Or survival of the most dishonest
Real Estate agents are regarded poorly by the general public. To be fair, there are many conditions that impact on a real estate agent. These impacts can either spit them straight out of the industry or have them evolve into sharks. In many cases it becomes survival of the most dishonest.
Now before all the trustworthy hard working real estate agents groan and moan, about another person giving their industry a hard time, please read on. I believe it is the system in many cases that is broken, and it is that system which shapes many a real estate agent into that predatory shark.
Firstly, becoming a real estate agent isn?t difficult. Most states within Australia have a real estate institute where you can complete a course in under a week. (I completed my course by distance learning in one night and I am no mental giant. The before mentioned groaning agents are really agreeing with me now!)
In the US you can complete a course online and be accredited. All it costs is $99 US.
We are talking a very easy entry point to become a real estate agent.
Now that you are a real estate agent ? with your suitable qualifications, you expect people to trust you with their single most expensive asset, typically their home! Sounds a little bit out of whack right from the start doesn?t it?
Now from an external point of view, real estate looks like a pot of gold. Commission rates of between 2.5% to 3.0% to sell a house. A property worth $500,000 represents a commission of approximately $12,500 to $15,000.
?WOW, I should be able to do one of them each week and earn $650,000 per year. Finally an industry that pays me what I am worth.?
And thus the evolutionary cycle begins. You have an easy entry and the prospect of a huge amount of money. Sounds damn perfect. In fact so perfect it attracts a huge amount of willing entrants with that simple view. Most may I say have the full intention of doing real estate far better than what they have experienced when dealing with real estate agents themselves. Ahhh the noblest of intentions.
The problem is, it attracts far too many people.
Now we have a vast amount of agents all vying for that property sale. The industry cannot support all the agents that are working within it. People rush to enter this industry and there simply is not enough property sales or money to go around.
Now we have the 2nd most critical issue in the evolutionary cycle from person with best intentions to shark real estate agent. COMMISSION ONLY.
Most agents are on commission only. This means they only get paid when they make a sale.
Any agent competing against a vast number of agents for any one property sale, if they don?t say the right things, they won?t get the job. Which means they don?t get paid. It means agents learn to say what ever it takes to get that property listed for sale and then whatever it takes to get it sold. It ?s the only way they get paid. It?s survival of the most dishonest, because many times, potential buyers and sellers really don?t want to hear the truth.
Yes, I can hear Jack Nicholson bellow out to all buyers and sellers??You can?t handle the truth?
Typically agents will say the property is worth more to the owners. This way they will have those owners sign up with them. Because most owners like to think their property is worth more. It?s a simple human trait called greed. (Michael Douglas just stepped in and added his line ?Greed is Good?)
But for the real estate agent it?s a simple numbers game. The more properties they have for sale the better the chances they will make a sale and therefore get paid.
Guess what comes next? Agents learn that it is far easier to sell something cheap. Everyone wants to buy a bargain so the agent pursues a process of marketing the property with such clich?s as ?marriage bust up?, ?owner desperate?. ?bank instructs to sell? and ?owner wants all offers?. They are simply aimed at attracting the most buyers with the lure ? BARGAIN BUYING. Now the poor owner at this stage is horrified at this approach, but the agent convinces them it is the way to attract the most interest. They should know - they completed a course within a week!
Conditioning follows, stage 3 in the evolutionary process. The agent will now try to get the owner to accept less for their property. The buyers won?t offer more ? because they are the bargain hunters, so the agent tells the owner with all sincerity ? this is all the market will offer. Cheap is easy to sell. The faster an agent can convince an owner to accept less the faster they get paid. This is largely the whole auction process. Auctions are designed by agents to get paid as fast as possible.
The sad thing about most of this is that the larger franchise groups have corporate training which promotes these processes as the best way to get a result for their clients. Many an agent is brainwashed with corporate training that simply focuses on evolution of the shark.
Now whilst all these activities are occurring, we have the 4th issue in the evolutionary process. VALUE FOR MONEY.
Buyers and sellers assess the agents? activities. Most buyers and sellers will have at least one unhappy experience with a real estate agent to describe. Yet they both know the agent is paid handsomely.
The owner has the added grief of being very aware, that they pay for the advertising, the sign, the internet, the brochure, which will attract the buyer that they then have to pay for again. Yes, that is exactly what occurs. Sounds quite stupid when you say it like that! The agent may throw it around they can organise a better sign or get a cheaper ad etc, but usually the owner is required to pay. They have training for this process as well. It?s called Vendor Paid Advertising.
Lets not even talk about agents suggesting they have better negotiation skills. They do, it has been finely honed by corporate training to get the owner to accept less and pay for all the advertising.
So, with all these processes in mind, the general public are very dubious about the honesty and integrity of any agent they deal with. The agents counter this with expressions such as ?Buyers are Liars? and ?Vendors are Benders?.
And the evolution is finished. You have a shark or you have someone leaving the industry. Survival of the most dishonest, well it would make for a funny reality tv show.
Da dum, Da Dum, Da Dum, I think I hear the agents circling my home right now.
Michael Eroz Property Analyst www.zeroagents.com.au
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