Real Estate Agents

Now that the house has closed and the realtors aren’t involved, I want to write down our experience with our realtors and with other realtors (who will remain nameless).
Our goal was to buy a house without an agent. We believed that agents don’t justify their cost and we like to do things on our own because we have fun learning how things work. We also understand that when you’re on the buyer’s side, everyone is working for you, even the seller’s agent, because without you the deal doesn’t get done and nobody gets paid. So why do we need two agents when the seller’s agent is on our side already?

Agents used to be required because there was never any way to list and find houses for sale other than using the MLS, which is a monopoly that only agents have access to. That’s no longer true. Thanks to the internet, sellers can list their houses and buyers can find them without use of the MLS monopoly or agents who have access to MLS listings. Agents do some legal paperwork, but even that just amounts to filling out standard forms. Redfin and Zillow can send  you daily emails of all new houses on the market. So why do we need an agent to find listings for us?

Most people think agents are free, especially to the buyer because the seller pays their commission. But they raise the cost of houses by 6% (3% from buyer’s agent + 3% from seller’s agent) — seller’s add 6% to the price of their house to account for their fees. We figured we could reduce the price by 3% by not using a buying agent. 3% is $9,000 on a $300,000 house, which buys a lot of beer, but it’s a lot more than that on a house in Seattle’s more expensive market.

For the paperwork, we decided we’d use a real estate lawyer from our law firm to review our offers and handle any legal paperwork through the process. Real estate lawyers generally handle commercial deals but residential deals are just simple versions of those, so they were more than capable.

We used Redfin and Zillow to find houses on the market. If we saw one we were interested in, we called the listing agent and set up a meeting to see the house. We ended up seeing a lot of houses that we shouldn’t have bothered with. A good agent on our side would have helped that because they’ve seen the houses already and they learn what we like and don’t like. An agent would have saved us a lot of time.

We eventually found a house that we liked and wrote up an offer. We sent it to the selling agent. The agent was also the daughter of the owner who had passed away last year, which seemed like a conflict-of-interest and the real estate agency would want another of their agents to list it, but is legal. We got our first taste of how antiquated real estate agents are… we sent the offer electronically but she requested that we fax it and that we deliver it in person to her at her office. So we faxed a copy and printed a copy to take to her office the next morning. We thought we’d just drop it off and go, but she asked us to sit in a room with her. We thought she’d want to do the negotiation in person, so we did. She sat down, opened the envelope and went page-by-page through the offer while we sat there watching her. She didn’t even read the pages, she just flipped through them, licking her finger between each page turn (a pet peeve of mine) and told us what each page was for. We wrote the thing, we knew what each page was for! I think she wanted to “hold court” and let us know that she’s a professional and that we’re amateurs. She also claimed that she hadn’t even looked at our offer price on either the fax or the emailed copy yet so she couldn’t talk about it. Not only is it her listing, it’s the house she grew up in and was the owner so would profit from the sale but she never bothered to even look at the price? Yeah, sure. She told us she’d get back to us and we finally could leave.

To arrive out our offer, we used 30 comparable houses that were sold in the last year to come up with our offer. Agents generally do comparables on just 3, the 3 that best support their high price, of course, but we did 30 to show how reasonable our offer was. Our offer was still at the higher-end of prices, but significantly lower than her list price. The next evening, she emailed us her counter-offer and called us to talk about it. Ours had to be delivered in person, but hers can be done electronically. She blathered on about how great the house is and how the comparable houses she picked (one which hadn’t even sold yet) justify her price. She talked for about 10 minutes and didn’t let us get in a word. When she seemed to be done, I asked “Do you want to hear our thinking?” and before I could finish the sentence, she yelled “NO! I know what you’re going to say. Your offer is too low and WE’RE NOT GOING THERE!”. I don’t know if she was angry or if she was just trying to be a tough negotiator. I said we’re too far apart on price so we wished her luck and that was the end of the conversation.

We thought the deal was dead, so we were surprised when our attorney contacted us the next day telling us that she told him that she gave us her counter-offer and that it expires in 24 hours. She seemed to think that we were considering it. She must have forgotten that she was yelling at us hours earlier. We emailed her reiterating our offer and told her that we weren’t considering her offer and would let it expire. She replied a couple days later, much more politely, suggesting that we both wait and if circumstances change, we could try again. Not likely. It’s been 4 or 5 months and she still hasn’t sold it and she’s dropped the price twice. At this point, her list price is more than 10% lower than her counter-offer to us and she’d have to sell it for almost her asking price, which is almost impossible in today’s market, to do better than our offer. She even keeps having open houses for it every few weeks to get traffic. The end of the selling season is fast approaching so she has to sit on the house until next Spring if she doesn’t sell it soon. I bet if the house wasn’t hers she’d have tried harder to sell it to us. Now she has to keep paying taxes on it and paying to maintain it. I still laugh at how she yelled “WE’RE NOT GOING THERE!”. When she does sell it, and for less than we offered, I might call her and yell “YOU WENT THERE!”.

The second house we made an offer on was on the market for a year. We wrote up an offer and called the selling agent. The seller is a recent widow and her son is handling the negotiations, so she asked that we give the seller 4 days to consider the offer — the norm is 24-48 hours. We agreed and sent the offer on a Friday with a 4-day deadline. The selling agent obviously shopped the offer around all weekend, which is why they wanted more time. This is considered unethical even among real estate agents. By Monday, they found another buyer who, of course knowing our offer, beat our offer. Their agent called our attorney to tell him that we lost without even giving us a chance to beat the better offer! That’s just plain stupid on their part.

We didn’t understand why this was handled so poorly, so we called the agent. I also found out the email address of the son doing the negotiating for his mother to ask him what happened. The agent blamed the son, claiming that he told her not to even talk to us about a second offer. He admitted they counter-offered to the other person but asked us to submit a better offer anyway. As I was emailing with the son, Gay was on the phone with the selling agent, the agent told Gay that the other buyer had just accepted their counter-offer. We knew before the seller did that the house had been sold. The son seemed to be a guy who thought he was a great deal-maker, the type who hate even losing a $1 on a better deal, and clearly did not know the house was already sold, so I decided to have fun with him. I told him we’d offer the list price. He was giddy with excitement and said he was going to call his mom and the agent to make sure they’re ready to accept our offer. A few minutes later he emailed me telling me to wait a few minutes because there was “a minor problem”. Yeah, the house is already sold, dummy! He was scrambling. He talked to his lawyer trying to get out of the deal and his lawyer harassed the selling agent threatening to sue. The agent called us immediately and asked us to submit a “backup offer” that would be accepted in the event the other deal falls through for whatever reason. It was fun to watch these people falling over themselves to get us to submit an offer when they completely ignored us 24 hours earlier.

After these two failures, we decided that not having an agent was working against us. The first selling agent would have been a lot more respectful and willing to negotiate with another agent. The second selling agent would have communicated to our agent rather than ignore us and call our attorney who doesn’t do price negotiations and isn’t familiar with the courtship-like games that agents play with each other. In retrospect, it all worked out well for us because we ended up with a better house in a better location for less money. But at the time, it felt like we just couldn’t buy a house on our own.

While we had been house-hunting, we looked at a couple houses that Bob Bennion was selling and we had some good conversations with him about what kind of house we wanted, the neighborhoods we liked, etc. We were very up-front with him and told him we were determined to buy a house without an agent. Yet he called us about several houses we might be interested in, houses he wasn’t listing. Cynics would say that he did this because he wanted our business, but no other agent we had dealt with called us to point us to houses that they weren’t listing. And we must have dealt with a dozen agents. Either Bob is smarter than other agents or he understands that his business is about reputation and relationships over the long-term rather than any one sale. I think both are true.

It didn’t seem that seller’s cared much about saving the 3% buyer’s commission (or the selling agent didn’t communicate that detail to them) so not having an agent wasn’t helping us with the price. Real estate seems like an old-style business with lots of hand-shaking, social interactions and reputations amongst each other. They know they likely won’t be dealing with us again, but they know they’d be dealing with another agent again in the future. Bob is so respected and well-connected in the Seattle market that we didn’t think any agent would risk screwing him out of a deal, so we’d at least get the chance to consider improving our offer in a bidding war. So we decided to give up and hire Bob as our agent. On the plus side, they do the paperwork that we had to pay our lawyer to review each time and we could waste less time looking at houses that Bob knows we shouldn’t bother with.

We learned a lot about the Seattle market from Bob and helped us understand the neighborhoods and the markets in each neighborhood. Bob and his assistants, Megan and Stacey, were great to work with. Bob gave us good advice through the whole process, handled the negotiation, communicated everything back to us and acted quickly. After we agreed on the sale of the house we bought, they met people at the house who we scheduled to see the house for a variety of reasons because it was inconvenient for us to get into the city from Vashon.

I still think the internet and sites like Redfin and Zillow will eventually replace real estate agents and people will buy houses they way they buy cars. But that day isn’t here yet and agents still offer a service beyond what a web site can do. And sellers still aren’t comfortable having showings for their house, they need a salesperson to say the right things, highlight the positives, downplay the negatives, etc.

Agents will need to lower the 3% commission. As real estate prices go up over time due to supply/demand and just plain inflation, agents are taking a bigger number of dollars away from sellers. Yet they aren’t doing any more work to deserve the extra money. In fact, it’s probably easier and much cheaper today to market a house on the internet than it was 10 or 20 years ago advertising in newspapers. A flat 3% commission can’t be justified forever. A seller can negotiate a lower commission with the listing agent because there’s competition among listing agents and that’s more common today than it used to be. And with more expensive homes, a smaller percentage of a bigger sale is still good, so listing agents will still be happy (less happy, but still happy).

The buyer’s agent commission is more difficult to lower. A buyer’s agent isn’t going to show buyers houses that will pay them 1-2% when they can sell them a house paying them 3% so sellers still have to offer 3% to the buyer’s agent. But thanks to the internet, buyers can be more aware of what’s on the market and force their agent to show them a house. If Redfin and Zillow et al disclose the commission to the buyer’s agent, all the better, because buyers will know why their agent isn’t showing them a house.

Businesses like Zillow and Redfin have a tough battle ahead and they’ll eventually win. Hopefully they will by the time we buy our next house.

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