Five “Big” Real Estate Questions Test Common Sense
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It must be a full moon or something in the water, but of late the five “big” real estate questions have arisen from the muck with greater frequency than usual, questions so lacking in logic and reason that I trust such queries are raised only as a kind of test, something to measure patience rather than wisdom.
Here, in one place and at one time, are the big five:
Don’t you think real estate prices will go down next year?
This not a question, instead it’s an expectation. A neutral question would ask “what do you think will happen to real estate prices next year.”
No one knows where real estate prices are headed — but no less important, while prices may rise or fall in one area, they may do something different elsewhere. National price generalities are less important than local market trends. Each and every parcel of real estate is local and unique — if this were not true then why would consumers spend weeks and months looking for just the right house, with just the right price and terms? Would not all prices for all units of the same size in every location be identical?
Don’t brokers just want to sell property for the highest price?
Owners want to sell property for the best price and terms, and brokers who work for sellers want the same. But not all brokers work for sellers. There are buyer brokers who represent purchasers and they are obligated to seek the best price and terms favoring buyer clients.
The oddity of this question is that brokers who represent sellers are condemned for being lucid and logical — after all, shouldn’t they want to get the best possible deal for owner clients? If you were an owner and a broker came to you and said, “I can help you get less for this property” would that be the person you want selling your home?
Why can’t we just get rid of brokers and save the commissions?
The unstated assumption in this question is that brokers are mysteriously inserted into transactions, perhaps by evil trolls, but provide nothing of value.
Buying or selling a home is an infrequent event in most lifetimes, a huge financial commitment, something complex and unfamiliar, and a transaction in which there are opportunities to lose your shirt at every turn. Little wonder that most people — 85 percent nationwide, according to the latest study from the National Association of Realtors — use brokers when they buy or sell.
What we really have here is an example of false economics. Think about it this way:
Imagine that you are in an auto accident. The other driver has an attorney. Wouldn’t it be cheaper for you to defend yourself and not hire an attorney? The direct answer to the question is “yes” — but everyone knows the question is not complete and that the answer is less than the whole truth.
Aren’t real estate brokers a dying species, like book sellers and travel agents, soon to be replaced by the Internet?
There is no doubt that the Web impacts many businesses and trades, but in many cases the Internet is just another marketing venue, an alternative to newspapers, magazines, and other marketing platforms.
Consider printing. You can order printing online. But someone has to fill the order — an actual printer with a press, ink, and paper. Instead of taking orders by phone or behind a counter, someone gets them from the Web.
The same is largely true of real estate. There must be someone who buys property sight unseen, but most people use the Internet to search for properties, find brokers, and then engage in a traditional transaction where nothing will happen without physical visits to houses and neighborhoods.
Wouldn’t real estate be cheaper if we had less paperwork?
To answer this question you first have to ask why it is that we have so much paperwork and which paperwork — exactly — you want to eliminate.
When someone says they want “less paperwork” to close a real estate transaction bells should go off. Do they want fewer pieces of paper, or do they want fewer players? In effect, is “less paperwork” a code term, something that really means less consumer protection — after all, don’t things like title searches and seller disclosures slow down closing speeds?
Automation and the Web will certainly speed up closings by reducing the tedious processing required to transfer title and record loans. But we need to be careful because if “less paperwork” means doing away with certain closing functions we may later be in trouble.
For instance: Wouldn’t we save a lot of time and money — wouldn’t we eliminate a lot of paperwork — if we did away with those pesky home inspections? Nope, sorry, this is paperwork I want — and the more careful the inspection the happier I am as a purchaser.
Here’s another one: Think about your tax bill when next someone tells you that drive-by appraisals and automated valuations save paperwork and closing times. Then think about the $150 billion spent during the S&L crisis — a collapse that would never have happened had the appraisal process not been compromised.
Published originally by Realty Times on October 20, 1998 and posted with permission.
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