Reluctant as I am to admit that I have a free subscription to the AARP magazine, I have to confess my wonder at the contents of the most recent advice column by Liz Weston.
Since I believe that you get what you pay for in almost any arena, it occurred to me that the name under which she brands her column–“My Two Cents”–couldn’t be more appropriate.
Weston answers a question from someone who has had a house on the market for months. The individual asks:
How can we find a buyer and get the best price in a slow market?
In the old, the old, old days, we would call that the $64 question. Even in just the old days, it would be the $64,000 question. These days, let’s dub it the $64,000,000 question.
Here’s the advice that Weston provides:
- Set a realistic price
- Create a clever marketing plan
- Hire an aggressive, experienced agent
- Offer some incentive to the buyer’s agent, say, a bonus of 1 percent of the purchase price to the one who nails a sale
Uh oh. She was fine until her fourth recommendation, which reminds me of a tactic forbidden by law in many states. At a minimum, her notion makes me uncomfortable.
The law refers to a “net listing.” A net listing occurs when a seller authorizes a broker to procure a specified amount for the property and then allows the broker to keep as a commission any money above this specified amount obtained from the sale, according to one of my yellowed textbooks.
While it is okay to offer brokers a bonus for a sale–for example, a set dollar amount, a motor scooter or a vacation–to tie the bonus to the amount of the sale strikes me as a net listing whether it goes to the seller’s or the buyer’s broker.
If the bonus goes to the buyer’s broker as a percentage of the sale price, that broker has a conflict. Although the broker is supposed to represent the buyer’s best interest–the lowest price being key–the broker receives a bigger commission by negotiating not the lowest, but the highest, sale price.
Listing agents will sometimes structure commissions so that the buyer’s broker gets a bigger proportion than does the seller’s. I’ve done it, though doing so implies that buyer’s representatives are less likely to show their clients a property that might work for them than one offering the greatest amount of compensation.
As others have pointed out in the past, percentage commissions create an inherent conflict with the buyer’s best interest. Perhaps I should thank Weston for jarring loose my thoughts about the prevailing commission structure, which essentially assumes that it is harder to sell a $2 million property than a $1 million property.
Not so. Isn’t a flat fee more defensible than the current system? I’ll explore that question in a future post.
The columnist continues:
5. Check comparable sales from the previous 90 days
On the surface, that sounds like good advice, except that those prices are far less telling in a dynamic market than those on contracts signed in the prior 60 or even 30 days before settlement. The most current information is vital for anyone seeking to list a property competitively.
In any case, it is extremely difficult for most sellers to obtain those prices, while good agents usually can. Moreover, evaluating what those prices mean in terms of property condition, neighborhood and the state of the market is beyond the majority of buyers.
Ask a broker how many times a seller has stammered, “But, but, my home is unique,” and you’ll get a laugh of recognition. Guaranteed.
6. Ask your agent to set up a Web site with your home’s address as the URL.
This one’s debatable. Some agents swear by the notion, but I think it’s an outdated way to reach potential buyers, with the possible exception of luxury properties. In my humble opinion, brokerage Web sites, agent sites and databases such as StreetEasy.com work just as well.
7. Post a virtual tour with 360-degree views
Virtual tours were big a few years ago and then viewers began complaining that they made them dizzy. Personally, I favor tons of photos, and I believe that’s true of most buyers.
8. Promote the house at sites frequented by prospective buyers such as zillow.com and craigslist.org
9. Market your house on Facebook and Twitter–and ask your friends to spread the word
10. Showcase your home with an ad you create at postlets.com or vflyer.com
11. Get an inspection; fix problems that could thwart a sale
12. Snub an agent pitching a sky-high offer price.
Nos. 8 and 10 are solely the agent’s job, while both agent and seller could share the Facebook/Twitter approach in No. 9. As for No. 11, I’d rely on the broker’s advice as to whether that is necessary to advance a sale.
And of course, an agent who seeks to “buy” a listing by suggesting an irrationally high price ought to be shown the door.
The bottom line is this: Any property priced right, no matter what, will sell so long as prospective buyers can be made aware of its availability and be tempted by photos and descriptors. Although many sellers manage to attract offers, it is an arduous climb for most others that results in a stumble.
Within her space constraints, Weston does a fair job of offering conventional wisdom, a potentially poor job of defining compliance with the law and a mediocre job of explaining the complexities.
Yes, I’m self-interested. But there’s a difference between an amateur trying to go it alone and one who calls upon a qualified professional to accomplish the mission.
When it comes to plumbing, I don’t try to do anything more complicated in my apartment than change my water filter. When it comes to electrical work, I don’t do more than change a light bulb.
When it comes to selling real estate, most buyers shouldn’t try anything more complicated than hiring the right broker. Assessing a property, marketing it effectively and negotiating a real estate transaction is not as easy as it looks.
Subscribe by Email
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022