Realtor freakonomics

I listed my place this morning, and I already have a showing scheduled for tomorrow. It’s kind of strange being on this end of selling my place and the work it takes to keep it constantly clean, particularly now having a dog who sheds – and black hair, no less (Reese is a silky terrier and doesn’t shed).

I’ve had two people ask me about a book called Freakonomics, where the author (and I quote per the website): “explores the hidden side of everything.” One chapter deals with real estate, which accuses realtors of using empty adjectives for selling a client’s home versus specifics to sell their own at higher prices. Or, those agents will encourage their sellers to accept a lower price than what they would for their own house.

I would like to address this bullshit. Right now. Sorry it's a little long, but it might be interesting if you own or will soon.

First of all, one reason that an agent might sell their house at a higher price is that they have the flexibility to wait for the market to reach that level or to test the waters. They aren’t accountable to anyone else to sell it within X amount of days in order to prove their worthiness.

Whenever I speak with sellers, I always ask them whether their goal is to sell it quickly or at a certain price level because the two can often be mutually exclusive. Sellers who want to be the highest-priced house in the neighborhood are often not the first ones to sell, and they need to know that. Expectations have to be realistic.

Another point is that realtors will often do the type of work that would garner the higher sales price, whereas, it’s often difficult to convince a client to do so. A seller oftentimes just doesn’t “get” how $3,000 in wood laminate flooring actually translates into about $6,000 in a higher sales price (I should also take a moment to add a disclaimer in that I’m also speaking from the standpoint of Hawaii’s market, though some principles could be applied anywhere).

For instance, I’m currently selling a fairly high-priced house in a suburb for a family friend that was built in 1987. The kitchen looks like it was built in 1987 and I’m even including a picture so you can see what I’m talking about (yes, the one above). The primary concern I’ve heard from 75% of buyers and their agents, who’ve seen the house, is that they don’t want an 18-year-old kitchen/appliances (and esp. at our list price). However, when I relay this feedback to the seller, she gets defensive and says, “Well, I’d rather have 18-year-old Jenn-Air quality than newer low quality.” I also want to point out that I did not determine the list price (it's a long boring story).

A realtor, on the other hand, would probably have realized that this 1987 kitchen would be the stumbling point and had it redone prior to putting it on the market, or priced it as such to factor in that a buyer may want to remodel. There’s nothing in the authors’ essay to compare the condition of the homes that they’re comparing from a realtor-owner to a regular-owner.

To address the point of the language used in a listing, the authors claim that verbiage such as “well-maintained, charming, and fantastic” indicate to buyers that they can submit a low-ball offer. But, words such as “granite, corian and gourmet” are used for realtors’ homes to get a higher price.

Again, if a seller refused to do any work to their house to upgrade, it would be illegal to use “granite” if there were, in fact, not any granite countertops in the house. Imagine that. Trust me, if the home actually contains those types of upgrades that buyers are drawn to, they will be mentioned (as my 1987 house mentions its corian countertops).

Buyers aren’t stupid and neither are their agents. When they go to look at the home in-person, their offer is going to be based upon seeing the place and determining what they think the condition is worth – not because a seller’s agent used the words “charming” in the descriptor. Another reason to use those words is so that if a buyer’s agent has a client who wants a place in perfect condition, they aren’t wasting anyone’s time if that particular home won’t be up to par.

In an age with the Internet, it’s pretty difficult to swindle a client on either side because they can look up what the comparable sales were in the area as well as what’s also currently listed. We live in an economy of capitalism and it’s always a matter of supply meeting demand, and just because a seller wants to get a certain price, it doesn’t always mean a buyer will pay it. What sold at X amount two months ago may not be possible now – it’s always fluctuating, and as odd as it may seem, realtors cannot control the economy.

The key is to use a realtor you trust to give you accurate information and sound advice, but always remember that the decision is ultimately yours (if your realtor seemed bullyish at your initial meeting, then don't use him/her). And please feel free use me as your bullshit detector. Think I can put that on my resume'?