Two of the biggest mistakes home sellers make when choosing a listing agent are selecting an agent solely based on the two things: the highest list price for your home and the lowest commission.
At first glance, a seller might say, "What? Are you nuts?" because sellers want the highest possible price and to pay the least amount of commission. But those two criteria have very little to do with hiring a competent agent and, in many instances, are completely irrelevant. Let's look at why.
The Highest Suggested List Price
Agents can't tell you how much your home will sell for. That's a fallacy. A listing agent can show you comparable sales, pending sales, and active sales. But YOU choose the sales price, and a buyer will tell you if the price is right. An agent can suggest the list price that will attract a buyer. Where it goes from there is generally left up to the buyer.
To Get the Listing, Some Agents Distort the Truth: Since agents can't guarantee your sales price, the listing agent who suggests the highest price could very well be untruthful. Ask the agent to show you numbers supporting the suggested list price. If the agent has no stats or the home sales are located in a different neighborhood, that could be a red flag.
Look for a Listing Agent Who Gives You a Range: There is often, but not always, a price range. It might be apart $10,000 on the low-end versus the high, or the spread might be greater. Many factors determine the range, among which are location, the temperature of the market, and improvements in the home.
Pricing Is an Art: The best time for an offer is within the first 30 days on the market - 21 days is ideal. If the home is priced right, you'll get an offer. If it's priced too high, you might not get any showings at all; buyers will shun your home, and you'll eventually end up reducing the price, leaving buyers wondering what's wrong with your house.
Should You Choose an Agent-Based on Commission?
Real estate agents are not equal; each is unique. Remember about 10% of the agents do roughly 90 percent of the business. Each has their own marketing techniques and advertising budget. By choosing an agent with a large advertising budget and company dollars to match it, you might gain greater exposure to the largest number of buyers, which is ideal. Reaching greater numbers of buyers equals better chances of a good offer.
Why would an agent willingly work for less than competitors? There is always a reason why a broker or real estate agent would discount a real estate fee. Sometimes it's the only way the agent feels it's possible to compete in a highly competitive business because the agent can't otherwise stand apart from the competition on service, knowledge or negotiation skills.
If the sole benefit an agent brings to a table is a cheap fee, ask yourself why. Is the agent desperate for business or unqualified? Do you want to work with a desperate agent?
Sometimes full-service agents will negotiate a lower commission under special circumstances such as:
You're buying a home and selling a home at the same time, giving both transactions to one agent. I don't give discounts like that*, but some agents will.
You're willing to do all of the legwork, advertising, marketing, and pay for expenses related to the sale.
You promise to refer more business to the agent, which would result in multiple transactions.
You're selling more than one home.
You don't have enough equity to pay a full commission.
The agent accepts you as a pro bono case.
The agent will lose the listing unless she matches a competitor's fee.
The agent wants the signage (exposure to traffic) overcharging a full commission.
If you are interviewing agents who offer similar services and can't decide between them, ask to see a track record of each agent's original list price and final sale numbers. Odds are the lowest-fee agent will show more price reductions and longer DOM. The difference between an agent who charges 5% and 6% is 1%. Ask yourself how you come out ahead if your price ends up reduced 2% because you chose a lower-fee agent who could not afford to market your home actively.
Tip: If your home is located in a hard-to-sell neighborhood, consider an agent with experience selling hard-to-sell homes.
Importance of Agent Marketing
Beyond the expensive car or fancy clothing, a good listing agent lives and dies by marketing. Because marketing sells homes. Ask to review a complete copy of the agent's marketing plan. Precisely, what is the agent going to do to sell your home? Here is the bare-bones minimum you should expect:
Professional signage, including an agent's cell phone number
Daily electronic monitoring of lockbox access
Follow-up reports on buyer showings/feedback to the seller
Incentives for broker/office previews
Digital targeted marketing
Advertising in local newspapers, only if it's warranted
MLS exposure with 36+ professional photographs
Distribution to major websites
Four-color flyers, if warranted
Financing flyers for buyers
Minimum of two open houses, providing its location is a candidate
Direct mail to surrounding neighbors, out-of-area buyers/brokers
Exposure at Board of Realtor meetings
Feedback to sellers on buyer sign calls and buyer showings
Updated CMAs after 30 days
E-mail feeds of new listings that compete
Updates on neighborhood facts, trends, and recent sales
Remember, no single tactic sells homes. It's a combination of all those methods that sell homes.
Characteristics of a Good Listing Agent
You will be in a relationship with your listing agent for a month or two or longer. Choose an agent you like and can relate to. Here are some of the characteristics sellers say they want in an agent:
Experience: Let new agents learn the business on somebody else's dime.
Education: Ask about degrees and certifications.
Honesty: Trust your intuition. Your agent should speak from the heart.
Networking: This is a people business. Some homes sell because agents have contacted other agents.
Negotiation skills: You want an aggressive negotiator, not somebody out to make a quick sale at your expense.
Good communicator: Sellers say communication and availability are key.
Finally, ask for a personal guarantee. If the agent won't guarantee performance and release you from a listing upon request, don't hire that agent.
*The reason top producers who are team leads usually do not offer discounts is that the team leader might not work with buyers. She might assign her seller to a team member for the buying end of the transaction.
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