 What Sells A HomeInformation is the KeyIn the early 1960s, realizing the difficulty in selling their own listings, brokers created the multiple listing service (MLS). Today brokers still pool the information and split the 6% commission paid by the homeowner with any other broker that produces a buyer. Since the MLS is not accessible to the public, advertising the home is the only way to share this information with buyers. This "marketing" expense on behalf of the seller, apparently justifies the listing. Promoting the home would not be necessary if the buyers could freely obtain the information themselves. The Internet is breaking down the information monopoly of MLS. The growing popularity of posting homes on real estate web sites diminishes the revenue of real estate agents. The January 15, 1999 edition of The Wall Street Journal reports most of the large, low profit brokers are now increasing their commission rate from 6% to 7% or adding "transaction" or "global marketing fees". What Does Your Listing Agent Do for The 3%? Sellers paying a 5%, 6% or 7% commission to have their home "merchandised" by a "listing agent" have been sold a bill of goods. Advertising is a "fig" or "gimmie" used to secure your signature on the listing contract. Only 1 out of 9 homes are sold as a result of advertising. The listing agent has little chance of producing a buyer as she competes with 700 - 1000 other local agents. In fact a large East Coast broker, Weichert Realtors, acknowledges that 67% of all their sold listings are the result of "cooperative" sales made by other members of MLS.
At best, the listing agent serves as a sort of "property manager" while the home is listed in MLS. Sellers Want to Believe The HypeSellers, who have bought into the listing agent's rap about promotion, conclude more advertising means more buyers. The seller interviews many firms searching for an aggressive agent ("With All the Marketing Power of Number 1!") to magically deliver a buyer willing to pay more than market value for the home. The home owner expects the listing agent to "sell" the home, i.e., trick the buyer and buyer's agent the property has more value than actually exists. In the real world this rarely happens.
Buyers flock to brokers because brokers have thousands of homes for sale conveniently packaged in one multiple listing book (MLS). In addition, inspecting these properties via the comfort of the agent's car is free! It is easy for a buyer to call a broker on any day of the week to set an appointment to inspect available properties. Once contact is made, it is not uncommon for agents to show 50 - 100 homes before the buyer finally selects a home. Real estate salespeople do not "sell" homes with the same approach salesman clad in plaid sell cars, appliances or long distance service. Instead, realty agents perform a service of gathering and disseminating information. Buying a home is not an impulsive decision. Buyers with common sense never spend hundreds of thousands of dollars to purchase a home as a result of the sales tactics of a real estate agent - with the exception of fraud. Buyers tell the agent where they want to look and what they want to buy. Real estate agents are merely facilitators providing the information and moving the transaction forward. When the buyer finds a home he likes the buyer's agent works in cahoots with the "listing agent" to negotiate the sale and share the 6% commission paid by the seller. Buyers Come and Go Buyers have little loyalty to agents. Unlike sellers, they are not bound by a listing contract. In real estate circles the adage "buyers are liars" is learned the hard way by agents wasting weekends showing homes to buyers who seemingly never buy. Experienced agents call these buyers "Looky Lous" and prefer to work with personal referrals rather than customers who call on newspaper ads. Should an agent fail to show a house that meets the buyer's needs, the buyer will always find some other agent to show it to him. Buyers may look at homes with one agent in the morning and yet another in the afternoon and later, while driving home for the evening, they stop and buy a FSBO. Consumers Control the Real Estate Market - And Agents Too! Like entrepreneurs searching for good investments, buyers search every nook and cranny to find their dream home. They look to brokers, newspapers, supermarket bulletin boards, employee newsletters, lawn signs, friends, neighbors, relatives the local beauty parlor and the Internet. The National Association of RealtorsŪ claim 61% of all agent sales comes from personal referrals or word of mouth.
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