If It Is So Important, How Come I Know So Little About You?

Real estate agents will tell you, and rightly so, that for most people, selling their home is the biggest dollar transaction in which they will ever engage. And it would follow that choosing a partner in that transaction (i.e., the real estate agent) is the most important decision they can make in preparation for that transaction. If all that is true, why is it we know so little about real estate agents?

Jigsaw

Real estate agents will be quick to point out that there are all kinds of information available about them on their web sites, and that is true. But all that information is subjective and controlled. If there is something the agent does not want you to know about them, you can be sure they will do their best to hide it from you. For example, suppose the agent does a particularly poor job with one of their clients. Do you think that client’s testimonial will be prominently posted on their web site? Doubtful.

It is true that the real estate intermediaries like Zillow and Redfin post all customer feedback they receive for agents (as far as we know), resulting in a more comprehensive tally in their “star” ratings. But these too are highly subjective ratings. Real estate agents who are likable and give good service are more apt to get the five star ratings. There is certainly nothing wrong with giving good service and being likeable. (If I were a real estate agent, they would be the two core tenets of my business.) But if you had a choice between a likable agent that got you one price for your home, and an old curmudgeon of an agent that got you an additional $10,000 for your home, who would choose? I know which one I would choose. After all, I am not marrying them, I am just paying them to sell my home.

The problem is we know almost nothing objective about real estate agents, especially about their performance. Which makes it particularly difficult to assess their capabilities in a quantifiable and objective way. Without such information, agents who list the most homes become the “Top” agents, not the ones who sell fewer homes but get top dollar—we have no way of knowing that.

Here is the information I would like to see made available to consumers to help them in choosing an agent. This information should come directly off the local MLS, by DRE license number, to ensure its accuracy. The information should be for the preceding twelve months:

  1. Number of homes sold
  2. Average sale price
  3. Average percentage of sale price to list price
  4. Average number of days on the market

These four data sets may be helpful if you had it for just one agent, but what would make it really powerful is if you had it for every agent. Imagine having this information for every agent in just a single office. You might find that the “Top” agent averages 94% of sale price to list price, but some other agent in the office, who sells fewer homes, gets their clients 98% of the listing price. Now who should be the Top agent? The ironic thing is, this type of information would actually benefit the agents that help their clients the most. But more importantly, it would also serve as a check and balance against the inherent conflict of interest in the industry. How hard would a real estate agent work to get you top dollar when they know their quantifiable results are going to be available for everyone to see, which will directly impact their future business?

As things stand now, with the all-or-nothing commission structure in place, agents are more concerned with getting the home sold than with getting top dollar. But if the above mentioned “report card” were available for every agent, the conflict of interest would be reduced, and agents would be forced to strike a balance between getting the home sold and getting top dollar. And as sellers, that is all we can ask for: get the interest of the agent more in line with the interest of the seller.

 

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 Simple Way to be as Smart as Your Real Estate Agent When Pricing Your Home

Without question, the biggest mistake you can make when selling your home is to price it wrong—especially too high. You can have the nicest home in the neighborhood and if you price it above the market, it can sit there and sit there. And then it gets the stink of a stale listing, where buyers become afraid to make an offer. And thus begins the downward spiral of price reductions and capitulation.

1388609_20241747

Most home sellers who work with a real estate agent tend to defer the pricing decision to their agent. The agent starts by assembling a Competitive Market Analysis (CMA), which is a combination of recently sold homes and currently for-sale homes in your neighborhood. Then they sit down with you, go through the list, and the two of you decide on an asking price for your home. But relying too heavily on the agent for the asking price can be a real mistake.

First of all, agents are generally not certified appraisers, which means their choice of asking price is just a guess—an educated guess—but a guess none the less. Second, agents are subject to the Principal-Agent Problem, which means their choice of asking price is not without bias. The faster the home sells, the sooner they get paid. This incentivizes them to choose a lower asking price, which benefits them at your expense. Finally, it is unlikely your agent knows more about your neighborhood then you do. You may have even been inside one or two of the recently sold or for-sale homes in the CMA. It is doubtful your agent has. And the insides of those homes has a dramatic impact on the price of yours.

So, how do become as smart at pricing your home as your agent? Simple, become a buyer who is looking to buy your home. First, you set up a simple spreadsheet that tracks the asking price and sold price of homes in your neighborhood that match the specifics of you residence. Entries on the spreadsheet include the following:

  • Listing date
  • Address
  • Bedrooms
  • Bathrooms
  • Square feet
  • Asking price
  • Sold date
  • Sold price

Next, about 90 days before you are ready to sell, go to any (or all) of the online real estate sites (Trulia, Zillow, Homes.com, Redfin) and sign up for e-mail alerts that notify you whenever a home goes up for sale or gets sold in your neighborhood that matches your home’s specs. Then, whenever you receive an e-mail alert, enter the information into your spreadsheet. You can even add comments to an entry if you know something about the condition of the home.

With this approach, not only can you see what homes similar to yours sell for, but you can also see how long they took to sell and what percentage of the asking price they got. What is more, by doing this for 90 days, you will also get a feel for price momentum in your neighborhood: what direction and how fast are the prices moving.

I promise you, if you do this for three months, you will now as much, if not more, about the pricing of your home than the agent you work with. Then, when you sit down with them to determine the asking price, there will be two informed people making the decision instead of just one.

To see how ReaListing helps home sellers make better decisions, 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.

An Easy Way to Identify Serious Home Buyers

Buyers are liars! Get any two real estate agents alone, and you are bound to hear that sentiment. Where does it come from? Lookie loos. Buyers who waste an agent’s time by looking, but never actually buying, a home.

904328_52196889

As long as there have been lookie loos, there have been real estate agents trying to do something about these time wasters. The objective is to separate the serious buyers from the less-than-committed ones. The idea being that if an agent could somehow identify them ahead of time, they could avoid them and let some other agent deal with them.

One of the tried-and-true techniques used by agents to help spot a serious buyer is if they are willing to get pre-qualified, or better yet, pre-approved for a loan, prior to actually looking for a home. The thinking here is that if a buyer is willing to go through the financial gymnastics of getting pre-approved prior to working with an agent, they must be serious. And it is not a bad idea, but it has one flaw: it may be good at eliminating non-serious buyers, but it may also eliminate serious buyers.

When my wife and I started looking for a home recently, we were definitely NOT serious buyers.  We were just looking…until she found our dream home for sale on the Internet, months before we were ready to buy. So, several months ahead of schedule, and against my better judgment, we decided to make an offer. No pre-qualification; No pre-approval.

We got pre-qualified in about 4 hours. We jumped through hoops to arrange the necessary paperwork and got pre-approved not long after. We were serious buyers, we just did not know it, and neither did the agent we had already agreed to work with. Had she asked us to get pre-approved at that instant we would not have done it—we were not ready yet, or so we thought. And yes, we ended up buying the home.

The fundamental problem of the lookie loo is the structure of the buyer-agent relationship. The way the real estate industry works, the buyer’s agent does not make a nickel unless and until the buyer actually buys something, regardless of how much time and money they spend on the buyer. Is that any way to run a service business?

I think there is a better way to spot a serious buyer, and it is also a much more intelligent (and fair) way to run a real estate business. Ask for a refundable cash deposit up front. The buyer writes a check to the agent, say for $1000, before the agent goes to work. If the buyer ultimately buys a home through the agent, they get their deposit back at closing, so it cost them nothing. But, if they fail to buy, the agent keeps the $1000, to compensate them for their time and effort. Only a buyer truly committed to buying a home (and committed to the agent) would hand over money up front. And if the agent really wants to make it enticing, they could offer to refund $1500 at closing. That way serious buyers stand to actually make money by going through with it.

It will be a tough sell. After all, buyers are accustomed to getting their real estate services for free, which is what they are doing when they don’t buy anything. But it is not fair to expect agents to work for free. Perhaps the real estate industry that established these customary practices in the first place, can come up with a newer “customary” practice that is more fair for the agents they represent.

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.

Would You List Your Home With a Realtor You Don’t Know?

It is an interesting question, because it is something most home sellers probably should do, but don’t.

OLYMPUS DIGITAL CAMERA

If you are like most home sellers, when it comes time to selling your home you will call a real estate agent you already know, or call friend or family member and solicit a referral. The thought being, that selling your home is such an important transaction, you simply have to use a realtor that comes with some degree of pre-approval. But should you? I am going to try to make the case that using a referred agent may not be in your best interest.

But first, what if I posed that same question to a real estate agent: would you list the home of a seller you don’t know? I bet a 100% would say yes. Hell, they dream about it. They are constantly marketing themselves to find new home buyers and sellers, because they know if they limit themselves to only people they already know, they will not do very well in real estate. If agents are willing to work with you as a stranger, maybe you should be open to doing so as well.

The most important thing to understand when choosing an agent to list your home is this: selling your home is a business transaction that will cost you thousands or tens of thousands of dollars. You can be friendly toward your agent, but they are not your friend. They are your service provider. It is essential that you select the best agent, and choosing a referral comes with a litany of potential problems.

Problem number one: selling a home can get emotional. Arguments and disagreements can ensue, which in extreme cases, can end the relationship even before the home is sold. It happens all the time in real estate. Do you really want to have a relationship go south with someone you may have to see socially again? It is better to keep business and pleasure separate.

Problem number two: it is really difficult to negotiate a better deal for yourself with a referral. Make no mistake about it, real estate fees are negotiable and if you do not negotiate your fees, you are going to pay too much. Negotiations can get heated, and you may even have to walk out and find yourself a better deal. Do you really think you can walk away from a friend or a friend of a friend? So, what do most home sellers do? They end up  paying too much to list their home for the vague comfort of working with a referral. Not worth it.

Problem number three maybe the biggest problem of all. The best realtor for your situation may not be a referral. The best real estate agent to list your home may be an agent you do not know (yet). And you will never meet them if you limit yourself to only referrals. Why limit yourself?

Problem number four: not interviewing more than one agent because you got a referral. Whether you use a referral or not, you should always interview at least three agents to list your home. The only way you will know who is best suited to list your home is to compare. Sellers are often times afraid they will insult the referred agent if they speak with other agents. If that makes you uncomfortable, that is even more reason not to work with referred agents.

When it comes time to sell your home, be open to working with a real estate professional you do not know. If things go really well, you can always use them when you sell your next home.

To see how ReaListing helps sellers find real estate agents to interview, 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.