"I'm Working With Someone Else, But Could You Just Help Me With..."

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I recently got an email from a reader that was coming into a property as I left. I dropped my card and we did the lockbox shuffle thing, then there was an email when I got back to the office that said, "That was ME with the other agent! What did you think about the property?"

No.

What I think is that if you're not going to give me the opportunity to earn the business, I'm not going to put my license, my insurance, and most importantly, my reputation on the line. I am in business to make money. I am not a charity. I earn my money by advancing your interests, by saving you more money than I cost, by preventing you from getting into bad situations, by warning you about them and knowing what protective or ameliorating actions to take before it all blows up. If you want to brag that you did it without an agent, you are not a potential client - but you're not someone I'm going to give free advice to, either. I don't begrudge "do it yourselfers" coming in to read my websites, but as I've made clear on many occasions, there's a world of difference between general knowledge and knowing how to diagnose whether there is a problem, if so, knowing what that problem really is and what is causing it, and knowing all the tradeoffs between the various methods of solving it. All of this stuff is "free" to clients, or at least, part of the package. But if I do it where you're not my client, not only am I possibly creating an agency relationship despite the fact that I'm not getting paid, but I'm removing some of the most important reasons why you should do business through me.

I'm going to decline to do that.

There seems to be a fundamental confusion on the part of many people. They want free information as to where the bargains are, free information on how to handle all the issues and problems that pop up, free opinions on the state of the property, free information on how to fix it up for maximum profitability, free this, free that, free everything. Then they turn around and say "Agents don't do anything!" Kind of like, "Other than that, Mrs. Lincoln, how did you enjoy the play?"

Agents aren't just about putting the property into MLS, putting up a lockbox, and on the buyer's side, opening the door so you can take a look, no matter how many people tell you otherwise. Maybe that's what the shake and half-bake agent at the do nothing discounter says, or the "do it yourself" real estate author trying to sell fairy tale books. There are people out there who are fully capable of working without an agent - but they don't make requests for basic information like these examples. They realize that by being unwilling to have an agent get paid, they're assuming these tasks and decisions themselves. Folks who are qualified and able to do it themselves are sharp cookies - sharper than many agents who benefit from large advertising budgets. I admire that sort of do-it-yourselfer for being sharp and dedicated enough to take on the difficulty of real estate as well as whatever else they do for a living. But if you're asking about basic questions, you're not one of them.

Agents are paid on a unique basis. It takes anywhere from weeks to months of work to earn a pay check, and the whole thing can fall apart at any time, and if it does we make nothing. Yes, it may seem like a large number of dollars, but we don't get to keep all of those dollars. Outside of the real estate field, I can think of exactly one example of this, and that's lawyers taking the case on a contingency basis, who make thirty to forty percent of every dollar they recover, not a mere 2.5 to 3% of the amount in question. By that standard, agents are ridiculously cheap. We're assuming all of the transaction risk, and we're at many times the liability risk of the legal profession, where even if your lawyer was a grossly incompetent tool who took bribes from the opposition, you have to get through members of a profession with more history of protecting fellow members than any other. Lawyers have written the law so that lawyers are less responsible to their clients than anyone else. But real estate agents get scrutinized by lawyers, so that is not the case with us.

What you're doing by asking for free advice is no different than asking for a free steak from your supermarket, a free cake from your bakery, or free legal advice from your lawyer. Actually, it's worse because there's no prospect of a business relationship or income from it, and there is potential liability. Your supermarket might occasionally give you a free steak because of your continuing custom and other purchases - mine's done it twice, actually. A bakery you go to anytime there's a birthday or other reason for a party might give you some freebies because you spend a lot of money there. Your lawyer might decide not to bill you for an unrelated discussion of another issue you ask about after the main business is done - but in all of these cases, it's due to an ongoing business relationship. If you asked for such favors without the relationship, the answer would definitely be "no". For an agent who gives free advice to non-clients, you're putting yourself on the line liability-wise, without the paycheck at the end. I'll give free consultations to prospective clients, I'll go over your situation and all of the other stuff. All contingent upon a successful transaction. If there isn't one, it's because you were working with another agent and they got the job done better and first, which is a risk I willingly assume. But the general doctrine in real estate is "If there is no transaction, there is no foul and therefore no liability" This is why slimy loan providers get away with so much, and if there's another agent who did the transaction, they're on the line, not me.

But if there is a transaction with no other agent, and I gave advice on it, I'm put my license and my pocketbook on the line. If I do that when I'm not getting paid, why should people use me as an agent? How the heck am I going to feed my family as an agent? Which means no more expertise for those who would use me as an agent, do a transaction, and get me paid.

This applies just as strongly to people who want to use other agents, but use my expertise. It's not for nothing that one of the recurring themes here is firing bad agents and learning enough not to hire them in the first place. There are way too many bad agents out there. Many of them are involved in a lot of transactions, because they do know how to market themselves even if that's the only thing they do know. Chances are that if you need to ask another agent's opinion, you should fire the one you've been with. My expertise is for my clients - you want it, you've got to be one of them.

I am willing to work hourly instead of contingent. But that requires you being willing to write a check to the brokerage right away rather than being able to lump it in with the costs of a successful transaction. It's not what people think of as being cheap, either. Most people aren't willing to part with that sort of cash, deluding themselves that they'd rather have what they think of as a "free" transaction. To be fair, it's usually much cheaper to sign the agency agreement where I get paid contingent upon a successful transaction. Doing real estate agency right is a very time intensive thing. I've usually got 200, 300, or more hours invested in a client before the transaction closes. Multiply that by my consulting rate (that some people really do pay), and you've got a very tidy sum; far in excess of what I make on transactions under a million dollars or so for even a 200 hour investment, and I don't do many million dollar transactions. And on hourly rate, there is no possibility of me not getting paid when the transaction fails to close because something made it fall apart. I did the work, I put in the time, you owe me the money. So when you really think about it, the normal small percentage, contingent upon closing, is an incredibly good deal for the client. Many people get freaked out when they see what agents make for a transaction, but considered in context of what a good agent provides it is both incredibly cheap and damned cost effective.

So unless you're one of those folks who really does know enough to do it themselves, make sure you've got a good agent who will do the work themselves instead of delegating it to a ten dollar an hour new hire fresh off the street. If they're not a good agent, fire them and find another - because the money we make is too much to spend for a bad agent. Finally, understand that what agents agents make is very much worth the cost of the money they make, and having them make that money is the price of having the end result of the transaction not only be more profitable to you, but reliably result in fewer and smaller problems down the line. If you're one of those who really doesn't need an agent, I'm not threatened and more power to you. But people who really don't need an agent don't ask me what I think of a property, how to price or market it, or how to handle the seemingly endless complicating details that can and really do crop up in most transactions. Nor do people with a good agent need to ask other agents those questions.

For everyone else, get yourself a good agent. If you're not in the areas I work, there are other agents that work on the same basis. Look around, read their websites - you can find them if you try. But if all the posts on the website are about sales and marketing, that's kind of a red flag that they're not really a good agent, and you should keep looking. Yes, sales and marketing are important for listing - they're what gets a property sold, or at least offers on it. But offers, even an accepted offer, does not necessarily translate into a sale, and it's a sale that sellers want. On the buyer's side, marketing means very little. Indeed, the ability to pierce and deflate marketing claims is one of the hallmarks of a good buyer's agent. Both buyer's and seller's agents need a lot of specific problem solving ability. And buyer's agent or seller's, if marketing is all they can do you need to keep looking for another agent.

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About this Entry

This page contains a single entry by Dan Melson published on May 11, 2020 7:00 AM.

Mortgage and Real Estate Red Flags was the previous entry in this blog.

There Is No Fairy Godmother for Loans is the next entry in this blog.

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