Wednesday, August 12, 2009

Top 5 Realtor Myths

A lot of myths have grown up around the role of Realtors for the simple reason that selling a home is often the biggest transaction in most people lives. We try to separate fact from fiction about Agent's roles and what they can or cannot do for a home seller.

Myth #5: A Broker will get you the best price for you home.

False: There is no doubt a broker will try to get a good price for you by using their negotiating skills to get the most out of any buyer. But even if they are the best negotiators in the city it hard to overcome a few hard facts. 5-6% commission is a lot of money to over come with good negotiations, on the average home priced at $250,000 that $15,000 a broker has to make up just to be even with what you could net selling FSBO.

But the real issue isn't even the commission, it's time. Brokers make money by selling homes quickly. The longer it takes the lower their hourly rate. A couple years ago it was estimated that on average a broker spends 12-14 hours on any one sale. Trying to get an extra $10k on a sale will net a broker $150 (after splits and agency fees) - not a lot if it takes a few extra weeks work.

Myth # 4: Open houses help you sell your home.

False. Open houses help brokers find new clients. Truth is the open house is a hold over from the days when the only way people found homes was through a Realtor, who would take them around to the open houses every weekend. Now everything takes place online initially. The open house exists because buyer feel good that their broker is working for them and brokers have the chance to meet hundreds of possible clients every month. But you almost never find a buyer through an open house.

Myth # 3: Brokers will not show buyers FSBO homes.

True and False: Brokers who represent buyers earn their money from commissions. Traditionally with 2 brokers involved, (one for buyer and one for the seller), the 6% commission will be split between them. If a broker thinks an FSBO seller is unwilling to pay any commissions then they have no incentive to show the home.

The reality is most FSBO sellers at some point list their homes on the MLS and offer any broker who brings them a buyer 2% -3% commission. Everyone wins, The seller finds a buyer and still saves 3% that they would owe a broker who represented them and the buyer's broker gets the sale. It's a fair transaction, and you still keep the right to sell to an independent buyer if one shows up with an attractive offer.

Myth # 2: Brokers protect you from liability.

False. This myth is strong and pushed all the time by agents but the reality is there is no additional protection by hiring an agent. If an agent fails to disclose to a buyer something material you told them then they would be libel for essentially real estate malpractice. But this happens in very few instances.

Most liability and suits arise from undisclosed items and the seller is liable. The best protection is not hiring a broker, but having a through inspection done, and offering honest full disclosure.

Myth #1: You hire a broker to find you a buyer.

False. It sound right, you hired them to sell your home , that means finding a buyer, no? No, almost all buyers, even those working with brokers start their search for homes online and ask their broker to show them the houses they find. The only substantial marketing a seller's broker does is list your home on the MLS and wait for buyers to find you.

In reality you hire a broker to show a home for you, talk to buyers, negotiate a sale and manage the closing process. For some sellers this is worth the 3%-6% commission but for many sellers going the FSBO route or Flat Fee MLS is an attractive and lucrative option.