Damage from the nation’s housing market is evident throughout the economy and has permeated financial markets. Now, add real estate agents to the growing list of victims, though few tears will be shed for them.
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Home sales will hit a five-year low this year, as wary home loan lenders cut back on mortgages for many borrowers, a trade group for real estate agents said Wednesday.
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According to today’s Charleston Post and Courier, Barbara Julius thought becoming a real estate agent would fit her busy lifestyle and still give her the income she sought.
But shortly after passing her exam last April, the mother of two realized selling houses in a slow South Carolina real estate market would be tougher than she thought.
With mortgage costs high and inventory even higher, prospective buyers were difficult to find, and thinking of new people she met as potential clients made her uncomfortable.
With no current listings and no home sales credited to her name, Julius, 58, said she probably won’t renew her license when it expires.
“I think if the market had been flush and I got swept away, I could have gotten beyond this point,” she said.
More real estate agents such as Julius are questioning their career path as slower home sales make it harder to earn a living.
Hundreds of would-be real estate moguls jumped into the business amid the housing boom, enticed by the idea of making hefty commissions after a few weeks of training.
But now, some are opting to get out, while some in the industry are calling for stricter licensing standards.
“You see a situation where it starts taking more effort and more energy to make a sale,” said David Wertan, a mortgage broker associate with Re/Max Professional Realty. “Not a lot of people are just willing to do that, and they start getting out of the business once they see that it’s not as easy as it was. It’s happening now in droves.”
In the past few years, the pool of seasoned agents has been flooded with newcomers, and not only in Charleston. Four years ago, 12,399 agents were licensed to sell real estate in South Carolina. Since then, their ranks have jumped 64 percent to 20,343 in 2006.
The result: Competition has heated up among the new and experienced agents who are looking to stay in the game. With far fewer people applying for South Carolina mortgage loans, it’s become more difficult to sell enough properties a year to earn a living.
Of the 3,856 agents who sold at least one home in 2006, fewer than a third of them sold more than eight properties. By conservative estimates, a full-time agent needs to make a minimum of eight mid-range deals a year to earn a living. In 2003, about 42 percent had at least eight sales.
Also, although the area’s housing prices haven’t yet tumbled, properties are taking a lot longer to sell, which slows the flow of commissions and puts more pressure on incomes.
The average number of days on market has slipped from a low of 52 days, set in November 2005, to 89 days in January. So not only are there fewer buyers, they are increasingly choosy.
Veteran real estate agents say that, although selling real estate looks like it would be easy, newcomers sometimes don’t understand how much time and effort it takes to earn listings and commissions.
Follow the link to continue reading this article in the Charleston Post and Courier …
If you’re thinking of jumping into the real estate market in 2007, The Honolulu Advertsier has some advice: You’ll want to find a reputable Realtor who is friendly, professional and trustworthy.
Here is a list of skills you may want to consider:
1. Knowledgeable about the market
Michael DeMello of Prudential Locations LLC says it’s especially important this year, with changing market conditions and rising mortgage interest rates to have a knowledgeable agent giving you advice.
“Experienced Realtors will have a much better idea of which homes are overpriced, which ones are priced right and which ones may be a steal.”
In addition to knowing price trends, a Realtor will know what has or has not sold and why. Because many real estate agents specialize in neighborhoods, their knowledge of the community and the inventory can be invaluable.
Tiare Ti’aturi has bought and sold eight homes in her lifetime. She says it makes it so easy when DeMello shows her property because they don’t waste a lot of time looking at homes that really don’t meet her criteria.
2. A good listener
The mark of a good agent is one who will listen to your needs and will only show you homes that meet your criteria. After all, the process of applying for mortgage loans is complicated; you want it to be worth your while.
3. A skilled negotiator
Pick an agent with outstanding negotiating skills who will drive the best bargain on your behalf. An experienced agent will know how to walk that fine line between driving a hard bargain on behalf of his/her home buyers and when a counteroffer has the best chance of being accepted.
4. Resourceful at solving problems
Ti’aturi recalls how DeMello got creative when there were no listings available where she wanted to buy.
“He made a list of all the places I wanted to live and then he wrote letters to the owners,” says Ti’aturi, who ranks DeMello as tied with the best Realtor she’s ever worked with. “One seller was contemplating moving anyway, but it wasn’t until he got the letter from Mike that he decided to sell. Mike took me right over there and I loved it.”
In fact, being resourceful is an especially valuable trait once you’ve opened escrow. Yes, once the contract is signed is when most Realtors do most of their heavy lifting — representing the buyer through the legal process of the sale.
“Finding the home is a very small part of the whole buying/selling process,” says DeMello, referring to the roughly 45-day escrow period. “In that (45-day) time span, you would want someone that would keep you up to date, keeps all deadlines, and will keep you in the loop. I hear many clients complain about their last Realtor hardly ever calling after they found the house and how they felt very lost and abandoned. Long-term follow up is very important.”
There is no substitute for the depth of knowledge that a Realtor can provide during the final weeks of a real estate transaction — ensuring that the seller complies with the terms of the contract and that all the buyer’s rights were honored, chasing down necessary documents for escrow and loan officers, scheduling and assisting at property inspections are just a few of the details an agent handles.
“A good Realtor knows all kinds of things that you would never think of,” says Ti’aturi. “They make it seem easy.”
5. Trustworthy
Another of DeMello’s clients, California investor Michael del Rosario, says, “Knowledge of inventory and market conditions tops the list, but right up there with that is being trustworthy.”
Together with his wife, del Rosario began investing in property in Hawaii three years ago when — compared to home prices in California — “the market seemed right.” He has purchased three properties in two years from DeMello.
“This last property we bought from Mike, we bought from some photos he sent us,” said del Rosario, who thinks Hawaii will be a great place to retire someday. “We trust his judgement. I know what he says, he can deliver.”
It’s a slow housing market.
While this fact provides leverage for those pre-approved for a home purchase loan because sellers are desperate to move their property, there’s a problem borrwers must also be aware of:
Sellers are desperate to move their property.
As a result, these group of individuals - and related developers/builders - have been offering incentives to real estate agents in order to finalize a sale. Ivy Zelman, a Cleveland-based housing analyst at Credit Suisse Group, says home builders are “desperate.”
Therefore, rewards such as the ones listed in the chart below are being offered. Buyers must simply keep these in mind because they may explain why agents are pushing one piece of property over another. But always remember:
It’s YOUR money. It’s YOUR home mortgage. It’s YOUR decision. Don’t be swayed, especially not buy agents that don’t always have your best interests in mind.
Home buyers have a new reason to be wary in this weakening housing market: real estate agents‘ lucrative incentives to push one home over another.
Slow sales have prompted home builders and some individual sellers to offer unusually generous incentives to agents whose clients buy a home. Sellers normally pay the buyer’s agent 2-3 percent of the home’s price. Now many are offering thousands of dollars or other rewards, like travel vouchers, on top of the standard commission.
Such incentives have long been used to sell some homes, but they have been proliferating and become more generous recently as a glut of inventory makes it harder for people to sell homes.
“These guys are desperate,” Ivy Zelman, a Cleveland-based housing analyst at Credit Suisse Group, says of home builders.
Although there are no national data on the practice, real estate agents and builders agree incentives have become widespread of late, especially in areas such as Florida, Nevada and Arizona, where inventory of unsold homes has soared. Builders and sellers also are offering lots of incentives to buyers, including free upgrades, help with closing costs and even cars.
The problem with incentives is that consumers may not know their agents have a potential conflict of interest when they show and discuss certain properties. Of course, agents can’t make buyers want to buy an unsuitable home, and most buyers have strong ideas of their own. But agents can have a big influence on which homes consumers see.
And that influence can be particularly strong when it comes to newcomers to an area who don’t know what builders are reliable and which aren’t, or what neighborhoods are the most appealing.
As people struggle with rising Nevada mortgage costs and angle for better deals, Las Vegas builder American West is offering agents a $15,000 bonus to sell homes in its Glen Eagles development, provided they come in with a full-price offer within 30 days. The bonus drops to $10,000 for negotiated offers and those that take longer.
Other builders are offering the buyer’s agent commissions of 10 percent or more for homes sold to a buyer with a jumbo mortgage, and some sellers of previously occupied homes are also using bonuses to draw attention. These bonuses have piqued interest when agents realize it’s there.
What’s less clear is if consumers realize what’s going on.
Bob Poirier, an agent at VIP Realty Group in Naples, Fla., recently earned a 7 percent commission for finding the buyer for a condo that was listed by the brokerage firm where he works. He says he didn’t discuss the commission with the buyers.
“That’s just something nobody ever discusses with buyers,” he said.
The best defense for buyers is insisting real estate agents disclose compensation being offered on any property under serious consideration. That way, consumers can negotiate ways to share anything that goes beyond the normal payday for the agent — or at least take the incentives into account in assessing the agent’s advice.
But few consumers raise such questions.
The National Association of Realtors doesn’t require its members to tell buyers in advance of a purchase how much the agents will be compensated. Federal rules require bonuses and sales commissions to be disclosed on the HUD-1 settlement statement, but buyers don’t see that until the closing or shortly before.
At that point, it’s awkward to start negotiating with an agent about the compensation.
Stephen Cook, a spokesman for the Realtors group, says buyers won’t buy homes they don’t like or can’t afford a home mortgage loan on “merely because the agent is offered a nice commission.” He adds that a bonus or larger-than-usual commission “may cause a particular house to get shown more, which is the whole idea.”
Laurie Janik, the Realtors’ general counsel, adds that the group’s code of ethics requires members to show customers properties that meet their needs, regardless of the compensation offered to agents, in order to help buyers get the best deal.
Some agents argue for disclosure. “Ethically, if you are representing the buyer and taking the buyer to a place where you are getting an increased commission, the right thing to do is tell them,” says Danny O’Sullivan, a senior vice president with Long & Foster Real Estate Inc. in Fairfax, Va.