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