Ray Wilson, author of Bought, Not Sold, brings academic discipline and field experience to expose consumers to the reality of the realty industry.
Reality inReality in
1. "When An 'Agent' is not an Agent"
2. "Is You Is, Or Is You ain't, My Agent?"
3. "The Dating Game"
4. "States of Confusion"
Realty 2001 1. Career Advice
1.1 "Don't Quit Your Day Job"
2. Seller Advice
2.1 "Appraiser, Yes! CMA, No!"
2.2 "Listing Purpose & Pitfalls #1, 2, & 3"
2.3 "Listing Pitfalls #4 & 5"
3. Buyer Advice
3.1 "EBA, EBA, EBA"
3.2 "Promises, Promises, Promises..."
3.3 "You! You! You!"
3.1 "The 'Big Grab' versus the Big Dope"
3.2 "If not revolution, then evolution""
1. "Making Magic in Chicago"
2. "No Sign of Reform in NAR Leaders"
3. "The Wrong in the Percentage Commission"
Reality In Realty 2001:
Basic Advice to Sellers:
© 2001, Ray Wilson
Appraiser, Yes! CMA, No!
Editor's note: Ray Wilson's original and popular IRED
"Reality In Realty" series viewed the subculture of the real estate
industry in terms of the "reality" of the world -- the "real world" --
around it. Reality is dictated by the world of consumers, not the island
of one set of providers. Ray's academic discipline as a sociologist
focuses the light of that external reality on the mischief of the few who
profit by control over the many -- and who want to keep it that way.
series exposed industry acrobatics in the redefinition of both
"agency" and the history of the industry's recently abandoned fidelity to
true agency. Now, in 2001, Ray's articles continue to be a reality check,
holding industry behavior before the mirror of real world common sense.
The refreshing perspective of Reality In Realty has simply continued,
evident in recent career advice to those considering real estate careers,
and in the current and planned pieces of advice to both sellers and
buyers. It makes sense to regroup his 2001 work under the ongoing column
heading of "Reality In Realty 2001" and to anticipate that viewers
will be watching the IRED homepage for each new appearance.
You would be wise to do two things, two
distinctly separate things, before placing your home on the market.
- Get a professional estimate of the market value of your
- Choose your market method -- full agency, limited agency,
non-agency service, or FSBO (For Sale By
The separation of these two elements
is so important, that I am taking my own advice. I am separating out
discussion of #2 from any further discussion here. It will be the subject
of my next column. Staying now with #1, you would be most unwise,
(given the information in this column) to proceed with the traditonal
approach of letting your agent (or licensees seeking to be your "agent")
so much as suggest a market value.
"Nothing so delays the sale of a property as the owner's
inflated view of the value, and nothing so speeds up a sale and
guarantees a loss as the owner's underestimation of property value. And
nothing in the traditional listing process is so unreliable and
untrustworthy as the estimate of value placed on it by someone with a
vested interest in the value -- i.e., specifically an agent who wants to
list it, use it to attract buyers for other properties, and sell it for
(Bought, Not Sold, pages 289-290)
You certainly want the person who can get you the
highest price for your home. That unavoidable fact is the main reason (of
many) that estimating the "gettable" price must be removed as a
factor in the agent's pitch to list your home. Agents cannot effectively
compete for a listing while saying they will get a lower price than a
competitor who might either be unscrupulous or simply not know any better.
The truth is that agents generally do not "know better" than
professionals whose profession actually is appraising value. Oddly enough,
these people are called "appraisers" and they will be far better trained
in that task than a salesperson.
By definition, value is not a function of what you want or need, but of
what the market will pay, and even relatively ethical licensees can
convince themselves that an "ungettable" price can be "got." Moreover,
other factors come into play:
- An underpriced home will sell very fast with little effort or
expense, bringing the firm a quick and tidy profit
- An overpriced home -- say, a $200,000 home listed for
$250,000 -- will still draw in $250,000 buyers and profit for the firm
from sale of properties other than yours.
- At any price which fails to get your listing, the firm will
get no profit whatsoever.
As I wrote in the above Bought, Not Sold quote, the wrong price
can cost you big time. On the other hand, getting the right price might
not cost you anything at all. Before the final transaction, an appraisal
will almost certainly be required by a lender or a smart buyer, for no one
who knows better will put any value on your agent's "CMA" (Comparative
Market Analysis). You, however, can put value on it and to your
advantage. When the agent makes the CMA part of his/her pitch -- implying
it is worth an appraisal -- then simply give it that value. Tell the agent
you have already paid for an appraisal, and subtract it from the
commission you will agree to pay for the services you really need -- i.e.,
getting out and selling your house (a real issue in the choice of
agent, to be covered in my next column).
The cost of an appraisal will be paid, and in different places
or as a result of negotiation, it can fall on the buyer or seller -- but
that really means on both! When the buyer pays, that influences the
offering price downward. A seller with a bank-acceptable appraisal
already done can use it to influence price upward. An independent
appraisal with a credible market price not only eliminates the need for
the agent's CMA effort, but makes the whole sales effort that much easier
and quicker (though not as quick as underpricing).
Everyone gains from an accurate estimate of value -- but it is
important to remember that usually only the seller loses when the
estimate is wrong. Buyers learn market value quickly from their shopping
around and simply don't offer on overpriced houses. They snatch
underpriced homes with the oblivious sellers never seeing their loss. The
cost to the seller of the time delay until an overpriced home finally
drops to real value is about 10% per month of the net after-sale
return. It is all preventable with an appraisal.
There is one more benefit to sellers -- one that makes a convenient
segue to the coming column on choosing your agent (or non-agent). Once
you've gone through the professional appraisal on your house and know its
comparative value -- you are in a much better position to judge the
comparative value of those who are competing for your business. You will
know what you've got; but let them talk about it, giving them all
the rope they need to either hang themselves or tie up the deal. You and
your agent will both gain in a relationship where you can trust in having
made an informed