TO HIRE – OR NOT TO HIRE – A REAL ESTATE AGENT.
Posted by New Home Resource on October 21, 2015 in
(Or: How To Lose Money By Not Hiring One to Sell Your Home)
Everyone loves “a deal.” In fact, if you’re like most people, finding a great deal on a product or service doesn’t only save money, it just plain makes you feel good. You were smart enough to know where to look, you put in the time to do the research – so you should feel good, because these days we all need to spend our money wisely.
Which means it’s only natural that for any big-ticket expenses, people are going to look around for the best price. But unlike a discount on a new appliance or a smokin’ price on an airline ticket, when it comes to real estate there’s more to take into consideration than simply the commission rate you pay an agent. Or for that matter, you may even wonder if you need to hire an agent at all.
We hear that a lot, actually. And to be truthful, we completely understand the motivation. The mere fact that you are about to sell your home means you’re dealing with big numbers. So it only makes sense to ask questions about the value you’re receiving for those fees.
If you’re like most homeowners, you’ve probably got more than a few more questions on your mind about the benefits of hiring an agent vs. doing it yourself. But whether you decide to work with a Realtor or not, it’s only smart to have all the information in order to make an informed decision. In our experience, many sellers don’t stop to consider some of the following points – and as a result, it can end up costing them money.
1. “Why should I pay an agent’s commission at all?
Naturally, this is a common question. So common, in fact, that studies have been done to see how transactions fare when handled with and without a real estate professional. The results show that when an agent is not used – transactions typically net the seller between 10-20% less cash when it’s all said and done. What does that mean? That working with an agent to list your home will generally pay for itself – and then some.
Part of why that happens is explained below. But it’s not only a matter of counting the actual net proceeds at closing. There are many other ‘intangibles’ that sellers need to consider if they’re going to forge ahead on their own.
2. “What, really, does an agent do for me – that I can’t do myself?”
Great question! Without an agent , here’s what happens:
• Sellers need to determine the value of their home in the current marketplace and neighborhood. Contrary to what people think, it isn’t simply a matter of getting a “Zestimate” on Zillow. For one thing, the estimates calculated by Zillow are created by mathematical formula. That means they don’t take into account the specifics of your property – such as upgraded items, water features, cul-de-sacs, and other potentially desirable features that set your home apart from the competition. Independent research has shown that Zillow estimates can range from 8-20% off actual market pricing. For a $200,000 home, that can mean an incorrect valuation between $16,000-$40,000. (Can you see that money leaving your net profit already?)
On the other hand, not only does a real estate professional have access to Multiple Listing Service (MLS) historical data and proprietary information gathering systems – they also know the area, and in many cases, are even familiar with the specific homes that you will be competing with for a buyer. Providing a detailed analysis of what has sold and is for sale in your specific area is part of an agent’s service – and allows you to ensure your property is priced right, seen often, and gets the best results.
• Sellers need to market their home themselves. Without the mainstream access of the MLS, sellers must spend time and money on advertising and getting the word out that their home is for sale at all. Whether it’s through newspapers, online ads, flyers, direct mail to Realtors – it takes a lot of effort to make your single home noticed in a busy real estate environment. Taking photos, putting up signage – it’s a lot of work; and worse, without a network it might net you only minor results. At best, sellers are able to make a small local part of the market know their home is for sale. At worst, it means that having a much smaller pool of potential buyers limits the offers and opportunities for a speedy sale at the best possible price.
Of course, this is all in addition to the time it takes you, as the seller, to maintain your property in ‘show-ready’ condition at all times. There may be repairs to be made, or even just the day-to-day maintenance of living in a home and trying to make it as welcoming as possible to potential buyers by keeping it clean and clutter-free. (Many sellers consider that a full-time job in itself!)
On the other hand, a professional agent not only has an internal network of support and services that takes care of creating both an online and print identity for your listing – but your home gets marketed to all the other agents in the area. You know – the ones who are representing real, pre-qualified buyers. The combined reach of the MLS and the broker’s own marketing programs mean that once your home is listed, the word is OUT.
• Sellers need to handle the paperwork, contracts, and documentation on their own. That can be a scary proposition if you’re not familiar with the laws concerning real estate transactions. Failure to provide information or contractually cover all your bases can not only result in failing to close the deal – but can involve potential legal ramifications via lawsuits and costly settlements – both now or even years down the road. And all for an oversight you simply weren’t aware of.
On the other hand, real estate agents know the law. And a good one not only knows what is required to meet its demanding specifications, but also knows how to anticipate and head off potential problems – simply by the scale of their experience.
• Sellers may still be working with a buyer’s agent, even if they’re going the “For Sale By Owner” route. If you think about it, here’s what that means: You’re going to pay the buyer’s agent to protect the buyer’s interests – but you’re not willing to pay a seller’s agent to protect yours. Ouch.
On the other hand, having an experienced agent on your side, who knows the market, often knows the other agents, knows the business, and follows-through – can give you a considerable leg up in negotiating a deal more beneficial to you.
• But even if you’re not going to agree to a buyer’s agent fee, there’s another drawback. (And just so you’re aware – that’s how most FSBO listings start, by saying “No real estate commissions paid!” But due to lack of activity, it doesn’t take long for sellers to agree to pay the buyer’s agent commission just to get people to see the property).
The drawback we’re talking about? You need to screen potential buyers. Are they financially capable of completing the purchase? Are there any mortgage lender requirements they cannot overcome? You’ll have to do the footwork, make the phone calls, and ask the ‘uncomfortable’ questions about their personal situation so that you can protect your own position. Believe it or not, people will make an offer, you’ll take the property off the market, and only discover weeks or even months later that they may have to sell their own home first, or they don’t have the ability to get a mortgage loan at all. So the closing never happens. And in the meantime, you’ve lost the chance to sell to a truly qualified buyer.
On the other hand, (are you sensing a pattern here?) your agent knows the dance. They set the conditions, they follow up to make sure they’re met, they talk with the escrow and mortgage companies to keep on top of every single requirement the buyer has agreed to. That means problems are discovered and dealt with quickly – and all on your behalf, because your agent is working for you.
Buying a home is an emotional investment, not only a financial decision. And for that reason alone, it is critical that every step in the process is properly handled – the first time around.
Why is that so important? Because perception matters when it comes to real estate. The length of time a home has been on the market, whether the listing price has changed and why, if it has gone into and then fallen out of escrow – all these facts and many others will collectively play a role in the success of your sales efforts.
If it’s all done right, the property is considered “hot” and “in demand.” If not – as in the case of a failed FSBO effort that is ultimately then listed with an agent for sale – it can give potential buyers the perception that there’s something wrong with your home. And quite frankly – with all the other homes available for sale – it’s not worth the risk to them of finding out.
Much like people – a home doesn’t get a second chance to make a great first impression. If your goal is to sell at the right price in a reasonable time frame, a decision not to hire a real estate professional can be a very costly one, indeed.
New Home Resource helps current and future homeowners with all of their Las Vegas real estate needs. Whether your preference is for a newly-built home from a local builder, or a resale property in just the right location, a New Home Resource Realtor® is here to find the perfect property for you. Please contact a New Home Resource Realtor® today at 702-365-1000 or at www.newhomeresource.com. Broker Joanna Piette, and agents Denise Moreno Thrasher, Jessica O’Brien, Evelyn ‘Beng’ Kern, Lance Partin and Kathy Paterniti are all here to help!