There are a few things the Internet is incredibly good at. Content delivery, communication and administrative services. If you're in any of these industries, don't expect your job to be around 10 years from now. It's time to evolve.
EVERY industry needs to evolve along with technology or suffer the consequences.
I think there should be far few real estate agents working in the US. And that the level of innovation should dramatically increase. But agents will not become a completely endangered species in the foreseeable future...certainly not within the next 10 years. The best agents will just become better at their jobs and BENEFIT from technological advances. The future usually doesn't shake out like people think it will, and disintermediation due to the internet is one of the forces that is usually overestimated. People who think real estate agents will cease to exist because of the internet don't fully understand what a good agent does. I know, because I was one of those people just a few years ago. There's a reason some people need agents, just like there's a reason I never ordered my dog food over the internet, Pets.com be damned.
I started a real estate brokerage after working in the software/internet and finance industries. Getting the license was just a legal formality because I was all about disintermediation. I was going to help eliminate those greedy, good-for-nothing agents. But then I learned that the good agents DO serve a purpose. And that the industry is much more complex than most people understand.
Customer service. I have had the same real estate agent since 1997 and have done four transactions with her during that time. All have been in the same local area, which she knows extremely well. The in-depth knowledge of the community, how a house will resell after you bought it, the unwritten history of some of the homes comes into play. Additionally her helpful tenacity got a house sold under very difficult circumstances that I thought made the sale impossible.
Granted, this might be rare, but the lesson for the real estate agents is that customer service can give them an edge in competitive environments.
And while that commission might look rather large, the last time I bought a house we looked at something like 20 houses, so you need to figure that into the agent's cost.
A GOOD real estate agent performs various professional tasks requiring expertise that save you time and money, protect your interests, and keep you out of trouble, at a cost that is less than doing it yourself. Kind of like a GOOD lawyer (I noticed your JD) or a good accountant. You can do it yourself...just like you can fix your own car or plumbing, but the results may not always be what you intended. It may SEEM like a super simple task until you're knee deep in shit and then you start to appreciate why there are professionals with training who stay up-to-date and have E&O insurance for the field, etc. Specialization is a good thing.
The bar to get a real estate license is lower than getting most other professional licenses, though, so there are many more BAD agents than bad plumbers/accountants/mechanics. I think most real estate agents suck. Just like I think most lawyers suck. It doesn't mean that either shouldn't exist, though.
I don't disagree that there's some value to having an agent. But as someone looking to buy in the Bay Area, the amount realtor's (particularly buyer's realtors) get paid relative to the work they put in, is all out of whack.
Finding houses is easy, that's what MLS listings do. So that leaves the hidden "gotchas" in the actual sale process, For a buyers agent to get 3% of an $800,000 home is ridiculous. I'd rather pay a lawyer $500/hr to do the 10-20 hours of work closing a deal.
I have done by-owner transactions twice--it was lots of fun. The lawyer time in each case was not more than two or at most three hours. If it is more than that, there is something unexpected.
> I'd rather pay a lawyer $500/hr to do the 10-20 hours of work closing a deal.
Where does buying a house require 10 hours of paperwork? (It seems endless while you're doing it, but it's way less than 10 hours and almost all of the paperwork is canned.)
Do you really think that a lawyer has 10 hours of expertise that's relevant to buying the typical house? (How many houses have you bought?)
His point wasn't that it required a lawyer's expertise.
It was that a lawyer could do the work of a buyer's agent, and even at $500/hr, would be cheaper when buying an $800k house. (That hourly rate would buy you 48 hours of lawyer time before you got up to the 3% commission of $24k.)
I'm not a fan of realtors either, but in addition to the fact that the best properties never hit MLS (as I mentioned above) the part where a buyers agent earns their keep is everything before closing. And for that, a lawyer cannot help you.
I've bought two houses, one in my original hometown, and another for a cross-country move in a city I'd never lived in.
In both cases I viewed dozens of homes before putting in any offers. Because I had a realtor, it was as simple as finding a home I wanted to see and emailing him about it. We'd group a few together and he'd take us through them. In cases where there was a lockbox, he'd call the sellers agent and get the code. Others, when it was still occupied, he'd call the sellers agent and let them know there would be a showing.
I only remember a couple times when the sellers agent was there.
Now, try doing it on your own.
No sellers agent is going to give you a lockbox code. If its occupied, no owner is going to let some couple walk thru their home unescorted.
You're going to have to call the sellers agents and make appointments. They're not really working for you so they're not going to be nearly as responsive as your agent is. With your agent he'll setup an appt with you, a few hour block, to drive around and see the homes. On your own, you're not going to have these clustered appointments. Even if you get some scheduled back-to-back, you're at the mercy of the sellers agents keeping themselves on time.
This would've been hard enough in hometown the first time around. My second time, when I moved 1000 miles away, it would've been a positive nightmare. Our agent then blocked off whole days on a few separate occasions where we flew into town to see as many homes as possible in a weekend.
I think you get my point. Buying a home is hectic. There are so many variables to keep track of. Even more so when you're also coordinating a cross-country move.
The buyers agent was like combining all the best qualities of a tour guide, a personal assistant and a paralegal. They abstracted a lot of complexity. They were an expert we could rely on for advice and guidance. They knew things about neighborhoods I had no clue about despite living in the city most my life at that point.
Now, 3% is a bit high, though it's not the near-criminal-ripoff you make it out to be.
And to condemn the whole practice based largely on the fact that you are choosing to buy into one of the most expensive and inflated markets in the country seems a little over the top to me. Even in California the median sale is half the $800k you mentioned.
My experience is unique to me, I can't speak for this being status quo, but I'll answer your points. My wife and I have been looking for the last year and a half or so, the first 8 months with a realtor, the last without. We're looking primarily in SF in the 800K range but at some houses in the East Bay and Marin. Note that in this area this is not the large end of the spectrum 800K will get you a nice condo and if you are lucky maybe a single family home. This isn't like some areas where you're looking for a premium property at that price.
We're also doing this in a buyers market - which gives us a lot of leverage and we also know the area. My wife has lived here for 8 years, I've lived here my whole life, so we don't benefit from getting a locals input from an agent as we would moving to a town where we are not familiar, this would be a benefit to many.
In the first months, working with a realtor, we never saw a house not listed on MLS, (which we used via Redfin).
Second we we're always able to call a sellers agent and get a showing. If you tell them you are not currently working with an agent we found we got a very responsive agent who see's the opportunity to get both sides of the commission. Again its a buyers market so this may be easier now then in the past.
If you found the worth in using an agent by all means use one, its your prerogative. But the point is that the amount of work required of an agent doesn't really change with the price of the house. A commission basis for a buyer's agent is a piss poor model, and I'm at the end where its ridiculous.
> In the first months, working with a realtor, we never saw a house not listed on MLS
I'm living in a house that wasn't on MLS when our "buyers realtor" showed it to us. (We were looking at another house and asked the realtor to get us in this one.)Unfortunately, we weren't able to stop it from being listed, so we had competition when we bought it, but .... Yes, this is highly unusual, but since we're trading anecdotes.
> Second we we're always able to call a sellers agent and get a showing.
If the seller involves a realtor, the commission is due in almost all cases, so buyers don't get to make the "realtor or not" choice.
Two good purposes that they might serve are providing search results you may like that you didn't actually search for (obviously this can be automated to some degree, since Pandora and Netflix try to do it), and reducing transaction costs by vouching for one side or both.
Comments
There are a few things the Internet is incredibly good at. Content delivery, communication and administrative services. If you're in any of these industries, don't expect your job to be around 10 years from now. It's time to evolve.
EVERY industry needs to evolve along with technology or suffer the consequences.
I think there should be far few real estate agents working in the US. And that the level of innovation should dramatically increase. But agents will not become a completely endangered species in the foreseeable future...certainly not within the next 10 years. The best agents will just become better at their jobs and BENEFIT from technological advances. The future usually doesn't shake out like people think it will, and disintermediation due to the internet is one of the forces that is usually overestimated. People who think real estate agents will cease to exist because of the internet don't fully understand what a good agent does. I know, because I was one of those people just a few years ago. There's a reason some people need agents, just like there's a reason I never ordered my dog food over the internet, Pets.com be damned.
I started a real estate brokerage after working in the software/internet and finance industries. Getting the license was just a legal formality because I was all about disintermediation. I was going to help eliminate those greedy, good-for-nothing agents. But then I learned that the good agents DO serve a purpose. And that the industry is much more complex than most people understand.
I learned that the good agents DO serve a purpose.
What is that purpose?
Customer service. I have had the same real estate agent since 1997 and have done four transactions with her during that time. All have been in the same local area, which she knows extremely well. The in-depth knowledge of the community, how a house will resell after you bought it, the unwritten history of some of the homes comes into play. Additionally her helpful tenacity got a house sold under very difficult circumstances that I thought made the sale impossible.
Granted, this might be rare, but the lesson for the real estate agents is that customer service can give them an edge in competitive environments.
And while that commission might look rather large, the last time I bought a house we looked at something like 20 houses, so you need to figure that into the agent's cost.
A GOOD real estate agent performs various professional tasks requiring expertise that save you time and money, protect your interests, and keep you out of trouble, at a cost that is less than doing it yourself. Kind of like a GOOD lawyer (I noticed your JD) or a good accountant. You can do it yourself...just like you can fix your own car or plumbing, but the results may not always be what you intended. It may SEEM like a super simple task until you're knee deep in shit and then you start to appreciate why there are professionals with training who stay up-to-date and have E&O insurance for the field, etc. Specialization is a good thing.
The bar to get a real estate license is lower than getting most other professional licenses, though, so there are many more BAD agents than bad plumbers/accountants/mechanics. I think most real estate agents suck. Just like I think most lawyers suck. It doesn't mean that either shouldn't exist, though.
I've got to go to bed...I'll come back later.
I don't disagree that there's some value to having an agent. But as someone looking to buy in the Bay Area, the amount realtor's (particularly buyer's realtors) get paid relative to the work they put in, is all out of whack.
Finding houses is easy, that's what MLS listings do. So that leaves the hidden "gotchas" in the actual sale process, For a buyers agent to get 3% of an $800,000 home is ridiculous. I'd rather pay a lawyer $500/hr to do the 10-20 hours of work closing a deal.
When I was in school still I was a researcher for an appraisal firm. Mostly commercial but also a great deal of jumbo-loan-sized residential business.
One of many lessons learned was that most the best properties never make it onto MLS.
I have done by-owner transactions twice--it was lots of fun. The lawyer time in each case was not more than two or at most three hours. If it is more than that, there is something unexpected.
> I'd rather pay a lawyer $500/hr to do the 10-20 hours of work closing a deal.
Where does buying a house require 10 hours of paperwork? (It seems endless while you're doing it, but it's way less than 10 hours and almost all of the paperwork is canned.)
Do you really think that a lawyer has 10 hours of expertise that's relevant to buying the typical house? (How many houses have you bought?)
His point wasn't that it required a lawyer's expertise.
It was that a lawyer could do the work of a buyer's agent, and even at $500/hr, would be cheaper when buying an $800k house. (That hourly rate would buy you 48 hours of lawyer time before you got up to the 3% commission of $24k.)
I have bought none, if its less then 10 hours my point is even better made ;-)
I'm not a fan of realtors either, but in addition to the fact that the best properties never hit MLS (as I mentioned above) the part where a buyers agent earns their keep is everything before closing. And for that, a lawyer cannot help you.
I've bought two houses, one in my original hometown, and another for a cross-country move in a city I'd never lived in.
In both cases I viewed dozens of homes before putting in any offers. Because I had a realtor, it was as simple as finding a home I wanted to see and emailing him about it. We'd group a few together and he'd take us through them. In cases where there was a lockbox, he'd call the sellers agent and get the code. Others, when it was still occupied, he'd call the sellers agent and let them know there would be a showing.
I only remember a couple times when the sellers agent was there.
Now, try doing it on your own.
No sellers agent is going to give you a lockbox code. If its occupied, no owner is going to let some couple walk thru their home unescorted.
You're going to have to call the sellers agents and make appointments. They're not really working for you so they're not going to be nearly as responsive as your agent is. With your agent he'll setup an appt with you, a few hour block, to drive around and see the homes. On your own, you're not going to have these clustered appointments. Even if you get some scheduled back-to-back, you're at the mercy of the sellers agents keeping themselves on time.
This would've been hard enough in hometown the first time around. My second time, when I moved 1000 miles away, it would've been a positive nightmare. Our agent then blocked off whole days on a few separate occasions where we flew into town to see as many homes as possible in a weekend.
I think you get my point. Buying a home is hectic. There are so many variables to keep track of. Even more so when you're also coordinating a cross-country move.
The buyers agent was like combining all the best qualities of a tour guide, a personal assistant and a paralegal. They abstracted a lot of complexity. They were an expert we could rely on for advice and guidance. They knew things about neighborhoods I had no clue about despite living in the city most my life at that point.
Now, 3% is a bit high, though it's not the near-criminal-ripoff you make it out to be.
And to condemn the whole practice based largely on the fact that you are choosing to buy into one of the most expensive and inflated markets in the country seems a little over the top to me. Even in California the median sale is half the $800k you mentioned.
My experience is unique to me, I can't speak for this being status quo, but I'll answer your points. My wife and I have been looking for the last year and a half or so, the first 8 months with a realtor, the last without. We're looking primarily in SF in the 800K range but at some houses in the East Bay and Marin. Note that in this area this is not the large end of the spectrum 800K will get you a nice condo and if you are lucky maybe a single family home. This isn't like some areas where you're looking for a premium property at that price.
We're also doing this in a buyers market - which gives us a lot of leverage and we also know the area. My wife has lived here for 8 years, I've lived here my whole life, so we don't benefit from getting a locals input from an agent as we would moving to a town where we are not familiar, this would be a benefit to many.
In the first months, working with a realtor, we never saw a house not listed on MLS, (which we used via Redfin).
Second we we're always able to call a sellers agent and get a showing. If you tell them you are not currently working with an agent we found we got a very responsive agent who see's the opportunity to get both sides of the commission. Again its a buyers market so this may be easier now then in the past.
If you found the worth in using an agent by all means use one, its your prerogative. But the point is that the amount of work required of an agent doesn't really change with the price of the house. A commission basis for a buyer's agent is a piss poor model, and I'm at the end where its ridiculous.
> In the first months, working with a realtor, we never saw a house not listed on MLS
I'm living in a house that wasn't on MLS when our "buyers realtor" showed it to us. (We were looking at another house and asked the realtor to get us in this one.)Unfortunately, we weren't able to stop it from being listed, so we had competition when we bought it, but .... Yes, this is highly unusual, but since we're trading anecdotes.
> Second we we're always able to call a sellers agent and get a showing.
If the seller involves a realtor, the commission is due in almost all cases, so buyers don't get to make the "realtor or not" choice.
Two good purposes that they might serve are providing search results you may like that you didn't actually search for (obviously this can be automated to some degree, since Pandora and Netflix try to do it), and reducing transaction costs by vouching for one side or both.