Residential Real Estate Brokers Use Education to Counter Effects of Marginal Players

real estate agent educationAccording to the DANGER report, recently released by the National Association of REALTORS® (NAR), buying and selling agents list “marginal” players as the greatest professional danger they face. “The real estate industry,” the report says, “is saddled with a large number of part-time, untrained, unethical, and/or incompetent agents. This knowledge gap threatens the credibility of the industry.”

What are “marginal agents,” and what can a real estate brokerage, or an individual agent, do to reduce their numbers or minimize the damage they do? In general, educators and real estate agents agree that constant improvement—of your own tools, knowledge, and skill set—is more helpful than trying to expose the bad apples.

Stephen Antoni, incoming chair of Realtor Party Member Involvement Committee of NAR and broker associate of Mott Chace (Newport, R.I.) estimates that as many as 90 percent of agents in the U.S. could be classified as “marginal.” Of the NAR’s million-plus agents, he asserts, more than half probably haven’t executed a transaction in a year. Consequently, he says, real estate agents suffer from the same sort of stereotype that dogged car salesmen years ago.

“But look what that stereotype did to the automotive industry,” he says. “It pushed the industry to get rid of that unprofessional approach, to put no-haggle prices on the cars, with proper disclosures. If you go to a doctor, you’re expecting a doctor. If you go to a Realtor, you should expect a licensed, trained Realtor. Unfortunately, in some states it’s a matter of a couple dozen hours of pre-licensing class. Our model is diluted as soon as Uncle Joe comes along to sell Aunt Gladys’ house, claiming to be a licensed regulated Realtor.”

Mistakes, Shortcomings Are Pervasive

Michalene Lanzito-Melges, of Michalene Melges Properties in Lake Geneva, Wisc. lists the biggest faults of poor-quality agents as follows:

  • Throwing off the market’s inventory and confusing buyers by listing a property at whatever price the seller demands;
  • Listing a property without a pre-inspection, hoping that the official inspection won’t uncover anything;
  • Not doing their homework. Lis pendens, federal tax liens, and judgments are all on the County website.

Melges says the minimal standards a selling agent should live up to, to be considered reputable, include showing up with a plan; setting the seller’s expectations; showing the owner their odds of selling so they’re able to make a clear decision whether to list or not; and explaining the current market as it pertains to that property and the competition. A buyer’s agent needs to have a thorough understanding of what the buyer is looking for, so that every tour is relevant; anticipate every question about a property and have an answer for it; and bring an offer.

“When the client has made a decision to purchase,” she says, “write the offer. That’s what you’re there for. Do your own homework: never go on a listing appointment unless you know the property’s background. Interview the prospective client: Let them believe they’re interviewing you.

“If you’re a selling agent, always do a pre-inspection on the listings you take, so you can spot problems and have them taken care of prior to the buyer writing the offer.”

Jack Cotton, residential real estate broker at Sotheby’s International Realty in Osterville, Mass., says low barriers to entry bring a lot of incompetent or uneducated brokers into the business. However, he remarks that standards seem to be getting higher.

“When people ask, ‘Who’s your biggest competitor?’ I say it’s the 20 people who each sell one home out of their kitchen,” he says. “But the requisite level of competence is rising. Buyers are much more sophisticated today, and want answers to questions about permits that were issued on a home 20 years ago, for example. A part-time or marginal agent doesn’t have the information, doesn’t know where to get it, and makes more work for other parties to the sale.”

Another grave danger, Cotton says, is the agent who’s too focused on the commission.

“This past weekend,” he recalls, “we set an appointment to show a $1.6 million house to an interested buyer. In the course of making the appointment with the listing agent, my agent asked a lot of questions to gather information that the buyer wanted. The level and depth of the questions must have made the potential buyer’s interest evident to the listing agent. After our agent and his client had driven three hours to view the property, the listing agent informed everyone that there was an accepted offer, and that this showing would now just be for backup.

“In other words, that agent used our buyer to get another buyer to ‘step up to the plate.’ Our buyer was naturally annoyed, and the homeowner might’ve been better served if he’d waited to accept an offer till the second buyer had seen the property. However, the full commission on a lower price was more attractive than a co-broke on a higher price. Like many agents, he forgot whom he works for.”

 

Set, Maintain High Standards

Mike Duran, CEO of McKissock, insists that your worth as an agent depends much less on the hours spent on the job, than on the standards you set for yourself. Some part-time agents dabble in the field; others are fierce professionals and competitors, every bit as dedicated as those who work the business full-time.

“Your education must be ongoing,” he insists. “The highest-performing agents look beyond state-mandated continuing education requirements to build their skills. They continually monitor trends, think of skills they’ll need to work with those trends, and seek out supplemental classes, learning materials, and networking/mentoring to fill the gaps. At McKissock, we’re responding with learning products that meet our customers’ full range of skill development needs.”

Nationwide, residential real estate brokers agree that educational opportunities are greater than ever. Private-sector educators like McKissock are constantly adding to their offerings, and many state certifying organizations have upped their game as well. Jane McCune, broker and co-owner of Blank & McCune (Iowa City, Iowa) says standards of professional education have risen dramatically since she joined the industry in 1975.

“The state requires that we take continuing education every three years,” she says, “and it used to be a waste of time: You just sat in those classrooms because you had to. Now, you can actually learn something. You can get useful information about professional ethics, banking law, and lots of other subjects. The teachers are experts who travel statewide or nationally: They’re not just locals. Marginal agents aren’t much of a problem in this market because of our high level of education.”

 

Education, Knowledge Make Difference

Realtors generally agree that an agent’s standing in the industry is largely a matter of differentiation and competitive positioning. Education and knowledge—of your local market, of transaction structures, and of tools to streamline the process for your client—are the key differentiators in a market that’s fast becoming less parochial, more global.

“It’s extremely difficult for any agent to be an expert in everything,” Duran admits. “McKissock recently started to assemble ‘the world of real estate’ to guide our overall education curriculum while also giving professionals a chance to focus.  We’ve identified more than 100 areas of specialization that aren’t geographically specific, where professionals can focus on building deeper knowledge to improve competitive differentiation.”

Duran advises agents to be prepared to answer the tough questions. Most buyers and sellers won’t dig deeply when interviewing an agent, but they should—and some will. Agents should be able to answer theoretical, situational questions in detail, and relate their answers to experiences the client may have had. They should discuss the local market accurately and articulately. They should be able to talk about the advanced training they have, their certifications, and their recent transactions. They should have a solid list of references.

“We see a huge gap between client expectations for marketing their homes and actual delivery by the listing agent,” Duran continues. “Home marketing is one of the most important services a real estate agent can deliver, and sellers lose confidence early in the relationship if the marketing isn’t first-rate—especially if the digital components haven’t been well thought through.”

The NAR, Stephen Antoni remarks, has now instituted core standards that every state board must comply with, for educating members, community outreach, and advocacy. Continuing education is also required. But, he insists, that’s still not enough.

“The hours of education required to renew your license don’t always consist of material that’ll make you a better agent,” he says. “You can sometimes slide by, in that renewal process, by taking online classes on things like environmental issues. If there were a testing component, maybe that would help: if there were a 10- to 15-minute quiz at the end to make sure you got it.”

“The current curriculum is fine,” Jack Cotton agrees. “It just needs more frequency.”

Another issue, says Antoni, is that it’s considered unethical to warn someone off of an agent you consider incompetent, ill-trained, or dishonest. The professional code dictates, “If you have nothing good to say, say nothing.”

“Spend more time promoting yourself as a professional,” he urges. “That’s the best way to make yourself useful to the community. Make it about the consumer and how you can help them sell or buy their house.”

The most serious knowledge gaps in the real estate profession, Antoni says, vary from region to region. But one of the most universal is the failure to understand how to price a property.

“Do you list at the price the seller wants you to list it at?” he asks. “How is that helpful to the client, or to other Realtors? It’s my job to show the client what the market is showing me, and say, ‘My best educated guess is your house is worth X I’m not talking about giving it away, but pricing it realistically so that it’ll sell. Do you want to sell or stay? If you’re not willing to sell it for that price, then it’s okay for you to stay here.”

“If you’re carrying inventory and sending multiple market updates to the owner, the market has proven the product is overpriced,” Lanzito-Melges adds. “Face it: You’re not producing and the product is dragging the rest of the market down. After about the third incremental price adjustment, you won’t be the client’s advocate or ally: You’ll be their scapegoat!”

 

Beware Accidental Ethics Breaches

What are the most serious ethical gaps in the real estate profession, and how can they best be addressed? Antoni says that whatever they are, education is the best way to address them. In practice, he adds, the failure to disclose known issues with a property is the most pervasive ethical breach.

“If you’re my client and I’m selling your house, and we’ve agreed that what we’ve talked about is confidential, and you tell me that a year ago the government buried 150 gallons of green smoking stuff in your back yard, that’s where the confidentiality goes away: I have to disclose that,” he says. “The uneducated agent might not realize that the brokerage is responsible, if it isn’t disclosed.”

The profession recognized that a part-time or seasonal agent might be every bit as reputable as a full-time agent, Antoni says. Unfortunately, many buyers or sellers assume that the agent with the biggest billboard is the best in the area.

“A referral from a trusted friend is the best way to find out who’s best,” he concludes. “We ask people to look for the REALTOR® designation, but that’s not always enough: You have to get counsel from your trusted advisers.”

A recent Inman survey seems to confirm that agents are concerned about the public’s perception of their value. It’s broadly believed that even experienced agents tend to be behind the times in adopting new technologies or systems that could provide more information and make transactions run more smoothly. Indeed, many agents agree that that criticism is justified. There’s considerable concern that agents will become irrelevant as consumers find homes and process loans without an agent’s help. The next step, some industry insiders expect, will be title searches, inspections, and even closings all arranged via the consumer’s desktop computer.

The best way to address these issues, Duran concludes, is ongoing real estate learning.

“As for addressing ethical gaps,” he says, “the most common and effective formula seems to be clear rules; regular education using real case studies that clearly illustrate the consequences; and regular prosecution of egregious offenders.”

 

Resources:

View NAR’s DANGER Report

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