Wednesday, September 26, 2007

Realtors Are Our Own Worst Enemies

Now Realtors are giving into terrible real estate market hype which is REALLY bad! Check out this email I just got from an agent representing a buyer on one of my listings. They made an offer, we countered and now the buyer is having “second thoughts” about raising his offer. Here is the agent’s email to me:

I just don't think my client will come up that high. He really feels it's a declining market. I would love to make this work too but we feel $XXX,XXX is a bit high. I'll let you know when I hear back from my buyer as to if he wants to come up. some. Thanks

Now I could get into how justified my clients asking price is (and it really is) but that’s not the point. The point is that we all know buyers think the real estate market is tanking but if Realtors start buying into the hype then we’re all in big trouble. So consider this a prime example of why the real estate market IS tanking. It’s because buyers aren’t even willing to pay market value for a home and their agents don’t have the wherewithal to educate them. Notice how the agent said “we” feel the price is too high. Not just her client, but the agent who should know the market!

The issues:

· Buyers want to buy below market value or else they move on to the next one.
· Agents aren’t properly educating their clients that not every property for sale is a foreclosure or short sale so they can’t expect sellers to give away their homes for lower than market value.
· Agents blindly let their clients lead them from house to house making offer after offer that is not accepted. After 4 to 6 months of searching the buyer decides to stay in his lease and renew or stay in his house until the market “gets better”.
· Buyers and sellers think they know the real estate market better than the experts which should be local Realtors.
· Local Realtors are letting their clients tell them how bad the market is and Realtors aren’t standing up for themselves and educating their clients.

My question to the buyers out there is what are you going to do when the market gets better? There will be less inventory and chances are you’ll be paying more for the home than if you were to buy it now. So you are willing to potentially pay a premium for the same home years from now rather than to buy it at market value right now? Makes perfect sense to me. (Sarcasm)

My theory on the real culprit behind this? Immediate equity. Too many home improvement shows have shown how young couples live in a home for 2 years and make $100,000 without drastically improving the home. That has never been the case in Dallas and never will be. So I think the buyers are afraid of the commitment a home offers. The average person needs to live in the home for at least 3 years and put at least 5% down (or 5 years if they put nothing down) if he or she wants to sell and break even. But buyers don’t want to hear this. Sellers have put their home on the market after living in it for 2 years with very little equity and can’t sell it at a premium and get stuck. Buyers are catching on to this so they don’t want to “overpay” since they may or may not want to sell within 2 to 3 years and if they “overpay” then they won’t have immediate equity just in case they need to sell and get out.


  1. You're a good, level-headed business person. Unfortunately, most real estate agents aren't. They got into the industry for a lot of the wrong reasons, and now good agents like you have to deal with their lack of any sort of business accumen.

    They're not only helping to perpetuate the "down market" mentality, their ignorance is also a black eye on the industry itself.

  2. By the way, when I said "most" I didn't mean "all." As you've said many times, a small group of agents handle the lion's share of sales. Those people, you included, are good agents/Realtors and are good business men and women.