Selling your home is one of the biggest financial decisions of your life. Unfortunately, the vast majority of sellers know nothing about marketing or how homes get sold. This leads to millions of sellers each year getting far less for their homes than they should. You must choose the best way to sell your home and protect your investment and I hope to help you do just that!
Before you can choose how to sell your home, you must understand what actually sells homes. Most people believe that homes sell because of ads however, the fact is that only 17% of homes sell from advertising and only 2% sell because of someone wanting the house featured in an ad. This may sound a little strange, so let me explain.
Real Estate companies do not advertise homes to sell them. There is only a 2% chance that a home will sell because someone calls about its ad. Most likely, when a call is received on the ad, the caller will find something about the house that doesn’t work for them, and the real estate agent who took the call will then direct them to another home which does meet their specific needs. That said, there is about a 10% chance that the home will eventually sell as a result of someone calling about a different house, and then be directed towards the home in question. This is why people who try to sell their own homes get so frustrated. They have limited themselves to just 7% of the buying market! They can’t even tap into the 10% that sell from people calling about other houses, since they don’t have other houses to refer callers to or from. So what else sells homes? Well approximately 15% of homes will sell as a result of For Sale Signs, 3% from Open Houses, and 5% from fliers and print or newspaper advertising. That said, the total chance your home will be sell as a result of one of these traditional methods is about 23%.
So why do real estate companies even advertise? Well, real estate companies advertise for three different reasons, and none of the reasons have anything to do with selling the house in the ad. The main reason they advertise is to get future home listings. Real Estate Companies realize that when homeowners make the decision to sell, they often look for the company doing the most advertising, and assume that company will be the best at marketing their home. The second reason real estate companies advertise is to get buyers. The more houses they advertise in print and news publications translates to more calls from buyers and thus more transactions the company will be a part of. While many of these transactions will involve homes listed by other companies, the real estate company doesn’t care, just as long as the buyer finds the home they are looking for and it receives a commission on the transaction. Finally, real estate companies advertise because the homeowners expect their homes to be advertised. It’s unlikely these sellers understand that this gives them only a 17% shot at the market, but the real estate companies understand that their clients will get thoroughly upset if they don’t see their home advertised in the Sunday paper every week.
If conventional ads sell 17% of homes, what makes up the other 83%?The answer is Internet marketing and Realtor-to-Realtor contact. More specifically here’s what sells homes: the Multiple Listing Service, lots of phone calls, postcards to agents, marketing meetings, faxes, broker e-mail lists, website listings, and web commercials. These are the the tools of our trade and the things that sell real estate today. Not passing out fliers. Not open houses. Not yard signs. Not quarter-page full-color ads. These things certainly help but more than anything else they are done to make sellers happy, get more sellers in the future, and build a larger buyer pool, but 83% of sales occur because of Realtor-to-Realtor contact and Internet marketing. That’s not to say that the other 17% should be ignored. Every percent is a good percent; it just all needs to be put into perspective when you decide how to sell your home.
There is no national conspiracy to set commissions at 6%.Homes sell because of Realtor-to-Realtor contact, and it’s important to understand how commissions work. Some people believe that after a home sells the listing agent takes a big bag of money equal to 6% of the home’s value, and deposits it into his or her private bank account. While it would be nice for us if this were true, this is not the case. When we Realtors sell a home at 6%, we plan to make about a 1% profit. Generally 3% goes to the buyer agent and 3% goes to the listing agent. Of the 3% that goes to the listing agent, approximately 1% of this will be taken by the broker (that is the listing agent’s company), about 1% will be spent on advertising, and the listing agent will ultimately receive a profit of approximately 1% for making the whole thing happen.
So what options do you have for selling your home? Three actually… First, you can sell your home on your own. Secondly, you could list with a discount broker. Finally, you could list with a full-service company. Using an average agent should net you about 14.9% more in the final selling price than if you sold For-Sale-By-Owner. Using a good agent should benefit you even more. If you decide to sell on your own, you have a 9% chance of actually getting market value or better for your home, however, the overwhelming majority of the 9% that get a good value are selling directly to a family member or friend. The remaining 91% of For-Sale-By-Owners will either eventually give up and use a Realtor, sell for below market value, or stop trying to sell the home out of frustration. Again the average For-Sale-By-Owner loses 14.9% of their home’s value! Using no agent at all means that you may think you did a great thing by avoiding commissions, but you almost certainly have lost out financially and put yourself at considerable legal risk. Ohio is one of the most litigious states and there are multiple disclosures and many procedures that you must follow, by law, when selling a home. Last year in Ohio there were over 15,000 real estate lawsuits, and over half of them involved a For-Sale-By-Owner, even though For-Sale-By-Owner properties make up less than 5% of all transactions. Please don’t try to sell your home yourself, especially in Ohio.
The next worse thing you can do is use a discount broker. Discount brokers only sell 4% of all the properties that make it all the way through the escrow process. Now, don’t get me wrong, discount brokers get far more than 4% of the listings, but many of their listing will expire or have to be reduced in price for the property to sell. Once again, by trying to save a little on commission, you will be hurting yourself when it comes to the final selling price. Discount brokers who will sell your property for a 4% or 5% commission do so by making drastic cuts to their advertising budgets. Cutting out the 1% on advertising won’t hurt you too bad, but it is still cutting you out of about 17% of how homes get sold. Cutting anything off the buyer agent’s commission is a really bad idea. This almost certainly means less customers, less offers, a longer selling time, and a lower final selling price.
But it gets even worse, some companies say they will sell your home for only a 1.5% or 2% commission. These places almost always cut the buyer agent’s commission entirely, which usually means they are barred from putting their listings on the local Multiple Listing Service! What you usually end up with is a bad experience as these companies focus entirely on 17% of the market they can reach with ads, while ignoring the 83% of the market that would have helped capture the actual market value of your home. By attempting to save a few percentage points on a sales commission these sellers end up surrendering a significant amount of their home’s value, that’s if their home actually sells! Once again, there is no conspiracy that keeps the national average for commissions at 6%; that’s simply what it takes to sell a home right!
So how do you make the most money and stay protected? It’s no secret, like the customers in over 90% of all successful transactions, the best way to stay financially and legally sound is to hire a full-service brokerage. A full-service brokerage is most likely to fetch you the highest sales price, get you the most money for your home, protect your legal interest and make the total sales process as smooth as possible. Full-service brokers usually have home warranty plans, referral networks, teams of contractors, inspectors and appraisers, in-house mortgage departments, and technological tools that help the whole process along! If you’re considering selling your home, would like to request additional information on the sales process or have any other questions please email or call us at 614.332.6984 and let us know how we may be of assistance.
