Unforgettable Quotes From the Intelligent Home Seller

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You could not create the real estate industry from scratch as it is practiced today. Nobody would stand for it. And yet it persists.

There is a little secret in the industry that everyone knows but nobody talks about: there are too many real estate agents.

Much of the reason why home sellers pay too much to sell their home is that the real estate industry has convinced them it is so difficult to do.

Real estate agents learn early on to use half-truths and outright lies to convince you that paying their hefty commission is the best thing you can do.

If you can find a way to get a dollar for every time you hear the line “You get what you pay for,” you may not need to sell your home.

There is no reason why anyone should pay $20,000 or $30,000 or $40,000 to sell their home. Not with today’s technology.

Just because you need help selling your home does not mean you want to get ripped off.

The proportion of home equity a seller is expected to sacrifice to sell their home is way out of line with the service they receive to sell it today.

As long as buyers and sellers remain passive, uninformed and intimidated about the home buying and selling process, the ability of technology to change things will be severely limited.

How do you feel about splitting the equity in your home with an agent when you spent twenty years paying the mortgage and they spend 20 hours helping you sell it?

The history of the real estate industry is littered with the dead carcasses of companies that tried to solve this problem.

Only in the wacky world of real estate can eliminating consumer choice be spun as a benefit for consumers.

Dual agency is often branded and marketed to naïve consumers, by the large, national brokerage firms, as a thing of value.

 

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 One Interview Question No Realtor Wants to Answer

Talk to any Realtor and they will tell you that you should interview several of them before you hire one to sell your home. And then they will suggest some interview questions to ask such as 1) how long have you been in the business?, 2) are you full time? and 3) how many homes did you sell last year? The problem with these questions is their answers do not tell you what you really want to know before you hire them: is the Realtor truly on your side?

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What good does it do to hire a full time Realtor, with many years of experience selling a lot of homes, if those years were spent not representing the best interests of their clients?

Most home sellers naively assume that Realtors automatically represent their best interests, but that is not always true. It is not that Realtors don’t want to represent a seller’s best interests, it is just that the way the real estate industry is structured, they are frequently put in a position of having to choose between the best interests of their client and their own best interest.

Unlike most other business transactions, in real estate there are two middlemen: the buyer’s agent and the seller’s agent. And for a transaction to complete successfully, these two middlemen have to cooperate. Consequently, there is a great incentive for agents to get along with one another.

The relationship you have with a Realtor may last 30 to 60 days. Their relationship with the other Realtors in the area will last years or decades. In this strange circumstance, Realtors are more interested in making other Realtors happy than making home sellers happy, because they have to deal with them a lot longer. But what you want is a Realtor that cares more about you than other Realtors.

In the US it is customary for the seller to pay a 3% commission to the buyer’s agent. Of course in a hot seller’s market there is no reason to do so. A smart home seller will offer less, sometimes a lot less, because the demand for their home is so great. The problem is that offering less than customary commission to the buyer’s agent will make them mad, and by proxy, make your agent mad, unless of course they are truly on your side. And that brings us to our question.

So, here is the question to ask to see if your agent cares more about you or more about their relationship with other Realtors:

If I told you that I intend to offer less-than-customary commission to the buyer’s broker, would you 1) support me 100% or 2) try to convince me it is not in my best interest?

The answer to that question will tell you all you need to know about whose side your Realtor is on. If they try to convince you that it is not in your best interest what they are really saying is they care more about not making other agents mad than how much of your hard-earned equity you get to keep. Is that really the attitude of an agent you want to hire? One that comes right out and admits that do not care about you? You would be better off selling your own home. At least that way the person selling your home would care about you.

Unfortunately, you may not get a single agent to respond that they will support you 100%. But if you do, they are probably a keeper. In the meantime, most home sellers will continue to ask pointless interview questions in their search for a Realtor they can trust. But not you.

 

 

 

 

 

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.

New Research Confirms Realtors Systematically Violate Their Fiduciary Duties – Hurting Buyers and Sellers

A survey by Google found that 67% of Americans do not trust real estate agents. Now, new research conducted by the National Bureau of Economic Research confirms they may be justified in their belief not to trust them.

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How impressive was this research? It was conducted by PhDs from Cornell, MIT and the Wharton School of Business. And the National Bureau of Economic Research is one of the most respected think tanks in the US. And what did the research discover about Realtor behavior?

Properties listed with lower commission rates experience less favorable transaction outcomes: they are 5% less likely to sell and take 12% longer to sell. These adverse outcomes reflect decreased willingness of buyers’ agents to intermediate low commission properties (steering) rather than heterogeneous seller preferences or reduced effort of listing agents. While all agents and offices prefer properties with high commissions, firms and agents with large market shares purchase a disproportionately small fraction of low commission properties. The negative outcomes for low commissions provide empirical support for regulatory concerns that steering reinforces the uniformity of commissions

Our findings provide empirical support for regulators’ long-standing concern of steering behavior contributing to the lack of variation in commission rates, despite consumers’ increased access to information and lower search costs due to the internet.

Compared to other industrialized countries, commission fees in the United States are high. For example, commission rates average less than 2% in the United Kingdom and the Netherlands, compared to the typical rates of 5% and 6% in the United States (Delcoure and Miller, 2002). As highlighted by our model, unbundling commissions has the potential to eliminate steering and reduce commission fees.

Why are real estate commissions still so high in spite of all the new information freely available and an oversupply of Realtors? Because buyer’s agents punish sellers who try to save on commission by keeping their buyers from buying the home until the seller increases their commission to the acceptable rate. In other words, extortion.

Sellers get ripped off because they are forced to pay the extorted rate and buyers get ripped off because they do not get honest representation from their agent. That’s a problem.

And what is the solution these really smart people suggest to combat this problem? The same thing I have been screaming about for two years: stop expecting the seller to pay for the buyer’s agent. What I call Problem One in my book The Intelligent Home Seller.

Unbundling of commissions (making the buyer pay for their own agent) makes 90% of the problems in the real estate industry go away. Unfortunately for Realtors, it will probably make 90% of the Realtors go away. What we know from countries like Australia, where sellers do not pay for buyer’s agents, is that there are almost no buyer’s agents. And without buyer’s agents (and their steering buyers away from low commission homes), there will be tremendous downward price pressure on Realtor listing fees. The average commission would most likely fall from around 6% to less than 2%, instantly turning a $60 billion industry into a $20 billion industry and wiping out a lot of Realtors in the process.

I think it is fair to expect NAR (The National Association of Realtors) and their team of high-priced lobbyists to be out in full force to oppose any legislation that even hints at unbundling of Realtor commissions. After all, what’s more important, serving the interests of 85 million home owners or maintaining the revenue from a million dues-paying members? Fight on NAR.

 

 

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.