Does the Real Estate Industry Need Realtors?

by Cooksquared

Real Estate Investor

Author website

Inspired by the glut of controversial posts appearing here lately, I thought I would add one more to the fire. In my recent browsing I stumbled upon a blog that asked a simple question, “Do we need Realtors?” That’s all. That was the whole post. While the questioned seemed relatively simple, the 1000+ (literally) comments made me think a bit harder about this question.

First, let me say that the comments came down on both sides. Many people screamed Yes and No for a variety of reasons, some valid and some simply ludicrous, but the most interesting point that came to my mind was what if someone asked do we need investment bankers? My immediate reaction would be outrage at the attack on my profession. After a bit more consideration, I would ask the more complex question, what has caused that question to be asked? What am I not doing to make my services indispensable to my client?

As an outside observer, I would like to turn this around to suggest what I need and then take a look at how well consumers view realtors meet their needs. Obviously, there will be generalizations here, so if they don’t apply to you, don’t take offense to them.

First, as a consumer I want a realtor to relentlessly try to get me the best deal possible. If I am buying a property, I would like a realtor to help me get the lowest price and if I am selling I would like the opposite. In order to assess this, I need a realtor that knows the market beyond printing out a set of comparable transactions. I would like to know the best blocks to buy and why my house should be valued differently than the house next door.

Realtors fall all over the map in this area; however, on the buyer side they really don’t cut the mustard. To start, the commission structure favors the seller. Most realtors will tout their ethics, but on more than one occasion I have heard and seen realtors take a price that was clearly inappropriate for their client (too high and too low). Even if every realtor was perfectly ethical, consumers see this as an unnecessary temptation; they don’t see it as only several hundred dollars.

Second, realtors need to be consultants, ensuring I find as close to what I am looking for as possible. If this means a quick sales or the right neighborhood, realtors should have enough connections to get me where I want to be. Furthermore, they should be willing to tell me if they just can’t meet my needs. Again, this goes beyond putting my price range in the MLS and handing me a print out. Talk to me about how good the school districts have been in the past and where they look to be going in the future. Show me how many new families have moved in or connect me with some of your previous clients in the neighborhood.

Again, realtors often lack the analytical skills to provide this service. Most consumers actually don’t know this, however. Until you have experienced great service from a great realtor, you would simply be under-whelmed with the services most realtors provide. Case in point, I asked my current realtor for some simple market information and she sent me their quarterly report wrought with poor and incorrect analysis. I might have thought nothing of this, if I had not had a great realtor in the past. Now I just chalk it up to another average realtor.

Finally, I want a realtor who can get me through the transaction as painlessly as possible. While the other things mentioned can be overcome by an active consumer, a bad realtor in this area really engenders negativity. There are countless things that can go wrong as the deal closes and most of them have nothing to do with the realtor; however, realtors are paid to be the experts in this portion of the transaction.

In this arena I feel like most realtors do a good job. I have had great experience with realtors, who have not done the top three things well, but have been able to make a closing happen. This is a very underrated skill, but should certainly be considered in this discussion. Is this enough for a competitive advantage? Perhaps, but it is being eroded quickly by real estate lawyers and other transaction specialists.

The last thing I want to mention are the outside factors affecting realtors and their perceived usefulness. It seems like I have harped on the National Association of Realtors for a week now, but I am amazed that they get paid to destroy their members reputation. Instead of being paid to think of industry innovations, they use their members’ funds to fight a fruitless fight against the Department of Justice and other organizations, as well as spout data to undermine their integrity and that of their members. Perhaps I should start charging realtors half the price to bad mouth them, then maybe I could put the NAR out of business. Too many members spout the party line, which has not been consumer friendly for quite some time.

In closing, I would like to point out that I fall more on the realtors are unnecessary side in their current form. If most realtors provided half of the services listed here well, I would change my opinion in a heartbeat. The realtors on this site (and many of those commenting) never cease to amaze me with their brilliance; unfortunately, they represent a minority of the industry.

While there may not be a better alternative out there now, there sure do seem to be a lot of people clamoring to create one.