Here is a quick story about one of my former students who was well known in the local business community. Shortly after he was licensed, he called and invited me to meet for a free cup of coffee. He nervously informed me that he had anticipated his first listing might be a nice modestly priced little bungalow in the suburbs. Much to his utter amazement, the owner of a huge motel-restaurant complex (with an individual home thrown in for good measure) learned that he was in real estate and wanted to list the property with him. My advice was to talk to his broker and get help from a more experienced agent in the company. He did and the story has a happy ending; but don't assume you'll start with a nice, easy introductory real estate project.
Working with Sellers
After you become well established, people will often simply call and tell you they want to sell their property and they want you to handle it for them. It might be a family you sold a house to or sold a house for, or it might be someone who was referred to you. That is when real estate becomes really satisfying and profitable. In these cases, you merely prepare ahead of time by coming up with pricing information and a marketing plan and meet with the people to take the listing. It won't be quite that easy in the beginning.
Most people, when they decide they want to list, call several different real estate companies. That way they get three or four estimates of an asking price and they have a chance to evaluate the real estate agent who would handle the listing. To be competitive in such an environment, you need to convince the owners that you are a highly competent practitioner who is capable of selling the property.
Preparing for the Listing Appointment
Let's assume you have secured an appointment to discuss listing a residential home. Here are some of the steps you can take to ensure that you do a professional job in making your presentation, taking the listing, marketing it, and seeing the transaction through to a successful close. I should disclose to you that the approach I advocate is a somewhat more lengthy listing process than other approaches. There is a school of thought that says, "Get it all done in one visit and move on out." You can choose. Here's my recommendation:
1. Research the property thoroughly. The first step is to secure a listing packet. In some areas, the local title company will provide you with one for free that includes things such as the legal description, a plat map (showing property boundaries), assessor's tax information, and ownership data. If you have to do the research yourself, all the information will generally be available in public records. Increasingly such information is available via computer, but however you get it, the information is essential. There will be a formalized system in place in the brokerage with which you affiliate, so learn the details early.
2. Visit the residence. Remember, this is before the formal listing appointment. At this point, you are gathering information. Inspect the neighborhood and the home, take measurements, become familiar with the amenities, ask questions about how things work, and get a feel for the general area. The listing form your office uses will provide guidelines. When you visit the home, take along one or two other agents from your office. It is always good to get a balanced input. Each agent should give you suggestions on pricing. You will do the same for them on their listings, so don't feel you are imposing.
Be sure to become fully aware of all immediate neighborhood properties currently or recently on the market, whether they're for sale by owners or are listed. Homeowners are generally familiar with what is going on around them. If you do not include this information in your market analysis, you will lose credibility.
3. Complete a market analysis. Acompetitive market analysis (CMA) is simply a process in which you do research to determine your estimate of the market value of a property. Your office will have forms to help you prepare yours, but you may eventually want to adapt these to meet your needs. Your first few will take some time, but soon you will perform them quickly, as a matter of routine. With the advent of computers, it's now more a matter of knowing the right buttons to push and being able to interpret the results.
Your goal is to present the home owners with information upon which they may make their pricing decision-how much they will ask for their home. To do this you will compare their home to similar properties in the same area that sold recently. You will also include information on unsold homes currently on the market and homes that were on the market but did not sell. It's basically the process an appraiser uses in arriving at an estimate of value for residential properties. It will be tempting to suggest a specific asking price, and many agents do just that (I will admit I did). However, it is probably wiser to present the information and let the home owner make the decision on a specific asking price. It won't be a big secret what you think a reasonable figure should be.
4. Bring your listing folder up-to-date. You need to make certain that you have all the forms that the sellers need to review, descriptive material about you and your office, and information (including pictures and flyers) about other listings you have. A display binder with plastic inserts is often used. Many agents also now carry along laptop computers that can plug in to the local MLS to display pictures and information on other current listings. You can also do incredible things now with a digital camera, which allows you to take pictures of the property and display them immediately.
You wouldn't stand before an audience to deliver a thirty-minute speech without having prepared an outline ahead of time. Neither should you go to a listing appointment without some idea as to how you would like to proceed when you get there. I do not, however, recommend reciting canned presentations, for the same reason that speech instructors do not recommend presenting memorized speeches. If you forget your lines, you'll come across as a mumbling, incompetent novice. Work out an approach you are comfortable with, make sure you cover the major items that any seller needs to know, and be flexible.
Before you arrive, confirm that all the decision makers will be on hand for the appointment. Also, suggest as tactfully as possible that non-decision makers not be there. Friends and relatives kibitzing from the sidelines can complicate the situation for everyone.
During the Listing Appointment
Here are some things to consider during the listing appointment. Make sure you have all the information and forms handy.
1. Go over the market analysis. The logical order of events suggests itself if you understand what is uppermost in the minds of the sellers. They want to know how much you think their home is worth. They also want to judge you.
Most training programs advocate going through a long ritual before you share pricing information with the poor folks. That always seemed artificial and self-defeating to me, but do what works for you. The first figures I discussed with them was the price range I thought their home was in, based upon closed sales of comparable properties. Emphasize that where in that range they decide to establish the asking price will be determined largely by their motivation to sell. As you would suspect, the lower in the price range, the more likely the home will move quickly, although determining real estate value is an art, not a science, so be very conservative in how you phrase your statements.
The second item on the agenda is for the home owners to decide on a suggested asking price, which is almost always somewhat higher than the anticipated selling price (in recognition of the universal procedure among buyers to offer less than full price). It's at this point you need to suggest that your sellers look at the transaction through the eyes of potential buyers. It's quite likely that if the asking price is inflated well beyond what the owners would actually sell for, many excellent prospects will never even bother to look at the home, assuming that it's out of their price range.
Be sensitive to feedback. You should be able to tell whether you are gaining the sellers' confidence or not, but do not be afraid to ask questions. Not even the most experienced real estate agent is infallible, so if it is apparent that they think their home is worth a lot more than your analysis seems to indicate (rarely do they think it's worth less), agree to review it and seek another agent's opinion.
2. Provide information about yourself and your company. You can use your listing folder for this and maybe some snappy computer graphics. Some agents even have a short promotional video. You want the sellers to see you for what you are-a skilled professional. After you've been in the business a few years you can impress them with the number of listings you've sold and provide them with names of past clients as referrals. You also want your company to come across as an aggressive, wide-awake organization that is respected within the community. If you have letters of appreciation and diplomas from educational programs such as GRI, have copies displayed in the plastic inserts. Modesty will dictate a low-key approach when extolling your own virtues, but people do want to know something about you.
Explain how the multiple listing service works, and describe in detail any special marketing techniques you use, such as advertisements, flyers, the Internet, and contacts with special groups of buyers. Describe your company. If there are successful agents who work there, that fact will enhance the likelihood that a listed property will be sold.
3. Show them the actual forms they will sign. Use the listing form itself to explain the various ramifications of listing a property, including the formal agency relationship, the role of your broker, the obligations they incur, and the actions you pledge. Leave the forms with them to review and study, unless they want to proceed with the listing immediately.
4. Go over a "net proceeds to seller" computation. Sellers are interested in the bottom-line amount they will get from the sale. It is what they walk away with at closing that concerns them. At this time, you can give only a rough idea, because there are as yet many unknown factors. Despite the limitations, you can provide a fairly good estimate, with the major variable being the final sales price. After outstanding mortgage and other financial encumbrances are paid, the largest single cost is generally the commission (be ready to describe all the things you do to earn those big bucks). The simplest way of presenting the net-proceeds-to-seller information is as part of the market analysis, on the same form, although some offices use separate forms. When the actual offer is presented, you will do a more detailed "seller's net" sheet.
In most cases, property owners will thank you for your time and tell you that they will think it over and give you their decision later. There is a series of techniques designed to forestall that and to convince them to list immediately. Chances are they will have encountered this approach if they have talked to other agents. There are those who believe a low-key, no-pressure approach actually works better. They realize that it is probably a good idea for the sellers to take a little time; after all, the home owner is making a very important decision. Those agents maintain that sellers are generally so relieved not to be hassled that they become very receptive to doing business.
Taking the Listing
You call to follow up (no, you don't wait for them to call you) and are informed you've got the listing. You will then return for another appointment to get the signed contract.
1. Complete the listing agreement. The home owners have had the documents to review and you have gone over it with them, but this time it's for the record, and they will have questions. Make certain that you fill in all the items (don't skip something and say, "We'll fill that in later") and ensure the listing has an expiration date.
Almost all listing forms contain an item about "known defects." Most states now have mandatory property condition disclosure forms. No home is perfect, not even a new one, and if there are defects that the owners know of, they must disclose them.
2. Discuss hidden defects. Selling real estate is more complicated and much riskier than it once was. The concept of caveat emptor (let the buyer beware) is rapidly changing. Courts are ruling that sellers and agents are liable to buyers for defects they should have known about but did not. Even in the states where there are no mandatory disclosure laws, many brokers will not take a listing without a formal written property disclosure. That's a very sound practice.
An independent inspection will help. It would be better for the sellers to have the inspection done and to correct any deficiencies before putting the property on the market, but it's not always easy to convince them of that. If the sellers decide to order an inspection, advise them to hire a company that does not also do structural repair (in some places that's not permitted by law), because they have a disconcerting habit of finding a lot of work that needs to be done. Sellers may be reluctant to get an early inspection, but if there is bad news, it is better for them to know about it up front than to wait for the issue to surface later.
3. Agree on the asking price. What happens if the sellers inform you that they have decided to list their home for substantially more than the highest range you documented? Should you take the listing? You will quickly learn that there are few things more frustrating and time-consuming than servicing an overpriced listing. However, if you make the sellers aware of the dangers inherent in listing above the market and if the price is not flagrantly excessive, you will probably want to take the listing. During your first year or so in the business, you will probably take a listing at almost any price. Be sensitive to market conditions, however, and recommend a price reduction if the listing has not generated interest after a reasonable period of time.
4. Avoid the temptation to "buy a listing". Here's what I mean. If a home owner has interviewed several agents and has received an estimate of market value from each, it may be tempting, assuming the owner shares the results with you, to offer an estimate higher than anyone else just to motivate the owner to list with you. Yes, it's done in the real world.
For example, I'm very familiar with a townhouse development in the local area. All the homes were built in the same time frame by the same builder and were all the same design and size. A rigorous Homeowner's Association keeps the development impeccably groomed and maintained. All of this results in property values that are very similar, as past sales clearly indicate. I recently saw a "For Sale" sign in front of one of the town homes with brochures available. The listing price was clearly well above market. It stayed on the market unsold for over three months (average days on market were much shorter at that point). It eventually sold after two price reductions. Did the agent "buy" the listing? You decide.
5. Provide a checklist for the home owners. The final step is to give the owners a standardized checklist on how to prepare their home to show. In many localities, the multiple listing service provides a checklist. If it's not available from MLS, someone in your office may have one, or you can make one up yourself with just a little thought. There are even videos on the market that present the information in an entertaining way.
The advantage of giving your clients a preprinted form or a video suggesting steps such as cleaning, painting, and keeping the house neat is that you will not be perceived as criticizing their house or yard-you are simply providing generalized guidance. Be prepared, however, to diplomatically bring up any specific problems that may detract from showing the home. The family dog often poses a particular difficulty, especially if, like most dogs, he is very unreceptive to strangers tromping around on his turf. If the owners are not home, the dog should be left in a secure area so the showing can take place with a minimum of disruption to Rover's tranquility and your prospects' nerves.
If you would like further information on products to assist you in working with sellers in prepping their properties, visit the Web site of Barb Schwarz at www·stagedhomes·com. Schwarz is the pioneer in this activity within the real estate profession. A DVD she markets is designed to be presented to home sellers. It's titled "How to Stage Your Home to Sell for Top Dollar". It's described and is available from her Web site. Schwarz has also founded the International Association of Home Staging Professionals (www·iahsp·com) which awards the professional designation of Accredited Staging Professional (ASP). Incidentally, it's a real estate career option that some folks find exciting and profitable.