Too Many Weekend Warriors. How A Flood Of Real Estate Agents Are Hurting Homebuyers.
I read an article this morning from the Miami Herald. I have a link to the article below so that you can read it also, but first I want to provide my thoughts on the topic.
So the article starts with the question, "Do too many agents spoil the real estate pot?" That is an interesting question. I do not believe that too many agents spoil the real estate pot. I do believe, and have for quite some time, that there are to many unprofessional real estate agents in the industry.
The article then states that the majority of real estate agents are recently licensed or work part-time. I do not know if this statement is accurate that it is a majority, but I do acknowledge that are many new and part-time agents. First, let us address the recently licensed agents. Everyone is new at some point in their carrier. I do not believe that the issue alone is that an agent is new, provided the agent is willing to learn the profession properly. In my experience, I have worked with agents on the other side of the transaction who were new, and they also conducted themselves professionally. There is a saying, "You don't know what you don't know." When a new agent is willing to acknowledge that and is willing to learn, I am more than happy to help them and educate them as we go through the transaction. Some new agents that I have worked with have not been receptive when I have tried help them through the transaction, and in some cases they have been combative. I cannot help someone who does not want help. The ones who have accepted the help have been very appreciative. Regarding part-time agents, if they have taken the time to learn the profession properly, I do not believe that this alone is an issue. It comes down to, how serious are you taking the profession? When a person decides to become a real estate licensee, they need to understand the seriousness of the profession. You are assisting many people with the largest transaction they are going to make it their life.
The article then addresses an issue they refer to as "dual agents". This is an agent that represents both the buyer and the seller in the same transaction. For residential real estate in Florida, the term is "Transaction Broker". There are states where this type of representation is not allowed. In Florida, it is permitted for a real estate agent to represent both parties in the same transaction. I do not agree with this, and I wish that Florida would change this. I believe that in a transaction, the agent should represent either the buyer or the seller, but not both. Even though Florida allows this, in my own practice of residential real estate, I do not do this.
Later, the writer quotes a 2015 study commissioned by NAR (National Association of Realtors), "the industry is saddled with a large number of part-time, untrained, unethical and/or incompetent agents." That is a lot packed into that quote, let us dissect that below:
Part-Time: I addressed part-time agents earlier in this post.
Untrained: Real estate agents are self employed. They are subcontractors under the agency broker. Ultimately, it is the responsibility of the real estate agent to learn their profession of choice. As I stated earlier, "You don't know what you don't know." Because of that, I do place responsibility on the broker also. The broker should know what the agent does not know, especially when the agent is recently licensed. A problem that I see in residential real estate is that too many brokerages treat the industry like a multi-level marketing structure rather than a professional service. "The more agents I have under me, the more money I make." Instead of focusing the training on understanding the real estate contracts and professional etiquette, the training focuses on how many phone calls did you make today to potential customers? This mindset reduces the industry from one of professional service to a telemarketing cold calling center. This is not good for the industry or the true professionals in it.
Unethical: From personal experience, I do not know with 100% accuracy when the agent on the other side of the transaction lacks knowledge or lacks ethics. I do not want to make that accusation without being 100% certain. I treat it as a lack of knowledge and do my best to provide knowledge. I am not naive, I believe there are unethical real estate agents out there. Just like there are unethical people in all professions. Regardless if it is lack of knowledge or lack of ethics, I always maintain my professionalism. That has always worked for me to navigate the issue.
Incompetent: I see this as taking the untrained category to the next level. This is the agent who knows they are inexperienced but does nothing to increase their knowledge. Ultimately, the agent is responsible for their own actions, but if more brokers treated their business as a professional service provider rather than multi-level marketing this category could be eliminated.
The article also addresses the commissions that agents are paid. To be a stickle, the real estate agent is not paid a commission directly by the customer, the brokerage is paid by the customer. The brokerage then pays the agent an agreed upon split. The brokerage sometimes keeps a percentage of the commission or retains a flat fee. I do not want to get too far into the weeds with how that works, but I thought that it deserved a mention. My focus is rather on the quote from the article, "5%-6% rates" that agents charge for their services. This is a common misconception. Let me state very clearly, there is no standard rate that is charged to list your home for sale. This is negotiable. Sometimes the fee charged is a percentage of the selling price of the home and sometimes it is a flat fee. The amount, whatever it is, is agreed upon between the customer and the brokerage at the time the home is listed.
Next, I am going to address a quote in the article from a Realtor:
"I'm running across more and more agents who are either new or don't work real estate on a full-time basis, and that often creates a lot of needless work (for) the more active agents like myself to essentially watch over the deal and make sure everything closes OK."
My thoughts on this quote:
I run across this too. My response is to take the opportunity to pass my knowledge onto the new or inexperienced agent. As I wrote earlier, some are receptive to the help and some are not. It is an opportunity for those of us who are more experienced to share our knowledge. This is an opportunity for us to raise the level of professionalism in the industry. It may create more work on this transaction, but complaining about having more work does not help the other agent or the industry.
Regarding "watch over the deal to make sure everything closes OK." I do that anyway regardless of who is on the other side of the transaction. That is my responsibility to my customer.
I appreciate it when the agent on the other side of the transaction conducts business professionally and is knowledgeable. I agree, that it makes everybody's life easier. To have that on every transaction is not realty. If you want to improve the industry, then be willing to assist your colleagues. At least the ones who are willing to accept the help. If someone is not willing to accept the help, then maintain your professionalism, get through the transaction and move on.
In closing, those of us in the residential real estate industry need to behave like professional service providers. If you are new to the industry, be willing to learn the profession. Find a broker/mentor that is going to take interest in you. One that is going to train you to be real estate professional. Brokerages need to stop treating the profession like multi-level marketing. Having your agents pound the phones for hours a day cold calling does not raise the level of professionalism. Think of other professional service providers, when the last time a dentist cold called you, or a CPA, or a doctor. That behavior damages the already low reputation of the real estate industry. If you are an experienced agent working with an inexperienced agent on the other side of the transaction, be willing to help them. Yes, it will be more work for you on that transaction, but it is what is best for our profession. If you are someone who is looking to sell or buy real estate, interview more than one agent. Hire an agent that views themselves as a professional service provider not a sales person. A professional service provider puts you, the customer, first.
As promised, here is a link to the Miami Herald article.