The Most Expensive Way to Save Money?

By Craig Lowe

 

We pride ourselves on being a nation of do-it-yourselfers with a can-do attitude. Yet most of us use a real estate agent to sell our home. In fact, over 90% of homes in New Zealand are sold through an agency. This is consistent with property markets throughout the world.

Even the most successful real estate salespeople do not market and sell their own properties. A good salesperson understands the value of having a middle person in the transaction. Just because someone is an experienced middle person, doesn't change the fact that they could benefit from using one themselves.

However, there are a few small businesses trying to carve a niche as service providers to people who want to sell their home privately - offering signs, advertising space, and negotiating advice. There are also small discount agencies (often with outsized aspirations) that employ people on salaries or very low commissions. Their business models implicitly assume that a house will just sell itself - in which case why not charge vendors a flat fee and let them do the leg work? Tellingly though, these entrepreneurs pop up during booming markets and then disappear again when times get tough.

In reality, there is an enormous difference between what an average Real Estate Salesperson and a very good one will get for your home (let alone an owner selling privately). An experienced agent who understands buyer psychology, marketing, and how to generate competition, will use those skills to drive up the price, and will get a much better spread of potential bids than an average agent or an owner.

Discount agencies will never be able to attract the best agents; therefore they will never thrive; private sellers fair even worse. However, while a few owners will always be fooled, the market in aggregate is way too efficient for those models to ever achieve significant scale. Their market share will always be confined to a very small minority of sellers who fixate on the lowest cost rather than the best skills.

Ultimately, the bottom line isn't the percentage of the commission fee but how much value an experienced salesperson can add to your home's sale price. So don't risk short-changing yourself with a shortsighted strategy to save money that, in fact, could cost you dearly.

If you're thinking of selling and want a premium price for your home call me on 021-764-647 for a free no obligation appraisal.

 

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