If I had my way, the realtors will all be regulated. The financial advisers are regulated, and the accountants are part of the association that governs how they are supposed to conduct business. Why not the realtors as well?
Never mind our 401k and taxable investment accounts. The house is the biggest asset in most American households. Furthermore, not over-leveraging on our home is one of the most beneficial decisions we can make for our finances.
While Emma and I were looking at houses, we have met agents who yelled at us, lied to us, looked down on us and this was during one of the toughest time in California housing history! Can you imagine how it was like during the bubble years?
These people claim to help us find our home, but most of them have no idea how most of the financing options worked nor do they seriously have our interest in mind. Buy buy buy is what they really care about. When they shake our hand, I bet all they see are dollar signs.
True, there is the National Association of Realtors (NAR) but instead of valuing ethics and integrity, this organizing routinely works like a giant advertising agency. We know the benefits of home ownership already. We don’t need more people telling us that “Now is the perfect time to buy” every day of the month and every month of the year, every single year.
Even the compensation structure of realtors are setup so that home buyers are screwed. While a buying agent is supposed to represent the buyer’s interest, the agent makes more money by keeping the transaction price high, not to mention that the number one priority is to create a transaction. What if the buyer wants a better deal? What if the house isn’t a right fit? The realtors are the experts, and should offer advice and be compensated that way.
In order to improve the experience of the American dream, the realtor association should be:
- emphasizing on ethics and integrity, and realtors should be punished heavily when he/she violates the code
- increasing the standards of obtaining a realtor license and controlling the number of new a licenses issued each year. This way, there are less realtors out there and the ones that are out there are more knowledgeable and qualified.
- working on changing the compensation structure to be based on effort put in and not based on transactions. We need representation, not salespeople when we buy a home.
Please do something about all these realtors. We don’t need the stupid advice of “House prices will never go down so stretch to buy the most expensive house you want” ever again.
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{ 10 comments… read them below or add one }
What about dismantling the MLS monopoly as well?
Sorry you are meeting the bad side of the bunch. “Shop” for a realtor to represent you. Find one you are comfortable with, and one that is not pushy. Find one that you can talk to, that you can make understand what it is you are looking for, and then, and only then, go house buying. Ask friends or business associates for references of realtors, etc. You are more apt to find a ‘good one’ in one of the smaller firms (in my opinion) – and not in a big glamourous fancy office known for it’s sales volumes.
Remember that you are the one paying (via the commission) for this sales transaction… They need to do YOUR bidding, not theirs. If you want a better deal, then write down what YOU want and have them present YOUR offer. YOU have the final decision. If you want to present a lowball offer, they are supposed to do it. Period. You are in charge, not them. Buy law, they HAVE to present your offer if you are anywhere near the sales price. They don’t make the deal – you do! Do your homework, know what you want, know what you want the offer to be, and make sure that is the offer they present – after all, you are signing on the line – it’s your call. If they don’t do YOUR bidding, then leave. It’s as simple as that.
I have had realtors look at me like I was nuts when I gave them the offer I was willing to make – but I was firm and said, yes, that’s my offer – but they presented the offer anyway. And 9 times out of 10, the offer was accepted, altho sometimes there were some counter offers in the process, which is all a good part of the bargaining process. You’ll never know what a seller will accept until the offer is actually presented. What have you got to lose?
If one of them has lied etc, report them in writing to the board of realtors, with back up info. If the board does not get complaints, they can’t take care of the problem. Also report them to their supervisors if they have one – some supervisors may not care, but others will. Realtors may be desperate right now, but desparation should not breed dishonesty.
I understand that the realtors have to present your offer, but I’m sure I have a much better success rate on whatever offer I present if I did it directly to the buyer. That’s because I believe in my offer and why it’s a good deal for both parties.
If the realtor thinks the offer is ridiculous, the person on the other side will just pick it up subconsciously and think it’s too low as well. How do that help me at all?
I’m sure there are bad apples out there as well as good ones though, so I will keep looking!
I whole-heartedly agree. Another unregulated industry that I despise is the house inspector racket. Some of them are in league with crooked realtors.
I live in Montana and when I went and bought a house I got a realtor and had the house inspected. For the money I paid I should have gotten good service, right? The realtor failed to tell me about title problems, easements, and covenants. The realtor representing the seller was in the same agency and he knew I wouldn’t meet the standards of the covenants and didn’t tell my realtor or else she decided not to tell me. I had two dogs and covenants state one dog. My realtor met my dogs almost every day during the selling process of selling my townhouse and I stated to her that I AM MOVING TO THE COUNTRY BECAUSE I HAVE TWO DOGS AND WANT TO FOSTER FOR THE HUMANE SOCIETY. Compounding the anger and disappointment I feel is the huge amount of money I have had to spend on the house for basic things like leaky roof, improperly done roofing, some mysterious leak in the foundation, and various other heating and plumbing issues. I still haven’t replaced the rotten back door which leaks like it is open. And I have no idea why NO HEAT GETS TO THE BACK BEDROOMS. Between the house inspector’s clauses and CYA in the contract there was nothing I could do. I consulted a lawyer and was told there is nothing I can do. Between that terrible beginning and the hassles of crooked contractors I throughly wish I had bought an RV and hit the road instead. Or could find a rental that accepted dogs. Seriously, home ownership this time around has been a nightmare.
As a California commercial real estate salesperson I take a little offense to your article. First off, all real estate agents in California are regulated through the California Department of Real Estate (dre.ca.gov). It is obvious that the agent wants you to buy buy buy since they are compensated on normally a 100% commission, however, per the regulations of the DRE, real estate agents have a fiduciary duty to represent their respected client’s best interest. Any unlawful or unethical violation of that duty and the agent can be punished (suspension/revoked license) and worse (lawsuits both civil and criminal). In the end their job is to do a deal by satisfying the client’s requirement. I do agree that there should be more education and not something I can just take online with an open book test that anybody could pass.
Although your article talks about some unfortunate incidents (the yelling, lying, etc), the client should have a real estate attorney review any and all documentation (purchase agreements, etc.) as they are the expert in law and the real estate agent is the expert on the market (pricing) and the transactional tasks of an offer/escrow. The client should be consulting with their CPA and financial advisors on how the transaction will alter their financial and tax outlook. Lastly they should shop around their financing with perhaps the recommendation(s) of the real estate agent. Also, each party of the transaction should not have one agent (Dual Agency), this is a major conflict of interest (although not illegal or unethical). Dual agency is a cause of much real estate transaction litigation. So make sure you have your own agent representing your interest – they are typically compensated by splitting the commission the Seller is paying. Basically do not solely rely on your agent for all areas of advice.
In summary, although I can emphasize with your article and believe there should be tighter regulation, it is short sighted to generalize the industry as a whole as many of us work our tails off for our fee and we don’t get paid unless the finish line is closed on a transaction. A real estate agent is a salesperson above all.
Thanks for putting the post together. I wish there were more honest realtors like you out there. I should note again that I do think (just like every industry) that there are good and bad representations out there. Hopefully, the bad ones actually help because it makes the good ones that much more valuable.
What you said about working your tails off in hope for a closed transaction is the exact reason why I brought up the compensation structure. Realtors are supposed to be the advisers in the transaction but they are paid like a salesperson. This is just wrong and one that should be changed to better align the interest.
This situation is not limited to realtors. EVERY salesperson makes a commission when you buy and nothing when you don’t.
As longs as agents are compensated this way, things will never change. Didn’t we just see Wall Street’s traders take devastating losses because they were only compensated for profits – and not for risk management?
I feel for the realor who commented above. But, fiduciary responsibility? Who is he kidding? Financial planners and advisors have the same responsibility – and does it appear that they care? And stockbrokers who churn the accounts of the ingorant and push high commission products on their customers.
It’s the same everywhere. Salespeople have to sell to earn any money. With that incentive, how can they be expected to have your interests at heart?
So let them show you houses and get your information from reliable sources.
I agree. I think realtor/real estate agents should not be allowed to work on commission. They should earn a flat fee – $500 or some such number per house sold. That would run most of them off really fast. It would change the face of the whole industry. It needs a complete overhaul.
The only reason the industry is even still there is because of the MLS system, where people can list their home and buyers can see all the info. Then the lockbox is put on the home and the realtor is the agent that the seller trusts to bring the buyers in when the seller is not home. If not for the MLS listing and the lockbox, we would not need the realtors and their fees..
Some realtors around here do charge a flat listing fee of $500 and then 1% – 3% when the house is sold – about 1/2 what everyone else charges. That is headed in the right direction. But their motivation is still commission oriented – higher priced house = more money in their pocket. Until there is a set fee earned, no agent out there will really be working for the buyer.
I am an insurance broker and I see the same thing in my business bec it is also a commission based business. I just lost a nice group to another broker because I wanted to do what was right for the client and the other broker wanted to make the most possible money in her pocket, so she brought in another broker to do the deal with whom she would make more profit for herself. We were not going to make much commission on our product, but we were going to place some really great terms for the group with which we were working.
Just for the record, Realtors are regulated. Unfortunately, it’s not about the money. It’s about the service. Many folks don’t know what we do. Please don’t judge all realtors by the bad experience you’ve had. There are plenty of us out there that are always looking out for the people we represent. Take care and understand not everyone has done a bad street on Wall Street either.
How are realtors regulated? BS