Realtors: appraise thyself

Here's a column I published in the St. Petersburg Times Friday:

Just when you start to feel for Realtors' plight during these crumb-scrounging times in the housing business, you happen upon a couple of sympathy-squashing stories about rampant greed in the profession.

Case 1: Pinellas County property records disclosed a big-shot Clearwater Realtor who helped jack up property values all across the waterfront. He pocketed hundreds of thousands of dollars in murky deals, then let the homes slide into foreclosure. To give you a sense of the flimflam potential, at least one of his properties is selling for a third of what it sold for two years ago.

Case 2: In a scene reminiscent of a shakedown, Realtors are trying to dupe desperate condominium owners into paying them double commissions. They'll take your listing, but you have to give them 10 percent for their trouble. I was glad to hear one would-be target offered the Realtor the one-finger salute.

These manipulators shouldn't define a whole profession. Most Realtors try to make an honest buck. And it's a rotten time to sell houses. With home sales down nearly 60 percent since the 2005 peak, the Greater Tampa Association of Realtors lost 1,200 members this month when it came time to renew their affiliation.

The federal government is pursuing an antitrust lawsuit against the National Association of Realtors for essentially running a price-fixing cartel. The association's lock on the Multiple Listing Service, the most popular database of homes for sales, smacks of a monopoly.

The Internet lets more buyers and sellers bypass agents. One of the latest is called Pad4Pad. As the Web site's founder described it: "You buy mine and I will buy yours." Of course, bartering doesn't command 6 percent commissions.

Most Realtors display an endearing optimism. Paychecks are slim, but you'd think most just sold Eddie DeBartolo's mansion to Donald Trump.

Here's hoping for a self-critique of a business that, through a minority of bad actors, conspired to bring about the current turmoil. Blaming reckless mortgage bankers and property speculators gets you only so far.

Comments

[Tom]

In the age of the internet, it's somewhat ridiculous that this profession even exists anymore. The "knowledge" of an area that realtors supposedly possess can now be replicated with a few clicks. Paying them a percentage is also absurd. How hard is it to put some pictures on the internet and give a tour?

More importantly, however, I don't see a distinction between realtors and speculators. Because of their fee structure, they have an incentive to inflate prices as much as possible. I can't tell you how many properties (especially the new developments and lofts in Tampa) I've seen listed as realtor-owned, as if that is a good thing. That tells me that the owner bought during pre-construction, hoping to turn a quick profit and never intending to live in the unit. Sorry if I have no sympathy.

[James Thorner]

You'd be amazed at the number of Realtors and mortgage brokers holding down 5 investment properties and flipping like bandits. For better or worse, they were a huge part of the housing bubble in their role as investors.

[Fuzzy Bear]

These manipulators shouldn't define a whole profession. Most Realtors try to make an honest buck.

I would agree with you that there are some realtors who are honest. However, the advertisments by the NAR stating that on average homes double in ten years is nothing but a total false statement as they attempt to manipulate the market with false information.

When the national association of realtors is allegedly engaged in price fixing and creating a monopoly to the point the justice department has to take legal action, it tells you that the industry is tainted with fraud.
That in turn impacts the honest realtor who refused to sell to those who did not have the income to sustain the payments on a mortgage they could not afford during the housing bubble years.

Unfortunately,the way realtors are paid, which is commision only, often invites extensive fraud which is contributing to the decline of the realtors reputation. I often hear realtors mentioned as used house sales people which reminds everyone of the bad reputation of the used car salesperson.

The job as a realtor really has no transferable skills to other industries. It does not require advanced education, financial skills, sales skills or technical training to fill out a form that anyone can purchase in an office supply store.

It won't be long before the realtor job becomes obsolete as this field will certainly be replaced by the internet.

[Fuzzy Bear]

These manipulators shouldn't define a whole profession. Most Realtors try to make an honest buck.

I would agree with you that there are some realtors who are honest. However, the advertisments by the NAR stating that on average homes double in ten years is nothing but a total false statement as they attempt to manipulate the market with false information.

When the national association of realtors is allegedly engaged in price fixing and creating a monopoly to the point the justice department has to take legal action, it tells you that the industry is tainted with fraud.
That in turn impacts the honest realtor who refused to sell to those who did not have the income to sustain the payments on a mortgage they could not afford during the housing bubble years.

Unfortunately,the way realtors are paid, which is commision only, often invites extensive fraud which is contributing to the decline of the realtors reputation. I often hear realtors mentioned as used house sales people which reminds everyone of the bad reputation of the used car salesperson.

The job as a realtor really has no transferable skills to other industries. It does not require advanced education, financial skills, sales skills or technical training to fill out a form that anyone can purchase in an office supply store.

It won't be long before the realtor job becomes obsolete as this field will certainly be replaced by the internet.

What was the number of Realtors and mortgage brokers holding down 5 investment properties and flipping them? I'll bet it was way, way under 1% of them.

Speculators were a huge part of the housing bubble problem. The speculators included Realtors; but also taxi drivers, doctors, teachers, store clerks, preachers and every other occupation.

Painting a picture that Realtors caused this mess is inaccurate and unjust. Most Realtors stick to helping people buy and sell houses. Realtors can't control other peoples' greed.

[James Thorner]

I'm not sure what percentage of Realtors were flippers. I can only say that 3 of the 4 Realtors I worked/consulted with in selling my house last year were big property speculators. I'm not calling them corrupt or anything. They were normal people trying to collect easy money while times were good. I'm merely saying Realtors played the field with the best of them.

[bryan]

How exactly did a single agent "jack up property values all across the waterfront"? I had always been under the impression that something was only worth what somone was willing to pay for it. Dont get me wrong their are plently of scumbags in my business just as their are plently of newspapermen who are horrible people but I think when you use the term "realtors" thru-out your article you're painting with too broad a brush. I agree that trying to get a listing at a 10% commission is exorbanant. I also dont believe it, in my years in the business I have NEVER seen a buyers agent commision offered at above 4%. As far as these internet sites go, if consumers are willing & able to trade homes to each other without involving a professional, more power to them. Caveat Emptor.

Bryan Carroll
Alexa Realty & Mortgage

[Chris S.]

It seems I'm in the minority here that thinks that the "career" Realtors have and still offer a valuable service...

Imagine moving to a new city where you know no one... How would you even begin to identify which neighobhoods serve your family's needs? Schools, shopping, crime, commute, and overall value...

The Realtors who make a career out of what they do are the ones worth their salt. Some are in it just for the quick buck, but maybe some on this forum just haven't been lucky enough to be assisted by a great Realtor?

[Chris S.]

It seems I'm in the minority here that thinks that the "career" Realtors have and still offer a valuable service...

Imagine moving to a new city where you know no one... How would you even begin to identify which neighobhoods serve your family's needs? Schools, shopping, crime, commute, and overall value...

The Realtors who make a career out of what they do are the ones worth their salt. Some are in it just for the quick buck, but maybe some on this forum just haven't been lucky enough to be assisted by a great Realtor?

[Chris S.]

It seems I'm in the minority here that thinks that the "career" Realtors have and still offer a valuable service...

Imagine moving to a new city where you know no one... How would you even begin to identify which neighobhoods serve your family's needs? Schools, shopping, crime, commute, and overall value...

The Realtors who make a career out of what they do are the ones worth their salt. Some are in it just for the quick buck, but maybe some on this forum just haven't been lucky enough to be assisted by a great Realtor?

[Chris S.]

Sorry for the repeated posts.. The page kept coming up "error" when hitting the post button. I didn't see that my post actually made it through.

[Patrick]

As a Realtor working with lenders for loss mitigation (trying to find a way for people to avoid foreclosure and keep their homes)I see so many people who overpaid for their homes. In checking in the MLS, I find most of them did not work with a Realtor. If you think you think Realtors don't help people, you are kidding yourself. Every Realtor will tell you about the Donald Trump wannabees who are clueless. And a Realtor's job is not done when you find a house you like. Negotiating a contract, handling inspections and generally making sure you are protected is part of the Realtors job. You can get information on the internet, but don't confuse that with knowledge.

[Thomas]

Patrick, Chris and Bryan,
There will be a need for realtors for those people scared of the internet, not able to do basic research and with less than a 105 IQ. You will still have business. I would bet though that income and high FICO and money in the bank for a down payment correlate closely with the opposite of the first list. Sorry, you won't be making sales to sub600 (or sub680) FICOs again. BTW, a realtor does not protect you; a real estate lawyer does. What does this mean? I can research comps in the neighborhood, schools and what the previous owner paid all from my living room. What was the service you offered again? Ohhhhhhh, friendship (lifelong referrals) and a warm fuzzy feeling. No thanks.

James, you supposedly don't call them "corrupt" yet you choose to refer to them derogatively as making out like "bandits". Your bias bleeds through your writing.

I'm a Realtor and the "Realtor/investor" types you describe where they basically worked two different businesses, tended to be stay-at-home Mom types that only got a license to benefit their own purchases and sales, and didn't have the capacity to act as a true professional. Also, when compared to the 1000's in the business, getting your "data" from 4, is pretty shallow.

The justice department investigated the likes of AT&T and Microsoft too. Antitrust is the issue, not fraud.

I've protected many of my Buyers from unscrupulous Sellers on more than one occasion at no charge. No Real Estate Lawyer would ever do that and although I have much respect for their profession, I've encountered a few incompetent lawyers as well, who through their own arrogance botch the contract up.

I also work for many out-of-town clients and along with selling their places, we have to manage any repairs and issues that arise. My clients are often too successful and busy in their own careers that they do not have time to mess with the day-to-day drudgery.

Yes, there are a lot of fly-by-night Realtors out there. However, there are also many savvy and ethical ones as well.

[Rachel Sartain]

Wow James! Quiet a blog - did you need to get your page hits and ratings up?

You are right, there are many unscrupulous realtors in the profession and unfortunately the associations do little to police these realtors. Remember the story of the realtor who forged a dead person's signature on a listing agreement! Yes, that realtor is still selling real estate.

With every profession it is the same story. I am sure there are plenty of journalists out there elaborating stories. Oh- and look at the story of the writer of 'Misha' the Holocaust Memoir. It was completely false!

As a Realtor I can only vouch for myself. I work hard for my clients to make sure they are making good decisions when it comes to BUYING OR SELLING a home. There are many other respected Realtors that do the same.

Why don't you write a blog/story investigating these 'investors' that had fake appraisals for properties, got a loan for more than the purchase price, and took the remainder and walked? I see it every day. It would be nice to see you investigate the mortgage scams, appraisal scams, lender scams and investor scams that have really put us in the mess that we are in!

[Chris S.]

Thomas,

For the record, I do not practice general real estate (please don't make assumptions).

There is a reason why most respectable colleges forbid their students to use internet sources... Just because something is on the internet, does not make it a valid and accurate source.

You can certainly look at comps at the clerks office and what not, but you are looking at this issue as purely a "data" issue.

Example: If you go to the Tampa Police department website and look at crime stats, you will not be able to target a specific neighborhood (just a grid, which usually comprises of many neighborhoods).

An astute individual can certainly do a lot of research by themselves when using appropriate sources, but you are fooling yourself if that "data" is the only part of the equation when buying a home.

I think back to all those misguided people who actually thought trulia or zillow were source worthy websites... Weren't they just following what I believe your advice is?

[Rachel Sartain]

I sometimes get in online discussion groups - a glutton for punishment as a realtor. And then this morning I had an epiphany after reading this blog.

After reading this I was really upset and tired of all of the negative press. I am a good realtor and I truly care about my customers and the decisions they make when it comes to buying or selling (and in many cases making the decision to do neither).

But many of the online doomers (and real estate customers) are right with your impression of realtors. There are a lot out there who are unethical and practice self-serving real estate without putting their customer first. I am tired of having these realtors ruin the perception for us [ethical realtors]. This morning I wrote to my local and state Associations to demand higher standards for realtors. There should be more education hours required, stricter ethical standards and tougher policing boards and penalties! Not every Tom, Dick and Harry needs a real estate license!

Instead of advertising campaigns that say 'Buy Now' - the local, state and national realtor boards need to listen to the disgruntled public and implement a higher standard for the profession!

And let me step off of that soap box to make one more point - the real estate crash and the bad economy is not solely the fault of realtors! 'Easy money' brings out the greedy crooks in every field - appraisers, mortgage brokers, lenders, investors, etc. Real estate investenting and property values boomed too much too fast, which will always equal a bust - in any business.

[Thomas]

Chris
No the internet is not trustworthy as a source, that was not my point. The velocity of information and the ability to find all the 'value added' features that real estate agents supposedly offer has increased and means they can't keep the information to themselves. The situation is very similar to travel agents a decade ago. There are still travel agents but their business model has fundamentally changed. And BTW, lexis-nexis and many other reference sources are online and fully allowed by all colleges.

Rachel, bless you but I think you are spitting into the wind. Go on any RE or Broker board and see how they refer to customers and how they view the business, it's like looking into the abyss.

[Fuzzy Bear]

How exactly did a single agent "jack up property values all across the waterfront"?

There were numerous seminars put out by realtors for realtors to show them how they can earn money by buying houses low and then flipping them for higher prices, which in turn increased their commisions earned by the higher price of the flipped property. The secret was to grab these properties before the end users bought the properties.

Lending and underwriting were lax during the boom, so anybody could get the "liar loans". In essence a large portion of the realtors and other investors were just creating a shortage of supply and increasing demand to the unsuspecting end user who often got stuck with the overvalued property. In fact some realtors did get individuals to agree to give them a cut in the profits of the property they bought and sold at a profit. Both unethical and illegal!

Why were the legitimate realtors not stepping up to the plate to stop this nonsense? Everyone in the industry knew this was going on, but nobody took the actions to stop it. Why, because they would be blacklisted just like the ethical appraisers were blacklisted by the realtors for not providing an appraisal that was high enough to make the deal go through despite it being unethical and illegal to falsify the appraisal.

In the meantime, the realtor who recently broke into a renters property and stole the stove, etc. only adds fuel to the negativity of realtors. The list of this type of conduct and illegal activity is large and it does hurt the legitimate realtor. The realtors associations have done an extremely poor job of policing their industry.

Perhaps it's time the industry needs to be regulated in a manner that protects the consumer!

[Rick Marnon, Real Estate Agent]

This article is great, because this is the truth about the business. I am all for being able to make good money, but not at the expense of my honesty. Great article.

What's the problem if a broker charges 10% commission for listing and marketing? Brokerage fees are negotiable between broker and owner. The broker doesn't get paid until property sells and closes. If the broker and owner agree to 10% and the property sells, both are happy.

If the broker charged less, everyone would then gripe fees were fixed and brokers colluded in setting fees.

If anybody wants to complain about exorbitant fees...jump on lawyers that charge 33 1/3 percent to 40 percent fees!

[James Thorner]

Fuzzy's last statement about many Realtors being major league flippers was accurate. My goal is to illustrate that very phenomenon in a an article in the newspaper soon. Should be quite a read. As to the last comment, there's nothing illegal about charging 10 percent, but it just seems a little extortionate. If a broker brought a high paying buyer to the table, the 10 percent would be worth it. But let's face it: In this crummy condo market, they're only going to bring back lowball/short sale offers and still extract 10 percent. Does that pass your smell test? Couldn't the seller have paid a flat fee of $3,000 to one of those foreclosure avoidance companies and accomplished the same thing for much less?

[Fuzzy Bear]

James:

The New York attorney general just reached an agreement with Fannie Mae and others which will require appraisers to e independent from mortgage brokers and realtors. The probe started from Washington Mutual putting presure on the appraisers to come up with false appraisals.

[Fuzzy Bear]

In fact some realtors did get individuals to agree to give them a cut in the profits of the property they bought and sold at a profit. Both unethical and illegal!

What I meant by the above statement is if a realtor sells a property to an end user, but requires that end user to give that realtor a cut of the profits when they sell the property on top of the realtors commision, but the realtor is not an active owner listed on the deed, then it would be illegal as it violates some Florida statues.

[Frances]

If a Broker wants to charge 10%, who cares?! Extortionate? You're implying a Seller has little/no choice and we all know there's plenty of competition out there offering less and compensation is ultimately the Seller's decision.

There were so many seminars put on by every Tom, Dick and Harry for real estate investing, not just for Realtors.

Unethical Realtors are regularly reprimanded by the Board, however, the the sheer volume of business that went underway vs the miniscule Board doesn't make patrolling easy or effective. As to accusing Realtors of turning a blind eye, it's kind of like asking why do upstanding citizens allow internet fraud to take place?