An answer to Russell Shaw's post about buyers and sellers on Agent Genius
Tuesday, July 15, 2008 at 02:04AM 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.
Reader Comments (8)
Stick a sign in the ground and put it on MLS? Really? I guess the agents with vastly superior market times and sold prices/listing prices must have a better technique for pounding those signs in the grass. :)
Speaking only for myself.
You and I don't disagree on most of your points. Where I go elsewhere is when you say listers can't do anything without buyer's agents. That's too simple.
Those buyer's agents can't attract their buyers if they don't have my listings as bait -- period, over, and out. That's what I meant.
Notwithstanding your hoped for sea change in the way things are, the top producing agents, teams or not, are based upon listing. There's a reason for that. Buyers want the houses, so they look for houses. They don't look for agents.
If I list dozens if not hundreds of properties, they come to me, if I so choose by the marketing choices I make.
Buyer's agents work at the pleasure of listing agents.
What i meant by sticking the sign in the yard and the MLS is that seller's perceptions might say this, not that that is all a good listing agent does.
I agree buyer agents need listings, but that doesn't matter. Listers need sellers. Sellers need buyers. the point is that exclusive buyer agents can make a good living and create a profitable business.
I didn't say listers can't do anything without buyer's agents -- I said they can't make money without buyers.
The other point is that it takes just as much skill to be a good buyer agents as it does to be a good lister -- the skills may be somewhat different, but one is not superior to the other. Just because a lister has to get the seller to agree to pay a commission doesn't mean it takes more skill than a buyer agent working with a buyer, which is what Russell said. The seller doesn't have to pay if the house doesn't sell, so it's easy to agree to that. Besides, it's the buyer who pays for the commission, it's added to the net the seller needs. This is an old debate, but that's the way it is, and anyone in real estate knows it.
One more thing, though, then I'll be quiet -- theoretically, listing agents and "listings" don't have to exist for buyer agents to exist.
I mean, we all know listing agents are going to exist -- buyer agents are going to exist.
My main issues were Russell's insistence that you have to list for longevity and a profitable business, the suggestion that buyer agency is a "job" while listing is a "business" and that listing takes more skill. Those were the main issues.
Agreed that the skills are roughly equal.
Buyer doesn't pay commission. Are you seriously saying by adding commission the market will just say, ok? We both know that's conceptually wrong.
The property is worth what it's worth whether there's a commission or not. Fannie/Freddie sure don't mention commissions in their appraisal guidelines. Why? 'Cuz they're irrelevant. And if the buyer pays the commission, why is it taken from seller's proceeds?
But now we're doin' laps, aren't we?
Let's go get a beer.
Yes, we can go in circles and get dizzy, or get beers and get dizzy -- let's get a beer.
Mike
Over at HomeGain we get slightly more inquiries in our agent evaluator program from consumers looking to select an agent to help them buy a home than consumers looking for an agent to sell a home.
With your agent evaluator subscription, how do the inquiries break down between buyer and seller.
It's about 2 to 1 buyers at Homegain -- I'll check it more closely to verify that.