If I Were Selling My Home, This Would Really Piss Me Off

If you have not heard, there is a new real estate service called OpenListings that helps buyers buy homes without paying any commission. But wait, I thought buyers do not pay commission to buy a home, so it is already free. How can a service save a buyer money on something they do not spend money on? You are really going to love this if you are getting ready to sell your home.

Unlike the rest of the planet, it is customary in the US (and Canada) for the seller to pay for the buyer’s agent. I know that does not seem fair. It is like having to pay for the lawyer of the person suing you. In any event, if you want to sell your home and you do not want to bring down the wrath of the entire real estate community, you will offer the customary 3% commission to pay for the buyer’s agent. So, for example, if you intend to sell a $500,000 home, you have to sacrifice $15,000 of your hard-earned equity so that the buyer of your home can receive a free service that benefits only them.

What this clever new company, OpenListings, discovered is that it does not require $15,000 to help a buyer buy a home today. Not with all this new technology stuff like computers, smart phones and the Internet. OpenListings thinks $5,000 is a fair price to pay to help a buyer buy a home. And what does OpenListings intend to do with the other $10,000 you set aside to help the buyer pay for their agent? They are giving it to the buyer. That’s right. Whether you know it or not, without your say so, you just lowered the sale price of your home to $490,000. How does that make you feel?

So, as a home seller, how do you combat this distasteful practice of involuntarily lowering the sale price of your home? The good news, if you are getting ready to sell your home, is that OpenListings is exactly right. Five thousand dollars is a fair price to pay to help a buyer buy a home—even if it is a million dollar home. And therein lies the solution.

When selling your home there is no law that says you have to offer 3% commission to the buyer’s agent. You can offer any amount you want (including offering nothing). And it does not have to be a percentage. You can offer a fixed amount, say for instance, $5,000.

The solution here is a simple: offer only $5,000 for buyer’s broker’s commission and then direct all the buyers to OpenListings (which is only available in California right now). You maybe forced against your will to have to pay for the buyer’s agent, but you sure as hell do not need to give any extra money directly to the buyer. Of course offering “only” $5,000 for the buyer’s commission will severely limit OpenListings ability to attract buyers, since they use the “extra” money as incentive to use their service. But that is their problem not yours.

At a time when everyone from Redfin to OpenListings to Help-U-Sell is screaming that a fair price for a seller to pay for the buyer’s agent is about $5,000, why would any home seller pay more than that? Just say no NO! overpaying for buyer’s agent’s commission. And if you are really courageous, you can just say NO to paying for it altogether. To lean how to be courageous when you sell your home, visit ReaListing.

 

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.

Of What Use is the NAR Code of Ethics?

Realtors like to point out that when you hire a real estate agent to help you buy or sell a home, you shouldn’t just choose a real estate agent, you should pick a Realtor™. What is the difference? Realtors belong to the National Association of Realtors (NAR) and just plain real estate agents do not. And how does membership in NAR benefit buyers and sellers? The best I can tell, only one way: Realtors have a code of ethics.

angel2Go ahead. Ask any Realtor why it is so important to hire a Realtor and not just a real estate agent. Almost without exception they will tell you that they have a code of ethics. Of course a code of ethics is only effective if the people bound by it actually abide by it. So, do Realtors abide by their code of ethics? Not so much.

Based on a recent survey of more than 300 real estate agents by Consumer Reports, they found that about 86 percent said they have seen other real estate agents engage in poor business practices. That is code for violate their code of ethics. Of course none of the 300 real estate agents surveyed had ever done that. They were all angels.

What were some of the dirty little secrets agents confessed to? Here are quotes from the article:

“I sometimes steer clients toward houses that will bring me a higher commission, rather than the best house for them.”

“You can’t believe everything I say about myself in my marketing material.”

“I might persuade a client to sell a home for less than it is worth.”

“I might encourage buyers to make an offer that is too high.”

“I sometimes reveal information about the lowest price a seller will take or a potential buyer’s top price.”

“I might not disclose problems with the neighborhood to potential buyers.”

So you hire a Realtor for their expertise and you cannot trust what they tell you. Lovely. So what is the value of the NAR Code of Ethics? There isn’t any. The ONLY way to make sure your Realtor is doing right by you is to be an educated consumer. Everything else is just misdirection. To learn to be a more informed home seller, visit ReaListing.

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 Dare You Let Home Buyers Know What Their Agent Will Make

It was bound to happen. An Internet startup in real estate had the gumption to actually display, in public, for all to see, what commission a buyer’s broker would make representing a buyer for the homes on their website. And the storm that immediately ensued was a thing to behold.

If you have not been following the news, new home selling platform Trelora started publically displaying the buyer’s broker’s commission for homes advertised on their website. And since Trelora gets their information from the local MLS, and since the local MLS forbids such behavior, it took the local MLS all of about 12 milliseconds to blast out their cease and desist letter to Trelora, who reluctantly complied with their wishes by taking down the information.

None of this comes as a surprise to anyone who closely follows the residential real estate industry. Of all the new-age concepts that have escaped adoption by the real estate industry, the concept of transparency is right at the top of the list. We love you home buyers and sellers, we really do, but we do not want you to know a damn thing about how we operate, especially how much money we make. We have you in the dark and that is where we prefer you stay.

Still, the behavior of the local MLS, REColorado, raises the obvious question: why is it against MLS rules for a buyer to know how much their broker makes? The buyer is, after all, the one employing them.

Now if the buyer is the one actually paying for their broker—which does happen on rare occasions—how can they do so without knowing what the broker intends to charge. On the other hand, if the seller is paying for the buyer’s broker—which is more common—why do they care?

One reason why they care is because if the buyer knows how much money the seller is paying for their broker, they may be tempted to want some of that for themselves. But I have another theory why MLSs go out of their way to make sure no one in the general public sees any compensation information: they’re embarrassed. They are embarrassed by how much money they make for the work they do and the last thing they want is to draw attention to that. It is as good an explanation as any.

All this recent fuss is just one more byproduct of the outdated and asinine custom of having the seller pay for the buyer’s agent. If buyers had to actually come up with the cash for the brokers providing them the service, you can be sure of two things. The buyers would know what the brokers were charging, so keeping it off the MLS would be moot. And the brokers would make a hell of a lot less money.

Will sellers ever revolt and insist that buyers start paying for their own services? Not if the real estate industry has any say in the matter. There are too many dollars at stake. If you are getting ready to sell your home and you would like to know how to keep more of those dollars at stake for yourself, visit ReaListing.

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 Worst Reason to Choose a Real Estate Agent

Of all the mistakes home sellers make when choosing a real estate agent to sell their home, this is probably the biggest.

As most home sellers know, when working with a real estate agent to sell their home, one of the first things the agent does is to assemble a Comparative Market Analysis (CMA) for the home seller. The CMA includes the prices of recently sold homes in the area, prices of currently for sale homes in the area, and maybe even prices of homes that failed to sell recently in the neighborhood. The idea is to use this information to come up with an asking price for the seller’s home. But who determines that price…and how?

Deciphering a CMA is a lot like reading tea leaves. Because pricing a home is not an exact science, you can pretty much see any number you want in it (and justify it). When employed correctly, the CMA is used by the seller and agent together to strategize about an asking price for the home. When employed incorrectly, it is used by the real estate agent to get the listing. The agent “gets” the listing by reading the tea leaves and promising the seller that they can sell their home for more than any other agent. And that is the worst reason for choosing one agent over another.

The reality is that agents have no idea what you home will sell for. All the can do is help you enact strategies to ensure you get the highest price possible, within a certain time frame, given the current market conditions. So, choosing an agent who promises you the highest sale price based on the CMA is choosing the agent who is the biggest liar. But do not blame the agents for this. There are two parties that encourage this behavior.

First, the real estate industry is complicit in this behavior. It has established, as standard operating procedure, that the CMA be done before the agent has secured the listing. This only encourages the agent to use your CMA as their marketing tool. A better way to operate would be to first choose the agent and then, after the seller has “hired” them, conduct a now-unbiased interpretation of the tea leaves. But it is not just the industry that is at fault.

Sellers themselves are just as much to blame for this behavior. They either do not know any better, or just want to believe the lie. I liken to those who lose money in a Ponzi scheme. Deep down they know it is not true, but they want so much to make that money that the suspend judgment and common sense.

If you really want to know what you home will fetch, I suggest you pay for a professional appraisal. That is the number the bank lending the money to the buyer is going to use, and you will have a hard time getting much more than that unless you can get a bidding war for you home between cash buyers.

Next time you are interviewing a real estate agent to list your home, don’t ask them what they think your home is worth. Ask them how they will go about getting you the highest possible price for your home. The realtor that answers that question the best is the one who should get the listing.

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.