Saturday, January 26, 2008

On Realtors

Realtors are commissioned sales people who make their living by selling their services and ‘advice’ to home buyers and sellers. The higher the price of the goods they sell and the higher the volume, the higher their commission. Is there anything complicated in this that people do not understand? If the market volume falls and/or market prices fall who loses the most? You guessed it right. It is Realtors and pretty much everyone else in the real estate value chain. So why do people have any expectation that Realtors or the associations that represent them will put anything but a positive spin on everything. The case of David Lerah and the US real estate associations is all too well known. Do people really believe that CREB, EREB or any of the Realtors talk about on this blog really wish for lower prices or lower sales volumes? No.

They really want higher prices and even higher sales volume. And if I were making my living by providing these services, I’d probably be doing the same thing as well.
Just contrast how things have changed for the real estate business between 2004 and 2007. Sales volumes doubled. Which means double commission. Average sales prices doubled which also means double commission. So obviously, any thoughts of falling sales prices and/or falling sales volume must be an anathema since it clearly hurts their bottom line.

The problem here is that the real estate agencies control the data and since they are the custodians of the data, they can spin the numbers whatever they want, including changing the criteria or representation as they deem fit. We have to keep on referring to Bob’s site or Sheldon’s site because these are the only places where the data is available. If CREB/EREB were to make this data (or forced to make) this data publicly available, life will be a lot easier for everyone.

So here’s what I’d suggest again- look at the numbers from whatever sources you can, and don’t get too much into the commentary and interpretations of those whose occupation is to sell used houses. And don’t count too much on the advice you get here either-Be intelligent and smart, use your critical thinking. For example, if inventory keeps on climbing, prices have to fall, it’s just a matter of time.

Don’t expect a Realtor to say that you should hold off making purchases until a certain time. How will they make a living if they were to pass on such advice? After all, they have mortgages too! :)

I’ve nothing against any Realtor or real estate agencies. They are merely doing their jobs-if it involves pumping the market, creating an urgency to buy, introducing ‘fears of being priced out forever’ or anything else that will increase their commission-they will do it.

The onus is with the layperson to see what’s the best for them and act accordingly.

Finally, have faith in Mr Market. If the propaganda or positive spins could keep prices high, the situation in the US would have been far different.

UPDATE: Came across this nice article on the 'realtor ads' down in the land where real estate always used to go up. So clearly, these guys are the most 'optimistic bunch' with their tactics almost borderline chutzpah.
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