Will buyer’s agents become obsolete?

Buyer agent and clients viewing a home - Will buyer's agents become obsoleteReal estate is always shifting, and now that is more true than ever. Will buyer’s agents become obsolete with the cataclysmic transitions we’re facing? Today we’ll touch on:

  1. The role of expertise in real estate transactions
  2. What do buyer’s agents do?
  3. The impact of the recent NAR settlement and industry changes coming

Do consumers value expertise? If so, don’t expect that buyer’s agents become obsolete.

After all, a lot of data is online. The thinking goes, travel agents are mostly gone and journalists are being replaced by bloggers.  It’s possible that this will be the case for buyer’s agents in the future, as there is a trend in thinking that there are no real experts if everyone has access to information.

A few years back, I heard about a book that takes on this concept regarding expertise and it really resonated with me. The title is “The Death of Expertise: The Campaign against Established Knowledge and Why it Matters“. Confession: I have not yet read it, but want to do so. I did hear it discussed on KGO Radio by Pat Thurston, who was one of the radio personalities there, and her take on it was that it presents the concept that everyone’s opinion is as good as everyone else’s opinion.

That certainly does happen in real estate, along with the persistent idea among some consumers that buyer’s agents don’t really add any value other than unlocking doors. (I wrote about this idea that “it’s all on the web” so buyer’s agents aren’t perceived to be needed back in 2013.) Even this morning I had someone email to ask me if I would split my commission if they bought a home with me and would “do all the research”.  The answer, by the way, is no.

You can have a 20 or 30 year veteran Realtor with oodles of transactions, but a home buyer armed with a real estate app may not always know what he or she doesn’t know. And that’s dangerous. Information does not equal knowledge or skill.

Will buyer’s agents become obsolete? Before thinking that they will, learn what they do and what they know and why their clients appreciate them.

What do buyer’s agents do that consumers don’t do as well for themselves?

A good buyer’s agent will be able to help with these items (and many more, depending): (more…)

Why Silicon Valley Realtors usually do not do rentals

I work with buyers and sellers not rentersSeveral times a year, people want to find rental housing phone me (or sometimes email me), asking for help with rentals of various sorts.  When I explain that most Santa Clara County real estate agents do not work with rentals, myself included, only buyers or sellers, the reaction runs from surprise or even disbelief to anger.   In many areas of the U.S., real estate agents routinely handle leases or month to month rentals.  Why not here?

In the Silicon Valley or San Jose area, most leases or rentals are offered “by owner”.  The owners choose not to hire realty professionals to represent them, and they elect not to want to pay commissions.  So while in many areas of the country, landlords employ real estate licensees to help them to rent properties, here that is seldom the case – at least in terms of offerings made available to the public.  (Owners may hire agents to manage properties, but don’t want to pay commissions to the Realtors or sales people working with people trying to locate rental housing.)

Most homes for rent can be found on Craigslist, but there are a very, very few offered on our local MLS (MLSListings.com).  How few is few?  Just now I ran ALL of the rentals available in all of Santa Clara County – apartments, condos, townhouses, attached homes, detached houses.  In a population of 1.8 million people, can you guess how many rental homes are on the MLS this moment? It’s 64. Just houses = 46.

Why this problem?  With our inventory shortage, most landlords feel that they don’t have to pay $500 or whatever the fee would be to locate a tenant.  Not only that, but many full time agents wouldn’t be too excited about spending weeks with a rental client only to get $500 and then split that with their company!  It’s just not worthwhile.

So when you call your local real estate licensee asking about rentals available, please understand that this isn’t part of what is usually done in the Los Gatos, Monte Sereno, Saratoga or nearby areas in general.  Yes, there are some exceptions.  But for the most part, the owners of those properties don’t want us involved.

For related reading:

Finding Rental Housing in San Jose, Santa Clara County and Silicon Valley

More affordable homes to buy or rent in Silicon Valley with better schools

What do Silicon Valley Real Estate Agents Do?  (how their time is spent)

If you buy without an agent, can you get a reduction on the sales price of a Silicon Valley home?

When I have an active listing of a home for sale, I’ll hold it open and enjoy meeting prospective home buyers and answering their questions about the property. One weekend, I had three different buyers tell me that they wanted to write an offer but didn’t have their own agent.  Some of them thought that perhaps the listing agent could write up their offer – hopefully causing the price to fall. One home buyer, though, wanted to write the offer without the help of any real estate agent at all. Her thought was that the price would sell for less since only one agent was involved and that agent, the listing agent, would get just half of the commission. That’s not how it works.

When a listing agent gets a signed listing agreement with the seller, the agreement is that the listing agent will receive the entire commission, and if there is a co-operating agent, that person will get the stipulated amount. Often it’s half of the full commission amount, but sometimes it’s more and sometimes it’s less. The wording in the listing agreement reads as follows:

Broker is authorized to cooperate with and compensate brokers participating through the multiple listing service(s) (“MLS”)
by offering to MLS brokers out of Broker’s compensation specified in 3A, either ___ percent of the purchase price, or $________.

The seller pays the listing agent. The listing agent pays anyone else who may be qualified to receive a commission.

There’s another nuance, too. The co-operating licensee must also be a member of the MLS in which the property is being marketed.

So a real estate licensee who’s not a member of the MLS needs to do a little extra paperwork ahead of time to see if the listing agent will pay a commission to him or her.  But the listing agent does not have to agree to it – does not have to agree to pay non-members of the MLS.

Why is that?

The multiple listing looks to consumers to be just a big database of homes for sale.  That’s what is on the surface, however it misses the point. The reason the multiple listing service  exists is fundamentally that the MLS is a broker-to-broker offer of compensation if the cooperating agent or broker brings a buyer to the table and it results in a successful sale.

Not a member of the MLS? This offer is not for you. (But maybe it could be – check with the listing agent first.)

What if there is no other agent involved in the Silicon Valley real estate transaction? In that case, the listing agent or broker gets the full commission.

To recap, the commission amount is set between seller and broker (agent) when the listing papers are signed, and the listing agent pays a buyer’s agent, if there is one who’s entitled to receive it.  The commission agreement sets forth the possibility that another agent will be involved from another brokerage, and if that happens, there will be compensation shared.  If not, the listing agent gets the full commission.

It may be possible to find a listing agent who wants to “double end” a sale so much that he or she would give a buyer a small rebate (not the whole commission). To the best of my knowledge, this is not common, though.