21,500 Reasons Why I Would Rather Sell a Home in the United Kingdom

For those that do not know, buying and selling homes in the UK is very different than in the US. tower of londonWhat are some of the major differences? In the UK…

• There are no Multiple Listing Services (MLS)
• There is no buyer agency
• Real estate agents are employees, not independent contractors
• There is no professional licensing for real estate agents

No MLS and no buyer’s agents? How could anyone ever sell a home there? To quote the article Is the U.S. Model Defensible vs. the UK Model?

“England, after all, has been buying and selling homes long before the Massachusetts Bay Colony was established. And in contemporary times, we hear nothing about homes languishing on the market in Ye Olde England because there are no buyer agents to guide buyers to this home or that home.”

No professional licensing? Now you have gone too far. Real estate agents must be professionally licensed, right? Like somehow the four hour test that real estate agents take in the US qualifies as some significant barrier to entry. As things turn out, the UK has that figured too. The really important things in a real estate transaction, like paperwork and the closing process, are handled by lawyers, as they should be.

Oh, there is one other difference in the UK model. Commission rates average about 1.5%, rather than the 5%-6% sellers pay in the US. That equates to a savings of $21,500 on a $500,000 home, which prompts the author of the article to ask the following fantastic question: What is the American homeowner getting for that additional $21,500 in cost?

There is no way to know, but “it feels like a stretch to suggest that comparable homes are selling for $20K more in the US vs. the UK simply because the American REALTOR has access to a database. More importantly, however, there’s preciously little evidence that these employee-agents in the UK are failing to put forth the effort for the homeowner.”

So, in the UK, home owners pocket a lot more money, real estate agents get a salary and home buyers have figured out ways to find homes without the help of a buyer’s agent. (They must have since the average sale price for a single family home in Central London in 2014 was just under $2.4 million). So, what’s the problem?

The problem is that Keller Williams is Getting Ready to Ruin the United Kingdom by trying to convince them that the US model is better. That everyone would be better served with 6% commissions and real estate agents running around working for free all day. But if I were Keller Williams, I would be more worried about the UK model coming to the US.

To quote the article one last time:

“If selling a home in the U.S. costs $20K more than it does in the UK, there has got to be real value being delivered to the seller. As the world gets more and more interconnected, what works in one country is quite likely to migrate over to another. If British homeowners are getting great service from employee agents who do not cooperate with buyer agents, then American homeowners are likely to start asking just what it is that they get for paying a whole lot more.

Enough said. If you do not want to wait for the UK model to come to the US, check out The Intelligent Home Seller.

 

 

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.

I Have Seen the Future of Real Estate and the Future is…

Quill Realty. This company gets it. This is how all brokerages will function in the future. It is just a matter of time. Regrettably they are only available in Seattle right now. If I were selling a home there it is the only company I would consider using.

What is Quill doing that is so unique? They are actually pulling out of their local MLS (Multiple Listing Service), which is unheard of today. And why are they doing that when every other brokerage in the country belongs to an MLS? Because Quill understands that today MLSs exist ONLY to serve real estate brokers, and do almost nothing to help home sellers. And apparently Quill has this crazy notion that they want to serve home sellers more than they want to serve other brokers.

But you cannot sell a home without listing it on the MLS. Of course you can. When buyers shop for homes they do not go to the MLS to search for them, they go to Zillow or Trulia or Reatlor.com. And while it is true that those sites get their listings from the MLSs, anyone, including real estate brokers (like Quill), can send their listing directly to these sites and bypass the MLSs altogether. And that is exactly what Quill intends to do. And why do they want to do that? To save home sellers money. A lot of money.

When you list a home on the MLS you are expected to pay the cooperating broker. That is a fancy way of saying the seller has to pay for the buyer’s agent, a practice which is unfair to both buyers and sellers. By not using the MLS, Quill’s clients can forgo paying the 2.5% to 3% commission to the buyer’s agent.

By leveraging technology and NOT using the MLS, Quill will charge their home sellers just a 1% commission. That will save home sellers $25,000 on the sale of a 500,000 home (compared to the customary 6% commission). I would think that might get home sellers excited.

Naturally the other brokers in the area will be none too happy with this and will try to keep their buyers away from Quill’s home sellers, but with buyers seeing the homes on the Internet, it will be very difficult to do, and Quill knows that. A properly priced home in a seller’s market is going to get purchased, no matter how little the seller pays to the cooperating broker. Kudos to Quill for recognizing that AND doing something about it.

This is the future of real estate: listing brokers charging home sellers a fair price and home buyers paying for their own agents, if they feel they need one. I have seen the future of real estate and the future is…

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.

For Sale by Zillow – I Love it!

For Sale by Zillow refers to an article (paid) on Inman News last week that describes something called The Zillow Effect.

In the article, the author explains how his aunt, a busy professional, wanting to sell her home quickly, bypassed the entire real estate industrial complex and managed to seller her home in three days for over asking price. No real estate agent. No For Sale sign. No 6% commission. And how did she pull of such a feat: Zillow.

Maybe you think she needed a professional home stager and photographer to take beautiful pictures to find a buyer. No such hassle. She simply used the photos that were still there from the last time the home sold. Maybe you think she needed a professional appraiser to help her set the asking price. Nope. She just used the value Zillow suggested (called a Zestimate). She used the existing photos, updated the description, used the Zillow recommended asking price and flipped the status switch to “Active.” Three days, above asking price, no commission. And what did Zillow charge her for her trouble: NOTHING.

The article goes on to explain the home that sold was in Portland, which is a particularly hot real estate market right now. That makes perfect sense. In a hot real estate market homes practically sell themselves, which begs the obvious question: why would anyone pay a real estate agent 6% commission in a hot market when you can pay Zillow nothing?

The article also speculates that “she probably would have gotten more for her property had she listed with an agent.” I am not sure that is true.

In an article published in 2008 by the National Bureau of Economic Research entitled Do Real Estate Brokers Add Value When Listing Services Are Unbundled, what the researchers found was that other than the benefit of access to the MLS, “a seller’s use of a broker reduces the selling price of the typical home by 5.9 – 7.7 percent, which indicates that agency costs exceed the advantages of brokers’ knowledge and expertise by a wide margin.”

In simpler terms, what that research finds is that other than the benefit of using the MLS to advertise a home for sale, real estate brokerage services costs more than they are worth. All that expertise results in a LOWER selling price. In other words, not only did she save the 6% commission, she most likely sold her home for MORE than what she would have with brokerage representation.

What is Zillow but the modern day version of the MLS. It enables home sellers to advertise a home for sale to buyers. And if the only true benefit of hiring a brokerage to sell a home is access to an advertising platform, and sellers no longer need that platform to advertise their home for sale, do they really need the brokerage services at all anymore?

Buyers and sellers can find each other today for free, without the MLS and without a real estate brokerage. It is only a matter of time before home sellers realize that the 6% brokerages are just not worth the money—especially when using them results in a lower sales price.

Home sellers can find their own buyers and come to an agreement on price without help from anyone today. What they need are transactions managers: real estate professionals, who work on an hourly rate, and make sure the transaction goes smoothly. Who will be the first one to fulfill this latent market need? You better hurry. It soon may be the only position available in an industry that is in desperate need of change.

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.

Someone Agrees With Me About the Future of the MLS

Having just written the article Do the MLSs Need to Exist Anymore? ten days ago, I was delighted, and a little surprised, by the article that just appeared on Inman: The sun is setting on the era of the MLS. Make a note that there are now at least two people who believe the days are numbered for the MLS.

Creed Smith, the article’s author, summed up things succinctly with the article’s subtitle: Buyer’s don’t need it, so why would the seller? That is the question that would scare the heck out of me if I were in the industry.

MLSs have always facilitated broker-to-broker cooperation, but when the MLSs were first created, they also benefited buyers and sellers. In the absence of anything else, a central repository for home information was an excellent way for sellers to get the word out that their home was for sale and it was an excellent way for prospective buyers to find out about it.

Unfortunately for the industry, buyers and sellers no longer need the “central repository” feature offered by the MLS because they have Zillow and Trulia and Redfin and… The MLS still facilitates broker-to-broker cooperation, but at what cost?

Once enough home sellers figure out that they do not need the MLS to attract buyers, they will cut it out of the home marketing process completely and solicit brokerage services only after they have attracted buyers. What will be left for the brokerages at that point is transaction management. That is still a very important part of the home selling process, it is just not 6% important. It is more like $3,000 important. And the more expensive the home, the faster you can expect sellers to adopt this approach.

How much longer can we expect the MLS to be around? After all, something that is paid for by someone who does not need it cannot expect to survive forever. It is difficult to answer that question because at the end of the day it depends on sellers believing they no longer need it. And that depends entirely on home sellers. If you are a home seller who believes they no longer need the MLS to attract buyers, visit ReaListing to find out how.

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.

Do the MLSs Need to Exist Anymore?

Ask 100 real estate agents and 100 will answer that question yes. That is because MLSs exist to serve agents, not buyers and sellers. But what if you posed that question to a home seller? The chances are they do not know the answer to that question, and more importantly, they do not care. They just want to sell their home.

But wait, you cannot possibly sell a home without putting on the MLS, right? Oh yeah, ask any real estate agent who has ever done a pocket listing if that is true. The frightening truth for the real estate industry is that the MLSs are no longer needed to market homes for sale. Buyers do not go to the “MLS” to find homes to buy. They go to Zillow and Trulia and Redfin and Realtor.com and Homes.com and… The MLSs exist primarily as a channel of communications between brokers and agents. How does that benefit sellers? It doesn’t.

Now it is true that all those websites mentioned above get their information either directly or indirectly from the MLSs. But that is just an artifact of a bygone era. When you market a home today, you take photos, a description and a price and upload it to a web server. That web server could belong to an MLS, or it could just as easily belong to Zillow. Every buyer who uses Zillow to search for homes—and that is a big number—will see the home either way. The MLS is just a relay point in a communication link.

If you want to sell your home today and you take some beautiful photographs, figure out an entice asking price and post it to Zillow directly (which is free), buyers will see it, they will want to view it and they will want to buy it. And all of that will happen outside the confines of the MLS. So, again I ask: Do MLSs need to exist anymore?

In a hot seller’s market it is not uncommon to hear about a lot of pocket listings. Sellers are few and far between while buyers are easy to find. And a pocket listing is the fasted route to the double dip. Clearly agents have no problem “bypassing” the MLS when buyers are easy to find so they can get both commissions. That poses an interesting dilemma: If agents can keep it off the MLS to get both commissions, then sellers can keep it off the MLS to SAVE both commissions. You have to ask yourself of what use is a real estate agent in marketing a home when their primary benefit is access to the MLS and they do not use it to market the home?

Even at a time when there is talk about creating a nation-wide MLS, it would not surprise me to see the MLSs begin to slowly fade away. The only thing keeping that from happening is buyer and seller education, and that is about to get a big shot in the arm. Stay tuned.

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 Best Use for “Coming Soon” – Doing Away With Agents

The “Coming Soon” feature is all the rage. Ever since Zillow announced the feature, all I see now are Coming Soon notices on top of For Sale signs in my neighborhood.

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If you are not aware, last year Zillow announced a new feature available on its website called Coming Soon. This allows homes to be pre-advertised for sale, before they can actually be purchased.

In theory this is a good idea. It can help build excitement for a home soon to come on the market, as well as provide an opportunity for the home seller to get feedback on their asking price without spending any days on the market. If you are getting ready to price your home too high, it would be nice to know before you actually listed it. The problem is that Coming Soon has nothing to do with building excitement or getting pricing feedback. Coming Soon is about pocket listings. Coming Soon is about dual agency. Coming Soon is about double ending.

Most home sellers are too naïve to understand the subtle trick the real estate industry is playing on them with the Coming Soon feature. Most probably think it is a good idea, but nothing could be further from the truth.

Imagine you are a home buyer and you see a Coming Soon home that you are excited about. You want to get in to see it. You want to make an offer. But you can’t. The only thing you can do is contact the listing agent. And that is the key to the scam.

The listing agent gets to identify interested buyers WITHOUT having to put the home up for sale. And if they can identify enough interested buyers, they can convince their seller there is no need to list the home on the MLS because they already have a buyer for them. And if they can keep it off the MLS, then they can keep the buyer’s agent’s commission too. And while most home sellers would view keeping it off the MLS as a good thing, most home sellers also do not realize that they probably just got screwed out of several thousand dollars. Any marketing approach that limits a home’s exposure (e.g., pocket listing) tends to limit its sale price.

It got me to thinking. If an agent can identify buyers without actually putting a home up for sale, so too can the home seller. It is simply a matter of taking some nice photos, writing a description, coming up with an asking price and posting it to Zillow (which is free). Then, when an interested buyer calls, rather than speaking to the agent, they will be speaking to the seller. And if the seller can find a buyer interested in paying the asking price, then they truly can keep it off the MLS, and thereby save the entire agent commission altogether. All they would need is a few hours of a real estate attorney to help with the paperwork. Now that is a good use of Coming Soon.

To learn how to make sure Coming Soon works for you and not against you, visit ReaLising. ReaListing helps home sellers keep more of their hard-earned equity.

 

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.