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The Rise of the Virtual Real Estate Agent

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In the comments to my 30 May 2008 post on the rise of the American virtual real estate agent, there was plenty of confusion about what exactly a virtual agent is. The details of the settlement of the lawsuit against the National Association of Realtors also created lots of confusion.

A friend just pointed me to an article about how the Realtors lawsuit empowers virtual agents on MarketWatch.

Online Real Estate Agents Get Advantage

It’s the best written description of what’s going on that I’ve seen. Here’s the essence of it. For anyone wed to the traditional business model, it’s scary stuff.

“The Justice Department reached a tentative settlement with the National Association of Realtors that essentially forced traditional real estate brokers to give Internet-based agents access to home-listing information that they had previously been denied.

“Online real estate agents often charge discounted commission fees and let buyers review listings at their own pace, but for years those Internet-based brokers in many parts of the country could not access more than 800 Multiple Listing Services nationwide affiliated with the national Realtors group. An MLS is a database of regional properties for sale.

“The traditional argument against opening the MLS system to online brokers was that it would result in a significant cut in commissions for traditional real estate agents. Indeed, that’s precisely what government officials wanted.”

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24 Comments

  • Greg Vincent
    Posted June 6, 2008 at 7:49 pm 0Likes

    Dave, love the image attached to this post 🙂

    “opening the MLS system to online brokers was that it would result in a significant cut in commissions for traditional real estate agents”

    Are traditional agents in the US still charging around 7% sales commission or is that just a myth?

  • Glenn Batten
    Posted June 6, 2008 at 8:18 pm 0Likes

    Dave,

    I trust your comment “For anyone wed to the traditional business model, it

  • Graeme Callen
    Posted June 6, 2008 at 10:35 pm 0Likes

    With the our already competitive fee structures which are significantly lower than the USA and the high percentage of buyers from the internet (Approx 70% and growing) regular agencies in Australia are fast becoming virtual agents, with the need (and affordability) for flash offices in expensive main street locations fast becoming a thing of the past except in the egos of agents.
    It is also heralding the demise of major (and expensive) print media property advertising which is also used to boost the egos of some agencies, though, at present, it does attract vendors rather than buyers.

  • Greg Vincent
    Posted June 7, 2008 at 7:14 am 0Likes

    In the previous market down turn we saw a lot of agencies merge their businesses or close down. I remember Robert Bevan’s Best Practice seminars back then mentioned a lot about there being too much competition & encouraging agents to merge their businesses.

    If an agency closed down they would normally leave the marketplace & thereby create less competition. When an agency closed a number of their listings were then picked up by the other existing agencies.

    With the current tightening up of the real estate markets both in the US & here and with this latest ruling in the US, this time around these agents have the option to stay operating within their market – keep their database and existing listings & become an online/virtual agent.
    Using an intranet, virtual PA’s, & some of the portable computer technologies it could be possible for agents to re-locate their office to a table at the local Gloria Jeans.

    Here’s a very basic real estate product video from HP. http://www.hp.com/sbso/solutions/real/videocast/mobile_office.html

    Whatever happens, it’s definitely going to make for some interesting times ahead.

    Dave, I’m still cracking up over that image. Maybe you should label it “The Virtual Caravan” (Group Inspection) 🙂

  • Dave Platter
    Posted June 7, 2008 at 9:58 pm 0Likes

    Thanks for the great comments.

    6% is still the official commission rate in the US, although vendors’ agents often have to split it with agents who represent the buyers. I don’t have any current data on the amount of discounts being offered in the current market.

    It’s absolutely true that the role of portals in the Australian market protect the industry to some degree from the sort of disruption being seen in the USA. However, my argument is that if the business model works in the US or another major country, it won’t be long before elements of it are introduced in AU.

    As you point out, Greg, it might well be that AU moves even faster than that in response to market conditions.

    Graeme, I think you’re right. Several agents have told me that they are shifting the emphasis of the marketing online–saving money in the process.

  • Teena Andrews
    Posted June 15, 2008 at 7:47 pm 0Likes

    Interesting reading guys, and I too love the pic – should it possibly be renamed ” I Agent” 🙂
    I am a what can be loosly termed a “suburb” agent – operating
    as a contracted agent but working mainly from my home office in North Brisbane with the assistance of the company’s vurtual assistant software. [ VA ] I guess the beauty of my situation is that I have access as an agent for the company, who has an inner city Brisbane office , to all admin support & services but upload all my listings via VA, and work off my pc and pda.
    The company has a handful of us suburb agents operating around Brisbane, all of who have been in the industry for a number of years, but it also has a team of “traditional ‘ inner city agents servicing the inner city area, projects and apartments. So we have both bases covers and ALL agents use and have access to VA.
    It has long been a bone of contention with many other agents that a physical office is necessary to conduct real estate – not so !
    We look to the internet and it’s far reaching wonderful arms for our clients, as well as traditional method and mediums, but have done the market research to determine that our largest enquiry database is drawn from the internet.
    I look to the future and are proud to be involved with a compnay that is already looking ahead and who is preparing for the future of real estate.
    I hope I haven’t missed the original point here, but I just wanted to let you know that we are out here, operating in our virtual reality…

  • Glenn Batten
    Posted June 16, 2008 at 10:23 am 0Likes

    Teena,

    The article is about virtual agents legally being able to insist on having access to the listings of other agents so they can sell them..

    As has been mentioned, there are already traditional agents that operate entirely or in your case, partially, on the internet. But you still physically go out and appraise, list and inspect property. The virtual agent from the US in the story does none of these.

    Imagine yourself never leaving your desk, having access to all the listings in your area, advertising each one of those listings on your website and when someone wants to inspect all you do is organise the inspection with the listing agent and then you get half the commission. It all sounds too easy but the complexities of reality may get in its way.

    So whilst many would consider the fact that you operate at home through a VPN as being virtual, it is not as rare as you might think, and is not the same as the virtual agent in the article.

    It is such a different market in the US in that regards and there would have to be some pretty big changes in our industry before that could happen.

  • Sal EsPro
    Posted June 16, 2008 at 1:16 pm 0Likes

    Hi Glenn,

    I am assisting a buyer and they are a prospective purchaser for a property you have listed. If I introduce them to you and they buy it, will you agree to give me 1% of the sale price ?

    Rgds,
    Sal

  • Sal Espro
    Posted June 16, 2008 at 2:16 pm 0Likes

    Hi Teena,

    I like the way you are thinknig, Teena.
    What would your response be to the question I asked of Glenn?
    i.e. If I introduce my client to you and they purchase a property you have listed, would you pay me 1% of the purchase price?

    Rgds,
    Sal

  • Teena Andrews
    Posted June 16, 2008 at 1:53 pm 0Likes

    Hello Glenn,
    Thanks for your response & the clarification re the article.
    In the respect of what you have explained, it appears to me that the american virtual agents are what we could “categorise” as buyers agents , or referral agents, couldn’t they ? – agents operating without the physical contact of the actual inspections. In my mind their strength and market share lies in their internet access & databasing
    as well as the legislations of their market to allow them access to the other agents listings.

    In my humble opinion it seems a concept that would not suit the traditional australian market right now – or would it ??? Are there any agents still out there operating under a multi list option like there used to be?

    I can however imagine myself not leaving my desk for a day – not by choice but by demand. Although I am not a traditional agent as such now, I come from a traditional background and I guess have embraced the virtual agent system because of it’s mobility, but it still gives me access to the physical contact with vendors and purchasers – which I still feel is of paramount importance.

    It would be interesting to hear from other agents to see what level their current real estate business depends on their physical contact with vendors & purchasers – that would be another line of forum I guess.

    I welcome the technological real estate age – welcome the options and far reaching benefits of being a virtual agent, and welcome the changes that will come whether we all like it or not. Real estate has to be an evolving creature, like any business – evolving, adapting and being the exciting beast that it always has been.

    End of the day, I personally love people, property & progress. Mixing them together in my opinion means we have far reaching possibilities & an ideal workplace.

  • Dave Platter
    Posted June 16, 2008 at 3:55 pm 0Likes

    For everyone’s sake, let me propose some definitions. What do you all think of these definitions? If they make sense I’ll use these terms in future posts.

    Virtual agency: agency whose principal storefront is a website, that acquires and serves customers principally online, that serves either or both buyers and sellers. May also be a discount agent. Example: redfin.com

    Discount agent: an agent that charges lower fees, sometimes but not always by offering lower services. Sometimes will also provide full-fee for full service, at customer’s request.

    Traditional agency: an agency with a High Street storefront, from which most or all of its agents work.

    Virtual agent: an agent who works at a virtual agency.

    Traditional agent: an agent who works at a traditional agency.

    Road Warrior: Teena, this would be you. An agent who works for a traditional agency but does not work out of the office, but remotely.

  • Dave Platter
    Posted June 16, 2008 at 5:02 pm 0Likes

    I should add these two definitions:

    Buyers Agent: an agent who represents the buyer in helping them find and negotiate for a property. In the US, this agent gets a 3% commission, paid by seller.

    Sellers Agent: an agent who represents the seller.

  • Glenn Batten
    Posted June 16, 2008 at 6:16 pm 0Likes

    Teena,

    The virtual agents in the US are able to cover all bases, dealing with the buyer and the seller. My explanation is only so far as this article was concerned and that was virtual agents now getting the legal right to access listings so they can provide it do their buyers. The same virtual agent could also represent a seller in another matter so they are not just buyers agents…

    In Australia the majority of real estate agents only ever represent the sellers and buyers agents are still quite rare. In fact many who claim to be a buyers agents that I have seen merely try and conjunct a buyer with the selling agent so they sharing in the one commission pool. Charging a seperate commission to the buyer is rare in Australia, at least in my experience.

    In the US an agent can represent the buyer or the seller and both are considered normal practice which is why the total commission of both sides of the transaction is 6% as Dave advised.

    This might explain it a little better.

    http://en.wikipedia.org/wiki/Real_estate_broker

  • Greg Vincent
    Posted June 17, 2008 at 1:04 pm 0Likes

    Dave under your definition the Qld based http://www.RedDirect.com.au would be viewed as a (Discount) Virtual Agency. Is that the correct classification for this type of service provider?

  • Dave Platter
    Posted June 17, 2008 at 3:20 pm 0Likes

    Greg, thanks for asking. Yes, that is how I would define them.

  • Sal Espro
    Posted June 17, 2008 at 4:37 pm 0Likes

    Hi Glenn/Teena/(Are there any agents reading this? I can’t believe Glenn would be avoiding answering?) ,

    I am assisting a buyer and they are a prospective purchaser for a property you have listed. If I introduce them to you and they buy it, will you agree to give me 1% of the sale price ?

    Rgds,
    Sal

  • Dave Platter
    Posted June 17, 2008 at 10:10 pm 0Likes

    Sal, are you trying to make a point or close a deal? If the former, go ahead and make it. If the latter, email the agent in question directly.

    I do hope it’s the former because I’d like to hear what you have to say.

    dave

  • Peter Ricci
    Posted June 18, 2008 at 12:06 pm 0Likes

    Sal. I don’t think this is a place for asking questions on agents direct listings.

    Asc Dave mentioned earlier contact any agent in question from their respective website about a property. I will remove any more comments of this nature, unless of course you are trying to make a point.

  • Sal Espro
    Posted June 30, 2008 at 5:15 pm 0Likes

    Hi Peter and Dave,

    Thanx for responding as for some reason Glen didn’t.
    My point is that of course agents would like to control their listing and sales process from go to whoa. However, if a buyer can be obtained from *anywhere*, including..gasp! wheeze..from another unrelated agent, then they are not only morally bound but also legally bound to act to see whether this might be the best option for their vendor. And then the nature of the agency industry insists that the agent/operative/enterprise, who brings the buyer to the deal needs to be/should be rewarded e.g. The 1% I mentioned in my posts to Glen – and traditionally this has been handled in various ways e.g. fixed $ value or % of the sale price.
    Whether the facilitating party in this scenario is ‘virtual’ or not should not matter. And then we can consider listing agents…..

    (Ps Sorry you guys didn’t hgain the gist of my posts without engaging your black hats and jack-boots).

  • Glenn Batten
    Posted July 1, 2008 at 1:31 am 0Likes

    ahhh Sal, you finally got around to making your point.

    Lets just leave the moral argument out of it just for the moment. Please explain a little more on this legal requirement for an agent to pay another agent for introducing a buyer to another agent?

    Are you suggesting that this is set in each states legislation or is this a federal matter?

    and if this was really the case why do buyers agents not force this tactic on the thousands of “legally bound” agents?

    How is an agent “legally bound” to pay an “unrelated agent” for introducing a buyer?

    Surely this “unrelated agent” you refer to could not have presented a specific property to a buyer for sale that they do not have for sale but another agent is selling as wouldnt they then be offering a property for sale without due authority?

    That would have them break the law not the listing agent being legally bound as you describe would it not?

    Now if they did not represent the property to a prospective purchaser what have they actually done to deserve this “morally” and “legally bound” share of the commission. All they could have told them is something along the lines of “I know a property that might suit you that another agent has so I can try and organise with that agent to get you through”.

    From my understanding in the US an agent can present a property for sale to buyer without holding an appropriate authority to sell which is how the MLS system is structured, but not in Australia where to represent an owner you need an authority in writing as per each states legislation.

    Certainly to present a property in any way in Queensland to a prospective purchaser means you must have the authority in writing. Our administration staff and receptionist cannot even provide information to the public unless they have a salespersons registration.

    An agent who “chats” to a buyer about their property requirements first has no moral or legal right to the listing commission on whatever that buyer purchases. God help us all if that ever came in.

    In fact in Queensland the authority to sell specifically details if the agent is to entertain conjunctions on the property and at what percentages.

    In Queensland conjunctions arrangements are mostly agreed to in writing before the inspection even takes place. What legally binds us is that agreement which is signed by representatives of both offices, not by anything else. Sure you can do it verbally and not in writing but memories of agreed splits fade too often for my liking when there are thousands of dollars at stake.

  • PaulD
    Posted July 1, 2008 at 11:11 am 0Likes

    The legal maxim in NSW is “if it’s not in writing – it didn’t happen !”
    I think it will be a while until that changes.

  • Sal Espro
    Posted July 8, 2008 at 2:07 pm 0Likes

    Hi Glen,

    Thanx for the response.

    I was referring to a slight variation of what you have agreed in your last post, viz:
    “…conjunctions arrangements are mostly agreed to in writing before the inspection even takes place”. i.e. I wouldn’t be providing you with a buyer unless I had a written agreement that you would provide me with a success-based fee on the sale. However, while I might be recognised as a conjunctional agent, I would actually be presenting a buyer after the original listing process had been completed.

    So, if I have a buyer, and given a listing agent (with the sales Authority) has a legal responsibility to market a property as widely as possible (in order to gain the highest and best buyer) – c/- advice from the Property dept of a large national law form, then it would seem highly likely that I could gain agreement for a success-based fee from most listing agents.

    This happens all the time and that was my simple point in reference to ‘virtual’ agencies. And despite this all sounding MLS’y all this can and does occur without MLS as it’s invidvidual property related as distinct from any property listed anywhere on an MLS system.

  • Greg Vincent
    Posted July 8, 2008 at 7:57 pm 0Likes

    Sal Espro (or is it SalesPro?),
    I don’t think you quite understand the level of knowledge, skill, client nurturing & follow up that it takes to secure a good saleable listing & subsequently sell that listing.

    To come from your high moral ground position made me feel sick. ie. ‘So, if I have a buyer, and given a listing agent (with the sales Authority) has a legal responsibility to market a property as widely as possible (in order to gain the highest and best buyer)’

    Good listing agents have to deal with this sort of rubbish from their competing agents day in day out. Competitors will call sellers direct & tell them that they have a buyer, etc, etc, etc. This can create so much doubt in the seller’s mind, especially if the owner’s price expectations are a bit high.

    To shut one of our competing agents up I even offered them 100% conjunction on a property. The proviso was that they had to provide me with the buyers surname that day & those buyers had to be introduced to the property within the next 5 – 7 days. Typically, the agents’ buyer seemed to mysteriously disappear.

    In this current market there may be a place for a 10 – 15% buyer referral fee, but to give away 50% of the commission doesn’t make good business sense.

    I liken it to the bus company that introduces a bus load of Japanese tourists to a souvenir business. The souvenir business owner pays the bus company a commission but they certainly wouldn’t give him 50% of the sales volume – that would be all of their profit & more.

    In this day & age I can’t imagine that you could have a buyer that wouldn’t already know about a property listing if it is displayed on the major portals.

    Just a thought Sal Espro. If you are so good at getting the highest price for a seller, in this market you should have good saleable listings coming out of your ears & wouldn’t need to be seeking conjunctions.

    Maybe then you could change your name to Lis Tingpro. 🙂

  • Sal Espro
    Posted July 14, 2008 at 4:32 pm 0Likes

    Hi Greg,

    Yes, I acknowledge and understand everything you have said. However, my point is that I am happy to provide the name etc of my buyer *immediately* as long as you provide me a fee. Which would seem to fit your model and keep everyone happy.

    Ps Can I suggest that to avoid feeling sick from sharing your sales commish, you might like to focus on listing & work with others who might be able to assist you in finding the buyers. i.e. Especially as listing and selling are two distinct processes and the market is only going to get tougher which means we are going to need a lot more lurv to make it happen for us all!

    Best wishes,
    Sal 🙂

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