For the right price, everything is for sale. So when my Realtor friend pitched to put my home on the market a couple years ago given the lack of inventory, low interest rates, pent-up demand, and robust labor market, I said, “Sure why not.”
I have a single family home in San Francisco’s north end that might very well be suitable for a young family. It’s one of those modest looking art deco style homes that would be considered a townhouse in any other part of the country.
I told my Realtor that if I don’t get a certain stretch amount, I’m not selling, and he agreed. It was important to manage his expectations since he’s the one spending all the time staging, marketing, and showing the place.
Despite real estate selling commission fees still averaging 5%-6%, having a good Realtor can really be the difference between getting top dollar or getting “stalefished.” If you’re buying a home, a top Realtor will likely have the inside scoop and give you first dips before others so you can prevent a bidding war.
DISAPPOINTING REAL ESTATE AGENT EXPERIENCE
Unfortunately, my Realtor turned out to be a dud. My judgement of his expertise in selling homes was clouded because he was my friend. Here’s a list of things that happened to make me question his professionalism.
* Showed up dirty. I was shocked when my Realtor strolled up to my house five minutes before a private showing in sweaty tennis clothes right after a match. We’re talking a sweat ring on his chest and under his arms, shorts, and sneakers. Maybe his clothes would have been appropriate if he had just played tennis with the prospective buyers, but this was absolutely not the case. I e-mailed him after the showing insisting he keep a full change of clothes in one of my bedroom closets if he planned to continue playing tennis throughout the day during the showings.
* Didn’t listen. My Realtor pushed me to do an open house, and I told him “no” twice. Open houses open yourself up to nosy neighbors and potential robbers. Meanwhile, a report from the National Association of Realtors themselves said that only 2% of transactions ever come from open houses. Open houses are great for the listing agent to find prospective clients, which is what I thought he was most interested in doing. Although, in a hot property market hosting two Sunday open houses and setting an offers due deadline absolutely helps because it creates an incredible sense of urgency. If you’re a seller, it’s important to emotionally move on and I hadn’t.
* False assumptions. After saying that I wouldn’t have to pay anything out of pocket, he springs a $440 pest inspection fee I have to pay for the disclosure packet. I’m all for a thorough disclosure packet, however, if you knew there would be a pest inspection fee required, then say so up front. Paying a 5% commission on a property is already quite egregious in this internet age. You’d think the commissions alone would cover the costs.
* Not in my corner. Here’s the real kick in the pants. I asked him whether I could join his 4.5 USTA league team and instead of enthusiastically saying “yes,” he told me “it would be hard because some of the teammates have been members for a long time.” I was expecting him to at least say he’d contact the captain to try and get me on the team. I don’t want a Realtor who isn’t 100% in my corner to earn a five or six figure commission off me. The great comeuppance is that my doubles partner and I faced him and his doubles partner at his club and took them down several weeks later.
WHAT TO LOOK FOR IN A REAL ESTATE AGENT
After 29 days on the market in the summer of 2012, I took my home off the Multiple Listing Service. I purposefully priced the home about 5%-7% above the market because I really didn’t want to move. But my Realtor was insistent the home would sell and he was desperate to get the listing. Thank goodness my Realtor was so bad because the real estate market has seemingly gone ballistic since (See: $1.405 million over asking to $3.4 million for a 2/2.5, 1,550 sqft, single family home in Pac Heights)
Here’s my advice for those looking to choose the right Realtor to sell (or buy) a home:
* Go with a Top Producer. Seniority counts a great deal in the real estate game. It’s important to go with a “top producer” because the top 20% of Realtors move at least 80% of all the homes in any given area. Top producers are way more connected than your average Realtor. They will often know of listings before they hit the market and know of final sales prices before the official close of escrow to allow for better bidding and arbitrage. For sellers, they have a huge network to send out feelers for your property as well. My Realtor was not a top producer and couldn’t even get access to the top producer online network.
* Ask when was the last time they sold a home. If your Realtor hasn’t sold a home within the past six months, alarm bells should be going off. The Realtor should have a consistent flow of homes for sale, ideally in your price range or higher. The last property my Realtor sold was his own, because he could no longer pay the mortgage! He did a short-sale on his own condo, and I’m sure he’s kicking himself now for selling. I was too embarrassed to ask more about his home selling experience since he was my friend. I just felt very empathetic and wanted to help him out, which is bad for business.
* Does s/he have a web presence? If your Realtor doesn’t have a hisname.com website in this day and age where 80% of properties are found on-line, then you should be leery. The website should have basic info such as her bio, her previous transactions, thoughts on the market, some pretty graphs, and so forth. The website should also serve as her resume for the list of properties she’d sold or acted as the buyer’s representative.
* Interview your Realtor to ascertain intelligence, charisma, and professionalism. Realtors often get a bad rap in the media because of sayings such as, “It’s always a good time to buy or sell your home.” There isn’t much of a hurdle to become a Realtor and the commission level is frustratingly high. If you don’t find your prospective Realtor charming, neither will anybody else. It’s important to see if your Realtor can come up with a coherent thesis as to why he thinks XYZ about the direction of the housing market. Ask him about pockets of strengths and weaknesses in local housing market, as well as the risks. Ask about various real estate tax strategies or housing credits. Your Realtor should also present to you a comprehensive game plan for marketing and selling your home.
* Does your Realtor have integrity? One of the things I highly respect about my Realtor is his integrity. I asked him whether I should disclose a minuscule leak in the ceiling that I fixed a year ago and he said, “Absolutely.” I asked him whether I should turn on the portable air-filter in one room to help drown out some street noise, and he said best to leave it off to be completely upfront. Good integrity goes a long way because it minimizes the risk of negative surprises.
* Can you feel the hustle? When you wake up in the morning, will he have already sent you updates because he was working the night before? Will he create a Google Docs spreadsheet to track all the prospective buyers who have come through and shared the file with you Has he suggested you go with him to see competitive properties on the market to make sure you guys are in the ball park? You need to see and hear his hustle. You don’t want him strolling to your house in his shorts and a t-shirt because he had a practice match beforehand.
REAL ESTATE COMMISSION RATES SHOULD COME DOWN
The oligopoly priced 5%-6% commission fee is egregiously expensive, especially if you are selling in cities such as San Francisco and New York. Why does it cost $100,000 in commissions to sell a $2 million dollar house, for example? I can maybe understand a $10,000 commission on a $200,000 house, but it doesn’t take 10X more work to sell a $2 million dollar house. In fact, it might take less work selling a $2 million house because it’s probably much more impressive.
The reason for such a high commission structure despite internet companies such as Zillow, Trulia, and Redfin making it extremely easy for any buyer or seller to find or market a property is due to how the system works. Half of the 5% commission is used to pay the buyer’s agent for bringing the client. Some agents will literally not show their clients a particular house that fits their needs if the commission is too low. Meanwhile, the other half of the commission is generally split in half again to the brokerage house e.g. Coldwell Banker, Zephyr, Remax, etc.
The realty is that the selling agent might only get 1.25%-1.5% at the end of the transaction. Paying a 5% commission makes me ill, but I do feel I’m getting better “value” that the fee is split and incentivizing both parties to make something happen. Don’t feel their commissions are fixed, either. Both sides are definitely willing to negotiate down their commissions if the choice is between walking away, and making a transaction happen.
If real estate commissions come down, I strongly believe volume will increase, helping sellers, buyers, and Realtors who are starving for listings.
STRESS BE GONE
Even if you are stuck with a dud of a Realtor, know that it is very hard to screw up a sale if you’ve priced your property correctly. I did not, so I failed. Selling a home is extremely stressful, much more so than buying a home in my opinion. An experienced Realtor can help make your selling process as smooth as possible. And if you have the guts to list and market one of your most valuable assets yourself, go for it. Just remember that you will still have to pay at least a 2% commission to a Realtor who brings you a buyer. But 2% sure sounds cheaper than 5%.
Real Estate vs. Realtor vs. Broker
- Real estate agent: Anyone who earns a real estate license can be called a real estate agent, whether that license is as a sales professional, an associate broker or a broker. State requirements vary, but in all states you must take a minimum number of classes and pass a test to earn your license.
- REALTOR®: A real estate agent who is a member of the National Association of REALTORS®, which means that he or she must uphold the standards of the association and its code of ethics.
- Real estate broker: A person who has taken education beyond the agent level as required by state laws and has passed a broker’s license exam. Brokers can work alone or they can hire agents to work for them.