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.

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 Competitive 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 why?

Price

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 who 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 see how ReaListing makes the job a choosing an agent easier, 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.

The Four Secrets to Interviewing Real Estate Agents When Selling Your Home

Real estate agents will tell you, and rightly so, that selling a home is the biggest dollar transaction in which most people will ever engage. And yet few home sellers take the time to find the best real estate agent to sell their home. Studies show that a majority of home sellers list their home with the first agent with which they speak, which is usually a referral. Those are the two biggest mistakes you can make when choosing a listing agent: limit yourself to only referrals and then do not even bother to interview them to see if they are a good fit for you. Never forget, you are entering into a business partnership in which you will spend thousands or tens of thousands of dollars. Your choice of agent is critical.

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I think the reason most sellers do not interview agents is because they do not know how to do it. So, here are four secrets to interviewing agents (that you will never hear from them).

1. Do not conduct the interview at your home. Find a neutral location near your home (I suggest Starbucks). Once a real estate agent gets inside your home it can be difficult to “reject” them. They have no reason to leave and you may have difficulty asking them to leave. At a neutral location, nobody has to ask anybody to leave.

2. Do not have the agent bring a CMA to the interview. Most real estate agents like to bring a CMA (competitive market analysis) to their listing appointment. These help the seller determine a suitable listing price for the home. But having an agent bring one to the interview is a bad idea for several reasons. First of all, it will make you feel a sense of obligation toward them since they have already done some work for you. Second, the agent can bring a CMA with an inflated home price, which could distort your selection decision. And finally, since you have not chosen the agent yet, there is no need for them to work for free.

3. Have a list of ready made questions. You should have a few standard questions to ask every agent you interview. The answers from any one agent are useful, but what is really useful is asking the same questions to multiple agents. Comparing their answers is where the real education takes place. You simply cannot make an informed real estate agent choice by interviewing just one agent.

4. Understand your objective. The objective of interviewing agents is simple: you want to find one whose answers make you feel comfortable. If you interview at least three agents, I assure you that you will one whose answers make you feel more comfortable than the others. Their answers will make sense with you. And their demeanor will resonate with you. And you will have no doubt about which one to choose.

When you are done, thank the agent for their time and give them a commitment when you will let them know of your decision. And you should get back to each agent, whether you chose them or not. And if you really want to be helpful to the agents you did not choose, make it worth their time by telling them, in a kind way, why you did not choose them, so they can improve in that area.  

To learn how ReaListing is changing the way real estate is bought and sold, 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.

You Still Need a Real Estate Agent, But Not for as Much Anymore

It was not too long ago, before the proliferation of the Internet, that the residential real estate industry had a stranglehold on the buying and selling of homes. Buying and selling of homes is about information, and the real estate industry had a monopoly with their Multiple Listing Services (MLS). Anyone who tried to buy or sell a home without the help of a real estate agent was relegated to For Sales signs and local newspapers.

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Back in those “glory” days of residential real estate, a commission structure was established in the industry that required sellers to fork over a percentage of their equity to be able to leverage that information. The price was high—often disproportionate to the service actually delivered, but what choice was there? The industry controlled the information, so they made the rules.

Fast forward to today, circa 2014, and a lot has changed. The information once horded by the real estate industry has been liberated by a plethora of third party websites and information brokers. Home buyers and sellers now have access to the information once only available to real estate agents. And with that information, consumers have been doing a lot of what real estate agents used to do. Consequently, there are many things for which real estate agents are no longer needed.

What kinds of things? How about advertising a home for sale? For free, any home seller can advertise their home for sale on a website like Trulia and Zillow with greater reach than any MLS. MLSs still exist, they are just not as valuable as they used to be. What about buyers? No longer do they have to wait for their agent to “find” them a suitable home. Now buyers tell their agents what homes they want to see. And how about home pricing? Buyers and sellers now know the market price of homes just as well as agents. The CMA (Competitive Market Analysis) will soon become a thing of the past. It is a relic of a bygone era.

The bottom line is, buyers and sellers do not need real estate agents for as much anymore.  As a result, they have formed a new sort of relationship with agents, one that did not exist until very recently. I suppose you could call it “For Sale With Agent” (or To Purchase With Agent). These relationships are more indicative of a partnership than that of a hired hand.

So, if all of this is true, it begs a question: Why hasn’t the commission structure changed? If real estate agents are not needed for as much, why should they continue to make as much (percentage-wise)? The only answer I could come up with is inertia. A body in motion will maintain its heading until something big enough comes along and knocks it off its course.

Home sellers still need real estate agents, but not for as much any more. I suspect it is only a matter of time before sellers realize they do not have to pay them as much any more either.

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.

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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.

The Golden Rule Does not Apply in Real Estate

Ask most people what the Golden Rule is and they will say something along the lines of, “treat others how you would like to be treated.” But, ask a cynic what the Golden Rule is and they will tell you, without hesitation, “That he who has the gold makes the rules.” And throughout history, the “second” Golden Rule has held true most of the time.

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There are, however, exceptions to this other Golden Rule, and one of them is the residential real estate industry. When you, as a home seller, go to sell your home and employ a real estate agent to help you, who has the “gold,” you or the real estate agent? You do. You have the gold—the money—and they are the ones who want the money. But who makes the rules? Who determines what gets paid, how it gets paid and when it gets paid? The real estate agent, the ones without the gold.

I think it is an indication of how overwhelmed most sellers feel about selling their home that they are willing to relinquish their power to make the rules (and a lot of their gold) to real estate agents. You might think that with all the information and services available to home sellers today, from being able to conduct their own Competitive Market Analysis, to being able to post their own home on an MLS for a few hundred bucks, there would be a re-writing of the rules. But just the opposite has occurred. In fact, the percentage of gold that home sellers hand over to real estate agents has gone up in the past few years. Real Trends, a research firm, reports the average commission paid to the buying and selling brokers was 5.4 percent of the price of a home in 2011, up from 5 percent in 2008.

It cannot be for lack of interest on the home seller’s part that the percentage has gone up. I do not know of a single home seller who wishes they could pay more to a realtor to sell their home. Most think they charge too much.

So how does it persist, that in the residential real estate industry, the group without the gold continues to make the rules? It must be a failure of imagination. A failure, on the part of home sellers, to imagine a different set of rules for handing over their gold. Home owners simply cannot imagine any other formula for compensating real estate agents, other than the one the agents carved in granite so many years ago.

Only one question remains: does that antiquated formula persist to infinity, or do home sellers decide it is time to enforce the golden rule?

To see how ReaListing is helping home seller’s re-write the rules, 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.

The Only Effective Way to Negotiate Real Estate Commission

How do you ay less than the “standard” commission to a full service real estate agent and still get them to sell your home? Pre-negotiate.

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Under normal circumstances, a listing agent’s fee is not discussed until the end of the listing presentation. At that time, the agent informs you, the seller, of their commission schedule and it is incumbent upon you to try and negotiate down from there. Good luck. Most sellers are poor negotiators and most real estate agents are very good at defending their commission.

To make matters worse, most sellers use an agent they already know, or a referral from someone they know. Try negotiating with an agent that is a friend or family member. But wait, there are even more challenges.

If you have followed the real estate agent’s standard operating procedure, they will conduct their listing presentation in your home, and, as part of their presentation, they will assemble for you a Competitive Market Analysis (CMA), which is used to help determine the asking price for your home. So, they are in you home and have already done work for you.  The sense of obligation you feel toward the agent for work already done is not an accident. They are at your home for one reason: to get the listing at full commission. If you follow the agent’s standard operating procedure, you are pretty much sunk, as far as reducing their commission.

For better or worse, in the world of real estate sales commission, the person who speaks first, wins. It takes a lot of work to move someone off their initial declaration. That is why, if you, as a seller, want to get a reduced commission, the time to do it is not at the listing presentation, but before the listing presentation. You must make your commission intentions known up front. You must make their conducting a listing presentation predicated on their agreeing to your commission. In other words, they only get to do a listing presentation to sell your home IF they agree to your commission. Otherwise, they are not even allowed in your home. Why waste each other’s time?  They do not have to waste time doing a free CMA and you do not have to waste time trying to figure out how to get them out of your home.

Pre-negotiate or pay too much—that is the lesson. To learn how ReaListing helps you painlessly pre-negotiate lower than standard sales commission to full service real estate agents, 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.