Selling Agent Bonuses

Real Estate's "Chicken Soup"

Just another one of those anecdotal observations, based on what's coming through my email in-box, but lately it sure seems like there's been an uptick in selling agent bonuses (the selling agent is what the Buyer's agent becomes once there's a deal).

Sellers accomplish that two ways: 1) by offering a fatter "pay-out," the portion of the commission shared with the Buyer's agent and their broker; and 2) by dangling an actual cash bonus to the Buyer's agent.

Does it help?

Like chicken soup, it certainly doesn't hurt . . .

P.S.: As a Buyer's agent, my practice is to give my clients what's called the "Agent Full" report (unabridged) from MLS, so they see exactly what I'll be paid if they buy any given home.

Did the Seller Leave Money on the Table?

Four Ways to Tell

In the history of mankind, no first-time Mother has ever under-dressed their newborn in the winter.

--Manhattan Pediatrician

So which pediatrician uttered the above line?

Mine (and my wife's).

What prompted that comment were the 3 layers of clothing my wife had already put on our newborn son (this was 10 years ago), coupled with her anxiously asking him whether he thought "the baby was dressed warmly enough?"

What's that got to do with real estate?

I've yet to encounter the Homeowner who thought their house sold for too much.

Money Left on the Table

On the contrary, a great deal of Sellers seem to believe that their home sold for too little.

So, are they ever right?

To help answer the question, here are the four, inter-related variables I'd weigh:

One. How long was the property on the market?

It's hard to argue that any home on the market listed for more than a month -- let alone six months or a year -- sold for too little.

In today's networked, 24/7 world, serious Buyers (and their Realtors) often know about properties before they come on the market.

If a home is a good fit for a serious, prospective Buyer, it's a good bet that they'll: a) know about it; and b) have gotten in to take a look.

Assuming, of course, that the home was on the market longer than 48 hours.

Two. Was the home professionally and aggressively marketed?

My checklist of "To Do's" for Sellers literally has 143 items on it.

Things like, "work with professional stager to the get the house ready; "arrange professional photography and meet them at the house"; "proof marketing materials designed by professional desktop publisher"; "do pre-list networking with other Edina agents" (all 1,600 of them); "plug new listing at various Realtor meetings"; "draft and proof (flattering) copy on MLS"; "promote the home's Broker Open."

And so on and so on.

All those things come across loud and clear to prospective Buyers.

And so does their absence.

Three. Who was the Selling agent? (representing the Buyer) -- and was it the same as the Listing Agent?

As I've blogged before, there are two types of dual agency: "broker-level," and "single agent dual agency."

In the first type, both the Buyer and Seller have their own agent -- but they work for the same Broker.

While that legally shifts the agents' duties, in my experience it doesn't alter either the negotiation dynamic or the outcome.

The second kind of dual agency-- where both the Buyer and Seller have the same agent -- is much more problematic.

In my opinion, no agent can serve two masters.

Which is why I will only represent one party in the transaction.

Four. Who was the Listing Agent? (representing the Seller).

Good Realtors have good reputations.

They do repeat business in the same neighborhood(s); are known for being thorough and hard-working; and have an established track record.

Mediocre agents . . . don't. (In fact, you're less and likely to run into mediocre agents, because today's hyper-competitive real estate market has already weeded them out.)

So, to sum up . . . . .

If the same (no-name) agent represented both the Buyer and the Seller; the house sold in 3 days with no prep or marketing campaign to speak of; and no other agents had a chance to get their clients through (or even knew the house was on the market) . . . . yeah, it's just possible that the house sold for too little.

Absent one or more of those factors, I'd be dubious.

P.S.: Note that none of the above factors include, "Sold for less than the Comp's would suggest."

While the Comp's (Comparable Sold Properties) certainly frame the owner's asking price and eventual sale negotiation, showings and actual feedback trump Comp's once a home is actually on the market.

Real Estate "Trump Cards" -- Buyer's Version

Fanning the Fear of Loss

If the ultimate trump card available to Sellers is the existence of multiple offers (see, "Is it REALLY in Multiples?"), what is the equivalent for Buyers?

The threat to move on to another home.

So, how credible is such a threat?

Interestingly, the three-step analysis for Sellers parallels the one confronting Buyers facing potential competing offers.

Move on to What?

Step One. Is the threat plausible based on the house and the market?

If there are ten similar homes for sale nearby that are all about the same price and in the same condition, and the Buyer says that they'll move on if their offer (counter-offer) is rejected . . . you'd tend to believe them.

Even if that's a stretch, if the home in question has been on the market for awhile, it may be hard for the owner to pass up the Buyer -- and offer -- in front of them.

That's especially true if showings have been few and far between.

By contrast, a Buyer who threatens to "move on" is less credible when: a home is new(er) on the market; it's priced very competitively relative to its peer group; and its location, design or other features make it relatively unique (i.e., it has no close substitutes).

Good agents know the competing inventory, and whether a given home is poised to sell -- or sit.

Step Two. Probe the Buyer's Agent.

Just like Buyers' agents have been known to ask the identity of other bidders, Listing agents can certainly ask what other properties the Buyer is considering.

They may not answer (and don't have to), but simply the way they field the question can be telling.

I represented a Buyer two years ago who had exhaustively studied the market, and had rank-ordered their top three choices (which were all virtually tied).

When negotiations to buy their first choice stalled, I informed the Listing agent that my client was ready to move on.

"To what?," came the instant reply.

Without hesitating, I gave the addresses of the two "runner-up" homes, and proceeded to rattle off each one's merits and drawbacks relative to the subject home, their market history, current asking prices, etc.

The Seller came around.

Step Three. If neither of the foregoing techniques work, there is always a surefire way to determine whether a given Buyer's threat to "move on" is real.

Wait.

If they were bluffing -- or couldn't get an attractive enough deal on house #2 (or #3 or #4) -- they'll be back (undoubtedly with a stronger offer!).

On the other hand, if house #2 goes "Pending" two weeks later, and the Selling agent is the same one you were just negotiating with . . . it wasn't a bluff.

Why is the Buyer's Agent Called the "Selling Agent?"

"Real Estate Terminology 101"

One of the confusing things about real estate is that, once a deal closes, the Buyer's Agent is called the "Selling Agent."

Isn't the Listing Agent, representing the Seller, the "Selling Agent?"

Well, no.

Think of it this way: the Buyer's agent is selling something (besides the house) -- namely, the Buyer's offer.

Just like every home, every offer has strengths and weaknesses.

It's the job of the Buyer's -- er, Selling -- agent to play up the strengths, and defuse and/or minimize the weaknesses.

Selling Your Own Listings

Buyer's Market Phenomenon:
More "Dual Agency" Deals?

I don't have any hard data, but at least anecdotally, it seems like the number of homes being sold by the listing agent -- that is, they represent the Buyer as well as the Seller -- is on the rise.

(One of the quirks of real estate is that the agent representing the Buyer is called the "selling agent"; when one agent represents both parties, it's called "single agent dual agency").

It further seems like that phenomenon is happening more in the upper brackets.

Assuming I'm right about that, what's the explanation?

"Forlorn Listings"

Here's my shot:

When a home first comes on the market -- especially if it's a a "hot property" that's in great condition, priced well, etc. -- Buyers' agents practically line up to get their clients in the door.

Six months or twelve months later . . . not so much.

Showings drop to a trickle, if that. (Showings are when Buyer's agents take their clients through a home privately.)

Often times, the only agent driving any traffic to the home is the listing agent, via open houses.

As a result, the odds of the listing agent also finding the Buyer (or vice versa) go up significantly.

Upper Bracket Phenomenon?

So, which homes are sitting on the market the longest?

Not the entry-level homes, roughly defined as under $200k; those have been selling briskly all year.

Rather, the homes with the longest projected market time now are the most expensive homes. According to MLS recently, there is now a three year supply of $1-million plus homes on the market in the Twin Cities.

With all that competition and scarce Buyers, a Realtor who wants to sell such a home had better be prepared to do it themselves.

RE's Most Confusing Terms

"Who's on First?" -- RE Edition

It's not quite as confusing as Abbott and Costello's "Who's on First?" routine . . . but it's not exactly clear either. Hopefully, the following definitions shed a little light on real estate's most confusing terms.

"Buyer's Agent": the agent who represents the Buyer.

"Listing Agent": the agent who represents the Seller.

"Selling Agent": what the Buyer's agent is called after the deal has closed.

"Sold sign" (in front of house): actually means "Pending." Once the house has sold -- i.e., title has transferred -- the sign is removed and the home becomes a "closed" sale.

"Pending": a home that is under contract, but hasn't closed yet.

"Sold, subject to inspection": precedes "Pending" status. Once any inspection issues have been resolved, the home becomes "pending."

"Broker": the company who the Agent or Realtor (synonyms) works for. Some are franchises, like RE/Max, others are not (Edina Realty).

"Preview": when a Realtor tours a home without a client along.

"Showing": when a Realtor tours a home with their client(s).

"Median Sales Price": middle value in a group. For example, if a $200k, $250k, $275k, $400k and $2M home all sell, the median sales price is $275k.

"Average Sales Price": in the previous example, the average sales price is $625k.

"Condo": an apartment that is owned.

"Highest and Best": Highest offer, best terms.

"Traditional sale": a normal or routine sale (vs. one that's "lender-mediated," i.e. a bank -- or many banks -- are involved).

S&P/Case-Shiller methodology: a complete mystery to everyone but them (but widely cited nonetheless).

If you want to know what a short sale is . . . call me (the term's a complete misnomer; personally, I prefer the term, "long sale").