the six figures. Clients hourly would have to pay me thousands per hour.
If people made an hourly wage there would be no incentive to do better. ( Think paying a server a set wage whether they give good service or not ).
I respect your opinion but I have been in this business awhile and I do not agree with the assessment.
We can cordially agree to disagree. I have friends on the residential side that do closing after closing and do a great job for their clients. They are not part timers. The buyers emotionally respond and value the relationship. It is an emotional experience for a majority of buyers and sellers especially in residential. Even in large commercial deals when it's more about due diligence and the numbers there is an emotional component.
I do agree that there are part time agents trying to make a quick buck at any cost. They look at real estate as a ( quick money maker ) and one off transactions.
When I take on a client I want the long term relationship for decades. My situation is different in that I vet potential clients harder than they vet me. I feel this is a point where many brokers/agents fail is not getting specific on what kind of business they want and what people they want to do business with. Someone can have a ton of money but if they are a PITA or we just do not click it is a no go for me.
I have heard the argument for changing the broker/agent system for decades and it still doesn't hold water today. There have been hundreds of models over the years for flat fee, hourly, etc. and yet the public at large still likes doing things the way they have been handled for decades. These alternative concepts have garnered a small fraction of the marketplace but have not taken over even with repeated attempts over decades of trying. Technology has been introduced but it has COMPLIMENTED and not REPLACED the traditional buying and selling process.
In buying or selling especially on the residential side even though initial contact might be made in some cases by the male or the husband the woman usually has the final say on a decision.
By statistics men are more analytical thinkers and women are more emotional type thinkers. There are exceptions of course. Trying to strip out the emotional component for the buying and selling process and the relationship is why I think repeated attempts have failed in the past to use technology only.
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Steven Kopstein
New York City, NY · Member since 2015 · 95 posts · 39 votes
10y
Not sure if you've read Zillow Talk, but there's a chapter in there about Real Estate Agents and why it makes sense to use one. I found that surprising, considering the fact that many thought Zillow was going to rep[lace agents.
In summary, he says the reason why people should, do and most likely will continue to use an agent is that selling a home is a high value transaction that most people only do a couple of times in their lives. So, it's not worth the risk of mucking it up. The amount one stands to lose by making mistakes is far greater than the 5-6% of the transaction that the agents get.
I've been a broker since 1985 and I remember when we used to fax listings to each other. This was in Washington, DC. A few years later, the internet came along and everyone was saying - this is the end of realtors! Well, here we are 30 years later, saying the same thing.
I'm not saying it can't or won't happen - I was part and parcel of the end of the Travel Agent as we knew it while working for United Airlines in the 90's - but the Zillow guy has a point - people do many airline transactions at relatively low cost (and low risk) so using a specialist no longer was necessary.
What I have seen is that my role has changed tremendously. I'm more of an adviser these days. No longer sending info on listings (thanks to the internet, many clients do their own searches) - but I do pull all the pieces together and tread the treacherous waters of high-stakes negotiations so my clients don;t have to. I'm also providing perspective to sellers who can never see their place objectively. It's impossible. Like thinking your 3 year old is only the 10th smartest kid in pre-school. It's not going to happen. They've nursed and burped that baby through sleepless nights. They cannot be objective. They don't spend all day very day working the market and can't keep up with trends they way a pro does.
In NYC of course, everything is way more complicated and people haven't got the time to understand the maze of rules that each building has (flip taxes, restrictions on who can own and occupy, specific income and debt guidelines and 300 pages of personal data required even for a starter apartment).
So, agents and brokers are here to help and happy to do get it done for people efficiently and accurately.
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Jacob Sampson
Investor · Topeka, KS · Member since 2015 · 1k+ posts · 1k+ votes
10y
Super old post but I wanted to add my $.02. Coming from someone who dislikes every business that has built up around real estate, be that banks, real estate agents, or appraisers, I have found the only good realtor, IMO, in my area. I do all my purchases through her. She brings me tenants, will look at 10 properties to narrow down which ones I should actually look at myself, she has connected me to great maintenance people, and is great at providing realistic assessments of rehab costs.
I doubt that type of realtor is going anywhere.
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Don Montgomery
Wholesaler · Orlando, FL · Member since 2011 · 32 posts · 8 votes
10y
I have anticipated a large interruption in the Realtor business for sometime now. To say that its not already happen is to be blind. I have been an investor for over 20 years and of course back then there wasn't any internet, so every REO, handyman, etc went on the MLS for Realtors to capitalize on. Today a small fraction of REO properties go on the MLS and the rest hit auction sites.
The difference with the auction sites is that the Realtors get 1% comm if that.
The problem is that this business interruption is also hitting us the investor as well. Between auction sites, banks fixing their own properties and selling retail, selling REO in large blocks rather than 1 at a time, this has taken many properties out of the small investors hands.
With the large attraction of being a house flipper (Shows, Infomercials, and hot real estate markets) the industry has once again been flooded with wide eyed newbies. With limited inventory to go around, you must rock at marketing and conventional business to survive or you will starve. Realtors are also failing because of lack of inventory to sell and sellers having so many other avenues to sell their property online and get great exposure.
In my opinion, this business has become a 2 tier challenge now. You must not only know how to flip, fix, and acquire. You must also be an expert at social media marketing, build market alliance, online marketing, Building marketing funnel systems, direct mail, etc.
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