I am always amazed at the things people do to make a good living. I mean this in the most open and generous way: My own skill set is limited — as is my imagination — so when I meet people who do things far afield of what I do, I am eager to learn. I am also somewhat in awe at those who can excel at things at which I’d surely fail.
Just this week, I have spent time with successful people in the following pursuits: Technology consulting, software development, real estate sales, building construction and contracting, the law, nuclear physics innovation, advertising, medical sales, and product innovation. Also, architecture, store management, and payments services. Not all these people are equally intelligent, successful, or gritty but I had much to learn from each one. Moreover, if I needed any of the services they provide, I would be happy to pay top dollar for the best.
What irks me, therefore, is the common assertion made by otherwise decent people that “what the other person does” is somehow of low-value or trivial. We hear this too often about school teachers (yes, I am serious), farmers (who are the butt of “them and us” jokes), and other professions. In my circle, I hear this often about real estate agents as well (“They hardly do anything and get 6%!”).
In a later article, I will devote pages and vent my spleen at those who thus insult teachers and farmers, but here I will do so in favor of the much maligned real estate agent.
For most families, a house is the largest single investment they will make and the largest source of both equity and generational wealth transfer. In addition, where one lives defines much regarding the quality of life: Neighbors, schools, safety, air quality, commute times, and other key variables. As such, the process of buying the right house is crucial to get right. Most of us are not trained in the arcana of zoning laws and education districts nor do we understand what specific elements of a house are high-risk and which retain value. Most of us are not trained in the legal process and do not know all the questions to ask. Most of us, therefore, do not understand the full balance of risks and rewards that defines the home-buying and selling process.
When we face this problem in other fields, we all know what to do. We hire electricians, plumbers, lawyers, accountants, consultants, and other experts to help us navigate the shoals of processes we do not understand. When we do so, we know we are going to have to pay and at times pay handsomely. For trivial things, we expect to pay lesser amounts and for important or high-impact things we expect to pay a great deal.
Why, then, does this understanding not apply to real estate agents? Why do we think that what they do is easy, obvious, and low value-addition? Is this fair?
I surmise that this is such a common, if unfair, perception for four reasons:
1. The sheer amount of “total commission,” not the percentage, but the sticker shock on actual number.
2. The sense that all an agent does is what the client “sees” versus what goes on behind the scenes and the level of knowledge goes into advice, pricing and negotiation.
3. The notion that “since a lot of people have homes” that buying and selling them cannot be such an abstruse task.
4. The “stress-creep” involved in buying, selling, negotiating and moving.
Each of these has a professional rejoinder but it is unclear if that is the right path to take to change perceptions. Still, if one wants simply to “win” the argument one can respond as follows to each of these issues.
1. Total cost: There should be no sticker shock since the terms are set from the start and, further, the buyer or seller initiated the relationship because of the need to rely on another’s’ skill set.
2. Good agents do a lot more than simply show houses. They do extensive research, bring to bear years of knowledge of neighborhoods, price fluctuations, and other variables, and negotiate on behalf of their clients with vigor. They also absorb a great deal of risk as they are not “paid along the way,” only after a transaction is done.
3. Simply because many people have homes, does not mean understanding the market is easy. Buying a house is not the same as buying a car and the impact of making a mistake in the process is far more than in any other purchase or sale.
4. Projecting one’s own stress on someone “in your camp” is understandable (even if unfair) but no excuse for suggesting that the other person adds no professional value.
But, as I said, logic does not always change or dispel perception.
What we need is more empathy and understanding of what another person, in this case an agent, has to do to create a good outcome. We do not begrudge paying others for their skills, just as we hope to be paid for our skills. The same understanding we want when we bill someone for our services has to be applied to a real estate agent.
Surely, there are some agents who do little to earn their keep. But that is true in any profession and the rotten one does not apply to the whole barrel. Surely, there are instances in which an agent’s compensation can seem out of line with the work, but there are many times when an agent has sunk one hundred hours into a process that yields no income, only expenses.
Finally, the numbers are not always what they seem to be. From what I understand, the average “total” commission is more like 5% and all agents have fixed costs that eat into their profits.
Again, the math might or might not matter to any individual. But the key point is to respect the skills others have and to be humble enough to know that each of us needs help when it comes to large decisions that we are not trained to make.
