Avoid Problem Realtors
Facts About The Real Estate Business That Most Realtors Don’t Want You To Know
This is more likely to read like a Dennis Miller rant than any real estate marketing material you’ve glossed over previously.
The purpose of this report is to provide the nuts and bolts of how this business works and what it takes to get a home sold. Unfortunately, there are a lot of knuckleheads in this business who give the few good ones a bad name. The perception of Realtors is often two steps above a used car salesman. A large part of this problem is due to the fact that the barriers to entry into this business are relatively low. By that, I mean that if you don’t have a criminal record, you’ve had a semester or two of college, you take 4-5 classes and a state test - “poof” you’re a licensed agent. I’ve actually had calls from agents who can’t seem to construct a sentence in English and, somehow, they’ve passed the state test.
Where do I get my basis for my opinions and views? I’ve been in the business since 2001 and have helped over 1000 families. I am a third generation Realtor and have seen and heard most everything at one point or other.
The first thing you need to realize when you put your home on the market is that, although it is your home, it’s a house to anyone else. It’s a product that is worth $X. The sooner you realize that, the better off you’ll be. You don’t determine the value. Your listing agent doesn’t determine the value. The BUYER AND APPRAISER will determine value.
I have heard a number of reasons from sellers when I ask the question, “Can you tell me why you think your home hasn’t sold?” Here are the most common responses:
Expired, Cancelled and Withdrawn Sellers:
1) Realtors who show it just don’t know how to sell.
Fact: Buyer Agents who show your home do not care if they sell your home. They could care less about selling the buyer your particular home. They care about finding a house that the buyer(s) like, that will likely appraise, and that will pay them at least 3% commission. Think about the last time you purchased a house. Did the agent talk you into buying it? Chances are that you would have fired the agent if they pushed you toward a particular home. You know what you want in a house, don’t you? The Buyer’s Agent represents the buyer and will be comparing amenities, lot location, and other details from your house to others in the market. There are a lot of sellers out there right now and, as a result, buyers are able to be more selective about what they buy and how much they pay for it. As a general rule, if you’re not seeing around two showings per week, you have a problem with your price – hint: and I don’t mean it’s too low. If you see around 30 people come through the house, but no offer is generated, there is something about the presentation of the house that is turning the buyer off.
2) My Realtor (listing agent) isn’t doing anything (marketing).
Fact: Most of the time, they are doing some sort of marketing; you just don’t get daily updates as to what they’re doing to market it. Over time, these efforts may fade because their budget for your home or ideas for marketing it may fade. Additionally, since most agents do not sell many properties each year, their knowledge of what is or is not effective is sketchy, at best. If glossy brochures, open houses, Realtor Luncheons and other relatively useless exercises worked, you’d see more agents doing them. Since 94% of the time another agent is going to bring the buyer for your house, having it on MLS AT THE RIGHT PRICE will generate the offer in a reasonable amount of time. Call or e-mail for market data to determine what “reasonable” is in your area.
3) The recent sales in the area were sellers just dumping their properties at prices that were too low and we’re just not going to do that.
Fact: There is no conspiracy to dump property at bargain basement prices in your neighborhood. I recently had a seller in McKinney who was convinced he “stole” the house he purchased 4 years ago from the previous seller. He put it on the market about 10% higher than he should have. The reality was that he didn’t “steal” anything. He paid market price for a home that backed to a busy road and had the entrance to the subdivision on the west side of his home. Exterior lot prices do not fetch the same price/ft as interior lot prices. His opinion was that others in the neighborhood were just dumping their property and he wasn’t going to compete in this type of market.
For Sale By Owners
I have heard a number of reasons from sellers when I ask the question, “Why are you choosing not to use an agent to help you sell your home?” Here are the most common responses:
1) I don’t want to pay all that commission.
Fact: Homes sold by owner consistently sell for significantly less than homes listed by agents. Is this because all agents are outstanding negotiators? Not likely. Put yourself in the buyer’s position. If you, as a buyer, are going to buy directly from a home seller, aren’t you going to immediately deduct 6% from the estimated market value or asking price of the property since the seller will not have to pay a real estate company? Ironically, most FSBOs ask significantly more than market value when they try to sell their home on their own. Most FSBOs will pay an agent 3% to bring a buyer to them. Note: It is imperative to offer at least 3% to the buyer’s broker or your showing traffic will suffer. Some agents will offer to list your house for a total of 3% and only offer 1.5% to the buyer broker. Then, when the traffic doesn’t meet your needs, they say, “Well, we can bump the buyer broker commission to 3% and see if that helps.” All of the sudden you’re at a 4.5% listing! My team always offers 3% to the buyer broker and converts a lot of FSBOs since the full service package is only $1000 more than they’re already willing to pay (3%). 96% of FSBOs end up listing with some company since a sign and newspaper ad isn’t going to make it happen.
2) I’ve had a previous bad experience with a Realtor.
Fact: Me too… and I’m a Realtor! The truth is that every company in the world is going to have great people, good people, and people who are just ignorant. Real estate brokerages are no different. Almost every real estate brokerage is set up so that agents are independent contractors. This is essentially a nice way of saying we’re all independent business people paying a bunch of money to use a specific company logo on our advertising.
3) I don’t have enough equity in the house to afford to pay a Realtor.
Fact: This is impacting many sellers right now. I am able to help mitigate that problem with our discounted listing program. You’re essentially forced by market drivers to offer 3% to the buyer’s broker, but I can save you up to 3% on the listing side of the transaction.
The DFW Market
The market is not as bad as CA, MI, FL, AZ or some of the other areas of the country. One reason for this is that we have not enjoyed the double digit appreciation rates for a number of years, and as a result, we have not seen a market correction in our area. We have two problems facing us right now. 1) Local media gets their Associated Press national real estate feed and simply regurgitates it to us rather than doing their own research on the local market. 2) Buyers, after hearing the national news about real estate, think they should be able to steal whatever they like. When I list a home, I take steps to proactively mitigate the second issue. I recently listed a house and the homeowner in McKinney thought that the market was down 10-15%. Actually, McKinney’s values are only down 1% from last year. Homes are taking about 35 days longer to sell, but the prices are holding firm. For details about your specific city, e-mail me with a request.
Realtors
1) 80%+ of newly licensed agents will wash out of the business within the first year. Yes, that’s about the same longevity as a fry cook at Arby’s. It is your job as a seller to ask how long AND how much annual volume the Realtor closes. Did you know over 65% of agents are part time? There are a lot of Realtors that will talk about their 20+ years of experience and never divulge that they sell 3-4 houses each year. Also, if they’ve been in the business for more than 20 years, they aren’t required to take continuing education classes. You want someone who is up to speed on current Texas Real Estate Commission rules and laws.
2) The listing agent will find their own buyer 6% of the time, per the National Association of Realtors (NAR). i.e. 94% of the time another agent will find the buyer. Every agent who has been out of school for 15 minutes knows this. What can you glean from this fact? You must be on MLS and you must be priced competitively. That being said, I do provide a lot of other marketing to try to increase our probability of finding a buyer before my competitors beat me to the punch. At the end of the day, you don’t care who brings the buyer as long as it gets sold. I’m essentially in a foot race to find a buyer before someone else.
3) Most Realtors understand (and are taught) that sellers want to hear “Your home sold fast and for the most money.” The length of time on the market is directly related to how much you ask for the house. This is Economics 101. Supply and demand curve type of discussion – and there is no way around that fact. Every house will sell at some price. Determining and accepting that price is the hard part. Make sure you look at the comparables, including associated photos of the properties, and honestly compare what you have to offer with other SOLD properties. Once in a while, we’ll see some foreclosures show up in the comparables. Don’t compare or base your pricing on those, unless yours happens to look like a foreclosure or is about to be one. Don’t compare your house to others that are listed and base your list price per foot on those. Many of those will likely expire or come off the market. Focus on SOLD per foot pricing and adjust your list price per foot 1.5-2% above your expected sale price. If you talk to an agent and they’re talking about list/ft pricing that is out of line with what you see on the comparables, then they’re simply pandering to get the listing. These agents then spend the next 6 months beating you up to drop price every few weeks.
4) Many of those who stay in the business resort to gimmicks to get you to call or e-mail. Here are a few of the most common we see on mailers, billboards, and web sites.
“Your home sold in XX days or we’ll sell it for free!”
These listings typically force you to price your home below market price, yet charge 6-7% commission. The listing periods are often about 30 days longer than the guaranteed deadline (i.e. the listing agent only has 30 days of exposure to be required to sell it for free).
“Your home sold in XX days or we’ll buy it!”
These listings typically charge 6-7% and force you to price your home below market with scheduled price reductions between the list date and the guaranteed sale date. The Realtor buy out price is typically 80-85% of market price since the agent will deduct 6-7% commission, three months holding costs, repair costs, closing costs to acquire, closing costs when they sell it, etc. If you’re considering one of these Realtors, ask them to provide a closing statement from the last house they actually purchased from a seller. Most of these listing agents use this as a method to get a foot in your door.
“Up to $XX bonus when buying and/or selling through us.”
These bonus programs are based on the sale price of the house you sell or buy and are generally about 2% of the sale price. The listing commission (typically 6-7%) funds a type of investment vehicle that pays you a bonus three years after the closing date IF you have completed all the rebate paperwork in the allotted 5-7 days. Much like rebate programs on appliances, all your “T’s” must be crossed and “I’s” dotted perfectly. We offered this to our clients previously, but they indicated they would simply prefer a discount today.
5) Most charge 6%+ to sell your home and spend a lot of time hyping why their whiz bang marketing will make the difference. Most of the time, the glossy brochures and other marketing efforts employed (see section below) are simply an attempt to justify the 3% listing commission. If 94% of the time another agent is going to bring the buyer, what does that tell you about the effectiveness of these marketing methods? 84% of people now start their shopping on-line. Where do you think most of the marketing budget should be spent?
6) The average Realtor spends $175 marketing each house they list. Scary, isn’t it? Most agents have resigned themselves to putting it in the MLS and waiting for an agent to supply the buyer so they can collect their 3% listing fee. After all, the statistics aren’t in their favor to find a buyer before one of the other 19,000+ DFW area Realtors do. By offering our $1000 listing, we have effectively removed the profitability from the listing side of the transaction and that forces us to rush to find the buyer. This is specifically why we offer to sell a buyer’s old house for FREE if they buy your house through my team. Basically, it all comes down to getting a “deal”. As a seller, you want to feel like you get a deal and NET more at closing. The buyers are no different. They want to feel like they get a deal when they buy your house. My willingness to sacrifice commission when I’m listing your home or finding a buyer for it, allows everyone feels like they got a deal, without causing the seller to feel the financial pain at the closing table.
Typical Realtor Marketing And Their Effectiveness’
Open Houses - Per the National Association of Realtors, less than 1% of homes are sold through an open house. Agents typically hold houses open if they’re starving for buyers or if the seller is bugging them to do one because the house hasn’t sold or generated any significant traffic. Newsflash – an open house will not overcome pricing that is out of line.
Realtor Open Houses, Luncheons or Tours - These are extended versions of the open house for the public but focused on Realtors. I’ve tried these in the past. I’ve organized multiple broker agent luncheons where we served appetizers at the first house, lunch at mine and dessert and a $100 drawing at the last house. Each house was in the same neighborhood and I always made sure the other two houses were different brokerages than mine (to encourage their offices to attend). I put out sign up sheets for the agents. I did these for over a year – almost every week. NOT ONCE did one of the agents who came to eat my food bring me a buyer. The reason? Generally, the agents who are producing are not spending each weekday in 2-3 hour luncheons. They’re out there – selling property!
The Real Estate Book, Harmon Homes, and other paper publications - These are dated mediums. The deadline to get into books coming out at the end of any given month is about 25 days prior to the publication date. More and more, buyers are moving to the Internet to get more up to date listings. In fact, I’ve heard the sales representatives pitch the publications to Realtors as “great listing tools” because they know agents know that buyers generally don’t come from the books, but sellers like to see their home in color magazines. I have advertised with full color pages in both publications and, when I received my copy, it would take me 10 minutes to find my page. At the time, there were roughly 100 double sided pages. Each page had 8-10 or more listings. Yes, that’s over 1800 houses that are organized how? By city? By price? By size? No, no and no. They’re organized by Realtor. Talk about making a buyer crazy. Going on-line for more up to date data and searchable by any number of criteria is preferred by everyone.
“I’m The Neighborhood Expert” - This is actually being taught by a well known brokerage in DFW. The gimmick is that an agent mails a post card to a specific neighborhood every 25-30 days for 6-12 months with the recurring theme that they’re the neighborhood expert. In the business, this recurring mailing to a specific neighborhood is called farming. I’ve run into this when talking to sellers twice in the last 6 weeks. Both times, I pulled the neighborhood statistics and discovered that, not only were they NOT the neighborhood expert, they hadn’t sold anything in the neighborhood in the last year or more! But, let’s set that aside as possibly two anomalies. Any time I have ever known a neighborhood to have a dominant Realtor who lists a bunch of property in that area; I’ve pulled the statistics in MLS and found that they almost NEVER bring the buyer to the transaction. Some other agent from some other brokerage has simply performed a MLS search and stumbled across the property using criteria provided by the buyer. If that’s what happens, then where is the value in paying the “expert” a full 3% on the listing side of the transaction? There isn’t.
“Our Brokerage Specializes in Relocation” - So what? Let’s say they get 20 relocation referrals per month moving to the DFW area. What do you think the agent will do? They’re going to gather the buyer’s purchase requirements (price, bedrooms, size, area, etc) exactly as they would for any other buyer. They will then go to the MLS and search that set of criteria. So, how does this help you as a seller? It doesn’t.
What Matters?
OK – so unless you were raised in a German family too, this may all seem pretty harsh. The intent wasn’t to scare you away from selling or to convince you every Realtor besides me is a simpleton. There are a number of good Realtors in the area and I love when one of them brings me an offer on one of my listings. They’re a pleasure to work with and I know I don’t have to worry about their competence. The goal in this document is to help you navigate through some of the marketing hype you hear from some agents. Although there are a lot of marketing methods I’ve tried and dislike, there are a few key methods that are working very effectively for me. If/when we meet, I will review them in detail. My team has the knowledge, methods and experience to get your home sold.
After all the dust settles, your home will sell at market price. Realtors and buyers find your home by searching the MLS and its various affiliates. Other than being on MLS at the correct price, having a Realtor with the ethics and experience to handle your negotiations and subsequent transaction in an efficient and professional manner is critical to a successful transaction. I, and my team, help people on a daily basis and we do it in an efficient and cost effective manner.
Please don’t hesitate to call or e-mail if you have questions, would like a free market analysis, or would like to get your home sold with a higher net to you than other agents can provide.
Each of the sellers below used our programs.
Proof is in the pudding - 2X out with us, both times sold within 2 weeks and with a better net to us than any other Realtor out there. Bryan is professional, seasoned, aggressive (in a good way), and gets results fast. If you list - we recommend him highly.” ~ Ron R.
“I wish we had known about this program before we spent the money with BuyOwner.com! We were very pleased with how quickly and professionally the marketing pieces and on-line advertising were completed. His team made selling our house a bit less stressful...” ~Toby and Bonnie Dalton
“I would like to take an opportunity to let you know how much my wife and I enjoyed working with Bryan Waser on several recent transactions. His level of professionalism and follow-up etiquette are impeccable. We have referred one listing to Bryan already and will continue to do so in the future.” ~ John Caren
“Thanks for all your assistance. Everything went very smoothly. You did more than some full commission brokers I have had in the past. Believe me; I have been spreading the word about your agency.” ~ Todd Frerichs