There are a lot of real estate buyers and sellers in Chicago who erroneously believe that there is some kind of advantage to be gained by working with a “Top Producer”. The industry certainly encourages this belief with numerous rankings across the city or in specific Chicago neighborhoods or within specific offices or brokerages. Thus many, many real estate agents get the opportunity to claim the title of “Top Producer”.

But, aside from the fact that there are a lot of realtors who can claim to be a top producer out there, the whole notion that these realtors possess some kind of special powers is totally absurd on so many levels that it’s going to be really hard to keep this post to a reasonable length.

First, let’s consider exactly how someone gets to be a top producer. A realtor becomes a top producer by closing more real estate deals than everyone else. And they close more deals not necessarily by being better at selling real estate (although that helps) but by being better at getting clients. And a sure fire way to get more clients is to be a top producer since everyone wants to work with a top producer. In other words, it’s a self fulfilling prophecy – a vicious circle. And once you break into this vicious circle there is no way you are going to discount your commission.

Second, many of the top producers in Chicago are celebrity realtors who head up a “group” at a brokerage. They have several other realtors that work for them and they are all part of the “Joe Realtor Group”. What this allows them to do is to aggregate the business of all these realtors under the group head’s name, thus giving this realtor top producer status.

But is there a real difference between the top producer and a realtor who is not? Well, I do think it’s safe to say that you can’t become a top producer if you are a Bozo. So the moniker does serve as a crude filter. But are there any more substantive differences?

So that I don’t make a career out of writing this post let me focus on the sell side for the time being. When picking a listing agent you have to ask yourself “What can these people possibly do that is better than other agents?” Better yet, ask them that question and demand specifics. Here are some of the ridiculous answers you might get – if they are even willing to get specific:

Periodically I get letters from one of the neighborhood top producers citing his accomplishments but without providing any specifics of what he will actually DO for sellers. Here are a few examples:

• “I sold __________ in only 26 days after it sat on the market with another agent for almost a year” Well, he cut the price and increased the size of the home by 100 square feet (not sure how he did that last part).
• “I sold __________ in 56 days in a multiple offer situation. That means I have buyers…” No, he doesn’t have the buyers. Some other agent does and those same buyers are available to whoever lists your property.
• “Average property market time 47 days” There are several tricks at play here. After his properties sit for a while he cancels the listing and re-lists it. I wonder how he keeps track of his market time. Besides, you can achieve really great market times if you price low. Furthermore, it’s standard industry practice to measure the market time based only upon properties that actually sold – which totally skews the results.
• “Industry high list-to-sell ratio” Think that’s based upon the last list price or the original list price?

The fact of the matter is that all realtors have access to the same toolset today. Technology has totally leveled the playing field and the top producer really has no advantage over any other realtor in selling your home. In fact, you may even be disadvantaged in working with him. Here are a few examples how:

• Let’s say that you have one of several fairly identical condos on the market in your development and only one or two are going to get sold this selling season. Do you want your condo represented by the same guy representing all the other condos or someone focused on selling yours before the other ones?
• Suppose your home is competing head to head with another home in the area/ your building and the other home has some serious flaw. If both homes are being represented by the same agent will that agent point out the other home’s flaws to buyers looking at both places? Is the agent even ethically permitted to discuss such issues?
• If you are dealing with a celebrity realtor chances are you are going to be relegated to working with one of his minions.

Here’s the bottom line. In this day and age the most important thing is finding an agent that is smart, hard working, and responsive. Don’t get hung up on statistics that are largely meaningless and easily manipulated.

The NAR has recently released their newest (and totally unbiased I am sure) advertising campaign. The main message of the radio, TV, and print ads is that buyers shouldn’t wait to buy a home. In one of their TV ads, below, they point out that 8 out of 10 economists believe that home prices will appreciate over the next 5 years.

NAR’s Buyer Strength TV Ad

There is some kind of small print in the ad that I can’t make out but I suspect it tells us that this statistic comes from the Keller Center at Baylor University, which is mentioned in a similar 60 second radio ad. Hmmm. Keller sounds an awful lot like Keller, Williams, the national real estate brokerage. Oh, yeah, he started the Keller Center with a $5MM donation.

You can find a copy of the entire study here. It has some other interesting statistics not mentioned in the ad. For instance these same economists concluded that the gains would be modest. In fact, here is the breakout of their forecast:

Funny that the ad didn’t mention this. The other interesting fact that is not mentioned is that this survey was conducted in July 2008. Well, I’m sure that the NAR didn’t feel that it was necessary to mention this since nothing has really changed since July of last year.

Actually, there is a set of questions that the economists responded to in this report that I thought was really good and deserves special mention (seriously):

“In addition, 89 percent of the economists agree that people should closely evaluate the benefits and costs of owning versus renting before buying a home.”

You know, these economists must be pretty smart since they tend to agree with me. People shouldn’t buy homes for their investment potential but rather as a place to live. Perhaps if the NAR hadn’t emphasized the investment potential in the past and again today we’d all be in better shape now.

I know that this must be a shocker but the former NAR economist, David Lereah, has recently admitted in a Money Magazine interview that he “put a positive spin” on his housing forecasts. Wow! You mean you can’t believe everything the NAR says?

Now that he’s no longer getting a paycheck from these folks his outlook for housing is not nearly as optimistic as it once was:

My views are quite different now. I’m pretty bearish and have been for the past year and a half. Home prices will continue to drop. I think we’ll see a very modest recovery in sales activity in 2009. But we’ve still got excess inventories, a bad economy and a credit crunch that will push prices down further, another 5% to 10% more. It’ll take a long time to get back to the peak prices we saw in many markets.

Barry Ritholtz actually has a far more colorful assessment of this turn of events on his Big Picture blog: David Lereah is a jackass.

I’m about to commit real estate sacrilege. Oh, yeah, I do that regularly. Well, this might be perceived as worse than usual since I am going to bash the sacred CRS (Certified Residential Specialist) designation, which is positioned by the real estate industry as a very prestigious designation.

You see, we keep our eyes open for worthwhile real estate training. The only problem is that we rarely find anything that looks interesting and even if we do it ends up being pretty lame 9 times out of 10. Usually it’s fairly superficial or just a rehash of what we learned in our initial licensing course. Nevertheless, I had great expectations for the CRS program because it is so highly regarded but then we received an email promoting the program that really turned me off.

Really, the only problem I had with the program was the program. Here is a verbatim summary of classes and the topics covered in the current program offered by one of the local real estate associations:

Business Planning & Marketing (2 core units)

• Business plan development
• Prospecting techniques
• Budgeting and cost analysis
• Personal promotion techniques

Wealth Building (2 core units)

• Indentifying [sic] money – making opportunities [investing in real estate]
• Comparing potential investment opportunities
• Retirement planning and investing
• Calculating initial investment to rate of return

Marketing with Microsoft (1 elective unit)

• Maximize the effectiveness of e-mail by utilizing
  more features.
• Maintain your customer database in Outlook along
  with their e-mail correspondence
• Establish recurring contacts for birthdays and
  anniversaries
• Create a prospecting system a year in advance
• Provide financial information worksheets for buyers
  and sellers to make better decisions
• Maintain a single calendar and address list on both
  their computer and PDA
• Reduce your marketing costs with the HTML mail
  features of Word and Excel
• Transfer your database to Outlook without retyping
  the names
• Identify more time in your week to work with buyers
  and sellers
• Develop multimedia presentations for buyers and
  sellers, and a pre-listing package

Here are examples of some of the other courses offered at other times:

• Building an Exceptional Customer Service Referral Business (2 core units)
• Technologies to Advance Your Business (2 core units)
• Maximize Your Potential…Personally and Professionally (1 core unit)
• Personal Skills for Professional Excellence (1 elective unit)

Do you see the problem here? Most of this stuff has very little to do with the real estate transaction and everything to do with building a real estate business. Granted, there are other courses offered that have plenty to do with the transaction such as:

• Mastering the Art of Selling New Homes
• Listing Strategies
• Financing and Tax Advantages for Agents and Their Clients

and I’m willing to try these courses when they are offered. However, it’s possible to meet the education requirements for the designation without ever taking a course that has anything to do with real estate transactions. And judging from my experience with other real estate courses I’ve taken it looks like the transaction focused courses might simply be further rehashes of the licensing material. As with most of what the real estate industry does, I think this designation is just another way to justify high commissions.

It just doesn’t stop. The NAR (National Association of Realtors) has launched what they call a Surround Sound Campaign. The idea is to talk up the real estate market by making sure that consumers get the same message from all sides. We got an email explaining that:

The key is for REALTORS® to say the same messages about the market and why “it’s a good time to buy” using many different tactics including radio, print, digital media, networking via professional organizations and word of mouth. When asked at the grocery store, church or a school function, be positive and informed about your local market.

As part of this campaign the NAR has engaged professionals to train spokespeople for local Realtor organizations in media and community relations. In addition, they have made available for download a thick Surround Sound Toolkit document to make sure we all stay on the same page.

Of course, the NAR has been broadcasting variations of this message now for 2 years and has lost tons of credibility in the process. This is the equivalent of “pumping” stocks on the message boards.

Many of these talking points are simply recycled myths, lies, and distortions of facts that we have examined before but there are a few that we haven’t looked at yet:

Current market conditions won’t last long. NAR research shows that prices are beginning to stabilize and interest rates are creeping up. A modest increase in property values is expected in 2009. Well, as a cheerleader for housing, the NAR isn’t exactly an unbiased source of this kind of information are they? There are plenty of economists out there who differ on this point and the NAR has had to downgrade their forecast several times over the past few years.

Home ownership continues to be a wise investment. FHA market share is expected to triple over the next three years, from an estimated 4 percent in 2007 to 12 percent in 2009. Aside from the fact that their date range indicates that this is an old prediction what does FHA share have to do with the wisdom of owning a home?

Americans on average still believe buying a home is a good investment. Nine out of 10 consumers consider home ownership to be a sound financial decision. We’ve seen variations of this appeal to popular opinion before. If everyone believes something it must be true, right? I think the only thing this proves is that most people in this country still believe a house is an investment rather than a place to live – which is how we got into the current mess in the first place.

Homeownership is how many American families begin to accumulate wealth. According to data from the Federal Reserve Board, a homeowner’s net worth is 46 times that of a renter’s. While the statistic may be accurate they’re clearly trying to trick you into mixing up the cause and effect here. Most likely, it’s the net worth that drives the rent vs. buy decision as opposed to the other way around.

Humorous  side notes:

As an aside, under tips for buying a home the NAR says: “Commit yourself to your new home for at least a couple of years before making your next move.” Wow! A couple of years? Wouldn’t they love people to move every 2 years! I can guarantee you that if you are planning on only staying in a house for 2 years you are better off renting on average – that is if you insist on looking at your home as an investment.