Town & CountryQ: Does the amount of time I give the REALTOR® to sell my home make a big difference?
A: Not always. But understand that many times a salesperson will do some research on you and your home. If an agent finds that you entered into a short listing agreement, they may interpret that as a sign of anxiety to sell – in which case the agent would naturally recommend trying a lower than normal offer for your home.
Q: Won’t the REALTOR® work more quickly to get a home sold with a short term listing?
A: A long term listing will actually help your home sell more quickly than a short term listing. Not only does a short term listing imply that you are anxious to sell – encouraging low-ball offers, but real estate is a dollars and cents business which means that no money is spent until all the risks are weighed. Let’s say for instance, you list your property for 3 months – and two and a half months have gone by. When your real estate office chooses which ads to run – they would choose listings that will be with them for a longer period of time. The office has no way of knowing whether you choose to extend your listing period or not. Therefore they bank on a sure thing.
Q: Won’t I save more money by selling myself without a REALTOR®?
A: You may try to sell your home without a REALTOR® to save a commission, but are you really saving a commission? Let’s take a close look at all the key players. We have our seller, who like anyone else wants to save some money so they decide to sell their home without the use of a REALTOR®. Then we have our For Sale By Owner shopper, who decides to forego using the services, expertise, equipment, negotiating skills, connections and knowledge of a real estate agent – in order to what? Again – save the commission. Are we talking about two separate commissions here? No, there’s only one commission. And serious For Sale By Owner shoppers only shop For Sale By Owner to save this commission. They find a For Sale Buy Owner property that they can live with and knock the commission right off the top of the price. In this situation, you didn’t really save a commission – you just gave it away! Would you rather give this money away to a total stranger or enjoy the benefits of letting an agent handle all of the details?
Q: Does it make financial sense to sell your home without a REALTOR®?
A: If all you did was put a sign in front of your house and the first person to drive by offered to pay you full price for your home – then Yes – selling your home yourself does make financial sense if you were asking market value for your home. However, very few properties actually sell as a result of the sign in the lawn. The majority of sales come from the various contacts of the real estate agent and efforts such as networking, advertising, delivering flyers, postcards, sending emails, etc. Any of these channels can find that one special buyer, but your odds increase drastically by taking a shotgun approach. Through aggressive internet advertising, running ads in homes magazines, putting a sign in the yard, creating brochures, networking, through sales meetings, and direct mail, REALTORS® are able to maximize the exposure of a property and find the most qualified buyer who is willing to pay the highest price. All of these expenses are necessary to obtain the full market value of a home. And since better than 95% of all properties are sold by real estate agents, these fees are already included in the price of the home – it is not tacked on top of the value of the home.
Q: Can I list high and come down later?
A: Yes, but there are significant drawbacks to doing so. Pricing your home higher than market value will actually cost you money, time and headaches. The fact is, overpriced listings actually help to sell fairly priced properties. Buyers will shop around and if there are similarly priced properties in the same area, they will see them all. If your home is overpriced, the buyer will be disappointed in what they see, and will then be impressed with the apparent great value of a properly priced property when compared to yours.
Another drawback to overpricing your home is that the first few weeks that your home is on the market is the most critical time. You are the new kid on the block – and buyers that have been waiting for new listings to become available will come to see your home. These are the most qualified buyers waiting to find the right property, already working with an agent, and typically already approved for their loan. If your home is overpriced, the buyers looking in that price range will be disappointed and will move on to something else. But the real loss is that the buyers in the price range that your home should really be in may not even look at your home because it is something they don’t qualify for. Consequently, your home languishes on the market until you bring the price down to a more realistic amount. Then if these buyers haven’t purchased yet, they will wonder why your home hasn’t sold in all this time. Your home is now what is known as shopworn or stigmatized property. Buyers will be asking themselves why your home hasn’t sold and what is wrong with it? So you later run the risk of having to lower the price again from the true market value of your home in order for the home to sell.
Q: I’m not sure if I’m ready to sell at this time.
A: If you know you want to sell your home, putting it off may be costly. The sooner your house sells, the sooner you can get into a new home. Waiting could bring drawbacks that are unexpected. For instance, interest rates may go up – a little jump can be make a costly difference. The price of your future home may go up. And new construction homes tend to appreciate at higher rates. If you find your future home right away, you may incur vacant monthly expenses; or you may wind up making double house payments. You may find yourself making additional costly repairs. We are not saying that these things will happen – just that they might.
Q: Why is Commission important?
A: The marketing fee or commission is the most vital part of the marketing plan because this is precisely what brings the cooperating brokers. Since commissions are negotiable, we’ll talk in terms of averages. Let’s say an average commission for a certain area is 7%. The fee is normally divided evenly between the selling office and the listing office. Let’s trace the path of this 7% just for illustration purposes. In a $100,000 home, the commission would be $7,000 which is split up between both offices – $3,500 for the listing office and $3,500 for the selling office’s effort in securing a buyer. This $3,500 is then divided between the office and its respective agent. On the listing side, the commission is split between the agent and the owner/broker. And from the agent’s amount, the agent must pay taxes, MLS fees, expenses incurred on advertising and promotions, desk fees, etc. The agent that procured the buyer would be in a a similar situation with their owner/broker. All of a sudden, what started out as being a large 7% commission has now dwindled to substantially less for each specific agent involved. This is why it is crucial to offer at the very least the average commission for your area. Some agents and offices highly recommended you consider offering a 1% higher than average commission for the sale of your home. A one percent raise in the commission translates into about a 20% raise to the real estate agent’s paycheck.
Q: Won’t another office list my home for a higher selling price?
A: Without a doubt. But remember this key point: Agents don’t establish selling price – the market does. The only thing that determines the selling price is what a buyer is willing to pay for your property. Many agents list properties at one price and expect to sell them at a completely different price. This is what is known as buying a listing. What this does is entice the seller into signing a contract, and a few months later the seller is shown the facts and asked to drop the price down to market value. At this point your listing is shopworn and will sell for less than it would have if priced right initially.
Q: Some brokers say they will sell my home at a lower commission.
A: This is a good point to look at. What you need to ask yourself is, did they say they would put it on the market at a lower commission, or did they assure you that they could sell it charging a lower commission, because there is a tremendous difference. If you just want to have your home on the market, 5% is a great number – 3% is even better but if you want your property sold in a timely manner, a standard commission or better is required. Many properties that expired and never sold were properties that were offering a smaller commission incentive to cooperating brokers. And by offering a smaller commission to the buyer’s agent, they are likely to just skip past your property and show other properties.
Q: What are the odds of selling my home myself?
A: The National Association of REALTORS® (NAR) conducted a study that found 70% of all people who see homes for sale can’t buy your home because they have frozen equity – in other words, they must sell their home before they buy. 11% of them can’t afford what they are looking at. 15% of people who see homes for sale prefer to rent. 4% of them are actually ready, willing and able to buy your home. A real estate agent’s job is to weed through potential buyers and pick out that 4% that is ready, willing and able to buy now. For Sale By Owner sellers should consider these odds closely. It is one of the reasons that over 90% of For Sale By Owners eventually list with a real estate agent.
Q: Should I wait to find a property before I put mine up for sale?
A: Probably not. It is common to fear you might sell your home before you find a suitable one to replace it. However, this very rarely happens and unless you are looking for a unique property, this will probably end up costing you thousands of dollars. Let’s say for instance you find the right property this Sunday at an open house – this is the house – you have to own it. Let’s also assume that the seller is asking $175,000 for the house. You probably want to try to negotiate the price downward a little. Well, now you have two jobs. You need to talk him down off his price, but you also need to convince him to take his home off the market and risk not selling it, while you put your home on the market, find a buyer, qualify him and get it closed. Your seller will probably agree to wait a couple of months, but he’ll more than likely want you to pay full price for his home. So now, you’re out a $5,250 price reduction (going by the 3% national average) but in order to sell your home in two months you now need to get aggressive and price your home below market. Let’s say your home is worth $100,000, and to get it sold in two months, you probably need to sell it for $94,000 (going by the national average of 6 months to sell).
In this situation, waiting to list your home cost you $11,250 dollars. This is what finding a property before putting yours on the market could cost you.
