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Net-borne buyers create new burdens for listing agents

This is my column for this week from the Arizona Republic (permanent link):

 
Net-borne buyers create new burdens for listing agents

“Eighty percent of buyers start their home search on the internet.”

You don’t have to dig too deeply in the real estate world to unearth that statistic. There are two problems that I can see with the claim.

First, it’s based on an outrageously unreliable mail survey of recent home-buyers. Fewer than five percent of recipients returned the survey. How did the other 95% manage their home search? We don’t know.

Moreover, while the long-term trend, surely, is that more people are using the internet to shop for homes, what matters is not how they started their search, but, rather, how did they finish?

There’s more to think about, though, because it seems reasonable to me that people who are starting their home search without professional representation — without a Realtor — are continuing their search unrepresented as well.

What’s the implication? Like it or not, the listing Realtor’s responsibilities are increasing.

Realtors like to say — to each other — “If you list, you last.” What that means is that a listing, at least in a normal market, is a pretty secure paycheck, where working with buyers can be a lot riskier. This is the reason that the buyer’s Realtor often gets 60% or even 75% of the gross commission. The listing Realtor presumes that the buyer’s Realtor is going to be doing most of the heavy lifting.

But this is not as much the case in the age of the internet. If an unrepresented buyer clicks through to the listing Realtor from an on-line Realty.bot — or if that buyer simply makes a sign call — the listing Realtor is obliged to show the home, even if the original intent was to have buyer’s Realtors doing all the work. Moreover, the open house, long derided by Realtors, is suddenly much more important.

All of this creates new opportunities for dual agency, whereby the listing Realtor gets paid more — and incurs huge risks — while giving the buyer almost nothing in the way of representation. It’s hard to argue that this is an improvement, but it seems to be the way things are trending.

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11 comments

11 Comments so far

  1. Ben Bach January 19th, 2008 5:58 pm

    “the open house, long derided by Realtors, is suddenly much more important.”

    Why ?

  2. Doug Quance January 19th, 2008 10:26 pm

    I like to stay away from the dual and designated agency issues by referring the activity to another agent.

    It reduces my legal exposure, as well.

  3. Brad Nix January 20th, 2008 7:09 am

    In my state, we can show the prospective Buyer our listings and it not be considered dual agency. I see no problems with showing the listing to Mr./Mrs. Internet Buyer and treating them as a ‘customer’ and not a ‘client’. It should be obvious to the Buyer that you represent the Seller – it was your # or email they contacted and it was your sign they crossed in the yard.

    I guess I view this as a positive trend. Buyer’s get to tour properties with an agent who truly understands the benefits the property offers. It is also more likely that the deal will be made at a lower price, as most Listing agents are willing to reduce commission if they are the only agent involved.

    Sellers are choosing No Representation more and more to save money – is this a way that Buyers are doing the same?

  4. Real Estate Facts January 20th, 2008 9:14 am

    I always hear the 80% statistic but never knew about the “Fewer than five percent of recipients returned the survey.” I would like to know as well, what about the other 95%?

  5. Bob in San Diego January 20th, 2008 10:18 am

    >It should be obvious to the Buyer that you represent the Seller – it was your # or email they contacted and it was your sign they crossed in the yard.

    Buyer representation is different from state to state, so I don’t think anything is obvious to the buyer, particularly the one relocating from out of state.

    In California, it is rare that a buyer is unrepresented. It is either a buyer agency or dual agency situation. Fiduciary applies in both cases.

  6. Greg Cremia January 20th, 2008 10:35 am

    While consumers are making the transition to internet shopping they are also becoming more educated about the process. Part of that education is about representation.

    More and more consumers are asking the question “Will you be my buyers agent?” In fact most of the buyers we have worked with for the last half dozen years or so have been asking that question. Some of them ask it after they have been involved in the process for some time.

    So the biggest problem I foresee for listing agents is them showing their listings to buyers who end up getting a buyer’s agent to represent them. Let the procuring cause battle begin.

  7. Kevin Tomlinson January 20th, 2008 5:29 pm

    Greg,

    Being mainly a listing agent, I get calls from buyers specifically noting that “they do not have an agent.”

    They do this for one reason: with hopes of saving commission.

    I play ball, but I will not be the whole team.

  8. Tim Theiss January 21st, 2008 8:54 am

    For me, the point of where the Buyer starts their search is important only so that I know where to create visibility for my services.

    Listings are still King to me because they create the perception of Market Share in the minds of home shoppers as well as home sellers. Additionally, it seems that the more signs I have in a particular neighborhood the less Realtor competition I have for the listings. I guess Realtors looking to farm a subdivision say to themselves, “Why bother with this neighborhood – Tim Theiss seems to have it all sewn up.”

    In the past several years I have Dual-repped over 60% of my listings – successfully without incident. My sellers benefit because they all receive a discount if I also represent the buyer. The buyer benefits because they get professional representation by someone who has intimate knowledge of the property. Full disclosure and a “Win-Win” attitude have helped me create clients for life.

    Open Houses seem to be a good training ground for new Realtors to learn how to handle consumer disdain and contempt for sales people in general. Once I learned the scripts and techniques to crack the consumers anti-sales armor I have done very well with open houses, regarding growing my clientele (not selling the home sat open).

    All in all, regardless of how the buyer and I connect, having the right words to say, the best questions to ask, and the courage(confidence) to be persuasive in this buyer’s market has helped me and my team stay productive.

    Tim Theiss
    Phoenix, Arizona

  9. […] hold Open Houses every week until the home is sold. Why? Because there are an awful lot of un- or under-represented buyers out there, and we want for them to be able to see our home. We avoid dual agency, but we have no problem […]

  10. […] hold Open Houses every week until the home is sold. Why? Because there are an awful lot of un- or under-represented buyers out there, and we want for them to be able to see our home. We avoid dual agency, but we have no problem […]

  11. […] hold Open Houses every week until the home is sold. Why? Because there are an awful lot of un- or under-represented buyers out there, and we want for them to be able to see our home. We avoid dual agency, but we have no problem […]