Real Estate Around the Country

I just returned from my semi-annual meeting with other large independent brokers from around the country. This time, we met at Lake Lanier in North Georgia. The weather was great, but the real estate climate is, in some respects, sobering. National experts are saying that equal supply and demand and a "normal" market may come as late as 2015. Sales for the first quarter were down around the country, in double digits. Some of that was weather-related, but the rest is still about jobs and financing issues.

There is a silver lining, though, and it's a big one. The interesting news was that prices of sold properties were up by a fraction, 1% or so. This is counterintuitive, if you think about the effect of foreclosed properties and short sales on the value of homes. What it seems to suggest is that it is the best homes (not the most expensive, but the most desirable homes in every price category) that are moving. What that means for sellers is that homes must be put on the market at levels that seem to be good values.

What it means for buyers is even more important. There aren't great bargains out there, at least on homes that are well priced and well maintained. Putting in a lowball offer isn't going to result in a purchase. It goes back to the old saying "You get what you pay for". If you want it, you're going to have to buy it at its value, and not at a fraction.

We just had an offer on a commercial property with a listing price of $2.1 million. Someone submitted an offer of $700,000. That's just wasting everyone's time. The statistics seem to indicate that the short sales and foreclosures aren't yet changing prices on regular properties, and given what we are experiencing in delays on such sales, we can vouch for that. Those things are backed up in the pipeline. What's moving through are the good deals, but they are good deals at good prices, not bargain basement fire sales. Buyers should assume that they won't get what they want if they insist on bottom fishing. It may be a sport, but it's not a strategy.

Independent Contractors

Yesterday I explained to a client that real estate agents are independent contractors. I know that most people realize that real estate agents, and companies, only get paid when someone buys or sells a piece of property. But sometimes I doubt whether they know the full extent of what that means. It means that agents don't get paid for their time. Or their gas. Or the lunch that they might buy you when you spend a long day looking at houses. Or their cell phone. Or their car, car insurance, and repairs. Or their real estate license, continuing education, Board fees, and MLS fees. Or the extra advertising and marketing that they may do on your property (while our firm pays for postage, advertising, and training, many firms charge agents for those services). It's expensive to be a real estate agent, and even more expensive to be a real professional, with all the tools.

Indpendent contractors, who don't get salaries or benefits, deduct their business expenses themselves. In effect, they run their own small businesses. They affiliate with brokers, and use the branding and offices of those brokers, but they don't work set hours. We aren't even allowed to carry worker's comp insurance on them. They assume the costs of working, and, as I often say, they "eat what they kill" in terms of compensation. They get paid for what they do, when it goes well. When it doesn't, they bear the risks.

Why, you may ask, did I decide to blog about this now? The simple answer is that, when I was told by this client that he understood that an agent only got paid when he bought, and that those were the breaks, I'm not sure he really got what he was saying. I guess it gets down to the Golden Rule, as most things do. How much time would you spend doing work for someone and not getting paid, before you felt that it was unfair?

Clients didn't create our compensation system in the real estate industry, and I'm not asking them to be responsible for changing it (although I would certainly love to change it!). I just want them to understand that, if they aren't serious, or they aren't willing to stay with someone until the transaction is completed, then they are really asking for services for free. And the way you treat someone who is doing you a favor may be different than the way you behave if you think it's someone's paid job to help you. It's that simple, and that complicated.