The first time I heard the word “fungible” was in my college economics class. Fungible was one of those concepts that stuck with me because it seemed like such an odd word for what it really meant. There is nothing “fun” about something being fungible. It means something can be easily substituted – easily replaced with something of relatively equal value. If the gasoline at Costco is just as good as the gasoline at Chevron, but it’s $0.10 cheaper, most people will line up at Costco. Most people treat not only the brand of gasoline as fungible but even the grade of gasoline, putting regular in their cars when the engine may perform better on premium fuel. Too often many home buyers and sellers see real estate agents as fungible.
Real estate doesn’t allow you to go through a transaction 3 times with 3 different agents
The problem is particularly acute in real estate, because there are so many people with real estate licenses, and in a hot market where homes can easily sell themselves, people would just use their brother, sister, or cousin to sell their home. The extra benefits or slightly better sales price a more experienced agent “could have garnered” is minimized, because the general view is that agents get too much anyway for the amount of work they do. Real estate doesn’t allow you to go through a transaction 3 times with 3 different agents to see which scenario turns out the best.
Just recently I was working with a person who wanted to buy a newly built home. Her credit needed work and she needed to save money to get the down payment. After courting this buyer for several months (who assured me she was buying alone and not working with another Realtor®), I found out that she went ahead and tried to purchase the new home with two other buyers, listing another Realtor as their agent. My guess was that one of the other two buyers convinced her to use the name of another agent – maybe a family friend or someone that promised them other incentives. While I’ll never know the exact reason, the outcome was the same. I was considered fungible. My new home services are probably not matched by many agents in Texas, but that didn’t matter. The three buyers on the contract simply replaced me with another agent. I was substituted – my services were not deemed valuable enough to the three buyers, or at least two of them. This happens all the time especially with buyers who see agents as disposable at the first sign of trouble in the home buying process. Any hiccup they see is the fault of the agent, and they immediately look to find another one. Luckily, not everyone does this, but it happens more than you would think.
LESSONS FOR HOMEBUYERS
Stop using just anybody to purchase or sell a home. Interview agents and ask hard questions. Find out which agent is the most qualified and best fit for your personality. If the most qualified person doesn’t listen or acknowledge your spouse, or seem demeaning, find another agent.
You can’t spend 7 days to look for a home you’ll live in for 7 years.
Have patience and value relationships. Deciding to pick another agent because your current one was out of town for the weekend after showing you homes for 6 months is disingenuous. A trustworthy and qualified agent brings a good balance to discussions on why that dream home may not be so perfect. When home buyers get FOLP (fear of losing property) the buyer rep agent is often left with an angry buyer, an upset seller and listing agent, and no commission. There truly are multiple homes that will meet most buyers’ needs if the first choice is taken, but home buying requires patience. You can’t spend 7 days to look for a home you’ll live in for 7 years.
Value specialization and geography. If you want to buy a high-rise condo in the Post Oak area of Houston and your agent lives in a Post Oak condo, selling high-rise condos for the past ten years, you probably should use them to find you a place. If you’re buying a newly constructed home, find a new home specialist. If you’re buying beachfront property, find an agent that works almost exclusively with properties near (and on) the water.
Understand that working with a good real estate agent and sticking to their advice can pay dividends long after you’ve closed on your home. Savvy homebuyers that realize this have an agent on their life team just like a lawyer or a primary care doctor. That agent will help guide them through all kinds of real estate related issues and may even find a house for the buyer’s son or daughter years later.
Shiny things do get dull. Listen and ask questions. While it’s easy to get focused on the prettiest house, it’s critical to understand the other factors that help you avoid a money pit. And if the house is right, did you listen when your agent said there could be a mall built right down the street from the neighborhood you love, and traffic will triple in the next 5 years. There is so much more to consider than just the house. Even financially, buyers will purchase a home knowing that it will stretch them, only to lose the house 5 years later as taxes go up or other life events happen.
LESSONS FOR REAL ESTATE AGENTS - WHAT CAN WE DO BETTER?
Be honest about your specialty. Having a large circle of friends and family does not automatically qualify a person as a top real estate agent. But with the barrier of entry to real estate being so low, the industry is super-competitive. This leads to agents competing for every single deal even when they may have little to no experience in selling certain types of property. My wish for agents is to focus on being more specialized which brings more credibility to the industry. Trying to chase every deal over every area of the city spreads the agent’s time and expertise too thin, ultimately leading to unhappy buyers and sellers when deals fall through. Agents focused on certain types of property in a well-defined area, will tend to be able to better navigate through problems they see all the time.
Set better expectations with your buyers. Don’t promise a flawless transaction when so many variables are outside of your control. You don’t control the seller, their agent, the inspector, the mortgage lender, or the closing officer. Tell your buyers the problems you anticipate and the path around them. Good agents that have developed a good rapport with their buyer tend to have less lash back when things go wrong. An agent with tons of expertise but no personality will immediately get the blame when things go wrong.
The transaction doesn’t end at closing. The best agents will continue to provide value long after the sale. Even though I have a broker’s license, the agent who sold me my home when I wasn’t practicing years ago, still calls me up a few times a year to see how things are going. I’ve used his vendor list several times to get things done on my house.
Focus on educating your clients. Even for experienced homebuyers and sellers, most people don’t buy or sell a property every month. If it’s been more than 2 years since the client did a real estate transaction, chances are things have changed in the market. There may be new forms to complete at closing, new regulations. It’s easy to get focused on getting and closing the deal to move onto the next, but most clients will appreciate the extra insight and guidance along the way, even if they don’t verbally say it.
You can’t save everyone. Some people just won’t take advice – plain and simple. Some people are going to change their mind or contradict themselves twenty times. As an agent, you’ll need to set boundaries and decide when does it make sense to not have that person as your client.
The blog for everything about buying new home construction (and resale homes).