You want to save money.
Better yet, both.
I get it. I want that too.
So when it comes time to sell your home, you decide to sell privately in order to save yourself that pesky commission. This sounds sensible and appealing.
It’s interesting what happens in people’s minds when they begin to imagine large amounts of money. Whether they imagine selling for a big price, or envision saving big commissions, it’s almost as if a switch is flipped, and they want more. More. MORE! Their decisions soon follow a predicable downward slope.
Maybe I can save some much-needed money soon becomes, Hey cool, I can determine my own price. That thought quickly becomes, I can determine as high a price as I want because it’s my house and no one can tell me what to do. This mentality quickly descends into My house is worth 50% more than anyone else’s because I changed the carpet ten years ago, and because I’m not willing to sell for less, and that’s the end of it. If they want it, they’re gonna have to pay. Heh heh. (Insert Grinch-like grin and the rubbing together of hands.)
This doesn’t just happen with private sellers. I’ve watched this happen with clients. Despite my highly researched, professional estimate of market value, they demanded I list their home above market value. I did it, and felt uncomfortable for the duration of the listing. I used to think I was treating people with respect by listing their home above market value because they asked me to. I realize now it is not a loving thing to do at all. By agreeing to list the house for more than what it’s worth, I sabotage the deal, and make it nearly impossible to get full market value.
How does overpricing sabotage the selling price? I’m so glad you asked!
I can tell you from experience that an overpriced listing will go through this cycle.
The data shows what market value is. The seller lists tens of thousands of dollars above market value. People look at the property, but no one puts in an offer. After a while, the listing becomes stale. The public begins to assume that there must be something wrong with the house because it has been for sale for so long. The seller begins experiencing anxiety, and lowers the price. Then lowers it again. And again. Eventually, months and months down the road, something has to give. Usually, due to personal deadlines and fear, the seller will give in to an offer that is well below market value.
In one case however, they were not so lucky, and the bank repossessed the house.
As a result there is no return on the investment for the Real Estate Agent who spends their own money(sometimes borrowed money) to advertise the property. I cannot think of any reason why I would want to spend my time and money again on a listing that will not sell.
I have heard some agents argue that an overpriced listing has value for them because they can still pick up buyers from the listing and make money off of the buyer’s. That is in fact true.
However, when I list a property my fiduciary duty is to be loyal to the seller. I desire to get the seller top dollar for their property. I know that if I list it over market value then that simply does not happen.
How to Keep This From Happening to You
Luckily, you can learn from the mistakes of many who have gone before you. I’m all for saving money. But don’t let greed cloud your judgment.
The biggest mistakes these sellers make is completely ignoring the factual data from their trained, professional real estate agent. They were determined to stick to a price simply because they wanted what they wanted. Whether it made sense or not. (I’d like to sprout wings and fly, but all the stubbornness in the world won’t make it a reality.)
Basically, getting rid of the “I’m the king of the castle” mentality will pretty much guarantee success in this and most ventures in life. Because sellers are not the only people or considerations in the equation.
Key points to remember:
- A buyer is not willing to pay more than market value (they research too, by the way)
- A buyer is fully aware that if you’re selling privately, you’re saving the commission – they expect to save that amount too, when they purchase. If you want to slide the commission portion back into the sales price, think again. Buyers can do math too.
- The bank will require an appraisal on a private sale. If the appraisal reveals the value to be less than asking price, they will not approve the mortgage.
I want you to save money and time too – and this is how: keeping the price real, and your greed at bay. It will save you the cost of lost value, and the time of trying to get more than you deserve.
Keep it real.
I’m saddened by an unfortunate experience with my clients.
And it happened because of the four difficulties that come from working with private sellers.
I share the story to encourage or equip agents when dealing with private sellers. Or perhaps to advise them to think again. I also share this story as a warning to sellers so they can experience success instead of loss.
Recently, a lovely young couple asked me to help them find a very specific kind of property. As soon as they described what they wanted, a property came to mind. It was a perfect fit. There was just one problem. It wasn’t listed.
I remembered though, that the owners had wanted to sell it in the past.
Allow me to stop here to tell you that I have helped my clients purchase for-sale-by-owner properties before. Every one of those experiences was painful either for me, my client, or everyone. So I wasn’t altogether excited about repeating the process. Still, the property was absolutely, completely, irresistibly perfect for my buyers. So I approached the owners. Perhaps they were still interested in selling.
What soon followed were four of the biggest, and most common, reasons that I, and many other agents, would rather avoid working with private sellers.
Five Reasons Agents Avoid Working with Private Sellers
Working for Free for Strangers
The thing about private sellers is that they don’t know what they don’t know. Like their house value for starters. How do they know any offer an agent would bring would be fair? The buyer’s agent often ends up educating, advising, and even assisting the seller without any compensation or even appreciation.
In one case, I advised a seller to get an appraisal. But I sure wasn’t about to do it. Conflict of interest much? In the interest of transparency and unbiased fairness, (and helping move things along for my buyers) I arranged and paid for an appraisal out of my own pocket.
Not only was I not compensated for the expense or even thanked for going the extra mile to be very clearly on the up-and-up, but I was treated with contempt for it. Unfortunately, this is a common thing with private sellers. Which brings me to the next point.
Being Treated Like a Slave
There’s the working for free mentioned above, and then there’s slavery.
For some reason, people think a buyer’s agent should work for free. This is especially true for private sellers.
One couple who had once upon a time listed their house, built in a 5-6% commission for the selling agent. When I approached them with a buyer, they fought with me about payment, insisting I should get nothing for brokering the deal.
Basically, they think they can bully agents. There’s no relationship – not a personal one, and most certainly not a professional one.
Being Treated Like a Murder Suspect
Private sellers tend to treat buyers’ agents like they’re selling mismatched knives out of a trunk.
I’ve stood on the front stoop in winter, without being invited in, and explained how my buyer wants to buy their house, only to be looked over with a raised eyebrow. Do they think I’m trying to trick them out of the deed to their house?
One time I presented my buyer’s conditions, one of which was a satisfactory water test. I even did the sellers a favor by furnishing them with the sample kit. Their response? Accusation.
“You’re just doing this for the buyer’s advantage!” they said.
But it’s a standard requirement from the bank. They won’t even fund a mortgage without a water test having been performed. Besides that, I’m not actually a selfish creep who’s out to get you. Everything I do, I do for the benefit of both parties. Thanks for the implication, though.
Look, I can understand why sellers would feel guarded and protective. Between all the door-to-door scams, robberies-by-phone, and fraudulent emails happening these days, a person needs to be careful.
But that’s what seller’s agents are for – to protect sellers from any creepy, horrible, out-to-get you agents who try to bring buyers for your house.
Directing a Soap Opera
The thing about dealing with people is that everyone is dealing with something. Maybe they’re selling because of a divorce, or illness, or even death. Maybe there was a job loss and the financial situation is critical. Maybe the couple just doesn’t agree on anything, including the price, or whether to sell at all.
Wading through those waters is generally the seller’s agent’s role, and we’re happy to come alongside.
When there’s no seller’s agent though, there is no buffer between the seller’s drama and us, the buyer’s agent. Suddenly we have to navigate the personal stuff on both sides of the boat. It’s tricky, it’s demanding, and actually it’s pretty doggone impossible, given the previous three points.
The Biggest Deal Killer of All
This one’s not specific to private sellers, but they sure can sport a streak of it. The biggest deal-killer? Greed. Too many deals have fallen through and houses lost because of plain, old fashioned greed.
In one case, my buyers had offered the private seller Thirty Five Thousand Dollars more than the appraised value of the place just because they wanted it so badly. The seller’s response? They wanted more. They wanted an additional Twenty Five Thousand Dollars.
Allow me to gaze into my crystal ball here for a minute and tell you what’s going to happen to them and anyone else who overestimates the value of their house and refuses to accept less.
Ah, yes. I see it. A cloud looms in the distance. The house stands alone and sad looking, its original owners pining for the money they will never, ever see. Oh, and there – I see the banker raising an eyebrow in confusion. He shakes his head and snickers at the idea of lending more than a property is worth.
As long as sellers insist on getting more than a fair, sensible, and realistic price for their properties, deals will continue to die at the feet.
Sadly, the young couple I represented fell victim to some of these private seller behaviors. My buyers were respectful, flexible with the seller’s schedule, accepting of the seller’s terms, and even generous with their offer but, as often happens, the deal fell through. They were unable to purchase their dream property.
The not surprising final outcome.
My buyers found a much more appealing home that offered them way more value for their dollar. They have moved in and enjoy their new space.
The seller listed their property and eventually sold it for less than the offer that my buyer wrote and they paid a full commission for the sale.
Recently I spoke with a woman who wanted to list her home with me. But there was a problem. She explained that they had attempted selling privately. “We have a dilemma – we already have someone interested in our house.”
I said, “That’s not a dilemma, that’s an opportunity!”
Then I did what many other agents don’t.
I told her to name those people as an exclusion in the listing contract.
That means if those people end up buying the house after all, my sellers don’t have to pay me. (Of course, if they want to hire me to write the offer instead of paying the lawyer to do the paperwork we could agree to a fee. Not a full commission. That would help me recover costs for investing time and money on their behalf.)
If you want to list, but have buyers possibly interested already, use this technique with your agent! List those interested buyers as exclusions. You worked hard to get them!
Many agents will not mention this to their clients.
Some agents will be angry that I even told you about this technique.
But you need to know. There is already provision for this in the contract.
If you, or your friends or family members have tried private selling, and are now thinking of listing with an agent, please share this with them! They need to know too! It could help them potentially save tens of thousands of dollars!