Author Topic: RE agents should die out  (Read 25794 times)

sol

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RE agents should die out
« on: September 11, 2014, 05:34:49 PM »
Real Estate agents and stock brokers should not exist.

There has been lots of discussion here about robots and technology changing our workforce (here, here, here, here, here, and especially here), but little recognition that this process is already happening.

Wikipedia killed the encyclopedia business.  Google Maps killed paper maps.  Craigslist killed newspaper classified ads.  Millions of jobs writing, compiling, editing, and publishing printed materials no longer exist, whether or not those individual people actually got fired. 

Kayak and Priceline and the like are currently killing off travel agencies.  This isn't just replacing published materials with online equivalents, this is full-featured customer service operations being run almost solely by algorithms and automated reservation systems.  They'll book your flights, hotel, car, book your evening's entertainment and throw in a coupon for dinner at a local restaurant.  Currently, the only people who actually have travel agents are the disproportionately wealthy who don't care to economize.  In ten more years, even those folks will just have their personal assistants book their travel online for them and then let a service like Google Now direct their travels, and travel agents will be no more.

TurboTax and TacAct are currently killing off tax-preparers (not accountants).  Even ten years ago this was thought of as a service job that technology could never replace, yet here we are filing complex tax forms for free using algorithms and hand-holding decision support systems.  I suspect there will always be a few tax-prep humans still working, mostly as volunteers for the poor and desperate who can't sit in front of a computer for long enough to file, but the former juggernaut industry of humans writing numbers on pieces of paper and then mailing those papers to other humans has largely evaporated.

I think Real Estate agents and stockbrokers are next.  These are jobs that totally made sense in the analog world of 1950s America, and are basically ridiculous now. 

Stockbrokers first:  the floor of the NYSE is not full of sweaty men shouting buy and sell orders at each other, it's a TV studio backdrop for market news about what high speed computers did that day.  There are no people actually setting stock prices by buying and selling from each other anymore.  There are still some individual humans who buy and sell in person at the location of the exchange, but they do so using a computer and don't really need to be present, or have a stockbroker's license.  The rise of services like Vanguard allows any schmuck to buy and sell at this second's current price from any internet-connected computer, and the long term trend towards indexing threatens the stockbroker's bread-and-butter business.  No more hot tips, no more cold calling clueless investors, no more 4% load funds and per-transaction commissions.  It's all automated, all free, and the job title "stockbroker" is about as silly as "buggy-whip manufacturer".

RE agents last, because I know we have some here and they will no doubt be offended.  Your jobs are superfluous.  Zillow and Redfin and Estately are crude tools but they are only getting better over time.  Their algorithms will soon be better than your "gut feeling" about local real estate valuations.  We'll still need some humans involved in the home-buying process, but that person really should be a lawyer, the transaction should only require one of them for both parties, and that person should not make 6% of the purchase price of a home.  By what possible logic does a RE agent deserve to make ten times as much for selling a $500k home as for selling a $50k home?  Is it anywhere near ten times as much work?  Real estate lawyers should charge a set fee or an hourly rate to do the paperwork, and they should contract out the cost of hiring a bonded worker to open front doors in the same way they currently contract out the title insurance.  All of the home shopping and comparisons, including the marketing for sellers, is already better done online.  Eventually, the websites will be able to walk you through the paperwork too.  Is signing a home purchase contract really more complicated than filing your taxes?

I think RE agents will last longer than stockbrokers or travel agents, just because some people currently are more needy about having their hands held while buying a house than they are about having their hands held while buying plane tickets or mutual funds.  But that will change over time, too.  We just have to wait for the population to catch up with what the technology can provide.

Emilyngh

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Re: RE agents should die out
« Reply #1 on: September 11, 2014, 05:44:47 PM »
Thanks for putting this out there.   We're pondering selling and buying (downsizing) in the next few years and I've wondered about this.

I don't think Zillow's very good around here, but individuals can find what comps are selling for.   With the internet, they should also be able to list and look for houses.   We have our own attorney that we use for the actual sale, are from the area- so are already familiar with locations, and won't have a time crunch.   Frankly, I just don't see how RE agents can justify their pay.   I'm not saying they don't work hard, but I don't see why I'd pay them for what it seems like I could do most of myself.

Hmmm....

Beric01

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Re: RE agents should die out
« Reply #2 on: September 11, 2014, 05:48:21 PM »
Well said. The commissions on RE agents are crazy - part of the reason I don't plan to buy at this point.

The reason why they'll hold for a while on due is the regulation and bureaucracy which prevents the individual from selling property themselves.

Sdsailing

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Re: RE agents should die out
« Reply #3 on: September 11, 2014, 05:56:18 PM »
I half agree.  Certainly the search part of their function is reduced, but what percentage of the job was that?  They still provide access to the houses.  Who would do that absent an agent? There are a number of core functions that they do provide, and these may be more than meets the eye. 

I think a reasonable compromise is fee reduction, or perhaps even a menu of services from which the client picks and then pays incremental fees.

kite

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Re: RE agents should die out
« Reply #4 on: September 11, 2014, 06:14:48 PM »
Ha ha ha ha ha....
From someone who works on a trading floor.

ender

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Re: RE agents should die out
« Reply #5 on: September 11, 2014, 06:17:16 PM »
What about financial advisors?

RE agents will exist for a long time for the same reason FAs will.

sol

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Re: RE agents should die out
« Reply #6 on: September 11, 2014, 06:20:58 PM »
They still provide access to the houses.  Who would do that absent an agent?

I'm pretty sure you don't need to pass the RE agent test in order to unlock front doors.  This is not a skilled position requiring a college degree.  Any bonded day laborer would do, and I suggest the lawyer who handles the contract hire the door-opener out of his fee just like he hires the title insurance.

There was a time when real estate agents were kind of like personal shoppers.  They tried to find out what you were looking for, they kept their eyes open when the market was all word-of-mouth, and they tried to talk buyers into making reasonable bids and sellers into accepting reasonable bids.  These days the searching process is already online, the pricing information is online but not very good yet, and the bidding is already heading towards being automated.  I dream of the day when a buyer and a seller can complete a purchase over email by dealing only with the same website. 




Beric01

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Re: RE agents should die out
« Reply #7 on: September 11, 2014, 06:21:23 PM »
What about financial advisors?

RE agents will exist for a long time for the same reason FAs will.

Some people are too lazy to figure out this stuff for themselves?

I don't need a FA and never will - this stuff is all available for free on the internet, and often will put you better off than hiring an FA. IMO the same is true for RE agents. The problem is you have an either misguided or lazy group of people who think they "must" have one to succeed.

sol

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Re: RE agents should die out
« Reply #8 on: September 11, 2014, 06:22:45 PM »
Ha ha ha ha ha....
From someone who works on a trading floor.

Sweet!  Please tell us about it!  I'm genuinely interested to hear.

RE agents will exist for a long time for the same reason FAs will.

Are you suggesting that the reason RE agents and FA will both continue to exist is because people are stupid and easily defrauded?  Because that's all I can see in your comment.

backyardfeast

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Re: RE agents should die out
« Reply #9 on: September 11, 2014, 06:43:01 PM »
It's interesting to think about this, and of course, all things are possible.  Your point about personal shoppers is well taken.  But I think there is something fundamentally different about buying a home than buying a lot of other things, or than trading numbers on a computer.

We sold our condo without at realtor, and I'm glad we did.  But we knew the people involved, so there was no trust issue.  We talked frankly with the buyers, we hosted some viewings, we then worked out a price by email and had lawyers draw up the paperwork.  It was reasonably straightforward, and I would absolutely do it again to save the commission cut.

That said, we then needed to buy, and in a different town than we had sold, where we didn't know the market well.  We didn't intend to use an agent, but then found one we liked a lot, and as we weren't going to pay the commission as the buyer, we hired him.  They were moderately helpful in the search, as they did still have access to listings before they hit MLS.  But I was at home obsessively searching, so I came up with private listings they hadn't seen yet.  All of this is already changing so that REs are pretty redundant for searching (although some of the searchable filters need improving!).  BUT when it came time to actually view and consider the homes, the agent did all kinds of useful things that we wouldn't have known about, especially as first time buyers.  They coordinated with the other agents/lawyers, they pulled city hall records, development permits, etc, referred us to home inspectors, asked all kinds of expert questions.

As a more experienced buyer, could I do all this myself?  Of course.  But there's still a fair amount of labour and time involved that I am happy for someone else to do in particular circumstances.  Some of this could certainly be done online in some coordinated way, but we're not there yet.

Some of this reminds me of the whole online education issue...yes, there's a lot that can be taught effectively online.  But I'm not sure face to face teachers are an endangered species for a while yet...

Roland of Gilead

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Re: RE agents should die out
« Reply #10 on: September 11, 2014, 06:45:32 PM »
You forget that over half of the people in the USA are dumber than a sack of bricks.  There likely will always be a place for handholding real estate agents and stock brokers.

ender

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Re: RE agents should die out
« Reply #11 on: September 11, 2014, 06:50:38 PM »
What about financial advisors?

RE agents will exist for a long time for the same reason FAs will.

Some people are too lazy to figure out this stuff for themselves?

I don't need a FA and never will - this stuff is all available for free on the internet, and often will put you better off than hiring an FA. IMO the same is true for RE agents. The problem is you have an either misguided or lazy group of people who think they "must" have one to succeed.

Whether or not it makes sense to people who want to educate themselves doesn't change the demand for the service.


RE agents will exist for a long time for the same reason FAs will.

Are you suggesting that the reason RE agents and FA will both continue to exist is because people are stupid and easily defrauded?  Because that's all I can see in your comment.

Plenty of people are willing to pay money for a sense of security.

Whether that sense of security is legit or not does not really matter, as can be seen with financial advisors. Many (probably the majority of the United States still?) people still feel there is a value added by them, in spite of clear and definitive evidence to the contrary.
« Last Edit: September 11, 2014, 06:52:28 PM by enderland »

Mr. Frugalwoods

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Re: RE agents should die out
« Reply #12 on: September 11, 2014, 06:55:58 PM »
We bought out house with redfin two years ago.  It was AWESOME.

I'm a data guy, and they have great data... all exportable.  I built some crazy valuation models that I fed in near real time using redfin data.

Their agents that show homes are great.  No "Here's the kitchen.  Look at the nice stainless!"  They always stood back, let me roam the house, and answered questions.  Building my own itinerary online was great.  No need for the phone at all!

When it came to actually putting in an offer, I worked with the lead agent to come up with a valuation.  Rather than just giving me a number, he walked me through his model and commented on any differences between his and mine.

Communication was great (all by email), and the negotiation process was smooth.

Once we had a signed offer, I started working with another redfin team that specializes in getting you ready for closing.  They were super efficient, amazingly organized, and very nice.  There was an online status tracking system that recorded who was waiting on what (basically a simplified gantt chart) that made it really easy to see that we were staying on schedule.

Each service provider in the process had their own login to the system and logged their progress towards completion.  We were ready several days before closing, which from talking to friends who have done this without redfin appears to be rare.

Closing went super smooth, everything was in order, and I got half the buyer's agent commission back.  Pretty sweet deal.

All in all, I wouldn't hesitate to recommend redfin.  As long as you are interested in doing the work of looking yourself (and with the internet, of course you are!) then redfin is a great choice.

I'm working with a traditional realtor now in an area that redfin doesn't service.  The difference is night and day, and I've gone through several realtors trying to get even a fraction of the competence that redfin provided.

Traditional Realtors should be quaking in their boots.

(feel free to hit me up on PM if you want to talk more about buying with redfin.  Happy to fill you in on all the details)

socaso

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Re: RE agents should die out
« Reply #13 on: September 11, 2014, 07:04:24 PM »
Having worked with two very wonderful realtors in different states I have to say that a seasoned realtor can offer a lot of insight into the home buying process and what is and is not possible to fix or change about a house. Both of the realtors had 20+ years experience in their respective cities and were a wealth of information about neighborhood development over time. We were interested in buying a duplex and the realtors had experience with what types of houses could potentially be turned into 2 units and whether the property was zoned for that. They also showed us a ton of houses and were very gracious about the time we spent looking. Even though we never bought we also never got the sense that they were annoyed by the time they spent on a deal that didn't pan out. I do think it's possible that the job could be automated but I like working with people for some things. Also both realtors told me that they had had clients who took a year or more to find a home. The realtor gets the same commission whether they show 1 home or 100 so I don't think the fee is unfair. It's not the fault of the realtor that sometimes the job gets done faster than others.

Elderwood17

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Re: RE agents should die out
« Reply #14 on: September 11, 2014, 07:08:02 PM »
I agree RE commissions are excessive, and increasingly will be bypassed.  However, there is a real service provided in cases like my last move where I was relocated 800 miles to an area I new nothing about and was faced with options and choices I had never seen (mountain views vs easy access, private roads vs count maintained roads, well vs city water).  My wife had a couple of short weekends to fly up and look around and he served as much as the regional guide and advisor as anything. 

That was definitely a valuable service.  We bought from a pirate seller who had to pay him three percent, and I don't know if it was worth that, but there was some value to all he did for us!

On the other we managed to sell our previous home with little trouble.

Undecided

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Re: RE agents should die out
« Reply #15 on: September 11, 2014, 07:17:13 PM »

That was definitely a valuable service.  We bought from a pirate seller who had to pay him three percent, and I don't know if it was worth that, but there was some value to all he did for us!


Sure, pirates might be tough, but maybe they're not good negotiators.

hyla

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Re: RE agents should die out
« Reply #16 on: September 11, 2014, 09:21:36 PM »

 Google Maps killed paper maps.  Craigslist killed newspaper classified ads. 


Hmmm, that's news to me.  I still use paper maps all the time - most of the places I work and recreate have no internet service, so google maps is useless there.   And craigslist is pretty limited in rural areas and small towns - best way to find an apartment in those places is still the newspaper classifieds. 

Beric01

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Re: RE agents should die out
« Reply #17 on: September 11, 2014, 09:26:26 PM »

 Google Maps killed paper maps.  Craigslist killed newspaper classified ads. 


Hmmm, that's news to me.  I still use paper maps all the time - most of the places I work and recreate have no internet service, so google maps is useless there.   And craigslist is pretty limited in rural areas and small towns - best way to find an apartment in those places is still the newspaper classifieds.

You can print out Google directions, you know. I haven't used a paper map in 15 years.

vern

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Re: RE agents should die out
« Reply #18 on: September 12, 2014, 12:09:32 AM »
"It takes brass balls to sell real estate."


lemanfan

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Re: RE agents should die out
« Reply #19 on: September 12, 2014, 12:33:29 AM »
Hmmm, that's news to me.  I still use paper maps all the time - most of the places I work and recreate have no internet service, so google maps is useless there.   

If do you use a laptop, smartphone or a tablet - do note that there are downloadable maps too. 

Last time I went overseas, I downloaded complete USA maps from http://www.skobbler.com/ into my iPad and my smartphone in order to navigate.  It cost me a few dollars, but much cheaper than buying paper maps for my 2000 mile journey over six cities. :)

The maps I mentioned are just one vendor - there are many others.  The Skobbler ones are based on data from http://www.openstreetmap.org/ - a wiki-like open source map system.  Not perfect in all areas but good enough for me.  And you can improve it yourself! 



usmarine1975

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Re: RE agents should die out
« Reply #20 on: September 12, 2014, 04:26:03 AM »
I will not use a Real Estate agent again.  My RE lawyer cares more about my concerns and issues more then any RE agent I have worked with.  And he is cheaper.  The RE community has a pretty active association and they have their hands on the mls system so I don't think they will go away.  But many more are selling without Realtors. 

Did someone really say that you have to sell with a Realtor.

kpd905

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Re: RE agents should die out
« Reply #21 on: September 12, 2014, 04:51:32 AM »
I've always thought that car salesmen were pretty pointless in the same way. 

hybrid

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Re: RE agents should die out
« Reply #22 on: September 12, 2014, 05:00:50 AM »
Good discussion. I think the notion that the realtor is obsolete is a bit premature, because a good realtor is a SME that can navigate buyers and sellers around all the landmines when it comes to buying and selling homes. I do believe that the realtor in today's market has to demonstrate a lot of bang for the buck. Up to and including being a shrewd negotiator, being able to spot issues in houses that a buyer would not think of, streamlining the buying and selling process whenever and wherever possible, etc.

I think of it in a similar fashion to law. Legalzoom can certainly take care of some of the basics, like drawing up a simple will, but the moment that estate gets complicated the software is more and more likely to let you down. Better to pay a little more and work with an attorney who has been asked all those complicated questions and will bring up scenarios you as the non-expert never even though of. This was certainly the case for us when we bought and sold property and had our will made.

Until software becomes better able to interact with clients, rather than just provide data, the human is safe. In general though I agree, anyone in a field that can eventually be automated or driven online should figure out how to make themselves so valuable a program simply won't be able to replicate what they can provide. As a sysadmin I don't take it for granted that I will always be needed, so I look for ways to provide value that software simply cannot provide.
« Last Edit: September 12, 2014, 06:35:08 AM by hybrid »

Ian

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Re: RE agents should die out
« Reply #23 on: September 12, 2014, 05:01:14 AM »
Saying they should die out involves an uncertain value judgment, but I feel reasonably confident that they eventually will. Society overall is increasingly removing middle positions and while the difficulty of this one might be high, so are the potential savings.

Dee

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Re: RE agents should die out
« Reply #24 on: September 12, 2014, 05:11:13 AM »
Quote
The realtor gets the same commission whether they show 1 home or 100 so I don't think the fee is unfair. It's not the fault of the realtor that sometimes the job gets done faster than others.

If you had narrowed down the houses you wanted to see on your own and just got your agent to show you houses for one afternoon, and had pretty plain requirements (none of the special zoning requirements or anything that would require additional knowledge beyond what is posted on line), and bought one of those houses you saw on that one afternoon of showings.... it might indeed seem unfair. Because no matter how much or how little you use the agent's services, it's the same price, and it's all built into the price of housing. If you don't need much from the agent, it does seem unfair to have to indirectly pay for all the time the agent is spending showing someone else dozens of properties without a sale.

As a first-time buyer, I knew my agent's commission would be paid by the seller, but I didn't realize that meant it was built into the price of the house. Theoretically, I should have been able to buy the same house for 2 or 2.5% less if I'd gone through the process without an agent.

Currently, my condo is up for sale and I've listed without an agent. It's been listed for about six months now, with no sign of an offer. Of course, I would think there was a problem with my approach except that there are three units just like mine also on the market, listed with various agents, and none of them have sold either. And even though I've listed without a full-service agent, I've used one who does a mere MLS listing so that my house can be seen by buyers and their agents, who are reassured that, yes, I will play by the rules of the current system, and pay their agent a percentage of the sale price. (Of course, when buyers come in without an agent, I tell them that means an automatic 2 percent discount off the sale price.)

To sum up, I do think the RE estate agent position is in danger of eventually becoming obsolete, especially if the profession doesn't change the model under which it currently operates. Flat fees for specific services is probably the way to go, I would think.

kite

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Re: RE agents should die out
« Reply #25 on: September 12, 2014, 05:52:30 AM »
Ha ha ha ha ha....
From someone who works on a trading floor.

Sweet!  Please tell us about it!  I'm genuinely interested to hear.

RE agents will exist for a long time for the same reason FAs will.

Are you suggesting that the reason RE agents and FA will both continue to exist is because people are stupid and easily defrauded?  Because that's all I can see in your comment.

Your comment that "it's all automated and free" has me perplexed about just where to begin.   Is that hyperbole?  Or are you did you just finish Michael Lewis' book and now you're on a mission? Because your argument is the logical equivalent of the following: 
Now that we've got webmd, and pharmacists give flu shots so who needs all those doctors? 

MrsPete

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Re: RE agents should die out
« Reply #26 on: September 12, 2014, 06:22:01 AM »
You forget that over half of the people in the USA are dumber than a sack of bricks.  There likely will always be a place for handholding real estate agents and stock brokers.
Impolitely stated, but not wrong.  As a high school teacher, I've seen the reading level of the average student decrease over the years -- LOTS of our high school graduates are able to read, but they don't read at the level to function in the business world; that is, they're stymied by contracts and other documents filled with industry-specific jargon.  And they won't bother to do the homework necessary to navigate the purchase of a house without professional help. 

Furthermore, LOTS of people do not feel confident in their own ability to navigate the purchase of a house, especially since it's something that most people do only a few times in their lives.  These people are willing to pay someone to see them through the process.  They want someone to explain PMI (yes, they can read about it online, but they'll feel that they missed something vital).  They want someone to go down a checklist with them:  Yes, a home inspection is worth the cost.  This is why you want a lawyer to do a title search for you. 

And I know that when we bought our first house, our agent found us a first-time homebuyer's program (lower interest rate) that we wouldn't have known existed. 

As for other jobs mentioned, I agree that they're going to decrease in numbers, but they won't disappear.  For example, I agree with you that the internet has made travel plans easier and most of us aren't going to pay a travel agent -- but my husband's office has a travel agent on speed dial.  That agent make plane reservations, reserves cars and hotels for business trips.  Yes, he could do those things for himself, but it's cheaper for him to "hire out" this menial job than to spend his work time on it. 


TurtleMarkets

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Re: RE agents should die out
« Reply #27 on: September 12, 2014, 06:42:51 AM »
What about financial advisors?

RE agents will exist for a long time for the same reason FAs will.

Some people are too lazy to figure out this stuff for themselves?

I don't need a FA and never will - this stuff is all available for free on the internet, and often will put you better off than hiring an FA. IMO the same is true for RE agents. The problem is you have an either misguided or lazy group of people who think they "must" have one to succeed.

not everyone is smart or has time to learn things. Sometimes we think that specialist are not needed because we can easily learn what they do. People who are above average intelligence can, there is an equal number of people who cant. 

dude

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Re: RE agents should die out
« Reply #28 on: September 12, 2014, 06:54:29 AM »
Couldn't agree more re: Real Estate agents.  Their compensation generally bears no relation the amount of "work" they put into the job.  Most good properties sell themselves, and the agent just skims money off the top - money that should be going into the seller's pockets.  I think that before then die out, then will adjust and do what many financial advisors do:  offer a flat-fee rate.  I would pay a reasonable flat-fee to avoid some of the headaches and time required to sell a house.  But 3-6% regardless of the value of the house?  That's fucking stealing.

SweetTPi

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Re: RE agents should die out
« Reply #29 on: September 12, 2014, 07:03:50 AM »
I have mixed feelings on RE agents.  I do agree that the cases of simple transactions and dedicated solo buyers/sellers, they are not necessary, and are an additional cost.  I agree that perhaps we should go to a 'fee only' style of RE agents, or at least have the option between the two styles.  Anyway, that being said, I recently sold my house, and I'd use my RE agent again.

I sold my place and moved 2 states away, and between finalizing my employment and moving, there were only a few frantic weeks.  My agent was incredibly helpful.  Now, did my house sell quickly because of my agent?  Partly.  I mean, it was a well maintained house, staged well, in a good area, at the right price, in a strong market.  But, my agent helped price it, and for more than I would have, fwiw.  She also helped point out a few staging tips.  And the main thing, she was able to work within her network, and that did bring in the buyer.  The day the house listed, she had some 10 agents do a mass walk through, lasting only about 15 minutes.  Two of those agents had clients who were looking for a house like mine, and 36 hours later, I had accepted an offer.  Obviously this is not typical, and the stairs aligned, etc.  I'm convinced I've used all my 'points' up for the next decade or so.  After I moved, she also handled all the paperwork and such for me.  Could I have gotten a lawyer or someone else to do this for less?  Maybe.  But it is part of the service that she, as my RE agent, was providing to me.  I was very happy with the process, and don't feel badly about paying her for her services.  It was all stated upfront, and I agreed to it upfront.  It wasn't hidden, and there was an explicit estimate (which ended up being the cost, since I sold at full price).

An aside- Not part of the agreed-upon services, but still provided: help selling furniture.  I had mentioned that I was going to sell some of it (moving from 3 BR house to 1 BR apartment!), and she asked if I had a price.  She had just sold a house to a young couple- and they bought my furniture (bedroom set, washing machine, & dryer).  Less than 2 hours, no craigslist needed.  Did I mention I had very little time in which to move?

Elderwood17

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Re: RE agents should die out
« Reply #30 on: September 12, 2014, 07:09:10 AM »

That was definitely a valuable service.  We bought from a pirate seller who had to pay him three percent, and I don't know if it was worth that, but there was some value to all he did for us!


Sure, pirates might be tough, but maybe they're not good negotiators.
[/quote

Pirate ..... Private.   Durn autocorrect.

Fishingmn

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Re: RE agents should die out
« Reply #31 on: September 12, 2014, 07:10:47 AM »
Yes, I'm a Realtor and I agree that things will certainly change. Everything is constantly changing. Heck it may be possible we won't need computer programmers in the future either once AI starts writing better code than a human can.

But back to real estate, here are some random questions that really would need to be addressed before substantial change will happen to the RE model -

  • The National Association of Realtors is 1 million strong and wields lots of political power at the state and national level. As with many things, hard to make serious changes if the politicians are on the side of the status quo
  • Without MLS you have a lot of potential challenges. MLS strongly regulates the content and results of each home sale. You can get a fine for not listing the correct home characteristics, posting a photo or entering the correct sale data. What is the alternative if MLS goes away? Every website like Zillow relies on syndicating MLS data to feed their systems. This allows Zillow, Trulia, Realtor.com and hundreds of other sites to all have the same information that is verified and up to date. While you could certainly have a portal to feed data in who is actually going to be responsible for accuracy if there is no MLS? Wouldn't sellers have a huge incentive to round upward on home sizes or features? Would anyone actually put in final sales data which is so critical to doing comparable sales? Would that comparable sales data include things like seller paid closing costs which totally skew actual net selling price? How would important things like sales contingencies get taken into account if the seller was the one responsible for maintaining their own listing? I pay $500/year to fund MLS which is a product of the agents and brokerages.
  • I can see that there is an appeal to move to a fee for services model and I think some brokerages are actually experimenting with that. The OP complained about a model where a $500k and $50k house pay the same % even though there isn't 10x more work. That said, according to NAR the average Realtor made $44k last year - not a whole lot. In order for Realtors to still make a living under a fee for services model people buying/selling a less expensive home would then have to pay more than the current model and people with larger homes pay less. How would that affect the home buying market?
  • Many home buyers are insulated from the true cost of buying a home through an agent since the seller pays the commission. How would the market change if they had to pay $100 every time they go see a house and $250 to write an offer? I had a buyer 18 months ago in a fast selling market for first time home buyers. We saw many dozens of homes and lost out on multiple offers 4 times before finally getting a home on the 5th offer. Here's your bill for $7k?
  • Real estate is complex. A Realtor typically does more than open a door at a showing. They are there to discuss what they see that can impact negotiations and a buyer's interest in the home. Negotiations can be simple but they can also be complex - and no current public facing system showing sale prices takes into account seller paid closing costs which totally skew the real price paid for a property. Inspections are huge part of a real estate transaction - who's working that part of the process for most average consumers with no agent? Appraisals and financing is another potential for challenges along the way. This isn't just buy a plane ticket and maybe deal with a flight change.
  • Finally, Realtors take on all of the risk in the current "% of final sale" model. Many people list but don't sell and many buyers want to go look at houses that never buy. In some ways, agents may be better off with a fee for service model. Personally, I've started a 2 tier listing commission option where I charge 5.5% under a normal model or 4.7% if the seller pays a $500 non refundable deposit (credited toward final commission). That way the seller is paying all of my up front marketing expenses whether or not the home sells. I think both parties benefit in this if they really want to sell and not just test the market

All this said, if you don't like the current Realtor model go sell your house For Sale By Owner. That option is totally available today so there's really no reason to complain about Realtors when you have a mostly free alternative, if you really think you will benefit financially.

frugalnacho

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Re: RE agents should die out
« Reply #32 on: September 12, 2014, 08:12:02 AM »

 Google Maps killed paper maps.  Craigslist killed newspaper classified ads. 


Hmmm, that's news to me.  I still use paper maps all the time - most of the places I work and recreate have no internet service, so google maps is useless there.   And craigslist is pretty limited in rural areas and small towns - best way to find an apartment in those places is still the newspaper classifieds.

Lol.  Ok grandpa.

MooseOutFront

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Re: RE agents should die out
« Reply #33 on: September 12, 2014, 08:18:42 AM »
Here in TX there are many flat fee brokers that will get you on the MLS and provide you some basic level of paperwork guidance.  Costs about $500.  They set it up to where you can agree up front to pay 0%, 1%, 2%, or 3% to a buyer's agent if they have one.  This is the route I intend to go when we eventually sell our house.  I detest the current status quo of paying huge money to door unlockers.  They're not even on your side as the buyer anyway as it's in their best interest to get some deal, any deal closed asap.

frugalnacho

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Re: RE agents should die out
« Reply #34 on: September 12, 2014, 08:42:37 AM »
+1 to the original post and everyone that agrees.

Seems ridiculous to me that you can seriously suggest to just go with for sale by owner and completely bypass real estate agents when the status quo already includes real estate agents.  Most of the market already has a parasitic agent attached to the property who is going to siphon off 3% of the sale. 

I also don't understand the comments that say the seller pays the cost, so it's irrelevant.  You do realize that as buyers you indirectly pay that?  It's like a renter saying they don't care about the property taxes or insurance because they don't directly pay it - even though it gets baked into the rent price so they end up paying it indirectly.  Somebody siphoning money out of a transaction without adding value is a just a middle man and everyone else involved the transactions end up paying for it in some way.

Your comment that "it's all automated and free" has me perplexed about just where to begin.   Is that hyperbole?  Or are you did you just finish Michael Lewis' book and now you're on a mission? Because your argument is the logical equivalent of the following: 
Now that we've got webmd, and pharmacists give flu shots so who needs all those doctors?

Wouldn't an appropriate webmd analogy actually require webmb to physically administer the shot the same way online brokerages can execute orders?  I don't understand where his logic breaks down; All of us on this site have benefited from the efficiency of sites like vanguard - the proof is in the pudding.  Webmd has never physically executed a medical order for me so they still seem fundamentally different to me.

"It takes brass balls to sell real estate."



+1 great movie

aspiringnomad

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Re: RE agents should die out
« Reply #35 on: September 12, 2014, 09:01:56 AM »
I bought my first and current residence without a real estate agent or attorney, jumping in with a DYI mindset and thinking that it would allow me to negotiate 3% off the purchase price. In the end, it was an invaluable learning experience that probably saved me a bit of money, but it was definitely not for the faint of heart or those unwilling to research every aspect of the homebuying process. More recently I bought an investment property using an agent, which I thought was worthwhile primarily because it was a tricky purchase involving a seller in bankruptcy and I was confident I could negotiate a great deal even with the 3% paid to my agent.

I think the problem is that the job description of the real estate agent no longer fits their diminishing value add. As others have noted, searching for a home is easy with Redfin, Trulia, Zillow, etc...Most of the forms involved are straightforward if you're willing to read every word and there is an effort afoot to make them simpler. I can almost see a justification for the 3% commission if the agent feels the need to identify homes, accompany the buyer to each one identified, and hold their hand throughout the purchase process. But for most buyers, real estate agents now add most value in functions that would probably be better handled by a real estate attorney, who would probably charge less when all is said and done.

But the transition from the public wanting "full-service" real estate agents paid 3% commission to real estate lawyers paid hourly to review contracts is probably a ways off because 1) the buyer thinks they are not paying that commission anyway and 2) Realtors are quite zealous about protecting the status quo.

totoro

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Re: RE agents should die out
« Reply #36 on: September 12, 2014, 09:16:32 AM »
I've purchased three houses without a realtor.  In two of these deals there was no listing realtor either.  They were FSBO which is quite simple to do in a seller's market.

Realtors are helpful for some folks, but the commissions are way out of line with the service provided.   

In Canada you can list on MLS for a flat fee of $799 including professional photos/consultation/lock box/signs, and you don't have to pay anything as a commission to any realtor.  You save about $20,000 on an average listing around here: http://markojuras.com/799-flat-fee/

Issue is that you might not attract a large response from represented buyers so many still choose to offer a commission to the buyer's agent.  That will change over time I think.


nyxst

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Re: RE agents should die out
« Reply #37 on: September 12, 2014, 09:31:02 AM »
I sold real estate for 3 years.  I still maintain my license, just in case I ever need it, but I just felt like I was always skimming and doing an unnecessary job... Not that I didn't help people out, but there are just SO MANY agents, I couldn't really find a niche that I felt particularly useful in.  I don't know that agents aren't necessary, especially for the complicated deals.  The standard cut-and-dry transaction has a lot of hand in it already (title company, lawyers, loan officers, insurance agents, etc etc) I think that a good agent can coordinate a smooth closing, almost like a wedding planner... What is that worth?  I don't really know.

TurtleMarkets

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Re: RE agents should die out
« Reply #38 on: September 12, 2014, 09:45:39 AM »
I sold real estate for 3 years.  I still maintain my license, just in case I ever need it, but I just felt like I was always skimming and doing an unnecessary job... Not that I didn't help people out, but there are just SO MANY agents, I couldn't really find a niche that I felt particularly useful in.  I don't know that agents aren't necessary, especially for the complicated deals.  The standard cut-and-dry transaction has a lot of hand in it already (title company, lawyers, loan officers, insurance agents, etc etc) I think that a good agent can coordinate a smooth closing, almost like a wedding planner... What is that worth?  I don't really know.

Its almost like good agents are like project managers. 

KBlynx

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Re: RE agents should die out
« Reply #39 on: September 12, 2014, 09:54:02 AM »
I'm going to chime in as I'm closing on my new home next week.

I started my home buying process on Redfin,but I ended with a regular 'ol Joe Real Estate Agent.  The market in my area for the under 200k is tooth and nail. Homes go on the market and by the afternoon the seller has 5 offers over listing price. Redfin is a wonderful tool, but being a first timer, and losing out on initial offers, I just needed real life help.

Having the knowledge and quick action of Mr. Agent was the only reason I was able to land the house.  Period. If I'd attempted it on my own via Redfin or Zillow I would have lost out and wouldn't have known what to offer.

There is so much legal tip-toeing that has happened over this last month, I would have gotten killed. The seller had unknowingly flooded her drain field and ruined her septic, and our county has very strict rules on that. You can't sell property unless the septic is pumped and 100% working. I never would have known that....our RE had it all handled immediately.

I'm sure there are mustacians that are wonderfully knowledgeable about county codes and the rules regarding earnest payments but when dealing with a very large, life changing transaction I am not that person. I was lucky in that the agent is a good friend of my fiance and worked really bloody hard. Some don't. That's any industry though.



« Last Edit: September 12, 2014, 09:57:42 AM by KBlynx »

sugarsnap

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Re: RE agents should die out
« Reply #40 on: September 12, 2014, 11:03:58 AM »
Note that while paper maps are mostly obsolete (although topo maps for hiking are still sold), cartographers are still very much in demand we just make maps digitally rather than manually these days.  Excellent career (Called GIS) for those starting out.


Bob W

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Re: RE agents should die out
« Reply #41 on: September 12, 2014, 11:04:48 AM »
I feel that a real estate license is the one license that every person interested in FI should consider.  The reason ---  The average person will buy and sell a home 5  times in their life.   

In Missouri it is easy enough to qualify.  About $500 and a class.  Take the test and find a broker to hire you on paper.   When it is time to sell your 200K home you could end up with 4K in commission.  Then when you buy the 400K home you could end up with another 8K in your pocket.  10K not bad for something you were going to do already.  By the way,  MMM's wife is an agent and I bet she handles their transactions. 

If you are into or will be getting into buying rental properties this makes even more sense.   I know a lot of people who buy property don't get their license for various reasons,  but I think it is a good idea for most people. 

As far as agents dying out ---- I don't think that is realistic at all.  "Good" agents bring value to table.  In our area there are many "pocket" listings that are not made public for various reasons.   Agents also assist with much of the process.   

I used to build homes and considered a license at the time, but I was too busy focusing on the home construction to take on another job.   My agent sold many homes with me and I was her top client.   I had great service and she helped me through more than one conundrum.   

Sorry, nope they aren't dying out anytime soon.   If you don't like em,  join em.   

Vilgan

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Re: RE agents should die out
« Reply #42 on: September 12, 2014, 11:06:14 AM »
I agree that in many cases, RE agents are useless parasites that will get replaced as technology moves forward. That said, those with value and experience will likely continue to make money since there will likely always be a spot for them as advisors in a big transaction.

I refrained from using a buyer's agent in our last purchase because we knew exactly where we wanted to buy and we were comfortable with the process. As a result, we were able to leverage this difference when making our offer and saved a nice chunk of change since our offer of 10k below list price was accepted even while other houses in the same development (priced equally as appropriately) all went for at least the list price.

Just like many "lawyers" who basically just looked stuff up have lost their job as technology moves forward, I expect many real estate agents that don't add extra value to find themselves made obsolete.

trailrated

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Re: RE agents should die out
« Reply #43 on: September 12, 2014, 11:06:52 AM »
Interesting concept, and I would add Uber/Lyft as killing the taxi industry as well. They found a better way to do something and are being rewarded accordingly.

I have to agree with residential real estate brokers, but I think there will always be a place for commercial real estate brokers. The deals that happen are too complex to be done with a computer.

DollarsAndDissonance

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Re: RE agents should die out
« Reply #44 on: September 12, 2014, 02:48:34 PM »
I bought my condo last year with a real estate agent I found through Redfin.  Redfin's commission rebate was great, but my agent still walked away with 4-6 thousand dollars for doing almost nothing:
  • Opening the key box and letting me into the two places I was interested in (one tour of each, and I bought the second one)
  • Providing off-the-shelf forms
  • Giving some advice about how to structure an offer in a competitive bidding situation
The advice on how much to offer and how to structure the offer was very helpful, but c'mon, thousands of dollars for one or two hours of attention?

A few months ago, I came across a start-up called Jason's House, which is trying to get real estate agents to bid against each other on commission % based on how much groundwork the buyer has already done.  I think it's an awesome idea, but I chose not to invest because I noted that the only agents they've signed up are independents (i.e., no one from Remax or Coldwell Banker is participating).  Seems like there will be a lot of industry pushback as people try to build the Uber of real estate.

usmarine1975

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Re: RE agents should die out
« Reply #45 on: September 12, 2014, 02:55:34 PM »
The big reason I will no longer use a realtor is in our last purchase the agent did these things.

Wouldn't unlock the door to let inspectors etc in.  Actually gave me the code.

Repeatedly tried to push me to more expensive home's.

Didn't find the property he sold us.

Tried to talk us out of buying it.

Told me at one point he had other transactions going that made him more money.

Added an extra fee to up his commission.  (shame on me for not catching it).

Realtors are now working their way into being rental agents.  I had asked him what it would cost to rent one of our rentals.  He wanted 1st months rent with a 10% haircut and 1st months rent for each year they continued with us.  We politely bowed out and rented it ourselves.

Elderwood17

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Re: RE agents should die out
« Reply #46 on: September 12, 2014, 06:52:57 PM »
Here in TX there are many flat fee brokers that will get you on the MLS and provide you some basic level of paperwork guidance.  Costs about $500.  They set it up to where you can agree up front to pay 0%, 1%, 2%, or 3% to a buyer's agent if they have one.  This is the route I intend to go when we eventually sell our house.
Ultimately we bought our house from a seller who listed his an on the MLS.  Our realtor got three percent.   We will do something similar when it is time to sell.

Daisy

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Re: RE agents should die out
« Reply #47 on: September 12, 2014, 08:18:15 PM »
Note that while paper maps are mostly obsolete (although topo maps for hiking are still sold), cartographers are still very much in demand we just make maps digitally rather than manually these days.  Excellent career (Called GIS) for those starting out.

I love maps! Is it a desk job or do you get to drive around and scout the scene when generating maps? Take cool trips? I'm picturing a Lewis and Clark type of kayaking adventure.

Or do you just use satellite imagery?

How much training is necessary? Is it something one can do as a part-time second career?

Is there math involved? What kind of skills are needed? I come from an engineering (communications) background. I like to draw too. Is this a needed skill (even if done electronically)?
« Last Edit: September 12, 2014, 08:20:00 PM by Daisy »

sugarsnap

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Re: RE agents should die out
« Reply #48 on: September 12, 2014, 09:58:50 PM »

Note that while paper maps are mostly obsolete (although topo maps for hiking are still sold), cartographers are still very much in demand we just make maps digitally rather than manually these days.  Excellent career (Called GIS) for those starting out.

I love maps! Is it a desk job or do you get to drive around and scout the scene when generating maps? Take cool trips? I'm picturing a Lewis and Clark type of kayaking adventure.

Or do you just use satellite imagery?

How much training is necessary? Is it something one can do as a part-time second career?

Is there math involved? What kind of skills are needed? I come from an engineering (communications) background. I like to draw too. Is this a needed skill (even if done electronically)?

I work about 80% at a desk now, the rest of the time is collecting gps data in the field.  My first job was driving a google car type car (way before google maps!) all sound the country which was pretty awesome!  Most people in the industry have a BA in geography or general IT but there are also certificate programs.  Most city and counties have GIS employees, so there are a lot of government jobs but plenty in the private sector too, the hotbed of GIS (Geographic Information Systems) is in the Denver area.

I am able to work part time but it is generally a full time job, although there are seasonal jobs for forestry, tracking forest fires, and other temporary projects.

The industry really has a wide range from basic data gathering and entry to complex database/programming jobs.  I do "draw" features digitally with satellite imagery as a base. You may be familiar with CAD, we use those drawings also. It's a nice mix of creative (making pretty maps for presentations) and technical (programming, etc.).

Daisy

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Re: RE agents should die out
« Reply #49 on: September 12, 2014, 10:47:42 PM »

Note that while paper maps are mostly obsolete (although topo maps for hiking are still sold), cartographers are still very much in demand we just make maps digitally rather than manually these days.  Excellent career (Called GIS) for those starting out.

I love maps! Is it a desk job or do you get to drive around and scout the scene when generating maps? Take cool trips? I'm picturing a Lewis and Clark type of kayaking adventure.

Or do you just use satellite imagery?

How much training is necessary? Is it something one can do as a part-time second career?

Is there math involved? What kind of skills are needed? I come from an engineering (communications) background. I like to draw too. Is this a needed skill (even if done electronically)?

I work about 80% at a desk now, the rest of the time is collecting gps data in the field.  My first job was driving a google car type car (way before google maps!) all sound the country which was pretty awesome!  Most people in the industry have a BA in geography or general IT but there are also certificate programs.  Most city and counties have GIS employees, so there are a lot of government jobs but plenty in the private sector too, the hotbed of GIS (Geographic Information Systems) is in the Denver area.

I am able to work part time but it is generally a full time job, although there are seasonal jobs for forestry, tracking forest fires, and other temporary projects.

The industry really has a wide range from basic data gathering and entry to complex database/programming jobs.  I do "draw" features digitally with satellite imagery as a base. You may be familiar with CAD, we use those drawings also. It's a nice mix of creative (making pretty maps for presentations) and technical (programming, etc.).

Fascinating! I looked up my city's information on GIS and there's a big project underway. It's a big city in the Southeast (hint hint). I saw there were some certification programs. Oh man...I've got to do some research on this.

I've been working in software for quite a while. I haven't programmed in a bit, but I'm sure I'd could learn the lingo.

Maybe when I get laid off, I can take a little sabbatical and then look into this. I'd be close to if not at FIRE in the next year or two.

If I can do this part-time on my own terms, that would be amazing. Project-based work is definitely FIRE-friendly.

Is the field open to people without a BS in this but obtaining certification instead?