While these site offer some useful information about buying, selling, mortgages, home design, etc., below are the top 3 reasons why these sites are not a good place to conduct your home search.
- Money. While these sites pretend to be a source of information for buyers, these sites exist primarily to make a profit. While these sites are free for consumers to use, these sites profit from selling services to those in the real estate industry. I’ll explain how they make money below.
- When you click on the “Request Info”, “Contact Agent,” or “Request More Details” button, chances are you are not contacting the listing agent for that property. Instead, you will be contacted by an agent who is paying the website a monthly fee for leads. The website sells your contact information to these agents, and these agents hope to convert you into a customer. For a price, Zillow does allow agents to have their contact information displayed next to their listings. As of April 2015, Zillow had an estimated 60,000 agents paying for leads. Do you really want to be represented by an agent that was picked on a rotational draw by a third party provider who is paid by these agents to be included in this blind draw? This is not a good way to pick a professional service provider.
- The property may no longer be available. While these sites pull listing information directly from the MLS, they are known to continue to show listings which have accepted offers. Why? So they can sell the lead. Most of these sites promise agents a certain number of leads per month. The more listings on their site, the greater chance you will ask for more information which will allow them to sell your contact information.
If you really want to contact the listing agent directly, the only way you can do that for sure is to drive by the home and call the name on the yard sign.
So what are your alternatives? While these sites are a good source of general information, if you are looking to buy in the near future I would consider interviewing local agents and hiring a buyer’s agent to work for you. Agents have direct access to the MLS, and can set it up so you are emailed when new listings within your target area and price range become available. You are also able to log in and conduct direct searches. Most MLS systems allow you to pick how often you wish to receive these emails. If you are just in the beginning stages, you may want to receive emails weekly. If you are looking to find something right away, you can get these emails daily (some systems will even check hourly or every 15 minutes and email you when something new is posted so you don’t miss out in a hot seller’s market). Most agents with a personal website will have an MLS search function on their site which allow you to search the MLS as well. My site does not show properties which have an accepted offer. Feel free to give it a try. Search the MLS
But can’t I get a better deal if I go directly through the listing agent of the home I want to buy? No, that is a myth. If you choose to go this route, one of two things will happen: 1. You will not have representation; 2. The agent will be acting as a dual agent which will limit their abilities to help you. In neither scenario do you save money.
In the first scenario, the listing agent represents only the seller (not you). The listing agent has a fiduciary duty to the seller. While the agent would be able to give you standard offer form, you would be on your own as to what to offer. If you make the mistake of telling the agent you are willing to pay $300,000 but want to make an initial offer of $280,000. The listing agent has a responsibility to the seller to give them this information. I can guarantee a counter offer of no less than $300,000 would come back to you in this instance. Some agents offer what is known as variable rate commission contracts to their seller clients in which they will lower the commission the seller pays if no other agent is involved. With this the seller will have a greater net on their end, but in no way will they let you pay less than market value. Listing agents are typically paid based on a percentage of the sale price, so the more you pay the more they make.
In the second scenario where the agent represents both the buyer and seller, the agent’s ability to help the buyer and seller is reduced since they have a duty to both parties. According to Massachusetts state law, a “dual agent shall be neutral with regard to any conflicting interest of the seller and buyer. Consequently a dual agent cannot satisfy full the duties of loyalty, full disclosure, obedience to lawful instructions which is required of an exclusive seller or buyer agent.” So what are you really paying for at this point?
But if I hire a Buyer’s Agent to represent me, aren’t they still paid based on a percentage of the sale? How can I know they have my best interest at heart if they would get paid more if I spent more? Good question, glad you asked. The truth is the real estate commission system is based on an archaic system which began when there was no such thing as buyer agency. The Massachusetts Board of Registration of Real Estate Brokers and Salespersons did not change their mandatory agency disclosure form to recognize buyer agency until 1993. Before that, if a buyer was working with an agent, that agent was a sub-agent of the listing agent. Even though the buyer may have been working with an agent, the agent actually had a fiduciary duty to the seller not to the buyer. I can see why they changed these rules, but I have no idea why it took so long as this pre-dates my existence in this industry. Getting back to today, a good Buyer’s Agent will negotiate with their buyer client up front and establish a fee for their service. While many agents are content to get paid whatever the listing agent offers as a co-broke fee, this can be a slippery slope. An agent who hasn’t had a closing in a while may be tempted to show homes with higher co-broke fees. This is not only unacceptable, it is unethical as the agent has a duty to put the client’s interest above their own. If you choose to work with an agent that says “it won’t cost you anything to work with me,” be cautions. First, that is not true. Technically, they are being paid a portion of the listing agent’s commission, but who is actually forking over hundreds of thousands of dollars for the property. You. If you choose to work with an agent under this fee structure, make sure they are showing you the properties you want to see not just the ones they recommend. If they refuse to show you a home you want to look because the co-broke is too low or they say it is under agreement, demand they show you the MLS listing that shows an offer has been accepted or find another agent to work with. This agent probably doesn’t have your best interest as a priority. An alternative would be to find an agent that determines their fee up front. I feel my time and experience is valuable, and worth paying for. I typically set a minimum fee up front with my buyer clients, and have them agree to that in writing. This is good for both parties. I know I will be paid a reasonable amount for my time and experience while the buyer knows I will have their best interest at heart as my fee has already been established. I will not be tempted to show them homes with higher co-broke fees first, and I will use my market knowledge to make sure they are not over paying for their dream home.
I’d suggest taking control of you representation by interviewing local agents. Besides student loans or having children, buying a home is one of the largest financial decisions you can make. Treat this process as if you are a business owner, and you are hiring a new employee. Would you hire the first person you interviewed? Maybe, but I would bet you would interview a few more candidates before you make your final decision. According to a 2015 survey by the National Association of Realtors® 67% of Buyers only interviewed 1 real estate agent.
Source: 2015 National Association of Realtors® Home Buyer & Seller Generational Trends
Currently, the typical transaction takes anywhere from 30 to 45 days from the time an offer is accepted to you are sitting at the closing table. If you add in a week or two of personally viewing homes, you will be communicating with your agent on almost a daily basis for the better part of two months. If you are going to be spending this much time with someone, both parties should be comfortable working with one another. The same 2015 survey stated 73% of Buyers would use the same agent again or recommend them to others, however, only 63% actually recommended their agent.
Source: 2015 National Association of Realtors® Home Buyer & Seller Generational Trends
As a professional within this industry, I find those numbers to be too low. A business in which more than a third of your customers disappear and are never heard from again is not a well run business. That is why is important to interview multiple agents and find the right one for you. If at the end of the transaction you would not be willing to work with the person again, it probably wasn’t the right person to be working with in the first place.
Many agents specialize in specific markets or work primarily with a certain type of customer. Some agents only list homes, others work only with buyers, while others work with both. My last piece of advice is don’t get tricked by an agent who is quick to list all their “professional designations.” They don’t guarantee the agent has experience within that field, all a designation mean is the agent paid to take a class (maybe passed a test but probably didn’t have to) and may be paying a yearly fee in order to continue to use the trademarked designation. For example, a few years back I took a class on short sales and became a Certified Distressed Property Expert®. To this day I have not been involved in a short sale transaction. I took the class when short sales were more common so I could better discuss the process with my clients. Conversely, there is a Military Relocation Professional certification offered by the National Association of Realtors®. I’ve never taken this course, but I have helped a number of Veterans buy and sell homes in recent years. Real world experience will always trump classroom experience, in my humble opinion.