Monday, March 07, 2011

Is Your Agent Really Working For You?

I was taught long ago that the role of the Realtor representing a seller was to get the best price possible for their property. In today’s soft market, I have seen many instances where the agent managed to get the seller to accept a price considerably lower than true market value, costing the seller thousands of dollars. Of course, many sellers are stressed and anxious about the possibility of further decline in value, but like a shark that smells blood, self serving agents can feed on that vulnerability by further instilling fear aimed to make a weak offer sound attractive.

I recently had an agent encourage me to accept an offer on a property I have listed at $195,000, for $100,000. He explained that $100,000 is current market value and that I should take it. A week later this property sold for $175,000. Who is this agent working for?

I live in a townhouse complex where two different Realtors have convinced sellers to accept offers that caused everyone in the complex to lose at least $25,000 in value by getting the sellers to take considerably less than they could have gotten.

One of these agents has been very successful listing properties that have already been on the market and not sold, normally because they were over-priced. Looking at the MLS sales history of this agent, he consistently manages to sell properties 10 and 20 percent below market value. For this he is paid three to six percent of the sales price?

Another agent has sold three units under market value. Using the first and second of these sales as a comparable sale to demonstrate why the seller should take less. This was done by the same firm who encouraged me to take $75,000 less than an offer I got a week later.

More times than not, listing agents tend to list properties too high. That is as unprofessional as listing them too low, the main difference being in the second instance the Realtor gets paid but costs the seller money he didn’t have to lose, and in the first the Realtor wastes everyone’s time.
There is of course a middle ground. That is a property that is priced well with a seller prepared to be patient while the buyer is found. For my money, a Realtor who is able to identify the right price and obtain it has earned his commission.

As an example, I recently listed a townhouse in an eight unit community for $325,000. The last sale in the complex was a foreclosure at $285,000. I received three offers at or under $285,000 from agents who pointed to that sale, and even argued that prices had decreased since then. I sold the property for $315,000. As the sellers Realtor, I could have pushed the buyer to accept $285,000 or even less, and argued persuasively in favor of that due to the market. I would have been paid and avoided the risk of being fired for not selling it quickly (often the case with the first listing agent), and the seller would have lost $30,000. To me, that is not doing my job. Many agents would also be concerned that the property wouldn’t appraise at the higher price, but I was able to provide comparable sales of units in the area that supported the sales price.
Self-serving Realtors know that a seller faced with a short sale situation or a foreclosure are desperate. Sellers of short sales often don’t think about the possibility of a deficiency judgment against them after the sale, for the difference between what their lender netted from the sale and what it cost them. They are usually too stressed over the trauma of the sale. While the market is soft and sellers are at a disadvantage, be sure when you choose a Realtor, that they are on your side and not costing you money. In one of the examples I site, a potential judgment $30,000 less than it could be in the future is significant, and not something your Realtor should ignore in pursuit of a quick commission.

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