If you’ve ever looked at my online profile or resume, you’ll know that I’m a sponge for real estate education and that I take a lot of classes and attend a lot of seminars to improve my knowledge and skills. Yesterday there was a Realtor panel in Los Gatos of top producing agents talking about building their teams, best business practices etc. There was some good info from all panelists but one Realtor shared a story that I thought was worth conveying here. That real estate agent was telling a story about a Silicon Valley listing that gleaned multiple offers.
The property, located I think in San Jose, was offered at about $500,000. It was a multiple offer situation and a number of the agents from various brokerages were coming in with contracts for their buyers. All but one phoned ahead to get a feel for the number of the offers and where the market was. Offers came in on that $500k listing within a fairly tight band of pricing of $506,000 – $509,000 from the agents who’d taken the time to “check in” with the listing agent. But one agent, with a discount brokerage which was rebating part of the commission back to the buyer, did not call. That real estate licensee just sent over an offer for $525,000. That’s right. The buyer paid $16,000 more than the next best offer. But hey, those buyers got a rebate of 1 or 2 percent!
Let’s do the math…. Let’s say that they got 1.5% of the 2.5% buyer’s agent commission back. That translates to $7875 in savings. But did they really “save” anything? Not when you consider that their real estate agent didn’t phone the listing agent, didn’t get a feel for where the prices might go, and instead sailed in with far more than was needed to seal the deal. Sure, they “saved” but guess what, they paid way more than they had to in the first part. So the net proceeds was a loss of far more than they gained.
I have had similar experiences myself when listing homes across Santa Clara County. The better agents tend to save their clients money. It’s not just one step in the process where it can happen. There are many opportunities for doing the right thing, which takes a bit more effort, and taking a shortcut. As a home buyer, how will you know if your agent is making every effort or not? Guess what: you won’t. That’s why you want to hire on reputation or at least a sense of excellence rather than a discount. My husband used to say that in high tech, a lot of managers focus on what is easily measurable. Rebates can be like that: they are easily measurable. What is harder to know is what skills, effort, reputation, and good will are worth. In the case study above, the buyer or buyers were focused on a rebate. Sure, they got that. But did they have the best representation? They will never know how much they left on the table. A better agent would have made a better effort – and saved them money. But hey, they got the rebate!