The five critical mistakes home sellers make that cost them thousands of dollars
#1 - they hire a traditional real estate agency
talk about why you should hire an agent to sell your home? There are a number
of benefits to hiring an agent, but the biggest benefit is getting your home
listed on the MLS or Multiple Listing
Service. The MLS probably sells around 90% of all homes in Utah. There are a
couple of reasons for this:
- It is the most common website buyers
use to look for houses
- It contains the most up to date
information on homes for sale in Utah
- It has the largest database of homes
currently on the market in Utah
- When you list your home on the MLS,
you now have potentially thousands of agents trying to sell your home
to using an agent are:
To help you correctly value your
home. If you list your home too low, you’re leaving money on the table. If you
list it too high, it will never sell.
- Agents have hundreds of hours of
experience negotiating real estate deals and understand the various ways to put
a deal together that will most benefit their client and still make it a win-win
for both sides.
- They understand the contract terms,
and the deadlines, their clients must meet to ensure they remain in compliance.
- They have hundreds of hours of
experience dealing with inspections and the best way to handle any
So are all
agents created equally?
basically two types of agencies – traditional agents and flat fee agents
agencies normally charge a client 6% to list and sell their clients home.
Traditional agents offer several services that make up what is referred to as a
full service listing. These services normally include the following:
- Home Value Report
- Listing on the MLS or Multiple
- Sign in the yard
- Open houses
- Contract negotiations and contract
- Attend Closings
- Manage negotiations and other
communications between the Buyer and the Seller
also provide other types of ancillary services such as sending out flyers, 24
hour information hotlines, and soliciting feedback from showings.
agents take care of their clients and make sure the selling experience is a
good one for their clients. The downside to a traditional agency is they charge
6%. They then turn around tell any cooperating agency that brings them a buyer,
that they will split the 6% commission. So 3% goes to the listing agent and 3%
to the buyer’s agent.
So if your
home sells for $400,000, you will pay them a whopping $24,000 to sell your
house. That’s $12,000 apiece. Still, that is A LOT of money just to sell your
house, and a huge downside to using a traditional agent. It’s important to note
that they don’t have to split the commission 50/50 with the buyer’s agent. They
might only offer 2% or they could offer 4%. The decision is up to the agency.
You’ve agreed to pay them 6%, what they do with that money is up to them. Which
brings up another important point. If a buyer comes along that does not have an
agent, and decides they want to purchase your home, you will still pay the
traditional agency the 6% you agreed to pay them regardless. This is not the
case with Utah Home Central.
This 6% fee
was instituted long before the internet came around. Listing agents spent a
large amount of money on advertising, and specialized in certain areas or
neighborhoods, so they would know where to price a client’s home. Back then
they earned that 6%. However, with the advent of the internet, advertising has
become amazingly cheap, and an agent no longer needs to specialize in a
neighborhood since all the information is now online, but traditional agents
continue to demand a 6% commission, which is a lot of money considering the
amount time and budget required to sell a house these days.
agents will spend, on average, anywhere from 20-25 total hours to sell and
close on a clients home. If they are being paid $12,000 for putting in 25 hours
of work, they are getting paid $480 an hour. Doesn’t that seem a little too
there have been several firms popping up that offer listing on the MLS for a
small flat fee ranging from $175 - $500. Most of these are not full service.
They are like glorified For Sale By Owner agencies. They get you on the MLS for
a low fee and you do all the rest. As more and more of these firms enter this
space, the competition is becoming stiffer and stiffer, causing these firms to
try and differentiate themselves by offering more and more services. Some even
start making the claim that they are a full service firm. Either they are in
denial or are lying, but there is no way they can really service their
customers under that business model. I know because we used to be one of them.
Let me tell you why this is.
that an agent is offering a flat fee listing to potential clients for $300, and
this agent needs at least $6,000 a month to live on, which is pretty
conservative these days. That means the agent needs to list 20 homes each
month. That’s 240 homes a year. Did you know that the average traditional agent
only sells about 15 homes a year on average. Which is fine, since they are
making on average $8,000 a sale.
Do you think
an agent can adequately manage and service 240 homes a year? No way. And if
they’re only earning $300 per listing, where do you think they’re going to
spend their time? That’s right, trying to find more listings, not servicing
your sale. Plus, since you already paid them, there is no real motivation for
them to ensure your sale is successful.
We had one
frustrated customer call us and tell us that he listed his home for $175 with
one of these agencies. He had received an offer on his house, but he didn’t get
it until 6 days after the offer had expired. By that time, the buyers had moved
earlier, we used to run one of these agencies, and after seeing our clients
fail in their transactions, we realized that we weren’t doing them any favors
by offering them a listing at a low fee, but we still wanted to offer our
clients a fair deal. After trying several different offers, trying to balance
what we needed to live off of, but also trying to save our clients as much as
possible, we finally came up with a full service flat fee model. We would
provide our customer’s all the same services a traditional agency offered, but
only charge a flat fee of $2,700. We charge $200 up front, to pay us for that
work, and a commission of $2,500 when the home sells. This has worked well for
us and still allows us to save our customers, on average, around $9,000.
So I guess
you could call our business model kind of a hybrid. Part traditional and part
flat fee. This way all parties win.
- Home Sellers don’t adequately prepare their home for showings
walk through a house that is dirty, unkempt and or in need of repairs, it’s hard
for them to focus on the house, and is a huge turnoff. If the buyers do provide
an offer, it’s sure to be significantly lower than asking price. It’s critical
that you do a deep cleaning of the house, including those areas that you
normally don’t clean like window sills and baseboards and such. If you don’t
like cleaning or don’t have time, consider hiring a cleaning crew; it will be
worth the money. Utah Home Central offers a free eBook on How to Prepare Your
House to Sell Faster and For Top Dollar that will give you some great
suggestions on what you can do to prepare your house for selling. To get your
copy, click here.
- Home Sellers try to sell their house by owner
might be thinking that we’re just saying this because we want your business
right? Well, we do want your business, but as we mentioned above, we tried to
help many people sell their house by owner when we first started this
brokerage. The result was not good.
homeowners don’t understand how to correctly price a home. We saw many who had
“stars in their eyes,” and priced their home too high. The home didn’t sell, so
they ended up hiring an agent anyways. On the other side, we also saw
homeowners pricing their home too low. The home sold fast, but they left a lot
of money sitting on the table, and would have been better off hiring an agent.
homeowners also don’t understand real estate contracts and laws and made a mess
of things. We had one client that was selling a home for $1,200,000. At the
time, we were a flat fee brokerage that only charged $199 to list a clients
home on the MLS. The client was responsible for managing the rest. He received
an offer for $1,100,000 and accepted it. Midway through the transaction, the
homeowner decided he wanted to change the terms. I won’t go into the details,
but the deal ended up falling apart. At the time we didn’t know this, but he
was going into default. He didn’t get another offer in time, and so ended up
selling the place as a short sale for $665,000 and got nothing out of the deal.
Had he used a full service agency, his first deal would have survived, and he
would have pocketed approximately $350,000.
This is an
extreme example, but it was a turning point for us. We finally realized that we weren’t doing our
clients any favors by offer them this low flat fee and no service.
- Home Sellers don’t make the right repairs
As homes are
lived in, things become loose, get dinged, or get broken. If these items are
not repaired before the home is put up for sale, buyers will notice them and
know the home has not been maintained. They know they’re going to inherit all
of the maintenance the current home owner should have done, and it’s going to
cost them a lot of money to make those repairs. As a result, their offer will
be lower to reflect those costs. In most cases, the repairs will be cheaper
than the discount in selling price because buyers always estimate more that it
will actually costs.
that that we recommend, is to hire an inspector before you put the house on the
market. The inspector will make a thorough inspection of the house and will
give you a list of repairs you should make. Not only will this make your house
appear well maintained in front of buyers, but it will also make the inspection
your buyers perform go well. Inspections cause deals to fall through all the
time, so having a good inspection will go a long way towards a successful
- Home Sellers don’t make the right upgrades
This cannot be stated as a hard and fast rule, because it
really depends on market conditions, but as a general rule, upgrades to the
kitchen and bathrooms, will generally add 100% of their costs, if not more, to
the value of the home. In addition, upgrades will make the home more appealing,
which means it will sell faster than a home that doesn’t have the upgrades.
Other upgrades that add curb appeal and add value, though
probably not 100% of costs, are as follows:
- New siding. The
front of your house is the first thing people see, so it makes sense that any
improvements that make your house sparkle, will increase its desirability.
- Increased living space,
especially enlarging the kitchen
- New paint and carpet go a
long way toward selling a home, and will usually recoup most , if not all, of
their costs in the selling price.
- A new deck if the house doesn’t have
one. A deck provides more than a place to flip burgers and soak up the sun.
Buyers see a deck as a place to seek refuge and peace from a hectic day.
- New windows if the current windows are
single paned. New windows enhance the curb appeal and increase energy
- Landscaping. The front of your house
is the first thing people see, so it makes sense that any improvements―from
planting flowers to surrounding your home with a hedge―will increase curb
appeal and make your house sell faster.
- Central Air. Most new home buyers will
insist on it.