Countdown To Chaos (episode 2): 🗞 Will Home Buyer Agents Be Obsolete?

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What’s On My Mind: Are Home Buyer Agents Obsolete?

The recent NAR commission lawsuits stirred up a lot of controversy, and it's no wonder given the amount of misinformation being pumped out by the mainstream media. I've personally viewed countless hours of YouTube videos from all manner of providers, including agents and real estate lawyers. I can't even count the number of hours I've spent reading comments on those videos.

And the comments on the videos by the public have been overwhelmingly negative toward agents in general. I guess I've been spoiled getting to work with mostly professional agents who fully earned their commission. But to read these comments, agents everywhere suck.

Sigh.

The craziest line of comments I read were that nobody needs an agent to buy a home anymore because everything is on the internet. Yes, people are really saying that.

Is Everything A Home Buyer Needs On The Internet?

Of course everything is there somewhere, but how is the average consumer who rarely buys a property supposed to judge the source, even if they are inclined to spend hours and hours gathering information?

Should we just assume Zillow has everything? Whether they do or not, Zillow is selling leads and therefore has an agenda that may not be aligned with consumers.

What about Redfin? Again, they have the agenda of any large broker. Their tools are more impressive than most brokers, but there is nobody in the background trying to keep the materials balanced and helpful specifically for buyers.

What about the MLS? MLSs are privately owned and they show listings, but nothing else remotely educational for buyers. They don't even have all the listings.

Maybe we should leave buyers to works with AI bots? Yeah right....

So while everything is out there someplace, the average person is not going to know what to do with the information, even if they can find it all.

What Does A Buyer Agent Even Do?

The idea that "everything" a buyer needs is on the internet really assumes that finding the house is all an agent does.

🤣🤣🤣

Oh sorry, I digress.

Finding pretty houses is really just the start of the process of buying a home.

Here is a sample list of ways agents help before finding "the one":

• advising on the pros and cons of different neighborhoods

• lending their experience and expertise as professionals constantly "in the market" to consumers who rarely buy properties

• using their experience to recommend search area expansions

• tapping their networks developed over time for listings not yet on the MLS

• connecting buyers with lenders who have a successful track record of funding loans in a variety of circumstances

• organizing showings and home tours

• providing professional feedback on the properties toured

• helping buyers evaluate properties within the parameters of their specific goals

• providing a check on the emotions that run rampant in a personal decision like buying an expensive home

This is a sample list of ways agents help after finding "the one":

• sizing up the seller and listing agent to find negotiation advantages

• pricing an offer in a way that interests the seller without overpaying

• offering experience and data to back up that price recommendation

• advising the buyer not to show excess proof of funds with the offer

• explaining the implications of multiple offers

• explaining special seller demands like leasing back the property or otherwise staying in the property past the close of escrow

• negotiating a favorable price and terms in a competitive offer scenario

• explaining various contractual contingencies and how they impact pricing and timing

• explaining the terms of the purchase contract, such as the implications of an arbitration clause

• advising the buyer on the buying process and the associated opportunities and pitfalls

• explaining closing costs

• obtaining utility bills if desired

• keeping the buyer on top of contractual deadlines

• providing data to appraisers when appraisals come in too low to close the deal

• helping the buyer negotiate escrow and troubleshooting inevitable surprises

• helping the buyer read and understand property disclosures

• helping the buyer read and understand HOA disclosures

• helping the buyer read and understand natural hazards disclosures

• helping the buyer understand title insurance and the title report provided on the property

• helping the buyer acquire property insurance in a tough insurance environment

• helping the buyer understand the various ways to hold title

• arranging inspections, generally on a tight timeframe

• helping the buyer understand the inspection reports and evaluate additional reports that might be needed

• helping the buyer negotiate repairs or other contractual modifications in light of the inspections

• helping the buyer evaluate other risks with the property (bad neighbors and barking dogs, anybody?)

• helping the buyer understand the loan process and field buyer questions about the same

• wrangling a rogue lender who isn't meeting deadlines

• facilitating the final walk through and other closing support

And those are just the items I could come up with off the cuff in writing this article.

The lists can only get longer.

According to the NAR, consumers also count on their agents to protect them from scams.

So you see, buyer agents do much more than simply open doors to pretty houses that sell themselves.

I've often thought that the buyer agent has a harder job than the listing agent, and it's been a source of personal angst knowing I've encountered listing agents taking more than half of the commission. You see, commissions spelled out in listing agreement are not public. The only public component is what the seller was offering the buyer's agent in the MLS.

And come August 17th, that won't be public anymore, either.

For a "consumer" lawsuit, the outcome is surprisingly less transparent then where we started. 😱

Will We Start Seeing More Attorneys Rather Than Agents?

One suggestion I've seen floated is that attorneys can review contracts for an hourly rate that is cheaper than paying an agent.

First, I want to know how much the attorney is charging.

Second, what about the rest of the lists I provided above? An attorney is not going to have the daily market experience an agent has when it comes to understanding the value of the property in a dynamic market, and tailoring the offer accordingly.

And then there is the whole idea of getting through escrow with all the questions and the raft of paperwork that needs to be explained. That isn't part of "reviewing a contract."

What about arranging inspectors on a 10-day inspection contingency? What about defending an offer price to the appraiser? Is that part of "reviewing a contract?"

No, I don't think this "lawyer" idea has been completely thought through by the commentators floating it. And can you imagine the tab for my lists above at $300/hour? I would say you won't save much money if any, but you will be losing important day to day experience in the real estate market.

On the other hand, you definitely can hire me - a broker and an attorney, but I’m not working hourly. I gave up timesheets for a reason. 😉

So what do you think? Are buyer agents irrelevant at this point? I want to know what you think, so please share away in the comments.

Next week I'll take a dive into the new buyer broker agreements and potential compensation arrangements.

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Market Trendlines This Week In The Beach Cities

What is the state of play in your target community? Is it a buyers' market? Is it a sellers' market? How strong is the trend? We're here to tell you that in the Beach Cities, the seller versus buyer market debate is very much a community by community analysis.

We talk tons about market trends on social media. Not seeing your personal target communities covered? Custom charts and reports are always available on request. We can report on all property types, zip codes and custom drawn boundaries. Just ask!

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The RE:mix

These are a few of the stories we reported on in last week’s Sunday RE:mix. Visit your subscriber dashboard to subscribe to the Sunday RE:mix to get the stories delivered to your inbox on Sundays, nearly a week before they appear on The Trendline.

• Southern California Prices Are At A Record. Could Relief Be On The Way?

• With Prices Up, Buyers Check Out

• Home Sales Fall To Historically Low Level

• Mortgage Rates Fall Back As Data Suggests Economy Is Cooling

• Can Rates Keep Falling?

• When Will The Fed’s Moves Alleviate The Lock-In Effect"?

Anybody seeing a trend with the news? I would usually insert laughing emojis here, but the trend hardly seems funny. 🙃

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• June 18th - Westchester/Playa Neighborhood Council Planning & Land Use Committee Meeting

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