10 Surprising Real Estate Facts You Didn’t Know

10 Surprising Real Estate Facts You Didn’t Know

Most consumers don’t really know how real estate agents work, get paid or function. 

To help consumers better understand how a real estate agent works and gets paid, I present this infographic “10 Real Estate Facts That Will Surprise You.”

If you find the image useful, please feel free to download it and share it, I just ask that you link back to this page.

Good luck! Hopefully it helps shed a little light on this mystery.

Open Letter to Real Estate Consumers by a REALTOR®

Open Letter to Real Estate Consumers by a REALTOR®

Dear Real Estate Consumer,

Whether you own a home, rent a home or want to own or rent, most people at some point have or will be, a real estate consumer. I would venture to guess that by the age of 30 more than 95% of American’s will fall into these categories. This letter is to you all, not all of you are those that need to read this but you will probably know someone who should. Please share this.

I am a REALTOR® and a Real Estate professional. I help people buy or sell houses, sometimes I help them with rentals or leasing, but my focus is on helping people. I offer a service, expertise, passion and commitment – my goal is to help people navigate the waters of the largest financial decision that most people make in their lives.

I care, we care. I chose real estate because I have loved what it represents since I was a child, I remember peering over the wall of my parent’s pool cabana and watching an open house at my childhood home. It was fascinating, I wanted to be inside and to watch what happened, how people reacted, what they did and looked at, I wanted to get inside their heads to understand the thought process, how they made a decision.

We are REALTORS®, we are professionals.
We are REALTORS®, we are professionals. We have invested time and money to become licensed real estate salespeople and sometimes brokers. We have rules and regulations we must follow in how we work, behave and disclose. We have federal guidelines to observe and respect, should we fail heavy penalties could be levied against our Brokers and ourselves.

We are primarily independent contractors, we pay our own social security (double what you would see deducted from a regular paycheck), we pay our monthly fees (including that website you are using to look at houses), we pay annual fees to be members of the National Association of REALTORS®, we pay for Errors & Omissions Insurance, we work for Brokers, in most States we are also paid by the Broker, and we pay a lot more, in many ways.

We answer our calls at all hours of the day or night. We are frequently greeted with contempt and a tone of distrust from some consumers who call our cell phones or offices. We are the “lowest of the low” in the minds of some, and in the manner in which we are treated. We work every day to fight the public opinion that we are “not necessary” or “anyone can do it, why should I pay a commission when all you do is list my house and nothing more” are the type of misconceptions we encounter on a daily basis.

We don’t get a paycheck, no one pays our expenses, we get no payment until after a closing, and then the time varies depending on how the broker pays an agent. When we work with a client we commit to them, to not show another person a house they might be interested in, to put their needs first, to act as their Agent and at their direction and consent. When we make a commitment to work with you we are choosing you over countless other clients in a market area. It is not ethical to create a competitive situation for our own clients.

There are days when we may forget that our “jargon” isn’t your “jargon” and that plain English and explanations might be necessary, but we all have our expertise in our professional fields. When you don’t tell us “I don’t understand” but instead stop communicating or walk away, we are left feeling rejected, we worked so hard for you and we will never get that time or money back, or more importantly enjoy seeing your excitement when you get the keys to your American Dream.

The Value of a REALTOR®
Our industry has failed to make the value of our industry clear, it has become convoluted in the mindless media message of “real estate sales are sales” at best it is a misnomer. We don’t sell real estate, we consult and facilitate the purchase of real property and the improvements (the house and structure) on that property. We help facilitate the American dream of home ownership.

It is not always an enjoyable experience, it is fraught with drama, nail biting cliff hangers, and tremendous amounts of nervous anticipation. We know this, but sometimes we might forget to tell you this. We are not only your REALTOR® but we are your therapist, talking you off the cliff of “buyers remorse” because we saw the excitement in your eyes when you first stepped into the place you want to be your new home. We are market experts and can make that dream come true.

It is not just about completing some paperwork and calling it a day. Our job as a REALTOR® is to make the process SEEM easy, effortless and as carefree as possible. If you think it is effortless to buy real estate then we have succeeded, but that success brings with it a price – the blatant and rampant disrespect for the professional qualifications and experience that goes with the name REALTOR®.

This is our fault, to some degree. We spend so much time fighting to prove our value, that the message of what that value is becomes lost. We don’t teach you, the consumer, enough about how the industry works. Who likes to discuss money? You see the big picture and think we are “overcompensated” and a bunch of “Rich REALTORS®”. It might be helpful for us to open the books, to share the secret doctrine of the industry. A REALTOR® could possibly be the smallest cog in the wheel, but the most important, it is our efforts that bring the business to the Broker, it is our efforts and opportunities that make the transaction happen for your American dream.

Our value as a REALTOR® is many fold, but simply put – it is making the largest purchase of your life be the smartest purchase of your life. Helping you navigate the process from weighing the choices, to writing the contract, to protecting your interests and making sure the contract is not breached. Through the inspections, negotiations, and then the final walk-through, to the closing table, and beyond a REALTOR® is there for you, to be your advocate and your expert, without compromising our obligations to protect your interest, confidence and our obligation to be your Agent – your eyes and ears in the process. We are REALTORS® and real estate professionals, all of us.

I am a real estate professional but most importantly I am a REALTOR® meaning I took an oath to go above and beyond the rules of most states that govern real estate sales, I follow a higher standard with the REALTOR® Code of Ethics that is over 100 years old. I have spent 15 years helping people buy/sell/lease real estate, I have spent countless hours and thousands of gallons of gas driving around to show people houses who then decide to call someone else to buy a house. It is time to realize what a REALTOR® offers and the valuable partnership that exists between the consumer and their REALTOR®.

Not every REALTOR® will be the right fit for a consumer, we all have to recognize this, and consumers need to freely communicate this. It is a partnership of the most important fiduciary kind, a symbiotic relationship that makes the American dream come true. We are Professionals, we are experts, we want to help, we are consumer advocates, we are passionate about truth and justice, we are REALTORS® and we want to help you.

Thank you for your trust, your time and the opportunity to serve your needs. We are grateful to have the opportunity to prove our value to you, and if you don’t see it – if it looks effortless, then we did our job properly – the job of a REALTOR®.

The Importance of a Home Buyer Consultation with a REALTOR

The Importance of a Home Buyer Consultation with a REALTOR

You found your dream home online and now you want to see it.

Call a REALTOR for a great real estate buying experienceYou call the phone number listed on the website and get a REALTOR. You inquire about the property and request to see it right away. The REALTOR insists upon first meeting in their office prior to showing you the property. Despite your protests, the REALTOR is insistent upon the meeting.

You hang up, frustrated, immediately calling another REALTOR you find online. The second REALTOR requests the same first meeting, you only want to see this house yet none of the REALTORS want to show it to you. Or do they? The reality is that meeting with a REALTOR prior to seeing a property is a proven method of helping you, the consumer, have a better real estate buying experience.

The True Professionalism of a Consulation
Buyer Consultations are not a new concept, they have been around for as long as real estate agents have helped people purchase real estate. The purpose of a Buyer Consultation is to let a real estate professional understand your needs, determine what your requirements are for a property, review the process and procedures of a real estate purchase and help you determine what your purchasing power is. The result of a consultation is proven to be a far less frustrating real estate purchasing experience.

Why do most consumers get defensive when a REALTOR requests a meeting first? There is a conditioning in the society to believe that a REALTOR offers no value other than the ability to open a door and allow you to view a house. That is far from the scope of what a real estate professional does, in fact it is the tiniest portion of the work they do. Understanding the real value of using a real estate professional will help you, the home buyer, truly appreciate what it means to have an Agent who represents you in your real estate purchase.

The first step to understanding this is to meet with an experienced REALTOR and review your needs, as well as mutually set communication expectations and review the process. Despite your apprehensions to slow down and step back when you feel like you are ready to go, you need to overcome the urgency to determine what is truly important, realistic and reasonable for your market place. A REALTOR will ask you questions about what you are looking for, should take extensive notes, be able to introduce you to their business partners such as loan officers and title representatives, who all play an essential role in getting you from this appointment to home ownership.

A Good REALTOR Makes the Process Seem Effortless
If a REALTOR is good at what they do, you will believe the process to me mostly effortless, because their job is to keep things on track and make sure no obstacles pop up on your way to your closing on the new home of your dreams.

Remember, perception isn’t always reality, while a REALTOR may have to jump through hoops, make many trips to the property without you, facilitate papers being sent to many different parties involved, to get you to that exciting moment when you get the keys, their job isn’t to show you all those things and perhaps that is part of the problem with public perception. Just like a great magician, the trick should be effortless and impossible to see all the work that goes into making it happen.

The next time a REALTOR wants to meet with you before showing you a house, be confident that you have a true professional, focused on your needs, and not just someone who is opening doors so you can browse through a house that might not be right for you.

Social Media for Real Estate Isn’t Complicated

Everyone is making things so complicated!

social media for real estate shouldn't be as big as the sky

The choices are are big as the sky.

Every time you turn around someone is telling you a new network to use, a new platform to try, another vendor to purchase from, and if that were not enough your phone is ringing off the hook with vendors “guaranteeing” top placement on search engines. They will build your SEO, SEM, and possibly another acronym you are yet to learn. The buzzwords abound, and rather than admit we don’t know what everything is, we sign up.

The problem has reached epidemic levels, like a bad pandemic the “You MUST’ves” are everywhere you turn, or look. What do you really need as a real estate agent to succeed in marketing yourself and your business in this world of digital media? Not as much as you think.

I began using “social media” to market my real estate business as soon as I discovered it in 2008. It wasn’t intentional at first, it was a native environment for me having grown up in Silicon Valley and cutting my teeth on Bulletin Board Systems on my Hayes 300 Baud dial-up in 1981. Prior to entering real estate I was a very experienced web designer and developer. Since I coded my own web pages the search engine optimization was something I was keenly aware of and well acquainted with. For me it was a natural process to flow from having already been focused on keyword writing for websites, as well as my background with marketing and advertising which grew from my keen interest in the psychology of consumerism, my brain was pre-programmed to form most communications in manners that the “hot topic” words (call them buzzwords now) were planted and evenly distributed from within the content.

My experience also had helped my thought process evolve into a very regimented strategic processing system. I frequently find myself thinking in “If, Then” statements of a sort – for instance “If I say

what will the reaction be” – therefore usually when I share something on social media an entire analysis has already occurred as my thought process has followed the path of that comment. Usually, because I was once really good at putting my foot in my mouth. Learning to think before I speak, and to listen more has been an important lesson in the last 5 years.

Back to the vendors selling search engine optimization of whatever sort… this frustrates me. So many of my fellow REALTORS are being taken advantage of, because all we ever hear is that we need to use search engine optimization and search engine marketing to keep our pipeline full, to make sure we are generating enough leads to keep our business flowing. The truth is that it’s not that difficult to do. Our job as local experts is the share information on the local area, if we focus on this on a consistent basis then the business will come to you in a variety of forms, including media requests for news stories and other opportunities.

It can be time consuming, and it is not easy to understand how to engage on some networks. For me it is simple, but I am a native and most people are not. We are going to take a look at some of the basics, to help demystify real estate social media. Why am I qualified to write this? I was one of the people that wrote the book, literally, on social media for real estate and how to successfully use it for your business.

Ready to learn?

Real Estate and AVMs: The Deviation from Reality

Real Estate and AVMs: The Deviation from Reality

If you have been a REALTOR for more than a week I am sure you have had to overcome the “AVM Objection” or as some call it the “Zestimate Objection” from a client or consumer. Whether Buyer or Seller, it’s a fact of real estate today – the consumers trust the Zestimate far more than we trust a real estate agent. The best way to overcome the danger of the Zestimate mystique is to better understand what an AVM is and why the RVM is your best tool to help you demonstrate why an AVM isn’t the be-all-end-all of real property valuation.

I am going to attempt to keep this simple, so it’s as easy as possible for us all to embrace and master our nemesis – any AVM really, but mostly the AVM’s presented on consumer facing websites which then in turn sell advertising.  I will try to explain some of the methodology behind the process, and also the “median error” or the “acceptable” margin of error that’s in the “small print” most people don’t read.

AVM or Zestimate?
The Zestimate is a form of an AVM, so to understand it lets first look at what an AVM is. AVM stands for Automated Valuation Model. It is a computer software program that combines data which is publically available such as assessed value for taxes, public records of property transfers or sales. The program calculates a value for a property based on the data collected.

The use of AVMs began as a business tool to automate the process of valuing a real estate portfolio. Governmental organizations, high-volume mortgage lenders and Freddie Mac were some of the first to implement use of AVMs. This led to the consumer facing models of the AVM when media companies (such as Zillow) saw the opportunity to monetize the data, by presenting an AVM as a “fact” on consumer facing websites, intrigued consumers were more likely to take the “bait” and request more information, leading to the pay-per-lead model or advertising models that we are familiar with today.

The high consumer demand that began in about 2003 to know what the “true value” of real property was led to the growth and reliance upon these consumer facing AVMs. The problem with these models is that they don’t take into account the “local” nature of real estate values or the actual condition of a property, it would not be efficient to customize the AVM for each market, so a general model – frequently based on broad top level categories like zip codes – is used with a much higher “acceptable” (to the website owner) margin of error.

The problem with the use of public data is that it has two critical data issues:

  • Timeliness: There may be a lengthy delay in public reporting of property sales and transfers.
  • Availability: If there is a lot of data available the AVM can have a better success rate, whereas in an area with few sales or transfer, it can be incredibly inaccurate. In some non-disclosure states it is even more difficult to get an acceptable accuracy score.

Proving the True Value of Real Property:
AVM websites know their accuracy rate is low.  As an example, Zillow rates their accuracy on a 1-4 scale. The scale is tied to the Median Error for a specific geographical area. The AVM is run whether or not there is enough data to produce a reliable result. The Zillow AVM assumes average condition for all properties, to normalize the results. It is unable to take into consideration improvements, or deficiencies in a specific property.

Definition-MedianAs of May 19, 2015 Zillow lists that their current Media Error is 8% but then further down the page they state it is 6.9% – to read the entire explanation you can go directly to that data on Zillow.com or I will try to briefly explain what it means. If you remember “Mean, Median and Mode” from high school math, then you will understand what Median means.

Median in mathematical terms is the middle number within a particular set of numbers, this means that there are an equal amount of results before and after the median result. Without stepping into the mathematical argument of whether the median or mean is the “better” (depending on purpose) number typically when a Mean (average of the data) is calculated the Median (middle number of all available data) will be a “better” result for the desired purpose. So if you wanted to spin information to appear more accurate you might not want to go with an average, or the Mean.

Zillow-8percent-05192015

Click to view full size

Median Error Points Based on the information Zillow Provides on their Website:

  • Whether the correct number is 8% or 6.9% that means that 50% of Zestimates on properties are within 8% or 6.9% of the final selling price of the property, and the other 50% of the Zestimates are further off (above) the indicated percentage of 8% or 6.9%.
  • Zestimate Within 5% of Final Sales Price: Zillow states that rate is currently 38.4% (61.6% therefore are 6% or more off final sales price)
  • Zestimate within 10% of Final Sales Price: Zillow states that rate is currently 63.6% (36.4% therefore are 11% or more off final sales price)
  • Zestimate within 20% of Final Sales Price: Zillow state that rate is currently 83.1% (16.9% therefore are 21% or more off final sales price)

What does that mean? That means that they have a REALLY HUGE acceptable margin for error, in my opinion one that borders on inane and unacceptably inaccurate. Are consumers reading this information before they start waving the Zestimate flag? Is Zillow actively promoting their acceptable Media Error rate? Of course not. A side note, Zillow lists that they have 110 Million properties in the system, that statistics was dated in March of 2013.

How-Zestimate-Calculated-051915 (Note: I emailed Zillow CEO Spencer Rascoff on 5/19 to ask for an updated number as of May 2015, a PR representative from Zillow replied later that day inquiring what my deadline was and was researching and would get me results the next day. I did tell her I did not have a deadline but as of 19:15 EDT 5/21 I have heard nothing further, I will update with a footnote when the information is received)

The National Association of REALTORS to the Rescue!
I know I am not the only one who has had a hard time demonstrating why the AVM is not the definitive answer, even Zillow recommends that consumers consult a real estate professional for more detailed and accurate pricing and information, but people don’t read these days. So how can we best overcome the Zestimate objection with a more accurate AVM model and our area expertise? Quite simply with the RVM and RPR.

A Little History: The Birth of RPR and the RVM
In 2012 RPR became a dues-funded member benefit for all REALTORS. The development of the RVM was focused on creating a modern AVM model that could help REALTORS accurately identify, visualize and convey accurate and current market information and trends to use in their business. By incorporating the MLS data – which includes historic records, as well as the most current information the RVM has proven to be the most accurate AVM available.

As of today, RPR is showing that it has over 129 Million parcels in the data, 1.8 Million Active Listings and 222,000 distressed properties, all ONLY available to REALTOR Members.

The RVM overcomes the two critical data issues that AVMs have:

  • Timeliness and Availability: The use of the real-time MLS data via strategic partnerships with MLSs ensures accuracy that has never before been available to an AVM model.
  • Accuracy: With the RPR provided tools, REALTORS can refine an RVM to properly and accurately reflect the value of a property. By being able to make adjustments for property condition, market condition and improvements, you are then able to portray the true story of a property’s value.

RPR-129-051920
By using the RVM as a starting point, we are able to refine the value – make adjustments and present a powerful report – choosing from a few options. There are Sellers Reports (similar to a traditional CMA), Buyers Reports (which include Neighborhood data which is derived from sources such as The United States Census data showing a variety of demographics that are usually of high demand to your clients).

So the next time someone tells you what their Zestimate is, be sure to know what the Median Error is for your area, and perhaps even print a copy of that data onto a PDF and keep it on your phone to show the consumer. With the RPR Mobile application you can pull up any property and if it has an RVM you can refine it and create a CMA as well as email it to your client all while you are in the subject property.

The value of data is in the accuracy of the data, but the marketing can trump true value and lead to the “Rule of Perception” overcoming truth and creating trust. It’s a danger of the digital age. Now, hopefully, you are better equipped to handle the conversation.

The Zestimate is a registered Trademark of Zillow Group.
Source materials include The National Association of REALTORS Realtors Property Resource materials;  Zillow Group.

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