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
Seller Advice Continued:
© 2001, Ray Wilson
Listing Purpose & Pitfalls
Author's note: This "Reality In Realty" series approaches the subculture of the real estate
industry in terms of the "reality" of the world -- the "real world" --
around it. It is a reality dictated by the world of consumers, not the island
of one set of providers. Ray Wilson's academic discipline as a sociologist
brings light into the shadows of professional subcultures where the few
grasp for control over the many, sometimes in deliberate self interest, sometimes
themselves entrapped in their own island propaganda..
In my last column -- "CMA, No! Appaisal, YES!" -- I advised you to do two distinctly separate things before placing your home on the market.
The first of these was the subject of the last article, blatantly stated in its very title. A "professional estimate" is not an estimate by someone in just any profession, but by one in the value appraisal profession. Not only is real estate sales not the right profession for the job, it is flat-out WRONG for it. If you have not read that article, click here to read it now -- especially if you are under the impression that a listing agent can provide a valid and credible estimate of property value.
- Get a professional estimate of the market value of your property (an appraisal, and only by a qualified appraiser);
- Choose your market method -- full agency, limited agency, non-agency service, or FSBO (For Sale By Owner).
These articles are not about teaching you how to comply with the expectations of real estate professionals. They are to help you define your expectations based on your needs and to help you select the professional who will comply with what you require. Your expectations should most certainly be realistic, and my advice to use a true appraisal (rather than an agent's CMA) to find the market value of your home was all about that.
Your appraised value of course leads to your asking price whiich is only one of several expectations to define before you select the method and hire professional services. To be sure, you may not know much about the real estate sales process, but you should know what you want to get out of that process, i.e., your desired "outcomes." Likewise, it is not too difficult to assess with some guidance what outcomes others -- including agents -- might have in their minds. That gives you a fighting chance at spotting the pitfalls in hiring the wrong agent, and the appropriate warning signs. Thus, there are three general things you really should know about before you talk to any agent.
- the market value of your property ('nuff said on this);
- your desired performance outcomes (not what the pros will do, but what you will get from what they do);
- pitfalls & warning signs
There are five outcomes you should not only "expect," but demand that an agent work for on your behalf:
- maximized income to you;
- minimum time frame;
- the most favorable terms;
- minimum liability;
- minimum inconvenience and discomfort.
Fundamental to all five is that the agent works to insure that they actually do occur. You probably do not need a professional to put a "For Sale" sign on your lawn, or an ad in the paper, or even to add your property to a web data base. Not one of those tasks requires a talented sales person, let alone one competent to act (and price themselves) as an "agent." A buyer will come along sooner or later, and your lawyer can process the paper work. You should expect more than that when you hire a salesperson, particularly a high-priced salesperson. He/she should be an expert in the real estate market dynamics and not just the mechanical process of property transfer. It is not unreasonable for you to expect him/her to get out and aggressively sell and not to settle for being an order taker.
You want a sales agent, not an order taker. This is not to say that you want a hustler who will fast talk buyers into something wrong for them. However, a real salesperson can get things done that the average seller cannot do for him/herself. A professional salesperson will move quickly and conscientiously to address specific sales tasks through both personal buyer contact and through other professionals:
- get your house to the attention of buyers who it should be right for,
- stimulate price-maximizing competition, and
- encourage the highest price offer from any and all qualified buyers before they find and bid on some competing property.
The aforesaid need to hire "a sales agent, not an order taker" sets the framework. The first potential problem area is avoiding order-takers, and there are at least three levels of order takers, going from bad to worse (discussed below as Pitfalls #1 - #3). The second problem area involves hiring what you do need, a "sales agent," and we'll cover that in Pitfalls #4 - #5 in the next article in this series.
Pitfall #1: Listing your home with an Order-Taker.
Both the above performance outcomes and sales tasks are plain common sense. Virtually every firm and licensee seeking to list your home will say this is just what they do. Beware the order takers in salespersons' clothing! Master wordsmith, attorney, California EBA par excellence, and IRED contributor Leo Rodriguez sums up the approach of all too many alleged salesfolk with:
"You want some fries with that house?"
Some Order-Takers are simply sales wannabees who just don't have what it takes to be in sales. The turnover rate among real estate licensees is very high precisely because many endure all the training, testing, and expense to become licensees only to discover they are not suited to sales. So if you are seriously considering a particular agent because he/she doesn't seem to have the stereotypical aggressive "sales personality," you might want to reconsider whether you'd be paying a sales fee of several thousand dollars for something you can do on your own.
Pitfall #2: Listing your home with a Seller-Capturing Order-Taker.
Note that I just said "some" Order-Takers simply "don't have what it takes." Others not only have what it takes, but are best described as deliberate takers, taking orders from buyers as a specific strategy of taking (fees) from sellers without delivering (sales effort)! To them, a listing contract is simply a legal device capturing you and your checkbook as a revenue source at the eventual sale. The focus is your obligation to pay a commission, rather than their obligation to get out and sell the house. The ugly truth:
Listing and not selling is the most frequently touted path to financial success in the real estate sales industry!
Every real estate professional knows the industry axiom, "He who lists, lasts!" Translated into a personal work strategy, it means to devote time to listing and not selling -- but effective listing requires telling sellers that time is devoted to selling and not listing. The hypocracy and self-service are self-evident. The work "ethic" of far too many so-called salesfolk is all about capturing sellers and not buyers.
Pitfall #3: Listing your home with a Commission-Hogging Seller-Capturing Order-Taker.
These are the listing agents who lock up your commission obligation to them and then provide only a minor share of that commission to the people who really work with the buyer to make your sale actually happen -- i.e., the actual job you want done. Sellers would be wise to view such commission hogging as evidence of deliberate listing opportunism versus a commitment to a timely property sale.
Look at the above sales tasks in the light of modern technology and modern consumerism. Faxes, computers, and the Internet all make it far easier to put the home on the market where buyers can find it. On the other hand, dealing with better educated and more aware buyers in the age of consumerism, consumer protection laws, and a more litigious society is in many ways more complicated. Historically, commissions were split down the middle between listing and selling brokers -- say, 3% to each side from a 6% total commission. Arguably, fairness today would require a larger share to the buyer side.
Incredibly, some firms now offer 2% to cooperating agencies bringing buyers, keeping twice as much (4%) for themselves! That rewards people for capturing you, not for selling your home. It is about serving the firm's cash flow expectations, not meeting your outcome expectations. It not only makes listing far more profitable than selling, but discourages other agencies from bringing buyers -- and that gives more time for an internal (full 6% commission) sale to happen within the firm. It is a deliberately structured delay tactic profiting the listing broker at the seller's expense.
Make sure commission-splitting policy is spelled out in your contract. Don't hire a commission hog. Abruptly terminate any discussion with any firm which says the split is no affair of the seller. Employ only those who respect you as employer. Favor in your consideration any firm which will provide genuine sales motivation through greater shares to agents procuring your ultimate buyer.
Frankly, if there is a truly competitively-priced industry out there, then some listing firms will take only 2% for themselves, provide 4% as sales incentive, advertise it, and gain huge market advantage over other listing firms. Astute seller agencies (the only kind you want working for you) will grasp the legitimate benefit of this strategy for both them and the consumer. Benefit to the CONSUMER??? Now, there's a concept......
PITSTOP. (What else do we call this interruption in the discussion on pitfalls?)
In the next article, I'll write about Pitfalls #4 and #5 in the matter of putting agents and agency to work for you as a seller.
Pitfall #4: Paying A Full Agency Fee for Less than Full Agency.
Regarding #4 -- you can get some idea now by reading the original Reality in Realty series; but here, we'll focus on your interests as a seller. We'll look at why a true sales effort needs full 100-proof agency, at how to identify those who water the stock.
Pitfall #5: Being Used as a Pawn In Direct Opposition to Your Interests.
Regarding #5 -- you have two sets of interests at risk when putting your property in the wrong listing hands. Certain activities at least bordering on collusion and restraint of trade directed against true buyer agents are justified under the cover of working for their seller-principals -- and principals can be held liable for the actions of their agents. Most of these activities do little or nothing to serve your interests, and in fact tend to work against every single one of the above specified outcomes.
Note that I said these people allegedly working "for" you are actually working against two sets of your interests. These are best classified as "pre-sale" and "post-sale." The anti-buyer-agent shenanigans of Listing Lords may inflict collateral damage on sellers, but buyers are in the cross-hairs of their gunsights.
So, what are your plans after you sell your current home?