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Posted on Monday, May 22nd, 2017 at 3:42pm.
Is The Traditional Real Estate Model Under Pressure?
Asked to comment on changes affecting the traditional real estate model, Stephen Carpenter-Israel, President and Broker of Buyer's Edge, said that the increased use of house hunting websites, as well as a recent California Supreme Court ruling on the practice known as "dual agency" are shaking the industry to its core.
Tech Has Led to Increased Demand for Transparency
Over the past decade, consumers' widespread embrace of technology spurred the creation of firms such as Zillow, Trulia, and Redfin. "These online databases disrupted the 'cartel' of the old brokerages that used to monopolize access to property data" explained Carpenter-Israel.
In essence, these tech firms revolutionized house hunting by giving consumers free access to information on their smartphones, empowering them to look for better ways to buy or sell their homes. While this disruption brought greater transparency to the way the industry operates, "homebuyers are still turning to agents to help them parse through the noise and evaluate the true value of properties," said Carpenter-Israel.
With more information at their fingertips, there is a trend toward better-educated homebuyers and sellers becoming skeptical of the traditional brokerage model. "As clients become savvier, they are increasingly looking for a true fiduciary relationship with their realtor," said Carpenter-Israel. "They are demanding transparency and loyalty with no conflicts or competing interests."
California Legal Battle: The End of Dual Agency?
In fact, the courts are beginning to pressure brokerages to deal more openly with what has historically been a fairly secretive system explained Carpenter-Israel. "In fact," he said, "The need for increased transparency and full disclosure was the focus of a recent California Supreme Court ruling that may change the structure of the industry."
The litigation revolved around the practice of "dual agency" when a real estate broker is representing both the buyer and seller. In this case, the California Supreme Court ruled in favor of the home purchaser who said he overpaid because the size of the house was misrepresented by the listing agent, who worked for the same company as his buyer's agent.
"The ramifications of this ruling may lend credence to the case for eliminating dual agency and push the industry to accelerate the trend towards brokerages choosing to exclusively represent either buyers or sellers, but never both," said Carpenter-Israel. "With 25 states having already eliminated an individual agent's ability to serve as a dual agent, the timing may be right for a meaningful change."
Recently, California state representative Lorena Gonzalez Fletcher introduced legislation that would prohibit the practice of dual agency in commercial real estate transactions.
The proposed legislation may be the first of many efforts across the country that would fracture the traditional model of commercial and residential real estate firms representing both sides the deal. Ultimately, the outcome of these legal battles may require completely separate real estate firms to represent each side, not just provide a disclosure of the conflicts.
By Wendy Carpenter-Israel
Choosing the best Realtor to market and negotiate the sale of your home or condo is one of the most important decisions when you are ready to sell your home in Washington, DC, Northern Virginia and Maryland. Selling a home should be like any other important business transaction, but unfortunately many Sellers make impulsive and emotional decisions that inevitably cost them loads of frustration, time and tons of money.
When past clients of Buyer’s Edge (Buyer Brokerage Real Estate Company) are ready to sell their home, they often give us a call. They ask about the current housing market conditions, how to sell a home and whom they should hire to help sell their property. They know our exclusive buyers agents never act as seller's/listing agents, since we choose to represent homebuyers 100% of the time. But our past clients still ask our advice, knowing that we work day-in-and-day-out with some of the best seller’s agents in DC, MD, VA. As a result, we know which listing agents are the most professional and work the hardest for their seller clients. Here are the Buyer's Edge:
Top Tips for Selecting a Great Seller’s/Listing Agent.
1. Interview a minimum of three listing real estate agents.
Okay, so this one’s obvious, but it’s remarkable how many people tell themselves they will comparison shop agents and then don’t. It is vitally important to get pricing quotes and a marketing plan from several listing agents (and make sure they’re from different companies). This will minimize “group think” pricing that may occur when a pack of agents from one office come through the house or condo to help the listing agent price the property. The goal of having a group of agents give their recommendations for price is to get a realistic listing price for the property. However, many times if an experienced agent recommends one price the other agents often will just follow along with the pack. Interviewing a number of agents also will help you spot low-ball pricing by agents who already have buyers for your property in their back pocket. Most importantly, before interviewing agents, don’t forget to do your pricing homework. Look up recent property sales in your neighborhood with web sites like homes.com, redfin.com, zillow.com and trulia.com. You also are more than welcome to call the Buyer’s Edge and we will be happy to provide you with current and reliable home sales data in Maryland, Virginia and DC.
2. Choose a Washington, DC real estate listing agent who is an experienced, full-time professional.
Listing agents don’t have to have decades of experience to be good at their jobs. However, they need enough experience to guide you through today’s complicated home-selling process in which contracts run to more than 50 pages and hazards abound for seller’s who are not well represented. A good seller’s agent will keep you out of hot water, and, in a multiple bidding war, recognize what is truly the best offer on the table. Often times the highest offer is not, in fact, the “best deal” in the long, or even medium, run.
3. Choose an Realtor who is a tech-savvy marketer.
When you interview listing agents agent find out how they plan to market your property. A good listing agent will be gifted at staging homes and creating compelling virtual tours. Ask to see examples of tours and brochures. They should be of the highest quality, with photographs shot by professionals. Ask also how they plan to make use of social media. Do they tweet out newly-listed homes? To how many followers? Do they have a personal website or an active FaceBook page, Instagram account?
4. Be wary of real estate agents who promote the fact that a large proportion of the properties they list are sold “in house.”
An “in house” sale is one in which real estate agents from a single company represent both the buyer and seller of a house. Such “dual agency” sales generally are not in the best interests of either party. Why? Think about it: If you were being sued by an individual represented by a big law firm in town, would you hire for your defense a lawyer who worked for the same firm? Of course you wouldn’t. And, in fact, in the real world, law firms can’t do that. But in the crazy world of real estate, dual agency deals are still perfectly legal in most states. Indeed, traditional real estate companies like them so much (the entire sales commission stays in house), many offer their agents bonuses for dual agency deals.
5. Consider working with a listing agent who works for a small real estate company.
Big companies with battalions of agents naturally end up doing more dual agency transactions. At the Buyer’s Edge we recommend that sellers always ask prospective listing agents a few key questions: What happens if you or another agent in your company finds a buyer for my home? How do you protect my best interests? And do you or the buyer's agent receive a bonus if the buyer for my home is working with an agent from your company?
6. Be leery of listing agents who say they’ll sell your home without listing it in the Multiple List Service.
“Save yourself the hassle, inconvenience and dangers of having strangers in your home,” says the listing agent. But whose interests are really served in this situation? Not yours if you’re looking for the most qualified buyer and the highest sales price. You want all qualified buyers out there to have the opportunity to see your home, and so possibly bid on it. If you’re uncomfortable with a lot of the foot traffic through your home, tell the listing agent not to host “open houses.” The overwhelming majority of house sales don’t start with an open house anyway.
7. Choose an agent who is a hard-nosed negotiator.
Good listing agents have an excellent reputation in the real estate community and work for respected companies. They love what they do. They are professional and nice, but also tough negotiators, who work hard to sell their clients’ homes on the best possible terms.
8. Don’t favor “neighborhood specialists” over outside listing agents.
In fact, an agent who hasn't sold a lot of properties in a neighborhood may do a better job for you than an agent who specializes in your community. Outsiders may be more motivated to get the highest price: They have no conflicts about which of several listings to promote with a potential buyer and no neighbors to please. Yes, it’s important for sellers to understand the factors affecting home values in their community. But experienced, first-rate listing agents can and will do the research needed to dig out that information before putting your home on the market.
9. Work with an accessible agent.
Too often a listing agent will tell sellers not to expect instant callbacks because the agent, too, “has a life.” For most people, however, selling a home is one of the most important and daunting financial transactions of their lives. So, if, for no other reason than this one, listing agents should be accessible 24/7. If you need another reason, though, consider that if your agent responds quickly to you, she’s likely doing the same with agents working with potential buyers. So be sure to ask prospective listing agents when and how (text, email, office or cell phone?) you can contact them. If the answer isn't 24/7, you may want to move on to the next candidate.
10. Work with a listing agent who has a history of pushing up the market price of properties.
Sellers should work with seller’s agent that has a pulse on the current real estate market conditions. This is not the same as pricing a property low and having the negotiated sales price go way up in a multiple contract bidding war if you're lucky. An excellent listing agent has a history and motivation to consistently raise the bar on the homes and condominiums that they list for sale.
Editor's Note: This post was originally published on April 12, 2013. It has been updated for accuracy and comprehensiveness.
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