BY CARA AMEER
September 02, 2021 Inman news
'Facts' you may have heard de-bunked:
One of the frustrating things as an agent is to be sure that clients understand the what and the why of all things real estate. Real estate agents can’t always explain the dynamics and outcome of some situations. Real estate is a moving target, and various scenarios are complicated and ever-changing.
Here are 10 common misconceptions consumers often hold:
Myth 1: An agent doesn’t have to expend much effort to help a buyer or seller today
Many buyers and sellers think this is especially true because things are selling so fast and well over asking price.
Well, hold on. Many things that look deceptively easy or don’t appear to involve a lot of legwork are actually quite complicated. There is an art to making the complex look seamless.
Consumers don’t see the behind-the-scenes practice, preparation, research and legwork involved to facilitate a listing, sale and, yes, even a rental.
Agents reach out to numerous other agents to come up with potential homes for sale when all options on the MLS are exhausted, or there was simply no more available inventory that fits a buyer’s criteria.
Those were not five-minute phone calls either.
Given that reaching an agent by phone is no small feat these days, if they had a billable hour for their time spent on this endeavor, a buyer may be sticker shocked to see the total.
Negotiating a contract is not a one-and-done deal. When a seller receives multiple offers, for example, there is a lot of preparation involved in compiling all offer terms into a single format to make it easy to review and for the sellers to understand. That’s just the beginning of vetting each offer and determining how to handle each one with the seller.
Negotiating through the offers and finalizing one through to an executed contract is another time-consuming and very detailed process.
Even if a seller accepts a very strong offer initially made on a property, the real work begins once the property goes under contract. There are a ton of details to micromanage involving everything, including but not limited to:
- The buyers’ financing and lender
- The inspection process
- Negotiating any repair issues that may arise
- The appraisal
And guess what? Not every inspection or appraisal is a walk in the park. Inspections can reveal issues in which there is no simple or easy fix and maybe no fix at all.
Properties don’t always come in at contract sales price as all appraisal reports are subjective, and no two appraisers would necessarily give the same exact value to the same property they appraised.
As for a rental? Given the tight rental market, your agent’s phone will be lighting up at all hours of the day and night. Email inquiries will flood their inbox from various sites the rental listing feeds out to.
Arranging showings, vetting prospects and submitting a plethora of rental applications to the seller for review is not something that can be completed in an hour or two.
Myth 2: Once a property is under contract, all goes on autopilot
Not exactly. Any agent’s most significant responsibility in any transaction is making sure everyone involved does their job on time to meet all contract deadlines.
That means continually following up with all the key players from the buyers and sellers, other agents, lenders, appraisers, inspectors, escrows and/or title companies, etc., and knowing when to escalate issues to keep the process moving forward.
Myth 3: Selling off-market is a better deal for the seller
Not necessarily. Although the idea of not having to come publicly on the market sounds great for some sellers, especially those who wish to avoid people traipsing through their homes and all the hype and hoopla that surrounds a new listing, the reality is the seller is missing 99 percent of the market.
There is not much leverage or urgency when a few buyers look at home, knowing that the seller has no intention of listing on the MLS.
Sure, you might get offers, but they’ll probably come in lower with weaker terms than you’d get when you expose the home to the widest audience of agents and buyers possible. This will likely generate stronger multiple offers with very favorable terms to the seller’s advantage.
Myth 4: No prep for sale needed in the current market
Contrary to popular belief, many sellers think they don’t need to lift a finger to prepare their home, given the low supply and high demand at play in the real estate market today. Think again.
Failure to take the time to do some prep for sale can result in leaving money on the table. Buyers may mistake a home with no preparation as one that needs repairs that appear more major in nature and think maintenance has been deferred. This could result in the home being passed over or a less-than-enthusiastic response by the real estate market.
Myth 5: Everything I need to know about buying or selling is online
A little bit of information with no interpretation or context can be a dangerous thing. DIY is not the same when it comes to a real estate transaction as it is for home improvement projects, and even with those, many look easier on video than they actually are.
A lot of real estate information you find on the internet is oversimplified and “dumbed down,” leaving out important details. Scenarios are often more involved than what articles convey, and advice is often disconnected and not applicable to current market conditions.
Relying solely on the internet when handling the biggest transaction one likely makes in their lifetime can result in mistakes and unnecessary complications that can cost buyers and sellers time and money.
For example, does a consumer know what contract forms and addenda should be used and when? What disclosures need to be completed? What closing costs are applicable and can be negotiated with the buyer or seller? What are acceptable contingency timeframes for inspections, financing and an appraisal? What is a reasonable timeframe for closing?
Myth 6: Overpricing can be done in today’s market, especially since there is so little to buy
While many real estate markets may have been red hot, and are still given low inventory, pricing a property arbitrarily high may not result in buyers running over and making offers. Because home prices are significantly up, many buyers have become priced out as a result and could not attempt to compete in a multiple-offer situation.
Pricing right on the mark based on current comps or slightly under will result in multiple offers with buyers likely going over asking to get it. In today’s market, if a home is still on the market after a few weeks, unless it is highly unique, specific or ultra-luxury, the price is typically a reason why it hasn’t gone under contract.
Myth 7: As long as sales are happening, agents are getting paid
The current real estate market has been very tough for buyers. It may take multiple attempts to try to find a home after losing bidding war after bidding war. The agent working tirelessly on the buyer’s behalf doesn’t get compensated one dime for dropping everything to see these homes and writing offer after offer the minute they come on the market. This could easily translate into several months of work, which is often very easy for a buyer to forget.
When it comes to sellers, even in today’s market, agents may find themselves paying for staging on top of extensive marketing efforts with the expectation that the home will sell quickly.
Sometimes, it takes multiples buyers for one to stick. And even if you do find a buyer, things fall through all the time, so agents have to continue plugging along, seeing all buyers through — which could take months.
While all of this is part and parcel of the job, it can be easy for the seller to become indifferent to these efforts, and to expect and demand more, especially if the home isn’t selling in a typically brisk market. If a home falls through due to inspections a few times, and the seller refuses to address any areas of concern, things can fall into a cycle of insanity.
Myth 8: Selling ‘as is’ is the way to go, especially in this market
Maybe or maybe not. Oftentimes, selling “as is” is easier said than done. If the home has been well-maintained overall, and buyers can see that, then perhaps. But if a laundry list of items adds up after an inspection, no matter how seemingly minor they appear, a buyer could interpret those as a gateway to more serious issues that could arise once they start undertaking repairs.
Conditions on a home that could be major or somewhat minor, but are diagnosed as inconclusive or not really as having a practical solution can often be the culprit of creating doubt and contributing to the buyer walking away.
In addition, with buyers already paying their max — and in some cases, going well beyond their comfort zone to buy a home — an inspection report that turns into a major to-do list of deferred maintenance and “budget for replacement in the near future” may end up causing the buyer to have cold feet and cancel the transaction.
Myth 9: I can get a better deal on an ‘off market’ property vs. something that is listed
In theory, yes, everything is for sale, but at a certain price. Zillow called this “Make Me Move.” However, convincing someone to sell in a low inventory, high priced market to make a move when they don’t have anywhere to go is another matter.
The economics of the situation may not simply work for them for a variety of reasons. That being said, if an off market seller is interested in selling, then they will likely want to command a premium for it on their time and their terms.
Myth 10: Agents make too much money, especially in this market
Commissions have been spiraling on a downward slope over the last few years, and especially in a compressed market. The perception is with fewer properties for sale, agents can take less since the home will likely sell right away.
However, that does not mean that the cost of doing business has also decreased for the agent. In fact, just the opposite. Just as the prices for goods and services have increased on just about everything post-pandemic, the real estate business is no exception.
Consumers need to be reminded that commissions are paid to the broker and sliced and diced from there, with marketing fees, escrow facilitation fees and referral fees (if applicable) being taken out. By the time all is parsed out, and the agent sets aside money for taxes and necessary expenses, there isn’t much left compared to the glaring number the consumer sees on the closing statement.
Furthermore, as explained before, that agent is working for free until the transaction goes to closing, and we all know what can happen from contract to close. A myriad of things that can largely be out of everyone’s control.
The real estate industry will always be working to overcome misperceptions that consumers have about the nature of the job and the buying and selling process. The business can seem unfair at times for all involved. For the buyer that offered $100K over asking offer after offer, waiving every contingency in the book and it still wasn’t good enough, to the seller who tied up their home with who they thought was going to be “the buyer”, only for them to fall through after keeping the home off the market nearly a month.