Homebuyers: Watch Out for Bad Advice from Ignorant Reporters
Written by: Andrea Messenger — 02/8/07
We all know that sensationalized news stories sell magazines. But one reporter has gone too far by unjustly bashing REALTORS - of course, as a REALTOR, I take this personally and am offended.
But the worst part is that this reporter is giving false information to consumers - and not only that, but if people actually follow some of his advice, they will clearly be harmed. I can only hope that anyone who reads his article will realize the absurdity.
Stephen Gandel of Money Magazine flaunts his foolishness in the article, “Is your realtor on your side?” (Yes, he also failed to use the proper REALTOR trademark.)
The subtitle of “Make sure your agent gets you the best house at the best price” indeed has redeeming qualities. After all, any of us hard-working REALTORS would agree that this is our job and we strive to do it well.
But instead of providing homebuyers with helpful tips on choosing the best REALTOR or avoiding common pitfalls, Mr. Gandel chose to bash REALTORS as greedy and “susceptible” to putting their interests above their client’s interests.
The article focuses on the recent trend in many markets where additional incentives and higher commissions are being offered to buyer’s agents. It’s tough to sell a home now, so it’s no wonder that builders and sellers are working a little harder and paying a little more to get their homes sold. (The reverse is true in a seller’s market, where no incentives and lower commissions are often seen.)
Is this dangerous to homebuyers? Mr. Gandel says yes because this just has to mean that agents all of sudden care nothing about the clients they work with and only about those extra dollars. Hogwash!
Every business offers incentives and promotions when sales are down to promote their products over a competitor’s. Is it possible that a REALTOR would be motivated to show a particular home because it pays a higher commission? Sure.
But that doesn’t mean the REALTOR no longer cares about the client’s interests. No homebuyer is going to purchase a home they don’t like. And a REALTOR is motivated to find the right home for their buyer because they don’t get paid at all if they don’t. (Silly reporter!)
Incentives are also good news for the buyer because the seller is more motivated to sell, will often have a better price, and likely be easier to work with during the escrow process. And many sellers offer incentives to both the buyer and their agent.
Mr. Gandel practically makes it a crime to earn a commission. I suppose only reporters like him are allowed to earn an income for their work. And that he never has and never will accept a bonus or a pay increase, right?
What other professional gets paid solely on performance and only upon completion of a deal? And what other professional often works for free because of flaky clients or deals that fall out through no fault of their own?
Do you think Mr. Gandel told his employer to pay him only if people liked his story? And then only if enough advertisers chose to purchase spots in that issue?
The bottom line is that most REALTORS work very hard for their clients and their clients are better off for working with them. REALTORS are people with families and mortgages just like everyone else — who deserve to get paid for a job well done.
“Go it alone” rather than work with an agent, Mr. Gandel advises his readers. In most cases, it costs a homebuyer NOTHING to work with an agent because the seller pays the commission (Mr. Gandel fails to mention this benefit anywhere in his article.)
A home purchase is likely someone’s largest financial investment and carries a good deal of financial and legal risk. What a great idea, Mr Gandel! Instead of advising folks to get FREE representation from a licensed expert, just tell them to wing it and hope for the best.
“…most agents work for sellers. Now, even more so.” the article states. Don’t they teach “fact-checking” in journalism classes, anymore? You’re dead wrong, Mr. Gandel. Every state has laws regarding agency and most states now have very defined seller or buyer agency distinctions.
You see, the truth is… now, more than ever, agents either represent the buyer or the seller exclusively. Agents owe a fiduciary duty to their client, regardless of what they are paid.
That is why the author’s advice for a homebuyer to “go it alone” or go directly to a listing agent is so misleading. The listing agent works for the seller and is interested in getting the home sold quickly for the highest possible price; if Mr. Gandel is worried about a buyer paying too much or not getting the right home, his advice could most definitely harm the buyer in this situation.
And how will that unrepresented buyer feel when they find out that beautiful field of flowers they loved across the street was recently purchased by WalMart? Or that the convenient, neighborhood school is being torn down so a larger facility can be built? And that their kids now have to be bussed across town for school - to a high-crime neighborhood, no less?
A buyer working with a REALTOR would have the benefit of knowing such things before it’s too late. And there are countless other disclosures and material facts a buyer might discover… IF he was working with a REALTOR.
The other two techniques Mr. Gandel recommends are for buyers to “set the fee” or “put it in dollars.” Basically, he advises a commission cap or flat fee that the REALTOR would earn for their service to the buyer. However, he fails to mention that REALTOR services are almost always provided at NO COST to the buyer.
Does he really think that asking someone to take a pay cut motivates them to work harder for the client?
There is certainly nothing wrong with negotiation of both fees and levels of service between agent and client if both parties agree. Some REALTORS are already offering rebates, incentives, or extra services to their clients.
But when buyer’s agent services are already FREE to the buyer, it is MORE important for buyers to work with the agent they are most comfortable with and who can best meet their needs.
And what is wrong with someone being paid well for great service?
The author oozes concern about the poor, unsuspecting homebuyer who might work with an agent who won’t be objective or who “forces” them into the wrong home because of a higher commission. Now Mr. Gandel is offending the intelligence of his readers.
The truth is that buyers are more informed and have more resources today than ever before. Buyers can search the Internet for homes, REALTORS, comparable sales data, local builders, and more. It’s tough for any agent to “hide” available homes or price data from buyers these days.
And, yes, Mr. Gandel, I am sure there are greedy and unethical real estate agents out there in the big, scary world. Just as there are in ANY line of work. Such as news reporting, for instance.
There are many benefits for a homebuyer to work with a REALTOR. For starters:
- REALTORS have access to more listings and search features to help narrow down the right home.
- REALTORS have access to homes that are not yet advertised and are often the first to know about new developments in the area.
- REALTORS work to end housing discrimination and often give back to the communities where they live and work.
- REALTORS adhere to a strict code of ethics.
- REALTORS have access to the most current and most accurate sales price data to help you determine the best possible purchase price for the market.
- REALTORS have a network of reliable professionals such as mortgage consultants, escrow companies, home inspectors, local contractors, and more.
- REALTORS assist you with the due diligence process which can include the negotiation of repairs, discovering defects, termite inspections, zoning and use rights, HOA restrictions, easements on the property, water rights and conditions, and more.
- REALTORS have access to relevant information and a duty to share material facts to help you make informed decisions.
- REALTORS have the knowledge and experience to guide you through the homebuying process and protect you from harm.
- REALTORS have access to their state’s “tried and true” contracts and forms needed to complete a real estate transaction.
- REALTORS are the best people to objectively guide you through an often overwhelming process and to help you resolve issues and move the transaction through to closing.
In this market, the best asset for a homebuyer is a great REALTOR with the negotiating skills and resources to find the best home possible… at the best price possible… and with the fewest problems possible.