Unintended Consequences

OK, it’s time again for a small rant. I signed up for a web based leads system whereby potential buyers and sellers request services from local Realtors. The vast majority of these leads aren’t worth the time to respond to. Prospective buyers wanting 5 bedroom houses in Hillsborough for under $100,000, that kind of thing. Well, one lead came up from a seller looking for a listing agent the other day that I thought would be worth commenting on here simply because it goes to the heart of the thinking of plenty of sellers who really don’t understand the unintended consequences that are headed their way via this thought process. Here’s the post:

“Need agent who is an excellent negotiator and has sold homes in my area. Agent needs to come in with a very competitive commission quote, as this home will take very little effort and time to sell. Quoted commission rates will receive preference over “negotiable” quotes.”

The property in question is a 3 bedroom, 2 bath house in San Mateo and the seller is stating that he wants $1,500,000 for the place. Here’s a few small, but relevant facts:

* The most money ever spent for a 3 bedroom house on the sellers street was $1,275,000

* In San Mateo right now there are exactly 2 pending sales on homes priced at $1,400,000 or over while there’s 15 active listings whose average days on the market are 64.

Somehow the claim that “this home will take very little effort and time to sell” seems unlikely to me…and I don’t care how nice the home is.

The obvious, most important factor for this seller is a low commission structure yet is asking for an “excellent negotiator”. If an agent caves in immediately, via an e-mail, while negotiating his or her own money…how ‘excellent” do you suppose they’ll be negotiating with the sellers money?

I guess what bugs me the most is the perception here, not an uncommon one either, that all real estate agents are the same…and since they’re all the same all that really matters is how much commission they’ll charge. If you needed surgery how comfortable would you be finding a surgeon through and an online search and then demanded that they compete for your surgical business for the lowest fee. Would you be comfortable with the discount surgeon? OK, allright…we’re not surgeons, but we’re not mowing your lawn either. There are outstanding Realtors and lousy Realtors just like there are outstanding (and lousy) painters, plumbers, contractors, babysitters, hairstylists, chefs, lawyers, accountants, acupuncturists, gardeners and coffee shops and I’m not going to any of them just because they might respond to an online query with the lowest fee. I’d simply be too worried about their competence! The unintended consequence here could easily be that the seller hires an agent willing to take an overpriced listing that will be on for too long and ultimately cost the seller significantly more money in a declining market. Make the right choice the first time…and please don’t make the commission the primary focus. It’ll cost you in the long run.

Comments

  1. Jim, I couldn’t agree with you more. Interestingly enough, sellers often believe that becuse they are attached to their home and see loads of value…everyone else will too.

  2. You got it….we gave up on the promises of overflowing e-mails with qualified buyers and sellers…not…money better spent on your own website and let people choose you for the services you provide and the knowledge you have and refer you to 10 of their best friends. Every prosperous wish !

  3. I think you should sent a copy of this post to the seller. It explains many revelant points about selling and commission. Sure, I can charge you .05% if it doesn’t sell who makes money? neither of us. The seller needs to look at who can represent them in this market, who can do a great job of marketing in this down market and who can advise them on what price they should be placing their home on the market.

  4. There are too many people that “know” real estate and we are just another used car salesman. Then when your guy doesn’t sell it will be the agents fault… no time for clients unless they are interested in selling…sorry. And web generation services are worthless…

  5. I love a seller that want more than anyone else and buyers that want a home for “Free!” They have a saying for that where I come from. It’s “Dream on!”

  6. Jim, great post and I think it drives straight to an reputation issue for the industry as a whole. While buyers are typically not well educated on the process they have strong feelings because it is their money. Still, there are so many in the industry that snap up such listings just to get listings, these realtors, in the long run, perform poorly and perpetuate the wrong perceptions of how real estate deals are done.

    On the flip side, the educated or logical clients will seek the trusted advisors having either been burned before and learned a lesson or from the advice of those that know better. And the slow economy will purge many of the realtors that are the type to respond to the example you posted… and that will be good for the industry.

  7. I agree with the above commentor

  8. Hey Jim –

    Thanks, for the rant! I came across the very same lead and wrote him a proposal much like your post. I also included a couple of names & #’s of discount brokers that would save him a point or so up front but cost him far more in the end! Needless, to say I wasn’t contacted — should be interesting to see who ends up with the listing. Keep up the good work!

    Greg

  9. Frances Rokicki says:

    Jim, Some sellers still don’t get it. By the time they do, their home will be worth much less. This is not going to change any time soon. They need to get real. I use the comparison of Nordstrom’s and KMart. Good service or cheap price. This is one of the biggest reasons that referrals are the best!

  10. That just looks like a seller that is out of touch. Any sensible agent would be cautious picking up this listing. Look what happened to the home on Portsmouth. Another seller that was out of touch.

Speak Your Mind

*