Realty Bytes October 2009

The “Truth” about Listings:

Recently a Realtor shared a silly saying with me: “It is best to be, the First Born, the Second Wife, or the Third Realtor.” The third Realtor is listing Realtor. The third usually has the advantage of getting the property at the best price and with the most motivated seller. There is some truth in the observation.

For more than 30 years I have made my living representing buyers and sellers in real estate transactions. There are many compensation alternatives in the real estate market. In my experience, compensation has almost always been as the result of a success fee, a contingent fee. If one identifies a ready, willing and able buyer and they are able to close, the listing agent has earned his or her fee.

Most people do not understand the process involved in ‘getting the listing, in the marketing process, and in the challenges of getting the property closed. In other words, earning a fee,

Let’s preface the entire conversation with the absolute truth, that all real estate fees are independently negotiated between the client and the brokerage firm, the real estate company. Each company determines it own fee schedule. Part of that structure is what they will pay cooperating companies if they are the listing company.

First truth: There is competition to obtain the listing. Agents and their companies compete to have sellers list with them. This competition is very intense. There is also competition within offices among agents to get the listings. While many teams work on a cooperative basis that is misleading. Within the Multiple Listing Service there is an agreement by the listing broker to agree to cooperate and compensate other brokers.
Generally listing brokers prefer to sell in their own office, because they would earn both pieces of the brokerage. (There are alternative compensation structures), Sometimes a potential listing agent may say the other agent can always sell it. While that is true it ignores reality. Listing agents try to sell the listings of the owners who have hired them, not their competitors’ listings. When I am hired those sellers can reasonable expect that
I will give them my primary focus.

Second truth: if the fee structure is on a success fee, there is no value in making the process long. Sometimes it takes a long time to sell the home. Since a success fee is outcome driven, then it is best if it is sold quickly. Most listing agreements do not charge on fee basis, i.e. charge for each showing or telephone call. They charge only if they are effective in getting seller, buyer, lender, attorney, to the closing table.

Third truth, the price matters. The best agent, with the most effective marketing strategy, will not be successful if the price is not reasonable. In this market it is more important than a ‘normal market’ Prices need to be compelling, not competitive. Also, price needs to be compelling the first day of the listing. If you continue to drop price by small amounts, rather than listing competitively upfront you are following the market. It will take longer and will likely result in a lower price.

Fourth truth, house must be available for showing. Buyers will not buy a house if they do not see it. Some sellers, and frankly some agents, make it very difficult to set up showing appointments. This is stupid. There are so many houses on the market, the buyer will move on if they do not obtain an appointment. Make your home available for showing, and make certain your agent or their team member is equally available.

Fifth truth: all transactions in this market are tentative. Between inspection issues, buyer’s remorse flu, appraisal issues, and closing logistics, it is not done until it is closed, recorded, and funds dispersed. In other words, it is not sold until you have the money in hand.

Sixth truth: the agent matters. Some agents are better than others. You should compare and evaluate. Experience, designations, marketing strategy, and chemistry are all important. It is fair to ask for a list of sales and clients. Some of my future clients interview past clients. At minimum, you should have confidence that the agent will be effective. In my opinion it would be unwise to hire anyone who is not a Realtor, particularly given the Code of Ethics.

These are challenging times. Choosing an effective agent is important. It can be the difference between a sale and no sal

The Picture of Health (Reform) NAR's Officer's Blog

It is the 13th of October and I am writing from the 13th State. Yesterday, the Senate Finance Committee voted to forward a health care plan. The vote was 14 to 9 with Olympia Snow, Republican from Maine, voting with the Democratic majority.

The self-employed and small employers, such as REALTORS® and realty firms, would benefit from the significant changes that the amended Finance bill makes to traditional insurance underwriting and rating practices, including bans on the use of pre-existing conditions, health status and a number of other rating factors that have made coverage costly or unavailable. Self-employed individuals would be given an added advantage in that they could choose to purchase private health insurance as an individual or as a small business through the new health insurance exchanges.

Before the Finance measure goes to the Senate floor, it will be melded with the Senate Heath, Education, Labor and Pensions Committee bill, which passed earlier this year. The melding will be done by the Senate and committee leadership. Once melded, the combined bill will go to the Senate for a vote. Then, the House has three committee versions of its bill, HR 3200, that are also going through the melding process so that a single House bill will emerge for approval by the entire House.

In short, the legislation is moving forward, but has many steep hurdles to clear before it becomes law. It is important to remember that we are still in the early innings of health reform, which means the actual language that will be in any final bill is very fluid right now. Because of this, your National Association has not taken a position on the bill.

What your Leadership Team and staff have done is to work through the entire process, without a respite, to make sure that any legislative proposal includes provisions that take into account the unique challenges of the self-employed and independent contractors. Moreover, NAR has also been both visible and vocal about its opposition to any proposal that would limit the mortgage interest deduction (MID) as a means of "paying for" health reforms. You can be sure that we continue to be vigilant in that commitment.

We understand how important this issue is to the members. Last week, I traveled to the Maine Annual Convention in Rockport. Much of the conversation focused on health care. What was striking is the calmness of the conversation and the desire to understand and be understood. Over 20,000 people in Maine have lost their jobs over the past year. Its economy is a mirror of much of the country. Generally, the perspective was one of value. If we are going to have a national health insurance program it should have cost controls, be portable, be available to people with pre-existing conditions, and provide quality care. It should have ‘common sense.’ Does this sound familiar? It should. These are the National Association of REALTORS® priorities on health care reform.

All of this was in contrast to my personal experience in Rhode Island. Our small office obtains health insurance through Blue Cross/Blue Shield of Rhode Island. This month’s premium is $3,600. Over the past two years we have cut our overhead by 50 percent, but our costs of health care have increased by 25 percent. This has been necessary and I am confident you have been engaged in the same process. It is frustrating to see my premiums increase in part to fund a beautiful new glass skyscraper in Providence.

Nevertheless, please know that NAR is actively engaged in bringing common sense to the conversation. As Brokers, agents, support staff and Americans, this is a critical debate. -- Ron Phipps, 2009 NAR First Vice President