Letters to the Editor
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Ex Stockbroker
I laughed out loud reading this. An ex-financial advisor, I'm well acquainted with the "Bull Market Genuis". If the stock goes up, I'm a genius....if it goes down, you're an idiot. At least she cops to it.
Also, this reminds me of one little quirk in the American psyche. It's been my experience that large large portion (possibly a majority) of us prefer to deal with (reward) a personable incompetent, than a socially awkward guru. I see this in my mechanic, physical trainer, computer guy........all scarily competent, and with the exception of my computer guy who found a little niche where he doesn't really have to sell to eat, all "starving".
I would even go so far as to say that there tends to be an inverse correlation between personability and technical compentence.
Recently, this opinion of mine was validated somewhat by an old episode of "This American Life". A nurse, upon being told by a patient's son that he really liked Dr. X, informed him that as a general rule, the more you like a doctor, the less likely you should in actuality be to want him to treat you.
So it isn't just me.
V V
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Fluff
Fluff.
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The clock is ticking
I heard similar things from an experienced flipper and real estate agent. He had made and lost and made and lost millions, and in the end, it was the interest that did him in. It's not quite the same situation -- he was buying land and doing major renovations or building new houses outright, which required taking out small loans to finance the construction.
Rogers mentions the cash flow problem. Loans can alleviate that temporarily, but it means you have to work FAST, be very organized, and use reliable contractors. If you run into a delay or something snags the process, you can watch your profit simply evaporate into the interest on even a small loan.
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Nice choice of vocations...
Let's see:
Realtors = Scum of the Earth
Home Flippers = Soulless Profiteers
Nice choice of vocations, Alison Rogers!
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Fix the Fee Formula, Improve the Service?
I wonder if there isn't a solution to the problem of the broker rushing to sale in order to earn an income. I would think that a clever person might offer something like a Search Retainer. You could offer someone search services on a monthly basis. You could structure a fee schedule based on how many hours per month you devote to that client. Any client who makes a purchase through you would pay a much smaller percentage at closing (say, 3% rather than 6%, or a declining scale based on how much has been spent on the search.)
It seems to me that this would alleviate some of the income instability for the broker. By earning search fees the agent could be encouraged to provide high quality service to the buyer. It might also improve the looker to buyer conversion rate. There can be discomfort in asking an agent to show you places if you're unsure about being ready to buy. And the agent can feel resentful if too high a percentage of the lookers don't buy. Having a search fee could alleviate this.
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Markets Cut Both Ways
I liked this interview and wish it could have continued for at least another page. It did not, however, deliver on its promise to explain "WHY it's impossible to predict the housing market."
I just wonder if it ever occurs to real estate "flippers" that housing is a place to live, and that a good proportion of people are being priced out of the market. There's an old American myth that games (markets) have only winners. (I really loved that part about the poor kids in the real estate class. So much for the classless, market-driven society.)
Kudos to people who put sweat equity into their homes and build wealth. Blessings on those who invest in neighborhoods and schools and share the benefits with the people already there.
However, wealth without production is inflationary. It's just basic economics. And market players are subject to, well, markets. Consider that if a lot of people are getting rich on real estate and sending their kids to fancy colleges, the price of fancy colleges is just going to go up further. They didn't create more fancy colleges in the process, so supply exceeds demand. And then they lose again when lagging demand for overpriced houses erodes their net worth.
Real estate maintains class differences. If you ever wondered why, generation after generation, the public schools don't get better, this is why. Why in the world would people vote for improving all schools, when the scarcity of good schools drives housing prices?
The author is right; this ain't no game for rookies.
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Minorities need not apply
I've got a question. Why, when the author is explaining about the "poor people" and how they don't have what it takes to be a real estate broker, does she mention their race? What, exactly, does that have to do with her argument that a certain "sensibility" is required for real estate brokering? Or could it be that she's using the "sensibility" of "poor people" talk to mask her real message which is that minorities can't be high end brokers?
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Fees and Services
Allison: I liked your idea, but I did want to clear one thing up. In the vast majority of real estate transactions, the seller pays the entire commission to his broker, and they split that with the buyer's broker. The buyer's cash is usually long gone after downpayments, loan fees, attorney fees, title insurance, prepaid property taxes, and on and on.
If an agent required a "just looking" retainer, it would at least make the tire kickers pick on someone else. And, as you said, the agent could still credit that fee back to the buyer at closing, if and when they closed.
But if you want to make steady money in real estate, you can always be a licensed assistant. It doesn't pay much, but it pays every two weeks, and you can learn alot more than you would sitting on duty waiting for the phone to ring!
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Rogers is doing us all a service
You gotta love it when a truth-teller enters a profession whose practitioners are known for lying and then lets the rest of us in on what she found. And if the truth-teller happens to be an accomplished writer, so much the better. Nice interview and thanks for your candor, Alison.