For the right price, everything is for sale. So when my real estate agent friend pitched to put my home on the market in the summer of 2012 given the lack of inventory, low interest rates, pent-up demand and Facebook going public, I figured why not test things out.
I have a single family home that is suitable for a young internet couple looking to start a family. I told my realtor that if I don’t get X amount, I’m not selling, and he agreed.
The asking price of $1,700,000 was $100,000 over estimated market value, but he still thought a sale was possible. It was important to manage his expectations since he’s the one who’s going to be spending all the time staging, marketing, photographing, and showing.
It feels good not having to sell if you don’t get your aspirational price. It’s kind of like going to a bar with your buddies and having no fear talking to the most attractive person there because you already have the most beautiful wife already.
My biggest goal is to gain enough insight to write this post!
My Unprofessional Realtor
Here are some reasons why my Realtor was terrible.
* Showed up dirty. I was shocked when my realtor strolled up to my house 5 minutes before a private showing in a sweaty shirt, shorts, and sneakers after playing a 1.5 hour tennis match. His appearance was completely inappropriate and disrespectful to the buyers, and to myself. I would never dare go to a meeting that way and am absolutely baffled he would show my house in his getup.
I e-mailed him after, insisting he keep a full change of clothes in one of my bedroom closets. His presentation caused my blood pressure to rise. Maybe if my property was a studio in a bad neighborhood, it would be OK for him to come show my place in shorts and a t-shirt. But, at least take a shower beforehand dammit!
* Doesn’t listen. My realtor pushed me to do an open house multiple times. I told him NO each time, because all open houses do is open yourself up to nosy neighbors and potential robbery. I even sent him a report from the National Association of Realtors saying that only 2% of transactions ever come from open houses. I’ve personally been to over 100 open houses and I have never bought a thing!
I told him I cherish my privacy and to just use the internet marketing since 80% of buyers find their homes on the internet. He continued to push back, saying he wants the house to generate this “frenzy factor”. I asked him why can’t he just host a private open house where each prospective buyer and agent is pre-screened to create a similar wow factor? I did that with my rental property and had 30 people come in a one hour window. He shrugged. Open houses are for the real estate agent to find new clients!
* False assumptions. After saying I wouldn’t have to pay anything out of pocket, he sprung the $440 pest inspection fee I have to pay for the disclosure packet. I’m all for a thorough disclosure packet, however, if I’m going to pay him a 5% commission on $1,700,000, you’d think he would just cover this expense. What was originally a “no cost to you” listing, became a $440 pest inspection fee, a $1,000 paint job in the living and dining room, and who knows what else.
* Not in my corner. My realtor is on a tennis league team which I was thinking of joining. I use the word “was” because when I asked him whether I had a chance to play singles for his team, he told me that it would be hard for me to join because the singles players have been members for a long time already. In essence, he didn’t believe in me. He didn’t offer to talk to the captain to try and work me in. I don’t want a realtor who isn’t 100% in my corner. The funny thing is, months later I took him down in a double match with ease.
Things To Look For When Hiring A Realtor
* How big is his or her network? The longer he’s been in the game, the larger his network. Realtors can work from anywhere, so they don’t necessarily have to be a 10 year veteran of one firm In fact, if they’ve moved every 3-5 years, that could be a good sign they are in high demand. There is a virtuous cycle on one’s reputation the longer they have been working.
* 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 a little leery. The website should have basic info such as his bio, his previous transactions, thoughts on the market, some pretty graphs, and so forth.
* Does he do what he says he’s going to do? If he says he will be at your house at 1pm, does he arrive at 12:45pm to prepare the house and gather his thoughts beforehand? When he says he will handle the upfront costs, does he pay for everything or try and get you to pay some of the bill?
* Does he have a reasonable level of intelligence? You must ask them questions about their thoughts on the markets and see if they can put together a coherent argument. Realtors get an extremely bad wrap for being dumb by just regurgitating what CNBC, or the National Association of Realtors write. The realtor should have his own opinions, and facts that buttress these opinions. With good intelligence, also comes good salesmanship, because the more you know, the more you are able to sell convincingly.
* Does he have strong integrity? The one thing I like about my realtor is that he has great integrity. I asked him whether I should disclose a minuscule leak in the ceiling that I fixed and he said, absolutely. I asked him whether I should turn on the portable air-filter in one room to help drown out some outside 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.
* Does he make people feel comfortable? If you don’t feel comfortable being around your realtor, the buyers probably won’t feel comfortable either. The good thing about my realtor is that he leaves people alone to walk the property and doesn’t pepper them with questions. He lets people take their time and follow-up with him. I generally see this as a positive sales attribute, because I dislike pushy sales people.
* Can you feel his hustle? When you wake up in the morning, has he sent you some new thoughts and a marketing game plan? Has he created 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 make appointments to see the competitive properties on the market? You need to see and hear his hustle. You don’t want him strolling to your house in the nick of time in his shorts and t-shirt because he had a practice match beforehand!
The Other Realtor Is Incredibly Important
The oligopoly priced 5% minimum commission fee is ridiculous for expensive cities such as San Francisco and New York. Why on earth does it cost $150,000 in commissions to sell a $3 million dollar house, for example? I can maybe understand a $10,000 commission on a $200,000 house, but it doesn’t take 15X more work to sell a $3 million dollar house.
Despite the price fixing, don’t underestimate the power of the 2.5% commission for the buyer’s agent. The 2.5% commission for the buyer’s agent is an incredible incentive that makes Realtors hustle to do whatever it takes to make the buyers happy, which hopefully leads to a smooth transaction.
Paying a 5% commission makes me sick, however, 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 should definitely be willing to negotiate down their commissions if the choice is between walking away, and making a transaction happen.
The Internet Is Your Friend
Even if you are stuck with a dud of a realtor, it is very hard to screw up a sale if you’ve priced your properly correctly and made the house look its best condition. With sites such as Zillow where you can easily find properties for sale and check out their estimated values and the agent’s own network, it’s easier than ever before to sell your property.
The listing agent’s main responsibility is to get the word out and show the house. So long as the realtor isn’t an asshole or an idiot, the market will set the price.
You need to trust a realtor will do everything possible to get the word out and fight for your best interests. Good work experience, a web presence, and a great network should be standard. The problem with my guy is that I couldn’t stop thinking how my realtor wouldn’t speak up for me to join his tennis team. It’s that awkward moment where a friend speaks to you about another friend’s mutual party you weren’t invited to.
Finally, paying a 5% commission to sell a property just seems wrong. I’ve made a promise that I will never sell my house unless someone gives me a ridiculous price or until the commission level drops under 5%.
Update 2020: Surprise, surprise. After trying to sell my house for $1,700,000 in 2012 with no luck, I tried again in 2017 and someone offered me $2,740,000 so I took it! I got the real estate agent to lower the total commission to 4% instead of 5%. I proceeded to invest $550,000 of the proceeds with real estate crowdfunding to invest in the heartland of America, and the rest in stocks and bonds.
If you’re looking to buy property as an investment or reinvest your house sale proceeds, take a look at Fundrise, one of the largest real estate crowdfunding platforms today. They allow everyone to invest in mid-market commercial real estate deals across the country that were once only available to institutions or super high net worth individuals.
Fundrise is the pioneers of eREIT funds and they are creating an Opportunity Fund to take advantage of tax-efficient Opportunity Zones. Thanks to technology, it’s now much easier to take advantage of lower valuation, higher net rental yield properties across America.
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Updated for 2020 and beyond.