Homebuyers: Watch Out for Bad Advice from Ignorant Reporters
We all know that sensationalized news stories sell magazines. But one reporter has gone too far by unjustly bashing REALTORS - of course, as a REALTOR, I take this personally and am offended.
But the worst part is that this reporter is giving false information to consumers - and not only that, but if people actually follow some of his advice, they will clearly be harmed. I can only hope that anyone who reads his article will realize the absurdity.
Stephen Gandel of Money Magazine flaunts his foolishness in the article, “Is your realtor on your side?” (Yes, he also failed to use the proper REALTOR trademark.)
The subtitle of “Make sure your agent gets you the best house at the best price” indeed has redeeming qualities. After all, any of us hard-working REALTORS would agree that this is our job and we strive to do it well.
But instead of providing homebuyers with helpful tips on choosing the best REALTOR or avoiding common pitfalls, Mr. Gandel chose to bash REALTORS as greedy and “susceptible” to putting their interests above their client’s interests.
The article focuses on the recent trend in many markets where additional incentives and higher commissions are being offered to buyer’s agents. It’s tough to sell a home now, so it’s no wonder that builders and sellers are working a little harder and paying a little more to get their homes sold. (The reverse is true in a seller’s market, where no incentives and lower commissions are often seen.)
Is this dangerous to homebuyers? Mr. Gandel says yes because this just has to mean that agents all of sudden care nothing about the clients they work with and only about those extra dollars. Hogwash!
Every business offers incentives and promotions when sales are down to promote their products over a competitor’s. Is it possible that a REALTOR would be motivated to show a particular home because it pays a higher commission? Sure.
But that doesn’t mean the REALTOR no longer cares about the client’s interests. No homebuyer is going to purchase a home they don’t like. And a REALTOR is motivated to find the right home for their buyer because they don’t get paid at all if they don’t. (Silly reporter!)
Incentives are also good news for the buyer because the seller is more motivated to sell, will often have a better price, and likely be easier to work with during the escrow process. And many sellers offer incentives to both the buyer and their agent.
Mr. Gandel practically makes it a crime to earn a commission. I suppose only reporters like him are allowed to earn an income for their work. And that he never has and never will accept a bonus or a pay increase, right?
What other professional gets paid solely on performance and only upon completion of a deal? And what other professional often works for free because of flaky clients or deals that fall out through no fault of their own?
Do you think Mr. Gandel told his employer to pay him only if people liked his story? And then only if enough advertisers chose to purchase spots in that issue?
The bottom line is that most REALTORS work very hard for their clients and their clients are better off for working with them. REALTORS are people with families and mortgages just like everyone else — who deserve to get paid for a job well done.
“Go it alone” rather than work with an agent, Mr. Gandel advises his readers. In most cases, it costs a homebuyer NOTHING to work with an agent because the seller pays the commission (Mr. Gandel fails to mention this benefit anywhere in his article.)
A home purchase is likely someone’s largest financial investment and carries a good deal of financial and legal risk. What a great idea, Mr Gandel! Instead of advising folks to get FREE representation from a licensed expert, just tell them to wing it and hope for the best.
“…most agents work for sellers. Now, even more so.” the article states. Don’t they teach “fact-checking” in journalism classes, anymore? You’re dead wrong, Mr. Gandel. Every state has laws regarding agency and most states now have very defined seller or buyer agency distinctions.
You see, the truth is… now, more than ever, agents either represent the buyer or the seller exclusively. Agents owe a fiduciary duty to their client, regardless of what they are paid.
That is why the author’s advice for a homebuyer to “go it alone” or go directly to a listing agent is so misleading. The listing agent works for the seller and is interested in getting the home sold quickly for the highest possible price; if Mr. Gandel is worried about a buyer paying too much or not getting the right home, his advice could most definitely harm the buyer in this situation.
And how will that unrepresented buyer feel when they find out that beautiful field of flowers they loved across the street was recently purchased by WalMart? Or that the convenient, neighborhood school is being torn down so a larger facility can be built? And that their kids now have to be bussed across town for school - to a high-crime neighborhood, no less?
A buyer working with a REALTOR would have the benefit of knowing such things before it’s too late. And there are countless other disclosures and material facts a buyer might discover… IF he was working with a REALTOR.
The other two techniques Mr. Gandel recommends are for buyers to “set the fee” or “put it in dollars.” Basically, he advises a commission cap or flat fee that the REALTOR would earn for their service to the buyer. However, he fails to mention that REALTOR services are almost always provided at NO COST to the buyer.
Does he really think that asking someone to take a pay cut motivates them to work harder for the client?
There is certainly nothing wrong with negotiation of both fees and levels of service between agent and client if both parties agree. Some REALTORS are already offering rebates, incentives, or extra services to their clients.
But when buyer’s agent services are already FREE to the buyer, it is MORE important for buyers to work with the agent they are most comfortable with and who can best meet their needs.
And what is wrong with someone being paid well for great service?
The author oozes concern about the poor, unsuspecting homebuyer who might work with an agent who won’t be objective or who “forces” them into the wrong home because of a higher commission. Now Mr. Gandel is offending the intelligence of his readers.
The truth is that buyers are more informed and have more resources today than ever before. Buyers can search the Internet for homes, REALTORS, comparable sales data, local builders, and more. It’s tough for any agent to “hide” available homes or price data from buyers these days.
And, yes, Mr. Gandel, I am sure there are greedy and unethical real estate agents out there in the big, scary world. Just as there are in ANY line of work. Such as news reporting, for instance.
There are many benefits for a homebuyer to work with a REALTOR. For starters:
- REALTORS have access to more listings and search features to help narrow down the right home.
- REALTORS have access to homes that are not yet advertised and are often the first to know about new developments in the area.
- REALTORS work to end housing discrimination and often give back to the communities where they live and work.
- REALTORS adhere to a strict code of ethics.
- REALTORS have access to the most current and most accurate sales price data to help you determine the best possible purchase price for the market.
- REALTORS have a network of reliable professionals such as mortgage consultants, escrow companies, home inspectors, local contractors, and more.
- REALTORS assist you with the due diligence process which can include the negotiation of repairs, discovering defects, termite inspections, zoning and use rights, HOA restrictions, easements on the property, water rights and conditions, and more.
- REALTORS have access to relevant information and a duty to share material facts to help you make informed decisions.
- REALTORS have the knowledge and experience to guide you through the homebuying process and protect you from harm.
- REALTORS have access to their state’s “tried and true” contracts and forms needed to complete a real estate transaction.
- REALTORS are the best people to objectively guide you through an often overwhelming process and to help you resolve issues and move the transaction through to closing.
In this market, the best asset for a homebuyer is a great REALTOR with the negotiating skills and resources to find the best home possible… at the best price possible… and with the fewest problems possible.
You would think that a journalist would take the time to check there facts. Then again why should they bother? Talk about someone that only cares about their own interests…write up anything call it an article and get paid. Who cares if a buyer follows his idiotic advice and costs themselves thousands of dollars by not having an agent.
Thanks Mr.Gandel for showing us an example of a journalist that doesn’t bother to do any research or fact checking. It would take less then two minutes to find out about buyer agency and that a buyer agent works for their buyer, not the seller.
February 8th, 2007 at 12:38 pmHey Ken,
But he doesn’t have worry about the accuracy of the story. He gets paid regardless of results.
Hmmm, maybe we should try that…
February 8th, 2007 at 12:43 pmLOL. Would love to get paid no matter what. If I lied like he did I would end up in court and get fined by the state.
February 8th, 2007 at 12:46 pmPerhaps he is working for the wrong publication. I’m sure the World Daily News or the Enquirer is hiring. He simply went for the “cheap” laughs or the “gross out” as legitimate writers would describe it. Where are the actual facts to support his arguement? Does he own a home? Has he tied to buy a house without a realtor? Sell one? Does he know for instance, that there are SEVERAL national studies that show that a home buyer is better off using a realtor? That on average people who try to sell their home on their own usually end up using a realtor and actually make more money by doing so? Not to mention the legal protections afforded a home buyer by using a realtor. I think he is confusing his colleagues with realtors. I’m sure if he had bothered to contact the NAR, they would have been happy to provide him with plenty of statistics. Wouldn’t it be great if reports had to be held to the same standard of ethics as realtors?
February 8th, 2007 at 1:05 pmAlso thought it would be worth adding that you can Digg the post here
February 8th, 2007 at 1:09 pmCharles,
Great point. I too wonder if journalists subscribe to a canon of ethics…
I wonder if they carry Errors & Omissions Insurance?
February 8th, 2007 at 1:17 pmAnd vote for it at Netscape here.
February 8th, 2007 at 1:37 pmWhat I find offending is the fact that this writer has never bothered to speak with a realtor.
When I work with a buyer or seller, I give them my true opinion of what I think based on my 16 years of experience whether or not I think it will affect my commission or not. I don’t even look at the commission until I open my check. I have never steered a client one way or another nor will I ever do that.
We Realtors have a strong code of ethics that we must follow and our boards take complaints very seriously, as well our state agency assesses big fines for agents that break the law.
What about being ethical in the way that reporters report. Mis-information sells magazines I guess.
February 8th, 2007 at 2:07 pm[...] Today I opened up my Google Reader and saw a post on FamousAgents.com about a journalist who slammed the real estate industry by advising home buyers to go at their process alone! Well the little red flags went off in my head…what do I do when I hear about one of our clients getting bad advice (how many times have I had to tell someone hidden text is not the next best thing? hehe). So I figured in an industry so very close to our hearts and yours that you would want to know about this, and jump in with your comments. [...]
February 8th, 2007 at 2:49 pmThanks for your post! I think it is important to respond to misleading stories like this one. I mentioned this post to our readers on our blog.
February 8th, 2007 at 3:04 pmAnna, Thanks for spreading the word.
February 8th, 2007 at 3:15 pmI have been a Broker in the Real estate business for 6 1/2 years now and have never pushed a client to buy for my own personal gain. I consider myself an educated consultant. I take offense to the article!!!!
February 8th, 2007 at 3:25 pmMr Gandel’s advice about buying one of your largest investments without great counsel is preposterous! Would you pull your own wisdom teeth, treat your own cancer or perhaps perform open heart surgery on yourself?????
I think everyone that was misled by Mr. Gandels article should sue him when they have a major problem with their new purchases because of his misleading advice.
Thank you for everyone’s support. Keep spreading the word.
February 8th, 2007 at 4:10 pmI enjoyed this quote from the article:
2. Set the fee
“If you’d rather use a broker, have him put in writing what percentage he’ll get paid and guarantee that it will be the same for every house.”
Personally I never look at the commission offered, I am more interested in finding the right home for my clients. But this comment could result in the agent receiving a higher commission than the commission being offered by the listing brokerage.
“That way your broker will have no incentive to show you overpriced homes or discourage you from negotiating the price down, since she’ll get paid the same either way.”
Doesn’t the author of the article realize that a good real estate agent will pull up comparative properties for the potential buyer and thereby the buyer actually see the home is overpriced?
The author does not realize that real estate brokerage agency can vary greatly from state to state? As well as some states specifically state that a broker can not represent both the buyer and seller?
Finally, he does not tell the buyer to ask the real estate about the laws of agency within a state nor ask how the real estate agent will represent the buyer?
The author really needs to do more research - I wonder if we can sue him for defamation of character as a class action suit? LOL
February 8th, 2007 at 5:49 pmMy thoughts posted.
February 8th, 2007 at 6:02 pmWhat has happened to unbaised reporting? It seems that has gone to the wayside with research and fact checking. It was nice how he just spewed out the information in such a way that the consumer is even less informed. It seemed like he read a real estate examers guide from the 70s or something then thought the industry hasn’t changed since then. The web has created a spot for everyone to vioce their opinion but Gandel’s advice is so off track it is disturbing.
February 8th, 2007 at 6:34 pmI dunno if I agree quite as much.
If the co-broke on a $785,000 house is $70,000 don’t you think the buyer should know about that? Did the buyer agent really perform $70,000 worth of value?
Is the article completely free from bais? No, and I disagree with some of the tone.
But how buyer agents are paid should be up for a better debate than this.
February 8th, 2007 at 7:05 pmDear Andrea,
I am a Mortgage Banker in Chicago. I work with many Career Realtors.
After reading your Blog, It just goes to show how undervalued and distorted this “old haggard” vision of the neighboorhood realtor is.
Rather than underscoring the many benefits of working with a great “progressive” realtor, he apparently took some pretty “cheap” shots at one of America’s oldest and greatest living Icon.
I am shocked that this Journalist still has a job. Keep up the great writing and please feel free to stop by my blog and post!
Respectfully,
GC
February 8th, 2007 at 8:36 pmIsn’t it amazing that an editor actually let this article go public?
I love the way you said it “is so off track it is disturbing.” Ain’t that the truth!
February 8th, 2007 at 8:48 pmGreat point about how a buyer might actually pay more than the co-broke offered. So… instead of the buyer receiving service for FREE, now the buyer has to come up with some cash in addition to everything else.
February 8th, 2007 at 8:55 pmWow! $70,000 for selling a $785,000 home. That’s almost 9% - where are those deals at???
February 8th, 2007 at 9:00 pmIt is a shame this writer does not take the time to research the facts of his story.
As REALTORS much of our time is spent researching and finding the best home for our client regardless of the commission or incentive being offered.
I look for the best home for my clients, so that they completely satisfied with the home and the home buying experience.
Many times I continue to work for my clients after escrow has closed and I have been paid. I do so without a second thought. My goal is to be their Realtor for life. I have also made some great friends in the process.
We know how hard we work and it is evident that this writer is quite lazy!!
Jamie
February 8th, 2007 at 9:03 pmAthol,
That is an unrealistic example. I believe you know that. You state that buyers agents should be up for a better debate than this. To begin said debate, let’s not jump to sensationalist extremes. Fair enough?
Ok, I’ll play. Let’s begin…
Even if the seller was offering a huge bonus to move their house, are you saying that it is unethical for an agent to show it? I’ve shown houses with large bonuses before. It’s really very simple to remain 100% loyal to my client. It’s called disclosure.
Mr. & Mrs. Clients: the seller is offering the agent who finds the buyer for this house a rather large bonus. In fact, Mr. & Mrs. Clients, they are offering $20,000 more than some of the other listings I’ve shown you. Of course, should you decide to buy it you would see this on the settlement statement.
Why is it a crime to get paid well? Would you care to hear what my Cardiac Surgeon charged me for a one-hour surgery? I guess he must be a crook too.
Since we are on the topic of pay scales…how much is a reporter worth these days? Too much, I suspect.
February 8th, 2007 at 9:22 pmAside from the unrealistic 9% example, what do you think about the other points in the article, Athol:
- What about the author’s advice to “go it alone”?
- And that almost all agents work for the seller? (He’s only about 15 years minimum behind most state agency laws.)
- And what exactly is a REALTOR worth? Aren’t some worth more than others?
- If a REALTOR brings a buyer to a home that’s been a tough one to sell, isn’t a bonus in order?
February 8th, 2007 at 9:31 pmI already said I thought the article was biased and I disagreed with the tone.
All I said was if the buyers agent is getting paid $70,000 on a $785,000 property - That should be disclosed to the buyer.
Not sure why I am being attacked for saying that it should be disclosed to the buyer. Specially when Jim’s comment agrees with it.
Not sure why I am catching heat for discussing the high payouts some home builders offer either - that is what the orginial article is about. Though the author did blindly apply it to all transactions.
I’ve agrued mulitple times on my own blog that realtors should be paid, and paid well, for what they net their clients. On balance I think a massive co-broke split can net a loss for a buyer client.
February 9th, 2007 at 7:22 amYou forgot the ® after every time you used the work “REALTOR®”, the lawyers from the National Association of REALTORS® will be in contact shortly without a doubt.
Oh yeah, BTW, the word “Realtor” is not an acronym it’s lame to capitalize it.
February 9th, 2007 at 12:00 pmHi Robert-
Actually, the register mark is preferred, but NOT required in certain areas such as Internet posts.
And all caps is the NAR’s preferred method of their trademark.
Maybe you should tell them you think it’s lame and see what they say?
Check all the rules for the proper use of the trademark on realtor.org, but here is a snippit (small case is acceptable for url names):
When the preferred all-capital form is used, the federal registration symbol “®” must also be included unless its use is not possible. The preferred form would be:
REALTOR®
REALTORS®
REALTOR-ASSOCIATE®
Permitted (but only when use of the “®” is not possible):
REALTOR
REALTORS
REALTOR-ASSOCIATE
Also Permitted (but not preferred):
February 9th, 2007 at 4:10 pmRealtor®
Realtors®
Realtor-Associate®
Athol, no one is attacking you - we are just debating your comments. We love and welcome your participation.
You did say this topic ought to be up for more debate. So are we having fun yet?
So, you agree that REALTORS should be paid for their services - and, if the situation allows, paid well. Great.
I am a little confused why you think a large commission means a net loss for the buyer.
It is the seller - not the buyer - netting less. Or in some cases, the listing agent would net less.
The buyer’s agent would show comps and sales data to the buyer so that the buyer can decide what is fair market value and what to offer on the home. If the seller chooses to net less by paying a bonus, how is this possibly affecting the buyer?
February 9th, 2007 at 4:37 pmI’m sure they are well aware of it’s lameness, of course the entire origanization is terminally lame.
The entire purpose of the organization is to extract money from real estate agents.
Of course in order to do this they have to try to convince those agents that there might actually be some benefit to be gained by paying the money.
Which brings us to the pathetic and laughable ad campaign that they run, theoretically to “educate” the public about how freaking awesome a real estate agent becomes the minute he writes a check and gets to use the “REALTOR®” on their business card. Of course the fact that nobody is going to buy this load of bull is completely irrelavent, all they have to do is convince enough gullible agents that they will lose clients if they don’t pay.
I tell you, the whole “REALTOR®” ad campaign is so stupid and annoying that the next time I have need for a real estate agent I will be less likely to contract with one who has “REALTOR®” on their business card because it will give me reason to question their intelligence.
February 9th, 2007 at 4:50 pmYou have no idea the things that NAR and the local associations do to help promote homeownership or you wouldn’t have made that comment. Without some of their efforts key bills would have never passed that have allowed for easier access to homeownership for all income levels, races, and ages. But feel free to hate something you know nothing about.
Does being a REALTOR® make an agent better then the next agent? Maybe, maybe not, but it does give them access to way more homes in most markets. It also gives them the best way to get your home sold quickly and for top dollar in most markets. That alone is worth every penny we pay in dues, not that the dues are really all that much anyways.
February 9th, 2007 at 7:00 pmWhile in Chicago, her article does not make too much of a difference due to low commission rates and one of the lower metropolitan area prices it is OK. On the other hand, I have heard in high price places such as San Diego where house values double, a buyer agent’s rates can go up to 5 or 6% rather than the average 2-3.5%. While established agents like ourselves do not give in to such incentives as we value our referrals more than anything else, I would not find it surprising, if the newer realtors who are simply overwhelmed by competition (due to an inflation of realtors compared to growth in adult population and simply financial problems taking the easy way out.
My advice is always go with the established agent who has been on the market for at least more than two years and make enough income for themselves.
February 11th, 2007 at 8:43 am“But he doesn’t have worry about the accuracy of the story. He gets paid regardless of results.
Hmmm, maybe we should try that… ”
That’s is what Flat Fee Brokers do. That way, they don’t have to live with the results either. We live results and get paid accordingly.
February 11th, 2007 at 9:21 pmFlat fee brokers charge per service, maybe we should take it to the next level. This is probably what most people think would save the public money (LOL). Here is the next evolution to flat fee services in real estate should look like:
When someone wants to look for property they pay up front a non refundable deposit for our time.
We get paid if the buyer buys a home or not, purely based on our time and other efforts.
When they don’t know what a house is really worth, they will have to pay for that service.
When they have questions they pay for our time. If the question requires research for an answer the research time will need to be paid also.
If they end up looking at home after home because they don’t really know what they want, no problem as we would get paid by the showing.
When relocation buyers that don’t know the area and need to be driven around for hours showing them where things are in multiple towns, again no problem as they will pay us by the hour.
When the buyer calls us or needs showings after 5pm that is fine, but there will be a higher per minute fee as it’s after normal business hours.
Naturally there is a 15 minute minimum charge to all calls.
Need a referral for a trust worthy loan officer, attorney, repair person, …. That is fine, but we will have to be paid for our time.
Call us next year at tax time looking for your closing papers because you can’t find yours, no problem that will be a charge for our time and per page for the fax.
Faxes and emails will be charged for. Not just the time to send, but also flat fee per communication to cover our overhead.
Need to sit down and talk about your options for a couple for hours. That will be a flat fee for the room that we will be using, plus our hourly charge.
Could add so many more things it isn’t even funny, but feel that people should get the point with just this small list. Then again people like Mr. Gandel most likely think that we should just lump all of this together and only charge $2k for our time, less then a 15 year old gets paid to flip burgers based on an hourly basis. Does he want a pimple faced 15 year old providing advice about his largest financial investment?
Must say that I think that is the business plan for the future. Would make thousands more per deal by charging based on the actual efforts needed for each deal and more important by charging those that don’t actually buy.
February 12th, 2007 at 9:17 amInterestingly, the precise reason why I cancelled my Money magazine subscription back in 2001 was because of all the money I lost in the stock market taking their moronic writers advice.
I’m wondering how many people have lost money chasing their real estate predictions?
Most importantly though…. how did you like the Rebate brothers article in the Chicago Tribune’s real estate section on 12/18/2007? Wow…. blatantly using a system that cost agents tons of money to develop for the benefit of the sellers and then rebating 75% of the commission to the buyer.
I would understand if these guys spent a ton of their own money developing their own web listing service for sellers… but using the MLSNI to rebate commissions… I don’t know what’s worse…. rebating (or kickbacking as we call it in Nevada) or allowing them to do it.
February 19th, 2007 at 12:03 am[...] “Is your realtor on your side“ offers tips getting your real estate agent to work for you, and even suggests going without an agent and asking for 3% off the asking price. This inspired quite a discussion at the Famous Agents blog. [...]
February 19th, 2007 at 12:31 pmI posted a similar response to Gandel on Active Rain about a month ago. Good to see the Gandel fan club is not growing. =o)
http://activerain.com/blogsview/38785/Is-Your-REALTOR-on
February 24th, 2007 at 7:40 amOver the weekend Mr. Gandel stopped by blAAwg to comment. Laurie Manny, and Spencer Barron who was quoted in Mr. Gandel’s article, also had some additional comments.
Not all advice is good advice
February 26th, 2007 at 9:28 amAnna thanks for sharing the link. To bad he wouldn’t stop by here and try and defend his comments.
February 26th, 2007 at 2:02 pmOh, but the almighty and powerful Google has much to say, when trails of keywords are left along the way.
Has anybody done a Google search of Stephen Gandel’s name lately. Interesting results including, but not limited to, the blaawg link, and my follow up blog on page one.
http://activerain.com/blogsview/49147/MEDIA-MADNESS
Google Juice can be strong sometimes.
I had a Google alert within minutes of Stephen Gandel leaving his comment on blaawg. Went back to Chichi Ahia’s blog and cut and pasted Spencer Barons comment. I guess Spencer had Google alert set up also, because he came in minutes behind me.
There is joy to be found in Google.
March 17th, 2007 at 2:10 amProfit or not, big money or not, encouraging people to go it alone is just putting a big “kick me” sign on their back and sending them out into the school yard to fend for themselves. Whether or not anyone agrees with the idea of Realtors® making money off of bonuses and such, no one in this industry can honestly say that it is a good idea to have these buyers and sellers figuring out the details on their own.
March 27th, 2007 at 10:50 amI hope this page receives a lot of links from all the REALTORS out there that disagree with Stephen “I’m an Idiot” Gandel.
I’d love to see this post rank #1 for his name.
March 27th, 2007 at 11:29 am