I look forward to your industry reducing its unearned, over market equity cut on homeowners.

Next on the list: title insurance.

This thread is the cattiest thing I've seen on Texags in a while!

sidenote: I've never had a listing agent refuse to show me a home.

swimmerbabe11 said:

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This thread is the cattiest thing I've seen on Texags in a while!

sidenote: I've never had a listing agent refuse to show me a home.

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Because a listing agent can keep the entire commission and not have to split half with a buyer's agent if you go it alone.

This is more fun than kicking over ant beds and way more productive than watching Aggie football!

Real estate agents are overpaid.

Now that I've got your attention, I'd like to tell you a bit more about myself before I jump in to the rest of what I want to say. This is going to be a long post.

My name is Jamie Poirier. I have an undergrad in Finance and a Masters in Real Estate from Texas A&M University. The MRE program is a top 3 real estate masters program in the world, with a focus on commercial real estate and real estate finance. After graduation, I worked for Deloitte, with a focus on O&G real estate valuations and consulting. My last year at Deloitte was spent in NYC helping the federal government investigate and document the robot-signing scandal. I moved on to Hines, which is the worlds largest privately held real estate developer, in their investment management group. Over the course of my career, I helped acquire, develop, re-develop, and sell more than $7.2 billion in commercial real estate across the globe. I "retired" as a Director from Hines with some cool experiences. I'm still an active investor in both the commercial and residential and land sectors, and I started Red Pear to help Aggies. I've gotten to do a lot of that. I've brokered hundreds of deals across Texas for some great Ags. I also have another real estate brokerage company where I charge the full 3% because I can.

Now back to what I would really like to say.

Part A.
I have done way too many deals with agents who are not qualified to be doing what they are doing, and are therefore overpaid. Over the last few years, I've averaged closing a deal about every ~5 days or so, whereas the median agent, per NAR, does 12 deals a year. They used to post the average (I wonder why they stopped?), and it was something like 4 deals per year. This is one deal a quarter. If I had to guess, something like 20% of the agents are doing 80% of the deals, which means that 80% of agents are grossly inexperienced, however, they are still out there doing their clients a disservice when they do actually do a deal. I cannot begin to count the amount of money that I've seen folks miss out on over the years because they did not have competent representation. I regularly take advantage (that's the nicest way I can say it) of other agents and their clients when they don't know what they are doing. And I do it with a smile. In this regard, by my estimation, about 80% of the agents out there are overpaid.

Just for fun, here are some key statistics from that NAR link above:

• The typical REALTOR is a 60-year-old white female who attended college and is a homeowner.
• 62% of all REALTORS are female, and the median age of all REALTORS is 60.
• ~56% of REALTORS do not hold a college degree.

Part B.
The amount of anti-competitive practices that I have seen in this industry over the years disgusts me. If you can think of it, it's probably happened. Agents trying to do deals FOR their client behind their back, agents calling and asking if the (less than 3%) buyer's agent commission offered was a typo and hanging up on me immediately after, agents stealing my signs or key boxes, certain companies controlling submarkets and markets, agents boycotting my listings, etc. I'm not complaining for me, I'm upset about what it does for clients.

Part C.
Now that I've got your attention, I'm going to turn to the general public. Sadly, I don't think the end result of this court decision will be a win for the masses. I actually think it will be the opposite. Hopefully models like mine will take off. But I see one of two things happening. (1) Either buyers will have to start paying for their own agents (hopefully lending rules will allow them to bake in the cost into their mortgage and not have to come out of pocket at closing like in Europe), OR, (2) less buyers will have representation. Either one is not a win for buyers IMO.

Part D.
See my first point above. I just showed how 80% of licensed agents have no idea what they are doing in a real estate transaction. If I had to guess at the portion of the general population, it would probably be closer to 99% or more. I'm not sure why folks get offended about this. It's ok to pay people (qualified people) to do what they do best. You've just got to figure out how to stay away from that 80% mentioned above. Even if they are your wife's best friend or your aunt or the person your mom recommended or the instagram model turned sales agent.

My favorite, coming from a commercial background myself, is when folks in the commercial world (which is immensely more complicated than the residential world), think that their knowledge and skills of the commercial world transfer to the residential world. They do not, and vice versa. Pride comes before the fall, y'all. I've been out of the institutional investment/management game for a few years now. I have no idea what a TI package looks like in my markets anymore. Or rental rates, or abatement, or other incentives, etc. In the same way, just because you are in commercial, does not mean you have any business on the residential side.

Part E.
I'm going to correct some things I commonly hear or see posted even here:

• "FSBO will save you money." --Per the NAR link above, the average FSBO sells for $225,000 while the average agent-assisted home sells for $330,000. How much of that would you contribute to FSBO sellers not knowing market value and underpricing their home, and how much would you attribute to all other factors? Is it possible for a FSBO listing to hit the nail on the head? Sure. But most of the time, that's not what I see. Some of the largest companies in the world (Microsoft, Apple, Facebook, Amazon, etc.), all have external AND internal real estate brokerage representation. There's a reason for this.
• "The title company can just write up the contract for you." --Yes, almost anyone can fill in the blank or check a box. The trick is knowing how to do it best to your advantage. There really isn't a "fair" way a title company can do this, so you are going to get a contract that mostly just limits their liability. And probably got filled out by an admin on their lunch break. That's who you are going to trust with what is probably the largest financial transaction you will ever be a part of?
• "An attorney can do it cheaper/just as good." --First, a good attorney is not cheap. I've approved or personally paid for hundreds of thousands of dollars of attorneys fees in (mostly commercial, but in my share of residential) real estate transactions. Good attorneys don't usually specialize in ONLY residential real estate transaction law. They also typically do not understand the intricacies of the current real estate market from a brokerage perspective unless that's what they do regularly. Some of my favorite clients have been attorneys. They are awesome. But even they recognize that law and brokerage are two different things. Don't confuse the two. For legal reasons, the State of Texas tells me that I have to tell you that if you have a legal question, you should seek out an attorney to help you.
• "Sale" is a noun. "Sell" is almost always used as a verb (yes, it can be used as a noun in a small percentages of phrases). But the amount of people, including college educated posters on this forum, who confuse the two, is shocking to me. Contract terms have meaning, and if you are confusing these two words, it could be an indication that you do not have the skill set to navigate a purchase and sale contract unassisted.

I love you all. I want what is best for you and I wish you all the best in your real estate endeavors.

Red Pear Realty said:

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"FSBO will save you money." --Per the NAR link above, the average FSBO sells for $225,000 while the average agent-assisted home sells for $330,000. How much of that would you contribute to FSBO sellers not knowing market value and underpricing their home, and how much would you attribute to all other factors? Is it possible for a FSBO listing to hit the nail on the head? Sure. But most of the time, that's not what I see. Some of the largest companies in the world (Microsoft, Apple, Facebook, Amazon, etc.), all have external AND internal real estate brokerage representation. There's a reason for this.

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I agree with most of your post Jaime, but this stat always rang hollow for me.

Can't we agree that most FSBO's are lower valued homes to begin with? It others words, you don't see a lot of "luxury listings" going the FSBO route, which would skew these numbers. From the way this is presented, it could lead a person to believe that the "average" FSBO seller is leaving $100K+ on the table. This doesn't pass the smell test.

More data would be useful here, but probably doesn't fit the NAR narrative.

You could argue that "luxury sellers" not going the FSBO route is its own data point, but I think that's a distinct discussion.

MookieBlaylock said:

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Why did you use misleading data if you know it to be inaccurate?

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It's really sad to me that people can graduate from Texas A&M university and not know how to read.

Sick burn, impressed you didn't need 10k words of nonsense to make it

My post was more of a catch all for ALL the points I've seen/read on the topic on this forum.

RebAg13 said:

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The data used proves nothing.

Look at real estate fees around the world. They are way too high in America.

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Of course it doesn't prove the exact amount of underpricing. Do you think 100% of the FSBO price delta is due to FSBO sellers just selling lower priced homes?

I completely agree. I've bought and sold residential and commercial real estate literally around the world. London, Moscow, India, Amsterdam, Poland, Paris, Dublin, San Fran, LA, Seattle, Salt Lake City, etc. Red Pear is my attempt at fixing the system for my clients as best I can with the framework I get to operate in.

If you can't keep up with the adult conversation, you should just sit and listen.

True story...and Jamie is my realtor so probably familiar with this house and knows the real numbers....

But we were looking for awhile. In that time we saw a house that was FSBO in Hillshire Village. It just sat, partly because it was listed high and partly because it was hard to schedule showings. They finally got a realtor, had one weekend of showings, and it went over the ask price and what it was listed at when it was FSBO.

So, yeah, realtors add value. Also, not sure why people are kind of ganging up on Jamie about this....he probably has one of the most fair, consumer friendly commission models I've seen....

Realtors apparently are an easy target and this board seems to like firing at the target. Over many years I have worked with many great agents that added value and some that are actually an impediment to the transaction. In my experience when one side or the other in a transaction is unrepresented there's nearly always a hiccup or moment of confusion.. As I've already mentioned most of the times I've seen a property appraise for more than the sales price the seller is unrepresented. Not 100% of the times I've seen someone leave money on the table but very much the vast majority of those have been FSBO sellers.

Why aren't other professions targets? We can get our insurance using an app on our phone. What's the agent's function? When you go get a prescription filled I'm pretty sure a HS kid could count out 20 pills from the big, giant bottle with 500 pills and put them in the small little bottle someone has attached the physician's instructions to.

Working closely with real estate agents for a long, long time I think it's a very difficult job and pretty much thankless as well. For every time they show 3 houses, write a contract with someone well qualified and collect a commission they probably drive 5 meatheads around to a dozen houses and never get paid. Then the good ones have to help pull the bad ones on the other side of the transaction through the process.

I'll add the low barrier to entry isn't good for the really great real estate agents who post on this board.

jja79 said:

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Realtors apparently are an easy target and this boards seems to like firing at the target. Over many years I have worked with many great agents that added value and some that are actually an impediment to the transaction. In my experience when one side or the other in a transaction is unrepresented there's nearly always a hiccup or moment of confusion.. As I've already mentioned most of the times I've seen a property appraise for more than the sales price the seller is unrepresented. Not 100% of the times I've seen someone leave money on the table but very much the vast majority of those have been FSBO sellers.

Why aren't other professions targets? We can get our insurance using an app on our phone. What's the agent's function? When you go get a prescription filled I'm pretty sure a HS kid could count out 20 pills from the big, giant bottle with 500 pills and put them in the small little bottle someone has attached the physician's instructions to.

Working closely with real estate agents for a long, long time I think it's a very difficult job and pretty much thankless as well. For every time they show 3 houses, write a contract with someone well qualified and collect a commission they probably drive 5 meatheads around to a dozen houses and never get paid. Then the good ones have to help pull the bad ones on the other side of the transaction through the process.

I'll add the low barrier to entry isn't good for the really great real estate agents who post on this board.

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I will add that the proliferation of reality shows on Netflix and HGTV, which perpetuate the stereotype that agents are money hungry idiots, didn't do the industry any favors either.

NAR can't get out of their own way these days.

Your last sentence… spot on.

And they don't have our backs. The value of being a REALTOR has plummeted.

jja79 said:

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Realtors apparently are an easy target and this board seems to like firing at the target. Over many years I have worked with many great agents that added value and some that are actually an impediment to the transaction. In my experience when one side or the other in a transaction is unrepresented there's nearly always a hiccup or moment of confusion.. As I've already mentioned most of the times I've seen a property appraise for more than the sales price the seller is unrepresented. Not 100% of the times I've seen someone leave money on the table but very much the vast majority of those have been FSBO sellers.

Why aren't other professions targets? We can get our insurance using an app on our phone. What's the agent's function? When you go get a prescription filled I'm pretty sure a HS kid could count out 20 pills from the big, giant bottle with 500 pills and put them in the small little bottle someone has attached the physician's instructions to.

Working closely with real estate agents for a long, long time I think it's a very difficult job and pretty much thankless as well. For every time they show 3 houses, write a contract with someone well qualified and collect a commission they probably drive 5 meatheads around to a dozen houses and never get paid. Then the good ones have to help pull the bad ones on the other side of the transaction through the process.

I'll add the low barrier to entry isn't good for the really great real estate agents who post on this board.

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This is exactly why I liked Jamie's model. My thesis is that realtor's have value, but I think its compensation model is out of whack with the modern realities of home buying in the information age.

Jamie's model hinges on three truths of realty:
-The internet makes it very easy for anyone to see a listing
-Half of a realtor's professional power is access to comps
-Buyer's agents use their closings to subsidize their time spent with people who aren't closing

I was very happy to have a sharp realtor on my side who understood these realities. We found the house online. Jamie got us a tour (that we paid him directly and immediately for hosting). Jamie pulled and sorted good comps. Jamie had good advice on how to close. I didn't subsidize someone else dragging Jamie around for 15 viewings.

Jamie stays busy and more of his efforts directly result in getting paid.

I do think his model requires some caveats though. It requires competent buyers who know what they want, and want to close and can close conventionally. And that is not the whole market of buyers. But I'm glad Jamie's model exists.

I think it skews generationally as well. My parents have this realtor friend who has been taking them out probably once every 2 years to show them a 'forever home.' My parents don't know exactly what they want, they always find something that isn't up to snuff about it, and then go back to searching. That realtor understands that he is playing the long game. Maybe he'll land a $40,000+ commission one day and that is what keeps him around.

You're among a small group that actually thought it out. A lot of people who have identified a house, seen it, contracted for it, closed on it and moved happily along think every deal is that way and give no consideration to the time spent prospecting for that client.

Over a very long time I have closed in the thousands of mortgage loans. When I see a contract without a Realtor (don't delve into the compensation they receive because it's really not my business) I know I'm going to get one or maybe twenty one calls asking a question that is an agent question, but they don't have one.

I have no opinion on whether or not the comp model is the right one, I just know unrepresented parties struggle to the desired outcome much more than those with good representation. That said I still believe the low barrier to entry makes it somewhat a crapshoot when picking an agent.

I feel comfortable in saying I have never closed a deal with any of the agents on this board that was not exactly as expected.

RE purchases involving financing are complicated transactions and sometimes things get off track a bit without there being any reasonable blame to assign. You know you're dealing with a professional when everyone works together to get back on track and work toward the desired outcome.

I don't know how to estimate what they're worth but a really good RE agent is worthwhile to the vast majority of buyers and sellers based on my experience.

I've been an attorney for over twenty-five years with a significant portion of my practice in real estate representing all different sides of transactions (Buyers, Sellers, Landlords, Tenants, Construction Companies, Investment Groups) in both commercial and residential transactions. I am also a Texas Real Estate Broker and have represented the same groups of individuals and entities over the years in real estate transactions.

In the residential side of the industry, I regularly come across transactions in which agents aren't up to speed and have made a potentially significant error during the transaction process. Most of the times those issues have been resolved amicably due to the clients (buyer/seller) being willing to work something out to help make the transaction proceed to closing. On the other end of the spectrum there are agents/brokers who are as competent or more competent in real estate than most attorneys. In my opinion, a really good real estate agent and a really good real estate attorney are worth having as part of your team in what is likely the largest transaction of a person's life.

As to compensation in the real estate industry, I'm probably an outlier among my peers. For what could be thought of as a "typical" residential real estate transaction (say properties under $800,000.00), I don't think a represented Seller having to give up (pay) 7-8% of the value of their house/property (this includes closing costs, etc. to get to 7-8%) to sell their home is justified by the services rendered. A sample/example transaction would be: Property Sale Price $700,000.00 - Commissions/Compensation to Brokers/Agents = $42,000.00. With access to the internet, ease of operation in listing a property with the mls, ease of getting professional photographs of the property for under $250.00, ease of creating a comparative market analysis in a matter of minutes, ease of using TREC forms, ease of putting a Supra box on the property so you don't have to go show the property, ease of contracting out the setting up an appointment time to view the property, etc., the amount of time a seller agent spends on a typical transaction is rather minimal in comparison to the compensation received. Hourly Compensation Example - 30 hours spent on the transaction (often less than 30 hours in reality) / $21,000.00 = hourly rate of $700.00. Broker would share most of the fee with the Seller agent. The Buyer Broker/Agent usually spends more time on the typical residential real estate transaction so the hourly compensation rate would be reduced.

Personally, for various reasons I have sold client's properties for free or greatly reduced rates, and for several years I have thought about a fee/rate schedule that would be fair to the client's as well as fair to me as a Broker. I still haven't settled on a one size fits all fee schedule, however, I'm definitely well below what is "typical" in the market. As a full-blooded Aggie, I'm also pondering branching into Bryan College Station to help out fellow Ags in the area and would welcome thoughts on what people on this board think is a reasonable rate/fee schedule for the typical residential real estate transaction.

With the significant Missouri judgment against NAR/Keller Williams, et.al., and a similar case already being filed in Texas challenging the way real estate transactions are conducted via brokers/agents/mls companies/real estate associations, I think business as usual will change in the near future as to how Brokers handle listing properties and as to how fees for services are calculated and earned. Good, competent representation is a must in any real estate transaction. The bigger question is what is fair for the Broker/Agent to charge for such services and how access to list such properties is regulated.