Real Estate ‘Pretenders’ dropping like flies

I learned a new term this week at the Keller Williams camp in Austin. Agents from declining markets that have turned into Buyer Markets referred to the real estate “pretenders”, who are now dropping like flies in the tough markets. This year will be the first year in a decade that membership in the National Association of Realtors (NAR) declines. Austin saw this in the 1980’s. In 1986 there were over 5,000 Austin Realtors. Then the market tanked. 18 months later, there were less than 2,000 Realtors in Austin.

So who and what is a real estate pretender? They are agents who jump into hot markets and ride the wave. These can include discounters, newbies, scammers and legitimate Realtor hopefuls wanting to crack into the business. They are referred to as pretenders because they are not truly running a real estate business, but instead are just surfing a wave. They can get listings and sell them, or find buyers willing to write offers, but are not operating in a business manner that will survive a downturn. When the wave dies, so does the business, and the agent goes away.

One of the biggest real estate companies in Arizona is actually doing better now the that market has turned into a Buyer’s market. As the Owner/Broker put it during a panel discussion, “the market doesn’t matter to us. We stick to the fundamentals and the basics because we know that’s what will sustain us long term. We actually lost market share in the hot market but now we’re in the process of taking back more than we lost as the pretenders and discounters can’t compete with the results that our agents are able to provide”.

This reminded me of an interview of Warren Buffet, which I saw around 2000. The questioner essentially asked Warren Buffet if he felt like he was missing the train by sitting out the tech stock boom. In other words, by sticking to his business fundamentals, wasn’t Warren Buffet leaving huge gains on the table? Buffet just smiled and said “no”.

He trusted his method and was happy to leave the tech stocks alone. He didn’t say it, but he could have said that the investors flocking to these stocks and making money were investment “pretenders” as well. They might look smart when the market is doing well, but their true abilities are revealed by the downturn.

Similarly, when real estate markets heat up, a real estate business that remains grounded in its basic core business philosophy may be leaving some deals on the table, and letting the pretenders temporarily take away some business, but when the market turns and the smoke clears, the pretenders are gone and the remaining agents become even more valuable and needed than before.

Austin will have a downturn again. I’m not sure when we’ll cycle out of this current “good” market, maybe in 3 to 5 years. When we do turn, the market will separate the real estate professionals from the Pretenders as it always does.

5 thoughts on “Real Estate ‘Pretenders’ dropping like flies”

  1. I would say that Austin, and Texas in general, will not buck the national trend as long as people think. If Texas was comepletely self-contained, perhaps not. Being that Texas is connected in sundry ways to the outside, the great
    unwashed dealing with the credit crunch will taint the state sooner or later. Austin would look to be the first major Texas
    market to be affected, as there is a far higher percentage of investors, along with buyers from out-of-state.
    When buyers have trouble selling their out-of-state house, have trouble getting loans, and in general get freaked by the same info as others, Austin will feel it. 3-5 years is a very optimistic prognostic. I would say 1-2 years at this point, if that.
    Austin just has a freaked-out contrary economic situation now in housing. When houses were skyrocketing in prices
    on the coasts, the tech fall-out was still lingering over Austin. Now Austin is belatedly experiencing their boom.
    You can only swim across the current for so long, and the contrarian ebby shall get caught up in the larger housing
    fall-out in due time. And, yes, the RE agent pretenders will get washed-out of Austin as well.

  2. I think there are pretenders in every industry, and they get run out of the business during the hard times. But, I think the hard times are a great time for everyone to learn who should and who shouldn’t be in the industry.

  3. Hi Dave,

    > Austin, and Texas in general, will not buck the national trend as long as people think

    You make some good points. We’re keeping a close eye on things. Investors were definately a smaller portion of our buyers this year compared to 2006. I think many of them don’t feel as flush with equity from other homes as before.

    Also, many of the loan products used by investors are no longer available. This thinning out is good. There are still great opportunities in Austin for buyers, but removing the less qualified (or less enthusiastic) from the market will indeed have some effect.


  4. keep in mind that I truly hope the Austin market stays hot for as long as possible. They had enough bad times in the 80’s
    and after the tech bust. Austin is a tremendous city, physically, socially, and musically. I think people might be surprised
    that the quality of life issue may be even stronger than the affordability issue. Long life the boom!

  5. My mother is a Keller Agent in Dallas that’s why I am reading this blog. She’s really just does it part time so I guess she is a “pretender” so to speak. My agent was from Zip Realty and he talked about the market downturn in California. He said that in California they are the only company growing in the down market. I wanted to work with a Keller agent in Austin but I got terrible service from the one agent that I called. They promised a lot but never followed up on things. The Zip agent that I used was incredible with follow up, and they gave me a survey after the sale on the agent, which I thought was unique. Anyway, I welcome more good agents in the business and I am thinking of getting my license by the end of the year… Many choices.. The Zip agent said that they got about 100 leads a month from Zip.. who knows.. mom wants me to work for Keller.. we shall see.

Comments are closed.