HOW SOME HOME SELLERS FORCE AGENTS TO DECEIVE THEM!
by Neil Jenman
Before telling you how so many home sellers lose thousands of dollars, please consider two very important questions:
Here is the first question. As a home-seller, what is more important to you: the time an agent takes to sell your home or the price the agent gets for your home? Most people would choose ‘price’. Now, the second question. When you get the price that you want for your home, how would you prefer to be paid: slow or fast? Most people would choose fast.
So, the two main reasons you employ an agent to sell your home is first, to get you the best price and second, to get your money in the fastest period of time.
But here’s where things so often go terribly wrong and where so many agents literally feel forced to deceive home-sellers.
DECIDING TO SELL
Picture the scenario: A couple decide to sell their home. They speak to a few agents and choose one they trust. The agent places the home for sale for, say, $500,000. The agent then goes back to the office and, assuming the agent is competent, the first thing such an agent will do is go through the buyers who have enquired to the agent in the past few months looking for a home. This could amount to hundreds of buyers the agent has to sift through.
Presto! The agent finds a prospective buyer whose ‘wish list’ matches the home that has just been placed for sale.
The next day the agent shows the home to these prospective buyers. They love it. The agent, being highly skilled in negotiation, persuades the buyers to pay an extra $40,000.
The next day the agent visits the sellers and says, “Good news, not only have I got you the price you want, I have got you an extra $40,000 giving you a total selling price of $540,000.”
The sellers are delighted. Why wouldn’t they be? They have sold their home in less than a week for a massive $40,000 more than they expected.
THE SELLERS GET SUSPICIOUS
But then the home sellers get suspicious. Two thoughts enter their mind – first, the home sold very quickly, so maybe it was too cheap. And, second, the agent’s fee – $21,600 being four per cent of the purchase price, well, that’s a lot of money for less than a week’s work.
So, here’s what often happens: The sellers say they want more money for their home or they want to pay the agent less. Or both.
No matter how much the agent tries to ‘reason’ with some sellers, they won’t budge. They now want to increase their selling price to $550,000 and they want to pay the agent no more than two per cent; after all, that’s what many other agents charge. Why should this agent get paid double, they think?
THE AGENT’S SKILL AT NEGOTIATING
The agent’s skill has literally scored the sellers an extra $40,000 which, even after allowing for the agent’s fee of $21,600, effectively puts the sellers ahead by $18,400 – given that they will receive a net figure of $518,400.
Had the sellers chosen one of the other agents, sure they might have paid two per cent – being half the percentage charged by their agent – but the other agent would have sold the home for, at best, $500,000 (probably less) and charged $10,000 (being the two per cent).
So, in effect, here is the reality: Their ‘four per cent agent’ got a price of $518,400 net and the ‘two per cent agent’, at best, got $490,000 net – yes, repeat: a difference of $28,400.
The “cheaper” agent is, effectively, far more expensive – $28,400 more expensive!
Now, here is a third question home sellers should ask. Which is more important to you: The percentage you pay the agent or the net price for your home? Of course, all sellers say the net price is most important.
But what about the time it took the agent to sell their home? Surely $21,600 seems an exorbitant sum for less than a week’s work?
Well, on the surface maybe. But consider what the agent has actually done and then consider the alternative that happens in most cases because most agents do not want the sellers thinking they have sold too cheap and the agent is being paid too much.
THE REAL ESTATE AGENT DID WHAT THE HOME SELLERS WANTED – AND MORE!
Go back to the first two questions about what sellers want in an agent and you’ll understand, instantly, that the agent who sells your home fast and for a top price has done exactly what you wanted. Got you a lot of money and very quickly
When a home is fresh to the market, buyers will often pay extra to get in before other buyers. But when a home has been on the market for a few weeks – even as little as a month – it often elicits comments and questions such as, “Why hasn’t it sold?” “There must be something wrong with it.”
THE BEST PRICE IS OFTEN FAST
Anyone who knows much about real estate knows the following truth: The longer a home is on the market, the lower the price it’s likely to sell.
So, fast sales are often sales at the best price.
Agents who sell homes in a few days might seem to be paid a lot for doing a little but, as mentioned earlier, if the agent has got the best price and that money comes to the owner fast, then the agent has done a great job.
Is it right for the sellers to punish an agent for being competent, for doing exactly what the sellers wanted? Hardly.
THE AGENT HAS LIKELY DONE WEEKS OF WORK
To be sure, if an agent happens to locate a buyer in the first day or two of a home being placed for sale, it’s not accurate to say that “the agent has only done two days’ work”. To build a portfolio of ready-and-waiting buyers can take months of diligent record-keeping and follow-up. The buyer who buys your home in two days may have spent weeks with your agent looking at other homes. The agent may also have helped the buyers arrange finance, without which the buyers would not have been able to buy any home.
HOW AGENTS ‘STRING-OUT’ THE SALE TIME
Here is what happens to thousands of home sellers. When agents get a great price for a home in a fast time, they don’t tell the sellers. Rather than risk having sellers cut their fee, the agents deliberately string-out the selling process for several weeks. By then, of course, after a few weeks on the market, most sellers are thoroughly fed-up with strangers looking through their homes – of which many are bargain hunters who make absurdly low offers – the sellers are also alarmed at the huge cost of the advertising on both the internet and the print media. Many agents make an erroneous statement to sellers that persuades them to fork out huge amounts of money on advertising expenses. They say: “You can’t sell a secret,” which, of course, is nonsense. As any skilled negotiator knows, buyers often pay extra to buy a home that has not been “exposed” in the general market.
So, to save themselves from getting forced into a massive discount when they sell homes for a high price in a fast time, agents string-out the sales process and, by doing so, almost always get a much lower price. The agents then get their full commission. It’s scandalous but it happens all the time in real estate.
Many people, especially agents, argue that sellers only have themselves to blame. By refusing the fast, early offer at a good price or by insisting that the agent gives them a discount, agents deliberately sell homes slowly. They deliberately run-up needless advertising costs – and, as all agents know, the major purpose of advertising is not to advertise homes for sale, it’s to advertise the agents – at the sellers’ expense.
The reason that most incompetent agents seldom sell a home fast for a high price, however, is that they don’t even bother to check their current data base of buyers. Indeed, some seldom keep any records of buyers. As all buyers know, it’s almost impossible these days to get a good agent who follows them up when something new comes on the market. Laziness and the desire to waste sellers’ money on needless advertising is routine.
MOST ADVERTISING WASTES THE HOME SELLERS’ MONEY
Agents get home sellers to pay for advertising to attract the same buyers who have already enquired to the same agents.
So why do the agents advertise homes instead of contacting existing buyers? Well, as you have just seen, if they sell a home too quickly, the sellers often demand a discount and, of course, by selling a home fast, agents also miss out on using the sellers’ money to promote themselves.
So, if you are ever selling your home and the agent comes to you after a few days with an offer that meets your needs, the last thing you should do is punish the agent by demanding a discount.
DON’T PUNISH YOUR HONEST AGENT!
Be thankful that your agent is honest enough to tell you they have a buyer now at a great price.
Be pleased that the agent is competent enough to have had the right buyer ‘on their books’.
Don’t be unfair and punish the agent for doing the right thing. Reward the agent for doing exactly what you wanted – getting you the highest price and making sure you are paid as fast as possible.
And, one more thing: If you are lucky enough to have found such an agent when selling, give them one more reward for their honesty and competency. Offer them your sincere thanks.
Good agents, like all good professionals, appreciate being appreciated.
If you’d like to find an agent you can trust – please click here.
Neil Jenman is Australia’s most well-known real estate consumer advocate. His website www.jenman.com.au contains many articles to help sellers, buyers and investors.