by Budge Huskey
Chief Executive Officer, Premier Sotheby’s International Realty
conduct Your Own Research Rather than Falling for What’s on the Screen
Long-time residents of Sarasota will not doubt recall a lawyer who was among the first to blanket the airwaves with an offer to refer viewers to an attorney. For free, even! If you were like me, you viewed with comical cynicism, wondering who in the world would use an 800 service to select the person representing them is such matters of consequence? Apparently, the joke was on me as that same attorney was soon building an enormous Gulf-front mansion on Siesta Key while I was still schlepping my beach chairs down to the sand from my car in the public lot.
To this day, I still wonder why someone would use such a referral service, but it’s clear I must be in the minority. Since that time, it seems that similar referral schemes have cropped up across a spectrum of services. And yes, real estate was not to be spared.
Turn on any one of numerous television programs in the morning, and you’ll see commercials from multiple sources offering to refer you to a “top real estate sales professional in your market who will sell your home in as little as one day while saving you thousands in commissions!” And all it takes is a quick, toll-free call. Sounds pretty good, right? I mean, isn’t that what every seller wants?
It is no surprise that I have an opinion on such referral services, as I find them to provide few of the purported benefits; they are misleading at best. Let’s explore why.
First, the real estate agents receiving these leads are generally not identified based on quality of service or expertise in the local market. Rather, they have merely agreed to pay a referral fee ranging from 25-30% of their commission to the third party referral source in exchange for placement on the list. Often, these agents don’t have a book of their own business, but are simply grasping for any opportunity they don’t have to develop on their own. I would submit it’s the exact opposite of the process a seller should follow to hire a professional to represent what may be his or her most valued asset.
Second, the purported offering of savings cuts both ways. Since the referral service company is taking 25-30% of the commission off the top without performing any real service or adding any value, the dollars available to the assigned real estate company or agent are compromised. Less money coming in means less money going out to cover marketing expenses to promote the seller’s home — and less money for unique services to deliver the elevated experience sought.
Further, the commission savings represented is generally possible only by offering no commission, or at least one that’s reduced, to a cooperating agent for showing and selling the home. While everyone likes to save money, when selling my own property, I want to ensure every buyer’s agent in the market is highly incentivized to put my home on their short list to show. Considering how much more money an agent generating multiple offers may obtain for a seller above and beyond a point in commission, it’s pretty much a no-brainer in my world.
Third-party referral services are just one example of how opportunists have jumped into the real estate game, attempting to garner a percentage of industry dollars without ever having to conduct any of the activities typically associated with a real estate professional. And why not? Why do any real work when you can merely obtain a toll-free number or a website and have the cash pour in?
Perhaps the most prolific third-party interlopers are the online aggregators such as Zillow and Realtor.com. Many years ago, Realtors fell for the promise of free advertising for their listings and gladly handed over their inventory content for good. It was viewed as a great opportunity for brokers without scale and the money to invest in a first-class website to tell sellers their homes could now be found by all.
Years later, and what have we now? Consumers love the ability to obtain so much information and all inventory in a single site, yet with International Data Exchange rules of Multiple Listing Services, that is true of almost all real estate websites run by brokerage companies. The big difference is accuracy and transparency.
If you go on one of the portal sites, finding contact information on the actual listing agent and company is the modern day equivalent of a search for the Holy Grail. What you will see, however, are “recommended agents” or “buyers’ agents” whose information is front and center. So, who are these preferred agents? You guessed it. They are often the same agents linked to the referral companies — with little to no specific knowledge of the home or community and likely no significant track record. But why should that matter if they are willing to pay for online impressions or a referral fee at time of closing? I believe it does.
There’s a saying in real estate that everyone’s heard. It’s location, location, location. And while real estate has become a global industry where the best brokerages leverage networks of contacts throughout the nation and the world, it has always been about the local agent in your neighborhood who will take your calls seven days a week and who isn’t paid a dime unless the outcome is a success.
Technology is a wonderful advantage is real estate, and consumers have never been more empowered to make informed decisions. For that reason, I’m still so surprised at the number of people who entrust their business to an 800 number or a web portal, and ultimately, an agent rarely an expert for the role selected.
If you’re anything like me and conduct your own research rather than falling for what’s on the screen when needing a professional such as an attorney or a doctor, hopefully you’ll extend a similar level of diligence to your next Realtor. Or you can just dial 1-800-ask-Budge.