Separating the brokerage from the agent

Buyer BewareYesterday Dmitry was having a conversation with an unrepresented seller, lets call him Simon, who told Dmitry, “I would never use ‘PruCenturyMax Brokers’ [name changed to protect the guilty] to sell my home. When we bought this home they helped us and they gave us terrible advice. They recommended that we pay top dollar for this home because someone else was making an offer.”

I was not there for the conversation but a couple of things come to mind.

First, 99.9% of real estate agents in Michigan are independent contractors. Our real estate licenses are kept with one broker who is responsible for supervising us. But we act very independently, and there is little that can be done to ensure that all of the agents working for one broker live up to one high set of standards. Unfortunately, that is just a reality of the way this business is structured. If you go to a McDonald’s Restaurant anywhere in the world, you can expect that the burger will taste pretty much the same. But if you go to a Re/Max, Century 21, or, for that matter, even a Sotheby’s International Realty, you cannot be assured that all of the agents are the same within that brand. So if Simon got bad advice from one agent from a particular brand, he should not write off the whole company.

Second, the market was so different a few years ago that paying asking price might have been not at all unreasonable. Basically almost anyone who bought a home in Southeast Michigan in the last few years and wants to sell it now would be lucky to get back what they paid for that. Even in a more normal market it is rare to recover all the costs of selling a home in the first few years after purchasing. We are not in a normal market.

Third, hindsight is 20/20. Simon got the home he wanted at a price he agreed to pay. Unfortunately the market did not keep up.

I am sure there is much more to the Simon story. I never like hearing that a consumer was dissatisfied with the services of any Realtor. But I do recognize that in the course of the hundreds of thousands of real estate transactions that take place every year, there is lots of room for disagreement.

I have long advocated a change in the way the Michigan licenses real estate agents, and I would be thrilled to see an increase in training requirements not only for new licensees but for those with existing licenses. As it stands today, a new agent in the state of Michigan only needs to take 40 hours of coursework and then pass a relatively easy exam. This pales in comparison to the state’s requirements for getting a license to cut hair or give a manicure, and yet a real estate licensee is typically overseeing someone’s largest single financial transaction of their life. A real estate license renewal requires nothing more than sitting through a six hour class every year.

I know that Governor Granholm has bigger fish to fry right now than looking at the real estate industry. Still, I would like to see it addressed in order to better protect Michigan consumers. But even if we do raise industry standards, Simon, and every other consumer, will need to do a bit of due diligence of his own before he engages the services of a real estate licensee. Just because Aunt Tilly took the classes and got the license, that does not mean she is the best one to represent you. Caveat emptor and caveat venditor.

[tags]michigan real estate license[/tags]

Photo by Zesmerelda


  1. says

    I wish I could say that only happens in Michigan MF, but it happens all over. I also would like to see the education requirements increased, it would make a huge difference. And how about those agents that don’t pass the license exam and keep taking it over and over again until they do. More strict rules and better education would be a great start.

  2. says

    Good post and valid points. It all starts with the Broker/Owner. If the Broker will make the commitment to train their agents in the right way to do things, then he or she will likely have a lot fewer Simon’s out there spreading negative word of mouth.

    I agree that the standards to enter this industry need to be raised, but so do the standards of training at most brokerages.

  3. says

    It’s a lot easier to live with a bad haircut than that fallout due to lack of knowledge. Here in WA State, we’re heading towards single licensure, similar to what many states have done, where everyone is a Broker. It really raises the level of training/education/testing requirements. Definitely a step in the right direction to weed out the wannabes who don’t take this profession seriously….

  4. says

    I just had the same type of conversation last week. I tried to make them understand it is a very different market than it was 3 years ago. I’m not sure if I was successful.

  5. says

    I keep having the conversation that we are not in a high yeild time like a few years back…time to live in a house for the LOoong term investment.

  6. says

    Charles, we do need to raise the bar from within brokerages as well. Some brokers are great at it. Others, well, not so great.

    Sparky, the single licensing requirement is a good one. I am soooo ready to have the wannabees weeded out. It is frustrating to work so hard at something and have to work with others who don’t work at all.

    Louisville RE, its definitely going to happen one state at a time since we have no national laws on the topic.

    Bob, that is an important conversation to be having. The kicker is when they really do have to move for reasons like job transfers. Then its just going to sting, and there is no way around it.

  7. says

    Moni, some times they just have to experience it for themselves, don’t they? We can show them all the stats and facts but often sellers have to try it to believe us. It might not be gentle, but I say quite frequently when a seller gets frustrated about the lack of showings or offers, “You are not special. There are 75 competing homes in your price range and the average time on the market is x. We need to get us to the place where you are special.” This usually involves a price adjustment or other top secret trick.

  8. says

    Maureen, The public does not understand our relationship to the companies we contract with. I liked you summary.

    I also think other agents sometimes forget that their behavior impacts all of us. If we work hard on encouraging professionalism, it will pay off in the long term.

  9. says

    I found this blog from the AR blog tour….

    No wait, that’s not entirely true….

    Mo! What’s up, long time no talk to. Great post. FORTY HOURS?!?! I thought AZ was bad with only 90 (incidentally, if you want to stick plastic fingernails on someone, it takes 600 hours of class to get licensed for that here…….)

  10. says

    Jennifer, Amen Sister. We need to be responsible to each other.

    JT, I always love a visit from PREG. Your seminar looked super! I will have to watch the video when it is up.

    We have very rigorous requirements for fingernails, eyebrow arching and the like here as well.

  11. says

    This is a very interesting topic and one that I love having with clients. Does it matter what company you list with? Yes, a little. But it matters a whole lot more who your agent is and what they are going to do to make your deal happen.
    Regarding licensure, I agree it does need to be stricter, however I’m not a fan of the single license. Regardless of the “training” you receive in a classroom it takes several deals to realize what you are doing and getting off the ground. Which I like the “agent” and “broker” designation as a sign to the public that I’ve gone beyond just that initial level of experience and taken the next step.

  12. says

    The industry standards are in desparate need of overhauling. It’s way to easy to get a license in Georgia and the continuing ed requirements are laughable! I’d love to see a national solution, but the states don’t want to give up that revenue.

  13. says

    Maureen, I like your post. I just think in this ‘transparent’ era of RE that most consumers silently and not so silently resent agents, independent or not, getting paid for putting together a deal that in ‘hindsight’ or retrospect…ended imperfectly in some way.

  14. says

    True-you are right,you must take abort decisions.But my personel experience is that I have always found it easier to buy than to sell until now. I would go into areas that I had interest in, do the same research that you have learned from my materials, and buy what I wanted. Finding someone to buy these properties took time and sometimes great effort that is, until the internet. Everyday there are new ways to earn huge profits over the Internet with Real Estate.


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