How Your “Friend In Real Estate” Is Costing You Money
Almost every time someone invites me to their home to talk about putting it on the market, they say they have a “friend in real estate” they are considering hiring as their listing agent. It’s not surprising; with 13,160 members of the Austin Board of Realtors everyone knows several Realtors. In fact, if you don’t have any friends in real estate, I’d be worried you didn’t have any friends.
As one of my friends says it’s called Show Business not Show Friends for a reason. Here are a few ways hiring your friend to sell your largest financial asset can cost you big money.
Understanding The Contract
Would you believe the average real estate agent may only sell 2-3 homes per year? This is why before you hire any agent you should ask how many homes they sell. After all, how can someone be an expert at anything they only do 2-3 times per year.
Our standard contracts are essentially fill in the blank forms which sounds simple. What if I told you there are many gray areas in the contract and it is ‘buyer friendly” with 32 loopholes where a buyer can terminate a contract and receive their earnest money refunded? Does that still sound simple? To make matters worse for you the contract is constantly changing, in fact I received an email this morning about proposed new changes. If your friend only sells 2-3 homes per year there is no way they can become an expert at giving you advice about the contract.
There’s a saying that binge watching all the Bruce Lee movies on Netflix won’t make you a ninja. The same can be said about negotiating skill. It’s impossible to become an expert by reading books and watching videos.
When you think about negotiating in real estate you likely only think about the original contract. You may be surprised to learn 80% of the contracts do not close with the same price and terms agreed to in the original contract.
In most real estate transactions, there are 3 periods of negotiation; the original contract, during the inspection period and during financing/appraisal period. I estimate we defend 1-2% of equity for our clients with every sale. Sometimes it is negotiating the original sales price, sometimes it is knowing from experience which inspection items are bogus and sometimes it comes from my mortgage background and understanding the appraisal process. Your friend without strong negotiating skills is more likely to say “What do you want to do?” rather than being able to give you advice and help negotiate the best deal for you.
Marketing Plan And Budget
When you don’t do something every day it’s challenging to come up with a plan. It’s also hard to spend money on a marketing budget if you don’t have a successful real estate business.
If your friend does not have a successful business, they won’t have a proven marketing plan or an advertising budget and that will cause your home to have a lack of exposure to buyers. Less exposure means less showings resulting in lower offers for your home.
When it comes to marketing your friend will probably say they do the same things as everyone else. Don’t fall for that. Make sure you review their marketing plan and compare it to ours to be sure you are not short changing the exposure your home will receive.
Will You Hold Them Accountable/Will They Be Honest With You
Sometimes it is better not to mix business with your personal life. When you do it can be dangerous in two ways.
The first question is will you be able to hold them accountable? Selling your home should be treated like a business. You have the right to hire someone and expect they will perform. When you hire a friend, you may create a situation where you are afraid to be honest with your expectations causing you a less than exceptional sales process.
The second question is will your friend tell you the truth? Will your friend make recommendations about preparing your home for sale or will they be afraid to hurt your feelings? Your agent being afraid to tell you the truth will cost you time and money when selling your home.
In the end it’s human nature to want to do a favor for your friend. At the same time if they are truly your friend they will want you to have the best. Before hiring a friend to sell your home be sure to call us for a no obligation second opinion.