The 10 most common FALSE BELIEFS about selling a home:
- Real Estate Agents Have An Incentive To Achieve The Highest Sale Price
- Negotiations Are Best Left To An Experienced Real Estate Agent
- Real Estate Agents Have A Valuable Database Of Buyers
- A Home Is Either Sold Or It Sells Itself
- Three Or Four Appraisals Will Give Me A More Accurate Indication Of The Value Of My Home And Which Agent Can Achieve The Highest Price
- A Good Real Estate Agent Makes Selling My Home Convenient
- A Great Real Estate Agent Has The ‘Gift Of The Gab’
- Only Local Real Estate Agents Can Achieve The Highest Sale Prices Because Of Their Local Knowledge
- My Home Is Worth $ X And I Won’t Sell Below That
- The Agent With The Most Sales In An Area Is Usually The Best One To Use
1. Real Estate Agents Have An Incentive To Achieve The Highest Sale Price
To help with selling your home, would you trust someone if you knew that they didn’t have an incentive to achieve the highest sale price?
I’m sure you’ll agree that the last 5-10% of your home’s value is the most critical to achieve.
If your home was worth $1 Million, this would be the last $50,000 – $100,000.
What would your agent earn on the last $50K – $100K if they charged around 2.5% commission?
The answer is $1,250 – $2,500.
Do you think this is a strong incentive for them to maximise your sale price, if they’re likely to get over $22,000 in commissions anyway?
Several scientific research studies have proven that real estate agents have a greater incentive to achieve a quick sale instead of the highest sale price.
More specifically, these studies show that real estate agents undersell homes by an average 3%. Unfortunately, most vendors never know that this happened to them.
There are four common symptoms ignored by home sellers, which scream that an agent is underselling a home. You can read about them here.
You can click here for a more detailed explanation of why real estate agents undersell.
2. Negotiations Are Best Left To An Experienced Real Estate Agent
When a real estate agent negotiates on your behalf, how much of it do you get to see?
As a vendor, you never hear what the agent says about you or your property, because negotiations happen behind your back.
The secretive nature of real estate negotiations removes all transparency from the process for the seller.
When you combine this lack of transparency with a lack of incentive for the agent to strive for the highest sale price (See Point 1. above), you have a recipe for disaster.
Most agents simply bring you an offer and ask you whether you want to take it or counter it, instead of negotiating with the buyer first.
At worst, they will pressure you more than the buyer just so they can get the deal done and pick up their commission.
Remember that a $50,000 or a $100,000 difference in your sale price makes only a very small difference to their $20,000+ commission.
Having a real estate agent negotiate on your behalf is like trusting your chickens to a fox, and I hope you can see the problem with this.
3. Real Estate Agents Have A Valuable Database Of Buyers
When selling your home, do you believe that competition for your home is helpful?
Do you believe that a higher sale price is achievable when there is a larger number of potential buyers competing for your home?
This is a no-brainer, right?
Where do you think there are more of these buyers? On the database of one real estate agent, or among all the people searching on realestate.com.au and domain.com.au for a home like yours today?
The fact is that most real estate agents will have a database of thousands of people, but it’s important to understand who these people are:
Most of them are those who have left their names and details at open homes.
Most of these names were collected years ago and those people are not in the market anymore.
Most of the remaining prospects on this database are looking for a different kind of home to yours or in a different price range.
Many prospects on this database have left false names, phone numbers and email addresses, because they didn’t want to be hounded by the agent.
That leaves only a relatively small number of people on this single real estate agent’s database, who are looking for a home today, that is just like yours.
Do you think that these prospects are going to sit at home on the couch, waiting for this one real estate agent to call them about your home?
Or do you think it’s more likely that these people will be searching on realestate.com.au and domain.com.au, like 98% of all home buyers today?
When a vendor sells off-market to someone on a real estate agent’s database, they are fishing in a very small pond with very limited competition.
For this reason, they are almost guaranteed to undersell their property.
4. A Home Is Either Sold Or It Sells Itself
Did you buy your current home from an agent or because of the agent?
Do you see the difference?
Did the agent talk you into buying it?
Or, did the home simply introduce itself to you one day as the best available alternative?
Would you have bought your home if you weren’t even aware that it was for sale?
Would you have bought another home instead, if it ticked more of your boxes and offered greater value?
There are only two reasons why anyone buys any property: Awareness and Perceived Value. That’s it.
To create awareness and perceived value, there is a formula that needs to be executed correctly.
It is this formula that is responsible for making your home become BUYABLE for top dollar.
When executed correctly, your property doesn’t need to be ‘sold’, but without this formula, it won’t sell itself.
Real estate agents don’t have enough incentive to execute this formula (see Point 1. above) and private sellers have no idea that there is a formula, let alone how to execute it.
There are five reasons why it is highly risky to sell with any real estate agent or privately.
5. Three Or Four Appraisals Will Give Me A More Accurate Indication Of The Value Of My Home And Which Agent Can Achieve The Highest Price
Why do you think a real estate appraisal is free, while an independent valuation by a licenced valuer costs over $500?
Simple. It is the only way for agents to get inside your home, pitch themselves to you and then keep hounding you until you submit and give them the listing or choose another agent.
Did you know that what you think is an appraisal, is actually called a ‘Listing Presentation’ by agents?
In case you’re not aware, this makes it a conflict of interest. Why is this?
Because when you ask agents to give you an appraisal, you want to find out the accurate market value of your home.
But that’s not why agents go to your home. Agents want your listing, and they know that they have a higher chance of getting it by telling you a figure that you want to hear – accurate or not.
There is even a name for this phenomenon in the industry: “Buying The Listing” (buying it with a promise)
Even if an agent resisted the temptation to ‘buy your listing’, no agent will secure a listing (client) from every listing presentation (appraisal).
A good agent will generate around 5 clients for ever 10 appraisals. This means that every second appraisal is a waste of their time.
Considering this, how much effort do you think they will put into an appraisal, and how thorough and accurate will these appraisals be?
The accuracy of the appraisal has nothing to do with winning your listing – which is the agent’s real priority.
Appraisals can be generated within minutes using Core Logic / RP Data.
From 3 or 4 such appraisals, how would you know which is accurate – if any? The one you agree with the most? Seriously?
If you’ve ever had an appraisal, have you not found it strange that agents come to your home with a pre-printed appraisal containing so called “comparable sales”?
How could they know what’s comparable BEFORE seeing your home?
This is why valuers inspect your home first and only then find comparable sales.
6. A Good Real Estate Agent Makes Selling My Home Convenient
Do you believe that selling your home starts with the marketing campaign?
Or do you also consider the preparation of your home for sale to be part of the sale process?
Are you more likely to achieve a higher sale price with a better prepared and presented home?
If you answered “yes”, then preparation and presentation are part and parcel of selling.
Preparation and presentation could include many things such as repairs, painting, replacing carpets, decluttering, and styling etc.
Does a real estate agent do any of these things?
Even if they help organise these through the contacts they have, is it convenient to live in a house that is being repaired, painted, re-carpeted, styled, decluttered, and optimally presented for sale?
If the sale of your home feels convenient, then you haven’t prepared and presented the home properly, and you will most likely undersell it.
It’s OK to prioritise convenience when selling your home, as long as you accept the fact that you will undersell it in the process.
No agent can change that.
Keep reading about the other 4 traps of selling your home.
7. A Great Real Estate Agent Has The 'Gift Of The Gab'
Many people believe that if a real estate agent can convince them to sell, then they will convince a buyer to buy.
This is why many people believe that the ‘gift of the gab’ is indispensable to a good agent.
This raises the same question from Point 4. above: Did you buy your home because a real estate agent talked you into it?
If you answered “no”, then you have something in common with every buyer. Nobody buys a home because the agent talked them into it.
As a matter of fact, there are countless people who bought their home despite the agent.
Most people don’t like to be ‘sold to’ or ‘talked at’, so why put your ideal buyer through this pain? You may even drive them away.
Remember that agents do most of their talking to prospective buyers behind your back. Agents who talk a lot often say things they shouldn’t (about you or your circumstances).
Like you read in Point 4. above, there is a formula that makes homes become buyable, and it is also this formula that is responsible for achieving the highest possible sale price.
8. Only Local Real Estate Agents Can Achieve The Highest Sale Prices Because Of Their Local Knowledge
A good local real estate agent should know their ‘patch’ like the back of their hand – and most of them do.
Why is this important to sellers? Because they make two assumptions. Firstly, they assume that a strong local knowledge equates to a strong knowledge of local prices.
Secondly, they assume that this strong knowledge of local prices automatically equates to the agent achieving the highest possible sale price.
Let’s start with the second assumption. As you read in Point 1. at the top of this page, science has proven that real estate agents undersell properties by around 3% because they have little incentive to achieve the highest sale price.
The majority of agents are local to their areas so it is clear that simply knowing local prices does not lead to achieving the highest sale price.
This also makes the first assumption irrelevant. Even if a strong local knowledge meant that an agent has a strong knowledge of local prices, what use is this if they undersell anyway?
Not even the ‘best’ agent in a suburb will sell every property. So, unless that agent researches all the properties that were sold by others, they won’t know local prices as well as someone who has done that research.
These days, anyone can have access to this data with a subscription to the likes of RP Data. It’s not access to the data that matters, but how much time and effort is put into dissecting and analysing the data.
Local knowledge is helpful to better understand why one pocket (or even which side of the road or end of the street) in a suburb is priced differently to another.
However, these differences are reflected in the recent sale prices that are revealed by thorough research anyway.
9. My Home Is Worth $ X And I Won't Sell Below That
Do most properties have a sticker price or a recommended retail price? Are they worth exactly that? Says who?
If you had three people making an offer to buy your home today, you’d have three different amounts (not to mention different conditions).
Assume that the highest of those offers was for $1,020,000, with a $1,000 deposit and subject to 21 days finance, 14 days building and pest and the sale of the buyer’s home, (which they haven’t yet started marketing).
The second highest offer was for $1,000,000 with a $200,000 deposit, no conditions (cash, unconditional offer) and ready to settle as soon as you need.
Which offer would you take? So then what is the value of your property?
Buyers don’t care what an agent, a valuer or a vendor thinks a property is worth.
If you disagree, have a look at all the properties that remain unsold after weeks or months on the market.
Serious offers usually fall within a certain range and this is closer to the truth than to say a property is worth $ X.
There is a formula that helps to increase this range by lifting buyers’ perceptions of value.
Great negotiations discover what those perceptions are, while extracting the highest amount from the best buyer.
Unfortunately real estate agents don’t have a strong incentive to do this well. Refer to point 1 above.
10. The Agent With The Most Sales In An Area Is Usually The Best One To Use
Which do you think is more difficult for real estate agents to do?
To sell a house or to win a new listing? If you answered: “win a new listing”, you’re right.
This is why most agents spend most of their time and effort on getting new listings.
It is also why the most successful agents are those who get the most listings.
Naturally, the agents with the most listings will have the most sales.
This means that the most successful agents are those who are better at…selling themselves to you…to get your listing.
There are various industry ploys and tricks for this, such as promising a sale price you want to hear (see Point 5. above), or enticing you with their large “database of buyers” (see Point 3. above)…
…or to plaster their faces everywhere you look, including for sale signs, the premier ads you see on realestate.com.au, bus stops etc.
They know that the more often they are seen, the more successful they appear.
So what does this have to do with achieving the highest sale prices?
Most people simply believe that the only reason they are seeing the agent’s face so often is because they are popular, which “must be” because they achieve the highest sale prices.
If you read Point 1. at the top of this page, you would understand that real estate agents have little incentive to achieve the highest sale price for properties.