Dennis Rath

Home Sellers Newsletter

I was reading an article about the people in California that lived in the area that was devastated last year by the wildfires. I was surprised to hear that many were in the process of rebuilding in the exact same area. The article stated some of the homes would not contain fire-resistant materials. After reading that my first thought was, “That’s insane! Why would they do that?!” Well, it turns out that the building codes are still a little week when it comes to what building material has to be used. Since the insurance companies don’t have to spend the money, they don’t, which leaves the extra cost up to the homeowner.  Sitting here in the western suburbs of Cleveland, far away from the entire situation, it’s easy to assume that the people are crazy for rebuilding without using the best fire resistant material in an area that has burned twice; once last year and 53 years ago. Any rational person can assume that odds are great it will burn again.

The people are not crazy, they are just being human. The thing that changed my mind was an interview with a fireman whose home was lost while he was out fighting the fire. He said he was rebuilding because this was his family’s home, this is what he knows, the neighbors are his friends and his daughter goes to school here. I can relate to his need to get back some sort of normalcy, that’s human nature and maybe he is too close to the situation to see the danger of it. Maybe he thinks he will move before the next fire hits, who knows? I know this is human nature because I heard this line many times before. I heard almost this exact thing when I was in school in the 1970’s and 80’s when people were being let go from the steel mills and automakers, being a little longer in the tooth, I can remember them on the nightly news saying, “Now what do I do? Working here is all I know.”

I also know firsthand about the need to get back some normalcy after being devastated I felt that way during and after the Great Recession. I was financially wiped out, I had lost it all. With blinders on to everything that had changed, I set out going right down the same path. My goal was to get back some sort of financial normalcy in a hurry for me and my family, unaware of what was going on.

Luckily for me, I took the job at the hospital for health insurance. Although I did not feel lucky at the time, the job was clearly a blessing. I worked second shift cleaning operating rooms, and I was alone most of the time. Being alone allowed me some time to think and get some distance from my problems. During this time I began to clearly see that everything had changed; lending was very tight, the inventory of good homes was low, and because of the glut of foreclosures, the pricing was artificially low.

It was at this time the industry really started to change; Realtor.com and a little company called Zillow.com were getting legs. Before this a real estate broker performed a personal service, but with the arrival of technology came the Agent Team and the once personal service was now being handled more like an assembly line. With the growth of teams came the depersonalizing of service. Clients were no longer people with a name and a story, they were now just a lead; a phone number and an email in a database. Teams began to hire “inside sales agents” and set up big calling centers, here locally and in the offshore places like the Philippines. The only job of the ISA is to make hundreds of calls every day with the goal of finding actionable leads to hand off to the team’s leaders. You may recall a story on the news about a homeowner that received an estimated 75 to 100 calls in just a 12-hour period, that would be the inside sales agents on a robo-dialer.

It was during that time I witnessed a lot of behavior that was nothing short of disgusting. The market was full of short sales, that is people selling for less than they owed on a home, it was common for the bank to short the commission at the last minute, to make up the difference. Because it took months of work to get a deal closed, it became commonplace to charge the buyer a short sale fee, however, some of the mega brokers and teams in the area started charging the seller a fee as well as the buyer. The seller would pay it because a short sale on a credit report is way better than a foreclosure. How they slept at night charging an upfront fee to an already desperate seller who is losing a home is unconscionable to me. The Mega brokers and teams justified it by saying it went to overhead.  

 I don’t remember the exact day I made the decision to go in the opposite direction, but seeing the behavior of my peers did not sit well with the lesson that my mom and dad taught me when I was a kid; Treat Others As You Would Want To Be Treated. When I went through the “Great Recession” soon after my partner Jim died, Parkview Federal called the company’s loans and I was forced to sell all of our properties short. So I know firsthand the desperation that those sellers felt. Back when this was going on about 60% of my entire business were short sales. One day a very close friend/peer asked me if I was charging my sellers an extra fee?  When I told him no, he told me that I was leaving a lot of money on the table. I said that’s the seller’s money, not mine! That conversation really opened my eyes. It seems as though we went from an industry that was client-centric to broker focused in a matter of just a few months.

Having the forced time away from the business that working in the hospital gave me, I had a chance to disconnect from my point of view. I identified the behavior and the direction the industry was going. The agents and the brokers looked like one of those TV documentaries of life on the African Plains, where one of the gazelles sees a lion and they all begin to just run staying together in a pack. I am lucky because had I not had my point of view, I may have been in the pack myself. I think the entire industry was running to and fro looking for financial normalcy. The brokers and teams have very large overheads and when you take away financial security, that causes a sort of desperation. The job at the hospital also kept me from going to work on a team. Back then I was being heavily recruited by a large team, on paper the opportunity looked very attractive and I almost made the jump. I was going to make the call on Monday, but that weekend was my weekend to work at the hospital. All evening on Saturday and Sunday as I cleaned the ORs I kept turning the idea over in my head. My gut was telling not to do it. What did not sit right with me was on that team I would just basically go on appointments and prospect “Leads”.  I was not going to be involved in any other aspects of the transactions, even for my own past clients. At that point, I had been in real estate for 12 years and I had a large number of them. I did not want them, or their referrals being passed around from teammate to teammate like a hot potato.

The team model is a very lucrative way to run a business as far as the broker or the team leaders are concerned, but I think that model could hurt a client. Here is a prime example of why I think this way; Let’s say the seller wants to counter a buyer $10,000.00 for the purchase. The average commission is 6%, so for our example it’s $600.00. The $600.00 is first split with the company, now they have about $420.00, then next it’s split with the team leader, after they subtract expenses the agent ends up with between $150.00 and $210.00.  If the offer falls apart the agent makes nothing. You have to remember that the average agent sells about 8 homes a year. With the team model, the client is being passed around from person to person,  removing the personal liability of any one agent and opening up a very good possibility of hurting the client financially, because the agents on the team are only looking out for their own wallets.

Every team will try selling you by saying no one agent can do all that needs to be done. That’s true, but no agent has ever done it all, we have always had help from title companies, lenders, and home inspectors. I like that if one of my client’s needs anything, before, during, or after the sale of their home, they only have to make one call – to me! I remind agents all of the time; Sellers only sell one home, if they lose equity because of the fault of the agent, it’s gone, and gone forever. Just this week realtor relayed to me how frustrating it was doing any deals with a particular team in the area because every time he calls, he talks to a different person and no one has any idea what is going on with the transaction. Everyone seems to think someone else has a handle on the situation, but in reality, no one does.  The right hand doesn’t know what the left hand is doing. How that is a client based model?

Like I said about the hospital, I did not like the job, but it did give me the distance to see clearly. I don’t blame all of the mega brokers and teams; they do have a lot of overhead, and keeping them afloat and staffed costs real money. I would bet it’s a fortune just to keep the lights on.  When you talk to a teammate, it’s almost as if they have a false sense of security just being part of the pack.  The whole industry seems to be teaming up, and I am reminded of something Earl Nightingale said years ago; “Look at what the majority of people are doing, and do the exact opposite, and you’ll probably never go wrong for as long as you live.”

See you next month

Dennis

Past Clients Reviews from Zillow.com and Facebook.com

When I needed to move my mother in with me but my home wasn’t large enough, of course Dennis was the ONLY realtor I considered. He listed and sold both our homes while looking for a new purchase. He sold mom’s rental property for well over list price on day one…. and my house within the first week for asking price. And that was no small feat considering the neighborhood.

Of course, Dennis did everything in his power to get us into our perfect home and we couldn’t be happier.

Dennis was my realtor on two other occasions over the years and I would absolutely recommend him to all my friends and family.

Dennis made selling my boyfriend’s house quick and painless. Literally quick! And sold it for way beyond our asking price! There’s NO ONE else I would go to when it comes time to selling my home and buying a new one.

Dennis is the man for the job if you are buying or selling property!!! I have used Dennis 4 times in the last 10 years. Twice buying and selling a house. And two purchases of commercial property. This is tricky business and Dennis is the man with the answers and creative ideas. He also has financing ideas you may not have thought of. Dennis is my miracle man and would not want to be without him to navigate the local market. Dennis will get you the best deal possible no matter if you are a buyer or a seller. I plan on purchasing more property in the future and Dennis will definitely be there with me. Dennis is there for you from start to finish. Goes above and beyond your expectations…….He has done this for me……and I know he will for you. Dennis is the man for the job!!! CALL HIM…….YOU WILL BE GLAD YOU DID!!!