How To Avoid the 8 Biggest Mistakes When Hiring A Real Estate Agent
Here I explain the costly mistakes that property owners make when hiring a real estate agent to help sell their property. Here are the most common mistakes to avoid:
Choosing An Agent Purely on What They Tell you is Your Property’s Highest Potential Selling Price.
Home sellers make two of the biggest mistakes when choosing an agent by basing their decision on:
A) An agent who gives the highest POTENTIAL price for their home
B) An agent who charges the lowest commission
I know that you are probably thinking, ”WHAT are you talking about!” which is perfectly understandable, given that every home owner has those two factors at the top of their minds. Remember however, that what we are looking at here is how to hire an outstandingly competent agent. Those two criteria have absolutely no bearing on hiring a good agent. This is an expensive mistake that home sellers make time and time again, and I’m here to show you how to get out of this very expensive trap.
Ok, lets dive in a little deeper. Quite naturally, as a home seller you want the highest possible price for your home. The temptation to advertise your property at your DREAM price to avoid underselling it might seem like the perfect answer but, guess what, it isn’t. When an agent advertises your home at a price that is not supported by hard facts or reality, this practice by agents is called ‘buying the listing’.
The cold truth is that agents CANNOT tell you how much your property will sell for. A listing agent can help you out by showing you prices of comparable sales, active sales or pending sales. The final decision on the right sale price is made solely by YOU, and of course, the buyer.
Allowing your EMOTION to dictate the advertised selling price (The BIGGEST mistake you can make!)
You’re probably thinking in your head “but I need more money”. As a prospective home seller, it is quite easy to base your hiring decision on the agent who promises to deliver the highest sale price. That’s perfectly natural, after all you have financial obligations to meet and A HIGHER selling price means more options. You may need to raise your child’s university fees, buy a bigger home, or pay for that greatly overdue holiday. Allowing your financial needs as well as the emotions that go with it to dictate the value of your home will end up costing you thousands and lose you valuable time. This is how sneaky real estate agents will use your emotions to win your business.
Establishing the Value of your home, Without letting emotions get in the way
The truth is that what you or other agents think as the correct value of your home matters very little. The buyer who makes you an offer is the only person whose opinion counts for anything. Pricing homes really is both an art and a science rolled up into one. On one hand, it involves comparing your price with that of similar properties recently sold. On the other hand you need to examine market trends, ie, are prices currently going up or coming down; and how many other houses are on the market in your area that will be competing with your home. In other words, you want to come up with a price range that most realistically reflects these factors. It is a delicate balancing act that only a good agent can master. Notice that your emotional and financial needs are not establishing what your property is worth.
Remember that no two appraisals by different agents are ever the same. If these are done correctly, however, the variance in price should be small. There is no right or wrong price for your home. What you should work with is the best estimate of its price, based on the combination of factors I have mentioned above.
Is the Price Too Low?
For any property transaction to go through smoothly, the buyer must be willing to pay the price the seller is willing to accept. If your home is priced below its market value, you will most likely receive multiple offers with the effect that the final price will be closer to its true market value or even above. This style of selling is known as an ‘Offers Over’ and is used to great effect by experienced agents. You are therefore not likely to experience any serious setbacks by pricing your home too low. It’s a different story for advertising your property at its highest potential selling price (this is what agents call overpricing).
This is what happens when an agent wins your business by overpricing your property.
Imagine you are a buyer and seen a home that has come on the market for a high price. You seea property you like, and notice that it has loweredits price every 2 weeks over 2months. Now what would you be thinking? You’re probably thinking there’s something wrong with the property, right? We find this has a significant impact on enquiries and people start asking what is wrong with the property. We see this all the time in selling real estate and it is more common that you think.
The longer the property sits on the market, the buyers start making lower offers. As soon as a property is advertised on the market, statistics have shown that the property will receive maximum interest within the first two weeks. Buyers who have been searching for a home will view any new home that appears on the market. If the price is right, you will get bucket loads of people to your open home.
Pricing Is An Art
If you have priced it right, you will get an offer quickly. If your property is overpriced, you will be lucky to receive any offers. You will most likely be forced to reduce your price, but this will only make potential buyers suspicious, so going for price overkill does much more harm than under-pricing.
Choosing An Agent Based On Commission
“The cheapest agent can cost you a lot of money”
‘Cheap is expensive in the long run’ certainly rings true in this situation. So remember this before falling for the temptation of hiring the cheapest agent. Real estate agents, just like other professionals, are vastly different. Ten percent of real estate agents do ninety percent of the work. Generally speaking, it’s better to go with an agent from a company with a great track record and can negotiate extremely well. This way you stand a better chance of gaining greater exposure to more potential buyers, and a better price.
Have A Think About This….
So instead of focusing on the commission alone, you need to ask yourself can the agent stand apart from the competition on service, knowledge or negotiation skills.
Hiring an agent based on Emotion rather than Skill
Hiring an agent based on a friendship will not give you any advantages. There are several business factors that you need to consider when hiring an agent. Look at their track record. Don’t leave the sale of something as valuable as your home in the hands of an agent with poor English or one with minimal experience. Hiring friends or family to act as your agents can be particularly tricky and create tension in the relationship.
We see this often and the friend often finds it hard to tell you want you need because it may create stress in the friendship or they may not up to the task.
For example, they may not negotiate the buyers high enough or don’t have the courage to tell you the truth about your home. By the time you realise it wasn’t a great idea to use them as your agent, you don’t have the heart to fire them.
What happens next is your home sits on the market and you lose all the interest in your property and find yourself lowering the price because of a lack of enquiries.
When potential buyers see the price coming down they think there is something wrong with your home, which there is, YOUR AGENT!
Hiring An Agent Who Is Poor At Negotiating
One of the biggest reasons why home sellers lose money on their property is simply because their agent is a very poor negotiator. Many agents simply have no idea how to get the best price for their client’s home. If in doubt, just do a little research and ask a cross-section of buyers what they paid for their homes and what they were willing to pay if push came to shove. I know it sounds incredible but the truth is that many home buyers would have paid more for their property had they been pushed/persuaded to go a little harder by a more competent agent.
Don’t Hire A Slick Salesperson; Look for a Good Negotiator
Hiring an agent who is a good negotiator can easily add up to 10% of the final sale price of your home. If your home is valued at $500,000, that can mean getting an extra $50,000 on the final sale price, just by hiring a good negotiator. Try to find out just how skilled your agent is in negotiations by cross-examining them on the subject. Please refer to agent test below.
The agent test will let you know whether they are a good negotiator.
A well trained agent will pass this with flying colours. If you are less-than-impressed by what you hear, chances are that they are a poor negotiator so look for someone else.
Choose An Agent Who Is Current
The word ‘current’ here means agents who are up-to-date on the latest technological trends. Studies show that agents who rely solely on ‘Open Houses’ account for just 2% of total home sales (survey carried in 2013 by REA group). You want to hire an agent who is up to speed with the latest and most relevant technology. Many agents underestimate the power of video. Agents who neglect to use this vital sales tool are certainly lagging behind the times. If your agent doesn’t use video, it should alert you that you are better served looking elsewhere for a more technology-savvy agent. Buyers nowadays use GPS to locate neighborhood property that’s up for sale, and they use smart phones to look for homes. The more technology and websites an agent uses, the higher the chances of meeting and engaging potential buyers.
Sticking to Traditional Selling Methods
We are living in different times now and gone are the days when agents relied on simple classified ads to sell houses. MOST buyers search for property via the internet, which offers a wide variety of ways to search for property.This is not to say that agents should completely do away with traditional advertising methods. They should incorporate newer methods such as internet listings, social media, virtual tours, and video to name a few.
However, there are old fossilsout there that aren’t getting with the times. Theystill rely on print advertising more than relying on internet advertising. This is bad because internet marketing gives more targeted and track-able results, and gives you more reach than traditional print advertising. By targeted I mean finding qualified buyers (buyers that have finance) that are looking to buy your particular property. By track-able I mean — After spending X dollars the agent should be able to track where buyer enquiries come from and how many enquiries generated in total.
These old-school real estate agents are getting sellers to spend more money on print advertising than on internet advertising, which is wrong. It doesn’t get you as good a result as online advertising. They do this because they do not know any better. Please use the test below to sift these agents out.
Hiring an Inexperienced Agent
Hiring an inexperienced agent can have terrible consequences. An inexperienced agent can give you bad pricing advice, perform ineffective marketing or waste too much time with buyers that are not even qualified properly. You might be surprised to find that the commission charged by a good agent is not much different from that charged by a bad agent so take your time and do some prior research to get your money’s worth.