A letter from a reader.
I listed my house with a real estate agent in my area because we want to buy a small house in town. At first, I was excited because there was a lot of activity, but now it seems like everything just died.
Last week I called my agent because we are getting toward the end of the six-month listing. When I mentioned that I might go in a different direction, he told me to renew my listing and lower my price.
I understand his feelings, but I don’t want to spend another six months with this agent if nothing is happening. I also don’t want to drop my price because I think the right buyer will come along.
What should I do? Should I jump ship and go to another agent? Should I lower my price?
Frustrated in Ft Worth
Your agent obviously hit a nerve so let’s see what we can do to help you make a good decision. I’m going to take your questions in reverse if that’s alright. Is that OK? (long pause). Excellent. Let’s get started.
You are looking for a buyer. It seems like a fairly simple thing, but let’s not confuse simple with easy.
To start, sellers don’t really find buyers. It’s the other way around because buyers are the ones who find sellers. Since I know you just love statistics–(let’s be honest–who doesn’t?)–I am going to share with you the statistics on how buyers find homes.
Every year the NAR (National Association of Realtors) does a nationwide survey of home buyers. One of the questions they ask is, “Where did you first learn about the home you eventually purchased?”
Keep in mind, this does not include transactions where there was no Realtor involved like FSBO and private sales. Anyway, here are the results of that survey:
- 51% – An internet search
- 30% – The buyer’s Realtor
- 7% – Yard sign
- 6% – Friend, relative, or neighbor
- 5% – Home builder or builder’s rep
- 2% – Directly from sellers/knew the sellers
- Under 1% – Print advertisement
Wait, doesn’t that add up to 102%? Apparently, they need to teach a basic math class in real estate school.
But I digress. Back to your question…
Should you lower your price? Yes. (This was originally in 100 point type, but my wife said it was annoying so I changed it back.)
I know I haven’t seen your house and I know you don’t like that answer, but that’s the truth. If your home has been on the market for more than 30 days and it’s listed with a real estate agent, we now know a few things based on the above statistics:
- You are listed on sites like Realtor.com and in the local MLS or Multiple Listing Service. (51%)
- Buyer agents are telling anyone and everyone about this property. (30%)
- You probably have a sign in your front yard. (7%)
- You have nosy neighbors and people driving by the house. (6%)
- You know at least a few people and they know you are selling your home. (2%)
That covers 96% of the potential buyer pool (Trust me…I’m a Realtor). Therefore you’ve had enough exposure that any potential buyer already knows about your house and passed on it. Argue all you like, but I can prove I’m right.
Just for fun, go out to your sign and put up a neon poster board that says, “TODAY ONLY – $1” and I’ll bet you that same dollar you will have a full price offer before you get through one episode of Pawn Stars.
Like all of us, you want to lie to yourself and say that it’s the agent, the advertising, or the market, but I assure you–
The market never lies–not ever!
Still don’t believe me, go visit any retailer that’s going out of business. Look at the carts loaded with stuff those shoppers do NOT need and will NEVER use. People will buy almost anything if it’s cheap enough.
So, somewhere between $1 and whatever you’re asking is the price at which your home will sell today. You’ve already tested your price and since you’re writing to me instead of packing up your belongings, I’m assuming it didn’t work.
Still don’t believe me? Too bad, I’m moving on because everyone else believes me and soon you will too.
The next logical question is: how much lower should you go? There are no hard and fast rules here, but this might help. Over the years I’ve seen plenty of overpriced homes and when you get close enough you find a few common themes. I’ve taken the liberty of breaking them down for you into a sort of pricing barometer.
In order to use the pricing barometer and do your own experiment, you need to have a clear plastic box on your yard sign with about 50-100 flyers for your home. The flyer design doesn’t really matter too much, but make sure it has the basics:
- # of beds/baths
- square footage
- foundation (basement, crawl, slab)
- lot size
- garage type
- age of home
- brief description (100 words or less)
- IMPORTANT: YOUR name and phone number
- NOT a web address (This is for the pricing test)
Once you have the flyers on your sign and they begin to disappear, you can start to read my patented Price-O-Meter to decide just how far overpriced you are.
- If the flyers are disappearing, but no one is calling for more information—>you are at least 15% overpriced.
- If you are getting calls, but no showings—>you are 10-15% overpriced.
- If you are getting showings, but no offers—>you are 5-10% overpriced.
- If you are getting offers—>The Market Doesn’t Lie.
Buyers don’t tend to make frivolous offers, so pay attention to what those offers are saying. Once you’ve absorbed the blow, just remember that you can always keep your home. You can either stay there and wait for the market to catch up or you can look into renting your home if you absolutely have to move.
If, on the other hand, you’re in foreclosure that’s an entirely different response so you’ll need to write to me again to get that answer.
Now, on to the question of whether or not to dump your current agent. I’m afraid I have a rather dim view of the traditional 6-7% Realtor as a listing option. I’d much rather see you find a good flat fee agent, save you money and get the same results. <—– Shameless plug
Here is the current formula for success for the 6% traditional Realtor. Pay attention, because I’m only going over this once:
- Get seller to sign 6-month listing agreement with no escape.
- Get all information and photos.
- Put sign in yard.
- Put all information into MLS computer.
- Put feet on desk–wait for a buyer’s agent to sell it.
- Split 6% commission with buyer’s agent.
- Keep 3% commission for all that “work” you did.
- Rinse and repeat.
That may be a bit simplified (and harsh), but the fact is, most of the heavy lifting these days is done by the buyer’s agent and the seller. This is why I don’t do traditional listings and likely never will.
I prefer sellers to do a FLAT FEE listing. In a flat fee listing, you pay the listing agent a few hundred dollars and in exchange, that agent places your home in the Multiple Listing Service. This exposes your listing to all buyers and Realtors in the country at once.
If you’re worried about the process, hang around with us and we will get you through it.
I can’t imagine real estate should be exempt from the sweeping changes seen in every other market. The internet has changed everything about so many industries. Travel agents, stockbrokers, garage sales, taxi cabs–why not real estate?
I once had a doctor tell me that I had a sinus infection…over the internet…on Christmas day…for a $10 copay.
You’ll never convince me that a traditional listing agent could ever bring enough value to justify a 6% fee.
So…to answer your question…if you’re just going to get another traditional agent, you might as well stick with the one you have. Buyers don’t really care what sign is in your yard–they just want a fair price.
Lower your commission and use that savings to lower your price. I promise that will get you more action than any listing agent will ever get you.
In the meantime, keep sending your questions. Hit me up here and say what you gotta say. I read and respond to every message…eventually.
Take care and let me know what you decide to do.
Best of luck,
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