This is a contentious topic to some, but personally, I welcome it.
We’ve heard a lot in the past few months about “new real estate business models” popping up, both for sellers, and for buyers, and while I can’t exactly give you my entire thought process in less than 50,000 words, I can tell you about a situation I had recently that I think sums up with the “lesser” brokerages do for their sellers.
This isn’t opinion, and it’s not rhetoric. This actually happened…
One of my wife’s relatives told me last week, very gingerly, “An argument could be formed that, well, participants in your industry are….very well compensated.”
I told him, “I don’t disagree.”
This is a successful man, whose words I cling to, with every breath.
“The top agents more than earn what they earn, but it’s the rest of them that deserve the public’s scorn.”
We have a mutual respect, and he knows that I take no insult. He’s also in a line of work where the top participants are worth what they’re worth, and there’s a lot of bottom-feeders, corner-cutters, and folks who just shouldn’t be licensed to do what they’re doing.
“Either they’re overpaid, your you’re underpaid. Have you ever thought of charging 6%?” he said, with a gigantic smile that I honestly thought was going to fall right off his face.
I don’t mind discussing compensation.
And I don’t mind discussing my business model, versus that of other business models within real estate.
If somebody already has their mind made up that, “All Realtors are the same, it’s a needless, stupid job, and I could do it,” then I can’t convince them to use my services, as a buyer agent, for free.
Again, you might argue, “Your services aren’t free, since the seller pays your commission, and that indirectly comes out of the buyer’s pocket.” Agree to disagree, since about 99% of for sale by owners or discounted listings are priced (and often sell!) at 120% of fair market value.
Anyways, I’m doing what I said I wouldn’t, and that’s getting into a conversation that really deserves its fair share of time.
What I wanted to do today, was provide a real-life example of a situation that, I believe, shows how many inexperienced and discounted agents handle listings.
We can talk theoreticals all day, but when you see what really happens out there, it’s hard to argue with.
Late in December, I showed an entry-level condo in the King East area, listed at $329,900.
Now first thing’s first – I thought this was under-priced.
Had this property been my listing, I would have listed at $339,900. But I also would have done this thing called “marketing,” which would help with the sale.
The listing had no photos. Just a photo of the outside of the building, which was clearly downloaded from MLS.
The listing had no room measurements or descriptions. It looked like this:
But that’s not the worst of it.
This condo had a den, and the unit wasn’t listed with one! It didn’t show “1+1” for the bedrooms on MLS, nor did the “Rooms” above on MLS show the den.
That’s fine though, right? It’s not like a den adds…….$20-$30K in value to a unit. It’s not like many people searching for 1+1’s on MLS will type in “1+1” and therefore miss this listing, because it was erroneously listed as a 1-bed.
My clients and I went to see the property on the fourth or fifth day of the listing, and we really liked it. We didn’t love it enough to make a full price, take-no-prisoners offer on the spot, but why would we? There was no competition.
We ended up making an offer about a week into the listing, for $320,000. That’s about $10K less than the asking price, which I actually felt was low, but what did we have to lose?
On the day we made the offer, I called the listing brokerage (small shop – automated message, asking you to press buttons to get a person on the phone), and I asked if there were any registered offers on the property. The person on the other end of the line said that there weren’t any.
We made our offer on the property at around 3pm, and I emailed it to the listing agent. His email was a “Hotmail” address, not to my surprise, and I registered the offer with his office.
I had the agent paged, asking him to call my cell phone, but I never heard back from him.
I called the brokerage back around 5:30pm, but by that point, even after pressing buttons like a monkey to try to get a person on the line, it eventually went to an “after hours” call centre.
My brokerage is open until 8:00pm, FYI…
I scoured high and low to find the listing agent’s cell phone number, but it wasn’t on the MLS listing, nor could it be found anywhere on the Internet.
My cell phone appears on all my MLS listings, FYI. It’s also on my lockboxes, so that agents can call me direct with any questions, or problems with the lockbox. It’s also all over my blog, the Bosley website, and other locations on the Internet.
The day turned to night, and I never got a response.
The next morning, around 11:00am, I got an email from the agent which read:
Thx for your efforts but another offer came in 2day and we accpt.
Bit higher, but time is importnt.
I’m on a flight 2day. Email is best.
And almost two months later, it really bothers me.
It’s not just that he spells “today” with a number. I don’t understand it, or why Ariana Grande spells “cute” as “kewt,” but she gets a pass for reasons that probably don’t need explaining.
This guy had no excuse. He was a grown man, and he doesn’t have 40,000,000 Twitter followers…
His email didn’t contain his cell phone number, so even though “email is best,” it’s not like I could have called him if I wanted to.
So where did he go wrong, how many rules did he break, and how much money did he cost his client?
Well for starters, he had to inform me of any competing offers, which he did not.
My offer was registered first (his email said “another offer came in 2day”), and thus a subsequent offer couldn’t be accepted without first notifying me of the offer, and allowing me an opportunity to resubmit. My offer was made on the basis and knowledge of no competition.
My buyers’ offer of $320,000 was under asking, only because we had no reason to submit it as such.
If we were the second offer, we might have offered the full $329,900 asking price, or more.
But the agent just went ahead and took the “higher” offer (which ended up being $321,888), and called it a day.
Because he was flying to Aruba. But we’ll come back to that in a sec…
This agent likely took this listing at 4% or less, as a known discount brokerage who has a handful of sub-par agents. The seller saved over $3,000 in commission.
Had this agent done his job, or done what any experienced agent would have done, he’d have got his client $329,900 – which is $8,000 more than he got.
Where exactly is the value here?
Had he called me and said, “David, a second offer came in, do you want to improve your offer?” I would have improved, 100%. This isn’t hindsight talking, and it’s not sour grapes because my clients’ offer wasn’t accepted. It’s just the way this business is, and it’s what would have happened.
Now, had he come back to me, then the other agent, then me, then the other agent, and so on, perhaps he could have got more than the asking price.
It’s not inconceivable to think that one week into the listing, with two offers on the table, that one of the buyers would have paid a small premium – say $2,000 – $4,000 over asking, to get the property, stop searching, and move in thirty days.
Maybe this agent could have got $335,000 for the property.
Maybe he could have got $13,000 more than he did.
We’ll never know, because he didn’t bother.
He simply “took the higher offer,” and then caught his plane to Aruba.
And as I said at the beginning, I felt the property should have been $339,900 to begin with, if it was staged and well-marketed. But I can guarantee this guy just had his seller sign the papers, with no mention of how to maximize the property’s potential. Maybe he could have got the seller almost $20,000 more than he eventually did.
When the sale price was published on MLS, I called him for a bit of clarification. His defence?
“Come on man, you know how it is. I was leaving for a trip, I wanted to get it tied up. I didn’t have time to go back and forth all day, and I didn’t want somebody else doing the deal or I’d have to pay. You know?”
Yes, I know.
But I don’t agree. That’s not how I run my business.
When I was in Idaho last summer, I had a colleague sell one of my listings, and she received 25% of my commission. I had another colleague do a deal for a buyer client, and she received 50%. That is how I run my business; I service the client, not my own pocket-book.
This would-be Aruba-traveler, didn’t want to spend the day working for his client, because he feared if it went past his flight time, he might have to (gasp!) get a colleague to help, and pay him or her for their services.
Had he not been flying to Aruba, I don’t think he would have worked with the two offers anyways.
The listing was filled with errors and blank spaces, the property wasn’t marketed, his communication with me (and assuming other agents as well) was terrible, and he seemed to take the path of least resistance at every step.
He is the epitome of a discount agent in Toronto’s 2015 market, and he’s what I tell people to avoid.
A good portion of the public seems to believe, “The lower commission you pay, the better deal you get.”
As I just outlined above, it doesn’t really work out that way in practice.
This is just one of my many experiences with discount agents, and fly-by-nighters, but I see it all the time.
I firmly believe that “you get what you pay for,” and if you can hire a top Toronto agent for the same price as some of the middling agents are charging, then there is your value proposition! Because while Realtor #200 out of 40,000 in Toronto is charging the standard 5% commission, so too may be Realtor #18,000.
I work on the buy-side as often as the sell side, and I love negotiating against these discount agents as I can’t tell you how quick they are to tell their sellers “take the deal.” They’re looking for a paycheque – to come up with rent money, or put food on the proverbial table.
That is who you want selling your largest investment, for top dollar?
Anyways, that’s it. I feel like this turned into a sales pitch, and that’s not what I intended.
Questions on this topic? Please ask away. I’ll be in the office most of the day tomorrow, so I’ll try to get to the comments section periodically.
Have a great weekend!