Thursday, May 24, 2007

Unbalanced Reporting

Unbalanced Reporting – 60 Minutes – May 13, 2007

It has taken me a while to respond to the 60 Minutes broadcast on Sunday night May 13. I have been busy buying real estate from a Realtor. The points the show made were that anyone can sell his/her own home; Realtors do not deserve the commissions they earn; and the National Association of Realtors (NAR) is attempting to restrain trade. Although I am NOT a Realtor and I do not belong to the NAR, I can still see unbalanced reporting for what it is based on my experience and study.

They even interviewed a Realtor and asked her some questions she was unable to answer. I don’t know how many Realtors they interviewed to find someone who would be too stupid to respond to some simple questions, but it appears they waited until they could find someone to support their position and make Realtors look foolish.

First point: Anyone can sell a home and you don’t need a Realtor. Yes, that is true. However, study after study shows that when a knowledgeable Realtor is used, not someone who just got their license in a recent hot market, the seller gets more money in their pocket, even AFTER paying a full commission. The skill is not in putting a sign in the front lawn or listing the house in the Multiple Listing Service (MLS). Any discount brokerage can do that.

The skill is in the pricing, negotiating, qualifying the buyer, and nursing the deal through escrow to closing. It’s like saying anyone can cut hair, which is true, but how bad of a haircut are you willing to live with. At least your hair can grow back and you can get it cut by a professional next time. With a home sale, after you have lost thousands of dollars it is not so easy to make it up.

Second point: Realtors do not deserve the commissions they earn. Some Realtors do not earn it. Other Realtors do earn it. A study done by NAR showed that about 10% of the Realtors earn 90% of the commissions. I do not know if that means 90% of the Realtors don’t know what they are doing, or they are just scraping by, but the point I made earlier was that a professional Realtor will put more money in your pocket even after you pay the commission. Again, they earn their money from their negotiation skills, not by inputting your home information into a computer.

I had an auto accident a couple of years ago where the person who made a left turn in front of me tried to say the accident was my fault, and his insurance company did not want to pay. I could have represented myself against his company, but I hired an attorney instead. He produced results I could not have produced. The other company even tried to deny my medical bills because the medical records and X-rays showed I had three broken ribs, but I didn’t say that was a part of my injuries in their phone interview with me. Guess what? My doctor didn’t tell me that is why I had the pain in my chest and when I would breathe. There wasn’t anything he could do about it anyway. He couldn’t put my ribs in a cast and he didn’t tell me. These were the grounds the other insurance company tried to use to avoid paying my medical bills. Had I not had an attorney, I probably would not have received the funds to cover my medical expenses. His knowledge and skill in this area made the difference. Yes, I might have received some money, but not a fair settlement.

Third point: The NAR want to restrain trade by blocking discount brokers from listing with the MLS. The 60 Minutes program spoke about how some states passed minimum service requirements to force discount brokers to do more than list houses in the MLS and then leave the consumer high and dry. Guess what? There is a reason for providing minimum service when it comes to selling a home. Enough consumers got burned that states created laws to protect them. The broadcast made it seem like minimum service was a bad thing. There is a reason that a doctor has to perform an exam before writing a prescription. Just because you say you want some medication does not mean that is the best thing for you. Minimum service is a good thing.

One of the solutions would be to hire a Realtor as a consultant, just like you can hire a CPA or attorney for advice and guidance. They are out there. Check out for more information or the book by Mollie Wasserman, Ripping the Roof Off Real Estate.

This one sided broadcast was the most unbalanced reporting I have seen in a long time. However, I can recognize both sides of the issue because of my background, experience, and study, and can recognize when only one side is presented. Most viewers do not have that advantage and they were short changed.


Friday, May 11, 2007

Myth # 5 – You need to turn your home into a showplace to list it

Yes, this is a myth. However, if your place is a dump, you will certainly be offered less money for it than a similar house that shows like it’s in “move-in” condition. Also, you need to determine if someone is talking about cleaning and painting or remodeling.

I have been in many homes where I could not believe people actually lived there under the conditions before my eyes: Clothing piled up 2-3 feet high in the center of the living room; pathways through a room that required walking around clutter; bedrooms where the floor was not visible through 2 feet of clutter; dirty dishes, pots, and pans all over the table and counters in the kitchen; a front yard with a few patches of grass that grew despite never having been watered; and carpet worn through past the pad to the floor beneath.

These same homes where I live could sell for $100,000 more with the clutter removed, the dirt cleaned up and fresh paint. The work involved to clean up the house might cost a couple hundred dollars for some helpers to clean up and haul away the trash, and maybe $1000 to re-paint. Even if it cost $5000, and the home seller had to borrow the money to do it, the financial gain would be well worth it even if it only brought in half as much as I said.

Dirt and filth turn off most people. More people are attracted to clean and fresh environments. And there are some people who look for sellers who live in filth and clutter so they can get a bargain and then the buyers will do the clean-up work themselves. They may live in the house after they do the work, or they may “flip” it for the profit. I am surprised by the sellers who cannot see the advantage of doing this for themselves, but they are out there.

The Parade article went on about improvements, like a new kitchen or bathroom, just to sell a house, and how this would not be worthwhile. This is so silly it is hard for me to imagine why they even bothered writing about this. There are at least two reasons for a homeowner to avoid that type of expense to sell their home. First, what they do may not appeal to the taste of most buyers, and second, most remodel work only returns about 80% of the cost of the construction according to a recent survey cited in the Parade article.

Bottom line when it comes to selling your home: It does not need to be a showplace, but you will make far more money by cleaning out the clutter and giving it a fresh and clean look.