You’ve just spent 30 of the last 52 weekends doing endless chores around the home getting your home for sale and you are in the hole $17,568, give or take $5,000. You retire in 5 months, 4 days and 3 hours and you’ve always wanted to live in Hilton Head, ever since your folks took the family there for vacation back in 1964. All you need to do now is sell the home.
In a Seller’s market, that might be relatively easy to accomplish in short order but, if it is not a Seller’s market, you will need to hire a savvy professional Realtor to move your home. So, where do you start?
The first rule of thumb in researching this is to let everyone you come in contact with know that you will be interviewing prospective listing agents in the upcoming weeks. Once word leaks that you are thinking of selling, everyone from church members to neighbors to close friends will tell you, not suggest mind you, that you must use their Realtor. And btw, big mistake if you listen to them.
What you need though is a proven Realtor who can work with local Realtors to get your home sold. Here is a list of criteria you may want to consider in hiring your Listing Agent:
- You want someone who is selling now, not someone who was hot in 1985
- It doesn’t matter if they are selling the homes or listing homes that are selling, because the more sales a Realtor is around, the more Buyers they are currently in contact with – which will draw more prospective Buyer’s to your home
- Prospective Buyers also often research a good Realtor, so quite often they are going to choose someone who is hot or popular because they will know of more opportunities than a part time Realtor will. Everyone wants to work with a winner
- Ask to see a list of their individual sales in the past 12 months. Be sure to include their office’s list of sales too because many real estate agencies push their own listings
- Be very leery of referrals you receive from friends. Some friends have good intentions and other hidden agendas but, no matter what you do, just keep telling everyone that you are going to hold interviews for all prospective and qualified candidates
- Depending upon the market you live in, the more advertizing a Broker does not always equate to more prospective buyers through your doors, so don’t necessarily choose the one who advertizes the most
- In order to get buyers in your home, you need to reach out and attract Buyers Agents first, for if they like your home and feel it is a good value, they will pass the word along in their office and bring you any possible showings. The best way to accomplish this is for your newly hired Listing Agent to hold a Broker Open Home. The event should be held either at lunch or after work and there should be plenty of hot and cold hor’s deurves, desserts and light refreshments, including wine & beer. You want Brokers to come and to linger, so agree to share the cost of the open house and do it up big. Remember, you only get one chance to make that first impression, right? Oh, and you will want to invite everyone who lives on your street, including your best friends. When other brokers enter the home, they will be impressed with the ‘buzz’ associated with your home and want to be a part of it.
In most areas the common listing fee is 6%. The listing agencies firm receives 3% and the buyer’s agency’s firm receives the other 3%. Of the 3%, the listing agent or buyers agent receives a pre agreed upon percentage with their broker in charge. While it can vary from office to office and broker to broker, it’s safe to say that the listing agents and brokers of world receive approximately 70% of the 3%.
Realtors are human. They work hard for their clients and are motivated by the buck, hopefully in that order. And people who are selling their homes work hard and are also motivated by the buck. It is natural for a seller to want to ask for a 5% listing agreement if it is offered by an agency they are considering, and in a Seller’s market, 5% can often be quite the norm in some areas. But when it is a Buyer’s Market, the absolute last thing you want to consider is anything less than a 6% listing.
Janice the Realtor is working with buyers who are moving to the area because of a job transfer. She’s hit the jackpot because they have to move in with 45 days, are paying cash and have a budget up to $500,000. She shows them 10 homes and the couple narrows it down to 3 homes – all asking $500,000. Janice has not had a home sale in 7 months and is struggling with her bills. Kids in college, oldest son lost his job, husband just changed jobs and no longer has health insurance, yada yada yada.
So here is Janice and her clients going out Saturday afternoon to make a decision which home to make an offer on. One home was listed at 5.0%, which means Janice will receive 70% of 2.50%. The second home offers the Buyers Agent a 2.75% cobroke, which means Janice receives 70% of 2.75%. And the third home has, wait, is this a misprint? It is offering a co-broke of 3.5%. Double Jackpot! If by chance Janice’s buyers prefer the 3rd home, Janice will pocket approximately and additional $3,500. Hmmm, if all things are considered equal by days end, might Janice promote the third home just a bit more? Would you?
A friend of mine on Long Island went to list her townhome several years ago and was surprised it was getting so little showing activity. She had been very savvy to negotiate an unheard of 4% listing fee but homes in her development were getting showings and even getting offers but, not hers. Just before the 8 month listing expired, I asked my friend to find out what the split was. Well, her long time friend and Realtor did agree to a 4% listing fee but, she set the splits at 3% for the Listing Agent and 1% for the Buyer’s Agent. Hello? You will not motivate a Realtor nor a chicken to cross the road for 1%!
Needless to say, the deal my friend thought she had turned out to be a selfish mistake by a greedy Realtor. She changed Realtors and raised the fee to 6% with a 50/50 split and the home sold in two months. But like so many people, my friend wanted to disregard the importance of a Realtor and shortchange the people responsible for her being able to move forward with her life.
My suggestion is that you reward the Buyer’s Agent, whomever that might be, with 3.5%, and select a Listing Agent whose agency who’ll be happy to receive a 2.5% listing (and FYI, they ALL do! J). The total paid is still 6% but, you have redistributed the wealth to the Realtor doing the most important work, and that is bringing in a qualified buyer. As for the listing agent, they’ll totally understand and will be trying their absolute best to find a buyer for your home as well, especially with it listed at 3.5%.
Author is Doug Terhune of The Retirement Handbook