Home Sellers Often Ask The Wrong Questions
I've been a real estate agent for many years. I've talked to countless families about selling their property. Before I walk through the front door, I know the first two questions the seller is going to ask.
And I know they are asking the wrong questions.
First, before I have had a chance to look around the property, I'm going to be asked: "What's it worth?" or "How much can we get for this house?"
Candidly, I don't know. Beyond its square footage and the color of the living room walls, I don't know what's there to be sold. So, how can I know its value? Although I've probably already researched the sales prices of similar homes in the neighborhood, I'm not sure of the condition of this house versus others. And make no mistake, property condition has a lot to do with value.
The second question is: "How much do you charge to sell a house?"
Ah, the old commission question. Sometimes I think that no matter how low an agent puts the sales commission, it's going to be too high. "Six percent! I know ten real estate agents who will gladly sell this house for four percent. Six percent is too high." "Four percent! I know ten real estate agents who will gladly sell this house for two percent. Four percent is too high."
The simple fact is that when a seller first meets a real estate agent, the question of commission is irrelevant. As a seller, you don't even know if you want to be represented by that agent; and the agent does not know if he or she wants to represent you and your property. Before you start to negotiate a real estate commission, you ought to find out if you like the agent, have confidence in them, want them to represent you in the transaction, and what they are going to do to earn any amount of commission. Look at it this way, you are about to enter into one of the largest financial transactions of your life. Do you want to entrust that sale to somebody who's primary professional credential is that they will do it cheaper than somebody else?
I think both of these questions are irrelevant in the early stages of your talks with a real estate professional. One requires the agent to have a crystal ball revealing property value, the other is based on grocery store arithmetic which often results in voodoo economies for the seller.
How much is a property worth? It is worth its current market value, not one penny more or one penny less.
How much should the real estate commission be? The commission must be enough to provide the agent with access to sales and marketing tools, and to provide adequate incentives to attract the best buyer who will pay the highest price for the property.
The Right Question
The only really important question to ask a real estate agent in your first meeting is this: "How are you going to sell my property for the highest possible price?"
Now you've gotten down to the heart of the matter.
When you sell property, you want to sell it for the most money. In the entire marketplace, there is only one buyer willing to pay the highest price for the property. That buyer, by definition, is the best buyer. Selling to the best buyer is how you will net the most money as a seller.
The next important question then becomes: "What are you going to do to attract the best buyer?"
The answer to this question can be summarized in one word: Marketing.
The real estate agent should be able to present to you a comprehensive marketing plan desinged to find the best buyer and sell your property for the most money, in the shortest period of time, and with the least inconvenience to you. If he can't show you a written, detailed marketing plan designed to do that to your satisfaction, look for another agent.
If that marketing plans consists primarily of the 4-P's, find another agent. The 4-P's? Put a sign in the yard. Put it in the MLS. Place an ad in the newspaper. Pray that somebody buys it. Folks, that ain't marketing. That's what agents do who discount their commissions, and it's next to nothing.
When an agent discounts a commission, his profit disappears and he can't afford to do an in-depth marketing plan designed to find the best buyer. So, the house sits unsold for month after month until the seller complains about a lack of activity. Responding to the seller's concerns, the agent suggests that the price is too high and should be lowered. When the price is dropped, any savings that the seller thought he was going to receive because of the lower commission have vanished. In other words, the discounted commission created a voodoo economy for the seller. Actually, the discounted commission forced a reduction in marketing activities. A reduction in marketing activities equates to lost opportunites to find the best buyer and that means a loss of net profit to the seller. Or, as my friend and broker, Bill Tourtelot of Tourtelot Brothers Real Estate observed recently, "Discounted commissions mean that sellers don't get what they don't pay for." The seller didn't pay for a marketing plan, so he didn't get a marketing plan and the property did not sell for its fair market value since the agent did not find the best buyer. Bill is 100-percent correct in this observation.
So, when you invite real estate agents to your house to discuss selling, you should first be concerned with finding an agent who can bring you the best buyer and sell your house for the highest price. The place to start is with a full-service, full-commission broker because they will spend their own money to market your house and find the buyer who will pay you the highest price. Agents who work for cut rate and discount brokers don't offer the marketing needed to get the highest price because they gave most of their marketing budget away when they cut their commission. If you don't get the highest price you probably won't net the most money from your sale no matter where the agent sets the commission.
Don't ask the wrong questions. Ask questions about marketing. Leave the matter of property value and commission to a subsequent discussion if you must. The simple fact is that the agent who brings the best marketing plan to the transaction is the agent you should hire if you want to net the most money for your property.
And I know they are asking the wrong questions.
First, before I have had a chance to look around the property, I'm going to be asked: "What's it worth?" or "How much can we get for this house?"
Candidly, I don't know. Beyond its square footage and the color of the living room walls, I don't know what's there to be sold. So, how can I know its value? Although I've probably already researched the sales prices of similar homes in the neighborhood, I'm not sure of the condition of this house versus others. And make no mistake, property condition has a lot to do with value.
The second question is: "How much do you charge to sell a house?"
Ah, the old commission question. Sometimes I think that no matter how low an agent puts the sales commission, it's going to be too high. "Six percent! I know ten real estate agents who will gladly sell this house for four percent. Six percent is too high." "Four percent! I know ten real estate agents who will gladly sell this house for two percent. Four percent is too high."
The simple fact is that when a seller first meets a real estate agent, the question of commission is irrelevant. As a seller, you don't even know if you want to be represented by that agent; and the agent does not know if he or she wants to represent you and your property. Before you start to negotiate a real estate commission, you ought to find out if you like the agent, have confidence in them, want them to represent you in the transaction, and what they are going to do to earn any amount of commission. Look at it this way, you are about to enter into one of the largest financial transactions of your life. Do you want to entrust that sale to somebody who's primary professional credential is that they will do it cheaper than somebody else?
I think both of these questions are irrelevant in the early stages of your talks with a real estate professional. One requires the agent to have a crystal ball revealing property value, the other is based on grocery store arithmetic which often results in voodoo economies for the seller.
How much is a property worth? It is worth its current market value, not one penny more or one penny less.
How much should the real estate commission be? The commission must be enough to provide the agent with access to sales and marketing tools, and to provide adequate incentives to attract the best buyer who will pay the highest price for the property.
The Right Question
The only really important question to ask a real estate agent in your first meeting is this: "How are you going to sell my property for the highest possible price?"
Now you've gotten down to the heart of the matter.
When you sell property, you want to sell it for the most money. In the entire marketplace, there is only one buyer willing to pay the highest price for the property. That buyer, by definition, is the best buyer. Selling to the best buyer is how you will net the most money as a seller.
The next important question then becomes: "What are you going to do to attract the best buyer?"
The answer to this question can be summarized in one word: Marketing.
The real estate agent should be able to present to you a comprehensive marketing plan desinged to find the best buyer and sell your property for the most money, in the shortest period of time, and with the least inconvenience to you. If he can't show you a written, detailed marketing plan designed to do that to your satisfaction, look for another agent.
If that marketing plans consists primarily of the 4-P's, find another agent. The 4-P's? Put a sign in the yard. Put it in the MLS. Place an ad in the newspaper. Pray that somebody buys it. Folks, that ain't marketing. That's what agents do who discount their commissions, and it's next to nothing.
When an agent discounts a commission, his profit disappears and he can't afford to do an in-depth marketing plan designed to find the best buyer. So, the house sits unsold for month after month until the seller complains about a lack of activity. Responding to the seller's concerns, the agent suggests that the price is too high and should be lowered. When the price is dropped, any savings that the seller thought he was going to receive because of the lower commission have vanished. In other words, the discounted commission created a voodoo economy for the seller. Actually, the discounted commission forced a reduction in marketing activities. A reduction in marketing activities equates to lost opportunites to find the best buyer and that means a loss of net profit to the seller. Or, as my friend and broker, Bill Tourtelot of Tourtelot Brothers Real Estate observed recently, "Discounted commissions mean that sellers don't get what they don't pay for." The seller didn't pay for a marketing plan, so he didn't get a marketing plan and the property did not sell for its fair market value since the agent did not find the best buyer. Bill is 100-percent correct in this observation.
So, when you invite real estate agents to your house to discuss selling, you should first be concerned with finding an agent who can bring you the best buyer and sell your house for the highest price. The place to start is with a full-service, full-commission broker because they will spend their own money to market your house and find the buyer who will pay you the highest price. Agents who work for cut rate and discount brokers don't offer the marketing needed to get the highest price because they gave most of their marketing budget away when they cut their commission. If you don't get the highest price you probably won't net the most money from your sale no matter where the agent sets the commission.
Don't ask the wrong questions. Ask questions about marketing. Leave the matter of property value and commission to a subsequent discussion if you must. The simple fact is that the agent who brings the best marketing plan to the transaction is the agent you should hire if you want to net the most money for your property.
posted by Terry Ward at 6:31 AM
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