Once a home is for sale but not selling, how do you know what to do?
Both buyers and sellers can apply my List-Price Accuracy Gauge:
Once the home is on the open market, if it is……
- Getting visitors and offers, you are within 5% of being right on price.
- Getting visitors but no offers, you are 5% to 10% wrong on price.
- Not getting visitors, then you are more than 10% wrong on price.
It’s nothing personal, it’s just a simple guide to know how close the price is to being right.
The serious buyers rush out the first week to take a look, but after that it’s crickets, with only an occasional visitor. It is tough for sellers to cope, or make adjustments. But once the initial urgency has expired, you have to do something – don’t just sit there.
How quickly should sellers make adjustments? The DOM clock is ticking!
0-14 days on market – Hot property, and when the sellers have their maximum negotiating power.
15-30 days on market – Buyers get suspicious, want to pay under list.
30+ days on market – Buyers will be expecting deep discounts, or ignore it altogether.
After being unsold for two weeks, sellers will suspect that something is wrong. But it is natural to resist changing the price and instead blame everything else – especially the listing agent.
Sellers, and agents, need to shake that off and act quickly to keep the urgency higher. The first price reduction should be for at least 5% and happen in the first 15-30 days for maximum effectiveness. If the home doesn’t sell in the next two weeks, then another 5% is in order, and by then the fluff is eliminated.
Where do sellers go wrong? They don’t properly price in the negatives.
Typically sellers just pick apart the comps to convince themselves why their home is the best around, and then settle on a list price that will show everyone who’s the boss. If you don’t have any negatives, then you probably will get your price! But typically sellers are forced to come to grips with the negatives of their house, and adjust accordingly.
Do sellers have to lower their price? No, not neccesarily.
There are other alternatives:
1. Make your house easier to show. Listing agents who insist on buyers jumping several hurdles just to see the home aren’t realistic about today’s market conditions. Make the home easy to see!
2. Fix the problems. New carpet and paint is the best thing you can do: 1) it looks clean, 2) it smells new, 3) you have to clean out your house to install it, and 4) you are managing a business transaction now – it is the logical solution. Utilize staging too.
3. Improve the Internet presence. Have at least a 12-25 hi-res photos and a simple youtube tour.
4. Wait for the market to catch up. If unsold for 60+ days, cancel and try again later – probably next year.
5. Reset the Days-on-Market stat. As long as the MLS allows agents to refresh their listings, then it’s in the best interest of the seller to reset the DOM. It is a gimmick, and instead sellers should concentrate on creating real value for buyers – that’s what will cause them to pay more.
The longer it takes to sell, the more discount the buyers will be expecting – usually about a 1% off for each week on the market. When other homes are flying off the market, the buyers’ obvious conclusion is that your price is wrong, and they load up the lowball offers.
Even if you complete one or all of the five ideas above, don’t be surprised if you need to lower the price too. Keep it attractive!
The commission lawsuits and action by the DOJ will cause buyers to wonder if they need to pay for representation, and what do they get if they do.
It will also be a function of how much it costs. If the service was free, everyone would do it.
It’s been like that in the past, but it also caused buyers to be a little too casual about who they selected, and they tended to just grab someone – which doesn’t always bode well.
- If the fee was 1% at closing, you’d probably do it – if you liked them.
- If the fee was 1.5% to 2.0% and the terms were clean and non-exclusive plus the agent made a really good case why he’s worth it, then yeah, maybe.
- If the fee was 2.5% to 3%, there would need to be some guarantees or real promise that you would get exactly what you wanted, and be very impressed with the service too.
Buyers will be able to include in their purchase offer that the seller pays all or part of the buyer-agent commission. But there won’t be any promises about what a seller might pay – if anything. So buyers should be prepared to pay the entire amount to their agent, as agreed up front.
What should buyers expect? What are the skills that good buyer-agents possess and implement on behalf of their buyers? Here is my quick list:
Overall analysis of general market conditions
Video /audio tours of prospective homes for sale
Pinpoint Home-Value Analyses
Measure up the sellers and listing agents
Contingent offers that win
Tough and detailed inspections with free quotes on repairs/improvements
Expert deal management
Off-market homes for sale
Sniff out any shenanigans
See the new listings in person every week.
There are also the 132 things agents do for buyers linked here, but the real problem is demonstrating the skills. How will buyers know what they need? How will agents show them what they have to offer?
When you go to the car dealer, they let you take the car for a drive around the block. How can you do that with a buyer-agent?
It would be fruitful for agents to have a blog where they demonstrate how they work, and provide evidence of their results. But that may be asking too much of agents.
We do free consultations for sellers. Let’s do them for buyers too.
Buyer-agents should offer their list of services AND be willing to meet any prospective clients-to-be at a home for sale so agents can show them what they do. A tour of a house to point out the positives and negatives will give the potential buyers a great sense of the agent’s expertise.
Agents – let’s make the free consultation at a home for sale part of the effort to assist buyers. Besides, you want to get a sense of whether you want to work with these buyers too.
Before you get married, you should have at least one date!
What do you look for when you meet your potential realtor at a home for sale to see what they have to offer? If they add to the experience something you didn’t know, then you’re on the right track – ask questions! If they say, “Here’s the kitchen”, it is an automatic disqualification – just run to your car!
I try not to double up the content here, and this was only linked in a previous blog post so I’m not sure how many readers saw this previously. But it is noteworthy!
This third report on a surfeit of agents focuses on the role of real estate companies in the creation of the glut and related incompetence of many agents.
Our analysis of the sales experience of 2000 representative agents from large companies in five different areas revealed that there is an even greater surfeit than we and many others had imagined. Nearly one-half (49%) of these agents had none or only one sale in the previous year while nearly three-quarters (70%) had five sales or fewer. Almost all of these agents hold another steadier job or are retired. For most agents, the residential real estate industry is truly a part-time business. Yet despite this agent glut, many large companies keep recruiting new agents, often regardless of agent qualifications. They do so largely because of four factors – high agent turnover rate, new agent sales to friends and family members, fees paid by these agents, and limited liability for these agents since they are independent contractors. For these same reasons, many companies continue an association with agents even when the agents routinely sell only one or no properties a year.
The surfeit of agents ensures that many will not be able to receive adequate personal training and mentorship. One agent reported that a managing agent had been assigned responsibility for more than 100 agents. Large companies do make available on-line training but many agents report that what new agents really need is experience working with a veteran agent and close supervision by a broker while they are selling properties. That close supervision is not required by most states. Of the 50 states (and DC) we examined, only seven require closer supervision of new agents than more experienced ones. Furthermore, that close supervision is often not clearly defined, and we have seen little evidence that state regulators have focused on the issue.
Consequently, some companies and agencies feel permitted to adopt a “sink or swim” approach to their new agents that certainly is not to the benefit of their consumer clients. There are roles for states, the National Association of Realtors, and individual companies and agencies in addressing this issue. State legislatures should require close broker supervision of inexperienced agents beyond checking paperwork. Colorado, Illinois, and Montana not only require closer supervision but define what this supervision entails. States should also follow the lead of those states, a small minority, that require agents to receive post-licensing education on the practicalities of selling property. Moreover, regulators should intervene when the complaints they receive show evidence of inadequate training and supervision.
The National Association of Realtors (NAR) could play a role differentiating inexperienced sales agents from full-time professionals by raising the standards of earning Realtor status. Today, few consumers understand or are influenced by this status. If NAR were, for example, to require more experience and competence from Realtors then publicize this difference, consumers would more likely hire these agents. These requirements could include, for instance, selling more than five properties in the previous year and initially passing a new exam on the practicalities of selling property.
Many companies and agencies take seriously the training of new agents, yet many do not. The latter should recognize that heightened consumer awareness of industry practices resulting from class action litigation is likely to encourage more informed selection of agents. The industry should also recognize that increasing the number of agents does not appreciably affect home sales but does reduce the average income of individual agents and brokers. Companies and agencies should value full-time professional agents and brokers more highly than part-time sales agents who are engaged in other occupations.
The glut of agents and the inadequate training and experience of many has an important implication for consumers. Both home sellers and buyers should choose their agents carefully. These consumers should pay particular attention to the number of recent sales and client evaluations of the agents considered. Both Zillow and Realtor.com list this information about many agents, and this information tends to be more objective than that offered by referral agencies. Consumers should be wary of agents without an informative listing on either website. Friends and family members who have recently sold or purchased a home can also be consulted, yet consumers should also use Zillow and Realtor.com to supplement the information these individuals provide.
Click here for the full report:
Yesterday, we attended Gov’s annual update on new laws and forms for 2024.
He touched on many topics – including that landlords in California might be agreeing to tenants for life because it’s so hard legally to get rid of them – but the most interesting was his comments on the realtor lawsuits and commissions for the buyer-agents.
To demonstrate the difficulty of coming up with a viable solution, the best the California Association of Realtors can do is to add paragraph G3 into the purchase contract (above) and hope the buyer’s agent already has a written agreement for the buyer to pay the commission. At least paragraph G3 will pass the responsibility of paying the buyer-agent commission along to the seller so the buyer doesn’t have to pay it, but in a multiple-offer situation, all it will do is send your offer to the back of the line.
When in a bidding war, buyer-agents will be forced to omit paragraph G3 and saddle the buyer with the commission payment instead.
What’s worse is that the federal judge presiding over the successful realtor lawsuit will be deciding in May whether or not to make it a national law that PREVENTS the seller from paying the buyer-agent’s commission altogether, or let the current commission structure ride until the appeals process is complete.
It appears that the buyers will be paying their agent’s commission, sooner or later.
In an interesting twist, Gov was describing how the best solution for evicting a tenant is to bribe them with cash-for-keys and we even have a form for it now. But bribing a buyer-agent is completely out of line? A home seller should have the ability to pay the buyer-agent commission if they see fit.
If your listing doesn’t sell, or your listing agent withdraws it and then ‘refreshes’ it by inputting it a second time into the MLS, don’t be surprised if your phone starts ringing around 7am the next morning – and ring non-stop for hours, days, and weeks.
Did you know that those solicitations are prohibited?
While the listing agents might get a little frosty, they probably won’t do anything about it. Of course, there isn’t any MLS police either, so these solicitations run unabated – you will literally get dozens of calls and mailers, plus agents knocking on your door.
If lawyers want to chase around realtors for all the scummy things that happen, they will be busy!
One more blog post about the coming changes to the realtor environment.
Regardless of how the commission lawsuits are resolved, there will be a push – and possibly a mandate – for buyers to pay their agent directly. Agents will want buyers to sign an agreement to that effect.
Above is a copy of the verbiage on page one of the standard agreement.
If a buyer agrees and signs this form, and then finds a home on his own, he can ‘cancel this agreement by giving written notice to the other’. But only as long as THE BOXES CIRCLED IN RED AREN’T CHECKED.
Will buyers read the agreement before signing, and be reluctant to check the two boxes?
Otherwise the form is reasonable, with the agent being covered for any properties they recommend to the buyer with analysis (paragraph B1).
All that matters is whether the agent will insist on the two red-circled boxes being checked. I think a buyer will pause at agreeing to exclusive representation, but non-exclusive should be acceptable.
I doubt that I’ll use the form at all, unless Compass requires it. Why bother if you can cancel any time?
Hopefully NAR is busy in settlement talks right now, because they just don’t seem to get it, or they have trouble putting it on paper. These are their latest explanations:
However, there might be hope for settling the case:
Regarding the possibility of a settlement in the case, Katie Johnson, NAR’s chief legal officer said, “For NAR, settlement has always been an option.”
If NAR were to settle it would look for two outcomes, according to Johnson:
1. That homebuyers will continue to be able to access and afford buyer representation, and
2. That all liability from the suit’s claims is eliminated for NAR’s members, associations and MLSs.
“Settlements are always an option if we can achieve those objectives,” Johnson said.
Lesley Muchow, the NAR Deputy General Counsel & Vice President of Legal Affairs and Antitrust Compliance also advised agents to stress that commissions are negotiable. In that vein, she urged NAR members to leave compensation fields blank on forms rather than pre-filling them out — a phenomenon multiple plaintiffs emphasized in their testimony during the Sitzer | Burnett trial.
“Those are conversations you need to have with the consumer,” Muchow said.
“There’s no set amount. Sellers can decide and it’s on the Realtor to educate the seller as to why they might want to elect to make an offer of compensation and how that will work to their benefit in the transaction.”
“A Realtor should never suggest to a seller that if they do not make a certain amount of an offer of compensation that other Realtors will steer buyers away from their property,” she added.
Johnson ended by stressing that NAR’s current legal situation represents an opportunity.
“An opportunity to differentiate yourself from others – from your competitors and colleagues in your area – and an opportunity to improve your practices. An opportunity to think creatively and do things differently, using this delta, this point in time, as a launch pad for innovation.”
Zillow CEO Rich Barton weighed in on the bombshell cases in both an investor call and a shareholder letter. Barton’s key comment came early in the call when he said “We also believe complete disruption to the existence of buyer’s agents is improbable for a few reasons.”
Barton reaffirmed his support for buyer agents and the theme of buyers having their own representation. “We believe a well-lit game is cleaner and more equitable. People deserve and need independent representation,” Barton said. “We’ve seen double-siding in the industry, which is clearly a conflict and is at certain times more expensive to the transaction.”
Damien Eales, CEO of Realtor.com said, “I don’t think that from a consumer perspective, they are paying a great deal of attention to what is occurring more broadly in the industry. And as much as these court cases play out, I think it will be in some respects very much confined to the industry conversation as opposed to the consumer conversation.”
During his own investor call, Compass CEO Robert Reffkin pointed to the Seattle region, where sellers have not been required to offer buyers’ agent commissions for several years. Despite that change, Reffkin said, commissions in the area remain in line with the rest of the country — an outcome that suggests the bombshell lawsuits may not radically upend the status quo.
“I don’t think there’s any evidence to suggest that there will be pressure on commissions,” Reffkin said.
The history of steady commission rates will be mentioned in the lawsuit appeals.
Doesn’t the history suggest a conspiracy? Especially when combined with the ascent of home prices? Lawyers for the plaintiffs will note that the annual home appreciation gives the appearance of realtors getting a raise in income every year – including +40% since 2020.
There is no conspiracy on the street. It’s too competitive between agents!
Any pressure on commission rates will come from agents who are desperate to eat. The perfect storm of market conditions should push hundreds of thousands of agents out of the business. As they exit, they might give a seller a deal – if they can find a listing opportunity.
What do sellers and buyers want – the best rate, or the best agent? It’s one or the other.
Hopefully this mess will cause consumers to thoroughly investigate the choices. Otherwise, this will all blow over in a few months – unless the Department of Justice does something permanent.
Get Good Help!
I am willing to take the stand if it will help the realtor commission lawsuits, but the defense might have second thoughts. The complaint is that realtors have conspired to force sellers to pay a standard, non-negotiable commission rate to the buyer’s agent. My testimony could go like this:
Plaintiff Attorney: You look like you’ve been around a while. Have you ever sold a house to a buyer that cost less than $100,000?
PA: Was the commission rate offered by the seller and publicized in the MLS in the 2.5% to 3% range?
PA: Have you ever sold a house to a buyer that cost more than $2,000,000?
PA: Was the commission rate offered in the MLS in the same 2.5% to 3% range?
PA: Have you ever sold a house to a buyer on the first day you met them?
PA: Has it ever taken one to two years to sell a house to a buyer?
PA: Were the commissions in both cases in the same 2.5% to 3% range?
PA: As a buyer-agent, have you ever negotiated your commission rate with the seller or listing agent?
PA: No? Why not?
JtR: It is strictly forbidden by the rules.
PA: The rules? What rules?
JtR: The NAR Code of Ethics forbids any negotiation of the buyer-agent’s commission paid by the seller.
PA: Is that the strict Code of Ethics that all NAR Realtors abide by, and what makes them different then all other licensees? The Code of Ethics that NAR has advertised on TV ad nauseum for decades?
PA: Judge, I rest my case.
It’s been over two weeks since the verdict was announced on the commission lawsuit, and the response from the realtor community has been tepid, to say the least.
Agents are waiting to see a strong example of how to convince buyers to sign a buyer-broker agreement. It’s easy for management to just say, “Have your buyers pay you directly”. But will you furnish us with anything besides the cheesy 179-point list?
The annual Compass convention starts today in San Diego, and we’ll see what management has to say.
Meanwhile, CoStar senses an opportunity, and have ramped up their advertising of homes.com to agents. They say their search portal had 100 million unique visitors last month, passing realtor.dud and pulling into the #2 slot behind Zillow.
Their pitch? They send buyers to the listing agent directly.
When Zillow visitors inquire about getting more information or seeing a home, they get sent to the call center where Zillow employees scrub the leads, and send them out to agents who have agreed to pay 30% to 40% of their total commission to Zillow.
Homes.com will send those leads directly to the listing agent, no charge.
How long will it be before agents migrate their advertising budgets to homes.com? The buyer-broker agreement should be a complete failure by next summer, and instead the march towards single agency will be well underway by then.
The conversion to single agency will look like an obvious solution to the casual observers like judges, juries, and the DOJ because it will give the illusion that fees are coming down. But it will just add to the trouncing of buyers that has been going on for years.
Just when quality buyer representation will really be needed, the trend will be in the other direction.