If a Listing Agent Can Work for 1%, Why Can’t the Buyer’s Agent?

I am not sure if Redfin understood the ramifications of trying to win market share as a new broker in Washington DC by offing to list a home for 1% commission. That is an awful dicey precedent to set. Sellers all over the country might get the idea that any broker should be able to list any home in any city for 1%. That is definitely NOT how the real estate industry grew to $60 billion. Bravo to Redfin for letting all us home sellers know what is possible.

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But, the Redfin salvo brings up an even more intriguing question: if a listing agent can list a home for a mere 1%, why can’t the buyer’s agent get by on 1%? As a home seller who is customarily expected to pay for the agent who represents my buyer, that is a question I would really like answered.

I think it would be fair to say that once a home is in escrow, both the listing agent and the buyer’s agent work about equally hard. Both have as a primary responsibility, navigating the escrow to a successful closing. They both make lots of phone calls (if they are doing their job) and send lots of documents back and forth. So, what it comes down to is, who works harder before a home gets into escrow?

The full service listing agent has a good deal of work to do to market a home, but it is pretty much a fixed-time effort. Their tasks include doing a CMA (Comparative Market Analysis), taking pictures, creating a flyer, posting information on the MLS, holding an open house, etc. A lot of work to be sure, but not much variability from home to home.

The buyer’s agent’s tasks are much more limited in scope, but with much greater variability. Their workload consist of two major tasks: doing a CMA and driving buyers around showing them homes. How many homes they show depends on the buyer, but we know from research that the average buyer visits ten homes before they find “the one.” If we assume an average showing time of one hour per home, that equates to roughly ten hours of showing time.

As an order of magnitude estimate, I think it is fair to say that a buyer’s agent works about the same number of hours, on average, as a listing agent for a typical home sale. So, if a listing agent can get by on 1%, why are sellers forced to pay 2.5% – 3% to the buyer’s agent? What is the justification? If both the buyer’s agent and seller’s agent do similar things and work a similar number of hours, why is there such a great disparity between the buyer’s agent’s compensation and the seller’s agent’s compensation? What gives?

The next time you go to sell your home, you think about the answer to that question when you cut a check two to three times larger for the buyer’s agent. If it aggravates you, good. That is the beginning of how we change the real estate industry for the better.

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.

Your Real Estate Agent Is Not Your Negotiator—They Are Your Advisor

Experienced real estate agents like to brag about how they are great negotiators. They will tell you that they are negotiating the sale of your home for you and that you want an experienced negotiator on your side. But the truth is, they are not your negotiator, they are your advisor. For better or worse, when it comes to selling your home, you are the negotiator.

negotiateWhen you contract with a real estate agent, you empower them to speak on your behalf. Perhaps that is what real estate agents think about when they tell you they negotiate for you. And there is no doubt that you want an experienced advisor in your corner when negotiating the sale of your home, but the buck stops with you. If selling your home were a corporation, you would be the CEO and your real estate agent would simply be one of your employees. An employee who gives you input to facilitate your decision making process. When it comes to making offers and counter offers, it is your signature on the document, not theirs.

When making critical selling decisions, a good real estate agent will offer suggestion on what they think is the best course of action, based on their experience. Their recommendations are certainly something your should consider—perhaps strongly—when deciding what to do. But you should never follow their advice blindly. They may be experienced, but they are not flawless, and their motivations are sometimes counter to yours. If you disagree with their recommendation, have the strength to stand behind your convictions. It is you that has to live with the consequences of those decisions, not them. So never relinquish the final decision to them. And there should never be a time when your real estate agent makes an offer or agreement with the other party without approval from you first. The good news is that most agents would never do that because it would open them up to a gigantic lawsuit.

So, when you are interviewing an agent to list your home and they boast about their exceptional negotiating prowess, let them crow, but never lose sight of the fact that you are the one in charge, and the final decision rests with you. Do not be afraid to rely on the fact that you know what is in your best interest better than any agent. In the end the best choice is the one that is the best choice for you. Consider every input, but make the best final decision for yourself.

Here is to your informed and empowered home selling.

 

 

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.

What do You Mean You Can’t Tell Me When My Closing Day is?

The day your home officially sells is called the “closing day.” The closing refers to the close of escrow. It is the day you get the money from the sale of your home (ideally via wire transfer so you do not have to wait for the check to clear). It is the day the buyer gets the keys to your former home. But most importantly, it is the day you have to be out of your home (usually by 5:00 pm). In other words, closing day is a really important day. And because it is a such an important day, you might think that somebody would be able to tell you, with some degree of specificity, what the actual closing day is well in advance of said day. But you would be wrong.

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The way the real estate circus works, closing day depends on a lot of factors out of the control of any one responsible party or individual. Consequently, nobody can guarantee you anything when it comes to closing day, especially the date. The challenge, of course, is that most home sellers (and buyers) want to plan their move around the closing date.

When you hire a mover, they want some advanced notice of the move date. And the farther the move, the more notice they tend to want. We are talking weeks, not days. But since you have no idea of your closing date, this puts you reluctantly into the role of fortune teller. But trying to predict the closing date is a very real predicament.

You might think the “safe” approach would be to pick a moving day well in advance of any reasonable closing day, to make certain you are out of your home by then. There is only one problem with this approach: what happens if the home falls out of escrow (which happens all the time)? Now you have moved all of your furniture out of your home, BUT you still live there, you still own it AND you still have to sell it.

The bottom line is you cannot wait to plan your move day until you know your closing day, but you also do not want to move out too soon either. What to do? There are two possibilities.

First, when negotiating with the buyer you can try specifying an escrow period. Most home sellers specify a not-to-exceed escrow date by stating something like “escrow period to be forty (40) days or sooner.” Rather than that, try stating something like “escrow period to be between thirty five (35) and forty (40) days.” The buyer may object, but it does not hurt to ask. If they do agree, you can just arrange for the movers on day 35. And the good news is, with most movers, you can re-schedule (or cancel) with as little as 7 days notice.

The other approach is to just ignore the closing day, pick a (reasonable) move date and book the mover for that day. This approach works best if you first reach out to the buyer and see if they would be okay with that date. Keep in mind, the buyer, just like you, has no idea when they get to move into their new home.

If you pick the move date before knowing the closing day, two things can happen. Either the closing day will be a few days after your move date, in which case everything works out perfect. If, on the other hand, the closing day is before your move date, you just “rent’ back your home from the buyer for those few days. And, this approach does not cost you anything extra if you do not own the home you are selling free and clear. Because whether you pay your mortgage or the buyer’s mortgage, you have to pay to live in your home until you move out.

Selling a home and moving can be a stressful time, but you can lower the stress by taking control. Do not let the unpredictability of the situation throw you into chaos. You take control by dictating the situation and then doing what is necessary to make it happen.

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 I Saved $1,250 in 60 Minutes When Selling My Home

When you sell your home, one of the standard operating procedures is that your buyer will hire a licensed home inspector to inspect your home. And believe me, they will find a long list of things that are wrong.

calculatorIt does not matter how perfect your home, they will find a litany of problems. Why is that? Because that is what they are paid to do. The more problems they find, they better and more competent they appear to be to the buyer. Not only that, not listing a problem opens them up to a potential law suit. When it comes to inspecting a home, inspectors err on the side of caution: they list everything—even the minor items.

Of course, as the seller, this has no impact on you until the buyer comes back to you with a list of requested repairs. That is when you, as they seller, need to get to work.

First of all, no matter what the buyer request that you repair, you never offer to fix anything. If you do, you open yourself up to the possibility that the buyer will not be satisfied with “your” repair, and a whole slew of problems could ensue. Instead, what intelligent home sellers do, is offer cash to the buyer that they can use to make their own repairs. But how much to offer?

When I went to sell my home, the buyer requested $2,500 repair credit, and included the list of items he intended to fix with that amount of money. Seems reasonable enough, but was the dollar amount fair?

The first thing I did was go through the list and combined the repair items into three categories: electrical, plumbing and roof. Then I identified the major expenses in each list. And finally, I called an electrical contractor, a plumber and a roofer.

I told each service supplier that I was in escrow and needed a verbal estimate for some work to be done. They did not know that I had no intention of using them, so each one was happy to give me the estimate right over the phone. But as you will soon see, even though I was not going to use them to do repairs, I did give them a referral (which may or may not lead to their getting the business).

It turned out that the estimated total for the work was $1170. So, just to be safe, I rounded up to $1250 (half of the amount requested). I then crafted a written response to the buyer showing his list of requested repairs, the estimated cost for each AND the name, company and phone number of the person who supplied the verbal quote. What could the buyer do? He had to accept it.

Bottom line: The buyer received the money he needed to repair the things he cared about and three service providers got a business referral for the price of a phone call. Oh, and I saved $1,250 for about 60 minutes of work. I think they call that win-win.

 

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.