Although it seems absurd to pay a 5% commission to sell a property in the internet age, a great real estate agent with good connections may be worth it.
Let's say the best price you thought you could have gotten for your property was $1 million. But your real estate agent was able to work her connections and get you an out of town buyer for $1.1 million.
Paying $55,000 in commissions still leaves you with $45,000 above what you thought you could get. In this case, you probably are happy with your real estate agent even if the market was mostly responsible for dictating price.
But there are situations where a real estate agent will not only charge you a 5% – 6% commission but also unsuccessfully market your property to the point where it sells for below fair market value.
During my hunt for ocean view homes in Golden Gate Heights, I stumbled across one example. It's a case study of what not to do as a seller and as a real estate agent. It's also a case study for buyers to take advantage.
A Real Estate Transaction Gone Bad
Let's take a look at 25 Lomita Avenue in San Francisco, officially a two bedroom, one bathroom house with 1,529 square feet.
It has amazing views of the ocean with an oversized 5,998 square foot lot (2,500 sqft lot is standard in SF). The house also has about 400 square feet of unwarranted living space with another unwarranted full bathroom downstairs.
The negatives of the house are that the owner removed the garage to create about half of the unwarranted living space. The black garage door in the picture is actually just a wall. The home also sat on a bend which may be uncomfortable for some families due to a blind spot when cars drive by. Finally, there is some normal wear and tear.
Overall, 25 Lomita Avenue is a nice house in Golden Gate Heights. With $150,000 – $250,000 of work, it'll be really lovely.
Now that I've described the house to you, what do you think was the initial list price? To improve your real estate acumen, you should always do a walkthrough without knowing the price. The closer your estimate to the asking or final selling price, the sharper you will be when it's time to buy or sell.
I'll give you a hint about the price. Homes in Golden Gate Heights with panoramic ocean views sell for $850 – $1,050 / sqft on average for good to completely remodeled homes.
Based on its average condition and official square footage of 1,529, this home should be listed for $1,300,000 – $1,605,000. The average would, therefore, be about $1,450,000.
But what about the unwarranted 400 sqft downstairs you ask? Let's be generous and add 400 sqft to 1,529 sqft to equal 1,929 sqft, even though the unwarranted space is slightly below grade.
At 1,929 sqft, 25 Lomita should be listed for $1,639,000 – $2,025,000 based on $850 – $1,050 price/sqft. The average price would, therefore, be about $1,832,000.
Now let's take it a step further and average the averages given nobody pays full price for unwarranted space that is not listed on the 3-R report. This is important because when you turn around and sell a property, you will face the same issue of not being able to count unwarranted space as official square footage.
The average of $1,450,000 and $1,832,000 equals $1,641,000. Pricing the property at $1.6XX would have been the logical move.
The real estate culture in San Francisco is such that the final price is usually higher than the list price due to tremendous demand. It is very hard to underprice a home because the market tends to bid the price up to market value.
The worst thing you can do when selling a property is to overprice the property and let it sit. When a property becomes “stalefish,” people start thinking the worst about the property and go away. You've got to price a property at or slightly below market and sell within 30 days.
The Initial Listing Price
The agent and the seller decided to get greedy and list the price for an unreasonable $1,975,000. See the price history of 25 Lomita below.
$1,975,000 was a huge mistake because it signaled to buyers that the seller wanted $2 million or more. $2 million or more for a house with no garage and only 1,529 of official living space is out of line for the neighborhood. Maybe in 5-10 years, but not now.
At $1,975,000 the official price/sqft online was $1,291, on par with the most expensive neighborhoods in San Francisco.
Once the sellers realized nobody would pay $1,975,000 or higher, they cut the price aggressively by $225,000 a month later to $1,750,000.
During this time period, a house a couple of doors down at 65 Lomita Avenue came onto the market. However, the 25 Lomita agent and seller already knew this house listing was coming because it had a “Coming Soon” sign staked on the property before 25 Lomita was listed. See picture.
This is where a good selling agent is really worth his or her weight in gold. 65 Lomita is a smaller lot, with lesser views, no deck, half as much unwarranted space, and only one full bathroom in the entire house. The official square footage is slightly larger at 1,590.
But what it did have is a garage, an official third bedroom, and an agent who priced the home appropriately at $1,699,000.
The pricing really was key.
While 25 Lomita was busy lowering its price over a two month period, 65 Lomita listed and sold within 30 days with a final selling price of $1,750,000! What a much better experience for the 65 Lomita seller.
25 Lomita ultimately sold for $1,700,000, or 14% below its original list price of $1,975,000 after spending 3.5 months on the market. But what's really sad is that 25 Lomita sold for $50,000 less than 65 Lomita, even though it had a bigger lot with better views, a second bathroom, and more overall space.
I strongly believe that if 25 Lomita had been priced at $1.6XX as I calculated above, 25 Lomita would have sold for between $1.8 – $1.85 million, or $100,000 – $150,000 higher than it did.
Lessons Learned From This Debacle
1) Pricing is extremely important. Do not get too greedy with your asking price. It's better to price slightly below market to draw people in and create a bidding war rather than price too high and have the property sit.
2) Do not blame the homeowner. I spoke to the listing agent at 25 Lomita after the first big price drop to ask what was going on. She said she wanted to list the house closer to $1.79 million but her sellers insisted at $1.975 million. She is supposed to be the real estate expert, not the sellers. She needs to take ownership of the pricing.
3) Do not bad mouth other listings. I asked the listing agent about a couple other comparable listings in GGH and she said one was, “a piece of shit.” I was completely turned off by her response because that piece of shit was a diamond in the rough in my opinion. The property she bad mouthed was already in contract unbeknownst to her! The listing agent was unprofessional and bitter, which probably showed up in conversations with other potential buyers.
4) A little sprucing up can go a long way. Most new buyers lack imagination and are extremely picky, which is why staging is big business. New buyers may also be feeling financially stretched or unsure. As a result, they want everything to be perfect. For example, even though it might only cost $3,500 to refinish the floors, new prospective buyers might assign a $20,000 value to the refinished floors that smell new because they have no idea. The same thing goes for appliances and newly painted walls.
Experienced buyers, on the other hand, want to see a “piece of shit” like the 25 Lomita listing agent said because they can see the potential. They realize that it doesn't cost too much to paint and switch out appliances.
Related: Should You Buy A Fixer Upper? Weighing The Pros And Cons
5) Act decisively. The listing agent took too long to lower the price for San Francisco's standards. She waited 30 days to lower the price from $1,975,000 down to $1,750,000. Then she waited another 30 days to lower her price down to $1,725,000. Instead, she should have initially slashed her price down after the second or third week if she really was listening to feedback.
The seller might have truly been stubborn and had strong-armed the listing agent into keeping the asking price high. Just be aware of what might happen if you think you're the expert instead of your real estate agent. Listen to your agent. That's what she or he is there for.
If you're the listing agent, you're doing your seller a disservice by being a “yes sir, yes ma'am.” You will not only hurt your seller's chance of getting the highest price possible, but you will also hurt your reputation and future business if your listing doesn't sell at a price within the standard period of time.
25 Lomita would have sold for 6% – 8% more than it did if it was prepared and priced properly. Now imagine how pissed you'd be if you also had to pay $85,000 for commissions.
Sellers and real estate agents need to do the math and run through multiple scenarios if they want to get the best price possible. Otherwise, you might as well flush money down an unwarranted toilet.
Explore real estate alternatives: Sick and tired of dealing with bad real estate agents? Consider investing in real estate with Fundrise instead, one of the leading real estate crowdfunding platforms today. They have various eREITs in commercial real estate deals across the country to choose from. It is free to sign up and explore.
Related Posts:
How To Choose The Right Realtor Because My Realtor Sucks
Thanks for sharing that your asking price is key and that you should never get too greedy. I want to sell my home but I don’t know how much it is worth. I’ll look for a good agent that can price the house fairly so it actually sells quickly.
yarh..do agree with most of your points. If you are selling a property you need to decide whether to even hire an agent (you don’t have to, you can list on MLS for about $200 + buyer’s agent commission, I have sold many properties this way).
I disagree at the end. The owners have the final say in what they wish to list the price at, you can advise them, but if they do to wish to listen to your expert advice you don’t have control over that. I’m not a real estate agent, but my aunt is and I work in mortgage and have work with hundreds of people a year and a lot of people are my way or the highway type even though you are the expert. Your claims take all responsibility from sellers and that’s not right. If I’m a doctor and advise someone to take medication and the person refuses, is it the doctors fault? If I’m a loan officer and I tell a borrower their debt to income is tight and to not charge anything or finance large purchases until closing and they choose to buy a car right before closing, is it my fault the borrower didn’t heed my advice? In the real world, there are all types of people we have to deal with. If the agent refused to list at the price the sellers wanted, the sellers could fire them and hire someone who would list at the price they wanted.
I like that you said that it is not a good idea to overprice the property when trying to sell it. Someone told me that it was a good idea to check for how much other houses around your area are going for. Thank you for helping me learn more about real estate sales tips.
Typical US Realtor tactic: buy listing at high list price, then @30-45d, hint at dropping price with slick sales scripting new price, adjustment and other propaganda, etc….then reduce and reduce until it sells.
Collect 5% commission.
American hustlers.
It’s been a couple weeks, but hopefully I can still post this. When I moved away from Florida three years ago for a corporate move, I had a bad real estate agent whom I chose; I say bad because she was terrible at returning phone calls. I don’t know if it affected price.
Two years prior (2013), when I moved out of New Jersey, again, corporate relocation, that agent I’m not sure. She suggested a price $365k, that we knew we’d lose money on after 6 years ($441k), but my new employer was throwing in $35k for housing cost losses, and I had refinanced 3x during my ownership. I had a full price offer within a few days. I regretted I hadn’t priced it higher.
In Florida, our agent lived in the neighborhood, marketed heavily that she knew the neighborhood, and gave us a very high potential price $475k. We had bought for $419k two years earlier as a short sale, and did about $10k of work. We considered renting, but I estimated only $300 per month of income and was concerned about maintenance issues. We interviewed 3 agents. We picked two who submitted their paperwork to corporate relocation, and the comps were about $457k. We made the mistake of listing in February, which is fine for close to the beach, but we were in family territory, so we should have followed the school year (we were moving in March). We had so many showings. First offer came in at $450k; I wouldn’t even negotiate, against real estate agent’s advice. We got several more offers, none high. Dropped price to $465k and then got two competing one offers, one who came up to $465k. But then they pulled out for concern of maintenance issues just as we were moving up north. Of note, real estate agent never returned my calls, which was bothersome when people pulled out. We got more offers, 4 more, all very low though there may have been one that pulled out later. Total 100 showings on the house in 60 days. Of note, not many were offering 20% down either. We were now getting close to 60 days. My employer’s plan is they add an extra $6500 if you accept an offer within 60 days that goes to sale. Real estate agent noted the brackets and suggested lowering to $450k. Got an offer the next day at $451k. Needed a few things fixed, not major, which was a pain since I was up north. And then it sold. Employer pays all fees, commissions and taxes, and then added $6500 (taxable) to my earnings. I bought a new house up north for $450k.
In retrospect, I should have negotiated with the first offer of $450k, and that was MY fault, not the real estate agent’s fault. I shouldn’t have initially listed so high ($475k), knowing what the comps she told my company were $457. I should have waited until April, and delayed my move date until then. But I wish she had returned my freaking phone calls, especially when people pulled out of offers. And today, it still makes me mad. I also often wish, especially as I read this column, that I had kept the house and rented it out. My net worth in those three years has almost doubled and in retrospect, I valued the house more than the money. On the other hand, nothing stops me from going back to Florida and buying a new house either and perhaps wait until one is closer to a job I may find there (though schools are better up north and I have more and older kids now).
And maybe that New Jersey agent was better off than I thought.
A good agent is worth the price. I was recently referred to an agent who my contact said was good. I had a weekend lakehouse that I wanted to sell. The agent was very confident. Knew and lived in the area and the lifestyle (lake life). He said he charged 7% commission because of his marketing efforts and vast contacts. I went with him. He said listing price should be 18% higher than what I felt based on my limited “Zillow” comps. I trusted him. BOOM. The house sold in 4 days, cash. I got 97% of his suggested list price and 12% more than I expected. Good professionals are worth the money in any area (real estate, law, accountants, financial planners, etc). You get what you pay for. Remember, if you pay peanuts, you’ll get monkeys.
Irrational exuberance at its finest. I thank the baby Jesus that the really nice places to live are actually very affordable. Sam’s spot on though…it’s all about the jobs/money in the area. That house is a $250,000 starter home in the “up and coming” part of town in most places, I feel sorry for those that have to be in that market. Being house poor sucks, a real estate correction could wipe you out, and it is not even like you are living in anything remotely resembling luxury, and the weather isn’t great. Only cool part is its only a few hours drive to some amazing places, that’s a bonus at least.
Ah, but the multi-million dollar views! Gotta put a price on that.
Meanwhile, you can get an extremely nice 3,000 sq ft house in the midsouth for $300k, give or take.
Yes but California market has had such different dynamics these past 20+ years that comparing what you get requires some nuance. Case in point: we bought a 1,600 square foot rambler on a large by local standards lot (10,000 square foot) for $450,000 in 1997 in Mill Valley CA. Wholly unremarkable 1950’s box with only one nice feature – about 15 redwoods in the backyard. A few years later we bought an investment property in the finger lakes area in central New York – 1,900 square foot Victorian on a 4 acre lot. Genuine beauty that came along with a mini-farm essentially. Purchase price of $180,000. Today the California rambler will sell for $1.4 to $1.5 million in a New York minute. The New York property may fetch $225K.
Good agents really have to prove their worth in the current environment. It was a lot easier to sell a house two years ago, when the market was booming. Now, home sales are plunging and there’s too much inventory in the market.
Why? I’m hearing that luxury properties in coastal cities may fall as much as 50% from their peak. People can’t afford them after losing their deductions to the SALT cap.
Could you share some analysis on the 50% decline? I’d love to read it. Who are you hearing this from? I will be the first person to buy all the property I can in such a scenario. How about you? Do you own or rent and where do you live? How was your market doing?
For the record, I think 40% or 50% losses are extreme. Here’s a public prognostication at a hedge fund conference yesterday in New York (where I’m looking).
https://www.bloomberg.com/news/articles/2019-05-09/mozilo-sees-luxury-housing-rout-as-tax-bill-bites-coastal-rich
Hey Sam,
I know you have mentioned the opportunity that comes with purchasing a home or investing in the Heartland of America in a previous article. Do you have any thoughts on rust belt cities such as Detroit, Cleveland, and Pittsburgh? Do any of these 3 markets seem more enticing than the next, or does it seem like they would all offer relatively equal investment return?
Thanks,
Nate
Those cities have high cap rates and are attractive from a passive income perspective. Just don’t expect too much capital appreciation.
Each city is different, so you’ll have to do your own due diligence.
I live next door to the first house I offered on the last time I was house shopping. I’m not in the SF market but offered within 5% of asking on the first day of showing as I was on a 10 day house hunting trip and was already deep into the trip. Long story short, sellers countered back at full asking but that wasn’t what was passed to my real estate agent, which was something vague. I walked as I didn’t have time to play. While driving in the neighborhood that night I notice the house next door was for sale by owner (with the seller specifically saying she’d pay buyers agents a 3% commission). I bought the second house. The first sat on the market for 3 months and sold for $10000 less than I offered day 1.
Agh, wish I read this sooner. Our Seattle condo is almost three months on the market and we reduced the price three times. If it doesn’t spark interest we will just try again next year when the new Google complex is completed across the street. Went through Flyhomes with a 1% listing fee. I guess you get what you pay for! They’re nifty on the buy side though. We got Alaska miles for each $1 of purchase price.
Interesting to hear about Flyhomes. A 1% listing fee is darn attractive! But I assume you still have to pay at least 2% commission to the buying agent? Still, 3% is better than 5% – 6%.
Good luck on the sale. Seems like inventory has really surged in Seattle.
I’d hold on for that Google complex to be built first.
Yeah, I think real estate prices in some of these cities (including mine) is insanely high in general. To me, someone who just crossed the $50,000 income mark last year (my job pays me $62,000/year), $1.6 million is mansion pricing. And the house in that picture was no mansion. Not ugly by any means, but just a regular house.
This is probably (definitely) unrealistic and stubborn of me, but I look at what the prices of homes in most of the country are (such as the houses my sister and her husband looked at a few years ago out of state) and feel that THOSE are reasonable prices.
I can’t help but feeling that this is another real estate bubble ready to burst. Does anyone from non-coastal cities really think these are reasonable numbers!? And no, just because the neighbor’s home sold for X amount doesn’t make these numbers reasonable; it just confirms my belief that everyone’s gone mad.
Knowing the San Francisco real estate market you follow, Sam, I predicted about $1.9 million as the asking price (so close!). But looking at the picture with no additional context, I’d say $300,000 is a reasonable price to pay for that REGULAR non-mansion house.
So glad I paid $120,000 for my apartment rather than get sucked into the world of unaffordable housing. Let’s ignore the fact that that was all I could really afford, though I wouldn’t have bought anything more expensive anyway.
Sincerely,
Angry Retail Banker
It’s the income. People make a much higher income here than where houses cost $300,000.
And $1,900,000 is $200,000 off the final sales price. That’s a lot of money.
For me, I don’t think income should determine the value of an item. I mean, it DOES seem to do so, but I just think that’s wrongheaded thinking. If I made $1,000,000/year tax free, and you offered to bring me to a Chipotle where each dish cost $100 but there was otherwise no difference between that location and other Chipotles, I’d laugh in your face and walk away.
But lifestyle inflation is a common thing. It’s why so many people can’t reach FIRE even though they make a ton of money.
I was trying to predict the asking price, not the sell price. Having reach a few of your articles regarding San Francisco real estate and your implications that the house was gonna be on the high side, I figured about $1.9 million would be the right answer. So close to the $1.975 million that was the actual original asking price! Do I win a prize? ;)
Sincerely,
ARB–Angry Retail Banker
My wife and I make $90k/year. A 3,000 sq ft house would cost us $300-400k. If I moved to the SF area, we’d probably make 2.5 times as much, so $225k/year. However, a 3,000 sq ft house would cost us millions.
The ratio is absolutely insane, and feels totally out of touch. I have to agree with ARB; the market feels like it’s due for an implosion at some point.
Amen! $1.7 million here in the midsouth will get you 10,000+ sq ft. I’ll stay where I’m at!
Can you share your income in the midsouth?
Recent college graduates in the SF Bay Area are making $100K – $150K at the big companies nowadays.
Yeah, of course.
I graduated with a BBA in Accounting, and was hired at $50k. I’ve been working for 4 years, and I’m around $68k.
We are currently renting, but if we were to buy, $300k for ~3,000 sq ft would be remarkably easy to find. That’s with high end finishes and the such.
Salaries are much higher, but the job market is more competitive, and housing far exceeds the comparable salaries. Cost of living is just a beast.
SF also has a bunch of agents with reputation of underpricing to drive a bidding war. I’ve also seen some listings increase prices after it is unsold by taking it off the market and relisting it. Unknown to them, savvy buyers can see the price history even if it’s removed. Idk how the agents still get away with charging a 5-6% commission
Yeah, the increase in list price after failing to sell is an irrational ego move. Dumb.
Most folks have no idea of how much work agents do. We don’t only sell, but also our counselors, teachers, project managers, financing gurus and so much more. I wish folks could walk a day in our shoes to see what it really takes to be successful.
Jamie Parker,Exp Realty
Feel free to explain what are some things that have made you successful as a real estate agent. And some advice from homeowners who want to sell.
As I write in my article, there’s a good chance the homeowner did not listen to his or her real estate agent and stubbornly expected a much higher price and refuse to lower the price at the real estate agents counsel.
This is an incredibly valuable article. We were swindled by an agent last year and had to sell for 4%-5% below market value. The agents insisted that our house be listed by 8% more than what I thought was the actual value. Assuming these guys knew something that I didn’t, I went along with it. With almost zero inventory last spring, our house had 25 viewing in two weeks and no offers. Agent calls and says “I think we missed the mark, let’s come down 3%”. I pushed back with 5% price drop because we were way off. We get 1 offer a week later for 5% below the reduced price and walk away with $30K less than what the identical neighboring duplex sold for 4 months later that was priced correctly.
You CANNOT under price a house. If the house is listed below market value, a bidding war will ensue bringing you up to market value and reduce days on the market. Overpricing also helps in selling your neighbors houses because it makes them appear to be relative values. Agents are such scumbags. No house should be on the market for more than 10 days without a fair offer. The fact that most take longer is a perfect example of scum agents buying listings.
The problem is inventory is low in big cities and there are more agents then there are listings. Agents must compete to win listings and a common strategy has been to overprice properties to “buy” the listing. The agent doesn’t really care what the house sells for ultimately, they just want the free advertising and the massive 5%-6% commission.
Figure out what a similar property has sold for in the past 6 months and price 2%-3% below that to drive traffic and give buyers a sense of FOMO. That’s when people get competitive and irrational. A stale property gives the buyers no sense of urgency and even worse, gives them leverage in negotiating.
I’m sorry to hear about your situation. It is usually the case where the homeowner wants to list at a higher price because the house is “more special“ then another house.
I totally believe you are right that it’s very hard to miss price the house on the downside because the fair market will create that bidding war to potentially get an even higher price.
Thanks Sam. Everyone we talked to were equally perplexed by the seller wanting to list below what the agents were suggesting. We are just another cautionary tale for people looking to list their properties in today’s market. Everyone should keep in mind that the market is no longer “hot”, agents are getting desperate, and there is certainly some price discovery for whatever the “luxury” price point is in your metro area.
We timed the market perfectly by buying in 2011 and selling in 2018, but took a big L in sales strategy and execution. Fortunately, we had a ton of appreciation in the house and the 4% loss didn’t sting that bad. We are very hesitant to ever buy a house again. The agents are scum and buying a house at this point pretty much requires a PHD in economics to be able to choose the perfect property in the right location and buy at the perfect time, and hopefully at a discount from an estate sale or divorce.
Owning a house was such an enormous pain in the a$$ that I would have to be assured another massive financial gain to do it again.
Great article. I would caution a little bit more to know your market when choosing a pricing strategy. In Pittsburgh, Pa for example almost 85% of the homes sell BELOW asking price. In that market, buyers expect to negotiate down. It’s a major difference between selling real estate in a hypermarket. Second Know the norms and more importantly know the trend. The market for homes over $1.2M is stagnant and Days On Market are longer than a 3/2 in Hayward listed at 750K. Homes in this price range require a different level of financing. Also, they are usually not first time home buyers. Agents and sellers who are still operating on an early 2018 mindest have missed the boat–it already sailed and that’s why they are not selling.
As mentioned, a good agent will explain the difference in the new market vs the old one.
Yes, every market is different. But I still think that if you price the house very competitively, it’ll dry and many more buyers and increase the chances of getting the best price possible.
Just think about the bidding wars on eBay for example. Nobody starts with a super high price. They always start with an enticing price.
Just think about the car advertisements. They always ever ties some incredible deal we’re only one person can get it to bring the crowds in.
Love this case study Sam.
I still do not believe that the value of an agent justifies a 5% commission cost for the seller on these multi-million dollar homes. It sort of falls in line with how I feel about the AUM fees some advisors charge (and even then they usually have tiers where if it hits a certain level the fees go down). This is not the case in the real estate world.
I do realize the megamansions ($20+M homes need a lot of advertising/marketing expenses by the agents but the commission on such a home still is eye popping and feels to high).
The strategy you employ works well for hot markets like SF, but what would you suggest with an average market? If you under price a home and there is only one buyer who offers asking, do you just accept it or do you decline?
The case was very clear, I personally average selling homes 4% above the market average “list price to sold price ratio” … Unless an agent can show me their real no bullshit stat, just like a wealth manager or any performer in any industry then don’t hire them. I would pay 90% of the agents in the market a nickel to sell my home. I appreciate someone who notice the difference, if you look closely enough it’s clear as day who pays for themselves and who doesn’t. List to sold price ratio is the easiest place to start.
Almost every investment property I own was sold by a terrible agent. As a buyer, they are the best.
If you are selling a property you need to decide whether to even hire an agent (you don’t have to, you can list on MLS for about $200 + buyer’s agent commission, I have sold many properties this way).
If hiring an agent, NEVER take recommendations from friends and family. Go onto a site which allows you to bring up sales history (I use Redfin, other providers may work better in your area). Look at all the highest sales of comparable properties in the past 2 years in your neighborhood, assess time on market, understand seasonality of your market, and use one of those agents. Seasons of market is very important, in Chicago for example, properties take longer to sell in November – January.
To become a realtor in most states is about a 100 hour course, with no college or high school requirements. So your agent has less training than your hairdresser, and has a similar amount of training as your McDonalds cook. Some agents are incredible and add a lot of value, but due to the low bar, there are many who are not.
The past two homes I have bought were from agents who were family friends or referrals. Better yet, they were out of town agents who didn’t really know the market. They are a buyer’s best friend.
That was a very interesting and well-thought-out article. However until you walk a mile in a Realtor’s shoes you have no idea how hard it is for us to negotiate the correct listing price for any given property. Almost every property owner thinks their home is very special and worth more than everybody else’s home. My job is to advise them on listing price But ultimately it is the decision of the homeowner to set a listing price on their home. It can work the other way where an unscrupulous realtor just wants to get a home so quickly when they could have clearly nutted a lot more money for their client. My job as a listing agent is to sell the home for as much as possible as quickly as possible and there is just no set formula for that combination each sub Market is completely different even within a city. That was a very interesting rate I will definitely keep you on my reading list!
I agree, and I hope you don’t see this article as bashing real estate agents. I just wanted to write this article as a case study to help sellers and buyers.
The real estate market is much less liquid than the stock market. As a result, there is a lot of opportunity on both ends to get a better price.
I think he studies are the best way to learn. I loved doing to study work while I was in business school.
Sloan – Realtors are liars. Here is the playbook for the majority of listings…. List house for way too much money to “buy” the listing. House sits on the market for 30+ days. Casually say, “uh, I think we missed the mark here”. Adjust price down 2%-3%. If the seller is desperate, they start slashing prices until the house is sold at a discount. If the seller isn’t desperate, the house gets delisted and the agents are fired.
There aren’t any realtors that are trying to get clients to list lower. The competition for listings is so fierce now that virtually every house that comes to market is comically overpriced. This is the realtors fault. Realtors need to be exposed for the liars and cheats that they are. No house should sit for 30 days+. If the house isn’t sold in 10 days, the realtor is either inept or a liar.
Yes, I agree they over price. See the post I’m about to write on what happened to me in Florida and New Jersey.
Total agreement. If the house sits idle for @30d without 1 reasonable offer, then fire the realtor. It’s Their Job to list appropriately not the bs new price game.
I used to go on a lot of open houses for fun and researching the market and the more I went, the easier it was to spot a listing with a bad apple agent. There weren’t too many, but they always stuck out like a sore thumb. I felt bad for the sellers who likely had no idea or felt too far into the process to try and change agents at that point. Due diligence and getting a trustworthy recommendation for an agent when it comes time to sell can really make a big difference. Fascinating case study btw on the Lomita properties
Solid read and I will definitely keep this in mind when I or my parents decide to sell property. We had a terrible experience purchasing our first home, because the Real Estate agent did not do their homework and always recommended sub-par listings. Next time around I am definitely going to put in the time to find an agent who actually knows the area well and is seasoned at what they do.