There’s an old saying that you can’t underprice a listing in a heated seller’s market. While weak agents may get over asking price for a listing, in many cases, they can leave $50,000 or more of their seller’s money on the table.
The Austin real estate market has turned into the Wild West with properties in the $400,000 to $800,000 price range selling for as much as $275,000 over asking price. Higher priced properties can see numbers that exceed the $500,000 mark.
Because I’m licensed in California rather than Texas, I cannot represent Texas clients. Nevertheless, it makes me positively crazy to see friends and neighbors leave up to $100,000 or more on the table because they listed with their best friend’s daughter, their Bunco buddy or with an agent who is too weak to persuade them to do the minimal repairs that could net them significantly more.
Below are five case studies that illustrate how costly working with a weak agent can be.
Scenario No. 1: The pocket listing queen
An agent who does a substantial amount of business in our subdivision touts her “private buyer” list composed of people who want to purchase here. While sellers like the idea of being able to sell quickly, most are unaware that her listings seldom hit the MLS, and if they do, the property posts “pending” almost immediately.
My advice to anyone who is selling is to always interview three agents. During the interview, the sellers should inquire about how the agent will market their property in print, online, on social media and using video. It’s also smart to ask for specific examples of previous marketing campaigns to back up the agent’s claims about what they do.
It’s especially important that they inquire about the agent’s list-to-sell ratio. For example, a weak agent might sell a $400,000 at full price. Their list-to-sell ratio would be 1.00.
In contrast, a strong agent who implements a robust marketing plan that gives the seller maximum exposure to the market may sell the same house for $450,000. Their list to sell ratio would be 1.125 ratio i.e., 12.5 percent higher than the agent who sold at full price.
Two friends who followed that advice set record sales prices earlier this year, one for a townhome and the other for a villa (free standing house).
Scenario No. 2: ‘I got a lot more than I paid’
A different friend decided to sell his 1,512-square-foot townhome and move permanently to his ranch. I encouraged him to make sure his listing agent put the property on the MLS rather than selling as pocket listing.
His agent persuaded him to list at $425,000, and he ultimately sold for $415,000. Since he had paid $295,000, he was satisfied with the price. However, his listing agent made two key mistakes:
- She encouraged him to take the first offer that came in almost immediately rather than waiting five to seven days for the listing to hit the MLS.
- She also failed to take into account that the prices throughout the area were rapidly spiraling upward. Instead, she priced the property on the older comparable sales that were 60 to 90 days old.
Based on five different condo sales that took place within 60 days of his sale, my friend should have gotten at least $441,000, which included the price per square foot the condos were closing at ($292 per square foot) plus an additional $50,000 for the fact his townhome had a private patio, opened to a large green area ideal for dogs to play, and a two-car private garage rather than a single-car subterranean parking space.
In short, he left at least $26,000 on the table.
Scenario No. 3: ‘I didn’t want to hurt my best friend’s feelings’
As evidenced by what happened a few months later, the weak agent cost that seller a lot more than $26,000.
In April, another friend listed her unit with the same floorplan. Her dilemma was choosing between her closest friend’s daughter and another close friend, neither of whom had ever sold a home in the area.
She was more worried about losing a friendship than how much she could potentially lose by listing with a weak agent. So, she decided to list with the friend’s daughter who advised her to list at $415,000. My friend soon discovered she had made a tremendous mistake.
Fortunately, her son is a high-profile executive who had been tracking how Austin prices were exploding. He stepped to protect his mom and insisted on a higher listing price, a professional marketing program and waiting to let the marketing work.
When several offers came in, he handled the negotiation as well. The property closed in May 2021 for $595,000 — only four months after the $415,000 sale of a unit with the same layout. If her son hadn’t intervened, this single retired woman who lives on a fixed income might have sold her home for $180,000 under market value.
Scenario No. 4: ‘We can’t fix anything!’
Sometimes owners are unable to fix up their properties due to financial, health or other types of difficulties. When this happens, weak agents cave in and put the property on the market without addressing what could have been done to work around the problem.
One of our neighbors was having to move into assisted living due to declining health and mobility. To make it easier over the last few years for the owners to stay in their current home, they installed a doorway (with no door) between the front entry and the laundry room. That meant the first thing you noticed when you walked into the entry was the washer and dryer.
To improve accessibility, they also removed all the doors in the primary bedroom and bath as well as most of the doors on the kitchen cabinets.
The owners decided to list with a neighbor who obtained the bids to do the work but was unable to persuade them to do it. The house is still languishing on the market nine weeks later — even with a $25,000 price reduction.
Three ways this issue could have been resolved include:
- Virtually stage the property with a company like BoxBrownie.com.
- If available, use Curbio.com to get repairs done quickly and have the expense deducted out of their sale proceeds. Show the sellers the Curbio statistics that show their average profit increase for clients who use their service is $50,000.
- Greg McDaniel’s approach is to take care of up to $10,000 of work as needed for staging secured with a mechanics lien on the property. This guarantees he will get his money back at closing.
Scenario No. 5: The do-nothing, Bunco-buddy agent
Another property came on the market where the owner had just lost her spouse and wanted their house sold as quickly as possible. The house had the most popular floor plan in the subdivision, one of the largest yards, and it was in mint condition except for the bedroom carpets that needed cleaning.
The owner listed with one of their Bunco buddies for $685,000. The agent’s marketing efforts consisted of:
- Putting a brochure box up on Friday that only had one brochure taped to the front of the box.
- Only posting six blurry pictures on the MLS taken with a cell phone, none of which included the large backyard, a major selling feature.
- Holding an open house on Saturday and Sunday.
They received only one offer and took it. The house showed as pending on the MLS on Monday morning.
A week after this property went under contract, I found the same floor plan around the block from the Bunco buddy’s sale on an off-market property for almost $150,000 more. Below is a screen shot from realtor.com of the preliminary offer from Opendoor for the exact floor plan.
Even if the listing sold at full price, the Bunco-buddy agent cost that seller over $150,000! The number may be even higher because generally the iBuyer prices will end up being lower than those marketing with a competent agent.
What can you do to combat weak agents?
First and foremost, tell the story of your success in your marketing campaigns. In a recent column, Jimmy Mackin suggested using following email template to achieve this goal:
35,230 people viewed the home at 123 Main Street.
Body of the email:
Use storytelling to describe what happened:
The home was listed for 12 days, it had 23 offers, and is under contract with an all-cash offer for $28,325 over asking price. It sold for 8 percent higher than other comparable homes in the area.
So, here’s the bottom line: If you aren’t tracking your list-to-sell ratio, start doing so now. If your number is greater than the area average, use it to show the sellers how much more they will net when working with you.
You must also track how much prices are increasing and give your listings five to seven days of being marketed aggressively. This is what will result in the best price for your sellers.
Bernice Ross, President and CEO of BrokerageUP and RealEstateCoach.com, is a national speaker, author and trainer with over 1,000 published articles. Learn about her broker/manager training programs designed for women, by women, at BrokerageUp.com and her new agent sales training at RealEstateCoach.com/newagent.