Hi faithful readers. I apologize for the long delay in my writing. First it was the elections that distracted us all. Then for me, there has been a time of evaluation going on regarding this year working in this rather challenging market. The reason it is challenging to agents is that there are far less sales than usual. This means taking a huge pay cut for most agents as we only get paid when a transaction closes. I have been struggling with what I wanted to write about and decided that it was time to take a look at what the relationship is all about between the agent and the real estate client. I want to start with the basics of this business relationship and then get down to the nitty gritty.
First let us discuss how it is agents get paid. We are not W-2 employees. We do not get a salary. We do not get any money at all from our company for doing the various things we do. Realtors get paid by the seller who agrees to pay a commission when they sign a listing agreement with the listing agent, which is due when the home is sold and closes escrow and comes out of the proceeds of the sale. Every transaction has two sides, a selling side and a listing side. The commission is paid in part to the listing company and in part to the selling company. The company then pays the agents depending upon their split with the agent, for example, the agent may have a 70 percent split where the agent gets 70 percent and the company gets 30 percent of the commission for one side of a transaction. Until the home closes escrow all the costs associated with that transaction come for the most part out of the agent’s pocket. The costs for gas, marketing, advertising, computers, professional membership fees like the multiple listing board and local board of realtors, Errors and Omissions (E & O) insurance, etc, etc all come out of the agent’s pocket before they even make a dime.
Why am I saying all this? I want to start with this because this year I have found in this very challenging market that buyers and sellers often forget these facts and are sometimes not very respectful of the agent’s time and resources. It is important to have respect going in both directions in order to have a successful agent/client relationship. Buyers and sellers both can be extremely unrealistic this year which adds to the already present problems in the market place. Buyers have unrealistic fear and sellers have unrealistic expectations about what they think their house is worth. While buyers and sellers are caught up in their particular issues they often want to blame the agent or just forget to act in a respectful manner when it comes to the relationship. Over and over again there is failure to have open and clear communication. I would like to take some time in this article to focus on the buyer/agent relationship in particular. There are similar dynamics with sellers but I will spend a future article focusing more on the seller/agent relationship.
Buyers, or So They Say
There are several kinds of buyers that I would like to talk about here. The first category is the Dreamers. The Dreamers are the kinds of people that go out with their new boyfriend or girlfriend on a Sunday afternoon to look at homes because it’s a fun fantasy. There is no harm in that. Why not try it on? These are window shoppers.
Dreamers love fantacy and pretend games.
It’s a fun activity but they are not serious. Sometimes they pretend to be serious however. They may even engage the help of an agent to take their fantasy further. I will give you an example of someone I worked with. I will change the names to protect their privacy. Jake called up our relocation department one day and said he would like to come down from Sacramento to Piedmont with his fiancée to look at homes in the 1.5 to 2 million range. When I spoke with him he told me he was going to be coming into a large sum of money from his mother who was dying. Jake was in his 70’s and had met his bride to be online. She was from another state and would be in town for the next week and he wanted to look at the San Francisco East Bay area as a potential place to move to together. We went out and looked at homes on a Saturday. They were an enjoyable couple. Afterwards Jake then told me he wanted to check out Marin. I referred him to a Marin agent that I knew.
What
I kept in touch with them and the other agent for about one and a half years. At some point I spoke with Katherine when I called and she told me that in fact she had sold her house out of state and had moved into Jakes mobile home in a trailer park outside of Petaluma. About 6 months later the Marin agent told me Jake had called her and come to look at a $2 million dollar home with a new girlfriend and that she was suspicious about the whole thing. I encouraged her to call Katherine’s cell phone number which she had. When she did she found out that Jake was a complete scam artist who seduced his women by the promise of his future riches as well as his charm and had actually turned out to be abusive. Fortunately I am still in touch with Katherine who moved back to her home state and is now doing fine. She is a very nice lady. This is certainly an example of what can happen with long distance internet dating. This is of course a very extreme example but there are many more dreamers that are far less extreme who engage agent’s services just to show off to their partner or to get into some big fantasy that they have no plan to go through with. This is clearly not a respectful way to be dealing with a professional.
The second category is the Researcher Buyer. This is the person or couple who are researching the market in order to buy or not sometime in the future. There are lots of researcher buyers out there right now. They research because they are afraid and they feel if they collect enough data that will protect them from being harmed in a downturn market.
The researcher will spend hours looking at a house with no intentions of buying it.
Hello, we are already there. But they think it will go down further and somehow they will loose everything. This is an example of an unrealistic fear. It is unrealistic because it does not realize that the market operates in cycles and that what comes down will eventually go back up. Some degree of researching is always a good idea. But when I meet with buyers I always ask them the question, “if we find a house that you really like and can afford, are you prepared to make an offer on it?” If you are a researcher, you should answer no to that question. That is being honest and clear in your communication and intention. It is fine to research. If you are a researcher, I won’t turn you away. After all, you may one day become a “real buyer”. But I will work with you differently. I will point you in the right direction. I will send you the Sunday open home guides and do whatever services seem to make sense to assist you with your research that do not take too much of my time and energy. But what I will not do is drive all over creation looking at houses with you that you have no intention of buying. That does not make sense of my time or resources.
Sometimes researchers will say yes to my question because they want to use me to help them collect information and are afraid if they are truthful, I will not give them what they want. This behavior sets up a dynamic that in the end is doomed to failure and will result in the researcher loosing what could have been a really good resource for them in the future when they are ready to buy. Maybe they feel there are lots of realtors out there so what is the harm if we burn a couple out on our way to buying our first home. Well for one thing it’s creating bad karma. Using people is never the best way to go.
Sometimes people can start out as real buyers and turn into researchers out of fear. If that happens for you, communicate what is going on directly with your agent. Don’t give him this line, which one of my clients gave me recently – “we are not in a hurry to buy”. What does that mean? This person was very evasive and didn’t really tell me what was going on at all. We had looked at houses on a couple of occasions. I had taken them on the “grand tour” that I do with my real buyers showing them everything in their price range in all the different neighborhoods. They had shown interest in one house in particular. But in the end decided they wanted to lower their price range in a time when inventory was shrinking. For sure I get the picture here that these are not serious buyers. But the difficulty is I, as an agent, am left wondering exactly what it is that is going on with this person. For sure they are afraid of something. They have plenty of down payment money and there could not be a better time for them to buy. But for some reason they have gotten scared, changed their mind, or maybe are thinking in a whole new direction. Why not communicate whatever that is with me? Again, how can I be helpful when I get no information? I literally do not know what to do now with this person. They are giving me blow away dialog rather than just telling me where they are at. It’s ok to transition into being a researcher, but have respect for the person you are working with and share what is going through your mind so your agent can fully understand where you are coming from and know how they can best be of service to you in this phase of your home buying process.
The third seeming buyer is the Schemer. This is the person that thinks the way to get ahead is to scheme and manipulate a situation. They are not really good at deep relationships on a whole and bring this same quality into business.
The schemer is always trying to steal something.
The schemer is always thinking that maybe if they try a little of this and a little of that, they will get a better deal. In real estate they will often be working with more than one agent at a time but of course will not disclose that. I recently had a couple like this as well. For some reason they felt the agent they knew for many years would be too busy right now so they used me for 3 months to figure out where they wanted to buy, what they wanted to buy, what they needed to do to prepare their house for the market, and then they went back to the agent they knew for a long time to handle the transactions. This of course left an extremely bad taste in my mouth. They seemed to be very serious buyers and sellers, and for all appearances, had made it seem they had decided to work with me. They even wrote an offer for a house, although they didn’t follow my advice in what they needed to offer so therefore didn’t get it. But what they got to learn from all that was exactly what they would need to offer next time a house in this particular neighborhood with these particular features came on the market. That’s when they transitioned back to their lifelong agent. If you are a schemer, all I can say is please stay away. It is dishonest to behave this way and lacks integrity and of course in the end will also generate lots of bad real estate karma.
The final category is the Serious Buyer. The serious buyer is one that has decided that this is a good time to buy and that they want to take advantage of the huge price reductions in the market place.
The serious buyer will eventually buy a house
They tend to be focused and ready to take action if they find the right house that suits their needs. They may take a long time to find exactly what they want but they are faithful in their commitment to the process until they eventually get what they want. These buyers tend to be more realistic as to the neighborhoods that they can afford to buy in and will focus on those areas. If you are one of these buyers, you will for sure want to pick an agent to work with that listens to what you like and what you don’t like as you are out looking at homes together. This should also be someone that you feel completely comfortable sharing your thoughts and concerns with. You will want someone trustworthy who will put your needs above their own need to get a pay check. This type of agent will be patient and provide you with an enormous amount of service from showing you homes to getting you valuable information you need to understand the condition of a home. They will connect you with good resource people such as home inspectors and mortgage brokers that will also provide a high level of service on your behalf. They will advise you in the offer making process and educate you to all phases of the home buying process. They will negotiate for you to get you the best possible price and the best possible terms. They will act as professionals and take you and what they do for you seriously. Once you have found this type of agent your job is to communicate fully with them. That is how they will be most helpful to you. If something comes up that changes your situation or ability to buy, you will not want to talk with your agent right away about that.
Serious buyers are communicating.
The clearer the communication is between the agent and the buyer, the more helpful they will be to you. Holding back on some relevant piece of information is where the trouble can start that breaks down the relationship, and that applies to the agent as well. It’s a two way street and if handled well can become a lifelong mutually beneficial relationship and friend.
Written and Edited by Dan Joy
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