Are Agents Really Working Harder? A Complicated Question

Even though this is a reprise of my post regarding the market in Puget Sound, I thought some readers might have some other insights based on their local markets.

The Real Estate section of yesterday's Seattle Times tackles one of the most fundamental and important topics in the real estate industry today: what value does a real estate agent bring to the purchase or selling of a home. The article entitled "Slow housing market means more hours, more expenses for agents," focuses-in on the increased effort and cost agents incur in today's tough marketplace in order to be successful.

What I find most revealing about this particular article is the following confession:

"The days of just taking the listing and putting it into the [Multiple Listing Service] and letting the MLS sell the property are gone," said Brigitte Pascutoi, managing broker at John L. Scott Real Estate's Bellevue North office. (quote from the article)

This may be over-stating the simplicity of a real estate transaction; however, it should be no surprise to the public or, more importantly, the real estate agents themselves that times have changed. In 2004-2007 our local market was overheated to the point of third-degree sun burn. Almost 70% of listed homes were selling each month and prices were increasing at double-digit levels. Lending was, let's say, more liberal (this is a whole other subject) and it was truly the case that merely putting one's home in the multiple service was enough to bring a buyer through the front door and sell the house.

Fast forward to today:

• Only 9%-11% of homes are selling each month
• There are almost 50,000 homes for sale in the multiple service
• Buyers, even willing buyers, are having difficulty obtaining a loan
• Credit markets have been frozen
• Home prices are contracting
• There is a vacuum of confidence in the marketplace
• Technology has revolutionized the relationship between consumers and the marketplace
• Owners must now pay with real money (not fake equity) to sell their home

These trends, among many others, have forced the Real Estate Industry to make huge changes in its business model. It has also revealed many of the weaknesses of agents, brokerages and business practices. I won't go into the subject of commissions in this post, but I will say this: I'm not sure that agents are, indeed, working harder nor am I convinced that "working harder" is what they should be doing. Let me explain:

• We would not have almost 50,000 homes for sale in this marketplace if agents were advising clients to take their homes off the market UNLESS THEY MUST SELL! This isn't hard work, it's professional representation (something that became less valuable when the market was humming along).
• The article points out that some agents are helping owners by doing yard work, putting in crown molding, etc.. I would submit to you that this is hard work, BUT, real estate agents are rarely qualified to do this work. More importantly, they should not be expected to. An agent may recommend a landscaper or contractor to do these chores, but an agent runs the risk of taking on a mantle of expertise that he/she may be held liable for.
• Many agents have been offering FREE staging services or any number of other benefits to sellers to better market the property. Here's something all you sellers need to know. NOTHING IS FREE IN THE REAL ESTATE BUSINESS. The article rightly points out that proper staging and preparation of a home can run into thousands of dollars. In the old paradigm, when the marketplace allowed sellers an easy sale, non of this was as important. Sellers would gladly (or maybe not-so-gladly) pay a high commission to an agent with an expectation that marketing was happening. We all know this was not the case and this lack of integrity on the part of the industry led to a consumer backlash that continues to this day.
• Finally, sellers need to start putting skin into the game. Indeed, there's a lot of blame we can heap on agents, NAR, and a lot of other players in this industry, but ultimately sellers must realize that agents should not be expected to take on all the costs of selling YOUR home. Put another way: Don't expect agents to take your listing at a reduced commission and then demand the agent to overprice your house, pay for staging, marketing, open houses, professional photography, landscaping, your title report.........and carry these costs for the average three to 8 months it's taking to sell a home in this market. On the flip side, if you are willing to pay an appropriate commission, demand that the agent use professional services and hold the agent accountable for these activities.

I know I've gone on a bit here; however, I believe we all need to be more up-front about the current state of the real estate market. There are no magic bullets. There is no amount of hard work that will make this process easier. As the article correctly points out, this is a business based on trust and relationships. I have been in this business going on eight years now and I can tell you, after helping a huge number of families buy and sell homes, real estate can be complicated, emotional and difficult. When the time comes, choose your agent wisely.

Picture by mrsdalloway