Posted on Wednesday, June 25th, 2008
Saving money by using a full service discount broker has always been a good idea. But it has become even more important in today's market.
It's no secret that many homes aren't selling. No matter which media outlet you use to get your news, you will hear about foreclosures, falling prices, and people who just
can't find buyers for their homes. These stories are true; they just
aren't the whole truth. With all of the stories about gloom and doom,
it's easy to lose sight of the fact that homes that are priced
appropriately are still selling. In just the first week of June, the
Twin Cities Minnesota MLS shows that over 500 single family homes were
sold. What these homes had in common was that they were priced to sell.
Many of them also were professionally staged, which is the second most
important thing a seller can do. If you have a moment, check out my
post about home staging. But as important as staging is, it is of secondary importance compared
to pricing your home so that it is a better value than any of the homes
you are competing against.
Before listing your home, you need to have a competent agent prepare
a comparative market analysis. This analysis, also called a CMA, will
show what similar homes have been selling for. It should also show what
similar homes are listed for right now, as these are the homes you will
be competing against. The mistake that many sellers, and also too many
Realtors are making is as follows: They are unable to understand that
it is not 2002 anymore, and that market conditions have changed a
In 2002, a REALTOR would prepare a market analysis, and then try to
get the sellers to price their home so that it was "in line" with
similar homes that were for sale. Because there were more buyers than
sellers, this method was generally successful. Today however, agents
and sellers need to look at the CMA in a different way. We don't
prepare the CMA any differently than we used to. We search for
comparable homes that are currently for sale, and then we use the
search results to begin a discussion of how we can best compete with
them. The difference is that sellers need to understand that a large
percentage of the homes that are currently for sale are not actually
going to sell. This means that even though we prepare the CMA the same
way we always have, we need to use it in a new way.
Being "in line" with a bunch of properties that aren't going to sell
is no way to be successful. Your home needs to be priced so that it is
clearly a better value than any of the homes it is competing against.
This is a simple idea to understand, but it is very difficult to apply.
Psychologists have tons of research showing that people are most
comfortable placing themselves in the middle of a pack. Sellers are no
different; they will look at a CMA and be most comfortable pricing
their home the same way everybody else does. It is surprising how many
honest, hard working agents fail to show their sellers that they are
essentially copying somebody else's failure. I have nothing against
copying, I just prefer to copy ideas that have been successful!!
If you look at homes that are actually selling in this market, you
will see that they are consistently the ones that are offering a
slightly better value than the competition. By this I mean they are
priced about 2% lower than a home with identical features. The best
agents point this out to their sellers up front. But even the best
Minnesota brokers are having a hard time getting sellers to price their
home "out of line" with the competition. It doesn't help that these
agents are typically charging 6% or even 7% of the sale price. Many
Minnesota brokers are giving their sellers the same advice I am giving,
but then they charge so much for their services that their sellers find
it impossible to take the advice.
My answer is to discount the commission. At IBR Realty we have been doing this since 1987. That is one reason we are the
largest Minnesota discount broker. Historically I was able to save my
sellers about 2% compared to what other agents were charging. It felt
good seeing my sellers keep several thousand dollars that they would
have otherwise paid to a more expensive broker. But I knew that another
broker would have probably been able to sell the home anyway, and often
the sellers were getting so much that they weren't all that concerned
about saving an additional 2%. My ability to charge less was an
important component of my marketing plan, and it did save my sellers some money, but it wasn't central to my
sellers being able to sell their home at all.
In today's market, my high quality discount services are more
important than they have ever been. The approximately 2% that I can
save sellers is often the difference between selling their home and not
selling it. Just last week I sold a condo in the Highland Park area of Saint Paul that was identical to several other units for sale in the same
building. The only difference is my sellers were able to be priced
lower than their competitors without it hurting their bottom line. My
seller and her fiancÚ will be meeting with me soon to begin looking for
their dream home, while the other sellers she was competing against are
still where they were.