Real Estate’s Nonsensical Business Model

avatarthumbnail.jpgI find myself dealing with the near constant dilemma of the real estate industry today … do I make myself available to show homes to people who have made it clear they don’t place any special value in what I do.

We’ve been discussing this among ourselves in the real estate blogosphere for years – the real estate business model as it currently stands now is flawed. Commissions for both listing and buyers’ agents are determined by the seller as a portion of their net. The buyers end up paying this cost (in theory) in their loan but in many ways the fault for the current system lies with the buyer.

As long as buyers look at real estate agents as an ends to a means, an extension of their lockbox key, and don’t look to see what additional value an agent might bring to the table, this system never will change.

Talk all you want about buyers paying for their own representaion; buyers don’t seem to understand why they would need their own representation because they don’t view the vast majority of agents as any different from each other. And that’s just not the case.

With Canadian buyers, for example, I’m almost certain I can help you save money if not on the actual transaction then on the exchange and wiring of funds. The folks I have recommended have consistently beaten the rate of any of my buyers’ local banks, saving everyone at least $1,000 … (maybe everyone but one, now that I think of it. He may have been a little less.)

So when a client opts to go with a friend of a friend after telling me their trip to Phoenix had been canceled, I at least know they paid more than they needed to for their house. Call it an “interview” tax for failing to interview your buyers agent and see what they’re able to do.

Why do I require a buyer broker agreement? Because purchasing property is a process. There are exceptions but more often than not the home someone ends up with might not match the exact criteria of what they said they wanted. It happens. By listening to your feedback and discerning what’s truly important, I can make adjustments on the fly and find just the right property.

It doesn’t make sense for me to invest hours beginning this process to turn it over to another agent the next day who has access to no move inventory than what I have. If you feel they’re a better fit, let them do all the leg work instead of riding in for the low-hanging fruit upon which so many agents survive.

Part-timers, intentional or not, exist because the public allows them to exist. As a whole, the public doesn’t demand more from real estate agents so it doesn’t receive more.

Now, if I had my druthers I would charge buyers to view homes with me – not because I want the minimal income but because writing a check elicits commitment. If you’re just looking you’re not going to write a check. But if you’re serious, why wouldn’t you write the check especially if it will be refunded as part of the commission at the end of the sale?

Why wouldn’t a buyer do this?

Because there are hundreds of agents who will do it all for free and never think twice.

Because there are agents more than willing to tell a buyer who doesn’t know better how easy short sales are to close, even when all the statistics show these transactions rarely close.

Because there is a pack of agents constantly searching for the low-hanging fruit, agents for whom business evolution has caused them to bend their backs permanently and lower their sights knowing they don’t need to be better than they are.

Because there are agents who don’t realize Canada has a different tax structure than the United States … one of my clients and I learned some wrinkles unexpectedly early last year, wrinkles that even your average property manager doesn’t know.

I want to charge because I think people ought to value my time as I value theirs. I’m not going to spend hours showing you homes you don’t want just for the fun of it because it’s a waste of your precious time. I respect my clients time because, again, this is a process and often a time-consuming one at that. No sense wasting precious time – yours or mine – on unproductive tasks.

But it’s not going to happen becaus, no matter what I do, most buyers are content to work with the first name they see on a for sale sign. If only they knew what they were in for.

[tags]Phoenix real estate[/tags]

Jonathan Dalton

Jonathan Dalton is a 40-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at allphoenixrealestate.com.

4 Comments

  • Dan Simon - Charleston SC Real Estate 8 years ago

    Jonathan – great points, thanks for sharing (and venting). “Buyer loyality” seems to be harder and harder to come by these days but when it does occur it is a beautiful thing! I think most buyers think agents just turn in a weekly mileage & time sheet to our Brokers who will then quickly cut us a check. Buying a home is generally one of the largest financial decisions a person will ever make. Put a “buyer’s agent” to work and have the benefit of an experienced professional on your side. Your buyer’s agent is your advocate, your advisor, your negotiator, and your confidante throughout the buying process.

  • Portland Real Estate 8 years ago

    In the future could you do a post specifically on the wrinkles you helped your Canadian buyer through? I have never worked with an out-of-country buyer before (never had the pleasure), but I would love to hear the problems and solutions you found.

  • Jonathan Dalton 8 years ago

    Dan … I’m not sure if buyers think that or simply don’t care since many don’t view us as anything more than middlemen, rightly or wrongly (depending on the agent.)

    Tyler – contact me off-line and I’ll be happy to help. I’ve written about it in the past but am essentially done helping other agents here in the Valley learn what they need to know.

  • Top 5 real estate posts of the day – Thursday 5/28/2009 8 years ago

    […] Real estate’s nonsensical business model – Jonathan Dalton takes a look at why buyers should hire a professional to help them find a home. […]

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