5 things your agent won't tell youAre there things agents will never tell you?
Do agents avoid matters you need to know about, and replace them with topics that are designed to get you to hire them? Absolutely!
Agents will avoid certain things because they are trying to “sell” you into hiring them. As a result, some agents will tell whatever half-truths and false promises it takes to get a signed listing agreement, while leaving out the things that you need to know and that really matter.
Your selection of an agent will be the decisive factor in the selling process. So before you make that decision, you need to know the five things agents may not tell you:
1. What your Home is Actually Worth;
2. Their “Marketing” Claims Don’t Matter;
3. They Don’t Really Have Buyers;
4. Dual Agency is Good for Them and Bad for You;
5. They Can’t Protect Your Interests.
1. What your Home is Actually Worth.
Studies have shown that sellers will usually choose the agent that tells them their home is worth the most. Agents know this, so instead of researching and then giving an accurate value, some will tell sellers what they want to hear.
Because these type of agents don’t have anything to bring to the table (more on that in Number 5), they fear you may choose someone else. So for these agents there is a strong incentive to “fudge” the worth of your home to guaranty you pick them. This kind of agent knows this alone will likely get them the listing.
Besides, doing the research to determine a correct value in this market is hard. Instead of spending time doing that, agents would rather try to get other listings (more on that in No. 2). So it is easier for agents to just tell sellers their home is worth more than it really is.
To these agents, the most important fact is to get the listing. After they have you in their pocket, when the home doesn’t sell (in the period of time it should have sold in if priced right) these agents will blame it on the market, or the home, or something else. Eventually they convince you to reduce the listing price, often repeatedly.
But a sale won’t happen when a listing price is too high. Buyers and their agents do their own research and know how homes should be priced and won’t be fooled. So don’t fall for it. And you won’t be told about the multiple disadvantages of pricing too high:
1. Your home may be bypassed – many agents won’t show a home if it is overpriced;
2. You will incur “opportunity loss” – the search for a suitable replacement home is delayed, and the ideal replacement home that was on the market may no longer be available;
3. Keeping your home in show ready condition for longer than necessary is burdensome;
4. You will incur continuing ownership costs each month, wasting money on additional mortgage payments, utility bills, maintenance and repairs, etc.;
5. You will be unnecessarily stressed worrying why your home hasn’t sold yet and why your move has been delayed;
6. And most importantly, it has always been true that homes get the most interest, generate the most offers, and sell for the highest price during the period immediately after it is listed (listings get 4.5 times more traffic the 1st week than a month later according to Redfin). So you are likely not to get the highest and best price, even if the price is reduced. And homes that linger on the market generate lowball offers – one agent described it as creating “blood in the water.”
This means your agent has failed to put your interest first (more on that in No. 4), and you have probably incurred aggravation, delay and gotten less money than you would have if it was priced right from the beginning.
2. Their “Marketing” Claims Don’t Matter (and are often misleading).
Part One: “The Big Lie”
Typically agents will tell you that you should choose them because of their marketing. Why shouldn’t you believe it? Because marketing claims can be used to mislead you. When that happens, I call it the “Big Lie.”
In No. 1 you learned that some agents misrepresent the true value of your home. Another manipulation technique is discussed in No. 3 – the claim they will personally bring buyers to your home. But the most popular way for some agents to fool you is to make you believe that their marketing is better and different.
Why do some agents use the “Big Lie?” It’s because they have a problem. As you will see in Nos. 4 and 5, due to a critical lack of education and ethics, they have no particular advantage over other agents.
If an agent can’t convince a seller that the agent has an advantage over the others, the seller has no reason to hire that agent. In this way, agents have the same problem car dealerships have. Have you ever wondered why car dealerships advertise constantly on TV, radio and in print media? In those ads they attempt to convince car buyers that they have the lowest prices, give the most for trade-ins, and have the best repair facilities.
But for the most part, all car dealerships are basically the same; all dealerships have equal incentive to not sell at the lowest prices, or give the most money for trade ins, and as they are all affiliated with manufacturers, they have substantially the same repair facilities. So dealerships try to create distinctions that probably don’t exist.
Real estate agents use a similar strategy. They tell you in the listing presentation that their marketing programs will result in a buyer for your property – before any other agent can. But don’t believe it.
First, understand that “marketing” to the general public is not marketing to “buyers.” “Buyers” for your home are those who:
1. Are shopping for a home in your area and price range;
2. Need to buy (or will buy) in the next 30, 60 or 90 days (all others are not buyers but “lookie-loos”)
3. Are pre-qualified or pre-approved by a lender to buy, or can demonstrate an adequate amount of cash exists to close the transaction.
“Buyers” may buy your home; the general pubic won’t. Nevertheless, agents are notorious for marketing to the general public – which is the wrong audience. They do so because: (a) getting more clients is more important to them than spending time on your home (see Part Two below); (b) they can tell sellers they are doing “something” – so it looks like they’re working on your home, and; (c) most if not all of their listing presentation consists of promises to do so.
My goal is to attract “buyers.” And I know where “buyers” look for and find homes – the Multiple Listing Service. Both buyers and buyer-agents look for homes in MLS, because that is where all the homes for sale are.
Once your home is in our local MLS, in a matter of hours it’s posted to REALTOR©.com, and tens of thousands of real estate agents in Arizona, the U.S. and around the world can share your home with their buyers. There is nothing else that comes close to this immediate exposure to umpteen thousands of agents and their buyers.
MLS is the only place where virtually all of the homes for sale are located. So buyer-agents don’t look elsewhere (such as agent web sites you are told about in listing presentations), as they know all other sources are incomplete and only have a fraction of the properties – where MLS has all of them.
Buyer-agents are the appropriate target because ultimately almost all buyers in the Phoenix area end up represented by one. And those buyer-agents will only use MLS to locate your home.
This also means that buyer-agents are the ones who “bring” the buyer to the seller. So the advertising to the public by listing agents is unlikely to have any influence over the home selection process.
If agents have to admit that your home’s inclusion on MLS will, in almost all cases, result in the sale, they lose the ability to claim their marketing is superior to other agents. So they use the “Big Lie.”
By the way, buyers have figured out that MLS is the place to go. Recently the MLS web sites became is the #1 resource for buyers, surpassing all other sites, such as former leaders Zillow and Trulia. Plus our MLS already syndicates its listings to Zillow, Trulia, Homes.com, and the Arizona Republic’s popular StreetScout.
Don’t fall for the “Big Lie,” and don’t hire agents that use it, because they have in essence admitted that they don’t know the best way to attract buyers and don’t have any special skills that will benefit you.
Part Two: Agent Marketing Benefits Them Not You.
Besides trying to fool you into hiring them, why do agents tout their marketing to the general public, when it has almost no chance of resulting in a buyer for your home? The reason agents do it is because it benefits them.
The goal of agents is to get more buyers and sellers. Agents can do that by using your property to get them more visibility. As shown in Part One, the Multiple Listing Service will result in a sale of your home. So although the marketing done by these agents is unlikely to benefit you – it may create new business for the agent!
Open houses are a great example. The typical home in MLS gains nothing by an open house. In fact, there are disadvantages to open houses – theft of your valuables is one, and liability if someone is injured is another. Also research has shown that homes that had an open house may sell slower than the competition (homes in the Phoenix area that didn’t hold an open house were 17% more likely to sell in 90 days, according to Redfin).
However, open houses are excellent ways for the listing agent to attempt to obtain new buyers – not for your home, but for other listed homes – which may be in competition with you, which is a conflict!
Similarly, the true purpose of agent web sites is to impress buyers and sellers to hire the brokerage. So a considerable amount of the effort that agents allegedly are devoting to sell your listing is directed to the general public, in order to get them new buyers (not for your home) and other listings (which may compete against yours).
Instead of creating “vanity projects” of no benefit to you, agents should put effort into the photos and the way your home is described in MLS. But many agents don’t, so listings in MLS are rife with inaccuracies, misspellings, and poor grammar. And that hurts you. A study found that 43% of 1,200 peopled surveyed said they are less likely to see a home where the agent’s listing has misspellings and improper grammar. Agents also overuse punctuation and capital letters – despite the majority of buyers saying they bypass ads using all caps and too many exclamation points.
In some situations and for some homes, there are methods (in addition to MLS) that actually will promote your home. For example, I engage a company to further advertise your listing to many real estate web sites. Ask me whether those techniques are right for your home.
3. They Don’t Really Have Buyers.
Agents often say you should list with them because they have buyers for your home. This promise is usually false. Why? Because they don’t have any buyers!
First, the statement “I have buyers for your home” isn’t logical. As you learned in No. 2, buyers hire buyer-agents, and buyer-agents (and buyers themselves) use MLS to find homes that meets a buyer’s needs. By definition, a buyer “buys,” and doesn’t passively wait until this agent comes along and summons them to make a purchase. When a suitable home becomes available, buyers and buyer-agents will find it, see it, and make an offer.
Second, some agents say they “have buyers” to sellers whose listing has expired or is about to expire – as the reason the sellers should hire them. If you are told this, ask the agent “if you had buyers who will want my home, where were they during the time when the home was listed and on the market? If they truly were ‘buyers,’ why didn’t you find my home for them through MLS and bring them to me with an offer as the buyer’s agent?“
Not bringing a potential buyer to your home when it was listed doesn’t make sense. So the “I have buyers” statement is more likely to be untrue.
Another thing these agents do is try to make you believe that if you hire them, buyers will flock to them, and they will be the one showing your home to those buyers, and will use their selling skills to get buyers to sign a contract.
But what they won’t tell you is that the listing agent doesn’t interact with buyers due to MLS, and so doesn’t show the home or influence what a buyer does or the amount offered. A buyer-agent will show your home to prospective buyers, and if an offer is made, the buyer-agent – not the listing agent, will help determine the offering price and will prepare the contract.
Besides, if an agent actually “brought” a buyer to your home, it is likely the agent will try to represent that buyer in order to boost their pay – at your expense, as detailed next in No. 4.
4. Dual Agency is Bad for You (and good for them).
What is dual agency, and why should you avoid it? Dual agency occurs when a real estate agent acts for and represents both the buyer and seller at the same time. When a dual agent, the agent claims both the sellers’ and buyers’ side of the commission.
Ordinarily an agent has a fiduciary duty to the client. This requires that the agent be loyal to his or her client, with the specific duty to effect a sale to your advantage. But in dual agency, that duty disappears. Because the agent also represents the other side at the same time, the agent can’t be loyal to you, as favoring one side over the other is not allowed in dual agency.
So you won’t get any specific advice that favors you in dual agency, such as that which results in you paying less if a buyer, or getting more if you are the seller; or that which would enable you to avoid risk, or would contractually put you in a better or poorer position to enforce it.
That puts you in an unfavorable position, because the interests of the buyer and seller in a sale conflict: the buyer wants the lowest price, the seller wants the highest price; the buyer wants to have the best terms, but the seller wants those terms slanted in its favor; and so on.
As a result, in dual agency you won’t get what you thought you hired the agent to give you. You won’t get an advocate or adviser who will attempt to effect a sale to your advantage or put your interests first.
You would think that no one would ever agree to dual agency, as you not only gain nothing by it, but also place yourself at a disadvantage and may be harmed. But buyers and sellers agree to it all the time, because dual agency is legal in Arizona, and agents don’t have to get your informed consent (tell you about its disadvantages).
Moreover, agents don’t have to explain how they profit at your expense. In dual agency not only do they “double dip” and receive all of the commission dollars, they are also allowed to put their interests ahead of yours. So despite not being loyal to you and giving you a much lower level of service, they get paid double!
Agents often disguise dual agency from sellers by describing it as an “exclusive listing,” or an “off-market” or “pocket” listing.
Another problem is that exclusive listings are not allowed to be put in the MLS. As you learned in No. 2, MLS is how homes are sold. Excluding your home from MLS means limited market exposure, and limited exposure usually means the home will take longer to sell and sell for a lower price. In every market where it has been studied, homes in MLS sell for more than off-market sales – up to 17% higher according to one analysis. Also Redfin has shown that homes sell for a discount when the agent represents buyer and seller: a sale at $300,000 would cost a seller $4,800.
So why do listing agents urge sellers to do it? Because he or she will avoid the MLS requirement that a commission be paid to a buyer-agent. So the listing agent gets to “double dip”.
The increased use of off-market listings has resulted in Colorado regulators warning real estate agents not to keep listings out of MLS in an effort to boost their pay. In Arizona, our local Realtor organization said “it can be argued that the agent is violating Article 1 [of the Code of Ethics] if a property is not marketed to a larger audience via the MLS so that the seller can receive more competitive offers.”
Like me, some brokers agree it’s a conflict of interest, with one stating “[w]e see this as a tremendous disservice to our clients … it’s limiting the exposure of listings to the market …. [w]hile it might be good for the broker, it’s not good for the consumer.” Whatever advantage an agent claims an off-market listing has, it almost never supercedes this lack of market exposure.
Attorneys can’t represent two parties whose interests differ, rigorously avoid any conflict that could harm a client, and can’t put their interest ahead of that of the client. But the real estate industry doesn’t follow those rules, and due to dual agency, they won’t let loyalty get in the way of their wallet.
5. Agents Can’t Protect Your Interests (You need the Broker-Attorney Advantage).
In a study entitled “Most Trusted Professions,” real estate agents came out behind Sex Workers, Soccer players and CEO’s. The only professions to rank worse than agents in trustworthiness were Psychics/Astrologers, Politicians, Car Salesmen and Telemarketers.
Consumer Reports magazine recently reported that “[t]he real-estate-agent business is saddled with a poor reputation” and “[a]ccording to the real estate agents we surveyed, that reputation is sometimes earned.”
The D.A.N.G.E.R. report commissioned by the National Association of Realtors states that the problem with agents is “[t]he knowledge and competency gap from the most to the least is very large, due to the low barriers to entry, low continuing education requirements, and the lure of quickly making big dollars. There are too many real estate agents that are simply not qualified to the level they should be. And while this lack of agent knowledge is a significant danger in itself, when combined with a lack of basic competency it could be destructive and harmful.”
Home sales are the highest dollar transactions most people ever engage in. In other states lawyers are involved to protect you, but in Arizona no attorneys are required. So although an agent may be able to do tasks, you won’t get attorney level, fiduciary representation from anyone.
Instead, almost everything agents do is “functionary.” Functionary activities are routine and repetitive tasks that don’t require a high level of expertise.
An example is “marketing” – such as the creation of a flyer or ad. As you learned in No. 2, marketing is the one functionary chore most overemphasized. Agents usually spend an entire listing presentation talking about putting a home on the market. But those are functionary activities, and only one small step in the home sale process.
In most cases functionary activities can be done by an agent of any level of experience and knowledge. Agents prove that when they hand you over to a “team member”, such as an “assistant,” where your work will be processed in a “one size fits all” manner, just like that of everyone else.
Because functionary activities are the only things most agents can do, the real estate industry has brainwashed us to think that they are all you need. But you also need “fiduciary” representation. But this level of representation involves activities very different from functionary ones, because it requires specialized and expert knowledge.
Obtaining “fiduciary” level skills come at a price – they are difficult, expensive and time consuming to achieve. Agents are not required to obtain them, and a result, they don’t acquire those skills. That is because agents in Arizona aren’t required to have any education, diplomas or schooling (no elementary, middle or school high school is needed), and the sole pre-licensing training requirement is a course that totals only 90 hours and takes 3 weeks.
As a result, the Arizona Association of REALTORS says the Contract you will sign has been prepared at a 7th grade level.
This lack of education places agents at a distinct disadvantage throughout their career, despite whatever level of experience they gain and how many homes they sell.
However, there are many fiduciary skill level things that need to be done to close the sale of your home. And agents can’t do any of them.
First, you are signing a contract. But the Contract warns you that agents are “not qualified to provide . . . legal . . . advice regarding this . . . transaction.” But I am qualified, and can give you the legal advice you need, from the beginning to the end of your transaction.
For example, the Contract gives you the right to object to adverse title matters and to cancel the contract if necessary. To exercise those rights, the agent must know what to look for. Unfortunately, the Arizona Association of REALTORS concedes that agents don’t have the expertise to handle this important step, saying that agents should “[r]efer the buyer to the escrow officer or an attorney if there are questions or concerns about the title commitment.”
But what if you don’t have a “question or concern,” and there is a title defect that should be investigated or objected to? If the agent doesn’t know what the entries in a report mean, no one will object or cancel, and that failure may mean you could be stuck with a defect that destroys the value of the home.
Plus agents aren’t trained like a lawyer to write persuasively and negotiate effectively. I have those skills, so you get a trained attorney advocate that won’t let the other side take advantage of you.
Agents can’t create legally adequate language or documents that legally protect and promote your interests. But I will. And an agent can’t provide you with all the options when the buyer doesn’t perform under a term of the contract or tries to get out of it. But that’s another thing I can do.
Finally, many agents are comfortable with conflicts of interest, such as dual agency and off-market listings (as was discussed in No. 4). I adhere to a higher ethical standard, and will put your interests first.
To obtain the fiduciary expertise you deserve you need a real estate licensee that is also an attorney. My 30+ years of experience as a real estate attorney (and 20+ years as the designated broker of SimplySOLD™) means you get the unique benefit of the broker-attorney advantage when using me for your home sale.
And although you get more, my commission rates are no different from the competition – so my enhanced attorney level services cost you nothing. Why would you settle for less?
N. Mark Kramoltz © 2018, All Rights Reserved.