LennySellsHomes: The Blog
Why use a Realtor; I can get online as well as anyone
We've all see pros and cons on using a Realtor to help you buy or sell a home. Depending upon whether you are buying or listing there are different arguments to be made on both sides. So let me start with a true story of a guy who insisted he did not need a Realtor on either side of his most recent transactions:
We'll call my friend Dick. Now Dick is a bright guy, good family man and all-around regular kind of person. Dick runs his own small and successful Internet optimization business. This man is clearly very comfortable getting around on the Internet. Dick lived for about 20 years in an affluent suburb in the Mid-Atlantic states. Dick knows himself and knows that once he makes a decision he will act on it pretty quickly. He wanted to list his home but even Dick knew that a FSBO would limit his exposure; even if he paid the various fees to get it listed on MLS; even if he came up with a way to make the home available at reasonable hours. So Dick searched for a discount broker. He found an agent who took his listing at a significantly reduced commission.
Amazingly, the house was under contract with a back-up in 2 days. Even more amazingly, the contract that was accepted was $21,000 above list. I felt a bit burned that Dick didn't ask me to work with him. Later he explained that since I was relatively new and I worked for a very large brokerage, he assumed I wouldn't be allowed to discount. He was right and he was wrong. As an independent agent I can set whatever fee I care to (that's the right part), however I would not have worked at that steep a discount. I would have run a CMA that would have let Dick know that he priced his house at least $40,000 below the market. His discount schlock agent compared Dick's house to the three homes that sold in his neighborhood in the past six months. One was a similar home with no upgrades and improvements on a small lot, the other two were a short sale and a foreclosure. Not too far away was a similar development that didn't happen to have any foreclosed/short homes and the prices were in fact significantly higher. The 2 points Dick saved on his commission netted him $15,000. The low sales price on his home cost $20-25,000.
Of course when it came to the buy side Dick was much smarter...or so I hoped he'd be. Well, no such luck. Dick moved in much closer to the heart off the city. He found a super luxury townhouse himself. Since he did all the searching, Dick figured all he needed a Realtor for was to unlock the door and print up a contract. Certainly that was not worth the full commission that the seller was ready to pay. So Dick searched for an agent who gives a rebate. He liked the business models out there that offered to rebate about half of the buyer's commission. In a nutshell, Dick got back a huge rebate on his $1.2 million home. He also was the only person in that subdivision to pay full list price out of 11 homes sold in the past 12 months. A good Realtor might have been able to run a few stats that would have showed that the average home in that subdivision sold at 93% of list. It would have shown that no home sold for more than 99% of list. That Realtor might have been able to show Dick that in this particular, high-end neighborhood, sellers are building in a negotiating cushion of between 2-10 %. At just the average discount, Dick could have saved about $77,000 That would have put him $58,000 ahead of where he ended up.
Of course that story is just the tip of the iceberg. In reality, most people who aren't as Internet savvy as Dick do a better job of negotiation. Dick seemed able to find himself discount agents who gave him severely discounted service. For most home buyers and sellers our task is to let them know how hard we are going to work for them and to articulate the things we will do.
At the very least it is incumbent upon us to let clients know that in this online age we live, the hard part of a real estate transaction isn't finding the home. It's sorting through the hype and finding the home that truly fits the clients' needs while simultaneously making sure that a contract is formed that will go through to settlement and produce the best net result for the client whether they are a buyer or seller.
As Realtors we need to be teachers first. Most people just don't know enough about real estate to make truly informed decisions without a professional teaching them what they need to know. In the many years I spent as a school teacher and administrator I always introduced the Francis Bacon quote "Knowledge is Power" to my students early in our relationship. I do the same thing with real estate clients. I explain to them that my job should be to provide you with the tools and knowledge they need to make a decision about buying and selling. Your job as the client, should be to make the very best decision for your situation. I provide the knowledge necessary to make these tough decisions. I deserve to get a pay-day for that work.
A diligent Realtor will be able to run the numbers on a given home and show the client, through a thorough CMA, see that a given home should be worth X. Arming the client with the knowledge of what the home is truly worth is the most valuable thing an agent can do. That kind of research takes time and knowledge.
When you have a client who is insisting on deep discounts, have some challenging examples prepared to let the client see what they will be up against. Let them know that the most difficult part of buying or selling a home isn't finding the buyer/seller combo. It's making sure that a contract will make it to settlement. First and foremost a Realtor must value his service.
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