Losing by Saving
Recently, much has been flying around the blogisphere about a certain 60 Minutes report. And, Point2, a Canadian-based real estate website provider recently created a satirical spoof called 16 Minutes which they posted on YouTube.
The gist of the piece was that sellers may actually lose money on the sale of their home in the attempt to save on commission.
This brings to mind listing I competed for against a discount listing company. The seller, who I knew, elected to go with the discounter and I wrote about it last June in a piece called The Cost of Using Discounters. In trying to save $10,000 in commission, he actually netted less than had he listed with me. He could have walked away with $10,400 more in gross proceeds even with paying a full-service commission rate.
The market is diverse enough to accommodate various business models. Some people, in certain markets or who are in tight financial circumstances, may benefit from the alternative business models. Though, for the most part, in trying to reduce the cost of selling a home, sellers may actually be reducing, not increasing, their net proceeds than had they selected the full-service model.
Related article - Myth of the Discounters.
Whew! As a prospective buyer, now I know to look only at Redfin advertised properties. I would have spent $10,000 more had I purchased a Scott property. Thank you for your candor!
Jason - Thanks for your comment. Though, I must say there is a bit of misconception in that statement. The list price of a home for sale is set by the seller, not by the agent or company representing the seller, though, the agent will provide his/her recommendation based on market factors. Sellers have different motivations and needs when selling their home which can, and usually will, impact the pricing decision.
As stated in the original piece, though I knew the seller and his situation, I was not privy to his reasoning why his home was priced below market. That’s the important distinction…the property was priced below market value…not priced over market. Though, I do not follow Redfin’s pricing closely, the listings that I have previewed were priced close to or even above market value. Listing agents represent the seller and will work to optimize the sellers return, regardless if the agent is with John L. Scott or Redfin.
Groovy.
When my friend bought his home he did not use an agent. However, the seller had an agent.
The seller’s agent quietly disclosed how low the seller was willing to go which turned out to be a great deal for my friend.