If Your Home Doesn’t Sell Don’t Blame the Agent

Real estate agents love to take credit for selling the homes they list. Ask any of them how many homes they have sold recently and they will happily to tell you. When a real estate agent tells me how many homes they have sold, I sarcastically reply that “I didn’t know they owned that many.”

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The truth is, home owners sell homes, with some help (hopefully) from a real estate agent. When a home sells, it is not the agent signing all those contracts, it is the home seller. I think the seller-agent relationship is akin to that of the player-coach relationship: the seller is the player and the agent is the coach.

A good coach can advise a player and can put them in the best position to win, and that is what a good agent can do too. But, the coach can only call the play. And if the coach calls the wrong play, it is incumbent upon the player to make the necessary adjustments to find the winning play. But, the player can only change the play if they are smart enough to realize the original play will not work. If the player blindly follows the original play, regardless of the opposition’s defense, it may fail miserably. And you too may fail to sell your home if you blindly follow you agent’s advice.

Most real estate agents are good at what they do, but they are not perfect, and they are not infallible. They are working with partial information and suffer, to some degree, from the inherent conflicts of interest in the real estate industry. As a home seller, you should look to your agent for advice, but that is all it is, advice. The Merriam-Webster dictionary defines advice as a recommendation regarding a decision or course of conduct. It is a recommendation. It is something you should consider, along with other information, when making your final decision.

If you think that using a real estate agent to sell your home absolves you of your responsibility in the sales process, you are likely to be disappointed by the result. It is your responsibility to sell your home. And you will not get the best results selling your home by hiring the most informed agent. You will get the best results by being the most informed seller. How could you even find an well-informed real estate agent if you are not an informed seller? You would not know one from the another.

Taking responsibility means getting educated on the sales process: understanding staging, pricing and marketing. And if you think it is difficult to learn about selling your home, just think how difficult it was to earn those thousands of dollars you will undoubtedly be throwing away as an uniformed seller.

The minute you accept responsibility for selling your home, and do not just throw the whole thing into the agent’s lap, the less likely that you will be sitting in a home that does not sell. And, as an added benefit, you will finally understand the immortal words of the popular singer/songwriter Jimmy Buffett: If the phone don’t ring, it’s me.

To learn how to keep more or your hard-earned equity when you sell your home, check out The Intelligent Home Seller eBook and The Intelligent Home Seller eCourse.

When is a Crappy Realtor Better Than a Good Realtor?

Imagine you need to sell your home. You hate the thought of paying the outrageous customary 6% sales commission most real estate agents charge, so you decided to hire a discount broker. A deep discount broker. And then the nightmare begins.

They never return your calls. They give you bad advice. They do a poor job of marketing your home. They are the realtor from hell. But, some how your home sells. Later you find out that you sold it for about ten thousand dollars less than its appraised value. How does that make you feel?

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Before you answer, a little math. Your home sold for $440,000. A hypothetical full commission real estate agent could have sold your home for $450,000. In that case, the real estate agent’s take on the sale would have been $27,000. (Crazy, huh?).

Now your crappy agent took your listing for only 3% commission. Their take on the sale was $13,200. So, with the hypothetical agent you would have pocketed $423,000 after the sale, BUT with your crappy agent you pocketed $426,800. Almost four thousand dollars more. In summary:

 

Sale Price

Commission

You Pocket…

Full commission realtor

$450,000

$27,000

$423,000

Crappy discount realtor

$440,000

$13,200

$426,800

Ask any realtor and they will tell you when it comes to real estate agents, you get what you pay for. Actually, that is not true. You get what you pay for…or less. Paying top dollar for a realtor does not guarantee top results. (Actually, the only way to guarantee top results is for you to be an educated home seller.)

Real estate agents brag that their marketing plan will get you the most money for your home. Who cares? I do not care what my home sells for, I care what I pocket. If some agent gets me less but takes much less, then I come out ahead. I want to hear a real estate agent tell me that with their combination of marketing AND reduced fees, they will net me the most for my home. That is the agent who is getting my listing. The one who nets me the most.

For years real estate agents have played this sleight of hand with intimidated home sellers. Look over here at this price I am getting you, do not look over there at the money I am taking from you. When it comes to selling your home, there are two variables that make up the successful sales equation: sales price AND commission. It is your job to maximize the difference, not the sales price. And if that means hiring a crappy real estate agent to do it, viva la crappy.

 

 

 

To learn how to keep more or your hard-earned equity when you sell your home, check out The Intelligent Home Seller eBook and The Intelligent Home Seller eCourse.

The Golden Rule Does not Apply in Real Estate

Ask most people what the Golden Rule is and they will say something along the lines of, “treat others how you would like to be treated.” But, ask a cynic what the Golden Rule is and they will tell you, without hesitation, “That he who has the gold makes the rules.” And throughout history, the “second” Golden Rule has held true most of the time.

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There are, however, exceptions to this other Golden Rule, and one of them is the residential real estate industry. When you, as a home seller, go to sell your home and employ a real estate agent to help you, who has the “gold,” you or the real estate agent? You do. You have the gold—the money—and they are the ones who want the money. But who makes the rules? Who determines what gets paid, how it gets paid and when it gets paid? The real estate agent, the ones without the gold.

I think it is an indication of how overwhelmed most sellers feel about selling their home that they are willing to relinquish their power to make the rules (and a lot of their gold) to real estate agents. You might think that with all the information and services available to home sellers today, from being able to conduct their own Competitive Market Analysis, to being able to post their own home on an MLS for a few hundred bucks, there would be a re-writing of the rules. But just the opposite has occurred. In fact, the percentage of gold that home sellers hand over to real estate agents has gone up in the past few years. Real Trends, a research firm, reports the average commission paid to the buying and selling brokers was 5.4 percent of the price of a home in 2011, up from 5 percent in 2008.

It cannot be for lack of interest on the home seller’s part that the percentage has gone up. I do not know of a single home seller who wishes they could pay more to a realtor to sell their home. Most think they charge too much.

So how does it persist, that in the residential real estate industry, the group without the gold continues to make the rules? It must be a failure of imagination. A failure, on the part of home sellers, to imagine a different set of rules for handing over their gold. Home owners simply cannot imagine any other formula for compensating real estate agents, other than the one the agents carved in granite so many years ago.

Only one question remains: does that antiquated formula persist to infinity, or do home sellers decide it is time to enforce the golden rule?

To see how ReaListing is helping home seller’s re-write the rules, click here.

To learn how to keep more or your hard-earned equity when you sell your home, check out The Intelligent Home Seller eBook and The Intelligent Home Seller eCourse.

If Billion Dollar Defense Contractors Can Learn To Do It, So Can Realtors

For most of the past 50 years, if one of the large defense contractors won a big contract, the chances are it was a Cost-Plus contract. In a Cost-Plus contact, the supplier negotiates a fee, say 7%, and receives all of their costs plus 7% on top of that amount as their profit. In such a situation it is virtually impossible for the contractor to lose money. They are guaranteed to get all of their expenses back plus money on top of that to boot.  Seems like a pretty sweet deal for the contractors, and it was.

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Taxpayer groups complained that Cost-Plus contracts were subject to abuse by the contractor, which of course they were. With a Cost-Plus contract, the worse you perform, the more money you make. Inefficient companies that spent unnecessarily on expenses were rewarded with greater profit, because they received 7% of the inflated expenses.

The contractor’s argument has always been that in long-term, technologically challenging programs, there are just too many unknowns for the company to quote a firm-fixed price. In a firm-fixed price contract the contractor receives the fixed price and no more. If they are wasteful in development and go over that amount, it comes out of the contractor’s pocket, not the taxpayers.

Today, most large defense contracts are firm-fixed price. Why have these companies started accepting firm-fixed price contracts? That is what they have been offered. They want Cost-Plus contracts, but if the only kind available are firm-fixed price, that is what they will take. Their only other choice is to go out of business. And how have these companies responded? By sharpening their pencils, becoming exceptionally good at quoting new business and even better at reining in expenses. The taxpayers save money and the suppliers become more efficient, which benefits everyone. So, what does this have to do with realtors?

Traditional Realtor compensation, which is based on a percentage of the home’s sale price, is akin to the Cost-Plus contract. Just as contractors make more the more they spend, so too do real estate agents who sell more expensive homes. And just as taxpayer groups complained about the defense contractors, sellers complain about the unfairness of the agent’s compensation.

The question now becomes, would real estate agents accept a fixed price contract for selling a home, independent of the home’s sale price? Well, they would if that was all that was available to them. And how would they respond to a flat-fee listing? Probably the same way as the defense contractors: by becoming more efficient real estate agents, which benefits everyone. Can they do it? If billion dollar defense contractors can do it, certainly real estate agents can do it.

To learn how ReaListing helps motivated sellers find flat-fee real estate agents, click here.

To learn how to keep more or your hard-earned equity when you sell your home, check out The Intelligent Home Seller eBook and The Intelligent Home Seller eCourse.