Why Do I Need an Agent to Buy a Home -- Part 1

A few weeks ago, I wrote about whether sellers really need an agent to sell their home.  It got me thinking about the other half of a real estate transaction--the buyers.

There are two common home purchase scenarios--either the sellers have an agent, or they are DIY sellers.  Regardless of who is representing a seller, a buyer's agent is, in my opinion, a must.  This is a pretty big topic, so I'm going to break it into two posts. Today we'll focus on FSBO (For Sale By Owner) scenarios.

Just a quick conversation between friends, right?

A home is likely to be the biggest purchase you will ever make, so it's natural to be a little afraid and a little excited when you finally find that perfect home.  When it's time to make the offer, if you don't have a buyer's agent, and the home is FSBO, you will have to call the owners directly to make your offer.  It's just a phone call, it isn't that hard, right?





Have you ever seen those Facebook yard sale groups?  Plenty of "for sale" posts devolve into arguments over how much something costs new vs. how much the seller actually paid vs. how much the items cost on eBay.  Someone always comes along and asks "What's the lowest you will go?" The sellers get frustrated, everyone argues, the post disappears, and the bystanders all tell their friends about the drama that was on Facebook today.

Seems fair.

All for a $50 wagon.

Now make that call to negotiate a $150,000 home.

Without the involvement of a professional, the sellers are asking a price that is their "best guess"--and it includes their emotional attachment to the home.  Buyers without an agent may have even met the sellers to view the home, and have heard all about that emotional attachment and how wonderful the home is...all of which go in to the buyers making their "best guess" as to what is a fair offer.

Easy-peasy.

What could go wrong?


Aside from the potential negotiations disaster, there are still the formalities and legalities to navigate.  Offer contracts, title companies, inspections, home warranties, and the final purchase contract are all things an experienced real estate agent can--and should--help with.



If some of the paperwork isn't done properly, it's a mistake that could cost thousands of dollars when it finally comes to light.  Can you imagine finding out years after the fact that the largest purchase of your life may have been made with legal mistakes or missing paperwork?  An experienced professional really is a must to minimize your risk.





Next week we'll cover buyer's agents when there is also a seller's agent.  Meanwhile, stop by our YouTube channel and check out our ongoing "Why Cheyenne?" video series--you might even see a few familiar faces!

Until next time,

Steve

Comparative Market Analysis--huh?

Raise your hand if you watch a lot of HGTV.  If you’re reading a real estate blog and don’t have your hand up, then you are probably reading the wrong blog….

OK maybe not everyone has 10 hours of Property Brothers on their DVR, but if you’ve watched even just a few home shows, you’ve probably heard the word “comps” while someone is holding a stack of info sheets about other houses.  They throw out some prices of these “comps” and everyone (usually) agrees and the show moves on.  What are these powerful, mysterious comps, and what do they have to do with your house?

“Comp” is just a more fun way to say “comparative market analysis,” or CMA. A CMA is usually performed by a real estate agent and/or appraiser, and is best done by someone familiar with the area.  CMAs look at a lot of things, but especially location.  While most agents know that a house with a direct view of a power plant is likely to be worth less than the exact same home in a gated community with a lake view, local agents will also know things like the reputation of the area schools and whether there are new developments in the works for your area of town.

So what happens when someone “pulls comps” or performs a CMA?  They need to see your home, of course, so they can assess the overall condition, see the lot/property, and check out any upgrades you’ve made.

They’ll also look at current listings, and see which ones are most similar to your home.  “Similar” can mean a lot of things, but in general, what counts is location, number of bedrooms and bathrooms, similar condition, and square footage.  So while the ranch style home 2 miles away might not look like your mediterranean style home, it’s possible it will count as a “comp”—or maybe it won’t, but there’s only one way to know, and that’s to look at all the data that’s available!

At least real estate agents get pictures.

So what’s available besides current listings?  While the rules can vary from state to state, agents and appraisers can generally use pending listings (homes that are currently under contract), canceled or expired listings, and sold listings.  

Here’s where it can get tricky—all those paper numbers are great, but what we do with them is what really counts.  No two properties are going to be exactly the same, so we have to make adjustments for differences.  A few hundred square feet may not mean much for very larger homes, but for smaller homes, it can mean a huge change. 

Is that structural damage or just cosmetic?

And what if most of the comp homes are overpriced and have been sitting on the market for months?  Should you overprice your home because you want “top dollar,” or so people don’t think it must be priced lower because something is wrong?

A great agent is not only going to know these things and how to point them out, but is also going to know that “top dollar” doesn’t mean overpricing a listing.  It means selling your home for true market value.

So, are you ready for your own CMA?

www.cheyennehomevalue.com

Until next time, 

Steve

Do I need an agent to sell my home?

Sorry I've kept you waiting--we've had a busy few weeks, including the R4 convention in Las Vegas, and just yesterday had our annual awards breakfast.  Check out the honorees!  I love how technology lets us share the accomplishments of our great team of agents.

Isn’t technology great?  Because of technology, we have so many more marketing tools available than ever before—websites, mobile apps, even the ability to text makes scheduling a showing almost painless.  

With so many tools available to everyone, “Do I really need an agent to sell my home?” is becoming a common question.  I know you might think I’m biased, but it is my personal and professional opinion that you absolutely do!  I could go on all day about all the reasons why, but I don’t want to bore you, so I’ll stick with three: legal protections, market knowledge, and saving money.

Perhaps the easiest case to make is legal protections.  Remember all the papers you had to sign when you purchased your home?  There’s a good chance that they are now considered “outdated,” since they may not reflect the most recent regulations in your area.  Legally, the party who writes or presents the contract gets the least favorable interpretation of that contract if something goes wrong.  If you’ve presented buyers with an outdated contract, you are liable for any errors it contains.  How sure are you that you researched all those regulations thoroughly? Are you insured against any errors you might make?

How about omissions?  Are you required to tell buyers about something that isn’t yet a problem with the home, but might become a problem later?  Do you have to tell them in writing, or just verbally?  Where does that go in the contract?  

Stephanie can probably find me a really nice blazer.

That list of questions is getting pretty long!

If only there were someone out there who knew all about this stuff…

Speaking of knowing stuff—a huge value to having a seller’s agent is market knowledge.  Many home values are public after a home has sold, but gathering and sorting all that information, then taking into account current market conditions, the condition of those homes at the time of sale, and many other factors takes time and yes, experience.

I'm a French model.

There is no shortage of websites that want to give you a home value, and it’s tempting to take those estimates and ask for that amount.   Those estimates are based on data that might be years old and based on homes only vaguely similar to yours, and often don’t account for current market trends.  If it’s on the internet, it has to be true, right?

Real estate markets are often different from national trends.  Right now, Cheyenne is a seller’s market—since January, I’ve had two different homes go under contract within one day of being listed! Trulia and Zillow, the big names in online home values, estimated one of those home’s value at 10% and 20% less than the home’s purchase price.

Which brings me to what is arguably the most important reason to hire a seller’s agent—saving money.  If the seller in the above scenario had listed their home in the middle of the two online estimates, they would have asked for 15% less than the eventual purchase price.  Would they have negotiated down from there?  Either way, they would have missed out on thousands of dollars.

As the seller’s agent, it was my job to really know the area, the home’s features, and the market.  We worked together to set a price right at fair market value, and then I had a professional video walkthrough of the property produced to preview on our Facebook page.  The result was a happy seller with a sold home, for more than the online estimates had suggested.

Thank you for the wonderful review!

That’s a great example, but it’s not necessarily uncommon. “FSBOs (for sale by owner) accounted for 9% of home sales in 2012. The typical FSBO home sold for $174,900 compared to $215,000 for agent-assisted home sales.”  That means that, on average, FSBO properties sold for 19% less than those listed with a seller’s agent.

Now, commissions are negotiable, but let's say the commission for these FSBO properties would have been 6%. Selling on their own and "saving" that 6% actually cost the DIY sellers 19% of their home's value.  You read that it right--it would have been "cheaper" to have had a seller's agent.  13% cheaper, to be exact!

So, how do you feel about needing a seller's agent now?  I'd love to hear your thoughts!

Until next time, 

Steve