Editor’s note: In this three-part series, brokers and agents share tips and insight on approaching buyer and seller standoffs and ways professionals can keep a transaction moving in a slowing real estate market. (Read Part 1 and Part 2.)
Salesperson, psychologist, accountant, chauffeur, diplomat, photographer, videographer, customer service representative, landscaping consultant, handyperson, interior decorator — these are among the hats that real estate agents can wear in the course of a single transaction.
In addition to starring in these various roles, agents can invest a heap of time, energy and money to sell a client’s home or to help a client find a home. Sometimes deals fall through and agents don’t get a dime in return. Clients can fire their agents and walk away from the market, and in some cases there is no recourse for agents.
These risks can be heightened in a slow market, as sellers can be wary about lowering the listing price of their home or making too many concessions to buyers, and buyers may feel more confident that they can walk away from a deal and find another home in the area that better meets their needs.
Experienced brokers say there are ways to help avoid these pitfalls.
Jack Seaman, broker-owner of WYO-Country Real Estate in Worland, Wyo., said real estate professionals can minimize the risk of blown deals by paying attention to details.
“As I was growing up people made many deals by a good handshake. Boy, those days are gone,” he said. “Part of the reason so many deals don’t go to closing is communication between lenders, buyer and seller Realtors. The little things always become big things if you don’t keep control of the situation.
“I call these deals the ‘lawnmower deal’ when you jeopardize a $200,000 home sale for a no-good $20 lawnmower parked in the seller’s garage,” he said. “I think the best way to protect yourself from working for nothing is to do a better job of what you are getting paid for. Start right from the beginning, inform, disclose … I think the best way to guarantee your commission is to work harder and smarter. That’s what you are getting paid for. You won’t close them all, but try a little harder and you will close more deals.”
His advice to agents: “Stay in touch, follow up, don’t just wait for your commission check.”
Agents don’t have to take every client who walks in the door, he said. “If you smell trouble just walk away and spend your time on the good listings and people who are sincere. Know your own market, don’t take those overpriced listings just to keep your competitor from having them — let someone else waste their time on them.”
Costs in the real estate industry — as with so many other industries — continue to rise, Seaman said.
Home appraisals and tightened lending standards have emerged as a potential deal-killer these days, said Wallace Perry, chief operating officer of the Carolinas Region for Coldwell Banker United, Realtors, based in Charlotte, N.C.
Even though the company’s market area is performing well compared to the national housing market as a whole, Perry said that financing terms are now stricter. “I think lenders are a little more careful about doing 100 percent financing,” he said. And in the past few months Perry said he has seen an increase in the number of appraisals that come in 6-10 percent below the selling price of the home.
Consumers, he said, don’t always seem to realize the risks that agents face in the business. “Many times they don’t understand that their agent may have had the last two or three deals fall apart where they didn’t make anything — the buyer and seller walked away scot-free and the agent didn’t make any money. There’s a lot of things that go into selling a home, and the paperwork is enormous.”
These days, agents face high gas prices and healthcare costs on top of other expenses. While agents used to pay $29 a month for a subscription to the multiple listing service publication that contained property listings information, agents today are reliant on handheld computers and the Internet, he said. “Real estate today, more than ever, is a career. It’s not something that people jump into and become successful overnight. You have to work two, three, four years before they really start making good money.”
When economic times are tough, consumers can be much more nervous about buying and selling homes, and transactions can face more risks as a result, Perry said. “It definitely has an effect on buyers and sellers and how quickly they might walk away from a deal. If they’re all nervous and things don’t go right, they may throw in the towel very quickly.”
While some consumers seem to resent the money that real estate agents make per transaction, Perry said, “For some reason they don’t understand the expertise it takes to sell a home and do it the right way.” The true value of agents is in their expertise, he added.
Joseph Ballarino, founder and president of Amerivest Realty in Naples, Fla., said there are ways for agents to protect against deals that fall through, though they aren’t widely used.
“When working with a seller, (agents) can have the seller pay a marketing fee upfront to defray some of the listing broker’s expenses,” he said. “That amount would appear in the listing agreement. And when working with buyers, agents “can collect a retainer for their service, which is usually rebated to the buyer only if they make a purchase. This fee and terms would be contained within a buyer’s brokerage agreement.”
Ballarino said that in his market area an increasing number of listings are expiring because they are not selling within the defined contract period. “Most agents are not being fired, but owners usually will change agents (after an expired listing) to try to get different results,” he said.
Those agents who don’t qualify their buyers or seek a written brokerage agreement with buyer clients could “spend days and weeks showing them properties to find out later they purchased one through someone else,” he said, and these mistakes are more common for agents who just entered the business.
Such incidents can lead some agents to leave the business altogether, he said. Successful agents in the current market should learn to place a proper value on properties they list for sale, he said.
“Advertising has and always will be the number one expense related to listing and selling a home,” he said. Consumers, he said, aren’t always aware of the time and effort Realtors put into their job, including time spent on continuing education and conferences, researching properties and statistics, and learning about new technologies and marketing techniques.
Carolynn Ozar-Diakon, broker-owner for Resources Real Estate in Rumson, N.J., said the key to avoiding failed transactions is in offering a higher level of professionalism. “If there were not such an influx in part-time and hobby Realtors then there would be less failures,” she said. “Sometimes even the best Realtor cannot save a transaction with a novice who does not want to learn on the other side. Negotiating an hourly rate, in the event the transaction does not close, would be somewhat of a remedy, although it opens the door for an expectation of paying hourly rates rather than a percentage in all transactions.”
The biggest cost “and largest waste of money” for real estate professionals is for advertising, she said. “Seller’s expect it, although it does next to nothing to sell a home. The broker overhead is high with advertising and insurance costs.”
A prominent deal-killer in a slowing market is sellers’ refusal to accept a changing market, Ozar-Diakon said, and buyers “tend to make a fuss over more things and also the little things in a slower market.” Sometimes buyers get the feeling that they are overpaying for a property, “especially as the media is constantly pushing the bubble concept,” she said.
Successful agents are the ones who do not give up on a transaction, she said. “There is usually a compromise that will fix the situation. The measure of an agent and a great agent is the number of closings, not sales.”
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