Great blog, I really enjoyed reading your other posts but when I scrolled down to this one my hair kind of stood on end. First of all, I do agree with you on the building value through transparency and advocacy, especially in today’s grainy Youtube world - these days polish gets trumped by what seems more real most of the time, which is fine with me.

However, you hit on a few points that I think people get wrong about the real estate industry most of the time, and it boggles my mind every time I see it. Yes, I’m a real estate agent so am speaking from nearly 10 years working in the Seattle area.

You said, in reference to buying situations, “I believe even the most well-intentioned people are motivated by the commissions that are structured. Thus, you are at odds with your agent from day 1.” While technically that might seem logical, there are several reasons that actually doesn’t make sense for most agents (those who are in real estate as a career, not to just make a quick buck and then skip out.)

1. On the ethical side, there are plenty of agents who simply are honest enough to not let the amount of the commission determine how they counsel someone on a home purchase. They simply do the right thing because it’s the right thing. I realize some people reading this will be too jaded to believe that, but plenty of home buyers know from personal experience that this is true.

Misleading someone about the true value of a home is no different than hacking into their bank account and stealing scads of money - ultimately that’s where it comes out of, even if it’s down the road when they sell and get a smaller net proceeds check. If you think of it like that maybe you can understand why agents misleading buyers is not as common as you might think. And seriously, as adults, I think we all know enough to examine whether or not our actions are possibly being influenced by our subconscious.

2. On a completely practical side, even if someone has crummy ethics, what kind of business model is based on making a quick $300 or $600 by letting someone buy a house that’s $10,000 or $20,000 overpriced, when ultimately they then sacrifice tens of thousands of dollars in future sales and referrals? People are not stupid - even if they overpay, they’ll figure it out later. I’ve worked with people who did feel used by their first buying agent, and that’s the reason they were not using that person the second time around. The primary and repeat business I’ve gotten from those people, who do trust me, is enormous - the kind of money businesses do run on.

As far as Redfin goes, I don’t know if their agents are getting out more now, but the idea of sending people out there to get shown the listing by the listing agent (or worse, some other poor sod who has been lied to by the buyers who ‘aren’t working with an agent yet’ - how lame is that) runs completely contrary to what makes a buyer’s agent useful in the first place.

For non-investors, a successful home buyer is someone who buys a place they’ll love to live in and that will have great re-sale when it’s their turn to sell. People never need me to tell them which houses they like, but they often do need me to tell them which houses not to like - especially if they’re switching areas, like moving from Seattle to the Eastside. This goes for repeat home buyers too, not just first timers.

Nothing beats the experience of an agent who shows homes for 10 years and after every SINGLE one, hears from the buyers: ‘Here’s why we’re buying it, here’s why we’re not buying it, here’s why we’re almost buying it… except, or, here’s what we’re not wild about but why this other thing clinched the deal for us anyway’. Do that a couple of thousand times, and you accumulate a critical mass of knowledge about re-sale potential that can’t be learned from anything except that exact experience, and certainly can’t be useful to someone if the agent is sitting at a computer screen instead of walking through the house with the potential buyers.

I once had buyers call me because they were referred by a Seattle agent and wanted to write up a house right away. As soon as I walked in I could tell it was a stinker (a nice-looking, new construction stinker) and I tactfully suggested we go see some other homes to compare it to. They ended buying a much better home that they love, has appreciated extremely well and that they’ve been in for 7 years now. Years later they joked with me that ‘We realized later you were never going to let us buy that first house.’ They’ve also referred me so much business it’s ridiculous - business I would never have gotten if I hadn’t done the right thing, and instead just written up that stinker.

I don’t remember which home was more expensive (I think they were about the same), but here’s the point - I don’t care. It never mattered. The point was, they would have made a terrible investment and lost out on many tens of thousands of dollars that they gained in equity (yes, still) through the purchase of the other home. What kind of sleazeball would let people do that? I realize there are agents like that out there, but way fewer than you probably think - my opinion is more the norm than the exception. And, as I mentioned before, even from a purely practical standpoint it still makes sense for agents to do the right thing.

OK, I have typed FAR too long. Thanks for your post.

At least in the real estate business, there is a little more information about the fees involved. I’ve not seen a statement yet that tells me how much my financial advisers are making and when they’re getting paid.

Financial advisers also have a conflict of interest because, not only do they get paid no matter how my portfolio does, they won’t tell you to pull your money out to invest elsewhere because it hits their pocket book too. So they have no incentive to help you manage your money outside of investments where they get paid.

BTW, whats up with all the cats in your posts?

After dropping out of escrow, I took the CA Real Estate course at the local college just to become more knowledgeable. A number of students were there for the same reason. It made some agents uneasy, that I knew all of the terms and procedures, even though I’m not licensed. But, it made me feel a lot more confident.

We ended up buying our house directly from the owner, which was a huge improvement. We could just call each other up and discuss the terms. I didn’t have to have my agent call his agent to get something settled. Obviously, the seller and his wife were great people or else it may not have been such a pleasant experience.

And, the seller didn’t have to pay the 6% comission, which allowed for a lower selling price. Even though the comission comes from the seller’s escrow, the buyer still pays for it. And in the O.C. where I live, the 6% comission is a lot of money.

I believe the mortgage and real estate industries have a lot of conflicts of interest, based on the comissions. This can be incredibly unfair to naive consumers, despite the heavy regulation. As far as I am concerned, both of these industries are ripe for disintermediation. (cutting out the middle-men)

The idea is to bring better transparency to the industry, and help take unproductive cost out of the process (like agents paying for extensive advertising and promotion, paying for unproductive print advertising, paying lead generation companies referral fees etc.). The consumer can pay less and the agents can offset the reduced commission revenue with reduced cost and increased production.

It is a new service so I cannot report it as a huge success (yet). I am just trying to spread the word.

I too have great respect for Redfin and applaud their contribution. We are trying to help change the industry across the board so that consumers are not disadvantaged, intimidated or uncomfortable and do not overpay when they shop for real estate agent services.

Another market would the Stock Market Analyst Reports. These things cost a couple hundred, and don’t provide any more information than what can be found in a SEC filing. Also, few of them have Analyst Report Cards - IE how their projections have done vs the actual results. I certainly understand that the economy is a dynamic environment, but even in “stable” environments the consensus is usually off. The sad thing is a lot of the information and projections are given to them by the companies. OK, I will leave it at that.