Real Estate thoughts
A friend asked for advice on selling real estate. I'm no expert, but I thought I would write up some of my thoughts in a blog post for everybody:
- The national average commission is 5%, though agents always ask for 6%. Do you want to do worse than average?
- Of course, home prices have soared far beyond inflation, but the realtor cut remains the same. This is the power of the realtor monopoly, which many have tried to break. Someday somebody will. I think Google could do it.
- A good realtor will usually get you 6% more than you will get on your own, which is how they justify their price. But that doesn't mean a realtor couldn't get you that same bump for far less if the market were more competitive.
- Except in hot seller's markets, open houses are not to sell your house. They are so the agent (or one of their associates) can meet new buyers, and try to sell them any house, not just yours. In hot markets, houses really do sell via the open house. (Also see below.)
A great story. A broker calls his agents in for a meeting. He asks them, "You're listing a house and you've gotten one of the buyers you represent interested in it. Who are you working for?"
One agent says, "The seller is the one you have a contract with, work for him.
Another agent says, "The buyer is the one who decides to make the offer. Work for her."
A third agent says, "Actually, the law in this state requires that you try as hard as you can to represent the interests of both.
The broker listens and then growls at them, "You're all wrong! You're working for me!"
- In other words, the agent is working at making a sale happen. I've never met a seller's agent who would not quickly betray their seller to make a sale happen. By "betray their seller" I mean tell the prospective buyer information the seller would normally never reveal, such that they will take less. Some would argue (validly) in some cases that this is in the seller's interest too.
- More often than you think, houses end up selling to friends and neighbours. A friend just listed a house and ended up with competing bids from the neighbour 2 doors down and another a few more doors down. People often love the chance to get a bigger house in the same location -- no need to reclocate kids, learn new area etc. You need a neighbourhood that people love of course.
- Because of that, consider doing one week of basic "for sale by owner" marketing to let neighbours and friends know you are selling. You will get swarmed by realtors wanting your listing, which is OK if you want them to compete over you. Otherwise tell them you've already picked the broker you will list with if the FSBO doesn't work
- You may still want an agent to handle your FSBO. There are agencies that do all the non-marketing part of real estate transactions for much lower fees, or you can talk a traditional agent into do it for far less as well.
- As an alternate, ask for a clause in your contract that says if the house sells to a neighbour or to somebody in your circle of friends, the commission is much less. In general the commission should be much less if your agent also represents the buyer, which would typically be the case here. Threaten to do FSBO (and give the agent nothing) if they won't accept this clause.
- Zillow is really cool and useful.