sellers

The Disappearance of Buyer Agency

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What if?

Seems like it’s at least possible at this point that buyer agency could cease to exist in the next year or two. A lot of people make the majority of their income from working with buyers.

What if there was no more need for buyer agency?1

Maybe the seller could save 2-3%. I’m of the mind that it would mean they’d get less activity on the property, at least until if/when this became the norm. Then, maybe, buyers will have found a more direct way to find the home and then the listing agent would benefit. But even then, if the listing broker can’t represent the buyer (or doesn’t want. to because they’re not incentivized and they’re otherwise just incurring more liability), who helps them negotiate? Even if a seller did have multiple buyers wanting to buy their house, how would those buyers negotiate well on their own behalf without representation? The listing broker can’t do it without establishing Dual Agency (permissable in NH), and I know I wouldn’t want to without money to justify both the work and the risk.

Maybe everyone will just have to hire attorneys on the buyer side.

The prevailing argument of the class-action lawsuits is that sellers had to unjustly pay for buyer agency, and that the fees paid for buyer agency were inflated and that the whole situation was anticompetitive.

From my perspective and that of many people I know, buyer agency was effectively a marketing expense for sellers. Anywhere (formerly Realogy) settled for north of $80m, and ReMax settled for around $55, but NAR, Home Services, and Keller Williams have yet to settle.

If buyer agency continues to diminish, it’s going to make for an interesting world in the real estate industry.

There is already a glut of agents that are picking up one deal here, two deals there. But when you factor in how many of those agents there are (many), it becomes easy to see how they affect the bottom line for everyone else who does this to make a living.

The end-result situation of no buyer agency could potentially be more lucrative for listing agents, even if the double-siding transactions goes away. Listing agents would be more likely to secure representation of the sale of the buyers’ homes and that would yield more business. Having to work both sides of a transaction (even if the buyer is self-represented) means more work overall.

I don’t think the industry is so unsophistocated to let buyer agency fall between the cracks without some company rolling in to disrupt the real estate industry even more with some “solution” to the problem. This could get worse before it gets better though, for people in the industry as well as for the consumer.

It will be interesting to see how things play out. I’m not sure whether articulating a really great buyer agency value proposition is going to cut it for buyer agents. Money talks and bullshit runs the marathon, as Nino Brown said in New Jack City. If buyers have to come out of pocket for $8-$10k on a $400,000 purchase (or $4-6k on a $200,000 purchase), they might decide not to come out of pocket at all.

  1. I think the need is there until something better replaces it, but from the consumer’s perspective, if the seller can save money by not paying out buyer agency and still sell their house, then I think they’re going to see it as unnecessary. It’s up to us to accentuate the value of having buyer agents because of their incentive to bring qualified buyers to the listing in the first place. ↩︎
The Disappearance of Buyer Agency

The Autopsy Report

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Something I learned from an excellent real estate coach named Brian Moses is the importance of reflecting on things that go well and things that don’t. The emphasis was on things that didn’t go well, but it can be applied to positive situations as well.

Brian talked about filling notebook after notebook with what he called “Autopsies.” He would autopsy situations after they were done, in writing, to learn what he could do better next time when the situation presented itself again.

This is based on the professional wisdom that at a certain point, situations we encounter in business aren’t really new. My father-in-law talked about this during his last visit with us. He spoke about how employees that come into his business fit into archetypes and he can predict how well they’ll turn out in many cases because he’s seen and hired and fired the same guy (not literally) before.

Whenever I have a deal die or I have a lead that I feel should have converted but didn’t or when I lose a listing appointment, I autopsy it.

In practice, this basically looks like journaling about the situation. But more specifically, I ask myself where I could have done better, where I was at fault. On further reflection, It’s usually evident where I messed up.

The one that comes to mind is a listing appointment from last summer. They were sort of an odd couple, around my age, and the house was a bit unusual. Mostly because there were something like a half-dozen or more cats living there. There was one bedroom of the five that was actually for the cats.

The people were nice enough. He was a bit more forward, she a bit more reserved. I quickly grew comfortable with them because of our closeness in age. We toured the home, sat at the table, and I went through my presentation. Prior to the presentation, I felt that we had established rapport. I especially felt that way with the man.

Well, I have the unfortunate habit of vulgar speech. It’s rarely a problem in my professional life, but it’s a character handicap inherited from my parents and perfected in the Marines that I’d rather not have. Because I felt especially comfortable with the man, and to a lesser degree with the woman but still comfortable, at some point I began speaking freely as I would with friends.

At the time, it felt pretty natural. There were no adverse reactions, and there may have even been some reciprocity.

I followed up a couple times as it was just a matter of time for them to list. Then one day, she told me that her friend recommended she work with someone and she decided to take her friend’s recommendation. She wasn’t bitter about it, and she was obviously forthcoming and didn’t just ignore me. I asked her point blank if there was something more I could have done to win her business, or, if there was anything I could have done better.

She paused and seemed to consider it, then convincingly said, “No.”

I was a little pissed about the situation. It was in the bag. $12k, gone.

Of course, I hung up congenially enough. But I was hurting.

I thought of Brian. So, I opened a Word doc and wrote through it. It was informative for me. Similar to seeking direction the way I described in yesterday’s post, this is a way that I can uncover stuff that’s holding me back, stuff that I otherwise won’t notice that I’m coming up against.

Here’s the Autopsy Report below as an example:

Autopsy Report
 
(The Person’s Name Was Here)

I interviewed for the listing and she said she was going to clean the house and paint and get her shit out before listing in about a month. I followed up with her after 1 week via text saying, “Just checking in with you. Were you able to connect with Attorney _______ about the capital gains tax question?” She responded saying that she hadn’t had a chance to call him but would hopefully by the end of the week. I asked if she had any other questions or things I could assist with. She said, “No not yet. I’m working on packing and cleaning/painting.”
 
I followed up again two weeks later on 6/21/22 asking her how the painting was going. She responded “Hi, I’m doing good. I’ve just decided to go with a realtor that a friend of mine just used, but thank you for your time and advice.”
 
I asked her if there were any other differentiators besides her friend’s recommendation that helped her decide. She said no, it was just the recommendation.
 
Damn!
 
I could have communicated more often. I let two weeks slip by before I reached back out again. By then it was too late. How do I continue to add value while seller leads are in nurture mode? I didn’t establish sufficient trust for her anyway. I won over the boyfriend, but I didn’t win her over.
 
I swore profusely while I presented to them because I felt comfortable. That was a mistake.
 
My communication is limited to texts and emails on Tuesdays. While that’s a step in the right direction as far as what I’ve otherwise done previously (structure), it’s not a very upbeat rhythm. I need to increase communication, but do it systematically.
 
What else can I do to add value and help to build trust with sellers? Brian would say that I should have left with the client docs signed. Some of these sellers aren’t ready to sign though. I stumbled a little through the presentation too I remember because the listing sheets were the CloudCMA listing sheets and I wasn’t familiar with where some of the details are located on the page. I need to know them like I know my phone number. Even if there was some other factor, she wouldn’t say it. If there was some other factor, she may not even be aware of it. It’s more unconscious. Trust. You increase trust by increasing communication. But how do you increase communication with somebody without coming across as over-the-top? Maybe over-the-top would have been preferable to the bi-weekly texter…
 
She tells me she needs a month to get it ready to list. She finds a new realtor somewhere between week 1 and week 3. I could have called last week. I don’t call. I could have called ever. I could send her listings as they come on market. I could send them the digital pdf version of the report. I could increase the fear and tension rather than putting them at ease. How? By increasing motivation to list sooner because of market conditions worsening. Because of buyers disappearing and becoming more particular as time goes by.
 
The fact of the matter is, she felt no problem with taking another realtor over me and not letting me know. She didn’t care about letting me know because what I was delivering was a commodity service. There was no real relationship there. Nothing to speak of. Now, whether or not this is somebody that you would get lunch with, this is somebody that’s in the market to sell a $400k home. Transactional. She found you (number one) on her own, but then when push came to shove she preferred a referral from a friend of hers who’d just had a positive experience with someone else. You should use your referrals and Success Stories more in your listing presentations.
 
You could ask people who you’ve just helped if they know anyone who’s thinking of buying or selling in the next few months. Other agents do this, and this is part of the reason why they find themselves in these situations and you don’t. You have to learn how to ask for the referral.
 
Pay attention to who gets this listing. Irrespective, note that this is something that you do not know how to do and need to learn how to do. This is a weakness of yours, not a quality of your character.
 
Now don’t beat yourself up. God wants you to learn. Like Yoda said last night, “The greatest teacher, failure is.” Use it.

That’s a good example. I was able to uncover some ideas and insight that I wouldn’t have otherwise. Furthermore, I felt somewhat better after I wrote this out. I put my arms around it, identified where I fell short, and committed to not making those same mistakes twice. To me, this is the work of a pro. We all make mistakes. The question is whether or not we learn from them.

The Autopsy Report

Don’t Balk. Learn ASAP.

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Today we had a birthday party for my four-year-old daughter. My wife invited a few couples from the community as well as our immediate neighbors and everyone that had young kids brought them. The party was a hoot and we all had fun.

I, of course, am now ready to curl up in a ball with a book for an hour or so before I fall asleep.

Talking with one of the fathers and he asked me how work was going. This is what people do. They ask me how the market is, how work is going. I answer the question, on average, two or three times a day to different people.1

I answered like I would, telling him that the interest rates are higher than they’ve been in more than twenty years, which makes it difficult for people to want to buy. Being that many sellers are also buyers, there’s also a lack of inventory which is compounded with what is already a low-inventory market. So, things are going okay, but they could be better. What homes there are are selling quickly. There are more cash deals than what is typical, and most of the sellers that I’m working with are moving out of state for various reasons.

We somehow got on the topic of assumable mortgages. It was definitely something I brought up. It’s something I’ve been thinking about. Having gotten licensed in 2017, there hasn’t been a big reason to know anything about assumable mortgages. Now, with interest rates being as high as they are relative to how low they were three years ago, I know it’s something I should learn more about to help buyer clients secure loans on the best terms possible.

But, I have yet to learn about them. That is, until after my conversation with this guy when I proceeded to look it up so I’d know what the hell I was talking about.

Don’t talk about real estate things that you don’t fully understand with people. That’s my lesson for today. We talked in and out and all around the notion of an assumable mortgage. I hadn’t grasped the concept fully. It was only partially hatched in my little 2017-licensed brain. No appraisal? Couldn’t be. Has to appraise. Turns out that’s not true. Bank doesn’t give a shit so long as you have the difference between the loan and the sale price in cash. What kind of loans are assumable? Are there certain kinds that frequently are or certain kinds that frequently aren’t?

I knew nothing, other than that the point was to acquire the lower rate. I didn’t know that one then has to come up with a down payment sufficient to cover the difference between the loan amount and the market value/asking price of the property. I didn’t know that government-insured loans are often assumable, that conventional loans rarely are.

I didn’t know. But he asked, and I admitted I didn’t know.2

What’s worse is that I brought it up. I initiated it. I looked uninformed, professionally, which makes it appear that I’m not fully able to represent my clients. That’s true to some degree. This is something I should know about, like I said.

I don’t want to get myself into situations where I don’t know things that I should know professionally. Not going to win me any points with the public. So, I learned, and I’ll learn more. I’ll begin to use this for my clients, when possible. I will ask my sellers about the nature of their loans and will research this more effectively in my pre-listing process.

  • If the thought comes that I should know something because it will make me more valuable professionally, I shouldn’t balk. Learn it asap.
  • Don’t unnecessarily put myself into positions where I don’t have the answers that relate to my profession.
  • When these things happen, autopsy the situation, see where I went wrong, correct course, and don’t make the same mistake twice.
  1. It pays to have a canned response to this. It’s not something I’ve mastered. I usually make the mistake of being transparent and telling them how the market actually is or how work is actually going. Maybe that’s me being authentic, or maybe I’m missing opportunities to be a clever real estate salesperson. ↩︎
  2. This is a sign of progress. The new-agent version of Sam would have tried to bullshit his way through it instead of just admitting that he didn’t know and exercising even the smallest display of humility. ↩︎
Don’t Balk. Learn ASAP.

Pricing

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I’m grateful that I spent a disproportionate amount of time creating CMAs early on. Effective pricing is a skill that I’m really glad to have.

When I was pretty new, I discovered Bold Leads and thought I’d found the holy grail. To be honest, it really didn’t win me that much business, but I was thrilled to be getting in front of sellers in any capacity in my first year. What it did do for me, was it introduced me to the idea of creating CMAs for seller leads which is what got me very engaged in pricing property.1

I read The 80/20 Principle by Richard Koch and it blew my fucking mind. I was aware of the notion of 80/20 from Tim Ferriss’ The Four Hour Workweek which was the first business book I read when I got back from the Marines. Fast forward like seven years and I’m reading Koch. From that book, I began really considering what the most important thing I did was to generate revenue. It was creating these CMAs and getting them into the hands of seller leads. So I doubled and tripled down on it.

This became my primary focus. I was engineering a script for seller leads based on the book Way of the Wolf by Jordan Belfort, laser-focusing in on CMAs and my Bold Leads seller leads, and working diligently every day to become the biggest REAL ESTATE AGENT I COULD.2

Because I was doing those CMAs like my ass was on fire and it was the only way to put it out, I learned a lot about pricing homes in my market — particularly in the average home price range.

I’ve never been a guy to look at the market monitor every day. The little thing that shows you what’s sold, what’s new, what’s under agreement, what’s terminated, etc.3 The best of us look at that once per day and know everything. I admire you and them. My business partner is this way. It’s great.

I’ve always thought it was a bit time-consuming, and maybe I’ve paid the price in terms of effectiveness because of that, but I don’t think I’ve missed much. What I do know, is that pulling comps, making adjustments, using a CMA software4 that makes the whole process streamlined, and doing lots of market analyses and BPOs have made it such that my pricing has rarely been off.5

Some notably successful agents I know will take a listing even if it’s highly overpriced. The logic is to get the price down sufficient to sell the property — even if it takes a while. That’s how I was first brought up.

I believe that this method of listing homes is ineffective. For me, the sellers being pissed off was the thing that made it suck. Something could be said about the ethical quality of the fiduciary who misleads the client into thinking the home is worth more. 6 It’s dishonest. If I’m upfront with them about price, they disagree, I go through my whole process and they still want to list high, we either agree to reduce the price after X days if X activity doesn’t occur, or I don’t take the listing.7 It’s not worth it to me.

Finding a good CMA software that helps to create not only the analysis but also the ancillary documents that make up a killer presentation packet has been essential for me. Just the other day, my business partner said that he now understands why I do full-on CMAs. Because he did (finally) and his soon-to-be clients were impressed as hell. Little do they know that much of that work is done by a computer.8

A lot could be said about making adjustments as well as pricing strategy. I live and work in a market that’s in rural New Hampshire, so I don’t have hundred-unit developments with identical homes throughout. We have to pull comps by knowing which neighborhoods are comparable, which municipalities are comparable, and then what homes are comparable. It’s more complex than what one will typically find in a city and more than in an area with large developments. We have historic homes here that are wildly different. We have acreage to account for. Every market’s different in some ways and similar in others, but it’s just to say that this one takes some attention when comping properties.

In closing, these are the things I did that helped me:

  • Finding a good CMA software
  • Familiarizing myself with how it worked and optimizing it
  • Creating Comparative Market Analyses and Broker Price Opinions for every seller lead I could
  • Generating seller leads to create these reports for
  • Presenting them9

There aren’t many skills I think are more important to a marketer and seller of homes than knowing how to price them.

  1. Another post should be written about the importance of learning contracts. Something I, for some reason, didn’t consider exciting enough to warrant spending my time on when I was newer. But I did create CMAs. I didn’t even need you to respond to me. I was making that thing and first-class mailing it to you. ↩︎
  2. The grandiosity was debilitating. I can recall sometimes feeling so anxious in my first couple of years that I would literally go to my little 800 SF luxury condo and lay on my pleather couch in the middle of the day to try to nap. This can be a hard business. ↩︎
  3. In our MLS, “Hotsheets” are basically the MLS equivalent of a spreadsheet with no photos and I don’t find them to be user-friendly. So, the tool that’s used by many is called Market Monitor. We use Paragon software for MLS. ↩︎
  4. Bold Leads introduced me to Cloud CMA back in 2018 and I’ve used it ever since. ↩︎
  5. I don’t like to take listings for more money than I know they’re worth. I hate it. ↩︎
  6. This was a tactic used to win the listing while competing with other agents. ↩︎
  7. I will walk away from a listing opportunity if the seller won’t come to terms about price or if it’s too far. I don’t like to compete for listings if they’re more than like 30 minutes from my home or office. If I know the person, I will list their house and sell the bajesus out of it. But I don’t want to make the trip unless I know I’m the only one gunning for it. ↩︎
  8. I don’t mean the selection of comps or the adjustments, but the averages and percentages and ratios and then all the extra documents that support the presentation. I spend more time than I probably should analyzing the comps, and I like to make adjustments to the comps in order to really dial in what I believe the list price should be. ↩︎
  9. Mastering the delivery of the presentation came with lots of practice. I took Public Speaking in my time in community college and it helped me a lot with presenting. I don’t look to that and think of the skills I specifically learned, but it popped my cherry a bit more and made it so this thing was just another performance. I have another group that I belong to where I’ve had lots of experience over the years speaking to a room full of people. I recommend it. Toastmasters is something I’ve been recently looking into as well. The CMA is the prop that also guides the presentation and provides cues throughout so you know what to talk about. It’s brilliant really. Use this shit. Most people print comps and wing it every time. Make it a science. ↩︎
Pricing

Did I mention follow up?

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There’s a guy who I’ve been calling every week for a while. What’s most surprising to me is that he’s never once been like, “Why are you calling me every week?”. It’s always been a little update even when he’s really saying nothing new.

I’d love to say that I’m just that diligent. I’m not. My client is. I have a buyer client that I represent only in this purchase (which may never happen), and he sends me a gentle text every week on the day that I say I’ll follow up with the seller again.

This began as an invitation to list the property. It’s an 11-unit apartment building in a small town near where I live. I prepared a market analysis without having seen the units, just to give him a down-and-dirty estimate of the value to begin with.

He went cold after we went back and forth a couple of times. I kept on him a bit but my spirits were flagging after about a month or two of checking in.

Then I met Mr. Buyer. He reached out to me cold after finding me on LoopNet, asking if I had any buildings like this one. I told him that I might have a listing coming on with 11 units in it and that it sounds like it would fit what he was looking for quite well actually.

Now I get to call the seller with a purpose! I have a buyer. He listened, intrigued, and asked if this guy had mailed him. He was fascinated that people actually wanted to buy buildings like this now (it had been owned by his LLC and others he owned and partnered on since the late ’70s).

Then he abruptly ended the conversation by saying something similar to “uh-huh, right, right, right, okay. Okay. Good. Sounds good. Good. Yup. See ya later. Bye,” all in fairly quick succession without me saying anything other than “bye” at the end. It’s one way to end a conversation. (It’s also the way he ends every phone conversation, I’ve since learned.)

Fast forward a week. I call again. Little update. Has some other buyers who might be interested (that mailed him last year and who he called). Okay.

My guy decided to submit an offer. Now he’s contractually my guy (on this place anyway). Seller invites me over to see the units. Things are looking promising.

I look at the units. I offer feedback. I inquire about the offer. They express interest but nothing concrete. Still thinking about it.

Another week. I call. Similar thing. The other buyer is working on getting more buyers to partner. Still interested in our offer (but it’s low), just want to see how much they can get for it. Don’t want to expose it to the market because then the tenants will know. That could be messy.

Okay. Next week. I call again.

Gotten keys from some of the units. Many of them are nicer than the ones I saw in person. There’s a lot of potential here. Do I have any idea about building code in this town as it relates to second form of egress? No? Okay. Still thinking about it. Buyers are still trying to find other partners. Bye.

This went on and has gone on now for five months, maybe six?

Every week, I put a new task in my calendar to call this guy. Every week, my client texts me and asks for an update.

Today was that day of the week. I called. Voicemail. I had a challenging day today (as well as yesterday). It’s the end of my day. He calls back. I answer. One of the first things he says is he asks me what the listing fee is. I know where this is going! I answer adeptly and I explain that that includes buyer agency as well. He asks a clarifying question. I explain. Finally! I’ve been at this stupid thing altogether since January (August 29th today), and calling weekly for close to four or five months. I’ve had a tough couple days baby, but this is going to make it all worth it!

He next asks if I know why his buyers backed out.

I say that I don’t. He explains various things regarding the width of one of the stairwells, that there’s a support beam too close to a header and they’ve taken water there before, and something he wasn’t sure about concerning the foundation.

I listen and make understanding noises as he talks.

After 10 minutes of this, he says they still have a lot to think about. He makes no committal indications of anything.

Well, it would have been nice…

What did I do? Cry into my keyboard and wish that my fucking day would lighten just a little bit?

I set the reminder to call him next week.

Did I mention follow up?