Homeowners, buyers and sellers have always been skeptical of real estate professionals. I’m certain this has something to do with the fact that real estate agents are perceived as making huge amounts of money, for what consumers see as little work.
(Hah!) It also arises out of the understandable skepticism of any professional adviser whose pay is 100 percent commission-based, meaning that if you don’t buy, they don’t get paid.
This sets up a situation in which incentives seem to be structured around what’s in the agent’s best interests, even to the exclusion of the clients.
For the record, things are not always what they seem, in this respect — many a real estate agent is more concerned with their long-term professional reputation and earning the trust and lifelong business of their clients than they are with selling any particular home to any particular client at any particular time.
Trashing a client’s interests for a single commission is, as any agent who’s been in the business awhile knows, not in the agent’s best interests after all. But people think it is, and that’s the point.
I remember when late-night television seemed riddled with infomercial after infomercial touting all manner of real estate snake oil and "strategery," to borrow the term.
Back then, it was every legitimate real estate professional’s personal cross to bear (and opportunity to be a force for sanity and clarity in the world) to have to frequently answer questions about why this nonsense was, in fact, nonsense, and talk family, friends and acquaintances down from the delusions of easy money with no effort, credit or other investment (except for that paid to the wannabe guru hocking their books or CD kits on the infomercial, of course).
Then, the last few years happened — and a lot of people got burned by their own flawed decisions rendered truly dangerous by the flawed lending guidelines of the banks, for the most part.
Subprime and prime, stated and not, with and without downpayment money: Millions of homeowners are feeling like they fell for the okie-doke, buying a line of you-know-what from even the better lenders, brokers, appraisers and even our culture in general, in terms of the high value we Americans place on homeownership.
And millions more feel like their own decisions were sound, but that their home’s values and finances have taken a hit from their neighbors’ poor decisions to take on a snake-oily subprime loan, with the snowball effect of ending up in foreclosure or short-selling.
Accurate or not, this is the perception. Perception creates mindset, and mindset creates behavior, so much of the behavior we see from buyers and sellers in their real estate decision-making today arises from the skepticism they perceive as justifiable or even necessary self-protection from the real estate charlatans they think are lurking around every yard sign, inside every open house or on the receiving end of every online loan application.
But here’s the deal. All who claim they can teach, advise or guide you with respect to real estate are not created equally. Right now, I’m seeing a lot of scam-checking in active real estate communities online. And that’s fabulous!
But I’m also seeing a whole lot of skepticism about legitimate advice from legitimate agents. Agent wants you to be aggressive and offer more? Need a second opinion. Agent wants you to be conservative, or tells you that the stated-income, no-money-down, etc., loans aren’t available anymore? Need a second opinion on that, too.
What’s wrong with that? First, the logic is flawed. Consumers are showing a lack of judgment and discretion when they paint everyone who claims to be any sort of "real estate adviser" with a very, very wide brush.
And this lack of discretion can be injurious to a consumer’s best interests, especially in the context of a fast-moving real estate transaction, when it’s critical to be able to act quickly on your advisers’ recommendations.
The way real estate is set up is that the people with the deepest knowledge of local negotiating and contract practices in most markets also happen to be compensated by commission. That’s just the way it is — deal with it.
But, there are many of these people who give top-notch advice in their clients’ best interests, often to the detriment of the agents’ own best interests, as a matter of course. Skeptical? Find one of these agents.
But how do you know whether your skepticism is healthy or not? Here’s a litmus test. Those who have an overly skeptical, dysfunctional distrust of all real estate advice is that the folks who have this belief system tend to disbelieve not only the advice that is too good to be true, but also the advice that is too bad to be what they want to hear in any given situation.
They question the "too good" recommendations, like those of some (but not all) media investment gurus, with a hope that they really aren’t invalid, searching desperately for someone, anyone, who can validate that, yes, it is possible to start with negative $10 in the bank and flip your way to riches in 10 minutes, with a FICO score of 32.
But these same folks also question their local agent’s advice that falls under "too bad" with the hope that someone out there has a super-secret trick or stated-income loan program that is a workaround for their denial of a home loan because they have no job, no savings and a fresh foreclosure on their credit report.
Their mindsets and beliefs about what should be possible are still wacked out from the everything-is-possible mortgage guidelines of yesteryear.
The problem is that in real estate, if you ask enough people, you will get someone to tell you what you want to hear. So, find a trusted, local real estate adviser by referral, if possible, then do a social media check on them. Google them. Read their blog. See if they are active in discussions about real estate issues that may affect you on the Web.
And get real with yourself — Are you really looking for smart real estate advice from a professional? — even if it means you may hear that you need to save more money, pay down your debt, or work on your credit score.
As an informed buyer, your job is not to be unhealthily skeptical of everything any adviser tells you, but to wisely select your advisers, educate yourself before making decisions and exercise your best judgment and discretion in whether to follow any piece of advice.
In psychology, we’re taught that just because you’re paranoid doesn’t mean people are following you. The reverse is also true: Just because you distrust everyone doesn’t mean you’re receiving bad advice.