People have different objectives when they sell their homes. Some of these objectives can include: obtaining the highest possible selling price, selling the property quickly, negotiating a certain rent back period, finding a buyer who can close the transaction quickly, minimizing the hassle and stress factor during the selling process, only selling if a suitable replacement property is found, timing the sale in a way to maximize profits, and locating buyers who appreciate the unique qualities of the property being sold.
The objectives of the seller will determine the strategy they should employ. One course of action is to hire a full-service realtor who will handle the different steps of marketing and selling while keeping the property seller informed. This more traditional approach places the property in a competitive marketplace referred to as the Multiple Listing Service and attempts to identify the current market value of the property.
Other approaches that have been gaining popularity are short-term all-cash purchases. Some examples are cash-for-home companies, “I buy”-ers, and home flippers. Often the objective with these approaches is to obtain a property below current market value, resell at a higher price, and turn a profit. If improvements are made to the property, the value of these improvements will not exceed the difference between the initial purchase price and resale value.
The result of these short-term all-cash purchases may be that the seller realizes reduced net proceeds from the transaction. However, this may be a quicker, less stressful pathway. Sellers may be willing to make this tradeoff if they wish to avoid the perceived stress and extended timeframe of open houses, comparing offers, and waiting for financial institutions to approve mortgages. It all depends on the seller’s objectives.
The Rady School of Management at the University of California San Diego analyzed extensive data and previous studies and found that the all-cash home buyers, such as cash-for-home companies, “I buy”-ers, and home flippers, pay roughly 10 percent less than buyers would obtain through the more traditional approach of full-service realtors and the Multiple Listing Service. In other words, the seller receives 10 percent less on their sale price. For some home sellers, this may be an acceptable tradeoff to make.
The advantages of working with traditional, full-service realtors are their knowledge and experience. Real estate agents have a deep understanding of the market. They can provide insights into pricing, market trends, and buyer behavior. Real estate agents that are members of the National Association of Realtors (NAR) are designated as realtors. This title means the agents adhere to a strict code of ethics set by the association while facilitating property transactions between buyers and sellers.
Realtors can negotiate more than just price. Real estate agents can negotiate many unique seller objectives such as rent-backs, repairs, closing costs, timelines, and inspection issues.
An important aspect of a full-service real estate agent is that the property is listed on the Multiple Listing Service. The goal of the MLS is to connect buyers with home sellers and it does this by increasing a listing’s visibility. This is a prime reason that the University of California San Diego found full-service realtors obtain higher sale prices. The MLS is not only accessed by realtors, but its data downloads to public websites such as Zillow, Realtor.com, Trulia, and Homes.com. Realtors have an extensive network and marketing tools at their disposal to provide maximum visibility of a property.
Another advantage of the MLS is that photos and videos are included. These too are downloaded to public websites. Key information such as price, square footage, showing instructions, and seller requirements are included and help to filter out buyers that either cannot qualify or lose interest as they learn more details on the property. More unique seller objectives, such as rent back periods, can be negotiated by a realtor.
If speed and perceived reduced stress factors are the seller objectives, then a full-service realtor may not be the desired course of action. But if maximum profit from a home sale is the goal, then serious consideration should be given to a full-service realtor.
Gary Frueholz is a realtor with Engel & Volkers Real Estate, a past member of the Alhambra Planning Commission, a Certified Senior Real Estate Specialist, Certified International Property Specialist, and can be reached at 626-318-9436.
