I'm so sick of hearing how real estate agents can't afford to work with buyers anymore - UNLESS that buyer has signed a buyer agency agreement AND has an iron-clad loan commitment in hand - because of the high cost of gas. What a crock.
Okay, let's do a little analysis.
Over the last several years, gas has hovered around the $3.00/gallon mark. Sometimes higher, sometimes lower, but I think that $3/gallon is a reasonable place to start.
In some parts of the country, gas is now around $4.00/gallon. That's $1.00 per gallon difference.
If your car gets 20 mpg, you're spending ONE EXTRA DOLLAR for every 20 miles you drive.
If you take a buyer out and drive sixty miles with him or her, that's three extra dollars you spent on him (over and above what you would have spent on him last year and the year before).
Are you really saying that you can't afford to spend an additional $3.00 in exchange for a shot at a $7,500 commission ($250,000 x 3%)?
Tell ya' what. I'll be happy to take your Denver buyers for a ride, whether they've signed a Buyer Agency agreement or not. Whether they're pre-qualified or not. Because I know that being out in my market with a warm body in my car (and that warm body probably has lots of friends he can refer to me in the future) is a MUCH better use of my time than sitting back at the office congratulating myself on saving $3.00 in gas.
I'll even pay you a referral fee. So, on top of the THREE BUCKS you saved, you'll also get $1,875 just for giving me a call!
:) Great post and analysis. Nice job of breaking down the info. Seems like a no brainer.
Dave
I fully agree. Realtors who won't show property to a buyer because of gas prices should seek another job. I hear K Mart is hiring.
I agree not to be cheap even though gas seems so expesive. However, I think a pre-qual letter is very important. Warm bodies in a car is great but unless they can secure a mortgage, they probably won't do you much good...
Jennifer This is perhaps the most creative post I've ever seen asking for referrals! Great job :) I would never use gas prices as an excuse, but (you knew that was coming, right?) I would require the consultation. It's just a good business practice in my opinion - we're talking an extra thirty minutes or an hour per Buyer, that could save you weeks or months with an unqualified person.
Yes! Sometimes we get bent out of shape without REALLY thinking it all through.
Just joined your "Daily Seduction". I like the title. It's nice to see someone put humor into business.
Dave - it does to me, too (seem like a no-brainer).
Gary - LOL!
Christina - I don't mind asking for a pre-qual after I've built some rapport with a new buyer. But right off the bat? Nah. I'll take my chances. My new buyer, even if he's currently not qualified, probably will be some day and I like a full pipeline. But if I blow him off right upfront 'cause he doesn't have that magic letter, I'll never hear from him again. JMHO
You shouldn't work with a buyer without an agreement even if the buyer drives.
Now I know we all do including me.
Actually, I think over the past several years gas has been closer to the $2 and under mark.
It's great that - I guess - your average sale is 250K. Mine is 110K and I split that with my broker (as do we all).
I think it's wonderful to be positive - and I also have never seen a "qualified" buyer that I don't want to work with - but the market forces in play today "are what they are" (jeez, I hate that cliche) and I think we all need to adjust accordingly.
I try to get Buyer Broker Agreements and Pre-Quals... but it isn't because of the price of gas. That is just part of the cost of doing business.
Nice post.
Sure put it all in perspective.
Have a great week.
I couldn't have said it better myself ! My husband is a Math whiz and we figured this out a long time ago.....Now, if someone just wants a tour 9 there are a lot of those around here lately) you know the ones who tell you up front they have no intention of buying but are thinking of moving here in 5 years and want a tour of the area..I will save that $3.00 and drive 120 miles with it with someone who is looking to purchase !
Thank you Jennifer for calculating this one for us gas prices are terrible but if you are out there working you should be fine.
Jennifer - great job breaking it down. I too would rather be out showing than sitting around complaining how bad things are.
I agree that the cost of gas isn't an excuse or reason to work with or not work with someone. HOWEVER, as a professional real estate agent, I do my VERY best to not take people into other people's homes just because they show an interest in seeing houses (and in essence, without a prequal, that's exactly what we are doing). I don't believe in exposing others to increased risks in the hopes of a big payoff for myself.
It is amazing how we lament the little things. I save my gas for my buyers by doing less foolish running around and more planned trips!
Funny and real - I hope I have some buyers to send you soon! :)
I'm just more committed to BAs now - it has made a difference in my choices, but I'm looking for ways to work WITH people who are serious!
Jennifer: I find this all very interesting. People speculate what that magic number is for gasoline - the number where people start making changes in their driving habits. Seems $4.00 is the magic number folks. I think's it's just a knee jerk reaction on our parts - this on top of a slower, buyer's market. Just one more challenge in this challenging profession. The cost of some services are prepaid. Ours are deferred. Just another rock in our back pack.
Alyce Martin, KW Realty Albuquerque
Jennifer, I am glad driving anyone around works for you. I wonder what you will think of this tactic after you get about 5 clients in a row that don't result in a sale? I still think for every client you show houses to that has not been pre-qualified is one client you can drive around that is prequalified. After all, there are only 168 hours in week. If you take away sleep, eating, hygene, commuting, relaxing and family time it is hard to find 60 hours to work. 60 hours is a little much for most Realtors as the flexibility is why most people choice the career.
Now, I would estimate 60 miles would equal 5-10 houses. Then the research on determining which homes to look at, mapping a course, waiting on your client to show up, stopping for lunch, making phone calls, emails, text messages and other items associated with selling a home. So, just getting to the point to make an offer you can easily spend 20 hours. 1/3 of your work week 1/2 if you only put in 40 hours. Then you find out they can't get qualified. Missed opportunity, missed time.
While your post makes perfect sense if you are arguing against Realtors not wanting to drive clients because of gas; however, it is weak on not getting people pre-approved. Not getting buyers pre-approved is the worse service you can give a client. Why get a person's hopes up and exicted when they can't even buy a home? So, you can get a referral out of them? Not advising requiring your clients to be pre-approved goes against your fidicuary responsibilty to you client.
The reason most agents don't ask for a buyer agreement or require a buyer to get pre-approved is out of fear. I think you owe it to yourself to re-evaluate your stategy and the disservice you are promoting by not requiring your prospects to be pre-approved. Do you really not care if you are working with a qualified buyer or are you afraid to ask? I have read many of your posts and I know you are better than that. I hope you take this comment as sincere advice as it was not meant to be offensive.
Jennifer,
I've never much paid attention to gas prices when it comes to my duties as an agent. I do look at MLS fees, NAR, and CAR, none of which seem to go down. All, including gas, insurance and the like are writeoffs though.
Driving buyers around is different than being a tour guide for lookers. Separating the two is what sales is about. Getting referrals from either makes it a win-win and since customer service is almost a thing of the past, those that give it won't have to worry about gas prices. Or the other rising fees.
Sorry, I have to disagree. I'm in an area where appropriate listings are spread out. Most people want to be near a train station and they now want to be able to walk to shopping etc. They are usually in a price range where any number of towns with train stations might work. But there are three train lines. Which has me running east to west and north to south in heavy traffic with lots of idling. Without saying what the splits and coops actually are in this area - I will tell you that they are some of the worst in the country. It is not uncommon for me to walk away from a closing with about $1500 pre-taxes. I had to do some simple math. The math reflects a very bad market in which agents are busy with people, but very few are actually pulling the trigger. When I did the math - the results were eye-popping. I realized something had to change. About 16-20% of what I take home before taxes has been going to gasoline. That's just too much of an outlay.
I am not demanding an EBA immediatley. I DO insist on it for the listings we visit and if they won't sign it, I won't work with them. After two showings (generally about 12 listings) if they aren't ready to commit to me, I send them on their way. The other issue, making sure that buyers are motivated to buy is something I need to work on. I used to have a solid conversion rate...but that has tanked as more people kick tires and sit on the fence. However, I must add that even agents with years in the business, find themselves trying to pry endless tire kickers off the fence.
Btw, the number you quote is so much more than i would take home from such a deal of that size that I had to laugh. I have never taken home anything close to that amount for far larger deals.
Many agents are start up agents, new entry, new affiliates, and don't have the financial advantages of our more affluent realtors. It's difficult for them to compete. Fuel costs are predicted to reach 5 dollars a gallon throughout America by the end of the summer. The higher the costs of fuel, the higher the cost of nearly everything else. We must find alternative resources to assist in the sale process, including more vigilant interaction with the internet and telecommunications. Buyer and seller assisted agency, and the communication that proceeds throughout the interaction, is now at a critical point because the United States is experiencing the worst energy crisis in the history of our nation. It's also very easy for some to support a war they don't have to fight, because they have the affluence to endure the deprivation of critical resources needed to support commerce and industry. Deprivation of important resources which will ultimately disable America, because America's government has disabled it's citizens through the piracy of the essential resources needed for life-support, and has perpetrated corruption of the economy at an alarming and incalculable magnitude.
It's past the point of lowering fuel prices. Justice should and will be sought to compensate our people for the damages. Damages to families, to neighborhoods, to schools, to business, to the environment, to the economy, to our faith.
Thanks for all the comments! I've gotten involved in many a discussion here about BBA's and I tend to disagree with the masses. I've never required one and have done just fine. When a buyer flakes on me, they would have anyway, with or without a BBA.
But that wasn't the point of this blog. If working with buyers is not something you want to do... if it's not something you can afford to do (financially or timewise)... if it's not profitable in your market to do, then that's just fine. As self-employed types, we can all choose what we do every day. My point is that the price of gas really should be a non-issue in the success or failure of your business, regardless of the average sales price in your market.
For those who say that driving around with a not-yet-pre-qualified or not-yet-committed buyer is time I should be spending elsewhere, I vehemently disagree... in my situation at least. I don't know about you, but I'm not exactly overbooked with buyers these days. Sure, if I were so busy that I had to triage my buyers, I'd certainly give priority to those who are more motivated than those who aren't. And if that's your situation - good for you! But I'll bet the vast majority of us here would love to have some buyers in our pipeline, even if they can't buy for another five months or more. Blow off a buyer because he's not ready to BUY TODAY and he'll buy from someone else in five months.
And again, please feel free to send these guys to me. I will take very good care of them.
Jimmy - your points are valid, but haven't been my experience. I can't remember the last time I worked with a not-yet-prequalified buyer who couldn't qualify once they made the phone call. I'm not saying that buyers shouldn't talk early with a lender; I'm just saying that I don't require it before we go out looking. The vast majority of my buyers talk to a lender right away, but not 'cause I made it a condition of my time.
No, I'm not afraid of a BBA - I just don't see the need. Knock on wood, I've never needed a signed piece of paper to feel comfortable working with my buyers.
Ron - I agree with you that we shouldn't impose on sellers just to entertain buyers. That's a great point. But you never know when a lukewarm buyer will turn hot and I'll bet sellers in today's market would rather have the chance at selling!
Jennifer, it is not about the gas. That is the cost of doing business. It is about he buyer contract and their committement to work with us. We will take them out one time, explain agency relationships, if after that they are unwilling to sign a buyer agency contract with us, we will not show them anymore. That is our expectation of how we work with buyers.
I had a call a few weeks ago from a prospect whose first question was how much I "charge" to show houses. I thought I had a very inexperienced first time buyer on my hands, but no, turns out the lady had talked to 2 agents who told her she would have to pay them a daily fee to see houses, to cover their gas expenses. I was totally blown away by that, particularly since we are in an urban area where, quite frankly, you can show houses all day and only drive 15-20 miles.
On the subject of BBAs, well, I don't push for 'em, either, but that's because *I* want the out in case I end up with a cranky client with whom I don't want to work. ;-)
I have had to fire a couple of clients in the past, but have never once had a scenario where I thought a BBA would have affected a different outcome.
Missy - I agree! It's not about the gas, or it shouldn't be. I've just been hearing a lot of whining lately about working with buyers DUE TO the cost of gas.
I see a slight nuance here... I never even bring up the topic of BBA, so I don't give buyers the chance to refuse to do it. I just work on the assumption that they are committed to me and, like Susan, I've never been burned. But again, that decision is up to each individual agent.
Susan - great point! I think we forget that BBA's obligate US to our buyers perhaps even than it obligates them to us!!
Great Post! Way to keep things in perspective. Don't worry so much aboout the costs, especially when you are grossing enough to cover it. I feel the same way about taxes. I hope I pay a lot of taxes, because that means I am making a lot of money!
I'm with you Jennifer and to those who complain, keep whining and send your buyers my way.
It is an age old dilema with ALL salespeople :) You have two choices (eapecially in a bad market) you can find ways to succeed (yes, it is hard) or you can find reasons to justify failing (much easier). NEWSFLASH: The end result is the end result, no matter what. A success is a success and a failure is a failure, it does not matter how you got there. I have trained and developed many loan officers and sales professionals and only about 5% or less of them ever end up being successful.
Sales is hard and it is not for everyone. You have to push yourself past your natural barriers and inhibitions every minute of everyday. You either will or you won't, most don't. If you can't afford $3 or $4 a gallon, then WHAT WILL YOU DO TO BRING IN CUSTOMERS, since you are still calling yourself a Realtor? That is the million dollar question. Answer that, and you will continue to succeed no matter what your circumstances are.
Sitting around and finding answers to why you can't succeed and the income is directly related to the effort involved with this. It is so easy that NOBODY will pay you to do it. Think about that and get out there and have a great week.
For those of you in the Northern Los Angeles area I can help you with your buyers if you don't want to spend the money on gas. 8)
First Jennifer - I'm taking home about 1/3 for the same priced property.
second - I'm driving all over a county that is densly populated so my milage is poor.
third - I've got a slew of fence sitters who are looking under every rock - even at totally in appropriate properties (dumps) when they want move-in ready. I wrote a post on misleading comments in listing discriptions. It was tongue in cheek, but actually, I wrote it in anger because these "white picket fence" comments lure buyers into demanding I take the miles and miles to places where I know they won't even walk through the door.
Fourth - this is NY...It is a different animal altogether and as one broker said to me the other day "THERE IS NO LOYALTY in NY. You need to protect yourself."
There are two problems with "trusting" a buyer will be loyal...The first is that it is becoming sadly common for buyers to engage an agent find the house they want and then snake around to the listing agent to try to squeeze about 1% commission out of the deal for them to keep. No way to screen for it except the EBA for each house visited. That at least gives me some "legs" if they try to do an end-run around me. It also eliminates people who are going to try that - which is why I'm not getting too much of that particular problem. We can explain agency and representation until we are blue in the face. Buyers only want a "deal" right now and they are squeezing everyone they can to get it. The other issue is rebators. I haven't dealt with this, but know people who have. I've seen a few redfin cards at open houses as well. These guys will sometimes engage an agent, then try to do the deal through Redfin - so they can get their rebate. Slimy - but there it is.
I had a client last year who had trouble getting qualified by the coop board. It looked like a case of discrimination and probably was. I went through WRO to see if we had a case. Many hours and days of time were spent on this. The commission in my pocket was probably going to be somewhere between $1000-1300. Before the second round I had easily spent about 70 hours and a mountain of gasoline because the areas that she could afford were all over the county. I really went to the mat on that one. I thought I had WON her loyalty. Nopers. I knew when her lease was up and when it came time to buy again I talked to her and she wanted to look. Then I coudln't get a response. Not a good sign. Turns out a friend of hers had just gotten her license....yep, she bought with her. Other issue - all those referrals that I was hoping to get (it's my niche market) will probably now go to her "friend."
You go through a few experiences like that and you recognize that loyalty is something that can not be relied upon...might be NY thing, might not.
I agree with you and your analysis of the gas thing, but I'm going to still with my rule of thumb that I give the people 3 days of working with me in order to get to know me, then it's sign the agreement or you're out the door! It seems fair to me.
Thanks for the post though, it did put the gas price argument into perspective!
Bob Mitchell
ValueList Real Estate Services, Inc.
I agree that there is no loyalty on the part of buyers. I don't know if a BBA will make a difference, but it sure feels better having one. I feel that they might think twice about going somewhere else if they have to sign on the dotted line.
Jennifer, I can't agree with you more. And....to add to this dilemma, these are mostly the same agents who buy the little bottles of water from the vending machines for a buck or more, and don't bat an eyelash. Go figure. I'm with you, send them to me, I'll spend that gas money.
Nice job giving everyone a reality check -- what is most important. My Irish father used the age old expression -- "Better to Burn Out than Rust Out."
Jennifer, I always love reading your stuff! This post was no exception. There is no reason to be greedy. You win some you lose some, and the ones you don't win now become buyers in the pipeline. We are still a very well paid profession and I for one am willing to give a little back.
Life is about the experience of living, and if taking a first time buyer through a few houses to get a feel of what the goal of owning a piece of the "American Dream" is like, I'll do it. Even if they don't qualify for a loan or They will call me in a year or two when they are able to purchase and in the meantime I will accept all of their referrals with a smile.
Buyers dominate this market and I'll take all that I can get.
Ruthmarie brings up great points. Some buyers are over the roof to work with you, then turn around and you never hear from them again.... especially if they happen to visit a builder on their own time when you're not with them. The incentives the buyer's give them somehow give them amnesia to the fact that they have a Realtor!
Frank
Great post Jennifer. I try to work smarter with my buyers by having them focus on wants and needs but I would never stop driving where we need to go. As for loyalty, this is the opportunity to work on getting those contracts as exclusive buyer's agents out so that the buyers realize what you do, how you are paid, and commit to you. BTW, Frank, many of the builder's will give your buyers the same incentives if you bring the buyers in.
I agree with you good post
I understand that Paddy, but if you have overzealous clients, they will go out on their own as well. I have a family that were calling and wanting to see EVERYDAY, and i did, they didn't really know what they want in my opinion, however I seen her in the store and slipped up and said they went to the new builder sales office on Sunday (i had phone duty) and the clerk showed her FIFTEEN houses! Now I don't really hear from her.
Frank,
Great point. You Snooze You Lose :) I read a great book by Bill Radin (he is a recruiting guru). The name of the book says it all. "Shut Up, and Make More Money". I now live my life by that motto. The market is bad for everyone, but that is still not putting any money in my pocket. I can blame the gas prices, the stars and the cow that jumped over the moon, or I can get out there work harder, kick doors down, market smarter, and keep trying. Everytime I find myself falling into self pity, I notice my pipeline shrink. I think one has to do with the other :). Everyone get out there and make money. It REALLY is that easy. Have a great week everyone.
PEOPLE DO NOT WALK ON THE LOT, LEST THEY WANT TO BUY! They are not spending time with you because they are lonely (usually). They want to buy a house, THE RIGHT HOUSE at THE RIGHT PRICE. That takse time. my wife and I ran our REALTOR around for 5 months, a couple of days a month. She made $20,000 off the final purchase that we made. WE LOVE OUR HOUSE. IT TAKES TIME . May the sellilng gods shine on all of you this week.
and we know the builder is not going to ask the client "are you currently working with a Realtor", i think not.
I think we've all had the client that runs you to the 4 corners of the earth to no avail and uses time and money. But we've all had the client that finds the perfect house right off the bat, or that already knows which house they want. I agree with Jennifer, if you don't want to waste the gas, send them on over. I don't view any client as a waste.
Those are the gifts that make up for the lemons, Kris. I don't hear too many complants when we are making money for doing very little. It all evens out.
Zig said, "If its worth doing, its worth doing for free".
I drove a buyer around for 2 days, mainly visiting and just looking at vacant land properties. Come to find out, this was his interview process. We even got in-to-it at one time. I raised my voice to him, because he had put words in my mouth.
Wasn't the last time we got in-to-it. Come to find out, he had visited with 12 or more other agents.
We were looking at 2 acre parcels, 1 acre parcels, up to 9 acres once. After about a week of emailing and phone communications, he wrote an offer on an 82 acre parcel I had listed. Long story short...one of his companies paid 975K cash.
We still are working on a couple projects, he drives his vehicle every time.
What do you get a buyer (for a closing gift) that has everything?
On your next deal wwith them, pay for the survey.
Jennifer, as a buyers agent I am feeling the crunch, but I have to remember... If I do not work, I (or my wife and kids) do not eat! So I plug along anyway. This is a reminder that we really have to know what our clients want and need so we can match them with the most appropriate homes to look at. This will save you car time and gas money. I have heard that some offices (not in our area) have started charging all of their buyer clients an upfront fee to help cover the gas costs.
I'd really like to see an agent explain the upfront gas charge - especially if a savvy buyer does the math.
I get this from the Realtors I work with all the time. (not to mention any of my other 3000+ client base who drive a vehicle of anykind). Really the recent increases are minimal when compared to the overall cost of doing business.
I know a coin dealer who isn't going on his 'road trips' to buy and sell coins cuz of the gas prices. I did the math with him. He makes over $10,000 on his average road trip and has to spend about $75 more in gas to get it done. Go figure..... (I guess he didn't! )
Keep up the great writing... I LOVE IT ALL!
With the value of the dollar going down, gas prices going up, I had to Join RE/MAX (#1 in World)! Some of the deals I did at CRYE-LEIKE (#4 in Country?) paid only 44%. 95% makes it worth while. Plus I have my own office, with real doors, a real window and everything.
I have never asked for a buyer agreement. I don't own buyers and I want them to be with me because they are comfortable with me not out of some contractual obligation.
Jennifer: The argument is indeed ridiculous. However, I would never think less an agent that felt they needed a Buyer Agency Agreement before showing homes to a buyer. Working a buyer vs. a listing is always more labor intensive....a much bigger investment of time. I don't think it is ever a bad idea to set the record straight before you go out and have a Buyer Agency Agreement signed. Even if you don't get it signed, you usually get a good indication of whether the buyers are monogamous.
Hi Jennifer - Factor in the 48.5 cent per mile IRS deduction and the increase is even less of a factor. It amazes me that when homes are selling for hundreds of thousands of dollars, some agents focus on a few pennies.
I don't drive people around, I usually have them follow me..If they want to use their gas too...that's cool..but I do ALWAYS make sure they are pre approved.....I at least need to know how much they can spend or how do you know what to show them.....
Jennifer,
that's the reason that I added you, we have similar point of view and we think very similar, I agree :), if you work your best, you will be compsensated somehow, just don't expect it, it will come alone.
ray saenz
Jennifer, you have to feel people out.... now if they sign the required forms and really seem like they want to buy a house, then get in and let's get going! I don't mind driving home buyers around, I have a problem with home touring. At the end of the day, you know who really wants to buy and who wants to look at houses (trust, me I learned the HARD way). We get in a zone, and when a lead talks homebuying we on it!! I learned the hard way, if you take the time to view a home, then let's take the time to sit down and talk, sign, get to know each other, then buy a home. There's nothing greater than finding a family a home that they love.
Would you list a house without a listing agreement, spend money advertising it, and allow other brokers to show it, only to have the Seller sell it directly to the Buyer or to use another agent and cut you out?
From a purely legal standpoint, how can you represent someone's interest without a written agreement? How would you describe your obligations to a court, in the event of a lawsuit, without a contract?
If more agents had higher standards, we wouldn't have to waste our time dealing with people unable to buy a house and we wouldn't waste our time driving other people's clients around on weekends when their broker is at the beach. Unfortunately, I come across as a jerk if I refuse to play taxi driver to another agent's clients because there are too many of you willing to jump through hoops for them because you think you might make a sale.
I suppose you feel it is acceptable to meet a stranger at an empty house at night?