Listing Agent No-No’s

Here’s part 1 of my effort to help raise the general quality of real estate agents by educating the buyers and sellers in what they should look out for or what they should expect from their agent. Part 1 has to do with practices of some listing agents that no seller should put up with. If your listing agent is doing or has done any of these things, have a serious talk with them. Greg from BlueRoof Blog in Utah has a wonderful post on the difference between good and bad agents. Anyway, here’s my list. Feel free to add to it in the comments.

Lack of communication with client - Communication between agent and seller is crucial. Do not put up with an agent who doesn’t return your calls or emails.

Incomplete or error-filled listing on the MLS - This is simply filling out a web-based form accurately and thoroughly. I’ve seen egregious errors such as a $400K house listed at $4 million (added one too many zeros) and had it sit on the market with the wrong price for 3 days before the error was noticed and corrected. A friend of mine gave me another example. The condo next to hers was listed with the wrong address. After days of no showing activity, the agent convinced the seller to reduce the price of the house. Never mind the part where nobody could find the house to go show it because of incorrect information.

Limited number of pictures or no pictures added to the listing – Pictures are worth a thousand words. In this day and age of digital cameras, there is no excuse not to have multiple pictures included in the listing. It’s fast and easy. Yet, every day I see new listings with no pictures. I even see listings near the million dollar mark without pictures. It really isn’t doing the seller or their house any justice. Equally disappointing is just bad pictures; pictures that don’t really show anything. For instance, 10 pictures of the yard doesn’t tell a buyer anything about the house. Is there something wrong with the interior?

No follow-up with potential buyers and their agents - Your agent should follow-up (or try to) with any buyer or buyer’s agent that expresses interest. Even if they’re not interested in buying, your agent should try to get as much information out of them as possible. What did they think of the property, why aren’t they interested, etc.

Pressure tactics to drop price - Price drops are sometimes inevitable. However, it shouldn’t be the first thing the listing agent turns to if there’s no action on the house. Have they properly marketed the house? What’s the feedback been saying?

Buying the listing - This is the practice of promising the seller that their house can fetch a very attractive (high) amount just to get the listing. Once they’ve got you under contract, they’ll complain that nobody’s interested because the price is too high. Make them justify their price.

Cheap flyers – There are some agents that want to save a buck so they go cheap on their advertising material. Flyers in the flyer box, in my opinion, has to be in color. Preferably a somewhat designed flyer to showcase the house as well as possible. I’ve seen agents use the standard printout from the MLS system or what looks like a print-out from a website. Then when the price changes, they cross out and hand write the new price on the old flyers. Thank goodness I don’t see this a lot, as it would drive me crazy that someone is actually paying that agent for that kind of marketing.

Lack of knowledge or due diligence – About a month ago I took a client to look at this one house. It was okay, nothing great, yet nothing particularly bad about it. My clients thought about making an offer, but we ended up not doing anything about it. I tracked it to see when it would sell and for how much. It recently closed and I noted its final price. Almost a week after that house had closed, a new house came on the market $50k under the house we had looked at. The catch was…this new house was right next door; same style home and similar size but $50k less. My clients (the same ones) wanted to make a move on it just because it was so cheap. I get a call from the listing agent that evening telling me basically that they didn’t realize how much the house next door sold for so they are raising their price $20k to be more in line with the market. I don’t know the exact circumstances, but as a seller, I would expect my agent to know about the house right next door that closed just before I was going to put my house on the market.

This list is not meant to alarm you. There are many agents that do their job as they should with the interests of their client at the forefront. However, if you or anyone you know encounters a situation where they don’t like the performance of their agent, the listing contract can be cancelled at anytime regardless of how long the listing is for. Some agents will claim you can’t get out of the contract until expires. Nonsense. It can be cancelled,… anytime. If they refuse, document what you don’t like about your agent’s performance, your attempt(s) to cancel the listing agreement and then contact the listing agent’s managing broker. Or when you sign the listing, include a written agreement that you will be let out of the contract with no hassle should you choose to. If your agent isn’t working for your business, they don’t deserve your business.

Redfin announced their first year performance statistics yesterday. The gist of their announcement was that “Redfin King County customers paid on average 99.329% of the listing price while buyers with other brokerages paid 100.233% of listing price for a difference of .904%, for an average savings of $4,474.”

My first impression was, ..wow! That’s definitely interesting. However, never having been a person to just take someone’s word blindly, I did my own number crunching. I originally posted these findings over on Rain City Guide earlier today. More discussions on this are on 360Digest, Bloodhoundblog, Freakonomics, and another one on Rain City Guide.

According to the NWMLS, there were 69,048 closed transactions for residential and condo homes in 2006 (in King, Pierce, and Snohomish Counties). In the same tri-county area, Redfin was a part (listing or selling) of 224 transactions. That equates to 0.3% of the sales…that’s three-tenths of 1%.

Redfin may be perfectly correct in their analysis of their data …that a Redfin buyer paid $4,474 less on average, but I’m going to argue the point that using 224 transactions out of 69,048 to draw any kind of conclusion about the other 99.7% of the transactions and the agents that represented those transactions is not only silly, but very misleading and not statistically sound.

To emphasize my point that Redfin over-generalized the other 99.7% of transactions, I did some number pulling from the NWMLS. I wanted to see how Redfin agents on the selling (buyer’s) side compared directly to other brokerages and compare them straight up rather than every brokerage lumped together. I first wrote down the first 5 brokerages I could think of (I just pictured driving down a local road and which brokerages were there). Since Redfin is listed in the NWMLS as being based in Seattle, I picked offices that had a Seattle presence. I came up with the following:

Century 21 North Homes
Windermere Real Estate Co.
John L. Scott Inc.
Coldwell Banker Bain
ReMax Metro Realty

I pulled closed Residential (no condos) sales with Redfin’s first year time frame of 2/6/06 to 2/5/07. I did not limit it to King County as they did. When pulling data I checked the option to include all company sales ..not just the office I input since one company can own several offices. Here’s what I got:

Median Sale Price to Median List Price comparison:
100.97% - Redfin - based on 149 closed sales
100.31% - Century 21 North Homes based on 575 closed sales
99.72% - Windermere Real Estate Co based on 1032 closed sales
100.00% - John L. Scott Inc. based on 5274 closed sales
99.43% - Coldwell Banker Bain based on 4093 closed sales
100.19% - ReMax Metro Realty based on 940 closed sales

Let’s translate that into dollars. Based on the same data, I averaged the Median selling price of all 5 companies and got $412,850. Round up to $415k for easier number to use. So, based on the above percentages and a house that’s listed for $415k:

Redfin buyer pays $419,016
Century 21 North Homes buyer pays $416,306
Windermere Real Estate Co. buyer pays $413,828
John L. Scott Inc. buyer pays $415,000
Coldwell Banker Bain buyer pays $412,646
ReMax Metro Realty buyer pays $415,776

…continuing the number analysis…I broke down the Sale Price to List Price percentage based on Cumulative Days on Market. For homes that were on the market:

between 0-30 days, Redfin was 1st at 99.86% while the others ranged from 100.07% to 100.90%. This means that a Redfin buyer paid the least (99.86% of list price).

between 31-60, Redfin’s 98% was 2nd to Windermere’s 97.58% with the most at 99.17%.

between 61-90, Redfin’s 98.74% was 5th with only Century 21 North Home’s 98.89% higher than it. Lowest and best was Windermere’s 96.44%.

between 91-120, Redfin’s 99.08% was again 5th with again Century 21 North Home’s 99.32% higher than it. Again lowest and best was Windermere’s 97.48%.

From 120+ days, Redfin stole the show with 93.45%. The others ranged between 96.13% and 98.04%.

Wow, ..93.45% ..something is way out of line. So I looked at the 149 closed homes Redfin had and filtered out the ones that were 120+ CDOM. There is an element of error here that I must mention …CDOM is based on the listing agent accurately entering when the house actually went pending. Those in the business knows…this does not always happen. Which may explain when I actually looked at the individual listings ..there were 18 homes showing 120+ days in the CDOM with an average SP/LP of 95.93%. Now…of these 18, four of them were $1 million + homes. For homes that high in price, huge price reductions in final sale price is not uncommon. So I simplified it. I eliminated all four of them. The remaining 14 homes now had an average SP/LP of 97.42%. At this number, it would put them at 4th, with the high and low of 98.04% and 96.13% respectively. But if you don’t like how I eliminated the million+ dollar properties, then fine,.. Redfin wins the 120+ day category with their 18 sales whereas say…John L. Scott had 605 sales of 120+ CDOM and Coldwell Banker Bain had 411.

So… looks like brand new listings ..Redfin agents did slightly better. However, as the listing ages, ..the Redfin agents did progressively worse.

I’d be happy to share my spreadsheet that I have all this data in.

You might have seen or heard ads for the Seattle Home Show. If you haven’t, it’s basically a gathering of all things home related (builders, remodelers, landscapers, roofers, window..ers, decking, hot tubs, pool tables, sheds, air conditioning, closets, etc. etc. etc. The show runs till Feb. 25 at the Qwest Field Event Center. $10 admission + whatever you pay for parking. I went to my first home show I think back in 2002 and thought it was mildly interesting and thought it’s been 5 years ..maybe it’s different. It’s not really. One part of the home show is the vendors selling stuff like unique paint rollers, or paintings, crafts, etc. stuff. The main showroom floor is the big stuff. My take on the whole thing is, unless you have a specific remodel project in mind or shopping for, ..the home show is just a big demonstration of stuff you probably can’t afford or don’t want to afford.

Fortunately, I went to this one with a different purpose. I went in to try and learn about the latest trends and what’s hot. I left there a little bit more educated than when I walked in. Here’s what I learned. Read the rest of this entry »

Over the last couple weeks you’ve probably seen articles all over the place saying 2006 sales had a record drop off from 2005. The Seattle P-I ran a front page article on some hedge fund manager (why is he giving out real estate predicitons?) saying the Seattle market was not good and asked if he’d buy in Seattle now, he said no!Well, lots of people were skeptical to buy in 2006 and the media didn’t help back then as well…spelling out doom in the real estate market.

So… let’s examine what happened in 2006. This is a follow-up and a more broader look at the market than my 2006 county reviews earlier. I got curious so I pulled sales data from 2000 to date. 2006 did see a noticeable drop-off from 2005, but just how good was 2005? Is it a fair comparison? How’d the market do in 2006 compared to ‘04 or ‘03? or earlier? How about condos? It’s said that condos lag behind single-family homes. Okay, ..how much does it lag behind? Read the rest of this entry »

I started reading a book about negotiating…it has a real estate angle to it but seems to be more geared toward investment properties rather than primary residences. Also not too long ago I was told by another agent that any negotiating had to be done in writing..he refused to talk numbers with me over the phone……per real estate law.

Okay, say what? Negotiating has to be done in writing per real estate law? I didn’t believe it so I looked it up. Per RCW (revised code of washington) 62A.1-206 (statute of frauds law which says a purchase of property has to be in writing) it makes no mention that negotiating has to be done in writing, simply the contract for a sale of property is not enforceable unless in writing…so this other agent I talked to …I don’t know what he was talking about. We can talk numbers all day long verbally but the only thing that sticks is what goes down in ink. But I digress. Read the rest of this entry »