Posted by nithi.vivatrat on May 21, 2009
These days, it is not uncommon for folks shopping for homes to do a lot of the tasks traditionally associated with a real estate agent: surveying neighborhoods, identifying listings, touring properties (via open houses), analyzing comparables, even contacting homeowners. The DIY home buyer has been greatly empowered by the proliferation of online real estate information resources such as Zillow, Trulia, and Hotpads that have eroded the information advantage of brokers. The most difficult part of the process for a non-professional, not surprisingly, starts after that: actually making an offer, negotiating the best deal possible, and working through the process to get to a successful close. This is where a real estate professional can add the most value. It is also, in my opinion, where the commission model makes the least sense.
Enter SmithAdams. Using our flat-fee, a la carte buyer services, the DIY home buyer can have the best of both worlds: no commissions but access to a real estate professional on an as-needed basis. Similarly to the way one would consult a lawyer, accountant, architect, or other professional on a fee-for-service basis, one can use a SmithAdams consultant – and pay only for the time used.
So to all you DIY buyers: SmithAdams is your trusted advisor, free from the influence of commissions and available at a reasonable cost. Don’t just take my word for it – read this case study of DIY buyer who used SmithAdams to get the job done.
Posted by nithi.vivatrat on May 18, 2009
Given how much of the discussion on this blog revolves around comparing the commission fee model to the SmithAdams fee-for-service model, I thought you might be interested in this lively discussion about brokerage commissions at ThinkOOB.com. It’s great to see that we are not the only ones actively thinking about this issue. I hope my contribution added to the dialogue.
ThinkOOB.com was created by Al Lewis, founder and president of Disease Management Purchasing Consortium International (DMPC) as well as all-around big thinker, to be a “community blog that rewards lay people for coming up with solutions to society’s problems.” To this end, ThinkOOB.com is offering a million-dollar prize to the first idea originated there that becomes policy at the state or federal level. There are some great discussions going on at that site.
In the context of government economic policy, Al coined a phrase that I love: the “methadone economy,” equating the new federal stimulus programs to a substitute — but still very addictive — for the “heroin” of the bubble economy. Great turn of phrase.
Posted by nithi.vivatrat on May 13, 2009
Three little letters every real estate agent spouts. It has been called the “black box” of real estate, was the center of a major antitrust lawsuit from 2005-2008, and may be the key to selling (or buying) your home. What is MLS and why does it matter?
MLS stands for Multiple Listing Service. The singular use of “service” makes it sound like a monolithic system; in reality, there are actually many separate MLS systems across the country, one per region. For instance, the Mid-Atlantic MLS, run by Metropolitan Regional Information Systems, Inc. (MRIS) happens to be the largest real estate database in the country, listing properties in Maryland, Northern Virginia, Washington DC, West Virginia, and Pennsylvania.
An MLS system is a database where licensed real estate professionals list properties they represent for sellers with all the relevant details, such as room dimensions, contact information, tax records, photographs, maps, and of course asking prices. Likewise, MLS is the go-to source for brokers/agents representing buyers to identify prospective properties to show to their clients. WAIT! There is more to read… read on »
Posted by nithi.vivatrat on April 13, 2009
When I talk to prospective homebuyers about SmithAdams, I spend much of the time, not surprisingly, explaining how our fee structure works. I thought it would be useful to recap a typical recent conversation:
“How do we get started?”
To get started, SmithAdams presents you with an engagement letter similar to that of an attorney. This letter describes the terms of our relationship, the scope of work, and the fees associated with our services. Our invoicing process is described in detail in this letter as well. Unlike the typical buyer representation agreement, there are no stipulations about exclusivity. By mutually agreeing to the terms of the project as described in the letter, you and SmithAdams are on the same page as to how we will work together.
WAIT! There is more to read… read on »
Posted by nithi.vivatrat on March 27, 2009
Craig and I were chatting yesterday about my March 24th blogpost regarding SmithAdams for buyers and an interesting issue came up. It was my assumption that MOST people shopping for homes sign an exclusive buyer representation agreement with the agent helping them. Craig corrected my misconception — in fact, MANY people shopping for homes do NOT readily sign any type of representation agreement with their agent.
I suppose one might think, “I just want to look at this property – why should I commit to any type of agreement before I know I can work well with this agent or that I will like any of the properties he or she will show me?” This attitude is likely exacerbated by the exclusive buyer representation agreements put in front of buyer prospects by most agents (there ARE non-exclusive buyer representation agreements, but that is a topic for another day). I can certainly understand why home shoppers might not want the commitment. WAIT! There is more to read… read on »
Posted by nithi.vivatrat on March 24, 2009
The Real Estate Matters column in Saturday’s Washington Post identified some of the reasons why this is a great market for first-time home buyers, ranging from the falling home prices, low interest rates, and the tax credit. I would add this reason why I believe the first-timer segment will grow as a proportion of all home buyers: by definition, first-time home buyers will not be saddled by the prospect of selling a current home at a loss, which definitely undermines the impetus to move.
The column got me thinking about why SmithAdams is such a great fit for home buyers, first-time or otherwise. I was talking to a buyer client this morning who summarized it neatly for me:
“If I do my own research and find the house on my own that I want to buy, why should I pay a 3% commission? I just wanted help determining the offering price, preparing and presenting the offer, and negotiating the deal. SmithAdams did just that, and I didn’t have to pay for anything I didn’t need or ask for.”
In this market, there are many opportunities to identify bargains relative to prices over the past few years. Doing so will require you to do some homework and research. SmithAdams can certainly help do this for you. But, if you indeed do that homework yourself, shouldn’t you be rewarded with lower fees? I think so. If you agree, give us a call.
Posted by nithi.vivatrat on March 17, 2009
On Sunday, the New York Times had this article about the growing use of buyer’s agents on Long Island. The article implied that buyer’s agents are fairly rare there; my feeling is this is less true in the DC area. Regardless, my focus is on this issue: the article cites real estate brokers who now focus exclusively as buyer’s agents to eliminate “the ’smoke and mirrors’ and ‘dual-agency conflict that has caused so much mistrust among consumers and real estate agents.’”
It is true that when there is a documented and disclosed (this is important) relationship between a buyer-client and a real estate broker, then the broker representing the buyer has a fiduciary responsibility to represent the buyer’s interests. This is clearly stated in Article 1 of the NAR Code of Ethics (Standards of Practice 1-1 and 1-13). Classes for agents pursing an Accredited Buyer’s Representative (ABR) designation.
That being said, it is hard to ignore the reality that, in a traditional commission model, the buyer’s representative gets paid a commission amount stipulated by the listing agreement and only at the consummation of a transaction. Sure, this means that buyers don’t have to pay any fees unless a purchase actually occurs. But as I have pointed out in earlier posts, the commission model, even for buyer representation, creates real potential for conflicts of interest that the SmithAdams fee-for-service model avoids. And by the way, most buyer representation agreements keep open the potential for dual-representation, should the buyer agree (I wouldn’t).
So, of course I think it is better for any buyer to have his or her own representative. I just think buyers should be fully educated on dynamics that the NYT piece glossed over.
Posted by nithi.vivatrat on January 21, 2009
Complicating the issue with real estate commissions is a widespread belief that only the seller pays the commission, not the buyer. Mark S. Nadel, a DC lawyer who writes on public policy issues, debunks this myth:
“Sellers who agree to pay a 6% commission to their real estate broker and to accept a bid of $500,000 for their home are, therefore, actually willing to settle for net proceeds of $470,000. Since the sellers’ broker has agreed to accept a net $15,000 commission for his or her own services, the sellers would accept a $485,000 bid from a buyer if there was no buyer’s agent to compensate. If, however, the buyer has an agent, and the sellers’ agent has promised half the $30,000 commission to that agent, then, to enable the sellers to clear $470,000, the seller must demand $15,000 more from the buyer. Thus, the commission to the buyer’s agent ultimately comes out of the buyer’s pocket.”
Let’s walk through this example step-by-step again for clarity. WAIT! There is more to read… read on »
