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Do You Really Need A Real Estate Agent To Sell A House?
Of all the professionals you will encounter in your life as a client, real estate agents are probably the least regulated by authorities.
In other words, this means that it’s pretty much like the wild west.
They can pretty much do whatever they want, and get away with it as long as they are smart enough to create the conditions of their “get out” clauses.
The most common profession compare to real estate agents are insurance agents. But insurance agents work around a rigid industry framework that prevents them from giving out investment advice in the public domain.
A rouge insurance agent that flaunts the rules face the prospects of legal proceedings!
Investment bankers have very strict rules on what they sell to customers.
In fact, we can frequently find news stories about complaints that consumers bring up about bankers selling them junk investment products. This shows that even consumers feel that it is implied that bankers operate with a high standard of moral ethics.
Real estate however, have little restrictions on what agents can or cannot do when prospecting.
Don’t for a moment think that real estate agents don’t have tests and exams to go through to qualify as one. Because they do. But the rules they operate within leave them a lot of freedom let their creativity run riot.
Because of the potentially huge payoff 1 single deal can bring, many people entertain the workload of being a part-time agent. The bigger a transaction, the bigger the commission check. You can’t fault someone wanting to make a side income.
From a consumer point of view, I think that there should be some form of ceilings placed on the commissions agents receive. Because whether it’s a $100k or $1m house, an agent pretty much does the same things.
Why should a customer be paying more just because he has a bigger pocket?
The problem is that houses are not things that people buy on a day-to-day basis. And for an inexperienced buyer or seller to handle a deal worth hundreds of thousands of dollars, it can be intimidating indeed.
This is why many decide to get an agent to hold their hands while going through the process.
But if you really think about what you agent really does, do you really need him?
Sure, an agent would be the first to tell you that they help feed your listings into the Multiple Listing Service (MLS), they put your advertisements in the local newspapers, and they make calls day and night trying to find a party to deal with you.
You do need their services. And would be crazy to go FSBO.
Or do you?
If you are selling a house and engages the services of an agent, he would probably help you mark up the price. You might like that idea a lot. But don’t forget that the mark up is required partly so that the agent can pay himself the hefty commissions which you have to pay later.
Now if you think about this pragmatically, won’t retaining a lower price without a mark up be more attractive to potential buyers?
Yes, an agent could probably get the word out about your apartment faster and more efficiently to a bigger audience. But the lower price you will list by doing it yourself balances things out very well.
The biggest fear that a buyer or seller feels in real estate transactions is the lack of knowledge of how the transaction and completion process actually works.
So how would you feel if you learn that you can have everything laid out for you with one phone call to the local authorities?
The only real legitimate reason therefore to hire an agent is when you have absolutely no time to handle the tasks yourself. This is when it’s makes the most sense.
In this case, make sure you get your agent to do everything for you. You want to get your money’s worth and have as little to do as possible.
Still unsure whether you can handle it yourself?
Don’t worry. Jump in and have fun.
Take into account that you can save thousands of dollar should you close a deal yourself. You can always hire one later if you realize that you don’t like the experience at all.
Even so, here are 2 ways to avoid giving away all the aces.
It makes sense that a property agent who has committed himself to sell you property want to have exclusive selling rights to it.
They are going to spend a small budget on marketing your house. So it is only right that they be granted the exclusive right to sell it.
However, you MUST set a time frame of a maximum 3 months to that exclusivity.
This is so that you have an easy way to wiggle out of a bad partnership when you end up with incompetent or lazy agents.
Get out clauses
If you have tried to sell your house yourself, you might already have some warm leads that are interested.
Imagine doing all the hard work to get those prospects, then one comes back later to make a concrete offer after you have signed an exclusive contract with your agent.
In this case, make sure to get it in writing that these sales from your own work will not make you liable to pay commissions to the agent.
Dealing with crafty agents
I remember a time when I was going on viewings with an agent. And during one of those breaks when we were having a drink at the coffee house, her phone rang. Then she started discussing with another agent on the phone about how to close a deal she was involved in.
I listened with interest and a little shock.
Here was an instance when both buying and selling agents are in cahoots to close a deal whereby at least 1 party represented by the agents will be getting the sharp end of the knife. They wanted to alienate another bidding buyer who could make a better offer. Thus, delaying the time to closing of the current deal-in-making.
How they laughed was pretty disturbing. I’d imagine that these types of conversations happen on a daily basis.
Never mind how audacious it was to have that conversation when I was in close proximity. It was seeing it with my own eyes that convinced me of the dark side of real estating.
So you will do well to keep these pointers in mind.
Get acquainted with the motivations of agents
In the name of self-interest, there will almost always be a party that your agent would prefer to deal with.
It could be that they are paying a better co-brokering commission, they are paying straight cash, they are ready to close, etc.
Whatever the reasons are, they could prevent you from the best deal out of a transaction.
You could end up losing due to the motivations of others.
This is even when you are the key party, either the buyer or seller, presumably with all the power.
Review the contracts you sign
You will undoubtedly hear agents say that the contracts are industry practice and cannot be amended. That is a bunch of BS.
Read through carefully what the contract is about.
If there are terms you don’t fully understand. Ask for them to be explained.
And if you don’t agree to it, strike it off and countersign. Or make amendments to it, and sign off. Get your agent to endorse your amendments with a signature too.
Everything is negotiable.
And every contract is amendable until it is signed by all parties.
If not, when does a contract become open to discussion? Before it is signed of course.
Don’t hire someone for the wrong reasons
Sellers with an obsession with a high price are often most prone to making the mistake of hiring someone who promises the highest selling price.
Remember that the market determines the price of your house.
If someone will pay your price, you will likely find him. And if no one is willing to pay your price, you won’t be able to sell no matter which agent you hire.
Customers with a weak spot for femininity often make the mistake of only hiring the hottest agent they come across. I don’t think that you will need anyone to remind you that this could be a huge mistake.
Just remember to hire someone based on merit and how you think they can add value to your deal.
Be realistic, goal-oriented, and emotionless when choosing which agent to hire.