If the House Isn’t Selling, I Can Always Drop the Price
“DROP the price??!!!” Seriously???
This is not the point of view you want in your listing agent’s mind. Read below on how you, as a home seller, can avoid getting this level of service. I stopped counting the number of agents who’ve told me this… they’re out there … and they could end up being YOUR agent.
SMARTePLANS® are designed to showcase high end luxury real estate, so I frequently make presentations to agents who handle luxury homes (>$1 M). They like the product, they like the results, but then I’ll hear the sentence.
“Why should I pay you to do this … if the house isn’t selling, I can always drop the price, and keep the money I would’ve spent on your marketing program — why pay you?”
And of course at that point, I thank them for their time, because if that is their mindset, they’re not interested in my product (or any marketing product).
So let’s examine how a home seller getting ready to put their home on the market can avoid choosing a listing agent with that frame of mind.
Now, there may be valid reasons to reduce a property’s price. But don’t you want an agent who uses every tool in the toolbox to effectively market the property before they think vaporizing $70,000, $80,000, $90,000 or more of YOUR home owner’s equity is a good idea? If they have a “cut-the-sales-price” mindset as a marketing strategy BEFORE they even put the house on the market — I fail to see how they are going to be successful in marketing your property effectively — and get optimum results FOR YOU. The responsibility lies with you, you need to do your homework. Too many sellers sign the listing agreement without doing enough investigation first.
SO WHAT ARE THINGS YOU CAN DO?
Their Listings ARE Their Resume
Go look at active listings they have online right now. In Houston you can go direct to HAR.com which is our public-facing MLS and the source of all MLS data displayed on broker sites, as well as exported to national sites like Zillow and Trulia, etc. So …go to the SOURCE data .. it is FREE and you do not have to “register” just to view the online inventory. So take a peek at the agent’s listings … are they displayed well? Are they staged? Is professional photography being utilized? Does the property description tell you what you want to know about the property? What tools are being used to distinguish the property from the other listings on MLS? These are the sorts of questions you want to be asking.
Interview More Than One Agent
Interviewing two is good … three is better. You need to interview them not only for their competence and skill, but they should also be a good “fit” … for you — how do you feel working with them? Are they a Realtor© (bound by a code of ethics) or an agent? They will evaluate your property based on recent sales in your neighborhood, commonly called “comps”. That means they COMPARE recent sales in your neighborhood similar to your property to help set YOUR price, based on comparable sales they’ve located.
Well, if 4 homes in your vicinity are used as comps, it can be VERY interesting to hear each agent’s explanation of how they interpreted the (same) data …listen closely. If you only interview one agent you have no basis for comparison, and you’ve just blindly accepted whatever they had to say about the list price for your property, regardless of how they may have arrived at that figure.
Consider The Agent’s Sale Price/List Price Ratio and DOM
Consider this ratio on the agents last 3 to 5 sales. To get the ratio, take the sale price divided by the list price … say the house was listed at $850,000 but the sale price was $795,000; so, $795,000 divided by $850,000 = 94% of the original listing “value” was retained. But wait …. what if the house listed at $ 850,000 only sold for $700,000 … the ratio drops to 82%.
A large part of your listing agents job is to MARKET THE PROPERTY in an optimum manner FOR YOU. If their recent history ratio is < 95%, offer them the opportunity to explain, but it may be an indication of the agents inability to price (several) properties correctly, and they languished on the market.
Also, run the ratio on the comps they are presenting to you. Face it, if they are setting the value of MY house based on comps they found — I want to know everything possible about those comps. Ask about that history, listen to their explanation and analysis. Understand the data they provide; don’t get bamboozled by jargon, this link may be helpful, too: [Link to “Median Price vs. Average Price. What Does Median Mean?”]
DOM = Days On Market
How many days a home sat on the market is also an important fact to know for your comps and also your potential agent’s recent history. There can always be mitigating circumstances … ask questions … listen carefully to how they respond. Listen for specific reasons, ie “the seller did not want to make updates to the Kitchen I recommended” vs. “the market is bad”.
Client Experience Rating
Our MLS allows you to search for agents with CLIENT EXPERIENCE RATINGs. Not all agents participate in this program, but to find one who does….. Go to HAR.com — home page and Select “Find an Agent” and a dialogue box will appear and you can then enter your zip code and put a checkbox next to “ Display Agents With Client Experience Ratings”. After each transaction the experience is rated earning 1 to 5 stars … a third party collects the information and makes it available to you. You can read the data … view the graphs, and also read the hand-written comments submitted by previous clients about their experience with this agent, giving you a very powerful insight into each agent and how they operate.
Marketing — What’s the Plan?
How do they plan on marketing your property? How much money are they spending out-of-pocket, and where is it being used? The money they are “spending” comes out of the commission they anticipate collecting. For a $1.7 million dollar home, if we use a theoretical 6% commission, $102K is being paid out in commissions. That $102K is first split between your listing agent and agent who brings a buyer to the table, so $102K divided by 2 = $51,000. At this point it is also likely that the commission is split in half once again as (historically) many agents split their fees with their own broker. So $51,000 divided by 2 = $25,500 is possibly what your agent is personally pocketing as a commission from this sale.
So why is this important? A SMARTePLAN is .20 per sqft, so the cost for a 3000 sqft house = $600….And that was considered “too expensive” by some agents marketing multi-million dollar homes — they’d rather skip that part, keep the money and if the house stays on the market they “can always drop the price”
So understand HOW much money your agent has budgeted to market your home and WHERE they are spending marketing budget … on staging? On professional photography? On a virtual tour? On a SMARTePLAN? What’s important here is not whether they hire me or not, but that YOU understand their strategy and are absolutely onboard with it. Make sure your concept of marketing expense and marketing execution corresponds with theirs.
Visit A Real Estate Blogging Community
Be a fly on the wall and listen in to real estate agents talking amongst themselves. You can go to www.har.com and tour through their public discussion archives and read the questions /answers people posted, or pose one yourself. Read the opinions and explanations from agents in their own words, giving you insight into how real estate “works” and often how real estate agents think. View what they say to each other – which may be different than what they present to prospective clients in a listing presentation.
The bottom line is do your homework! Spend a little time to find the real estate agent that seems to be right for YOU. It’s your money… your call!
- Biggest Home Seller Mistakes – Read Results of Agent Polling [Jan 23, 2014]
- Top Home Seller Mistakes When Selecting A Realtor – By BIll Gassett, Realtor [Jan 6, 2014]
- Agents: Do You Provide the Seller Receipts of Your Marketing Expenses?
- Why We Need To Drop the Listing Price of Your Home On the Market
- Median Price vs. Average Price — What Does Median Mean?
- Agents Who Use SMARTePLANS