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Archive for the ‘Realtors’ Category

The 10,000 Hour Rule

Donald L. Plunkett, Jr. Donald L. Plunkett, Jr.
Friday, September 30th, 2011

Malcolm Gladwell, a writer for The New Yorker and author of Outliers, famously wrote that to be an expert at anything, you need to practice that task for around 10,000 hours.  This would apply to Michael Phelps being a great swimmer just as much as it would apply to someone being a great real estate developer, dentist, table tennis player, spelling bee champion, magician, on anything else.  To put 10,000 hours into context, assuming you work 8 hours a day, 5 days a week doing something, 50 weeks a year doing something; it would take 5 straight years of doing just that to become an expert.  I thought about this in context of real estate.  What if someone wanted to say they are an expert at negotiating real estate deals?  How do you define someone as an expert?

Unlike swimming or practicing for a spelling bee, it is extremely difficult to do things relevant to negotiating for 8 hours a day.  Think about all the other things a Realtor would do besides negotiating during an 8 hour day:

  • Prospecting for listings
  • Showing properties
  • Continuing education in areas besides negotiating
  • Blogging, online marketing, Twitter
  • Email inbox management
  • Meeting people, letting people in properties (like inspectors)
  • Dealing with bureaucracy
  • etc.

At the same time, has the person on the other side of the real estate negotiation table (such as the other Realtor or a buyer), spent 10,000 hours negotiating or doing tasks directly related to negotiating?  It seems doubtful in most cases.  Unless they’ve previously spent years in a field where you spend the majority of your time negotiating (such as a commodity manager for a semiconductor manufacturing company or a sports agent), are they really an expert?  So if someone has 5,000 hours and the other guy has 500 hours, is the guy with 5,000 hours an expert, or is neither one?  Should the 10,000 hours include all time in real estate related activities?  There are quite a few activities that you do where negotiating is no the main focus, but it might still be relevant.  Going through a homebuilder’s models seems like it has nothing to do with negotiating, after all, they mostly have fixed prices for everything unlike your typical resale where all kinds of different things are negotiated (price, earnest money, closing date, possession, what stays, etc.); however, it might be relevant down the road for someone selling their own home.  There might be a comment made during a negotiation, about how the buyer could buy something comparable brand new for a similar price.  Someone who is always thinking about negotiating might say, I understand what you are saying, but this house has a superior location and there are five things in the kitchen (granite countertops, beveled edges, trim above cabinets, sink in island, and pot filler) that would be considered upgrades and would add on to the new home cost (thus my house is a better deal).  Even if you can’t amass 10,000 hours negotiating, you can pay close attention to the real estate market and gain practical knowledge that is helpful down the road; even if you don’t know exactly when it will come into play.

 

 

Leveraging the MLS monopoly – NW Arizona edition

Donald L. Plunkett, Jr. Donald L. Plunkett, Jr.
Monday, August 17th, 2009

We recently received a letter from the Bullhead City/ Mohave Valley Association of REALTORS® informing us that a new rule had been put into place.  ALL listings MUST have an ASSOCIATION lockbox installed.*  I put the asterisk there to indicate that if a seller refuses to have a lockbox on their property, they can a.) state in writing that they do not want one and b.) not have any other lockbox on their property (e.g. contractors lockbox), and still avoid incurring fines.  The lockbox vendor (GE) has been aggressively pushing this policy among many MLS’s.  It not only will cause more lockboxes to be purchased by agents, it will stifle any threat of competing lockboxes in those MLS areas, be it mechancial lockboxes or other electronic systems.  For instance, if one brokerage wanted to use a safe, competing electronic lockbox that only their agents could utilize, or if a group of luxury agents wanted to utilize their own private lockbox system, they would face fines.

We will comply with this and other rules.  We don’t really flinch when new rules like these are passed, we just adapt and continue to sell properties.  It is interesting, however, to see how companies like GE are able to tap into the local MLS monopoly and generate tons of money.  An agent in Bullhead City, Kingman, or Lake Havasu City, cannot say, “This rule is unfair,” and then quit the MLS.  They would be out-of-business, completely unable to sell residential real estate in Mohave County.  The MLS is so powerful that it has a degree of control over many aspects of the agent’s business (in this case, property access and lockboxes).

As a seller, this is just a demonstration of the MLS’s power in selling homes.  A seller should tap into this medium and take advantage of it, rather than fight it.  Just as you may not have liked the power Microsoft exhibited over the PC business when they were exhibiting what some would argue were monopoly-like forces, it still would have been wise to learn its products since most employers were utilizing them.  Over time, there may emerge competitors like Linux that provide an alternative, however, in residential real estate, this is many, many years away in my opinion.

Phoenix Business Journal – Residential Real Estate Agents

Donald L. Plunkett, Jr. Donald L. Plunkett, Jr.
Sunday, July 26th, 2009

I was recognized again this year as being one of the Top 10 real estate agents in Phoenix in sales volume (#9).  However, it is really a recognition of Congress Realty as a whole and the effectiveness of the flat fee MLS model.  With Phoenix as our first market, we developed the business here and have deep local expertise.  Many buyers agents in Phoenix are familiar with Congress Realty, and show and sell our listed properties knowing that they will be paid to bring a buyer.

For those interested in who was #1, the honors went to long-time REO broker Stu Troyan of Realty Executives.  Stu sold over $100 million of bank-owned real estate.

“Million Dollar Producer”

J. Andrew English J. Andrew English
Friday, August 29th, 2008

http://www.inman.com/opinion/guest-perspective/2008/08/19/the-myth-million-dollar-producer

A must read for homeowners planning on interviewing potential agents in the future. The real question is what do all of these designations mean and how do they benefit the consumer. In the example used in the article, the term million dollar producer adds absolutely no value to the client. It is nothing more than a term certain agents use to help advertise themselves. That being said, there are a few very legitimate designations that show expertise in certain areas. In the commercial field, CCIM is highly respected, on the other hand, CRS in the residential field is greatly respected.

So why do agents continue to put various designations after their name on their business cards, emails, etc.. Realtors(R) are constantly tagged in the professional world as those individuals with the highest potential for income but with the lowest level of education. As a result, rather than actually require stricter educational requirements, NAR sponsors many different designations to help hide the real problem. I’ll give you an example, the designation e Pro is earned by sitting through a 2 hour online tutorial. Any agent can pay the fee and sit through the class. The tutoriol consist of right and left clicking your mouse. At the completion, you’ve earned your e Pro designation!

The point of this entry is to help consumers not be fooled by agents. We wants homeowners to be able to tell the difference in a legitimate expert in their field versus a part time agent trying to make a few dollars on the side selling real estate randomly. The terms million dollar producer, GRI, e Pro, and most others designations used in the Realtor(R) profession rarely equate to a symbol of true expertise.

“Area Specialist”

J. Andrew English J. Andrew English
Friday, July 11th, 2008

This is a really tough thing to analyze. What is the benefit of listing with a full service area specialist? Or for that matter, utilizing an area specialist for your buyer representation? A true area specialist is someone who lives in the immediate area and typically only farms that one area. 10-15 years ago, these individuals were essential to the sale of a home because of their local presence. As the MLS has progressed online, the need for these individuals has diminished greatly. Is there any value in listing with an are specialist in today’s market?

Probably not, with the thousands of online websites available and the condition of today’s market, very little value is provided by these local individuals. You will notice that the # of area specialist has been greatly reduced over the last few years, as most either went out of business or had to expand to other areas in order to sustain profitability.

On the flip side, area buyer specialist have managed to survive and continue to still provide value. While certainly the increase in buyer rebate programs have put pressure on these individuals, they still provide service to those individuals who want specialized service. Area specialist have the advantage of following everything from up to date details of the school system, changes in area businesses, etc… for those buyers who sincerely want full service buyer representation, these individuals can add value.

Buyer Broker Compensation

J. Andrew English J. Andrew English
Tuesday, July 8th, 2008

The commission offered by the seller to the buyer broker is determined by the seller at the time of the listing. The seller has the opportunity to decide what amount they wish to offer this individual. There are many different strategies that sellers consider, however, I do get asked quite often what is the lowest amount that I can offer and not jeopardize my showings.

The first thing to keep in mind is that you can technically offer $1 if you wish. We have had sellers not only do this, but do this and sell their property quickly. Everything depends upon demand for the property and supply in the immediate area. My recommendation is to always look at what is around you and what your competition is offering. Typically, it in your best interest to offer competitive compensation with respect to those properties you are competing with.

Different strategies work for different sellers, however, offer what you feel comfortable offering. Should you wish to increase this amount at a later time, you can always do so.

KB Homes

J. Andrew English J. Andrew English
Tuesday, July 1st, 2008

KB Shareholders should want to know how homebuilders treat Realtors(R) with potential purchasers. KB Homes is notorious for making life miserable on out of area Realtors(R) who have legitimate buyers for their inventory. For example, our buyer rebate program is very popular amongst new construction home buyers. However, KB refuses to cooperate with any broker who does not physically walk the buyer into the model home on the very first visit. KB would rather lose the sale than break this pattern.

Here is the problem, our buyers depend upon our rebates in order to purchase the home. Without the compensation being paid to our brokerage, we can not rebate the funds to the buyer. Thus, a sale can not occur. The problem arises from the way in which KB homes compensates its sales associatiates.  Under the current structure, these individuals stand to make more money on deals where other Realtors(R) are not involved. As a result, KB sales associates will do anything to avoid another Realtor(R) being involved in the transaction.  The solution to this problem is simple. Homebuilders should pay their associates based upon closed transactions, regardless of who brings the buyer. Shareholders want to see results – i.e. closed transactions and earnings that meet and exceed expectations.

http://money.cnn.com/2008/06/27/real_estate/earns_KB_homes.ap/index.htm?postversion=2008062710

Continuing Education for Real Estate Agents is simply unacceptable

J. Andrew English J. Andrew English
Thursday, June 12th, 2008

The state of Nevada has approved 3 CE credits for Real Estate agents concerning a class titled, Real Estate Blogging 101. A Nevada licensee can now satisfy 3 credit hours of continuing education by taking this class. I can’t begin to understand how this can qualify for continuing education. Furthermore, a RE professional can complete all of their CE credits online through a number of websites. Many of these online classes have no exam and no way of proctoring who is even taking the class. (You can take them from any PC)

The bottom line is that this is unacceptable. RE Agents should demand tougher requirements involving education in Real Estate. Currently, CE provides no benefit to the agent or public and soley benefits the companies charging for these CE services. To be approved to provide CE, you must be approved by the state. More agents + More Required pointless classes = More Money.

Real Estate Blogging 101

Approved by the Nevada Real Estate Commission
3 Hours Continuing Education (PD) – CE.3706000-RE

How Realtor® Groups spend their money – Good or Bad?

J. Andrew English J. Andrew English
Friday, June 6th, 2008

Realtors® pay dues each and every year to their local board, state association, and National Association. These funds are allocated different ways, sometimes in responsible ways and sometimes not. It is not uncommon for Realtors® to have no idea where their money is actually going. I personally called the Austin Board of Realtors® asking about a bill received this past fall. On my invoice, I had a line item for something I had never heard of before. When I called to inquire, no one in the billing department could tell me what the bill was actually for or where the money was going. Sadly, I wasn’t surprised.

GLVAR (Las Vegas Assc of Realtors®) has done a fairly solid job in years past of spending money wisely. They have adopted bill boards throughout the community encouraging anti graffiti, etc… Other boards throughout CA have spent money opposing increased real estate transfer taxes levied by the counties. These groups should be commended for spending money in hopes of helping both its members and public. By opposing transfer taxes, these associations are taking an active role in reducing the cost of selling a home.

It’s a shame NAR can’t follow the lead of these associations. Instead, they continue to waste millions of dollars fighting the DOJ on issues they aren’t going to win. NAR would be much better served to put this money to a more positive use. Examples include Realtor® education, opposing the new Green Law proposition in Austin, etc…. NAR could do so much to increase its public perception by using their funds responsibly. Instead they waste their money fighting the DOJ and further reduce the public opinion of Realtors®.

Are Full Service Listing Agents becoming obsolete?

J. Andrew English J. Andrew English
Wednesday, May 7th, 2008

Over the next few weeks, I want to try and touch on a few myths that are created by the Realtor® community. Many of which I believe are created to help sustain the relevance of the Full Service Listing Agent.

If an online surfer spends 10 minutes sorting through various Real Estate Blogs on any given day, they will surely come across some sort of debate/discussion involving the FSBO selling process. Previously, I used to enjoy reading the various comments and blogs on this topic because I think both viewpoints can be presented in legitimate manners. However, as listing agents continue to lose business to alternative models, they have turned to using fear tactics to scare sellers away from these “other” models. Listing agents need to understand that today’s sellers are more informed than those of previous years. Attempting to scare a seller into using a Realtor® is simply absurd. However, I continue to see agents try and do exactly that.

Most recently I read a piece discussing the relationship b/w high Realtor® commissions and the potential turnaround concerning the health of the overall market. The author was arguing that high commissions are prohibiting buyers and sellers from coming together to strike a deal. (the article was pro fsbo, arguing the same usual points – online exposure, better informed buyers – etc) Now, in response to this article, I found nearly 100 different responses/comments from Realtors®. All of which were easily predictable, however, I want to point out one of my favorites and how fear tactics can be/are used by Realtors®.

Expert negotiators: In the instance above, I found that many Realtors® commenting were very adamant that sellers can not successfully negotiate their own deal and that by going the FSBO route; the seller is leaving thousands of dollars on the table. So the question becomes, why is the Realtor® an expert in negotiations? Bottom line, most times, they are not. Sellers are just as qualified to negotiate their own deals and their attorneys are most likely more qualified. Moving along, I took it upon myself to run a quick license check on one Realtor® who was very insistent of her expert negotiating skills b/c of her experience in Real Estate as a Realtor®. Not surprising, a quick check on her license showed that she had been a licensee all of about 18 months. Bottom line, she’s lying. She has no more qualifications or experience than that of your typical seller. So you might ask, how are Realtors® more experienced in negotiations? Unfortunately, there is absolutely no reason to believe they are. They are certainly not attorney’s, many do not have college degrees, let along specialization in business/finance/communication skills, etc. There are many positive reasons concerning why certain sellers can benefit from the use of a Full Service Realtor®, however, expert negotiation skills just isn’t one of them. Attempting to scare a FSBO into believing they are not qualified to negotiate their own deal is not going to be a successful tactic for the Realtor(R) community.