Wednesday, November 14, 2012

Should You Get Your Real Estate License?

More to the point, should I?

When I worked as a real estate investor and developer, my brother and I would classify real estate brokers. "This guy's a Groopoo," one of us would say about someone claiming to represent a Group Who was fabulously wealthy and would make you realize your fondest hopes and dreams resulting in gazillions of dollars, only if you worked with that broker, who's Groupoo identity was elusive.

The common term for what these people offer is bullshit. Bullshit is described here by Princeton Professor Emeritus in Philosophy, Harry G. Frankfurt. Bullshit is really a much fuller term than its common usage suggests. We hear something unpleasing, and we think or say, "That's bullshit." 

Bullshit, though, is far more nefarious than lying, since bullshitters convey, or try to convey, an impression of themselves with no regard whatsoever to truth. Liars, at least, acknowledge truth. Bullshitters ignore its existence.

[Editor's note: You're getting far afield, here. Consider getting back to the original point, whatever it was].

OK, Ed., got it. Real estate brokers and bullshit is fodder for several blogs, and this one is only about pursuit of a license.

Real estate brokers don't get paid unless the transaction closes. And it doesn't matter whether or not they represent the buyer or seller: No close, no dough.

Does it matter? Absolutely. What happens when a buyer's broker and a listing agent meet, for example, to discuss a buyer's repair list? A list that might include something unreasonable, such as installation of an inline GFC when an inline GFC wasn't code? Is the buyer's agent likely to say, "We need to get this done," and possibly killing the deal, or might he/she say, "I'll talk my people out of it" in order to get the deal closed, when both agents meet in private?

I can tell you first hand that situations like this happen in many transactions. I like to think I always advocated for my buyer-clients' requests, reasonable or not. It's their money, after all. And I know many brokers who would similarly behave (and all but one works in the Hillsboro-Remax office; well two, I guess).

But I've experienced more situations where the close of escrow--and therefore a broker's paycheck--dictates the application of advocacy. In one instance, a client wanted repairs I thought were unreasonable, but I pushed for them anyway, only to have the listing broker say, "Hey, get in the game. Do you want this thing to close, or not?" This is almost verbatim.

What makes it all worse is that the clients never, ever know this backstory, since their broker can blame it on the other side, and the client will never, ever know the truth. Bullshit at work.

In searching for my own home in Denver Metro, I'd gone through several real estate brokers. My plan was that as a licensed broker in Oregon, I could contact the listing broker directly with the intent of not paying for the selling agent side of the transaction and saving myself a few bucks.

And I can tell you from the point of view of a home buyer who is also a licensed broker, getting you to make an offer is about the broker's interests, not the client's. I had listing brokers reveal their client's dire circumstances, misrepresent pricing history, not disclose uncomfortable facts about the property that would never come up in a due diligence search, misrepresent their own expertise, and so on, Colorado law notwithstanding.

Granted, they represented the other side. But should the approach to getting an offer be analogous to throwing mud on the wall and hoping part of it sticks? Or, as I have always felt, is it better to get everything on the table at the outset and not waste anyone's time?

As my father said, the measure of a man's character is what he'd do if he knew no one would ever find out.

The final straw was a short sale property we liked. The listing agent told me both the first and second loan were with Chase. Neither was a Fannie Mae or Freddie Mac loan (kind of inside baseball, here: Fannie and Freddie loans have different short sale protocols than others). He had expertise in short sales. The short sale package had been assembled.

I was not familiar with Chase, so I investigated as best as I could (I also know one of Chase's national director of services I could call on to cut through the bureaucracy). With all documentation properly done, Chase could close a short sale in thirty days.

This was September 18. We needed to move in November 1--tight, difficult, but possibly doable if everything clicked. However, the agent emailed me two weeks later to say he'd just assembled the short sale package and tendered it, and oh, by the way, it was missing a few items, such as pay stubs, the hardship, and so on.

Which is the same as saying there is no hardship package. It also turned out that the property only had a first mortgage, and that it was a Fannie Mae loan. So much for critical path timing. His language totally ignored the existence of our previous conversations and his representations.

And so much for having a home to move into.

In my experience, this kind of thing is the rule rather than the exception. Most brokers will say anything they need to say to get a transaction going. They know that once a buyer and seller get emotionally invested, they will do most anything--even behave against their own self-interest--to keep a deal together and close.

In fairness, this is not universally true. Some real estate brokers view their practice as a business, and employ business-like best practices. But they are a minority.

Groucho Marx famously said that he would never join a country club that would have him as a member. My question for myself is, should I join a club whose members have a jabberwocky definition of reality?

Would you?

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