[photopress:fr.jpg,thumb,alignright]In my travels, many people quote the Freakonomics finding that agents get more for their homes when they sell, than the average house on market. My brain said “duh, of course…what’s new about that.”
But then when the Freakonomics boys tried to ascertain why that is, they went into some sideways mode of properties for sale, time on market, etc… Take the article I wrote yesterday as an example. Do you think an agent would fall for the tactics of the builder, and buy his worst lot because it was “the only one” for sale today? Hell no.
If agents sell their houses for more money in the end, it is more likely because they bought better in the first place.
The most common error in a buyer’s thinking, is that they think their choice equals what is for sale. Agents don’t do that. Of course by agents, I’m not talking about every license carrying member of the mls. Agents don’t buy “the T house”. Agents don’t buy the house that backs up to a busy road. Agents don’t buy the house on the wrong side of the street without strong compensating positives, like view considerations. Agents don’t buy the best “interior look”, while overlooking the exterior negatives. Agents don’t buy the house where the pavement is higher than the front door. Agents don’t buy “the bargain” with the most negatives, and brag that they got “a great deal”. Agents don’t buy “a house” without looking across the street, and determining if there are future tear downs in this home’s view corridor.
Also, agents generally buy based on relative value, and not based on negotiating an asking price down. Relative value is the only true pricing method. “Negotiating a good price” is the biggest trap in real estate. Agents don’t even go there, by and large, when they buy their homes. Again, I’m not talking about every person with a real estate license, as some of those are simply consumers with a license these days. I’m going back to a time when the only people with a license were those who actually sold real estate. And if Freakonomics is tracking the sale of agent owned homes, then the purchase of those same homes would in fact be back when only agents and real estate licenses.
When someone goes in and out of hundreds of homes for a living, and sells homes for a living, they know the weaknesses of property better, and they never get dazzled in the new construction office by the cabinets and counter finishes. They never look at that room of great “stuff”, until they first ascertain if there is a lot they are remotely interested in, and a floor plan that will hold up in value on resale. The average buyer starts picking out cabinets and floorings like they are in Lowe’s or Home Depot shopping for interior finishes, and they don’t spend nearly enough time determining lot and floor plan first. Everything’s nice when it’s new and shiney. Agents think about resale before they buy, not when it is time to sell.
When I am looking at resale issues, when showing property to a buyer, they do often say “Ardell, I don’t even own it yet and you are looking at what will happen when I sell it!” Yes, I do. Because now is the time to look for the resale weaknesses…not when it’s too late and you can’t sell it for top dollar later.
Every house has weaknesses. Many buyers don’t want to talk about weaknesses. Agents know that a house with weaknesses that are easy to correct, equals bargain. Agents know that weaknesses that can’t be corrected, should be avoided. Someone’s buying everything eventually, but maybe agents make more money when they sell, because they never buy a house in the first place, without first determining all of the weaknesses, and making sure none of them are difficult to correct.
Whenever I go to list someone’s home who wants to sell it at the same price as the neighbor, and I point out they paid a lot less than the neighbors when they purchased, and likewise will need to discount accordingly now. They always have the same line: “But I got a real bargain when I bought it!”. Yeah, right, that’s because you bought the T house and the T house is always a bargain. It will be a bargain when you buy it and it will be a bargain when you sell it too.
There is never going to be a time when the average agent won’t get more for their house when they sell, than the average homeowner. But that is not because they know a lot more about selling…it’s because they know a lot more about buying the right house in the first place. Someone has to buy the houses with the uncontrollable negatives, and it rarely is going to be an agent.
Always, always,always ask this question before the agent writes an offer. Would you buy this house if you were me right now, and if not, why not? Would you let your son or daughter buy this house right now, and if not, why not? Because an agent doesn’t have to tell you everything, but they are not allowed to lie. Watch for hesitation. Listen intently to what they are saying and what they are stuttering over. And then ask this final question. If I decided to buy a different house in 3 months, could you come back and sell it for at least what I paid? If you don’t see them thinkng really, really hard when they answer that one, or if they start hemming and hawing…take that as a sign. Every agent knows which houses they sell they will be happy to come back and sell for you, and which ones they are praying you stay in for a very, very long time.
So Stephen and Steven, you are correct. But only because agents are better at buying the houses, that will later sell for more than the average sale price, of like property.