The One Industry the Internet Has Made Worse: Moving

Right after you put your home up for sale you need to start thinking about hiring a moving company (unless you are under 30 and have little furniture—then you rent a U-Haul). Finding local movers is pretty easy, and a lot less can go wrong when you are only moving across town. But how do you find a good moving company to transport your valuables across the country? That is a much bigger challenge, and one the Internet has surprising not made any better.

movingWhen it comes time to pick a moving you may be inclined to head over to Google and search for “moving companies.” The first thing you are likely to come across are the aggregators like TopMoving, Moving.com and UnPakt. These aggregators allow you to get quotes from multiple service providers all competing for your moving business. Of course none of these service providers are actually moving companies, but rather they are moving “brokers.” These moving brokers are middlemen who send out for bid your request to move to several actual movers.

This one-stop, request-for-quote on the surface seems like a good idea. But there is a little secret none of these service providers will tell you, and you may have to really do some research to discover it for yourself.

When you get an Internet quote to move, you provide a list of items you want to move, usually along with their dimensions. The movers take that information, use some multiple to convert it to weight, and use that number as a cost estimate for your move. (No matter what anybody tells you, movers charge by the pound. They weigh the truck before and after and you pay for the difference.) The secret is that any quote you get over the Internet is NOT binding, regardless of what the quote says.

When you go online and research this, you discover how many people had their furniture held hostage by movers who demanded more money than the quoted price, before they off-loaded the truck. It is because the quote was just an estimate, and judging by the number of complaints online, you might think that some of these moving companies purposely quote low just to secure the business .

So, how do you avoid this unpleasant scenario? You get an in-home estimate. With an in-home estimate, an experienced moving estimator comes to your home and visually inspects everything you intend to take. This too will result in an price quote, but it is no estimate. It is a not-to-exceed price. You see, when they go to weigh the truck, if it weighs more than the in-home estimate, you pay the quoted price (not a dollar more). But, should the truck weigh less than the estimate, you pay they lesser price. So, you know the most you will pay, and you may be pleasantly surprised at delivery to pay less. That is the exact opposite experience many people have experienced who have gotten “virtual” estimates. And the crazy things is, the in-home estimates tend to be very close to the Internet estimates. It is just that they come with a lot more peace of mind.

When you get ready to hire a moving company, find a respected national brand like Mayflower or Bekins, and make sure you get an in-home estimate to avoid any unnecessary surprises. You get enough of those just moving, no need for any extra.

 

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.

Are Experienced Real Estate Agents Necessarily the Best Real Estate Agents?

When a friend of mine had a knee problem several years back, he went to see an orthopedic surgeon who ultimately performed surgery on his knee. His doctor was in his sixties with many years of surgery experience. Over time my friend realized his knee was not healing properly from the surgery. The doctor tried to diagnose (and fix) the problem, but ultimately had to give up and referred my friend to another orthopedic surgeon: the doctor’s son.

The doctor’s son was in his thirties. He was trained in a different time, with different technologies and surgery techniques, than his father. And sure enough, under the care of the younger surgeon, my friend’s knee problem was corrected. Experience is important, but it is not everything.

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When a real estate agent tells me they have been selling real estate for twenty or thirty years, I am not impressed. In fact, my warning systems go up.

Now, there is nothing wrong with having lots of experience, but it alone will not tell you whether they are a good real estate agent. Not only is there no correlation between years of experience in real estate and capability, there is also no causation. In other words, just because you have been doing something a long time, does not mean you are any good at it.

There are several problems that can arise with very experienced real estate agents. The first is a matter of technique. If they have been doing real estate “wrong,” then that means they have many years of experience doing it wrong. Experience does not guarantee expertise. The worst mistake you can make is assuming a real estate agent is good just because they have been doing it a long time. Unfortunately, it is possible to survive in real estate a very long time with sub-standard performance.

Another issue that can arise with experienced agents is their thinking that they have seen it all and that they know it all. There is nothing new for them to learn, do not even try. This type of agent may not even listen to you very carefully, because, after all, what could you tell them they do not already know. Be careful to avoid know-it-all real estate agents, no matter how many years of experience they have.

Another challenge with experienced agents can be their general unwillingness to change. They have been doing it a certain way for a long time, they feel it works for them, so they are not about to change anything. In real estate, like most other industries, not adapting to change usually leaves you behind the competition.

Finally, many older real estate agents may be reluctant to adopt newer technologies and techniques. Do you want to work with a real estate agents that faxes you all the documents?

The bottom line is that when it comes time to choosing a real estate agent, pay little attention to their years of experience (unless they have only been doing it for a very short while) and pay more attention to them. Do they listen to you? Are they up on the latest technologies? Have they changed with the times?

If you are stuck for how to identify a good real estate agent, regardless of their experience, start here with a list of 30 Interview Questions for Real Estate Agents.

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.

Are Real Estate Agents Really Sales People?

When you hire a real estate agent to list your home, you are hiring them to “sell” your home. But is that agent really a sales person, or are they something else?

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Traditionally, if you own a business and you hire a sales person, you pay them on a commission basis. At least part of their income will be predicated on how much they sell. The more they sell they more they make. And most sales people find themselves with a quota: some agreed upon amount they need to sell just to meet expectations. Many business owners will offer an “accelerated” commission percentage over quota. With this approach, the percentage amount of commission the sales person makes before they hit quota is less—sometimes much less—than what they make for every dollar they sell over quota.

In this regard, the business owner’s goal for the sales people and the sales people’s goals for themselves are in complete alignment: they both want them to make as much commission as possible. The reason this commission structure is possible in business is because for most businesses, sales is theoretically unlimited. In other words, the size of the sales pie is unconstrained, so growing the pie benefits everyone. But real estate sales is nothing like that.

When a home sells, the price it can fetch is not unconstrained. In fact, it is seriously constrained. Unless you can find a cash buyer (who wants to overpay for your home), the most you can sell it for is its appraised value. And since every dollar of commission your agent makes is one less dollar left for you, your goal for them and their own goal are in complete misalignment. You both want very different things for the agent. They want to make as much commission as possible and you want to pay them as little commission as possible, because unlike the unlimited pie of business ownership, the pie of selling your home is very much fixed.

So, is a real estate agent a sales person? I would argue that the custom of paying a real estate agent a fixed percentage on the entire amount of the sale price is more akin to that of a broker than a sales person. (Perhaps that is why every real estate agent works for a broker.) A broker, traditionally, is middleman, someone who buys and item at one price and turns around a sells it at a higher price and pockets the difference (think pawn broker). Of course in this pursuit brokers have to front the money and risk that they can sell the item at a higher price later on. Real estate agents/brokers have no such obligation and run no such risk. I think it would be more accurate to call a real estate agent a “broker representative” than a sales person. A broker who takes little financial risk other than their time invested.

So, if your real estate agent is simply a middleman brokering the sale of your home (without having to actually purchase the property), should they be paid a flat commission percentage on the entire amount? Where is the accelerated incentive to go “over quota?”

Without the risk of having to actually purchase the property and without an accelerated commission to go over some pre-agreed-upon quota, there really is no incentive for your broker representative to work hard to get you top dollar for your home. And therein lies one of the great conflicts of interest in the real estate industry: you and your broker representative want completely different things.

What would make more sense in terms of aligning the two objectives would be to pay your broker representative some nominal flat fee (to compensate them for their initial marketing effort) and then a percentage commission over some pre-agreed-upon quota. The challenge would be in agreeing on a quota. It would have to be tied in some way to some objective price (like the appraised value). You could even offer an accelerated commission percentage for a sale price above the pre-agreed-upon quota.

As much as this system would benefit the home seller, I doubt that any broker would go for it. As things stand now, brokers get paid full commission even when they do a lousy job of “selling” a home. Why would they want to do away with that?

Next time you go to sell your home, see if you can’t structure your broker’s representative’s compensation as described above. If they vehemently refuse, that gives you a pretty good idea of how hard they will work to get you top dollar for your home.

 

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 Root of all Happiness (and Unhappiness) When You Sell Your Home

Imagine you need to sell your home, and after doing all of your pricing homework, you fully expect it to sell for $500,000. After a few weeks on the market, you end up selling it for $490,000. How do you feel? If you are like most people, you are a little disappointed. You were really expecting $500,000.

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Now imagine you have to sell that same home, and after doing all of your pricing homework, you expect it to sell for $480,000. After a few weeks on the market, you end up selling it for $490,000. How do you feel? You are probably ecstatic—with an extra ten grand in your pocket.

So, the same home sells for the same price in the same time frame and in one case you are happy and in the other not so much. What changed? Your expectations.

When you sell your home, you can, to a great degree, dictate your satisfaction with the outcome simply by managing your expectations. In other words, selling your home is a really good time to be a pessimist.

Go ahead, assume the worst. It will never sell; I am going to take a bath; I am going down with the ship; I am going to be homeless; Nobody loves me. Really get into it.

Now that you have set your expectations properly, go ahead and do everything you can to sell it for top dollar. Clean it, paint it, stage it. Take beautiful, professional photographs. Price it a little below the appraised value. Put it on the MLS and every third party site you can think of (i.e., Zillow, Trulia, Realtor, Homes, Craigslist). Really market the hell out of it.

When listing day comes remember, it is okay hope for the best, just make sure to expect the worst.

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.

How Much Would Buyer’s Agents Make if Buyers Had to Pay?

I always thought it was a little strange that when selling your home in the U.S., the seller is expected to pay for the buyer’s agent. It seems like that approach is ripe for setting up misguided loyalties.

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In my neighborhood, where homes sell for around $700,000 and the customary buyer’s agent’s commission is 2.5%, an average commission is in the range of $17,000. Paying that amount, as a home seller, really stings. I am forfeiting a big chunk—and yes $17,000 is a big chunk—of my equity to pay someone whose job it is to make sure my adversary pays me as little money as possible to buy my home. But this dollar mount is skewed, since the buyer assumes their agent’s service is free, they are not incentivized to negotiate a lower fee. It is not a true representation of the buyer’s agent’s value.

It got me thinking: how much would the buyer’s agents in my neighborhood make if the buyers had to pay them, either cash up front, or as an add-on to their loan? How much would a buyer’s agent make if the person receiving the service actually had to pay for the service? Is there anyway to find the answer to that question? Turns out there is.

In a little place far away called Australia, it is not customary for the seller to pay the buyer’s agent. So, how much do buyer’s agents make in Australia? It is hard to say, because according to Simon Baker, former managing director of REA Group in Australia “there are hardly any buyer’s agents in Australia. Nearly all house hunters go unrepresented, because, unlike in the U.S., a buyer has to cover a buyer’s agent’s commission, not a seller. Maybe 1 in 1,000 use buyer’s agents.”

So, when forced to pay for the buyer’s agents themselves, 999 out of a 1,000 Australians value the buyer’s agents service at zero dollars. They would rather go unrepresented than pay for an agent. Hmmm.

One of the consequences of such an arrangement is that most home sales in Australia are, by definition, dual agency. The seller’s agent, who represents the seller, also handles the transaction for the buyer. In the U.S., dual agency deals are problematic because they create incentives for the agent to get both commissions, which can compromise their loyalty to the seller. But in Australia, that is not a problem because there is no buyer’s agent’s commission. Consequently there is no reason for the agent to prefer one buyer over another, thus eliminating the conflicts of interest that normally result from dual agency.

I know as a home seller I prefer the Australian home selling customs. I know home sellers do better there. Australian seller’s agents fair about the same as they do in the U.S. (customary commission there is 2% – 2.5%). Buyers there may do better or worse than buyers in the U.S. I suspect that since Australian home buyers are generally unrepresented by agents, they take it upon themselves to be more educated about the home buying process. Seems like the only real losers with the Australian model are the buyer’s agents. But they do not even exist, because the market has spoken and decided that they are not worth the expense.

Only one question remains: how do we convert the U.S. model to the Australian model? Anybody up for a challenge?

 

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.