Does using a real estate broker make your home sell easier?
Our recent listing for a residential multi-family home in a working class neighborhood in Brooklyn was priced ten percent higher than the comparable sales within the last six months in the area. I was certain that once we listed this property on the New York Multiple Listing Service (MLS), all real estate channels and social media sites, the major source of the interest would come from end users (people that will be the ones living in the home).
After taking photos of the property and posting the listing onto the MLS, within two weeks I received 18 phone calls. I conducted a private showing for all inquiries. No open houses were conducted due to the wishes of the seller.
Results of the property showings
From 18 showings, only 2 had no buyer’s broker – they had simply found the listing online and called me directly. The first prospective buyer claimed to be an investor looking to convert the home into an income-producing asset, however, she admitted to knowing nothing about the area and kept repeating that the asking price was too high. The other buyer spent 45 minutes knocking on the walls and examining every inch of the property with a flashlight. At that point, I would not be surprised if was he was going to start tasting the settled dust on the kitchen counter to truly get a real feel for the home. Needless to say, my expectations for both buyers were low.
My Impression of the Buyers without an Agent
They were both indecisive, overwhelmed by the asking price, and ignored some focal points that I was making concerning the seller and certain concessions. When I asked if they were prequalified for a mortgage, they essentially assured me not to worry and that their finances were solid to purchase a home.
Helpful tip to all prospective buyers: If an agent asks whether you are prequalified for a mortgage, brushing off the question is a red flag.
There are many instances in which someone thinks they are well qualified to secure a mortgage, but when they meet with a mortgage broker for the first time, the results are disappointing. They may fail to qualify altogether if the debt to income ratio if off, or they may be required to commit to a larger cash down payment than originally expected.
If the buyer is not pre-qualified for a mortgage, there is no reason for a seller to commit himself to a contract of sale. The last thing an agent wants is to waste his seller’s time and lock them into a contract that will not yield an actual sale.
My Impression of the Buyers who came with an Agent
The other 16 potential buyers who I showed the home to were accompanied by a real estate broker/agent. This essentially means that they entered into a “buyer agency” agreement with their broker. The gist of the agreement provides that the realtor shall show homes within the buyer’s budget and interest, and if an offer is made on a premises, the broker shall represent the buyer during the real estate transaction, hence the name “buyer’s agent”. Seller-agents generally like working with buyer-agents for the simple fact that clients are typically pre-qualified for a purchase before a viewing is scheduled. This simply means that a bank has evaluated the buyer’s financial health and has issued a soft pledge of their willingness to give a mortgage.
Throughout the walk-through, each buyer-agent did their best to have their client look past the imperfections of the home. Within a matter of 24 hours, four of the sixteen prospectives gave offers on the property via their respective agents. Ultimately, the seller entered into contract with the buyer that met his concessions and made a reasonable offer.
Why was working with a Buyer-Agent such a productive experience?
The agents were motivated in making the sale because of the broker commission split. The seller was paying my firm the standard commission rate of 6% of the sale price, but we split the total commission and paid 3% of the sale price to the procuring buyer-agent. Money is a powerful motivating factor. Had my seller decided to forego retaining a broker to sell his home, buyer agents would not bother introducing their clients to the listing since there is no commission guarantee.
From a practical stand point, if you are an FSBO (for sale by owner), agents can’t gauge your seriousness. I have met sellers who list their property just so they have someone to talk to during showings. Odd but true. When there’s a listing broker on the property, other agents know the seller is motivated to sell. Significantly, some FSBO’s make promises of paying a commission if a buyer is procured, however, if there is no written agreement in place, chances are unlikely and parties have to litigate the issue in court.
To conclude, why is working with a real estate broker an easier sell? Brokers attract other brokers with pre-qualified buyers! With an FSBO, you are attracting a very small pool of potential buyers – those without buyer-agents. The negotiation process can also be a rocky road without a liaison, since emotions tend to run high when buying or selling a home. In sum, agents and brokers prefer to work with a brokered listing for several reasons including:
- Commission is guaranteed;
- Retaining a seller-agent is a strong indication that the property owner is serious about selling the home;
- FSBOs are not always serious in closing title;
- No one wants to litigate for their commission. Even if an FSBO makes assurances to pay the buyer’s broker a commission, there is no guarantee without an agreement is in place. There is also the risk of the FSBO going around the agent by contacting buyer directly.
Paper Street Real Estate LLC
If you are a seller or a potential buyer looking for representation with a real estate brokerage, contact us at (646) 945-3727. We look forward to hearing from you.