Garfield's Ad Review
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Pay Heed to What Realtors Don't Say in Their Latest Pitch
These Agents Will Wallow in Conflict Like Pigs in a Sty for Their 7% Cut
1) The mortgage-interest deduction, tax-policy heir to the century-old general-interest deduction, serendipitously became social policy and the single greatest contributor to middle-class wealth in human history (not that there's much middle class in human history).
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Title: Building Wealth/ Home Values Organization: National Association of Realtors  Agency: The Most Agency, Newport Beach, Calif. |
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| Two TV spots from the National Association of Realtors portray cheerful, well-to-do young people moving into beautiful, spacious houses in leafy suburbs |
3) ... provided you don't sell in a down market, whereupon that leverage can absolutely kill you. If you put 10% down on a $500,000 house and the house's value drops 10%, you have zero equity. If the market drops 15%, you owe more than the house is worth.
That, in many markets, is exactly the situation we're in now. The bubble has burst. Hundreds of thousands of Americans are upside down on their mortgages or worse, the economy is shuddering and the real-estate industry -- predictably -- is freaking out.
Yes, your local Realtor -- who in bubble times was too busy raking in 7% commissions to notice all the press hype over the hot, hot, hot housing market -- is enraged that The Media are running doom-and-gloom stories about the burst bubble. How dare they! How dare they report, you know, the news.
So the National Association of Realtors is fighting back with ads reminding Americans of real estate's enduring value. Two TV spots portray cheerful, well-to-do young people moving into beautiful, spacious houses in leafy suburbs as the quintessential bottle-blonde real-estate lady walks around slinging enticing half-truths:
"If you purchase one of the millions of homes that will be sold this year," she says in one spot, "the National Association of Realtors wants you to know that you're making a good move -- for your family and for building long-term wealth. In fact, 60% of the home owner's wealth comes from their home equity."
In another spot, she notes: "Interest rates are low, and buyer opportunities have never been better."
Oh, there's no quibbling with what she says. Presuming the market is near the bottom, this is a swell opportunity for buyers. But where Realtors are concerned, it's wise to focus on what isn't volunteered. For instance, what about sellers, who in most cases are the Realtors' actual clients? If you grab a bargain now, the seller is probably selling in extremis -- an extremis possibly due to having been nudged by their trusty Realtor to bid higher, higher, higher during the bubble when they bought the place to begin with.
The campaign, in other words, is a perfect miniature of the inherent conflict of interest Realtors wallow in, like pigs in the sty, all the time. They have no incentive to perform due diligence for buyers. They don't even have incentive to protect their clients, the sellers. Their only interest is in closing the sale. Seven percent of $500,000 is $35,000, no matter who else takes a bath.
That's why they steer buyers to their own listings. That's why they have cozy understandings with appraisers and mortgage brokers. That's why they sniff the cat odor and declare it a piece of lint in the furnace. They are now and always have been salesmen posing as advisers. Please note that your CPA does not have a magnetized sign on his car door.
So if a slick TV commercial directs you to housingmarketfacts.com, caveat caveat caveat freakin' emptor. For facts you can really bet the house on, you might also check out rottenlyingsleazyrealtors.com.
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Garfield, you're spot on. These bastards are the people who convinced us to buy more house than we needed during the bubble. I'm just lucky I downsized and got out before it burst.
The spot is almost comical in its transparent insincerity. But, then, it was created by realtors. Should we expect anything less?
We prefer to stress affordability and commonsense, because being local, we rely on repeat business and referrals. For example, I am working with a young man who is still living in the house my Dad sold his parents -- nearly 20 years ago.
So I agree with your take on the advertising -- it perpetuates a negative image and way of doing business that took on mutant proportion during the last boom. Maybe like-minded realtors should start an anti-NAR advertising blog the same way you took on Comcast. Just as in that case, we would all want the service without the slime.
Shame on the the entire industry from the bankers to the R/E agents to the appraisers.
But, it is a good time to buy, the ad was correct and advertising the positive is one method of informing those with the means and resources to capitalize on a Buyer's Market.
(I'm not in any of the aforementioned industries either)
We promote BS and take the money just as the realtors. So, look at yourself first. Our industry is full promoting lies and taking the money for those lies.
Hans
Greg
Tucson
Now...back to the "ethics and good taste in advertising" discussion...let's talk about godaddy.com (again), shall we?
In today's society, many want to put on the pretense of success, ie. living in more home than they can afford. If the writer and the some of the other posts think the client is "talked into" buying, think again. People need to take responsibility for their actions.
What do realtors DO, really, to earn that 7%? Drive you around to show you houses that are publicly listed already? Spring for breakfast at McDonald's? Pull together paperwork that you could do yourself (and screw it up even then)? Not tell you to the penny what the closing costs will be the day before the transactions when they call you?
And anybody with a pulse can become a realtor. Look at all the people who were jumping into it during the boom of the last 15 years: people who couldn't sell a life preserver to a drowning man (or do any other job for that matter) were suddenly these big hot-shot REALTORS! WHOOO!
Please!
And heaven help you if you're a BUYER; you get NO LOVE from them.
I remember when my last mortgage closing was collapsing due to several inaccuracies and incompetencies on the part of my realtor, the seller's realtor, and my mortgage company. My realtor's "assistant" was at the closing. Where was my realtor? AT A REALTOR ETHICS BOARD MEETING! This was the same SOB who took up for the mortgage lender's mistakes, couldn't use a fax and cost me $80 worth of charges for HOA agreements, lied about my lack of contact with them prior to the sale when I'd been in touch with them at least once a week for three months, then, when I got upset, threatened me with the comment that this was "a small town, that's all I'm going to say!"
Same realtor sold a house to a colleague of mine when the colleague moved to town, then called and chewed out the colleague when he sold the house and used another realtor with whom he'd become friends!
My best friend lives in a boom area of middle Tennessee has similar realtor stories of his own and many other people, including kickbacks, bribes, etc., with builders, which I know is not exclusive to the real estate business, but he's got at least one new story like that about realtors in his area every couple of months.
Funny how I have yet to hear any good realtor stories from anyone who wasn't buying in the $1 million+ bracket! I did have a friend who bought in that bracket, and his realtor was great, but for the realtor of the common man, I have nothing but disdain.
We've had great experiences with realtors. They helped us sell our first house—quickly—at a fair price. And they helped us buy the next one. We set a number for what we would pay and we stuck to it both times. And we didn't leverage ourselves to the hilt to do it. Maybe banks were more careful about lending then because they were lending their money, and not just offloading the risk to others.
We also DIDN'T buy either of our homes in order to make a buck. We bought them to live in.
I think the emphasis these spots place on real estate as an investment is a mistake, and I agree with you. But you can make an argument that real estate prices are lower, and this COULD be a good time to buy. Of course, if you try to play the real estate market the way you play the stock market, you could be making a very expensive mistake. No realtor is a substitute for good judgment.
Second, many, but not all states, require something called a buyer broker agreement between buyer and Realtor, where the Realtor is acting in the interest of the buyer and not the seller.
Finally, any buyer or seller who participates in a real estate transaction without independent legal counsel is a fool.
I bought a house without a realtor in May 2005, sold it myself July 2007 in thirty days, and realized a 120K profit, zero commission. If I had gone with one of the many Realtors I interviewed, I would have lost not just commission money, but approx 80K worth of sale as they all low balled the value of the house so they could sell it faster. And I am far from the only one realizing this truth of buying and selling homes.
In a market of severe devaluation, a seller is gonna suffer even more financially with the Realtor 5%, and a buyer has no need for a Realtor as they'll find a bloated market and desperate sellers and more negotiating strength when the 5% commission isn't part of the sell price.
Simply put, it's a mouse click simple world with tremendous free information and opportunities available for buyers and sellers.
I predict that the Realtor model is going the way of the local Travel Agents. -AB @ www.andrewbaker77.com
First, I don't know who's getting 7%, but the national average commission is closer to 5.7%, and it doesn't go to one agent. It goes to two agents after the two companies take their split. Most individual agents walk away with 1.5-2%, and they've already spent a chunk of it to market the home for the seller. And whether an agent represents the buyer or the seller, he/she assumes a fiduciary responsibility to the client, and an ethical responsibility to all parties.
Second, you make the real estate transaction sound like a zero sum game, where if the buyer gets a good deal, the seller got a bad one. Wrong. It is possible and very likely that both parties in a transaction will come away pleased, unless the seller is actually fighting off foreclosure. For the record, 95% of the mortgages in the US are being paid on time.
Third, realtors do not "steer" clients toward their own listings. If I have a listing that I think is what my client wants, I am sure going to show it. But anyone that has worked with buyers at all knows and will tell you that you cannot shove a house down their throat. They will buy the one that hits their emotions.
Fourth, you're out of your mind to take issue with the statement that buying a home is a sound investment. How many years of historical data do you need to fo rit to sink in?
Five, how's this for an incentive to do due diligence for clients; to not do so can cost a realtor his/her license. Most Realtors succeed by referrals, and referals come from satisfied past clients. You don't make it in this business by screwing over your buyers and sellers.
Sixth, get your head out of California. Most of the country never experienced bidding wars on houses. To sell them, they had to be priced competitively, staged properly, and marketed aggressively (an expense born by the realtor), or they didn't move.
Now I don't what real estate agent ran over your pet cat, but ther's plenty of ethical and hard-working Realtors out there. Sounds like you have done a bad job of selecting yours. Too bad. But don't blame the whole industry for your mistakes.
http://blog.inman.com/inmanblog/2008/02/the-battle-to-b.html
Imagine my surprise to find your blog entry complaining about the use of real estate companies using advertising to convince people to buy real estate.
It was just a few days ago that I was watching a documentary "The Century Of Self" part 1 is about Edward Bernays - "first to take Freud's ideas about human beings and use them to manipulate the masses."
http://video.google.com/videoplay?docid=8953172273825999151&q=century+of+self&total=1247&start=0&num=10&so=0&type=search&plindex=1
http://tinyurl.com/2fjrln
From Wikipedia: Bernays also pioneered the PR industry's use of psychology and other social sciences to design its public persuasion campaigns. "If we understand the mechanism and motives of the group mind, is it not possible to control and regiment the masses according to our will without their knowing about it? The recent practice of propaganda has proved that it is possible, at least up to a certain point and within certain limits." (Propaganda, 2005 ed., p. 71.) He called this scientific technique of opinion-molding the "engineering of consent."
and:
One of Bernays' favorite techniques for manipulating public opinion was the indirect use of "third party authorities" to plead his clients' causes. "If you can influence the leaders, either with or without their conscious cooperation, you automatically influence the group which they sway," he said. In order to promote sales of bacon, for example, he conducted a survey of physicians and reported their recommendation that people eat heavy breakfasts. He sent the results of the survey to 5,000 physicians, along with publicity touting bacon and eggs as a heavy breakfast.
Bernays also drew upon his uncle Sigmund's psychoanalytic ideas for the benefit of commerce in order to promote, by indirection, commodities as diverse as cigarettes, soap and books.
~~~~~~~~~~~~~~~~~~~~~~~
So it's ok to create ads that encourage people to overeat and smoke, right? This is the father of your unethical industry - will your industry take responsibility for this neverending drive for consumerism, this neverending push to consume against our best interests? HA!
I'm a Realtor and I don't agree with NAR's current ad campaign but come on, it's probably consultants from your industry that designed the campaign for them. Take a good hard look in the mirror, will you Mr. Garfield?
Thanks,
Bob
I'm new to the real estate field. I got into real estate because in 2005 I attempted to buy a home, but that experience failed miserably due to really bad agents. I discovered that I knew more about real estate than the agents I was working with because I like to research and learn about issues, especially when I'm borrowing over $120,000 and paying around 6% (3% to listing agent and 3% to my buyer's agent) commission. I also discovered that I liked real estate. I found it fun and that was not really surprising since I have a B.S. in Geography.
I have seen people bash Realtors and real estate agents online pretty well. For clarification, I am not a Realtor, but a soon to be real estate agent (pending license issuance). The issue is not that there are bad Realtors or real estate agents as that is obvious given the commentary online and in public. The issue is that the systems in place permit potentially unqualified persons to become real estate agents. This ends up giving a bad reputation to the really great Realtors and real estate agents. Here is my suggestion for what it is worth:
First stop complaining and do something about the situation. Realtors and real estate agents listen up. If you want to be taken seriously as a profession then start this yourselves or people will start voting either with actions in dollars (e.g. not using real estate agents/realtors, but some other method or doing what I am about to suggest). Contact your state representatives and demand that license requirements be increased.
Complete Reform on License Requirements:
1) Absolutely require an accredited university (college) bachelors degree. Why? Do you really want someone who has only a high school education handling a deal (negotiating and drafting contingencies) that is really one of the most significant investments you may make in your adult life? Lets put it another way: would you hire and pay someone with only a high school education to manage a financial matter worth hundreds of thousands of dollars to you and pay that person thousands of dollars? In comparison (at least in Texas) an attorney is required to be licensed and hold an ABA accredited degree (usually, there are exceptions). A Registered Professional Land Surveyor (RPLS) is required, as of recent legislation in the last decade, to hold at minimum an Associates degree (but usually a bachelors) prior to being permitted to obtain a license. I use these examples because these fields run tangent to real estate.
2) Make the test for obtaining a license more challenging.
Below is an excerpt from a document on official Texas Real Estate Commission letterhead (http://esbd.cpa.state.tx.us/docs/329/73516_2.pdf).
Salesperson National First time Pass Rate from 9/1/06 - 8/31/07 71.0%
Salesperson State First time Pass Rate from 9/1/06 - 8/31/07 67.2%
Broker National First time Pass Rate from 9/1/06 - 8/31/07 82.9%
Broker State First time Pass Rate from 9/1/06 – 8/31/07 78.6%
These pass rates should be much lower. Given that in 2007 alone the number of exams administered was 37,932 and that was down from 42,406 in 2006.
By comparison in Texas for the Land Surveyor's exam from a 2006 document (www.txls.state.tx.us/sect05/word_news/newsletter_08_06.rtf):
55 % passed the Fundamentals of Surveying exam in Texas (34 passed / 62 took ). The National pass rate was 49% (732 passed / 1489 took).
The real estate exam in Texas and other states should consist of more that just a set of multiple choice questions. There should be a basic writing portion. A scenario portion (that links throughout the test, e.g. you get the first part incorrect you get the rest of the exam wrong). Also there should be a significant portion dedicated to real estate math.
Real estate is a profession. Real estate agents should be able to define what it is they do for a client. In simplistic terms that is providing a service of bringing together a buyer and seller, renter and landlord, or offering expert advice on real estate issues. They should also be able to explain their limitations, e.g. when a client should hire an attorney, engineer, or other professional. There is much more to being a real estate agent than my simplistic overview, but it communicates the basics.
Will my suggestion solve the problem of bad service? Probably not, but it could offer a step in the right direction for both the profession and the public (customers) at large.
Hope my ideas offer some food for debate.
Thanks,
Sam Trevino, TX, Future Real Estate Agent