Selecting a real estate agent to sell your home isn’t easy. How on earth do you choose? They all claim to be the best negotiator, an expert in your area, and with a long list of buyers eager to secure a property just like yours. Now I’m not going to pretend this is the quintessential guide to agent selection, but rather I offer a few points to consider when weighing up your options.
Below I have a heading for 10 ways (there are many more) that you might choose an agent, then discuss what some of the issues with each might be. Let’s get started…
1. The Most Listings
If you search Trademe or drive around the neighbourhood, you’ll often see the same agent names come up again and again. Social Proof is reassuring for everyone, and this agent has clearly convinced other vendors that they are the best option. But does that mean they get the best results? Not necessarily. All it means is they are successful at convincing other vendors they are the best. Remember, it hasn’t sold yet. Furthermore, if the agent has a lot of listings at once, how much time are they going to dedicate to yours? And how did they get so many vendors on board anyway? Was it the promise of top dollar for the property? Is that why there aren’t more ‘sold’ stickers on their sign boards?
2. A Family Friend
Ah the pressure. Often this person will get your listing purely due to the personal relationship, and your desire to avoid awkward future encounters if you don’t choose them. Unfortunately, this agent may or may not be a top performer, and as you have a close relationship, may either not be forthcoming with market reality to avoid causing offence – or else potentially under appraise it to make the job easy for themselves. A level of complacency can creep in here and the service level suffer as they take your business for granted or perhaps resent agreeing to discount the commission due to friend or familial pressure.
3. Agent Referral
Perhaps you have a friend who is an agent for one of the big brands but works in another town? They offer to ask around and find a good one for you. You’re likely glad for the assistance. What’s happening though, is your ‘friend’ is taking a slice of the commission from the agent they refer to you (this is commonplace). It’s not necessarily about your best interests, rather it’s about ‘clipping the ticket’ for the introduction.
4. Tried & True
These agents get listings without trying too hard, based on time in the industry and personal referrals. They’re generally well informed about the history of the area, who the main players are and what’s going on in town. The trouble is when they start to get complacent. If you don’t sign up with them, they know there will be other opportunities for listings tomorrow. And what’s the easiest property to sell? The one that reflects the best value for money to buyers. If this agent knows that you’ll only deal with them and they don’t have to compete with other agents for your listing – why strive for a high price? Rather price it sensibly, get it sold and move on. You’re happy that you got a sale – but could you have got more? Did they really push it for you?
5. Most Thorough Appraisal
Every agent is obliged to provide a written appraisal before asking you to sign a listing authority with them, and the appraisal standard varies widely. Some are beautiful glossy multi page documents, while at the other extreme I’ve seen a black and white photocopied single page with handwritten notes. While presentation is surely important, it’s the content that really matters here. Don’t assume that the fanciest appraisal document is commensurate with the best conclusion. Poor quality advice wrapped up in high resolution photos and pie charts does not make the advice instantly accurate. A well-prepared appraisal should be the entry point to the listing opportunity, but a great many other factors lead to exceptional service when selling real estate.
6. Top Appraisal Figure
I’ve discussed this at length in a previous article, known in the industry as ‘buying the listing’. Such an agent is trying to set themselves apart by promising something that cannot be justified. As a vendor it’s very hard to turn away the agent who promises you the most money, but sometimes (not always) that’s exactly what you should do. Please look up my website blog article on this topic for further detail. It’s one of the most dangerous tactics for vendors in a declining market. If you do go down this track, at least do so with your eyes wide open to the psychology involved, and the conditioning work that will start soon after to encourage you to drop your asking price.
7. The Biggest Office/Team
Here’s what can happen. You sign a listing with this agent, who promises to take it back to the office and get the whole team working hard to bring buyers to your property. You smile, assuming this is what happens next. I should point out that of the total commission you pay, some goes to the agency brand, some to the office, and the rest is split between the listing and selling agent. Clearly your new agent wants to maximise the opportunity for commission, so wants to list it AND sell it. So while photos are being organised and sign boards erected etc, the agent is keeping the listing to themselves as much as possible, trying to find buyers they already know, and holding off sharing as long as possible. The other agents in the office are doing exactly the same thing with their listings. Only if they cannot sell their own listings, will they introduce buyers to another agent’s properties. The listing agent can also make it difficult for others to show buyers through, with access issues, information delays, and prioritising their own offers over others.
8. The Buyer Database
When was the last time you wanted to buy a property but didn’t look online yourself – only interested if a specific agent showed it to you? Never? Me too! There are only two market segments I’m aware of where agents with buyer databases have a genuine asset. First is with the top end of the market, perhaps $6m+, where the buyers value discretion and privacy, and are perhaps located offshore and using a local contact to notify them of new properties available that meet their needs. Second is for investment properties where investment or development groups are continually sourcing properties at the appropriate yield / price. For the vast majority however, I believe a purported buyers database to be of minimal benefit. The agent does not own their buyers, and most that are serious can find properties for themselves. As yet, dedicated buyer agents are not commonplace in New Zealand like they are in other countries.
9. The Best Testimonials
Reviews from past customers work well for many businesses, and give confidence that vendors like you have had a good experience in the past. While I couldn’t possibly argue against genuine reviews when making a decision, its worth pointing out a couple of things. First, it’s possible with many online platforms to filter reviews so that only the good ones are visible to the public. We all know that most customers in any business who are indifferent to the service standard do not readily leave a review at all. Its only those that are either very pleased or very disappointed who do so without prompting – and obviously the more positive ones are elicited with gentle persuasion. The next issue is that after a sale is completed, the vendor often has no benchmark with which to measure good performance. One vendor might think a particular agent is amazing because the house sold in three days. But did they get the best price? Another agent might have a warm and charismatic personality, so the vendor loved them, but can they negotiate? These observations all end up in reviews that can give you a skewed perception of performance.
10. The Cheapest Commission
I’ve yet to meet a vendor who thinks agent commissions are too cheap in New Zealand. Most range somewhere between 2.5-4% + GST depending on the location, property value, saleability, and agency involved. While it is certainly tempting to choose based on the fee structure, all agents are not created equal, and I seldom observe the cheapest as also being the top performer in any market. If you were going to see a doctor, do you want the best? Or do you want the cheapest? It’s a considerable amount of money you’re dealing with here, and mistakes cost dearly. Given property deals are often negotiated in $10k or $50k increments, the hypothetical commission saving is trifling compared to the amount at risk with a weak negotiator. I would also add, that if an agent agrees to drop their commission rate immediately when you ask – how strong are they going to negotiate on your behalf with a buyer?
Any standout answers here? Sadly, I imagine you now have more questions than answers. But formulating these questions is certainly worth the effort.
It’s also worth noting that not one of the above factors should preclude you from choosing an agent who is either a friend, is well established, referred to you, the best reviewed, has the most listings, the best appraisal, the highest appraisal, the cheapest fees or whatever. It’s more that any ONE factor is not sufficient to make a prudent decision and there are pros and cons to each.
My hope it that you’ll now have a slightly better idea of what to ask and why.
If you would like help to choose a good agent, we provide a free service which identifies top performers in your area and keeps them on their toes throughout the entire sale process. Click here to learn more.
Take care out there,
Scott Morison, Registered Valuer