Real estate professionals in a slowing market
By Melissa Wirkus
The slowing housing
market brings about a lot of change for all sectors
of the economy, and the real estate world in general.
As the market has started to slow down, many people
are speculating on what is going to happen in the future.
Professionals whose job relies on real estate transactions,
such as real estate agents, mortgage brokers and buyer
brokers, are all concerned about the effects the slowing
market is going to have on their job security.
One thing that has many people concerned is the fact
that these brokers and agents may not be needed as much
in a slower market. A September 5, 2006 article by Peter
G. Miller of Realty Times, “Will we see a rising
tide of FSBOs and BUBBAs?” looks into the slowing
market’s effects on certain real estate professions.
An FSBO stands for a house that is, “for-sale-by-owner,”
meaning that the seller sold the house by themselves
without a real estate agent or broker. A BUBBA stands
for a “buyer unrepresented by a buyer agent,”
and means that the person is going through the home
buying process without any representation or assistance
from a buyer’s broker.
Many people have been wondering if we are going to see
an increase or a decrease in FSBOs and BUBBAs in the
slowing market. Historically, usually when a market
is hot FSBOs increase because it is much easier to sell
a home, especially compared to the volume saturated
market we see today.
“As a matter of logic, self-selling should increase
when markets are hot because homes are easier to sell.
In contrast, when markets slow the demand for listing
brokerage services should increase because it's more
difficult to find buyers. And yet, oddly, compared with
a decade earlier we can see that self-selling actually
declined in super-hot 2005.”
“In a hot market, such as last year, you might
think that purchasers would want to use buyer brokers
because good properties were scarce and buyers wanted
an edge. Conversely, in a slower market you would expect
the use of buyer brokers to decline because many homes
are on the market. In fact, 40 percent of all purchasers
used a buyer broker in 1995, a figure that rose to 63
percent by 2005, according to NAR.”
Analysts are speculating that the amount of FSBOs and
BUBBAs will decline in the future, but the volume of
real estate professionals will most likely be thinned
out in the future as well. One reason we will see less
people trying to conduct real estate transactions alone
is because the process in itself is a lot more cumbersome
than it was a few years ago, and most people need guidance.
“If you had asked about self-selling or self-buying
20 years ago it would have made sense to say that such
choices were viable marketplace options. But today that's
not the case. Forget some paperwork and you could be
out thousands of dollars or have a deal that's void
or voidable. Go into a transaction unrepresented and
the odds of success very much favor the other party.”
“So while some brokers may be distressed by the
idea of self-selling and free-roaming buyers, the odds
are overwhelming that both the marketplace will contract
and that the percentage of transactions which involve
a broker will increase.”