It’s easy to get bogged down with conflicting ideas while you’re in the middle of the real estate market– You know what they say about opinions, after all. The Real Group team put together the myths that we most frequently run into, so consider this a small moment of clarity and support:
1. “We should list our home for more money than we think it’s worth– that will give us room to negotiate!”
This is the most common mistake home sellers make. Sure, there's a benefit to having a small buffer– You probably want to feel like you’ve successfully negotiated and "won" something.
The reality of the situation, however, is different color of money. On average, the Real Group team sells clients' homes at 2.5-3.5% below list price. This number depends on a careful analysis of timing, season, neighborhood, and current market conditions. It’s typically better than the MLS average by a couple points, but this norm still illustrates that "marking up" the home by 8-10% is an expensive mistake.
Buyers compare your home against those in a similar price bracket.
If your gorgeous home is overpriced at $350,000, the buyers that view your home will find another gorgeous home that's well-priced at $350,000 (e.g. bigger or on nicer block.) Overpricing by 6% will be successful in selling your neighbor's home.
2. “We have a contract on our home. It's sold!”
This is a critical first step in the end of the real estate process. We do use the word "sold" at this point, but we aren't yet "closed". There's a lot that needs to take place before the deal is completely sealed, and you should work with your agent to coordinate a successful contract-to-close process. There's the home inspection, attorney review (in Illinois), and mortgage contingencies to get through, just to name a few other steps. These processes should be managed to increase the chances of success and avoid any surprises as the closing date approaches.
3. “My agent did five showings, sold my home, and received a fat check. I must have overpaid.”
First, let's examine the cause of concern: the agent did too little work and is still receiving a hefty sum.
However, here is a question you might want to consider before taking to Yelp:
Are you paying the agent for their value or by the hour?
The statistics demonstrate that homes with a shorter market time sell for more money. This gives your talented agent the platform for earning their fee by maximizing your return, strengthening your negotiating position, minimizing your hassle, and getting down to business managing the rest of the contract process.
Finally, consider the alternative. Would you have preferred getting your house in showing shape two dozens times while living in your converted "show room" for two months? OR would you prefer to get it sold ASAP and move on with your life? A good agent will consider your quality of life as well.
4. “Real estate agents are still paid too much!”
You might be surprised where all that money actually goes.
Agents don't receive pay until the client has been served. That means agents are working for free throughout the process, and if the buyer or seller changes their mind after two or three months of hard work, the agent gets nothing. Agents do a lot of work that goes uncompensated.
When the agent does sell your home, that commission is divided amongst a number of parties: first, the agent and brokerage must cover all of their marketing costs, which they’ve already paid out of pocket. This includes designing and printing brochures, and building and promoting a website. It also covers Multiple Listing Service fees and other public advertisement in print and digital mediums.
Next, the listing brokerage pays as much as half of the commission to the "cooperating brokerage" (the agent and broker that brought you a buyer.) That means if you're the buyer, you usually pay your agent nothing! After marketing fees and co-op fees, the brokerage keeps a percentage to cover their overhead, pays the relocation company and/or third-party referral source (when applicable) and then finally pays your poor, poor listing agent.
If you’re just entering the housing market or have questions about buying and selling, drop a line to the Real Group team! We’d love to help you find a new place to call home!
