The New Game

The New Game

The New Game

There’s something changing in the Lake Geneva real estate market. The change is mostly involving the lakefront market, but there’s little doubt that this change will make its way through the different segments, eventually engulfing everything, everyone.  The change is subtle to the casual onlookers, but it’s game changing for the players in the market, both buyers, sellers, and agents, alike. When something is described as game-changing, that usually reflects positive change. Like, this new phone/device/tablet/thing is game changing! But in this case, it’s game changing in the way that it makes losers out of us all.

The new rules of real estate are not at all like the old rules. The old rules involved some decorum, some particular process that was generally respected by those in the business. Real estate has always been cutthroat, as is most commission based business where the barrier to entry is the skill that is a continuous but methodical pulse. The business will never cease to be that way. Even as Redfin, Opendoor, and others have tried to change the old commission method with new technology, it’s obvious now that the model preferred by the consumer and agents alike is the old format of commission for results.

In this hunt for results, the new model has taken sellers and agents to extreme levels. Sellers, under the old model, would interview the agents that they thought gave them the best chance at selling. Sometimes, this agent was their sister’s hairdresser, or the lady who they know from the PTA. This wasn’t generally the best way to find an agent, but it worked and it worked for decades, for generations. Today, sellers in competitive markets interview agents, but mum is no longer the word.

Sellers interview, then sellers play hard to get. This is fun for the seller. The result of playing hard to get is a bidding process by the agents who know of the property.  The first time in the door, for that initial meeting, the agent told the seller the home was worth $3MM. The agent knew it would be easier to sell at $2.65MM, but she came in high, because the business is important. The seller fields these initial numbers, then goes quiet. Then, after some quiet, he tells the agents that he’d consider selling if he was able to get $3.4MM. The agents think, ponder, call back. They have someone interested.

Because they always have someone interested. I have someone interested, usually. At $3.4MM it’s no longer any representative of market value, but it’s a price and it’s a lakefront and that’s the game.  Agents looking to make a name for themselves, or further a name they already own, will pounce at the opportunity to list high and sell, maybe someday much, much later.  But the seller won’t list, and so the calls resume, and the agents tell the seller that it’s time to sell, for $3.5MM, maybe. Or perhaps it’s $3.6MM that will make this deal happen. The negotiations are between the seller and the agent, and in a market that some incorrectly perceive to be torrid, the price is always driven higher.

Without committing to an agent, the seller thinks he has many agents working for him, when in fact, the agents are working only for themselves. If they have a buyer, one that might think $3.5MM is a reasonable ransom for a $2.65MM house, they’ll bring the buyer to the door. They’ll show the house, and they’ll try like crazy to tell the buyer it’s the right house at the right time, because hurry! If they don’t buy it someone else will. This is the refrain of the ignorant, unless it is employed only when the case dictates such a sensationalized phrase. If your agent tells you this every time, you need a new agent.

The seller is at a disadvantage in this scenario, because he truly has no one representing his best interests in the sales process. He is flying blind, and by the time he does ultimately list, the bloom is off the rose and the market has already heard of his property, and they’ve already dismissed it as being overpriced, ugly, and bad. The traditional model would have better served this seller, if he had only chosen an agent, listed the home, and marketed effectively without first crying wolf at those artificially, agent-inflated numbers.

While the seller is making a mistake, because he thinks, erroneously, that he’ll be saving money, it truly is the buyer who is making the worst decision here. Buyers put their trust in agents, and the idea is that the agent is serving the buyer’s best interests in all of their advice. I effort daily to follow this, and I’ve talked myself out of far more deals than I’ve ever talked anyone into. But if the agent has the goal of selling the house quickly and quietly, before the market can even know of the property, has the buyer been receiving the sort of objective information that she should be entitled to? Highly doubtful. But this is the new game, and the new game isn’t engineered to serve the buyer or the seller, it’s engineered to serve the agent. In that, there should be concern, because the game has changed and it’s changed at the expense of the consumer.

For now, this: Merry Christmas. I’ll be back on this small keyboard on Monday, though I’ll be working this weekend should you require some assistance. Ideally, you won’t require assistance on Christmas Eve or Christmas Day, but Boxing Day is an embarrassing Canadian Holiday and I take pleasure in working while Canadians rest.

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