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I was speaking to a friend of mine who works at one of the largest Wall Street Firms. We were discussing the Realtor class action lawsuits. He recently purchased a second home in an exclusive area in Nantucket, and he told me about how hard his agent had to work to close the deal and how much he admired her. He said that buyer’s agents work so much more than seller’s agents, and he added that the same dynamic exists in investment banking.
In case you don’t know, investment bankers represent the buyers and sellers of businesses, sometimes very large businesses. Their primary business is mergers and acquisitions, also known as M&A. My friend said the most elite investment banking firms typically only work on the sell side of a transaction and rarely, if ever, represent the buy side. I wasn’t aware of that. He explained that both sides of a merger/acquisition earn a commission for their services, but representing the seller is preferred because the likelihood of closing is substantially higher. It makes sense, but I hadn’t previously understood how similar the investment banking business is to the real estate brokerage business.
The top real estate sales coaches, like Mike Ferry, flat out tell their students that representing buyers is for losers. Driving buyers around to open houses, dealing with fickle lenders, and filling out multiple offer forms is a lot of work. To make matters worse, after doing all that work, you still might not get paid if your buyers’ offers aren’t accepted.
Ferry and the most successful brokers know that if you want to be an elite realtor and earn the big bucks, you should forget buyers and spend all your time sourcing sellers. Like the investment banking business, representing sellers in a real estate transaction is far more lucrative than representing buyers. The logic makes sense, but I’m glad that not all agents subscribe to that way of thinking.
Last week, I was on a call with Dr. Lael Brainard, Director of the National Economic Council in the White House. Jason Riveiro, who leads our government relations, and NAHREP’s national president, Nora Aguirre, joined me on the call. I had the opportunity to explain the nuances of the real estate business and the dire consequences ending broker participation will have for first-time homebuyers. Nora eloquently spoke about her business and how she typically spends up to six months preparing buyers to purchase their first home. It was a great opportunity to speak with Dr. Brainard and her staff, and I hope our message resonates with them.
Agents like Nora, who are successful but choose to represent buyers, do so because they care about more than money; they care about people. They get more satisfaction and fulfillment when they hand the keys to a family because they understand what that will mean to that family over time. If Nora and agents like her have to deal with the added uncertainty of how they will get paid, I fear the worst for our industry – and for the first-time home buyers they represent. This is why NAHREP has been fighting so hard for the interest of buyer’s agents and their clients.
Saving seller’s money won’t trickle down to home buyers, regardless of what anyone thinks. It’s not the way the business works. If advocates and the federal government truly cared about consumers, their focus would be on lowering the barriers to entry for first-time home buyers, not raising them, and they would be cherishing, not vilifying agents like Nora Aguirre, for they are truly doing God’s work.
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