Despite leaving behind professorial pretensions for real jobs, I could not help but to keep returning to reflection, as a market I was participating in was going through profound changes at once exciting and unsettling. I’m talking of course about the real estate industry in the United States as I experienced it. I was an agent and when I learned about representing buyers and sellers of homes, I knew I was back to Hobbes and what he said about representation in negotiations regarding financial matters.
I heard in France they teach how to write essays with the thesis, antithesis, synthesis model and I thought it would be helpful to organize my thoughts in that way. With each perspective, I am attempting to locate the issues that make a real estate transaction unsettling, unsavory or difficult so we can evaluate if new technologies are serving us. I am trying to get ahead phenomenologically, to what is at stake with recent court decisions on the topic.
Real estate transactions are most difficult for the buyer.
Real estate transactions are most difficult for the buyer’s agent.
Real estate transactions are most difficult for the seller.
Real estate transactions are most difficult for the listing agent.
First a word on motivations to become a real estate agent. We can group them into the rough categories of the pure and impure and debate those terms later.
Pure: curiosity, appreciation, and karma.
Impure: growing my husband’s customer base for his related business and making money.
Curiosity: a decade of studying the authority of the legal system, I had yet to experience it in action. I thought well I aim to buy a home, so I ought to study as much as I can about the process.
Appreciation: One of the funniest days of hustle was when I was driving up the highway that defined my favorite area. I saw a man get out of his car and approach a real estate flyer stapled to a pole. I also pulled over and approached him and said “Are you interested in buying a home? I can organize a showing.” like the real hustler I was at that time. He laughed, it was his listing, he was updating the flyer.
Several years later we were chatting at the neighborhood bar and he says why did you get into real estate and I told him. When I was a child, I spent a lot of time at a horse farm. Indoor arena and stalls, a barn with runs, an outdoor dressage arena, an outdoor cross country course and a round pen were some of the features. Across a river more pens with river access then a path up to a huge pasture. That pasture was a magical place in the sense that one day, when I was little I was trying to get my pony and get ready for the horse show. 4:30 in the morning walking up big hills in the fog out comes trotting a fairly large coyote. I stopped in my tracks and we stared at each other. I had a slight upper hand since I was higher on the hill but I wasn’t thinking that at the time. I thought I would communicate telepathically with the coyote and so I did. I told he was big and beautiful and could hurt me, even eat me. But it would not be worth his while, because I taste bad and would punch him so he can go on about his business and me on mine. I felt like we made a silent agreement and moved past the moment. That was awesome.
Anyway, I had a friend that also rode at this barn and his dad was a Dutch professor of agriculture. I spent so much time at this place. It took an hour for my mom, dad, or brother to take me there so when they did, it was usually early in the morning and they would come pick me up in the evening.
So one day, this professor dad was walking the land and I walked along. He told me how he was reading the land. Noticing the natural paths of water, looking out for any poisonous herbs, noticing the fencing. As as he said things about why the horses were in this area of the pasture in the morning and another area in the afternoon, it struck me that he was reading the landscape. This made a huge impression on me.
If you have ever seen a well witcher its a similar idea. Reading the earth itself.
So these are some experiences where I realized how amazing surveying is, how the habitat and the horses were in a dance.
Karma: So the third motivation I thought property management, related to real estate would be right for me is karma. I was thinking about how blessed I had been in my life almost every time I went to rent an apartment. The 3 places I had in Chicago were each perfect. I landed the perfect rental in Paris that was gorgeous on a gorgeous street. I lived in 4 nice places in Chile. And my accommodations in Ecuador were cool. When I met my ex husband and I went to his house for the first time, I was floored by the acreage and how it backed onto blm, the coziness of the stone fireplace and the wooden beams. We saw elk drinking in a pond on our first walk. The love of place and this man went hand in hand. To whom much has been given, much is required. So I definitely saw property managers as angels, connecting newcomers up with homes.
As far as the less pure motivations, I was not becoming a real estate agent and property manager only to help people, as I could not feed myself with helpfulness.
Following my curiosity into both real estate and the laws around it, I got a job at a title company franchise so I could see how the orders for title came in and what happened at the closing table. Reading real estate contracts all day helped prepare me for knowing the steps involved in the transaction. In this role, I saw the checks the realtors were making and I also saw my 15.00/hr paycheck and I knew which one I wanted.
To learn more, I worked at the front desk of a well known small local brokerage in this town named after a weapon out west. For the sake of this story, I will say the brokerage owner’s name was Cheryl, because she reminded me of Cheryl Burke from Designing Women.
This job was ideal and I ought to have stayed there longer perhaps. I was able to read the independent contractor agreements the brokerage had with the agents. The managing broker showed me the check list she used. We had lists for new listing, under contract, and closed files. We had procedures for storing files for the requisite 7 years. She had big main street windows and got to hire a window painter to liven up the ambiance of walking by. I watched a successful realtor make her goal chart and hang it in her office. We had a web developer that did our website. It had a plugin of the mls so you could do the same home shopping but from our website and inquiries went to our office email. This was about the time that facebook came out with Pages and of course the brokerage had one. I was thrilled to be able to post on it and reveled in creating little ads on Canva. The day that a facebook post clicked to a home on our website and the interested person gave their contact info to the office and I gave it to a realtor, I was overjoyed. This was lead generation on the internet and I was all about it.
The most amazing moment, however, came from Cheryl’s domination of the old school realtor strategy, the sphere. The sphere is a person’s social network IRL. People you know from civil society clubs like the Lions Club, maybe from church, your kids friends parents you chat with, whomever you randomly “know”. The sphere is something an older realtor can rely on more than a fresh one because relationships take time. Trust requires multiple interactions. One day she had her office door open. I was just sitting at the front desk. She picked up the phone and called a friend and asked her if she was ready to move off the ranch and downsize, that she had identified a great home for this couple to go to, and she had also identified a buyer for this ranch. 15 phone conversation later she had two places under contract. That was around 100k in commissions. My jaw dropped to the floor. She made over 3 times what I was making in a year in a 15 minute phone call. If nothing else went right for her this year, her business would be able to keep running because that would pay for her living and office expenses for numerous months to come.
Now I need to mention a brief history of what realtors were doing in the past, then the era I was involved in which was a traditional era, in order to see what changes are coming down the pike and how different or similar new processes will or won’t be.
In a time long, long ago, before the internet nor cell phones, there were realtors using landlines and typing up contracts with typewriters. Then typewriters became electric.
Buyers and sellers had to go to in person to their realtors’ offices to sign the contract.
Then there was the fax machine, which permitted realtors to get each other the contracts faster.
Then there was the big bulky carphone and of course realtors were the first to jump on this innovation because it made communication on the go. You didn’t have to go back to the office to coordinate another showing, call the other broker, or call the client.
Cheryl told me about when the MLS was a binder. Each page in the binder was a document with the house’s details. Prospective buyers could go into a brokerage and look through the mls.
In this very in person service or rather complex set of services there would be a certain kind of person most likely to even become a realtor. For example, the character Annette Benning plays in American Beauty.
Let’s go over the 90’s stereotype of a realtor I had in mind from my childhood. This would be a very well connected person. Definitely church goer and or in a number of clubs or civil society organizations.
I never thought I would be a realtor because I was suspicious of the “main stream” whatever that meant. I also loathed the idea of wearing a lot of makeup which seemed de riguer.
There was a famous realtor in our hometown. Once I was at my parents house reading the paper and I kept seeing her ads for homes. I said, mom, what do you think of so and so. She told me that this person was aggressive. Aggressively got herself invited to every party or mixer and then aggressively approached everyone about their real estate plans and my mom found it totally off putting. Nevertheless, seemed to be working for her.
There was also an idea in my mind when I was a child that connected wearing too much makeup with being “fake” which of course is the opposite of virtue even if its not a vice.
So, while I was taught the value of belonging to the country club and going to church, from high school onward I just never saw myself in this genre of person I associated with realtors. I was wondering how society got so organized, with everyone following the law, questioning the authority of the state, wondering if there were alternatives to the dogmas of capitalism.
What did I become? A person who strove to be well dressed, well connected and fully make upped; getting invited to parties and telling people I’m a realtor.
I learned quickly that realtors are not fake, that was a stereotype. And I also saw that some realtors indeed were well off, and others struggled financially.
I find it completely not my style to dislike someone because they are well off, successful, or wearing too much makeup. I also do not find people to be synecdoches of the industry they work in. So resenting others for being rich or successful was not for me. I also did not blame individuals for ills of the markets they operated in. Later I found myself judged by a neighbor like I was a bad person because housing was unaffordable and my existence and participation in this industry was somehow complicity in the unreachableness of housing, even though it was for me, too, unreachable.
Let’s start with the thesis the buyer has it worst in a real estate transaction.
First, what is the relationship to be established with the buyer’s agent? The agent seems nice and starts doing helpful things after a brief conversation.
Now that we use the apps, you don’t need the agent to alert you when there is a new interesting home hitting the market.
As an agent, I hoped the buyer would download and use the Flexmls app, because that is the one I used. It was law in Colorado a liscenced realtor had to first put the listing into the mls, so the real first notice is only if you use flex.
Some of my clients did not enjoy using apps, so I would email them options.
You advise them to speak to a lender about how much they can afford, and give them at least three numbers of lenders they could work with and let them decide and pursue a relationship with a lender.
But they probably could have done that themselves.
Writing the offer without mistakes, presenting it. Advising on price. How many mls or apps show you the difference between list and sold price narrowed down to homes similar to the one the buyer is buying?
Our mls had an add on statistics compiler I used and some others did but some didn’t.
I got really focused on the numbers. Then I found that buyer’s weren’t. If they could afford it and they wanted the home, if they could see themselves living there truly, and they had some other pressing issue in their timeline like they had to move for a job, then all of the sudden it was not as much about the number. It could be about timing, which was really in the purview of the lender.
Then there’s the buyer’s agent’s ability to communicate with the lender, and the lender’s ability to communicate.
Next there is the under contract calendar and how it is managed. The agent can recommend several inspectors, but the buyer chooses whom to use. The agent helps the buyer read the inspection report and understand the implications of the imperfects. Then the buyer’s agent can communicate with the inspector, write a neat inspection objection that is reasonable, polite and asks for the correct amount of adjustments so as to not scare the seller that this buyer will be too onerous, nor do the buyer a disservice. In this stage, the agent may have to communicate with other trades to find out the estimated cost and speed of repair. Often, the best trades are not available on the buyer’s timeline.
Next is the recommendation of title company who will process the transaction.
On faceplace you can find huge lists of all the things the buyer’s agent can do, but the buyer herself does not know at which moment is she obliged.
She could sign the buyer agency agreement and then finances could fall apart.
She wonders if she would get the home at a cheaper price, cheaper by the price of the buyer’s agent commission. So the buyer wonders if the agent receiving the commission is truly acting in their best interest or simply trying to push for their payday. Are they minimizing the inspection issues? Is the affordability price point being pushed up a little higher than comfortable because of the commission situation?
Back to the cheaper price. If the buyer signs no buyer’s agency agreement and then the buyer allows the listing agent to be the transaction broker, then the commission will be higher for the listing agent which they will like and lower for the seller which they would like, then the transaction broker can whisper to the seller, you’re saving 2 percent and to the buyer you’re getting a 2% discount.
Armed with this knowledge of transaction brokerage they can go to an open house and see if they want what is there. The listing agent at the open house will say, “have you already signed a buyer’s agency agreement?” and the answer will be no, and then transaction brokerage can begin. In this case, what is foregone is representation.
The idea that the buyer and seller are represented by agents refers us back to the adversarial nature of our justice system.
Transaction brokerage assumes all negotiation is either over, or will be agreed to by both parties from the words of the transaction broker, who is now no longer representing either party.
In order to feel like they are saving money, they give up someone looking out for their interests alone. Now the transaction broker is also suspect, and is of course interested in getting the transaction to the finish line over this or that preference of either buyer nor seller.
To solve for these suspicions, there ought to be a price that is indubitable, a certainty to the market value. I would use RPR stats to establish this. (different outcomes on different websites what stats are available and which ones are important in the given scenario.
The lender relies on an appraiser and their judgment, however, since human appraisals can also be picked apart and disagreed with.
What would be a successful, positive experience for the buyer?
Certainty of appropriateness of price of real property, and personal property exchanged.
Certainty of price of any repairs needed, remodels.
Finally, desire for house and neighborhood, has to do with aesthetics and amenities.
Ability to handle an HOA.
Ability to trust their buyer’s agent bring them a just about to market opportunity to be the first person there, trust their analysis of the statistics to contribute to the certainty above.
So you could say that a local buyer might need less assistance than the buyer that is coming from out of town. In this case of flying in, the realtor may become the driver for the buyer. Here its a tour guide type scenario where you show the buyers the general lay of the land, where their target locations could be. But of course its important to not engage in racial steering.
Lawsuits in the 70s over this.
One of the most crucial aspects of the buyer’s agent role is getting the door code from the listing agent, arranging the showing. A seller would not want the buyer unaccompanied in the house, he has an actual financial incentive for the home to be damaged, it would cost him less. Plus why would you want to let a stranger in your house without a professional who felt responsible, whose license is on the line to ensure that nothing unsavory occurs at the showing and the home is locked up.
Some buyers only want to sign a buyer’s agency agreement for the particular home being shown, in essence saying, if I buy this home you’re showing me, you can write the offer and be my buyers agent, but the agreement does not extend past the showing.
Buyer needs at a minimum a buyer’s guide, know the neighborhood, read the contract, have a calendar for mutual execution, have a trustworthy lender, and be able to read statistics adequately to achieve certainty with reason chasing after desire to the mortgage yoke.
What are the obstacles they face to this
Want to have the benefits of an agent without having to sign the buyer’s agency agreement; want to not need an agent for negotiation but are unsure if they will. Unsure if they can trust the listing agent to switch to a transaction broker. Unsure in the inspection items are larger or smaller concerns as they appear. And of course, there could be uncertainty around whether or not buyer will enjoy the neighbors and neighborhood which makes a difference in quality of life.
Now we are on to an antithesis, it is the buyer’s agent who has the worst time.
First the buyer may not use the app you do and so you may have to also use their preferred app. When you download it, the website will extract all data about the agent.
Second, the lender may be unreliable and not close on closing date risking the earnest money.
Third the inspector may blow the deal by exaggerating a flaw to ensure their insurance is not affected if a problem is on the worse side in a close call.
The house may not appraise.
The buyer is qualified and you’re spending time on showings, but there really is no pressure point on the timeline so you work for free with no endpoint.
Your schedule doesn’t mesh with a buyer request and instead of going with your colleague they go and buy with another agent.
How much time can you afford to spend per person with uncertainty of purchase.
One of the ways to nail down the certainty of the price point is to ask for proof of funds if paying in cash, or pre-approval letter from a lender. But of course this letter is not valid forever, and buyer may prioritize a different purchase that changes the price point without realizing it.
Next, buyers say they have timelines but some people’s are more flexible than others.
Then there’s the possibility that the couple buying the home breaks up or that one person is delusional about their ability for their partner to agree with them, commit, keep their job, etc.
So there’s all this output of time an effort to find a property suitable for the buyer, be available when they are available for showings which is usually evenings and weekends. Then there’s the uncertainty of whether or not this person is going to close with you, in what timeline.
Being a buyer’s agent with another job does not really work because it over-severely limits flexibility. The buyers want evenings and weekends. The realtor tours and new listings are in the morning. Prospecting is in the morning. Lunch is for relationships. There’s the saying that you should make sure your realtor is a full time realtor.
There’s also the saying that buyers are liars, but this is an unfair characterization. What really happens is that the buyers want something from their imagination like a four bedroom house by the greatest school. Then they find out they qualify for a two bedroom house in that neighborhood. Could the kids go to a different school for a 3 bedroom in a different neighborhood. So as the buyer finds out more about who their friends are, where their friends live, where their kids can find their activities… the more they know the community and their finances then they can narrow down what the right house is. So its a process. Couples have to discover who can compromise on what feature. While this wonderful journey of self discovery is happening, the buyer’s agent is doing activities uncompensated.
Meanwhile, if the buyer’s agent is busy during a requested showingtime, or can’t find out a detail about a home that the buyer requests because the listing agent is being icy, then the buyer’s confidence in them could erode.
The buyer senses the agent is ready for this to move on then they start to question if they are being pushed into something just to get it done.
Next up, we explore the thesis that being the seller is the worst place to be in the transaction.
From the financial perspective, the relinquishment of an asset has a negative effect on a balance sheet, unless you do a 1031.
For those receiving large checks, there could be a tax consequence that requires planning.
The largest anguish I have seen in sellers is when the property has been in the family for generations and there are all kinds of emotions wrapped up in the transaction.
List of country songs that mention “grandaddies farm” go here. Feeling of betraying family tradition. Guilt at feeling like shouldn’t have to sell it, grandma wouldn’t want me to sell it type of feeling. Nostalgia for the past. Wondering if your grandchildren are going to have it as good at your next place as you had it there.
So owner is so financially in need that they are deciding to sell an asset. Trying to summon the power to throw off the guilt in front of grandma’s ghost and shame at not being able to just keep it. And while attempting to walk forward through this bog of emotions and tax math the listing agent comes in and starts talking about pre inspection, pre appraisal, repairs, updates with good roi, having better curb appeal and staging. All of which take time, thought, money.
The inconvenience of leaving the house during a showing.
Then there’s the listing price conversation. Looking around and can’t believe what my neighbor threw his house away for because he was desparate.
Not appreciating another neighbor for whatever crap is in his yard or driveway.
Trying to achieve the repairs, curb appeal and staging the realtor is asking for without breaking the bank.
And then there is the waiting. Why? Is it that the realtor is not advertising sufficiently?
Then there is the offer and having to decide to accept it or not.
Then there’s the negotiation around the inspection objection.
Thinking about people coming into the house during an open house and whether or not you need to lock anything up from a potential sticky fingers.
Now we are at an antithesis, the seller’s agent has it the worst in the real estate transaction.
First you learn to approach the FSBO, the unrepresented, For Sale By Owner. This is the perfect type of person to get used to conversing with about the value proposition.
What is the listing agent offering. Listing in the mls which gets all broker’s eyes on it when it’s a new listing. Being on realtor tour. Interpreting statistics to come to agreed upon listing price. And better advertising than with any other realtor.
You present the comparables to a seller, they put their house on top of the nicest comparable that you were showing them as an above your ceiling, ceiling, but they don’t see it that way.
Next you have to come to agreement on a staging plan. This just depends on what the house looks like aesthetically to begin with.
Once I lost a listing because the idea of staging really turned this lady off. People don’t want to rearrange their stuff to make their own house look generic, while they are still living in it.
Then you have to pay for a professional photographer to come in on exactly the day you can manage to get it staged, and it has to be a day when the weather is good. Also, the photographer has to be pretty good at video editing, and a drone would be great. So now you’ve spent 500-3k on getting the best marketing materials possible.
Seller unrealistic about price.
This leads to disappointment when they don’t get offers.
Then the agent says lower the price.
Seller starts mistrusting agent they just want to get it over with because they want their commission.
Meanwhile seller does not think it is necessary to not be present at the showing but it is hugely important. Think of it this way. When you go to someone else’s house and that person is there, you think of it as their house, not your potential house. To open the imagination of living there for the buyer, the seller’s presence is not good. Further the seller’s communication weakens the negotiation process.
Now we need to go back over the 4 roles with an eye towards how the massive influence of the internet affected each type of person achieving their goals in the transaction.
First since the private companies copied and repasted all of the data from the mls, you can find a lot of homes for sale with various private apps, most popular were Zillow and Realtor. You can put your home on facebook if you’re a FSBO.
If you’re not going to a FSBO, then you’ll still need a buyer’s agent to let you in. So then buyer’s agents are called glorified door openers.
So then you get discount brokerages like Redfin, where you can complete a transaction for a lower commission. Here though, the door opener may come from a farther away town, because not too many agents went this way, and since their not hyper local they probably won’t know much about the home or neighborhood.
Even the Redfin agent is still stuck with all of the vehicle expenses so they are still feeling like its a little pay to play.
Let’s be real, everyone wants a Cheryl but there is no way a Cheryl would be this type of agent because Cheryl’s know that they are not glorified door openers, and that their skill is in the contract, negotiations etc.
You have to be willing to believe that you’re making a great decision with an agent who if they were really successful, would not be accepting the meager Redfin role which diminishes them.
Do you get more certainty with using just the apps? No because they have no mls nor RPR, they don’t present the relevant stats on the websites like difference between initial and sold prices in the last 2 months in the locale.
Do you think you’re getting straight talk about the inspection report? Of course not, the budget agent and agency has incentive to get the transaction to the finish line just like the traditional buyer’s agent.
Do you think anyone is representing your interests in a negotiation? No, their whole impetus is to convince the consumer that there is no need for meaningful negotiations.
But the real impact comes when the realtor signs up for Zillow. Some agents used Zillow, only logging into the local mls to check the offer to the buyer’s agent and input a new listing.
When the agent signs up for Zillow they suck the data right out of your phone and then sell these contacts back to you.
I looked up how much it would cost to be the third featured agent so I would appear on the right side of the screen when buyers were shopping my preferred zip code. Well of course they used dynamic pricing and in this particular zip code the homes were expensive. So, it was 900.00 dollars a month to maybe be someone’s buyer’s agent.
Even if you took someone on a showing that hit you up on Zillow that person does not have to sign a buyer’s agency agreement so you’re back to being the buyer’s agent who had 10,000 leads and people to chit chat with but not real buyers on decently urgent timelines.
Then there was my experience with Zillow listing suppression. No, I think it was Realtor listing suppression. Anyway the monthly fee was 600 and I wanted better exposure for a ranch that I had listed. When I signed up to be an agent and pay this money they try to get you in a 12 month contract of paying them monthly for this.
So they showed my listing more when I signed up. Then a couple months in I couldn’t afford it and called to get out of my contract and they let me out but then suppressed the listing.
So since the value of the era is attention, and they had the most eyes on their sites they extracted from realtors, and sold their relationships back to them. And their leverage is to diminish the attention your listing gets.
At this point being a realtor got very pay to play. You could pay a number of this websites for leads, but many of them were window shoppers.
