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2010-06-04 16:15:46

What is YOUR Value Proposition?

Here is the initial posting from Saul that generated a flood of commentary on the value proposition real estate professionals bring to the table.

My brother in law is about 68 years old and he is a nuclear engineer. He and his wife are going to sell their home in Idaho and move south. He had a website (www.snakeriverhouse.com) created to help him market his home (not by a real estate professional).

He will then add it to Zillow, Trulia, Yahoo, Google Base and a number of other destination portals. His question is why hire a real estate agent to do what he can do himself. He is willing to pay a member of the MLS a few hundred bucks to get the listing into the MLS, but he will not pay a fee that is a percentage of the sale price

Your answers will help create your "value proposition," so what are your answers to what you will bring to the transaction?
Is he an anomaly or the future?

Saul
Saul Klein
CEO, Point2 Technologies

Responses follow:

Saul wrote about his brother-in-law - "He will then add it to Zillow, Trulia, Yahoo, Google Base and a number of other destination portals. His question why hire a real estate agent to do what he can do himself. He is willing to pay a member of the MLS a few hundred bucks to get the listing into the MLS, but he will not pay a fee that is a percentage of the sale price."

Why hire an agent to market his property? Simple! Because that is not the only thing a listing agent does. We are not paid by the number of web sites we place a house on or the number of directional arrows and Open House signs we own. ;-) Internet marketing and data entry into the MLS is only a small part of what we do. We are paid for guiding the seller through the entire selling process - properly helping the seller prepare and "stage" the house for the market; advising on the proper pricing to attract the most buyers; spearheading the marketing and promotion... not only to potential buyers, but to all the other agents in the MLS to get them to show our seller's house over all the other choices; getting feedback for the seller during the time on the market to determine if adjustments need to be made; being there in the seller's corner at any and all contract negotiations to make sure that the offer that is accepted or countered best represents the seller's needs and desires in the transaction; monitoring the 40 or more people (inspectors, appraiser, loan officer, underwriting staff, title company staff, etc.) who just got hired once a contract gets ratified... to ensure everything is going smoothly all the way to closing. This is the real job description of a listing agent!

Keep in mind that the average consumer (unless a small investor) is only going to buy or sell 5 to 6 houses in their lifetime. The average "rookie" in our business, if going to survive, will put together at least 5 to 6 transactions their first year. So by the end of that year, a typical agent already has a lifetime's worth of experience in buying and selling real estate! We are really paid for our knowledge, experience and brain-power... to guide the seller through a very complex transaction with many potential pitfalls ahead if not done correctly.
Furthermore, isn't it really true that the buyer pays the brokerage fee in the sales price... so that the seller gets it in one hand so he can pay it out in the other? The seller needs to think more like a "wholesaler" who wants a certain net and then builds in all of the marketing expenses (including the brokerage fee) into the "retail" price - really no different than any item found at your neighborhood grocery store. The grocer, after computing all of those expenses to arrive at a retail price, now just needs to make sure his price is competitive or people will stop shopping at his store.

Saul asks, "Is he an anomaly or the future?"

There will always be FSBO's. Some, not many, will actually be successful. (Some people are able to sell their used car by themselves too.) In a seller's market, it certainly can be easier. But regardless of the type of market, the vast majority of homeowners know that they are just not equipped to handle the job and need a professional to assist them. There is a lot more to successfully marketing a property than putting a sign in the yard, putting a lockbox on the door, entering it into the MLS, placing it on a few web sites, and then kicking back waiting for it to sell!

Saul, while this is not a direct answer to your question, I'd like to suggest that your brother-in-law install Google Analytics on his site so that he can get an accurate idea of how many people are visiting his site. As the site is currently set up -- especially with a brand new domain -- the chances of it getting any search traffic are extremely slim. So, he's going to have to rely mostly on the real estate portals for traffic referrals.

I think he'd be better off having his home listed on a real estate site for an agent in Idaho Falls, choosing one of the highest ranked sites on Google page 1 for searches for "Idaho Falls ID homes for sale", which is the most searched key phrase for his area.

Obviously your brother feels confident that he will be able to "represent himself," and negotiate his position with some authority. Recall for him the expression that a lawyer who represents himself has a fool for a client.
It has nothing to do with how smart he is or what his skill sets are. Unless he can turn off the emotion involved, and deal strictly with the facts, somewhere along the line he may injure his position, surely unintentionally.

Often a Buyer will not want to deal directly with him, but that would-be Buyer could arrange to pay his own agent, leaving your brother out of that equation entirely. I for one will be glad when we function with Buyers at that level, permanently.

But from the Seller's perspective: Buyers and their agents will ask questions, and they will expect answers; answers that they then can use against your brother, to their own advantage. It could prove interesting.

What about that old adage that says private sellers often end up with a net figure less than they might have gotten when working with a REALTOR®?

As I write, often, in my consumer education articles: There is simply so much more to selling a house than the end-price, sale price. SO MUCH MORE! And this is where REALTORS® fall short I believe; in not educating the public as to the "process." We make it look so simple sometimes. This is a perfect example. He has a BROTHER who is in the real estate business. What more does he need. That alone makes him an expert in his own right, no?

You know. You've been there. Done that. What say you about the (could be sad) position your brother may put himself in, if anything untoward should happen? Of course he is an adult and can speak for himself, and as a sibling or spouse even, we need to know when to back away and let nature take its course.

Will your brother feel comfortable letting strangers into his home? Will he insist on I.D. being shown, perhaps get license plate numbers? Will he insist on seeing commitment letters or approval letters before letting people view his home? To be absolutely certain only people who can qualify to buy it are being allowed in? Will he keep records of who has been into his home, should anything go missing? How will he feel taking all the phone calls for appointments, only to have would-be Buyers not show up? Does he have the patience level to deal with all the minutiae? How will he deal with Buyers who are rude and speak their minds while inside his home? Presuming they might not like or appreciate his décor or the upgrades he has installed (or not done).

You know the routine: But does he?

Just my thoughts. There is SO MUCH MORE to selling a house than putting it on the MLS. Careful now; he's YOUR brother.

Well, that's a great question, Saul.

I'm going to address why I believe he is partly the future.
Realtors are going to have to seriously look at their value proposition in the future. Yes, it's about relationships and it's about market knowledge, however, there's so much more to it than that.
In the scenario Saul described, his B.I.L. is an engineer, a personality type that is likely to be able to detach the emotional component. He can pay a lawyer a pittance to review any disclosures and contracts. Hell, he can even allow agents to do public open houses for him, and they won't charge him a penny.

I think that, as Realtors, readers will not be able to separate the 'real estate business' side of things from the logistics of selling a house. The public can easily handle the logistics of selling a house; easily.
I bet every person on RealTalk knows of cases where a FSBO sold for more than they could believe - I've seen them get $30,000 / 10% more than I could ever have imagined them get (basing that on researching the title records after the sale closes).

Where to begin with such an excellent question.

1. The consuming public still believes the myth that advertising actual sells their individual home, and it really does not. This has always been the case. Before Internet advertising (and advertising is advertising), only one out of 60 buyers actually bought the home they called on in an ad. The margin is probably smaller to day because Internet advertising allows the consumer to see more homes quicker, but I would bet the principle remains. In fact, does anyone have a reliable statistic on how many internet buyers actually buy the home they found on the internet and inquired about?? The reality, I believe, is that they still connect with a real estate agent who finds the home of their choice for them in the majority of cases. 80% of buyers may start on the Intenet, but 90% still use a Realtor to find their home. Buyers still pick the home while standing in the living room and placing their furniture, not by looking at the most high-def virtual tour every made. This means that Realtors still have the majority of the buyers, and a seller would be extremely wise to list with an agent who knows how to cooperate with those agents and expose the listing to the customers of those agents, which still represent the bulk of potential customers. That agent will also know how to present the home, both using technology and in person, to make it as appealing as possible to the consumer.

2. Since the vast majority of residential properties that are sold across America are listed by one agent and sold by another, a seller would be wise to have an agent who has listed the property and is working with the seller's interests in mind.

3. A good listing agent will not only 'splash' the listing across the Internet indiscriminately, but will know how to manage customer's, track responses, and practice good Customer Relationship Management, probably using professional CRM software, to make the most of every buyer inquiry.

4. There are a multitude of AVM sites that claim to price a home, and many are able to ball-park it. But pricing is an art and requires a level of skill and experience, especially in the local marketplace. Even more important is the management of the pricing as time goes on in the marketing process. Relying on a broad automatic algorithm to price your most valuable asset is, for most homeowners, a major risk.

5. A good buyer's agent is a professional negotiator. A wise seller would have a good listing agent to negotiate in return. There are a few websites that are popping up that claim to make this possible directly between buyer and seller over a sort of social networking/email environment. However, this process is highly adversarial, and is one of the foundations of the real estate industry. If buyers and sellers could routinely negotiate without conflict, perhaps there would not be a real estate industry. Negotiating the transaction will always be done best face to face, and person to person through agents.

6. Real Estate as a process becomes more complex and risk-oriented every week. A good listing agent knows how to make it through the shoals and know where the rocks are, and especially the sharks. The seller may have an attorney for the legal questions and legal risk, but an attorney is not going to go 'out into the field' where the issues and problems are.

7. A real estate agent manages the documents, and the list of documents grows larger and larger. As good as a good attorney is, a listing agent's focus on the transaction will assist even the attorney in guarding the transaction process and ensures everyone in the transaction gets what they need. There are document creation and management websites springing up that are available to the public, but it takes a professional to manage the entire document cloud. In many instances managing the documents electronically is for most people more complex, not less. In addition, electronic document management adds an important level of security and confidentiality that the real estate professional must maintain, and the 'civilian' may not be as aware of the threat and need for protection.

8. Perhaps the most valuable service is the reality that a transaction must be sold on average at least 3 times during the same transaction: once at the signing of the agreement, once at the cold-feet stage, and once more (or twice more) as the inevitable problems crop up. A good real estate agent helps make sure the property remains in the transaction by solving the myriad of questions, issues, emotions and problems that accompany every sale. This can only be done by a person, not a PC.

9. While the internet has automated the search for financing, and even the application process, someone(s) needs to oversee the process. Too many transactions still fall by the wayside because no one was watching the process, and good agents do that.

Interestingly, as I read this back to myself, I realize that while all these areas are touched by the internet and technology, they are still the services that have always been a part of the trade. Since this question seemed obviously targeted toward the impact of the internet and technology on the value of the real estate professional, let's make sure to talk about that.

10. Technology itself is more complex and growing evermore hectically chaotic. More sources, more devices, more websites, more services, more software, more products. If today's professional can barely keep up, how can the typical homeowner? A real estate professional, whether working with the buyer or the seller, must be able to manage the technology jungle better than the homeowner or buyer can for themselves. While all the above principles are timeless, an agent must now be technologically competent in an industry that is now technology based. Managing all the technology for the buyer and seller is the newest value added service.

11. The Internet is an information fire hose. The buyer and seller can get all the information they want, more even than some professionals I know. We are no longer the gatekeepers of the information, but the managers of it. Most consumers will admit they need a real estate professional to make sense of the overwhelming torrent of information they face.

The fact is, that even with my experience as a real estate agent, broker, and appraiser, and my years as an MLS professional, I seriously doubt I would attempt to sell my own house all by myself. On the other hand, I probably should feel a little sorry for the agent I choose to list with and buy through......

Did your brother create the website design himself? It's nice and informative. Loved the pictures of the river, sunset and the yard.

My motto these days: I want to be the third listing agent.
Why? 'Cause it takes the first two to get the seller realistically priced.