Bonzai Real Estate Blog

I will be taking a few days off -- going to Lake Hartwell. I've been working on a post that combines spirituality and real estate. Going to the lake will be like doing research.

later,

M

Americans can't take bad news for too long -- we begin to rebel against it, in our on way. We hardly ever take to the streets, moods merely change and a collective determination sets in. We can be a moody country, falling into periodic blue periods where a cloud of gloom affects our outlook -- but it's not in us to be gloomy for too long. In us also, at times, is a frenzied optimism, whether it's certain technologies, cult personalities, sports, political, homes/investments or virtual optimism over the internet. Our fortunes tend to change with our moods, and sometimes it's hard to tell which comes first.

Our current pessimism will make us sick before too long and our weariness will be replaced with a determination to make things happen again. Sometimes an election can change the public mood, sometimes ideas and inventions from outside politics emerge and inspire us to see things differently, from trains to automobiles to science to economics to the internet.

We've become somewhat jaded because progress has been so fast and we've seen so much. Right when real estate seemed to be the movement to great wealth, happiness and security, our frenzied optimism created a bubble that quickly deflated and now pessimism has set in. Like the internet frenzy of the nineties, we moved too fast and expected (demanded?) too much and now reality has set in. Maybe our coaster roller rides are making us weary, or maybe we are growing out of cheap thrill rides and maturing as a people in preparation for a more stable and realistic future.

I do know that we are a people who don't stay in gloom too long. We move on and continue to build and to grow, in spite of the predictions of our downfall. Predictions of our demise have been made over and over whenever we've hit a rough spot. It's hard not to think they are true when all around us the talk is of everything negative about our society, our economy or our way of life. Yet, we keep on going.

In times like this, and I have been through a few in 54 years, I have to put things in perspective and look at what is really going on around me. Yes, business is much slower right now, but that's natural. Reality doesn't work in straight lines upward -- there are zigs and zags. I suspect in 2009 we will have had enough gloom and we'll buckle down once again, solving problems, building new things, thinking of new and better ways to live and prosper, all with a better attitude.

The shake-out in real estate was natural and needed - it was over-heated and there was no way to sustain the growth. People will begin looking at homes as extensions of themselves and not as cash flow investments. The road back will be gradual, as it should be. All those who have been negatively affected will adjust, banks will adjust, the real estate industry will adjust and all will be mended, but not without thought and effort.

What will the real estate industry look like going forward? It will be less sexy for one thing - in fact it may not be sexy at all. I have a feeling people will look at homes in a much different way that has to do with long term plans. Yet where we live is so imortant to us it will still be a vital part of our lives. Americans aren't renters by choice, although for a few years many Americans will most likely have to rent. This presents a challenge to the real estate industry -- how to meet the growing need for rentals.

There will be a demand for good rentals in areas where people want to live. There will most likely be a big need for creative arrangements having to do with lease/purchase and maybe alternative financing. Many people who were credit-damaged or just don't have a downpayment, will be looking for ways to create future security when it comes to housing. Some will need a couple of years to rebuild and they will want to find ways back to ownership, or TO ownership for the first time.

As real estate professionals we should be thinking of how to meet these needs. The challenge will be to find ways to make a living off helping people work out long term goals, at least long term compared to the quickness of buying during the last five years. Property management and investment strategies will become a focus for real estate pros and quick big bucks won't be easy to find. Throwing the sign up and getting multiple offers will be a rare occurence. Working with clients who are in an iffy middle land of financing problems will be common.

Have you got a plan? It's time to earn our money or start another career.

It has become written in stone, repeated often, enshrined, ballyhooed by old-timers, and, yet, it's incomplete advice. The fact that the advice is so prevalent is evidence of why an agent should consider not listing. Not all agents. Most agents are going to do well listing if they have the ambition, a little talent and apply themselves.

But for agents who want to find a niche and do something different, now is a great time to go against the grain and establish themselves as  exclusive buyer agents. It's a way to stand out and be different in a reputationally damaged field.

An EBA has the opportunity to position themselves as champions for buyers, with no conflict of interest, true representatives. As distrust of agents is at a peak what better time to build your brand on trust with buyers? Oh, you will laughed at, and agents will scoff, but buyers will appreciate you if you apply yourself and perform well. Carving out a niche as an EBA is a viable real estate career choice and it can be very profitable. It's not for everyone, because not everyone wants to be so personally involved with their clients, and not everyone can understand the concept. It takes a special agent to understand the concept and believe in it wholeheartedly, and that is why it's valuable -- not very many do it, and of the ones that do it, not many do it well. So, for the agent who can understand the concept and can do it well, there is a great career ahead.

You will have to work your tail off for about two years, but once you have branded your business and distinguished yourself from the crowd and you are approaching business from a position of plenty, you can hire an assistant and one agent that you train to do what you do, someone who understands and believes like you do, then you feed the agent until the agent can feed herself, then you hire 2 more and repeat, then 2 more. This should be enough. Now you are creating leads, picking from the abundance and feeding agents with the others. You are working less and you have a steady flow of income and you've put in about six years. Now you can start buying properties and dealing with investments. Hardly anyone gets rich in real estate selling other people's homes or working with buyers. The business can be a springboard for your own investments. After ten years, you are in your late thirties and you have investments that are creating another stream of income -- then you start thinking about branching out or you keep the steady flow you have -- you have choices. And then you become independent, truly independent -- you can do as much or as little as you want to do.

So, EBA doesn't have to be wall, doesn't have to be limited -- you can create what you want to create and never list a home -- unless you decide to sell your own properties down the road.

I commented on a post by Russell Shaw at Agent genius, but the full response requires a full post. Below in italics is Russell's post broken up with my responses. If Russell had made only one post regarding this, I would have overlooked it as quick writing, but Russell has consistently made this point in post after post to the point of a religious stance, so I felt it needs a response.

It probably depends on your point of view.  Are you looking for a quick nickel or a slow dollar?  Do you want a job or a business?  How about in “this market”?  Isn’t it better to have a buyer than a listing now?

I’ve written before that my expertise is in getting and getting rid of listings.  In some of those posts I’ve seen comments to the effect that I forgot to mention working buyers.  I didn’t forget.  To sell a house you need a buyer.  Each time and without exception.  It just goes with the territory.  But if your goal is to have a long-term stable business then you are going to want to learn to list.  Period.  If you disagree - even a little bit with anything you’ve read so far, please do yourself a favor and set aside those disagreements and read on.

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Okay, I read on and set aside my argument until I finished what was written. I have a problem with nickels and dollars. Buyer agents make dollars, and buyer agents have a business. Exclusive buyer agent businesses never list, yet they have successful businesses. It's true, in order for houses to sell, there must be a buyer. Listing agents wouldn't have a business if there were no buyers, but I fail to see what this has to do with anything. If you want proof of buyer agent businesses being successful, check out all the buyer agent businesses across the country. There are far fewer buyer agent businesses, but there are long standing businesses that have been successful. My first broker ran a successful business until he died a few years back, about 11 years -- he started an EBA business in Savannah after 20 years as a successful listing agent in Conneticut - then his wife ran if for five more until she retired. Another lady here is Savannah has been running a successful buyer agent business for about 15 years. I was an exclusive buyer agent for 4 and a half years and went to lots of conferences where I met successful EBAs from around the country who had successful long-standing businesses. This is anectdotal evidence, but it's as valid as Russell's unsubstantiated claim and proves that buyer agents can sustain a successful business that is neither quick nor nickel-cheap.

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The biggest single barrier to increased production is FIXED IDEAS.  We all have them in one area or another.  You have certain ideas about “how much business is possible”.  Those “logical thoughts” are the very thing holding you back.

Is is easier to get a buyer and sell them a house than it is to take a salable listing?  The correct answer is yes. 

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I agree that fixed ideas are a barrier to increased production. Is it easier to get a buyer than a listing? It depends on who you are talking about. I find it equally as easy to get a salable listing as it is to get a buyer. It's easier for new agents to get a buyer. My broker, and many of the exclusive buyer agents I met years ago, were successful listing agents before becoming EBAs.

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If this were not a true statement new agents wouldn’t have a prayer of ever getting any business.  Reason?  Buyers are seldom ever looking for an agent. 

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However, there are a lot of buyers looking for agents -- this is how a buyer agent can become successful, especially in an area that attracts a lot of out-of-town buyers. In a smaller area, or an area where there are not a lot of out-of-town buyers, it's true that buyers, for the most part, are just looking for another home in the area. There is a certain portion, though, of first time buyers and well-to-do buyers who like good service, who look for buyer agents in any market. Again, this is drawn from getting to know EBAs in different areas of the country.

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They are looking for a house; they are willing to tolerate talking to an agent in order to see the house.  Most buyers are almost never “shopping for an agent”.  If you wanted to buy a car can you imagine saying to your partner, “I sure hope we meet a charming and fun car salesman today.  Someone who is a lot of laughs we can really bond with.” 

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Buying a home is much different than buying a car so the analogy is not helpful. Again, an out-of-town home buyer, or a first time home buyer, or a well-to-do homebuyer who would rather beat his/her head with a hammer than go from listing agent to listing agent, has needs that are much different than a car buyer. Plus, the choice of being a buyer agent is not based on having a good personality, it's based on a philosophy of doing business which states you are objectively representing a buyer and finding the buyer the best house with the best price and best conditions, as opposed to selling a home to any buyer that comes along. It's a matter of representation and believing in the need for good service on the buyer side and choosing buyer representation as a model. This is a viable business model choice and it takes exceptional skill, intelligence and knowledge to do it correctly.

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Sellers are different.  Most of them are looking for an agent to hire.  Totally different mindset.

Why does it take more skill to list than to work buyers?  Simple: because you don’t have to ask the buyer to pay you.  It is a “free” service you are offering to them.  The seller is going to give the listing agent a high enough commission that there is a paycheck for both agents.  It is the listing agent who goes in and gets that agreement signed.  Please understand that I am not saying it is “harder work” - because it isn’t.  In fact, it is a lot easier work, with no heavy lifting of any kind.  But that isn’t the good part.  Lets pretend that your goal was to do as good and as efficient a job as possible and to make as much money in the same amount of time.  Just pretend that with me.  How many buyers can you work at once?  Without help and if you are amazing?  How many at the very same time?  Two?  Three?  Could you juggle 4 or 5 at the same time?  And keep doing all of the necessary actions to have 4 or 5 more for next week because you will sell all of the ones you are working with right now?  Could you keep doing that week after week?  Month after month?  Year after year?

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Aside from the fact that you said it's easier to get and work a buyer than getting a listing from a seller, then said it easier working with the listing than a buyer, you fail to take into account the skill it takes to get a viable buyer and sign them to a buyer agent agreement. Is one skill greater than the other ? If the seller was paying you up front, I'd say that would be harder, but nobody gets paid anything until a buyer pays -- and the buyer pays enough for the seller to then pay the listing agent and the buyer agent, but the money comes from the buyer, the buyer that the buyer agent skillfully managed and found the right house for. If the house doesn't sell, the listing agent gets zero (in most cases), but the buyer agent with the loyal buyer is going to find another house and make a sale. I can work with fifteen buyers at a time. If the system is set up right, it's not that much work. Most listing agents should be doing more work for their sellers, if it's done correctly -- it's just different kinds of work. So working with a lot of buyers or working with a lot of sellers, I don't think the level of work should be much different. There is a mindset, that is an old mindset, that listing is the superior and easier action and path to success. Like all old ideas this idea is challenged by people doing something different than the old mindset dictates

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I don’t think so.  I’ve seen one agent here in Phoenix do around a hundred buyer sides a year for 2 - 3 years (without meaningful help) before hitting the wall.  Finally a heart doctor told him he was going to have to slow down.  The best buyer agent I’ve ever seen or heard about (he had a remarkable system for working buyers) did (with help) about 500 buyer deals the year before last.  This year he isn’t even in his companies top 10 agents.  (Hint: none of his companies top 10 agents are doing 500 deals this year).  Am I saying one can’t make money working buyers?  Nope.  What I am saying is that I personally know (or at least know of and what they are doing) most of the top agents in North America.  The pattern for almost all of them who enjoy long-term stable success is they have a listing based business.  Even though most of them do about as many buyer sides as they do seller sides, their businesses are listings based. 

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Most of this is opinion and anectdotal evidence. I think the reason most agents list is because they are told over and oner it's easier and more profitable. My broker's heart problems started when he was a listing agent in Conneticutt, but still it was related to cholesterol and genetics rather than real estate. I've had heart problems, but I was out of real estate for two years and this is when I had my attack -- it was also related to genetics and cholesterol. To suggest that working as a buyer agent leads to health problems is a stretch trying to make a shaky point. Steady work and activity is a boost for many people.

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Do you have to have a listings based business?  No, you don’t.  One of the wonderful things about this business is you can set it up any way you want to set it up.  Further, you can change it anytime you feel like it.  My first 12 years in the business I primarily worked buyers.  I “took listings” but wasn’t very successful at actually selling most of them.  The only meaningful thing that separated me from the pack was I continued to know that I was an incompetent dolt on the subject of taking listings.  I didn’t figure out explanations of how it was “better” to keep doing it my way.  I knew there was something to know that I didn’t know yet.  Was it hard for me to figure out?  Well, yes and no.  The biggest obstacles were the stupid (anything I believed that was unworkable) ideas I had about how it should be done.  If an idea is really “right” that “rightness” is easily tested: it works.  Again and again and again, without variation.  My own fixed ideas were what got in my way.  If you think you already know all about something there would be no good reason to then work on finding out about it.  You already know.  Once you know you don’t know you then can actually know - or at least start to know.  So one has to first come up to not knowing.

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Actually, I did well with listings 5 years ago when I opened my own business and decided to work with buyers and sellers. I got a lot of listings and got rid of them quickly. My average listings was about $400,000.  Recently I decided to go mainly with buyer agency and it's been a successful switch. So, I agree flexibility is a good thing. It's patronizing to suggest anyone who chooses to work mainly with buyers is doing so from a lack of skill at getting listings. For an agent like me, working with buyers is a business choice as valid as working with sellers, and it's a choice that requires a whole different set of skills, not superior skills just different.

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Nothing about the subject or learning it is complex or difficult.  Like most subjects, this one too, just reeks with false data and moron ideas.  Our industry is chock full of people who don’t do it or never did it who (for only X dollars) will tell you how to do it.  But it can be done and (if you want) can be done by you.  I’ve written all about it here.

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I agree, a good, experienced agent will find it easy to list and sell listings through hard work and good marketing. This market is tougher because many sellers are in denial. I made the decision to go mainly buyer agent this year because I had so many requests coming across the internet and by the time they are ready to look, we've narrowed it down -- it's quick and satisfying -- plus I am working with investors in this good buyer's market. It made sense to me and it's paying off. It's useless to put one way of doing business over another, when either can be a path to success. I'm not sure what motivates Russell's insistence on listing being the superior way, but I felt I had to dispell this fixed idea. It's not about one way being superior, it's about focus and choice and different business models. Most people do both, and I do both to a degree, but the fact still remains, I could go EBA and be successful -- I was successful at it before. I choose to list on a limited basis mainly to keep all my options open, but the vast majority of my business right now comes from buyer agency.

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Jeff Brown said in the comments that buyer agents can't exist without seller agents. Just as Russell warned about fixed ideas, we should all take warning that many things are changing and one change that could easily happen is that sellers realize  with internet marketing of listings improving and growing they could very well save money by contracting with a buyer agent to show their home to buyers that come their way and handle the paper work and closing for 3%. Sellers might decide they don't need selling agents to stick a sign in the yard and put the listing in MLS -- they need agents who have plenty of buyers to work with buyers. I can see this happening, where the sellers don't have exclusive listing agreements, they just contact several buyer agents and ask them to take the buyers that call on the house, or bring one of their own buyers. The seller doesn't have to be tied to an agent, the buyer agents take all the work out of it, and the buyer agent gets a sale or a lead -- the seller saves money.

Who knows, it could happen.

If Russell's point ha been that as most real estate companies are set up right now, the most successful companies are listing companies, then I wouldn't argue against that; however, Russell and Jeff are talking about mega-real estate agents and teams and there aren't many of them -- it's what makes them special -- but to suggest that listing is the only way to go for long term business success is just simply not correct. As the real estate game changes we will likely see more buyer agent team models emerge. Buyer agency is still relatively new and the industry has been resistant to it -- most brokers list and want all new agents to list. If the emphasis changes and buyer agent team models are created, you will see those teams posting unbelievable numbers. The fact is that a buyer agent model can be a successful long term business and this is where I disagree with Russell. Speaking to agents in general, in spite of the wild success of some listing agents, buyer agency is a viable business model to pursue. Just because listing has been dominate so far means nothing in changing times -- many people have claimed superiority one day and had to watch it all change overnight -- who knows what can exist or not exist in a changing world.

Where would you find more pertinent knowledge about Savannah GA real estate? A magazine in Savannah that prints magazines for a living? Yahoo? A website for city data? A REAL ESTATE AGENT WHO WORKS IN REAL ESTATE EVERYDAY IN SAVANNAH?

Uh, let's see, I think I'll go with the real estate agent. Yet, only 4 results of the top 20 results on Google for "Savannah Ga real estate" are real estate companies. I will give Homegain a break because they are leading consumers to agents, but the rest don't know squat about real estate in Savannah.

Hopefully Google is changing the way results are calculated and its algorithm will detect relevance much better. I am one of the 4, so I'm not complaining for selfish reasons -- I'm complaining because consumers should get better search results -- or perhaps agents should do a better job getting found on Google -- I don't know which it is, but I know that an agent who works day in and day out is superior when it comes to giving viable information and explaining all the nuances of an area. These other results will lead to pictures of homes and and iffy information and that's about it.

I know some people have denigrated Google search as an effective lead generator, and I don't know what their experience is, but I can unequivocably say that for me Google is my main lead generator by far -- not just lead generator, but revenue generator.

It's also true that the thinner tailed results are probably more effective and that agents come up more on the focused searches, but still it amazes me that "real estate" doesn't bring up more...uh....uh.... well, real estate results.