#01 – BASIC TRUTH ABOUT THE REAL ESTATE INDUSTRYThe field of real estate brokerage and agents by law and common sense should be one of the higher requirements and practices careers. Some of the most valuable, personal, and confidential items are stored and displayed in homes. Yet over 20 years in my real estate career, the basic agent property etiquette has been violated repeatedly. In fact, this basic etiquette has gotten worse and worse each year. This means a severe lack of ethics has been viewed as unimportant. While the society in the U.S. industry has overemphasized creating conflicting laws and guidelines, not much has been done to teach children from a young age about common etiquette. If we investigate the root of most problems in society and workplaces, the cause has been the deterioration of ethics disguised by many other branch issues such as knowledge, experience, communication, training, and degrees.
Common Issues Encountered
- Real Estate System – There are many real estate test-taking programs offering answers for test takers to memorize in order to pass the exam without understanding the contents.
- No need for transaction experience– Being in the real estate field for over 20 years, I am still in awe that the Department of Real Estate still does not require a designated amount of in-person and hands-on hours of training before giving a real estate license. Real estate purchase for most people, is one of the highest asset purchases but yet, I can’t believe how many agents and even brokerage owners can’t communicate with daily-level English skills. How can they understand contracts? The root of the problem is the real estate oversight which allowed a highly professional career to deteriorate to a lowly public reputation. It shouldn’t be this way. The fact is, the greater the quantity of people entering the field of real estate regardless of his/her level of quality actually benefits most of the salary or hourly paid real estate entities such as various Realtor Associations. As a result, the entity that was supposed to protect the profession ended up harming the profession due to the conflict of interest. If the entity staff is paid mostly by the commission, this issue would be easily resolved since it is in the best interest of the staff members to focus on the quality of the profession instead of quantity. Offering classes to promote ethical conduct while the structure of the system is the opposite gets no sustainable results. It is the system structure that needs to be replaced. If 100% commission agents/brokers run the real estate oversight department, there would be a great improvement for the profession and industry. However, the current entities that oversee the real estate industry constantly ask realtors for feedback without compensation. To provide sufficient insight into actual welfare going on in the field requires a lot of time dedicated to writing or verbally explaining. However, in a fast-moving society, we are all busy. Who has a lot of time to constantly provide holistic feedback without compensation? Therefore, while 1-2 things may improve, at the same time, 10-15 things are deteriorating for the worse. How then, can anything be really changed for the better? This concept is not new, it was the basic structure for America to rise above the world in as little as 150 years of inception. Somewhere along the line, we have sidetracked the reason for a successful nation and started to deteriorate backward. Truth and honesty are usually difficult to hear and accept.
- Part-time, temporary agents/brokers – Whenever the real estate market is “hot”, lots of people get a real estate license and start representing clients without any experience. When serious problems arise due to these inexperienced, unknowledgeable, and/or unethical agents, these clients find me, seeking to solve their problems. Once the agents don’t know how to handle problems, they simply do not respond back to the clients anymore. There is usually a reason why some Brokerages do not accept certain agents (quality). At the same time, there are usually reasons why some Brokerages do accept these agents (quantity). The more problems a client has experienced in the past, the more he/she learns the importance of a trustworthy and experienced agent/broker. I get many calls for help when a transaction has already been closed. From the stories I was told, most of the problems can be avoided during the transaction. After a transaction is closed, usually, serious issues can only be handled with attorneys who will either decline the case or require upfront fees paid to take a case without guarantees of resolution. As an experienced Broker, I can only be hired as a professional to provide information on the witness stand. I had represented clients in small claims court that does not require an attorney license and so far, won all of the cases that I accepted to take on.
- Agents/Brokers do not read the MLS information in detail – Over 50% of agents/brokers call me to obtain information that has already been disclosed on the MLS. When I respond that they should have read the MLS diligently, they get angry and express how rude I am instead of being embarrassed by their own lack of professionalism. There are lots of documents that need to be read, written, carried out, etc. for each transaction. Being detailed and diligent is a requirement for this career. Can you imagine how these agents would perform when a transaction is in escrow with this type of attitude and mentality? Many times, the quality of real estate agents/brokers hired by the clients causes more problems in a transaction than anything else. Especially clients who prefer agents/brokers who sugarcoat things instead of desiring honesty and truth.
- Usage of Supra Lockbox with CBS Code – Over 50% of agents don’t know how to enter CBS code into Supra lockboxes even though I’ve indicated on the MLS showing description “please make sure you know how to use CBS Code to open Supra Lockboxes”. Any agent who read that and did not know how to use it should ask his/her broker. It only takes 5 minutes to learn it, but yet, over 50% of agents did not seek help prior to showing the property to their clients. As a listing agent, I then get calls that the Supra lockbox does not work. Most of the agents then fabricate the facts to their clients to avoid being embarrassed. This is just an example of many other basic tasks that have to do with the mentality of work ethics. Knowledge can be learned, but attitudes and mentality is a choice.
- Quality versus Quantity – When real estate clients do not perform a basic level of research and interview to hire the right agent/broker, ultimately, they suffer. With today’s online presence, it is easy to research agents and brokerages. When a conversation takes place regarding whether a discount agent/broker is more important to a real estate client or an agent who is capable and seeks his/her best interest, just about everyone says quality. What changes is when a real estate client encounters challenges that reveal the incapability of his/her agent/broker. It is then that client expresses the required level of quality desired, not just “undefined quality”. Typically, the larger the Brokerage, they rely on the quantity of agents, not quality. Their concept is the more quantity of agents, the greater the income for the brokerage. At the same time, the only way to deal with higher lawsuits caused by low quality of agents is by hiring their own attorney (grab what we can first and deal with problems later concept). Smaller brokerages tend to focus more on the quality of transactions to prevent legal liabilities (doing things right from the start as much as possible). Therefore, in my experience, I have better professional encounters with smaller brokerages. Agents who are successful without being under a brand name entity most likely have individual capability. Those who rely on highly advertised name usually has less capability. Most of my clients can’t remember the name of the brokerage I was with before. They just remember me. When I notify them that I’ve changed brokerage, they can’t even recall what brokerage name I was under. This is a good sign for any person to be labeled as professional and capable. Many things in life are opposite of what the majority presents or says to rely on.
- True Real Estate Professional is NOT Easy – There are many things that need the attention of real estate professionals. I have closed thousands of transactions and not one is exactly the same.
- A) Interviewing Like-Mindedness – Just as a real estate client seeking a good real estate professional, good real estate professionals also only accept reasonable and cooperative clients. However, the process of searching for one often takes a lot of time, effort, and even pain. Many clients believe agents are getting paid too much for such an easy job. Well, first of all, agents/brokers risk his/her life daily out in the field meeting or serving new people not knowing who they are first. There are too many examples of agents/brokers being robbed or killed performing tasks. I remember as a new agent, some people pretend to be foreign investors only to use new agents to provide free transportation to places. Even more, times when men pretend to be real estate buyers only to meet me and ask me out. Most recent times, service providers and contractors pretend to be renters only to meet with me and ask me for business to give them. How then can agents/brokers trust people without a true client representation agreement? These are only a few examples mentioned and have to do with the ethical conduct of people. All these encounters do cost time and money. Therefore, there is a lot more to this industry than most people realize.
- B) Taking time to understand client needs – is the most important before putting any actions into seeking financial and property needs. One property may be perfect for one but not for another. One type of timing may be great for one but not for another. One type of loan product may be good for one but not for another. Sometimes there is only one decision maker involved and other times there can be a group of 10 people’s input involved. I find myself taking on as a family counselor more times than being a broker. The ability to speak the language that balances all decision-makers cannot be learned from any book but via real-life experiences. Unless a certain level of acceptance is agreed upon, there will not be any success in a transaction.
- C) Financial Readiness – Without obtaining a full picture of a client’s financial capabilities first, we will all be wasting time looking at properties without knowing if a real estate client has the capability to finance a certain property. Different people also have different lifestyles and goals. While one planning may be good for some, may not be good for another. Some clients also require a non-standard type of loan for their circumstances.
- D) Title Issues – Various title problems can come up and experienced real estate professionals need to know how to deal with them before, during, and after the transaction.
- E) Disclosures – It is important to know about the factors of a property as much as possible which may affect the value, health, and safety of the buyers. Disclosures are approximately 80% of a transaction and are growing in the number of documents as years go by.
- F) Compliance with Laws – Laws change often and can be several times a year. Most laws are established due to repeated conflicts. Other times are due to being politically driven which may contradict common sense. Knowledgeable professionals can best assist clients to minimize legal conflicts.
- G) 80% of Unprofessional Agents in the Field – For the past 20 years, I have encountered approximately 80% of agents categorized as “Unprofessional”. I am embarrassed to say that I am not proud of being labeled as an “Agent/Broker”. Another 15% of my encounters as “standard/acceptable” and less than 5% of the agents are labeled as “preferred/desirable/professionals”. Quality is also reflected in the pattern of cities and counties. For example, from my own experiences, LA County usually has the worst agents with all types of unethical conduct, Orange County usually has better quality agents and San Bernardino County usually has a mid-range level of agents in terms of ethics and knowledge. I have educated my client sellers regarding screening agents first and offers second. Since we are not allowed to contact the cooperating agent’s client, that means the conduct of the cooperating agent will be the most important aspect of a successful, pleasant, miserable, and even harmful transaction process. With the deterioration of buyer agent quality year after year, buyer’s commission has also declined as a result of listing agents often needing to “clean up” after the buyer agent’s unprofessionalism. As a listing agent, I would say for the past 20 years, I had to step in as a secretary for the buyer’s agent in order to successfully close a transaction. While I, myself pay a secretary/assistant to conduct my own tasks. Obviously, this does not make sense. Since the Department of Real Estate and the National Association of Realtors have not made much progress in promoting professional quality as a system structure, professional agents/brokers can only seek other solutions in the meantime for the sake of our clients.
- H) Above mentioned are only approximately 30% of challenges and difficulties in the field of real estate. It will take hours for me to state them. In short, the current structure of the real estate field promotes unprofessionalism, inexperienced/temporary agents, unsustainable long-term careers, disloyal parties, and increased legal disputes. As a result, good agents and brokers are becoming rare and almost distinct. The interesting thing is that everyone (both clients and professionals) desires quality and loyalty; however, the current system makes it extremely difficult to get there; while third-world countries such as Taiwan rarely have these problems.
- License Revoked/Suspended/Disciplinary Actions – There are thousands of people and/or entities with their licenses revoked, suspended, and disciplined due to various reasons. Usually, it takes quite a few repeated serious offenses to get negative license consequences. There are many more that are still out doing business in various unethical or illegal ways. Just like any career or job out there, interviewing and hiring people is an extensive job itself. Clients should perform research, and interviews before hiring. The good news nowadays is that we have websites and technology to use, making it so much easier to get to know people before hiring them.
- United States Real Estate Market Standard versus Other Countries – Many Asian countries that are labeled as third-world countries actually have much better real estate systems than the U.S. Take Taiwan, for example, a seller or landlord researches a real estate brokerage and agent to list with. Each seller/landlord and each buyer/tenant hire his/her own agent to work with. The commission is paid by each side of the client according to the level of knowledge, services, experience, etc. There is not much need for “ethical” courses. Each agent naturally represents his/her client in the best possible way to earn the commission. In addition, it is standard for every client to turn in his/her financial proof before agents offer any type of service. A deposit and payment agreement is signed prior to any type of service being given. This is a win-win for everyone. Real estate clients are committed to the selected agent/brokerage. At the same time, the real estate agent/brokerage is committed to the client. No party wastes time or plays games. Everyone understands the seriousness of getting the job done right. However, in the U.S., the way the system is structured encourages disloyalty, wastes time, and discounts agents to compensate for quality, professionalism, knowledge, and experience. This system discourages the desire for quality professionals…and what is left gradually are the substandard agents/brokers in this field. Those who are more capable and ethical gradually seek other types of focuses and careers. Since the good ones have to constantly do the jobs of the less knowledgeable and ethical cooperative agents while getting paid the same. It is like doing 2X amount of jobs and getting paid for one. After a while, both financial and mental result is highly unsustainable. Can you blame them?
- Like-mindedness – What we appreciate is often what we cherish. There are reasons why some people purchase Kia cars versus Lexus versus BMW or Mercedes Benz. Kia car buyers are usually looking for immediate affordability, which means durability and re-sale value is usually not there. There also tend to be more problems with these lower-quality cars during ownership. Lexus car buyers usually seek durability, dependability, not many repairs needed, and a medium level of status and comfort while the re-sale value is quite good. BMW or Mercedes Benz buyers usually seek to present a higher status and collusion protection, but the cost of maintenance and repair parts are more frequently needed and usually, costs are very high (a higher % cost goes to branding than quality). Similar to real estate, various clients seek various types of agents/brokers. The cost of these agents/brokers also often reflects the type of services that the clients desire.