Monday, May 6, 2013

Real Estate Agent Contracts

I’m no real estate expert, but I’ve noticed a pattern play out a few times, once when I sold my first house and a few other times watching friends and family members sell their houses. In these cases, the real estate agent did almost nothing until the listing was getting close to running out. There were no reasonable offers until shortly before the listing contract ended when the house suddenly sold.

From a busy real estate agent’s point of view, this makes some sense. If you’ve got more houses listed than you can work on at one time, it makes sense to work hard on the listings you’re about to lose. If other listings happen to sell in the meantime, it’s a nice bonus.

If this phenomenon is as widespread as my limited experience suggests, then homeowner’s need to develop countermeasures. Homeowners should prefer shorter contracts to longer ones. I’m used to 3-month contracts, but I’ve heard of 6-month contracts. Even 3 months is a long time to wait if the real estate agent isn’t doing anything.

The next thing to consider is contract renewal. In my case, the real estate agent began hinting about renewing the contract a little less than 2 weeks from the end of the contract. I didn’t piece it all together at the time, but I now interpret this hinting as “will you re-sign with me so I can keep ignoring your house and hope it sells on its own, or do I have to try to find a buyer quickly?” Fortunately, my wife and I decided to tell the agent we would be changing agents; our house was sold within a week.

Have readers had any similar experiences or is my view skewed by some atypical cases?

7 comments:

  1. In my (limited) experience and observations, the real estate agent is active in the beginning. If results aren't quick, less starts happening. My real issue is during the negotiations. There's pressure to complete the transaction quickly in a time of high emotions (lower your selling price or increase your offer). That helps the agent's ROI at your expense.

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    1. @Promod: I've seen the pattern you describe. This initial activity comes in part from the natural interest among buyers when a new listing comes up. This doesn't necessarily mean that the selling agent has done much. So, it's hard to tell how hard your selling agent is working based on some walk-throughs (and maybe even a low-ball offer) in the first week.

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  2. What works for me :

    I pick a real estate agent that is known to be the best in the area who knows the market and all the tricks. I make it clear from the outset I have picked him because I expect the most from him. I don't haggle over his commission because I expect top dollar for my home as well as top service. You get what you pay for. Also don't hire someone you cant fire! (try doing that to your family member and see what happens)

    Very true recent example (April) A friends brother (part time agent) wanted to list his sisters house at $250,000. I convinced her to go with a top agent in the area who listed it at $289,000. I told the agent what she expected from him. The house sold in 3 weeks for $287,500.00. By cheaping out she would have lost quite a bit of money by getting a small discount on the commission. (if it would have even sold, the brother listed it once already and failed to sell it at an even lower price the previous year)

    So people try to save themselves $ because they think the commission paid to an agent is too high. "Why would I give that guy X%?". People focus on the wrong things sometimes. If you go a doctor you want the best, keep the same thought when your selling/buying your home.

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    1. @Paul: This sounds like it might work for someone who can figure out who is the top agent and has an idea of what is a high price and what isn't.

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  3. If you have lived in the area for at least a year you will see which signs get the sold stickers, and which don't. The top selling agent's become quite easy to spot city to city.
    Then check the local publications for the ad exposure and websites. Then talk to them and tell them what you expect. If the agent is good he will tell you what you want to hear.

    "You will have traffic right away, looking at your property it will almost certainly sell in under 30 days". "If in 2 months it's not sold our contract is over". Other agent's are wishy washy from the outset, pass on those.

    When buying, you agent should get the picture of the home your getting. I saved at least $30k on my purchase because the agent I used didn't just make an offer. He took the time to investigate and found the owner was in a bad position and had to sell. They panicked and took a far lower offer. Again I expect my agent to do this type of work for me and be paid for it.

    It has worked for me 3 times now and I offer the same advice to others and they have benefitted from taking a more business-like approach to the sale of their home. You have to not take the sale of your house as being personal. It's not fun, but you deserve to get the most for your house and pay the least for you you buy after.

    Personally I have never experienced your first month non-traffic type service. You simply have the wrong agent not giving you his best. I would expect that if it's someone you have haggled down a commission on for example. Why would they give you their best then?

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  4. Some truly wonderful posts on this internet site , thankyou for contribution.

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  5. We and our family have only bought/sold in high demand areas so the problem has never been having to wait, it's been trying to get out and make an offer before the competition does. So it's been easy to sell but challenging sometimes to buy.

    We do research which agents are best (not just which agencies!) before we sign on. Be very careful to only agree to list with a specific agent, as if you don't you can be given to the junior hire at the same agency. The best agents actually have clients waiting for homes to list in certain areas so they can buy. New agents don't usually have those type of contacts.

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