We have been taught in business that referrals are the most reliable way to find a professional, and we have been taught for decades that the best source of business is referrals from happy clients or friends or business acquaintances.  And that has been the teaching in the real estate brokerage business, at least it used to be.

Referrals are still an important source of business, and a referral from a credible person to a truly professional Realtor who knows what they are doing, has vast experience, is using effective marketing techniques, has integrity, and so on, would be an example of the rule that referrals are good.

But more and more referrals in the real estate business are turning out to be a curse rather than a blessing.  What do I mean?  There’s nothing like a true story to make the point.

I got a call from a gentleman who showed me his house many months ago.  He and his siblings had inherited the property, and it is a very special property.  He really believed in what I am doing in terms of marketing, and he appreciated my 20 years experience as a real estate attorney and my many years in real estate sales and how I am reaching buyers from outside our area on the Internet.  But heirs always have to work together in listing and selling a property, and while he may have felt I was the Realtor for the job, he had a couple of siblings from outside the are who had not met me, but who had received a referral to a “traditional real estate broker and agent.”  Understandably, they wanted to go with this credible referral.

After months of “nothingness,” all of the siblings agreed that their traditional agent was not the great referral they had thought or hoped.  The comment was that the agent put the listing in the MLS and then did virtually nothing.  I cannot tell you how many times I hear that same complaint, over and over again.  I would not write about this if so many people did not keep getting hurt (a delay of many months, especially past the selling season, can cost a seller a lot of money and stress).

What I do to market a property effectively is so much more, but that is beyond the scope of this short article.  The point here is that referrals are not necessarily reliable these days when it comes to real estate agents.  This story I’ve shared is not an isolated story.  There are many more stories just like this.

A gentleman called me to ask about a listing I had, which he had made an offer on through his own agent.  I immediately explained to him that I cannot talk to him as he is represented by his own buyer’s agent.  He was very kind and responded that his own agent was making a mess of things, including his own offer, and that was frustrating to him.  I told him I still must ethically ask him to work through his agent so long as his agent represented him.  Before we hung up, he volunteered that his agent was referred to him by a trusted friend.

While referrals to good real estate agents used to be a simple matter, it has dramatically changed as the real estate market has changed, as marketing has changed, as old media is collapsing, and as Realtors have had to re-invent themselves.  But the traditional brokerage is almost outmoded, which reminds me of print newspapers which are going out of business all over the country.  What is traditional real estate brokerage?  Here’s an interesting bullet list from one author.

• A real estate company that focuses on it’s brand more than the consumer.
• A real estate company that is highly leveraged with office space and expensive leases.
• A real estate company that hires agents blindly creating a revolving door that can damage the brand on which they are spending so much money.
• The real estate company that continues to make promises to it’s agents that it can’t deliver due to corporate bureacracy.
• The real estate company that decreases dollars spent on the consumer in an effort to maintain profit due to high overhead.
• The real estate company who is “trapped in the box” with no ability to truly see “outside of it.”
• The real estate company that defends a 6% commission while providing less service than it did 10 years ago.
• The real estate company that claims to embrace change all the while avoiding it like the plague.
• The real estate company that talks the talk but resists walking the walk.

Fascinating list, isn’t it?  This comes from an article entitled The Traditional Real Estate Brokerage Model is Broken.

Conclusion:  Accepting a referral to a real estate agent from someone today is not much better than picking a name out of the yellow pages (wait, who even uses the yellow pages anymore?), unless . . . the person referring you to that Realtor can speak from a deep foundation of knowledge about that Realtor’s experience and knowledge AND about their effective marketing techniques.  If they cannot do that, you are better off, in my humble opinion, doing your own due diligence to find the best Realtor you can find.

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One of the popular games in Clallam County as well as around the country right now is called, “Musical Chairs With Realtors.”   It’s a game that some sellers of homes and land are playing without realizing the tragic consequences of losing.   Here’s how the game works.

An owner of either a home or vacant land hires a real estate agent to list and sell the property.   The agent wants to list the property at a sellable price, of course, because the agent only earns a commission if he actually sells the property.   The seller is a strong personality.   The seller tells the agent what the property should sell for.   The seller asks the agent his opinion, but everyone in the room knows the seller isn’t really asking:   the seller is telling.

An agent often cannot be certain the seller is wrong, because pricing property is not some kind of mathematical science.   It is partly objective, partly subjective, and timing is everything for the right buyer at the right time and place.   Often an agent is persuaded that a seller’s property could be listed at a price the seller is quite adamant about.   Who knows, the seller could be right.   There are not any recent sales of anything exactly like this home or lot, so it is hard to definitively prove anything to a seller that will persuade him to reduce the initial listing price.   But in so many cases, this agent can testify, as can many other agents, that sellers send strong messages that they are not to be challenged on the price.   There are many ways sellers send this message, and those of us in the business know only too well how this works.

An agent doesn’t want to be rude or offensive, and without specific mathematical proof that the listing price should be lower, it is hard to say anything real intelligent or persuasive to a passionate owner who justifies every which way up one side and down the other why this property should sell at such and such a price.   Sometimes it is just impossible to argue otherwise.   Any agent worth his salt knows that if he argues with his client, he loses.   We don’t argue with our clients.   It would be bad form and unproductive.

So the agent lists the property, but after so many months, usually three to six months, the owner has decided it’s the agent’s fault it hasn’t sold, and it’s time to try an agent that can sell it.   Granted, some sellers don’t blame the agent, but still the result is the same in that they hire another agent.   (Honestly, even though a seller may say he doesn’t blame the agent, he really does, or he wouldn’t be listing with another agent.)

And the game of Musical Chairs With Realtors begins.   The first agent notices that the new listing price with the second agent is way below the price the seller insisted he list it at.   What does the agent think?   The agent is thinking, “Wow!   Why didn’t my client list it with me at that price.   I might have been able to sell it.”   This is an entirely legitimate question.   To this some sellers would immediately reply, “Well, why didn’t you tell me it had to be listed at this lower price.   I would have reduced it and you would still have it listed.”   Not.   Experienced agents try to tell sellers a hundred times that the price may be too high, but many sellers simply refuse to hear it in all the conversations.   They don’t want to hear it, and they direct the conversation to justifying the price each time.

But it gets better!   Wait, there’s more, to parrot the famous commercial.

The second listing agent is soon to be replaced by a third listing agent, only this time at an even lower price.   Oh, this game of musical chairs is such a fun game for all of us. Who benefits?   No one.

The seller is making the job of selling his properties hard for everyone, and he is sabotaging his own goal of getting the properties sold.   The seller is also disrespecting every agent he hires and then dumps.   And worse, with his property on the market so long, he has made his own property less desirable to buyers who no longer see it, even when he keeps reducing the price.

There may be an occasion when it is appropriate to change agents.   Agents come in all different sizes and shapes, so to speak, and education, experience, competence, trustworthiness, and professionalism all play an important part to the discerning seller.   (Note the word “discerning.”)   A seller might find out that his agent is not good at marketing and sales, and with some due diligence find an agent who is.   But in the vast majority of cases from my experience, most sellers are playing musical chairs, rather than doing some deep investigation to find out who is the best.

This game of musical chairs is played all the time, every week in Clallam County and around the country.     Not all sellers are playing this game.   How many are or what percentage are playing is hard to say, but a substantial percentage are playing.   It’s too bad, too, because everyone loses when this game is played, and in this market who can afford to be a loser.

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The fact that hundreds of real estate brokers are in trouble across the country is no surprise at all.   This real estate and economic downturn has spared no one, and certainly not real estate agents and brokers.

I’ve written elsewhere about the dramatic changes taking place in how people buy and sell real estate,   and the extraordinary changes in how real estate is advertised.   I’ve written about the dying breed of traditional real estate brokers who hang on to large brick and mortar buildings (and massive mortgage payments or huge leases) and expensive traditional advertising that no longer is effective, and the way-too-high overhead associated with that model.

With real estate commissions way way down, and overhead maintaining a level financial strain for brokers, it is no surprise that hundreds of real estate brokers around the country should seek bankruptcy protection, merge with other companies, or just close their doors.

Here are just a few large offices that are seeking to survive or morph into something that can survive:

1. Prudential Americana, a brokerage company in Las Vegas, Nevada that has 1,100 agents.
2. Century 21 Advantage Gold, a real estate brokerage in Las Vegas, Nevada with 300 agents.
3. Century 21 Town & Country, a real estate brokerage in Rochester, Michigan, that has 550 agents.
4. Prudential Cranbrook Realtors, a real estate brokerage in Troy, Michigan that has 90 agents.
5. LandAmerica Financial Group, which was the third-largest U.S. title insurance company
6. Help-U-Sell Real Estate, a fee-for-service real estate brokerage franchisor that has 1,000 offices in 46 states
7. Foxtons, a cut-rate commission real estate brokerage company in West Long Branch, New Jersey
8. WCI Companies, a Florida-based luxury home builder
9. Haskins Realty Northwest, a real estate brokerage in Portland, Oregon
10. RE/MAX Town Centre, a real estate brokerage in Orlando, Florida that has 60 agents.
11. Robert and Loraine Dyson, luxury home real estate brokers in Solana Beach, California

What does all this mean?   It means the real estate brokerage of tomorrow is not the traditional real estate brokerage that is top heavy.   It means buyers are looking for an experienced real estate agent who has powerful tools they can use from the comfort of their own home computer.   It means sellers are no longer willing to pay high commissions to cover all the overhead of a traditional brick and mortar.   Buildings are still nice, and we all need a place to work, but clients are not as interested in the beautiful hard wood conference tables and the luxurious furniture of real estate offices anymore.   Honestly, they spend very little time, if any, in those offices, but the brokers still have to pay for it.

At Sequim & Port Angeles Real Estate, LLC, we are working hard to meet our clients’ needs and desires, and we’re doing that on the Internet more dramatically than any of our competitors.   How can we help you?

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Real estate and the way people buy and sell homes has been going through a dramatic change of tidal wave proportions.   For several years now, even before the real estate and national economy fell from its perch, this has been true.   Consumers have been voting with their checkbooks, and consumers have been voting based on how and who they retain as their Realtor, if they use one.

The change has taken many traditional real estate brokers off guard, although it has been a slow and consistent change, and has been obvious to some of us for several years.   I’m reminded of a phrase we used as children, “Ready or not here I come.”   Like playing hide ‘n’ go seek, consumers have been saying to the real estate profession, “Ready or not, this is what I want and how I want it.”

Here’s what my clients and prospective clients tell me they want, and I think this is a national trend:

1. I want the convenience of being able to search for homes using an online MLS search.
2. I don’t want to be harassed by an aggressive and obnoxious agent.
3. I want to be able to use the Internet to further my research, and I am not willing to pay a fee to use the Internet to do my MLS searches and my research.
4. I get turned off when I am forced to register to search the MLS.
5. I truly do not care about a brick and mortar building or a plush conference room at a Realtor’s office, because I am interested in finding my home, and I don’t see that as essential to helping me find my home.
6. When I look for a Realtor, I do not fixate on a franchise name.   I don’t even think of saying to my spouse, “Honey, let’s hire a franchise to help us find our next home.”   I’m hiring one agent, not a corporation and not a building.   It always boils down to one agent helping me.
7. Like over 80% of other home buyers, I start my search on the Internet.
8. When I do need or want a Realtor, I am thinking about finding a Realtor who is actually knowledgeable, experienced, and professional.   Not to sound harsh, but this is a huge investment for me, and I want to get it right, so I’m not interested in hiring a man who previously was a janitor for a school district and was recently licensed, or a female agent who got her real estate license recently after being a housewife for 20 years.   Nothing wrong with being a housewife, but I need a professional, not a housewife, to help me find and negotiate the best deal on my home.   So I will want to know what my agent has been doing all these years.   I feel I’m entitled to know before I retain him or her.
9. I don’t expect my Realtor to wear a $2,000 pin-stripped suit, but I’m not going to hire someone who is unkempt, wears shabby clothes, and doesn’t give me warm fuzzies with his or her demeanor.   Appearance is an indication of professionalism to me.
10. The Realtor I hire must be competent and trustworthy.   I expect that he or she will be able to answer every question I have, including every aspect of a real estate transaction.   If I know more than my Realtor, I have the wrong Realtor.
11. I expect and demand total loyalty and honesty from my Realtor.   I am not willing to do what 95% of all consumers have done in the past:   ASSUME that the first Realtor they talk to on the phone is “the one.”   I will do some due diligence and interview a Realtor, and maybe more than one Realtor.   The truth is, I want to find the best Realtor out there who can do the best possible job for me.

Consumers are taking control, and they should.   I applaud this kind of thinking, and I hope and expect that anyone who is considering retaining me as their Realtor would also do this kind of due diligence.   Any prospective client can learn more about me on the Internet (at no cost and with no required registration and no obligation) than any other agent or broker in all of Sequim or Port Angeles.   I give away more information on real estate (after almost 30 years in real estate, 20 as a real estate attorney) than any other agent I know of anywhere.   Why?   I believe people deserve information and honesty.   And if I can help to improve the quality of someone’s life by freely sharing what I have learned and experienced, I think it will eventually come back to me in clients, friends, and even commissions.

As a close to this argument, here is a 2002 video of a traditional brokerage approach, which is definitely so outdated, one would think it was made by cavemen back when dinosaurs still roamed the earth.

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Real estate agents are leaving the business around the country.   No surprise.   Jokes abound about how every Tom, Dick, and Jane holds a real estate license.   With a real estate market that is way down, one would expect that many would be washed out of the business.

The National Association of Realtors just announced they lost more than 100,000 members since 2006.   I believe that number only represents the tip of the iceburg.   Here’s why.   For every agent who stops paying their dues to the NAR, there are several agents who are on the fence.

I’ve talked to some local agents, and this is not an unusual statement, “I’ve not done anything in real estate in months.   I’ve been home with my (husband or wife), and frankly, I have no idea what’s doing on in real estate.”   Many agents have left the business in favor of a salary so they can pay bills and support their families.   Nothing wrong with that.

My speculation on a local level is that as many as 30% of all licensed agents who were working when the business was better are not currently working full time and are essentially out of the business, although they are still licensed and paying their dues to the local, state, and national associations.     There are no reliable stats we can analyze to understand how many agents are quitting and leaving the business.   We do know they are leaving the business in droves.

This is actually good news for consumers.   When the dust settles, consumers of real estate services will be left with agents who are full time professionals and committed to the profession and their careers.   This will leave consumers with Realtors with more experience, better track records, and   greater longevity than the “flock” of licensees who got licensed and made money in easier times.   (We can also expect that some real estate brokers will literally go out of business.   You may be surprised at who does go out of business.)

Our free enterprise system has a way of cleaning up imbalances.   The system is often harsh, but in the long run, opportunities to fulfill greed diminish, prices find balance, poorly managed brokers shut down, and slowly health returns.   Good will come out of this, and in the long run we will all be glad for the results.

By the way, I’m not leaving the business.   I’m as busy as an agent could be.   This week I wrote an offer on a $400,000+ house, and today I write an offer on a lot for $200,000+.   I have several pending transactions, and many listings.   As I have said elsewhere, there are still buyers, just less of them.   The key is connecting with them.

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