July 20, 2018

Buyers ask, ‘Who needs brokers anyway?”

More and more folks searching for a new home are bypassing real estate brokers.

According to research (shown in the table above) by the National Association of Realtors, 38 percent of buyers found the home they ultimately purchased from a sales agent last year. Contrast that statistic with 48 percent in 2001.

There was a dramatic change 7-point change from 2001 to 2003, after which the decline in broker assistance dropped by two or three percentage points. Exceptions occurred from 2005 to 2006, when the percentage stalled at 36, and from 2007 to 2008, when the number reached its nine-year low of 34.

Interestingly, the percentage has been inching up again, from 34 percent in 2008 to 36 percent in 2009 and most recently at 38 percent.

As you may well imagine, the Internet has been responsible for the drop from 2001, when 8 percent of consumers located their next home online, to last year. In 2010, that proportion of 8 percent had climbed to 37 percent.

Every other way of searching but one posted declines from 2001: Signs (15 to 11 percent); friends, relatives or neighbors (8 to 6 percent); home builders or their agents (3 to 4 percent); sellers themselves (4 to 2 percent); print newspaper ads (7 to 2 percent); home books or magazines (2 to less than 1 percent); and other (3 to less than 1 percent).

It seems the two phenomena affecting the changes had to have been the surge in Internet use and possibly the housing bust.

The Internet made it easy to find available properties without a broker’s access to proprietary databases. At the same time, the collapse of the housing market must have injected enough price uncertainty for buyers to have relied more on their brokers for advice, leaving much of the searching to them as well.

Rare is the buyer of mine in New York City who doesn’t pore over Streeteasy.com for listings, often finding those that are outside the parameters they have given me and sometimes ending up with those properties. That’s a good thing, if occasionally a head-scratcher.

Once they find a likely property, some of those represented buyers may be in tempted to be in touch with the listing broker to ask a casual question or two before alerting their own broker.

That’s a bad thing. Doing so muddies the waters, risks the buyer’s disclosure of information better kept confidential and may concern issues for which the consumer’s broker already has answers.

Innocent though such queries may seem, they can damn relationships and transactions.

When a buyer “hires” a broker, it is important to let the broker work without interference. Doing otherwise is not much different from contacting the other side directly in a legal matter for which an attorney has been retained.

It is dangerous and must be avoided.

Comments

  1. Malcolm… while I think your overall point about the value of the client-broker relationship is very accurate and true, I’m wondering if the title of the article (as well as its main thrust) wouldn’t be better summarized by saying “Who needs BUYER brokers, anyway?”

    I am sure that the internet has made it easier for sellers to market their own properties without a broker, but I suspect that the stats used in the article/chart only refer to the buyers’ side of the transaction. 

    Yes, only 38% went through buyer brokers to find their homes, but a large (perhaps majority?) of buyers who went to the internet (or Yard signs, or ads, etc.) still had to deal with a listing broker in order to close the transaction. Therefore, saying “38 percent of buyers found the home they ultimately purchased from a sales agent last year” might be overstating the situation. 

    • Good point, but turn it around and think about it like this:  don’t buyer’s agents work harder than seller’s agents? I mean, if that weren’t the case, why do agents all want the listing and not to be on the buy side? Doesn’t a seller’s agent sit back and take in the offers from the buyer’s agents? Isn’t dual agency discouraged due to ethics? If I were on the transaction side of the business I would much rather be a listing agent. That begs the question, “why is it so much more attractive?” Answer: Less work.

      • Oh Patrick… I’m not going to let you bait me into that argument. Both types of brokers–if they’re quality brokers–work hard for their clients. And as I said, I agree with Malcolm’s argument that buyer brokers serve a very important role. I was just pointing out that the internet’s impact has had a disproportionate effect on that side of the biz.

        (I will, however, respond to one of your more egregious comments: if you think listing brokers just sit back and wait for offers to roll In, then you migthe missthe that minor recession/bubble burst from the last couple of years. 🙂 )

        • Ha Ha, I think if someone is good then they are valuable. HOWEVER, you
          can’t deny that agents prefer to be a listing agent rather than a
          buyer’s agent. Maybe that in itself was part of the problem. Maybe in
          this biyer’s market the buyer’s agent will ascend to the top of the
          food chain. Who knows?

          • Malcolm Carter says:

            Of course, Sandy’s right about both buyer and seller representatives working hard, at least good ones. The difference is only in the nature of the work. Although I prefer to represent buyers and never rule out sellers, my preference has to do with the satisfaction of helping someone find a new home, the quality of the personal relationships that develop and with my dislike of many of a listing broker’s responsibilities.