Agents in a tug of war

The house was magnificent with a granite-and-steel kitchen, top-of-the-line flooring and beautiful wall treatments. But to home shoppers Robert and Deborah Bilder, not only did the Sherman Oaks residence seem overpriced at $1.3 million, but there was the sight and sound of the 405 Freeway in the distance.

And then there was the seller’s real estate agent.

“When we went outside to the pool and heard the freeway, the agent chose that moment to demonstrate the [outdoor] stereo system and turned it up to a deafening level in order to drown out the freeway noise,” said Robert Bilder, who has since purchased a different house. “The stereo was up inside too.”

It was a beginner’s mistake, a failed attempt to mask an imperfection, and one of the many missteps the Bilders witnessed as agents hustled for their business. With so many selling houses and so few properties for sale, agents are tripping over each other in a kind of modern gold rush for sales and commissions in today’s heady housing market.

In the last five years, the number of agents has swelled 38% to 264,000 in March. Throw brokers into the count and the state has a record 381,000 licensed agents and brokers, according to the state Department of Real Estate. That’s one for every 30 households counted in California during the 2000 U.S. Census, and the most since 375,000 was reached during the last real estate boom, which ended in the early 1990s.

The competition is forcing agents to work harder, especially with the supply of homes for sale so thin. The sales rate is so fast-paced that it would take just 1.6 months to deplete the supply of single-family homes on the market statewide, compared with 2.6 months a year ago, according to the California Assn. of Realtors. In Los Angeles and Ventura counties it would take about a month; Orange County, a couple of weeks.

As a result, agents are blanketing neighborhoods with fliers or postcards, taking to the phones and knocking on doors to solicit buyers and sellers. Some are even lowering the standard 6% commission to attract clients.

But it’s not just knocks at the door that have begun to occur more frequently. Buyers are knocking heads with agents, who, in turn, are often knocking each other to get the sale. The stakes are high -- successful agents can earn six-figure incomes.

At open houses, shoppers report seller’s agents trying to pry them away from their own agents. “They try to reel you in if you go out by yourself,” said Sabina Williams, a San Fernando Valley resident who has been looking for six months for a house under $400,000.

Her agent, Pamela Marie Topa of Dilbeck Gibson Realtors in Studio City, said it has happened to others too. “I’ve had clients who have gone to open houses and had my business card in their hand and the seller’s agent will offer them an incentive to go with them.”

Typically the seller’s agent pitches the idea of a commission reduction even though the buyer doesn’t directly pay a penny of it. The rationale is that the buyer’s offer will seem more attractive if the lower commission paid to a single agent saves the seller money.

“If they know they’ll be getting more on the bottom line, then they might be willing to take a lower price from you,” Topa explained.

Bilder had a couple of agents who simply assumed they were best for the job of representing him, so they just took on the role.

“We had two different Realtors, after we just talked to them about properties, they assumed that we were working with them,” Bilder said. “One wrote to us and said, ‘Now that I’m working for you.’ We just didn’t respond to any of their subsequent e-mails or telephone calls. I think that sort of sent the message over a week or two.”

Greg Cason, who recently purchased a house in the Melrose-Fairfax area of Los Angeles with his partner, Kevin Beer, said he was frequently frustrated by agents who insisted he sign in at open houses.

“They just come at you right away,” Cason said. “They ask you to sign in three or four times, and if you don’t want to sign in, they still want you to sign in.”

Seasoned agents complain that some of their new colleagues aren’t being properly trained, prompting potentially costly mistakes for buyers and sellers, such as fouling up bids or releasing information that’s supposed to be kept confidential.

New and veteran agents talk about being burned by colleagues who snatch away their clients. Many also bemoan buyers who secretly work with several agents at once in the hope that each will work double time to find a house, eventually leaving all but the agent who comes through first with the home feeling betrayed and bilked.

“Some people are making it a free-for-all,” said Nicole Romanowski, a Simi Valley agent with 14 years’ experience. “It’s not just agents, it’s buyers and sellers.... They just want to get in at any cost.”

Although some say all is fair in competition, others liken taking another agent’s client to theft. The National Assn. of Realtors’ Code of Ethics, the standard to which all members are held, states: “Realtors shall not engage in any practice or take any action inconsistent with exclusive representation or exclusive brokerage relationship agreements.”

But the next paragraph notes this “is not intended to prohibit aggressive or innovative business practices, which are otherwise ethical.”

“Greed is a huge factor” in driving some to test those limits, said Romanowski, who works at Troop Real Estate. “Greed and desperation.”

This is evident in bids made by some agents who, for example, claim their buyers have larger down payments than they actually do, gambling that sellers will accept bids at face value and then, eager to close once the process is rolling, continue on if the purchase is financed.

Romanowski is still angry about a recent experience. After showing a client eight houses in a month, she was stunned to find out that another agent lured her client away with an “office exclusive,” which is a home that the seller agrees to list solely with one agency and not on the multiple listing service.

Romanowski, who could have easily represented her client on the purchase, phoned the other agent for an explanation for the move, which cost her thousands of dollars in what would have been a share of the commission.

“Their viewpoint was, ‘I’ve had people in my own office do this to me, so too bad,’ ” Romanowski said. “This is someone who’s been in the business 25 years.”

Some agents feel so strongly about avoiding even the appearance of possible conflicts with colleagues that they decline to offer any advice to another agent’s client.

“When I begin speaking with people I ask, ‘Are you working with another agent?’ ” said Ree Abbott, an agent with Coldwell Banker in Studio City who got her license two years ago. “Getting a reputation of stepping on someone else’s feet is not a good one to have.”

Romanowski agrees, and expects to protect herself in the future by using buyer-broker compensation contracts that spell out an expiration date and what buyers can expect from their agent and vice versa.

One such contract issued by the California Assn. of Realtors says the buyer grants the broker “the exclusive and irrevocable right” to represent them in acquiring a home.

Although some question how effective the pledges may be, at the very least they set down ground rules, said George Lefcoe, a professor of real estate law at USC.

Steve Aguilar, who opened Boardwalk Realty on the Westside of Los Angeles in 1996, said he understood why some of his agents found the contracts useful. But, he said, buyers who work with multiple agents are often found out, which can seriously affect how hard an agent is willing to work for them.

“Once they’re sent out in the field, they’ve got to find their boundaries,” said Aguilar of agents learning the ropes and trying to make a name for themselves. He added that agents require more guidance than just knowing how to write a purchase contract. “We go into everything from how to list a property to how to market it,” he said.

But even some of those who get adequate training won’t make it. Aguilar speculated that about 80% of new agents will leave the profession after their first year. Others think the average could be higher.

When the market tumbled in the 1990s, the number of agents and brokers fell by 78,000 by the end of the decade.

“I think a lot of people think all we do is drive around in nice cars and show houses and make a lot of money,” said Judy Bauer, an agent with Coldwell Banker Bozigian Realty in Lancaster. “This is such a problem-solving business ... and if you’re not a person who cares about your client and can solve problems, you’re not going to be happy.”

Regardless of the competition, new agents continue to join the ranks, some of them chasing dreams as well as dollars. In three months as an agent for Dilbeck Gibson Realtors in Studio City, Octavio Solorio, 51, has yet to have a sale, but he recently got his first listing.

“It’s very scary because the competition is so high,” Solorio said. “There are so many people going into the business.”

Greg Holcomb, 38, an agent with DBL Realtors in Beverly Hills, has been in the business about 18 months. He represented the Bilders in their purchase, as well as Cason and Beer when they bought their home.

“I see a lot of people get in because they think it’s going to be easy money in this market,” Holcomb said. “They think it’s going to be a laid-back job of leading people around. It’s not like that at all. It’s extremely intense, a lot of hours.”

Like Solorio, Holcomb expects to survive the competition.

“No matter what industry you’re in,” Holcomb said, “you’re never 100% safe.”

Raphael Bostic, an associate professor of real estate at USC and director of the Casden Real Estate Economics Forecast, said he believes there will be a couple more years of high prices before anything changes. But once that happens and the market’s velocity slows, he expects some of the tension that’s currently building among agents to begin to be reflected in complaint statistics at the state level.

Complaint totals tallied by the state Department of Real Estate show about a 13% increase since 2000.

Of those complaints, which deal only with alleged violations of the law -- not ethical matters -- the share involving discipline, such as the revocation of licenses, went up more than 38%. However, the numbers are relatively low, from fewer than 1,300 to nearly 1,800, and no consistent trend has become apparent.

“People are too busy to take the time to file the complaint,” Bostic said. “My guess is you will start to see complaints go up when the frenzy ends, but given the current environment, I wouldn’t expect the frenzy to end.”

T.J. Sullivan can be reached at [email protected].