description of an ideal real estate web site
(real estate without brokers)
This is a letter I wrote in 2004 to the proprietor of a web site that was attempting to earn money by enabling real estate sellers and buyers to find each other, by-passing real estate brokers and their very large fees. I thought it was a long over-due idea, because in my experience most (not all) real estate agents perform their job very poorly and charge way too much. A site that made it easy for buyers and sellers to find each other and that educated both parties as to various aspects of the process could make a great deal of money while charging a tiny fraction of what brokers charge.
So this is a manifesto for someone to perform a vital service and get filthy rich in the process while saving buyers and sellers tremendous amounts of money.
By the way, the site to whose proprietor I wrote this has since dissappeared. He never replied to any of my ideas. Would he still be in business if he had ?
Well now we have Redfin.com and Zillow.com which actually fulfill many (not all) of the ideas I described in 2004 and 2007. I can't help wondering if anyone involved in either of those sites had read this article. More likely it's just an idea whose time had come, aided by the availability for most (not all) people to have high speed internet and huge hard drives, thus to ustilize the kind of real estate site that Zillow and Redfin provide.
(personal note : I still don't have anything better than dial-up at home, but until COVID hit, I would make trips to the public library and download my search results onto an 8 GB flash drive to take home.)
My predictions that the rapacious and unrealistic mortgage lending practices of 2007 and years preceding it would lead to disaster proved all too true in 2008, resulting in a huge real estate crash and a huge recession. A few reforms in lending practices resulted, but some proved all too short-lived.
now as of 2020, the price bubble has re-inflated and lending practices accordingly unrealistic. The COVID pandemic and high unemployment and job insecurity is bound to have some effect on the marketing of real estate. Hard to say how much of a crash will result and whether prices will drop slowly or precipitously as defaults and forclosures mount .
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What follows is the original 2007 article , without any updates :
I enjoyed our phone conversation yesterday. I look forward to offering you and your organization some input as to how you might make your site and your business into the real estate equivalent of Priceline or Amazon or eBay.
I think the time is ripe for revealing conventional real estate brokerage and the extortionate fees they have previously extracted from the buy-sell process as being the parasitic dinosaur that it is. High time to replace this massive bloodletting with a system that makes it easy for buyer and seller to deal directly and that has a relatively low cost per transaction but because of high volume has a great profitability.
I think there is room for a sufficiently committed and clever and enterprising individual or business to seize the opportunity and put a quarter to three quarters of conventional brokers out of business within the next 5 to 10 years and by doing so make the "American dream" of home ownership much less of a nightmare than it currently is and , no doubt of greatest interest to you, such a person or business could in doing this become fabulously wealthy.
I would hope that some of my ideas could help you to do this. Why ? Because I have come to think that percentage fee real estate brokers are about the lowest form of life on earth. I have dealt with so very many bad ones (the dead lazy, the stupid or incompetent, the dishonest, the egregiously greedy -- and some who were all of these) and so very few who were any good to either the seller or the buyer. I have come to the conclusion that in far too many cases the actions of the broker in disrupting communication and cooperation between buyer and seller actually has the effect of PREVENTING A SALE which would otherwise have had a very good chance of taking place. Even when the broker does not actually ruin the sale by mishandling one or both parties or by disrupting or corrupting communications, that 5% to 6% fee is a serious barrier to the parties finding a price that both can live with. I have even considered putting up my own site of advice to sellers and buyers which might be titled "NoMoreRealEstateBrokers.org" or even "MakeRealEstateAgentsExtinct.org". If I did so , my site would simply be an information and advice and "call to action" site, rather than a profit making site. I am not personally interested in selling services but only in disseminating ideas that will change the world. I would be just as happy to help someone else do the hard work and make the huge money by allowing that person to disseminate my ideas and so change the world.
So back to your own desire to make a whole lot of money by providing a genuinely valuable service.
I believe your business could flourish and make great profits by providing sellers for a PAID FEE those few services that they CANNOT do better for themselves and by providing for FREE on your web site the information they need to enable them to do well those things they CAN do for themselves, thus giving them the knowledge and courage to operate as FSBO sellers (if possible) and to make best use of your paid services. The purpose of the extensive free information is of course to encourage the seller to operate FSBO and buy those services from you that they need, rather than to submit themselves to being raped by conventional 5%-6% brokers.
I would suggest a model in which , in addition to package deals, you offer specific services at flat rate prices or at per month prices. Obvious services to offer are as follows :
(1) providing COMPARABLE SALES DATA, thus enabling the seller to set a price at which the property will sell easily and promptly. This could be a FREE service or it could be provided as a PAID service, probably at a flat fee that is substantially less than that which would be charged by a professional appraiser.
Sellers should also , for FREE, find on the web site some realistic GUIDELINES as to when they DO need to hire a PROFESSIONAL APPRAISER who is NOT also a real estate sales agent (eg when the property is of some specialized type rather than a pure residence, or when an estate sale is involved, or when the property is part of a divorce settlement). They should be educated as to when and how to DO THEIR OWN COMPARISONS by shopping their own neighborhood during the year preceding the time they plan to market the property so they can tour the homes and later learn the actual selling price. Do your own appraisal by comparison shopping is most useful when the property is one of many very similar ones (eg housing developments) and there are several for sale within any given several month period.
The site should also WARN SELLERS of the hazards of relying on so-called "appraisals" given by percentage based real estate agents, who generally will say whatever they believe will get them the listing. (whatever the initial list price, however unrealistically high it might be, the agent hopes that sooner or later it will be trimmed down to a selling price or the market will finally catch up; meanwhile the listing agent will just pop it onto the MLS and wait for someone else to sell it and hand him the listing agent half of the fee on a silver platter along with the seller's and/or buyer's financial head.) It is never too early in your web site to help sellers and buyers understand that percentage fee agents will say anything to get a listing.
Needless to say, you could also offer professional appraisers who are not also real estate sales agents an opportunity to advertise on your site or to have links to their own sites. For this you would charge a monthly fee. You should also make provision for customer feedback so that each advertising appraiser's overall customer feedback rating of satisfaction could be made known to the potential customers. The best way to do it would be to have customers report the appraised high-low value given by the appraiser and also the price they actually received and days on market to achieve same (plus any special incentives seller had to provide that might have affected the price). Obviously an appraiser whose high-low range is a highly accurate predictor of price achieved within a few months of marketing would be an appraiser who has done an excellent job. Income from appraiser advertising could subsidize the site during its early period.
As you and I already know, CORRECT PRICING is THE SINGLE MOST IMPORTANT step in marketing any property ! Sellers rarely understand the importance of correct initial pricing. They do not realize that the pool of potential buyers that already exists the first day the property is offered is the seller's very best chance of selling within 3 to 6 months, which is the time frame most sellers desire. Properly priced property will sell within that time frame, indeed usually within the first 3 months, and will sell at near the asking price.
A property that is initially OVERPRICED will take forever to sell and will ultimately sell for less than if it had been priced correctly on day one. Meanwhile the prices of property in seller's desired destination quite possibly have been rising faster than those in the area seller is leaving. Even if the price gap between the old home and the new were to remain constant, the mortgage rates may change for the worse, resulting in substantial costs over the life of the loan. Real estate taxes may also be increased : in California any rise in price of the new home will lock in higher real estate taxes on that home and will increase the carrying costs on the loan. It is only if the seller is in the unusual position of selling in a steadily rising market but buying into a stable or a declining market that the seller can afford to let his property take a long time to sell.
Even when a prolonged selling process does not harm the seller financially , there are other serious lifestyle harms. The selling process , which must include keeping the house and grounds in condition of maximum neatness and attractiveness so that the property can be shown to buyers and which must include the disruptions to normal life of showing the property, is an arduous and disagreeable process. No one would like to have to live that way for more than a few months. Note also that this process is less disruptive and difficult when the seller is working FSBO and does his own showings , because he can time showings to be at times that allow for any extra "tidying up" of the home and that are relatively convenient for the family. He also can ensure that buyer prospects are properly supervised (eg don't steal things) and that pets will not be allowed to escape into the street nor allowed to interact badly with buyers. (I know you can imagine a non-dog person fainting at the mere sight of your Neopolitan Mastiff -- or my pack of Bouviers !)
(2) PRE-LISTING PREPARATION : helping seller to prepare the home and grounds for maximum appeal. The first step for most properties is to ensure curb appeal, or at least to remove "curb repellency". The basics of this can be taught on your web site as a FREE service.
Removing "curb repellency" would include the pruning of trees and shrubs to allow home to be seen, the getting rid of ugly things like dead or dismantled cars or motorcycles, getting rid of anything trashy outdoors and in. Avoiding "curb repellency is is vital when the sale is an agented one, but it is even more important when the sale is FSBO.
For many sellers, the interior will show much better if it is uncluttered : thus moving extraneous possessions to a storage locker (figure on 3 to 6 months rent of same). Likewise moving any easily stolen and valued items out of the home and into a place of safety, a step absolutely essential if any real estate agents are to be allowed ever to show the home (sellers would be appalled to know how poorly some of these agents supervise buyers : I have actually been left alone in houses while the agent went elsewhere.)
( Update note : in the years since I wrote this a lucrative business has grown up , called "Stageing" homes for sale. In addition to the steps I list above, the "Stageing Expert" will advise on depersonalizing the home by removing anything that has any hint of personal taste and will advise renting good quality furniture in place of the owner's beaten up items. )
Pre-marketing preparation also includes making plans for management of children and pets during showings, so that they will be safe and not distracting or frightening buyers. Plans for odor issues should also be considered at this stage.
At this stage the seller should also ask a few friends to come over as if they were buyers so the seller can get his first practice at showing the place. A true friend, one with good taste and ruthless honesty, can be asked to critique the showing and offer input on making the place more attractive.
This kind of pre-marketing preparation is something that 99% of percentage fee AGENTS WILL DO POORLY OR NOT AT ALL. Until that listing contract has been signed, the agent is very properly afraid to say anything that the seller might take offense at. This makes it difficult to give realistic advice about removing eyesores and so on. After seller has been induced to list, usually by very enthusiastic talk about how the agent will quickly find a buyer who will adore the place and pay near list price, it becomes difficult for the agent to then say that this can happen only if the seller does a lot of clean up and de-clutter work and commits himself to keeping the place absolutely sparkling and clutter free (and often child and pet free) during the many months that it could take to actually find a buyer who likes it enough to make any offer, whether or not close to asking price.
See also my comments below on educating sellers as to benefits of doing their inspections and so on before beginning to market the property.
(3) GETTING THE PROPERTY INTO THE MLS or set of MLSs that is most appropriate : this is an essential PAID service, either a flat fee or a per month fee. It could be a very tiny percentage of listing price per month, eg 1/10 of one percent of listing price per month, which means that if property sells within 6 months (as any correctly priced property will do) the seller will have spent a tiny amount compared to the current 5 to 6% of selling price.
Your long run GOAL of course is to make the MLS obsolete, because your own site is doing so much better a job of enabling buyers to locate appropriate properties for sale. You might also want to enable buyers to list themselves and their desires in a Wanted section which potential sellers could search.
At the same time as the property goes into the MLS it should ALSO go ONTO YOUR OWN WEB SITE on the FSBO pages (or agent pages if the seller has already indentured his home to an agent), and this section should have its own search engine that searches within the section. Buyers coming to the site should have the choice to search here first before expanding their search to the general MLS sites. This gives your sellers improved chance to be seen first and to be found by the buyer withOUT an agent intervening and skimming off a huge share of any profits.
The GOAL of having a good within-site listing service and search engine is to ultimately achieve so much fame as being THE BEST PLACE TO FIND PROPERTY that BUYERS turn to your site as their very FIRST step, maybe even before they look to the local newspaper or RE magazine ads (which we should note are easily consulted only by buyers who already live in the area ; out of area buyers are often more willing to pay higher prices than local buyers.) If you can attain that kind of renown, then you will likewise attain a FAME with SELLERS as being the absolutely BEST AND LEAST COSTLY way to sell their home, so that they turn to you as their FIRST resort and have confidence to stick with you for the several months that the sale will probably require (rather than trying it half-heartedly for two weeks and then having a panic attack and racing off to be raped by the nearest percentage based broker .
You can achieve this ONLY if you require sellers to provide enough detailed information and if your search engine allows buyers to specify as many details as they want to and to put priority ratings on each specification. For one buyer having a certain number of bathrooms might be utterly essential and for another it might be of minimal importance. For one buyer having horse stabling might be essential, more important than anything about the house iteself, and for another horse stabling might be utterly worthless. A swimming pool tends to be a major asset to some buyers and a huge liability to others. And so on and so on and so on.
The information the seller should be asked to supply for posting on your site should go into MORE DETAIL than that that goes into the typical MLS description. Ideally, it should ask the seller to include every aspect that is likely to be of interest to buyers.
For example, in most of California summer heat is more of an issue than winter cold, so sellers should be asked to specify whether the house has shade trees and whether these provide only a little shade or a medium amount or extensive shade. Since energy costs and availability are becoming more and more an issue, there should be a place for sellers to specify amount of insulation (R values) for roof, walls, and floor, as well as space to specify if any of the windows are dual or triple paned. There should be oppertunity to describe if there are any energy creating devices such as passive solar water heater, photovoltic panels with or without storeage batteries, or wind-powered energy generator. I believe that energy considerations will become more and more important as time goes on. Your site could also supply information as to current tax rebates and PG&E and similar rebates available for energy upgrades. (I also believe that some upgrades will be required by law sooner or later, so the person who achieves them before such laws are enacted will be in a favorable position.)
Seller supplied information posted on your site should also include whether or not the legally required DISCLOSURE forms have already been filled out (and of course the site will supply these forms to be filled out on line and downloaded) and link for buyer to see same, whether or not any required or customary INSPECTIONS have already been done (roof, house, wood pest, well output and water quality, etc etc , ie whatever might be relevant) with links for buyer to view same. Sellers need to be educated as to potential advantages of having homes pre-inspected : buyers are much more willing to offer higher prices if they can be assured that the house does not contain problems, as every buyer has heard horror stories on this aspect of home buying (eg for an exaggerated view, the comedy film "The Money Trap"). Whatever defects might exist, it it best if the seller finds out and remedies them before putting the house on the market, second best if they are found out and revealed before the offer is solicited (in which case the seller can ask the buyer to accept these problems "as is" if seller is unable or unwilling to repair same), and worst and potentially disastrous if the defects are not discovered until after opening of escrow. Defects discovered after the opening of escrow often have the result of killing the deal ; defects discovered after the close of escrow can result in a lawsuit against the seller and seller's agents.
Here again, you might want to offer home inspectors , wood pest inspectors, etc an opportunity for PAID advertisement or links to their own sites. Again, you might enhance the value of this information by giving customers a chance to give feedback on performance by such inpectors.
If you choose to allow sellers to post more extensive information about their home, ie beyond the basic of your "extended MLS" type of form and any disclosure and inspection information, then of course that would be for an additional PAID fee, probably charging on the basis of per megabyte (or per gigabyte) per month. You certainly could include FREE educational information as to what kinds of further information might help to sell a home.
At the lower end in storage space and download time would be such information as a plot map of the property and perhaps surrounding ones with buildings indicated, a floor plan of the house with dimensions indicated, several well chosen photographs of home interior and exterior plus any important outbuildings. I would include on the site's information some instructions about the need to minimize file sizes in order to keep download times acceptable to buyers trying to access the information; to do this you might list a few books that give such information. Keeping downloads fast is extremely important whenever the pool of probably buyers is likely to lack high speed broadband connection, eg that would include anyone living outside an urban area where such Internet connections are common.
At the high end in file size, the seller could include streaming video tours of the home and land. Quite frankly, I think these are counter-productive , firstly because the video does not impress as much as the real thing, second because a FSBO seller really wants to talk to and meet the potential buyer so as to be able to point out features that are of value to this particular person and his family, and thirdly because streaming video requires a high end computer and fast broadband connection , and non-streaming video files are intolerably huge and slow in downloading. I would advise the seller who has capacity for making either VHS or DVD video tours to instead offer in the on site information to send same to anyone who phones him and is willing to pay a few dollars in postage to have the VHS or DVD snail mailed. There are out of town buyers for whom this could be quite valuable in convincing them that it is worthwhile to travel to see the home.
( Update note : since I wrote this, fast broadband connections have become much more common in most urban areas. They are still less common in rural areas. )
(4) ADVERTISING through newspapers and magazines. The site could offer some FREE education on how to write a newspaper ad or magazine, and perhaps more importantly on what to avoid in doing so.
Sellers DO need to be educated to understand that some advertising is essential. No matter how desirable the property and how bargain priced it might be, it will not sell if people do not hear about it. While some buyers do know how to utilize various MLS internet sites, and of course it is our goal to get as many buyers as possible using your site, many buyers including some very affluent ones still rely on print media. These buyers either do not know how to use a computer or how to use the internet or have tried and found that most of the MLS sites are too hard to use, mostly because they do not allow the buyer to enter some of his crucial search criteria. Having a site return 100 hits, 93 of which prove to be totally irrelevant because they don't match a critical criteria that the seller has not been allowed to specify, is an exercise in frustration. Likewise it is frustrating to have to run several different searches because one wants to consider more than one location, but one's criteria or one's price range are different for one's area of first choice from those for one's area or areas of secondary choice. Finally , on many search sites, downloading information on a specific hit is slow or difficult or gets an error message, or when the information finally arrives, vital pieces are missing or the property proves to be absolutely unsuitable. A few frustrating experiences will discourage the buyer from wasting another afternoon at his own home computer (with a slow connnection) or making another visit to the county library or the university to use their fast connection and pay 10 cents a page to print out any useful results or attempt to e-mail such results back home. (Do I sound like I am speaking from experience ? Absolutely.)
Most sellers do NOT understand the DIFFERENCE in purpose and strategy between a FSBO Seller's ad versus a real estate agent's ad. The Seller has ONE property to sell and usually strongly needs or wants to sell THAT one particular property ; he has no other properties to sell. The Agent has many many properties to sell, both his own listings and everything in the MLS, and the ad most important purpose is NOT to sell that one particular property (which indeed may never sell) but rather to bring in phone calls and bring buyers into the office so that the agent can sell them ANY property within the available inventory. Agents often write ads that function as a "bait and switch" in that the desirability of the property is overstated, but after being disappointed in that property the buyer may be switched to some other one.
Sellers need to appreciate the benefits of writing an ad that is accurate in describing the actual qualities of the property. The goal is for the buyer to read the ad and think "yes, that could be what I want" and , of vital importance, for the buyer on actually visiting the property to say "it is everything you said it was, and indeed it is nicer than I expected. now let's make a deal." Because Agents so often write glowing ads that inevitably lead to the buyers being disappointed or even disgusted when they actually visit the property, the Seller who writes an ad that is honest and factual can easily obtain the desired buyer reaction of "yes, it really IS what I expected". Buyers appreciate honesty and respond to it with candor. The deal is much more likely to be made , as well as infinitely less stressful to all parties, when there is a feeling of some trust and candor on both sides.
While agents commonly use a great many glowing terms that are either pure opinion or extremely vague (eg "stunning", "luxurious", "elegant", "huge", "spacious") or use euphemisms that buyers quickly learn to decode to the ugly truth (eg "cute" or "dollhouse" mean that the home is unbelievably and unlivably tiny), the FSBO seller would be wise to use adjectives sparingly and with great attention to accuracy, and to use more factual descriptions whenever possible. Eg instead of "luxurious huge mansion" say "aprox 3500 sq ft, 4 Bd, 2 Ba. 15 x 20 M Bd with Jacuzzi in M Ba. Many energy efficient features. hardwood floors and imported tile."
Sellers might try the consciousness raising experiment of taking the real estate classifieds and crossing out every word that is simply subjective opinion or quite vague. This often reveals that half to three quarters of the advertising dollars are spent on meaningless fluff and hot air.
The site should also offer worksheets to help the seller figure the costs of a 3 to 6 month newspaper advertising campaign. The figures for daily or weekend ads will have to be obtained from the newspaper's office by the seller. The goal is a realistic budget for advertising. Likewise worksheets for the local monthly RE magazine.
Sellers need to be educated to choose the RIGHT newspaper, the one that people looking for that particular type of property are most likely to look in, which is also the one that most sellers of that type of property advertise in. In some locales there may be more than one such paper. For example, in the Davis - Woodland area, country listings are found almost exclusively in the Democrat and almost never in the Enterprise. If the property is such as would appeal to or be affordable to only buyers coming out of some other area, usually a much higher priced area, then the seller must consider running some ads in the newspapers that reach that area.
If the seller has his information already up on your site, and perhaps also on his own personal site, the ad could be very short and simple : eg" location, XXX sq ft, Y Bd Z Ba, $XXX, full details on www.suchandsuch.com/pagename.html" Keeping the ad short might allow for advertising in several different papers reaching a much more extended audience than running one very detailed ad in the single most relevant paper.
As for the local monthly RE MAGAZINE, such as Homes & Land, these may or may not accept ads from FSBO sellers. If not, then one PAID service that your site could offer for a modest surcharge is to act as agent for placing such ads, eg charge the actual ad cost plus 5%, paid in advance of course. I really don't know if such an ad makes any sense for an individual seller or not. again see the difference between purpose and strategy for FSBO ads vs for Agent ads. Since these magazines tend to have a long lag time between ad placement and ad publication, I would question their usefulness for the FSBO seller. The RE agent does not care if his ad is outdated, because he always has other houses to sell.
(5) PROVISION OF STANDARD FORMS AND ALTERNATIVES. Sellers and Buyers alike need to have access to the various forms that are commonly used in real estate transactions. They need to be able to understand the commonly used alternative clauses as well as some of the more creative and useful non-standard clauses.
If your business DOES NOT include an experienced competent real estate ATTORNEY, then you will be limited to simply providing the standard forms for downloading plus education urging any buyer or seller to employ an experienced and competent real estate attorney to draft and review any papers, rather than to rely on the unqualified and highly self-interested services of the agent who , not being an attorney, is NOT qualified nor legally permitted to engage in the practice of law.
Now if your business DOES include on its staff an experienced and competent real estate ATTORNEY, then you can offer a wider array of drafted alternative clauses and you can offer a greater amount of education on interpreting the clauses, standard or non-standard. With of course the disclaimer that such info is presented for education and example only and that before using any of this material the buyer or seller should employ an experienced and competent real estate attorney (from his own state or locality, as laws differ with locality) to draft and review any papers.
Again, there is the opportunity to have PAID advertising or links from attorneys specializing in real estate law.
Most buyers and sellers naively and foolishly trust and rely on the real estate agent to provide "the standard form" and it is very very rare for either buyer or seller to realize or even suspect that this form has been drafted by attorneys working for the real estate brokers alliance with the goal of primarily protecting the interests of the real estate agent. To the extent that the interests of the seller do not conflict with those of the agent, the seller's interests receive secondary consideration. Protection for the buyer is provided only to the absolute minimum demanded by state law. If anyone doubts this , let him read the "standard form's" section on Liquidated damages and notice that if a deposit is forfeited, the broker grabs not the 5%-6% that might be reasonable, but rather a full half of it.
(6) PREPARATION FOR THE FSBO SELLER TO DEFEND HIMSELF AGAINST AGENTS WHO WILL ATTEMPT TO LIST THE PLACE.
Any seller, whether he intends to be a FSBO or intends to use an agent, desperately needs to be educated as to the realities of the "standard" listing form which the agent will push on him, ie the "exclusive right to sell" listing. This locks the seller in for way too long a period , prevents him from saving a commission if he should find his own buyer, grossly over-rewards a listing agent who after obtaining the listing does nothing more than place it into the MLS and wait for someone else to find a buyer.
Sellers need to see on your site some ideas as to possible alternative agreements which might be far more fair to the seller and far less tolerant of laziness by the agent. At an absolute minimum the listing agreement ought to specify the list of duties the agent must diligently perform and give the seller the right to cancel if the agent fails to do so in any substantial way. A fair listing contract would provide that the seller is entitled to the selling portion of the commission if the seller should find his own buyer. In regards to the protection the agent receives for a sale to one of "his" buyers that takes place within a specified period after the expiration of the listing, a fair contract would provide that in order for any agent to claim a buyer as "his" buyer, he must register the identity of that buyer (including buyer's phone number and mailing address) at the time he shows the house ; the period after the expiration would also be limited to 60 days if the agent had not obtained any offer from that buyer, or where the agent did obtain an offer from that buyer which did not result in a contract, the agent's fee would be protected for a period of 180 days after the date of the last offer or counteroffer obtained by said agent. Finally, a smart seller would limit the listing agent's fee to 1% (or even less for houses listed above $300,000 or 400,000, or possibly a flat fee) of the selling price, with 2% or 3% or 4% (lower % for expensive houses or easy to sell houses; higher % for low priced houses or hard to sell ones) to the actual selling agent. All of my recommendations are geared to restoring the emphasis on the agent actually doing his job of producing a buyer who is ready, willing, and able to pay a price the seller is willing to accept. The majority of the reward should go to whoever actually produces the buyer and convinces him to buy. The whole meaning of a contingent fee system is a bigger reward for success and no reward at all for failure. The alternative of course would be a fixed fee not contingent on a successful sale in exchange for a given time period of specified services or one-time performance of some specified service.
Every FSBO seller also desperately needs advice and strategies for dealing with the inevitable percentage based agents who, like vultures , will descend on him claiming that they already have the perfect buyer who will buy the place instantly and at full asking price immediately after the seller signs "this authorization for me to show the place" or some other phrase which is designed to disguise the reality that the seller is being asked to sign a 6 month Exclusive Right to Sell listing. The promised buyer of course either never existed or existed only in the agent's wishful thinking or is someone who does indeed want something sort of like the seller's property but who on seeing it does not like it at all or who likes it somewhat but not nearly enough to pay anything like the asking price or likes it enormously but cannot qualify to pay anything like the asking price. In any case, the immediate easy full priced sale does not occur, but now the seller is stuck with this agent for the next 6 months.
Any seller who is not a half-wit ought to realize that if there were any local buyer who really was looking for a place much like this one and priced much like this one, that buyer would be keeping an eye on the newspaper ads and/ or on the MLS web sites. If the seller does a decent job of advertising the property as a FSBO, that buyer will be very quick to respond. The absence of 5 to 6% parasitic financial load will make the agreement on price a lot easier.
My own advice to any seller being given a pitch from an agent claiming to have the perfect buyer on hand is very simply, first to point out how easy it is for such a buyer to find him without help of any agent , but secondly to say to the agent something like " well since you know for absolute certain that this buyer will totally adore my place and joyfully pay my price, it sounds like the only work you would need to do to make this happen is to phone the buyer and make an appointment to show the house, then spend an hour or three showing it to him and filling out the paperwork for him to buy it at my price and without any contingency of selling his own home. Is that right? well, that is only a few hours of work. I really think that 1% (or some lesser % or a fixed sum amount) would be plenty of compensation for doing a few hours of work successfully. So here is MY agreement that would give you one week in which to show the property and secure a full priced offer not contingent on sale of another property, and MY agreement would pay you XXX for a sale that is completed through close of escrow on those terms. Do you want to sign that ?" Of course the agent will not agree to that unless he is truly convinced (rightly or wrongly) that he does have that dream buyer firmly on the hook and that his buyer is not yet aware of this property. In the 1 in a million instance where the agent does indeed have such a buyer and can make the sale happen, the fee of 1% or less will be very well spent and probably less than the costs to the seller of continuing to market the property himself.
(7) Sellers also need advice on HOW TO DO A SHOWING and how to use one or more friends to rehearse for same. Sellers are very apprehensive about this and they need to realize that they will almost certainly do a much better job than 99% of all agents will do.
The seller KNOWS the favorable and unfavorable aspects of his home far better than any stranger can, especially an agent who has spent only an hour or two there or only seen it "on tour". By listening carefully to the buyer and paying attention to buyer reactions, the seller can discern which aspects of the home the buyer perceives as desirable and can draw added attention to those aspects or to other aspects that might be related in some way. The seller can discern which aspects that buyer perceives as undesirable, then acknowledge freely that he understands how this could be a problem for that buyer, and then go on to suggest possible mitigations or remedies if any can be imagined.
The seller needs to realize that part of doing a good showing is being a WELCOMING HOST. The buyer should be welcomed as if he were a dear friend who one does not know very well, or perhaps the image of someone who is a very dear friend of the seller's best friend but is someone the seller has not yet met. The buyer is to be welcomed with warmth and hospitality. The seller should remember always that he are hoping this buyer will do him the immense blessing of buying his home, usually at a generous profit to him, but in any case allowing him to get on with his own life plans and ambitions to go somewhere else where he hopes to be happier.
Sellers should also remind themselves that the seller needs to sell THIS particular home, but the buyer does not need to buy this particular home. The buyer only needs or wants to buy some home out of a choice of many homes currently for sale or that will go on sale within some future period.
Showings by a FSBO seller unlike those by an agent can be arranged for mutual convenience of seller and buyer. They can be timed so as to give seller chance to tidy up the home and to arrange for children and pets to be out of the way. A lock box is never needed and seller can be assured that no agent will leave a buyer inadequately supervised. If showings are timed for the weekends and that should happen to result in a departing buyer chancing to notice another buyer arriving, well that may spur one or both of them to make an offer sooner and higher than otherwise and may discourage the kind of delay and reflection that causes a buyer to pay more attention to the drawbacks of the property. (Most buyers initially notice the favorable aspects and only later start to give more weight and worry to the unfavorable ones.)
(Update note : I should also mention that while agents claim to "screen" and "qualify" buyers, I have noticed as a potential buyer that they rarely do so. The only financial questions I have ever been asked have been geared towards attempting to convince me to spend more, not to convince me to look only at properties I can comfortably afford. The fact that the agent is paid in full on Closing Day, whether or not the buyer defaults next month, coupled with the fact that the agent is paid on a percentage basis , gives the agent every incentive to show properties that the buyer can only marginally afford or cannot really afford at all. Unless a buyer presents a "pre-qualification letter" from a lender, there is no way to know that he is actually financially qualified. As of 2007, recent lending practices of making loans that are absolutely unsustainable by the buyer for more than the first few years have become a scandal and have caused financial devestation to those buyers foolish enough or unmathmatical enough to fall for these schemes.
As to screening the buyer for lack of criminal intent, there is absolutely no way that an agent can know whether or not the purported prospective buyer is or is not a criminal seeking to view the house as a possible burglary target or target for any other crime. In theory , one could check the Child Molester /Sex Offender web sites to try to see if the buyer is a convicted criminal of this nature. )
One service your site can sell is HELP IN NEGOTIATION, either working UNILATERALLY for one party or working BILATERALLY as a "mediator" to help the parties come together. Mediation services in which both parties have made some advance payment for the service can have a powerful effect of committing both to maximum effort to come to an agreement. Mediation encourages a spirit of cooperation by both to finding a deal both can accept. Unilateral help, ie help to one party, can have the detrimental effect of hardening that party's attitude , or the other party's attitude or both, into one of opposition. Deals in which seller is represented by a percentage based agent, whether or not buyer is also represented by an opposing agent (who if percentage based in compensation has a serious conflict of interest with buyer's desire for a lower price) almost always results in hardening of both parties attitudes into one of conflict and opposition, the belief that there will be a winner and a loser, rather than a belief that a good compromise can benefit both and let both be partial winners. However unilateral help by someone from your group who is being compensated on a fixed fee basis , whether or not that fee is contingent on a successful deal being reached, has a better chance to avoid hardening of attitudes as the negotiator is more free to encourage the one he works for to be more empathetic and sympathetic to the other side's point of view and can remind him that a less than perfect deal is better than no deal at all and having to continue the marketing process for a possibly prolonged period. A fee that is not contingent on success in reaching a deal may put greater incentive and pressure on that side to reach a deal, but can create some real resentment if a deal should not be reached.
Sellers and buyers are almost universally fearful of the NEGOTIATION process. Seller and the buyer have more goals in common than they have in opposition : both want for buyer to buy this house and be happy in it. Yes, there is some conflict about the price, and the seller does need to understand that the buyer's desires in this regard are absolutely as "legitimate" as his own desires. Moreover the buyer's ability to pay more may be under more constraint than the seller's ability to accept less. Some compromise is inevitable, especially if the seller has been too optimistic in setting his asking price; but the absence of the need to throw away 5 or 6 % on the agent's fee make this easier. If the seller's asking price was realistic in the first place and the market has not taken a dive since then, the negotiation aspect should be fairly easy. If a cordial relationship has already been established, the process can even be pleasant.
Sellers and buyers need to know that a lot of the escrow maze will be guided by the escrow company. A good escrow agent will take the mystery and difficulty out of this. Likewise the closing.
Again, there is opportunity for your site to offer PAID advertising and links to the more reputable escrow companies.
As to the FINANCING, your site can begin by demystifying the process for buyer and seller. Buyers can be educated to the benefits of pre-qualifying themselves and of seriously considering how much of their anticipated income they are truly willing to enslave to the Mortgage Monster. Sellers can be educated to the benefits of having one or more financing institutes pre-committed to making a loan on the property to any buyer who would fulfill specified requirements of that institute. Sellers can also be educated as to those seller financing or seller-assisted financing schemes that might be a reasonable risk and investment for them and to beware of those that represent an excessive risk. Sellers can be taught how to compare the actual income and return on investment from a seller-carry to realistic appraisal of return on receiving cash and investing in more diversified modes.
(Update note : remember that most people seem to have very little mathematical intuition or judgement. Most do not know how to set up a spreadsheet that is a reasonable model for their own fiancial situation, both current and future. Many buyers blithely assume that their income will rise in the future, but few consider that their living expenses may also rise. Few include in their calculations the costs of doing maintainence and repair work on the home, the ever-rising costs of commuting from the home to the workplace, or even the ever-rising costs of rearing and educating their children.)
From reading your ads, I do get the impression that the major portion of the income you hope to achieve from this site and business will be coming from your role as a LOAN BROKER or loan go-between or whatever. Thus it seems that your real self-interested reason in helping buyer and seller find each other is so that it will be you who gets the profits from arranging financing. Somewhat similar to the car companies that make more off of financing than off of manufacture or the jewelry merchants who make more off of financing than off of their margin on the underlying product. If that is the case, then of course you will be gearing any information offered on financing to encouraging buyers and sellers to perceive you as the best source, rather than looking to any other source.
(Update : I have no idea whether or not I correctly discerned the fiancial intentions of this site proprietor. All real estate buyers and sellers should always be aware of the risks that an agent or someone else involved in their deal will steer them towards a lender who is NOT offering them the most advantageous loan or even a loan which they can sustain and endure over the long term. Borrower beware ! Likewise the seller who is carrying back any part of the price should become very aware of the need for the loan to be sustainable by the buyer in the long term. Forclosure is not a fun game for either party.)
I hope that some of these ideas will be of value to you and will speed the day when conventional percentage based real estate agency fades to extinction or at least finds itself forced to offer its customers a far better service for a far less rapacious fee.
|site author Pam Green||copyright 2003|
|created 8/19/07||revised 8/19/07, 9/03/2020|
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