All Forum Posts by: Jacob Bindler

What I am doing is developing a platform where the seller, in the situation you just described, is able to find and hire an hourly or fixed priced expert who actually went through a similar situation a number of times before and can advise the seller. Not negotiate for them, but advice. I am not claiming to be the expert. All I am saying is a quick sale might leave money on the table. It is possible that your solution is the best one and you personally might find my platform useful and charge sellers per minute advising them on how to convert offers quickly and reliable. You might market your advice as independent assessment $100 for 10 min and people might love it. I hope. 

On a personal level, if I were a seller, I would call back and politely tell the first buyers that they are definitely ahead as I loved them very much, but I need a day to entertain other offers. I might even take a gamble and tell them that I will give them $500 discount if they wait for a day. Some people might play dirty and sign a contract knowing that they have three days of an attorney review (NJ) to get out of it if the other offers are higher. 

Market price is indeed is something of a ghost. It is a product of a process (buyers and their agents are accessing a property and submitting bids). None knows it for sure before the process starts.  What I am trying to get out of this post is to see if people can share the techniques that work for them. We already got one approach from Mike here: sell to the first guy with a credible offer before it becomes a pumpkin at noon next day. It works for him, but other people might have something better. 

Let's try to see the forest, not the trees. There are a lot of special cases and individual preferences, but at the end, after analyzing 100,000 transactions and accounting for differences that is what the authors found: the agents are doing better when the reward is bigger. Maybe the solution is to increase commission rates? 

I obviously am not writing all these posts just because I do not like agents or do not believe that some of them bring value. I understand perfectly well that some of them bring value, some are value neutral and some are value negative. I have my own agenda: I am trying to figure out a better way of working and compensating real estate professionals. I have my own ideas and am testing a service to do just that, but the point of my posts is to understand how an average investor thinks about these concepts. From what I see the people are mostly comparing apples and oranges. For example, Joshua was comparing his assessment of what he would get for the house with what the agent sold it for. He sold it for the higher price than his assessment and was happy. Wrong approach. He should have compared the selling price to the market price (the fact that it is hard to set is irrelevant at this point). Next example is the notion is FSBO sellers are getting lower prices for their properties than these who sells through agents. The stats is promoted by NAR and self-serving. In fact, the prices for similar properties are generally the same. Here is the link to the research on that http://domovendo.blogspot.com.

How, I have a question to all you agents: let's say you are selling your own property and at the very first day you show it four times and get an offer at the asking price. There are not many similar properties on the market. What would you do? 

The comment about appraisal has merits, but again the task here is to sell at or above market price. It is unknown, but there are ways to get there.  These ways are not secret. It might be a very lucky coincidence, but i would not get into a contract after just one day. I would ask buyers to submit offers, preapprovals, and procrastinate for a couple of weeks. Then I would run a little action.  I am sure your realtor would have done it if she were selling her own place.

The fact that she sold the house for more that you thought it worth is irrelevant. It just means that you did not have good information about the market. What is relevant is the relationship between the price she sold the house and the fair market value. 

First day? that is exactly the point of the guys in the paper: the property was underpriced.   A fair price is a function of competition. What are the chances that your agent managed to reach wide and create competition in one day? Not very high. Let me rephrase: "zero". I would not be surprised if it were a double sided transaction. Was it? She sold it too quick just to move on. 

At the end, the difference in net money to the seller is 3 plus 3 or even 6% somewhere in between 6 and 9 or 30 to 45K. 

Somewhat dated, but still one of the best studies. 

MARKET DISTORTIONS WHEN AGENTS ARE BETTER INFORMED: THE VALUE OF INFORMATION IN REAL ESTATE

This is an abstract. 

Agents are often better informed than the clients who hire them and may exploit this informational advantage. Real-estate agents, who know much more about the housing market than the typical homeowner, are one example. Because real estate agents receive only a small share of the incremental profit when a house sells for a higher value, there is an incentive for them to convince their clients to sell their houses too cheaply and too quickly. We test these predictions by comparing home sales in which real estate agents are hired by others to sell a home to instances in which a real estate agent sells his or her own home. In the former case, the agent has distorted incentives; in the latter case, the agent wants to pursue the first-best. Consistent with the theory, we find homes owned by real estate agents sell for about 3.7 percent more than other houses and stay on the market about 9.5 days longer, even after controlling for a wide range of housing characteristics. Situations in which the agent's informational advantage is larger lead to even greater distortions.

http://www.nber.org/papers/w11053.pdf 

The fiduciary duty of a listing agent to a seller is for the text books and a fairy tale for toddlers. I bought 6 properties through LA, and all of them told me that, but did all they could to sell it to me. At the end the sellers got screwed. As a side story I started the service helping people to sell themselves, but with help, not like fly blind of FSBO. I am thinking that at some point I will have to sell what I bought, so the service would do what I need: save money and avoid conflict of interests.