Commission shoppers beware
Low rates may not reflect true value
November 04, 2009
By Bernice Ross
Inman News®
How will you decide who is the best person to market your property? If you're shopping exclusively based upon commission, you could be making a very costly mistake.
Recently I was speaking with the CEO of a well-known real estate firm. He shared his frustration about what he was hearing from many of his broker-owners. Apparently, a large percentage of buyers are calling various real estate offices and asking, "How much is your commission?" If the person answering the call says, "Six percent," the caller hangs up.
Another version of the same scenario sounds like this, "We just talked to Joe Agent who works for the same firm you do, but he was willing to take our listing for 5 percent. We really like you, but unless you cut your commission to 5 percent, we're going to list with Joe."
Research from the National Association of Realtors shows that about 15 percent of all sellers select their agent exclusively by how much commission the agent charges. About 5 percent decide based upon their desire for premium service. The other 80 percent make their decision based upon price (i.e., commission) and value. Value includes the price plus the other services provided in conjunction with that price.
What many sellers fail to realize is that the real issue is not how much commission you pay, but how much you net at the close of your sale. The way you obtain the maximum amount from your real estate sale is with maximum exposure to the marketplace. Thus, as an informed seller, the first step you must take is to interview several agents.
Ask the agents to bring you a written copy of their marketing plan. Also ask the agents to provide you with the names of three of their past sellers along with their contact information. If the agents are unwilling to do so, look elsewhere.
When you look at the agent's marketing plan, does it include a staging strategy? Does it include a Web marketing plan including posting on Realtor.com, the local multiple listing service, and online real estate portals? Does the agent have a strategy for marketing to people in your local area using traditional approaches such as open houses and print advertising?
Does the agent have a strong online presence, such as a blog, and is the agent active on Facebook, LinkedIn and Twitter? Does the agent use an 800-number or text-messaging system that automatically captures the phone numbers of people who call off your for-sale sign? Agents who have all these systems in place will generally help you achieve a better net price because of the high degree of exposure they provide for your listing.
While an agent can have a great marketing plan, unless he or she has strong negotiation skills you can still end up netting less than if you hired an agent with strong skills. When you interview the agents, there is nothing wrong with asking them to cut their commission. What you're looking for, however, is how the agent responds to this objection.
If the agent caves easily, the question you must ask yourself is, "If this person can't justify a commission rate on his own behalf, how effective will he be in helping me obtain the highest possible price in the shortest amount of time?" If the agent becomes angry or defensive, how will that agent be when you have an issue that you want addressed?
On the other hand, if the agent gives you a solid and sound explanation for the commission rate (namely the robust marketing program the agent provides that benefits you in terms of more net price), this agent could be a good choice.
When you hire an agent with weak negotiating skills, it can cost you much more than the 1 percent or 2 percent you might save. Many sellers are unaware of how much negotiation occurs not only at the listing appointment and the offer, but after the offer has been accepted. A weak agent may cause you to leave money on the negotiation table.
Did you know, however, there are other places that can cost you money?
For example, did the agent advise you to order a home warranty that went into effect as soon as you listed the property? If not, this simple oversight can cost you thousands of dollars if one of the major appliances or systems in your home goes out either prior to selling your home, during the sales process, or after your property closes. If the home warranty is in place, in most instances you're covered.
Another place where weak agents cost their sellers money is when the buyer conducts an inspection and comes back with a laundry list of items the buyer wants fixed. A strong agent knows how to handle this contingency.
For example, the agent could suggest placing a dollar cap on repairs and then credit the buyer with the money to handle the repairs after closing. This approach avoids you being on the hook for repairs made by third-party contractors. A shoddy roof repair could cost you thousands for a new roof if the buyer elects to sue you.
Another area where negotiation skills matter is in handling low appraisals. A weak agent will let the deal fall apart. However, someone with strong negotiation skills knows how to keep the transaction together either with secondary financing or persuading the lender to obtain another appraisal.
If you are going to sell your home, do your homework. Interview the best agents you can locate in your area. Check out their references, their track record and their online presence. Challenge their negotiation skills. That's the best way to find the best agent to sell your house.
Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author of "Real Estate Dough: Your Recipe for Real Estate Success" and other books. You can reach her at Bernice@RealEstateCoach.com and find her on Twitter: @bross.
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