News Flash -- Real Estate Brokerages Do NOT Sell Homes

Question: Who do you think actually sells a home?

Possible Answers:

• The listing agent or
  
• The listing real estate brokerage?

I am purposely ignoring the seller, buyer broker, buyer agent and the buyer in this home, as that is a topic for another post. These entities/folks are quite relevant, but it's not the question under consideration. So lets just focus on the listing side for the purpose of this post.

Let's take a look at the main reasons a home sells or doesn't sell:

1. Demand. If demand exists, great. If demand isn't there, there isn't much one can do. If most folks don't want the home that backs to a major interstate, this home will be much harder to sell. If most folks don't want to live directly behind a major electrical substation due to health and safety concerns, the home will be harder to sell. If a home has a desirable location (water, golf course, cul-de-sac, loft overlooking downtown or a great view, etc.), and the general demand is there, then some properties practically sell themselves.
2. Location. While touched on in the previous bullet, some locations are in demand, some are so-so, and some there just isn't much demand for.
3. Condition. Many buyers prefer "new", whether new means an older home has been recently remodeled or a new home or even new construction. Think HGTV, think granite countertops, think stainless steel appliances. We also perform home staging, re-design and well as minor and major renovations for sellers in order to protect their financial bottom line and have sold homes with multiple offers and near list price for homes that had previously gone unsold by other agents using traditional methods, so condition will outsell price, even in a strong buyer's market like we have here in Greater Cleveland. In short, condition sells.
4. Price. Traditionally, savvy agents know that pricing is 90% of the battle when it comes to selling a home. The more price competitive it is out of the gate, chances are, the faster it will sell. That said, in a high inventory market that exists in many markets, in a non-short sale, non bank-owned property where the seller wants or needs to transact, price is no longer 90% of the equation as many sellers can't lower their home enough without taking a HUGE hit in their financial bottom line. This is where condition becomes more paramount (think home staging...think re-design...think minor and even major renovation - all depending on a seller's budget.)
5. Synergy of the above. Since real estate is never black and white. An experienced, savvy agent who understands the dynamics between demand, location, condition and price and how to best balance a given property's characteristics with a seller's constraints and desires, is key to presenting sellers with the best options and alternatives out there in order to allow to a seller to meet their goals.
 
Did you notice that marketing and advertising were not in the above list? I know many agents will disagree with me on this, but marketing and advertising does not sell a home. I have represented many times where a home was in mint condition and either poorly or not marketed at all and we had to fight to win the property in multiple offers. Why? Because savvy agents and buyers know how to use technology and were aware of it hitting the MLS on Day 1, regardless of what was done or not done to market the property. I have seen other properties in very sub-standard condition that have been excellently marketed and heavily advertised and hadn't sold because there just isn't much demand for a property like this - and I've represented buyers who have purchased these types of properties as well - the listing agent and brokerage didn't really sell it, my buyer bought it, plain and simple. I could give various other combinations as well.

Let's play question and answer:

Question: Does the listing real estate brokerage or listing agent create demand by themselves?
Answer: By and large, no. Demand is what demand is. The economics of supply versus demand is in play. Lowering one's price enough to artificially stimulate demand is always an option, but how many sellers (excluding short sales and bank-owned properties) are willing to reduce their home by 25-50% to stimulate demand to effect a sale?

Question: Does the listing real estate brokerage or listing agent have any influence over a property's location?

Answer: No.

Question: Does the listing real estate brokerage or listing agent have any influence over a property's condition?
Answer: My experience is the answer is no 98-100% of the time and only yes in 0-2% of the time. This is where home staging (minor influence), re-design (optional, depends on the property) and renovation (depends on many factors - minor or major) can make a difference. Granted, some homes are staged today. Both my wife/co-owner/REALTOR and I are Accredited Staging Professionals (ASP REALTORS) and we understand the benefit as we have staged many homes for sellers and know the benefits and also the limitations. Redesign and renovation are practically unheard of by listing agents when they meet with sellers. It's not something in their skill set, nor something agents are by and large equipped to either manage or have the capacity to perform an extreme makeover on a home in eight weeks for 50% of retail cost, on-time and on-budget - we do, as we have done it many times for both average priced homes and higher-end housing as well. Has a real estate brokerage which lists the property for sale (the Exclusive Right to Sell Agreement (ERS) is with the real estate brokerage, not the individual agent) ever stopped by to recommend property condition changes or improvements? No - I've never heard of it.

Question: Does the listing real estate brokerage or listing agent have any influence over a property's price?
Answer: Yes, the listing agent does. In fact, this is where listing agents spend the bulk of their time. Performing a Custom Market Analysis (CMA) to help determine an initial asking price. Recommending price reduction(s) if the market is declining and/or there isn't much demand (eg. little or no showings). While this is a valid technique, having this as the sole focus is short-sighted and lacks depth and options for a seller. When have you ever heard of a real estate brokerage recommending a price reduction for a given seller? Does the CEO of the large franchise or large regional company stop by a seller's home to talk about price? No - and I've never heard of it.

Question: Does the listing real estate brokerage or listing agent have any influence over a property's location?
Answer: No - this one is quite obvious.

So...we have talked about the factors that cause a home to sell - or not. And connecting the dots, we then asked based on those factors: Who actually provides the solutions (if relevant) for the decision points that cause a home to sell - the listing brokerage or the listing agent?

My opinion, largely, is that the listing agent sells the home and by and large, the listing broker has almost nothing or precious little to do with an actual sale. Real estate is never that true/false, so we are always those exceptions.

Ask any seller this question: Who sold your home? Does the seller respond with the name of the real estate brokerage or the name of the listing agent? The short answer is: Every listing agent will tell you that THEY sold the home, not their company. Their company may provide legal, administrative, logistical, signs, accounting, forms, and some company paid advertising, etc.

In fact, let's think about it.

When a listing agent successfully sells a seller's home and that seller is very satisfied with their agent and they recommend this listing agent to a family member, neighbor, friend or colleague, and this new potential seller calls up the listing agent and says -- pick one of the two possible answers:

· My friend Able Adams told me that ABC Realty just sold their home, or

· My friend Able Adams told me that you just sold their home.

Think about it - does the first answer even make any logical sense? Why would they even be calling this listing agent if the "real estate brokerage" sold their home? Wouldn't this potential call the real estate brokerage? If they did call the brokerage, would they just say: "Give me whomever, it doesn't matter, I'll take the rookie or the top producer of the office, as it is the company that matters, not the agent."
Where am I going with all this?

Think about it. If there is even the slightest bit of truth and logic in the above, then why do so many real estate brokerages (and some of their agents, not all) with whom they hang their license with (agents are Independent Contractors (ICs), not employees, heavily promote their own unique advantages on why you should use them versus another real estate brokerage? Pure and simple: Economics. After all, real estate is a business just like automotive, finance, oil, steel, apparel and the like. Different subject matter yes, but a for profit business nonetheless. What do businesses do? They differentiate themselves. They promote themselves. They distinguish themselves.

But, if their agents are ICs and the above is true, the real questions a home seller should ask themselves is:

• Who is actually selling my home and
• What causes it to sell or not sell?

The evaluation of this question and obtain objective answers is how a savvy home seller can differentiate and sift through all the hype, spin and the like so they can make an informed, rational and financially sound decision.

To interject some humor here: My wife and I co-own our own real estate brokerage and it's just the two of us as REALTORS. Having worked for a small, boutique brokerage when I first started, as well as the largest real estate brokerage/franchise in the world (RE/MAX) as well as large national and regional brokerages as well, I've seen how brokerages operate. So...just the two of us. In our case, we are one in the same, as we as REALTORS ARE the brokerage. So in our case, I guess the real estate brokerage did effect the sale of the home. The purpose of this post was not to talk about small, individually owned brokerages where the owners are the REALTORS and don't hire other agents and Independent Contractors.
With all the homes I have sold as either a listing or buyer's agent with the lowest price home being 92K and the highest price home at $1,140,000, I have never, ever heard one buyer or seller ever tell me or when referring me to others that the real estate brokerage sold my home.

Why did I write this post: There is this common myth out there that a real estate brokerage actually sold the home.

So the next logical question is: Is the real estate brokerage then relevant in the sale of one's home?

The unequivocal answer is absolutely yes, the real estate brokerage is relevant.

A good brokerage will ensure their agents know their fiduciary responsibilities, agency, risk reduction, core law, civil rights, contract preparation, basic marketing, negotiations, communication, customer service, technology, legal review and support, and the like. This is essential to ensuring an agent is well equipped to do their job and there is competency, professionalism and trust that should be there in any line of work, and should be true in the sale and purchase of one's home.

Choose your listing agent very carefully, your financial outcome or lack thereof depends on it!