Beware: Real Estate Agent Comparison Websites and Online Home Value Estimators
Consumers have the right to compare the services of any business to ensure that they are receiving the best possible deal when comparing like with like and competition between businesses is good because consumers may receive a better rate.
There are now many websites that promise to find you the best real estate agent or they promise to tell you what your property is worth. They also do not charge you for this service. Sounds like a great deal, right? Read on for the facts surrounding these ‘services’.
As agents are individuals, what they say and how they handle the sale is not so easy to compare as ‘like for like’. Therefore there are a number of hidden problems with these ‘referral services’ that need to be addressed.
Referrers can only recommend an agent they have a deal with.
Estate agents and referral service companies must agree beforehand that a fee will be paid by the agent to the referrer before the agent will be recommended to a home seller. In other words, referral websites are not impartial because not all agents are willing to agree to their terms or pay them a fee.
The typical fee arrangement with these websites is between 20% and 30% of the commission paid. I have spoken to some of the best agents in Melbourne and they simply do not agree to get involved with referrer websites because it dramatically reduces their fees and they are not willing to compromise their service. When you appoint an agent, you are appointing a professional to negotiate for you to obtain the best price for your house. The best agents are the best negotiators and their skill in negotiating extends to a negotiation of their own fees for their time and effort in marketing and selling your home. Imagine you were asked to go to work to do your usual job but your employer told you your pay would be reduced by 20% to 30%. Would you still be prepared to put in the hard work needed to get the job done?
The commission paid to an agent is their motivation, as they are not paid a salary; it is their reason for being there 24/7 to get your home sold and most importantly to get you top dollar. When you reduce the size of the prize, the agent’s enthusiasm and energy toward achieving a great outcome is reduced before they begin.
Imagine the reverse scenario where the agent is instead rewarded with a bonus for achieving a great result. This would be a motivating deal for an agent! Agents work on commission only so paying them fairly for a job well done benefits both parties. So whilst the ‘referral services’ claim to be free for the home seller, there is a hidden cost to be considered.
What agents do to recoup their ‘lost fees’
Despite the reduction in fees there are lots of agents who are keen to sign up with referral websites for various reasons. For some agents, they work on a volume approach and need to sell more properties to obtain the same income. This is problematic because you know your agent’s attention is divided between more properties and sellers. The less an agent is paid, the less they care about achieving the best outcome and instead the focus is to just get as many properties sold as quickly as possible.
Alternatively agents will sometimes offer a higher rate that they usually would offer because they know that the referrer will be skimming 20%-30% off the top so their fees are set to account for this from the start.
Other agents are just keen to get some listings and may be feeling a bit desperate so will agree to almost anything just to keep their business going and get the leads sent to them. The last thing a seller wants is a desperate agent representing them, as they clearly do not have the ability to be a professional negotiator.
If the agent cannot negotiate a fair fee for themselves or buckles under pressure, what sort of negotiator will they be for you when selling your most valuable asset?
Free home valuation websites
When something appears to good to be true, it usually is. Websites, online banner ads and pop-up ads purport to provide you with an accurate appraisal of your homes value for free. This sounds like useful information and knowledge is power right?
These websites are no different from the aforementioned ones in that all they really do is gather your personal information and contact details and send them on to the local agents that they have arrangements with to secure their referral fees. Some sites do give you an indicative price range using a computer algorithm however this will never be as comprehensive as a real live local professional agent who knows the market and can take in to account all the features and benefits that your individual home offers.
What to do instead
Go directly to your local agent. Don’t call the company, instead call the agents directly. Call them on their mobile.
All agents will prepare a detailed market appraisal, for free, if you invite them in to do so. In this way, the agent you choose will be rewarded for their hard work (once they sell the home) with their usual fees and not be demotivated by having to share a cut with others.
Do the research yourself to determine who is the best agent for you. There are some really good agents out there and whilst there may be several good ones in your area, there will be one that stands out that you feel that you can personally work with. A clue: It is probably not the agent who sells the most properties or the one who has the lowest costs. A great way to see if an agent is a good negotiator or not is to see how they handle the negotiation of their own fees. Many agents will discount their fee with very little resistance!
Choosing a person to represent your interests in the sale is after all a personal decision that no website can do for you. You will likely also find that if approached directly, most agents will be very fair with their fees. If you want to use their services, you will no doubt find it easy to negotiate a deal you are both happy with.
For all real estate related information or advice, contact the author Simon Wendt, Licensed Estate Agent at Hockingstuart Mentone on 0407 040 706.