1. "Your open house is really a party for me."
Hire a real estate broker to sell your home and one of the first things
he'll likely suggest is hosting an open house, so potential buyers can
casually check out your property on a weekend afternoon. While open
houses are promoted as a great way of finding a buyer, a National
Association of Realtors study found that their success rate is a mere
2%.
No matter. Having an open house serves another important purpose - for
the broker. "It gives him a database of clients," says Sean McNeill, an
independent real estate broker based in New York City who says that he
doesn't like open houses, preferring to match clients with appropriate
buyers. "At open houses, you get all kinds of people walking in. Some
are [trying] to see how much they should sell their own places for;
others just want to get a look at what's out there." All are perfect
pickings for a broker looking to increase his roster of buyers and
sellers. "Think about it," McNeill says. "The broker is devoting a
couple hours of a weekend. He won't do that unless it helps him in a big
way."
2. "My fees are negotiable."
Brokers like to make it sound as if their fees are engraved in stone,
but that's rarely the case - especially in a brisk market, when brokers
fiercely compete for properties they can unload fast. This past summer
one broker in the Midwest says he lowered his fee by a full percentage
point because there was so much demand for good properties that he
needed leverage. Indeed, says the broker, who asked not to be named,
sellers should shop around for broker's fees. He suggests these
negotiating tactics: "If somebody's willing to commit to me for selling
one place and buying another, I give a discount. If you're in a
particularly desirable neighborhood with a house that will bring a lot
of traffic" - say, at an open house - "that can be used, because the
broker will use the flow of people to get potential customers. And with
some [smaller] brokers, all you need to do is ask and they'll lower the
commission."
3. "Think you've had no offers? Actually, there've been several."
Legally, the broker you hire to sell your home is obligated to tell you
about all offers that come in. In reality, some don't. Perhaps he thinks
the offer is insultingly low for you, but more likely, "the broker
thinks it's too low for his own purposes. He wants to hold out for a
bigger commission," says McNeill. Or else there's an outside broker (or
"co-broker") circling your house, and the primary broker is waiting for
one of his own clients to make an offer so he can keep the full 6% to
himself.
"You must be clear with your broker that you want to be informed of all
offers," McNeill says. "Otherwise, you may be leaving him to make
decisions that you should be making." Check the listing agreement drawn
up when you hire the broker; if the promise to disclose all offers isn't
listed explicitly, insist that it be added.
4. "I talk about you behind your back."
You spot your dream house as you're driving through a neighborhood and
call the broker listed on the For Sale sign. That's how a lot of buyers
stumble on a broker - who, in turn, happily shows you other houses,
asking about your needs, laughing at your jokes. It's easy to get
loose-lipped and forget whom you're dealing with: someone else's agent.
"Legally, brokers are obligated to provide their sellers with any
information that can help them get the best prices for their homes,"
says Stephen Israel, president of Buyer's Edge, a Bethesda, Md.-based
company that represents homebuyers. "If you tell the broker that you're
willing to pay $500,000 but want to offer $450,000, they'll pass that on
to the seller. They have to."
Also, some brokerage companies encourage prospective buyers to get
preapproved for loans. While that can make a buyer more attractive to a
lender, it also tells a broker whether a buyer can afford a $600,000
house when he's trying to haggle on a $400,000 property. "When somebody
asks for [a preapproval], find out who they're representing," says
Israel, acknowledging that such details can short-circuit your
negotiating leverage. "If they represent a seller - or someone in their
office does - they shouldn't have it. The broker may tell you she will
be impartial, but how can she be?"
5. "Sometimes I forget whose side I'm on."
The past 10 years have seen the proliferation of the buyer broker,
agents who are supposed to work strictly in the buyer's interest,
helping him get a fair price on a home as well as avoid pitfalls along
the way. Unfortunately, things don't always unfold so nicely. While
buyers may think they're getting a broker who isn't commission-hungry,
many buyer agents are just that: They usually get about 3%, the same
amount any broker typically earns when he gets involved with another
agent's listing. "Buyer brokers are sometimes too focused on closing the
sale and getting that commission," says Max Gordon, an Overland Park,
Kan.-based real estate broker and attorney, so it's often in their best
interest to see you pay as high a price as possible.
Even worse, some brokers who call themselves buyer advocates are
actually working for companies that also represent sellers. "Brokerages
offer bonuses to buyer agents if they sell an in-house listing," says
Israel. A good way to get a broker who has no such conflicts of
interest: The National Association of Exclusive Buyer Agents, whose Web
site (www.naeba.com) can help you find a buyer agent near you who
pledges to help you get the best deal possible and has no ties to
sellers' agents; many even work on a fee structure rather than on
commission.
6. "I know zilch about zoning."
Real estate agents love to suggest big ideas to prospective buyers -
say, removing trees to enhance a view, or even squeezing a rental unit
out of a roomy garage - meant to happen once the deal is done and
they're out of the picture.
"We had a client who bought a dilapidated house with a beautiful piece
of property on a marshland," recalls Manhattan-based architect Mary
Langan. "The broker told him that he could fix the house up however he
wanted, insisting that this was a sleepy little town where nobody would
care what he did. He put up a $15,000 shed in his backyard, pulled down
trees, filled in some of the marshland. Now the town is making him put
things back because of environmental zoning regulations." The lesson:
Before you buy into your broker's creative thinking, check with your
local zoning commission.
7. "I won't let termites - or pesky inspectors - kill a deal."
If a broker is selling a house, you figure he knows the place pretty
intimately - after all, he talks a good game about the new kitchen, the
big closets, the heated garage. What you need to worry about, though,
are the home's features that he keeps to himself. Steve Van Grack,
chairman of the Maryland Real Estate Commission, says, "We have had
cases where [brokers have] been deceptive about termites and flood
damage."
You'd figure that the home inspector, who comes to check out the place
before you close the sale, might notice those things. And he will - if
he's not in cahoots with the broker. "Realtors give potential homebuyers
lists of home inspectors," says S. Woody Dawson, a structural inspector
in Connecticut. "Those are people who will rubber-stamp the house" in
return for repeat business. As one who works outside those lists, Dawson
says that he sometimes butts heads with overly controlling brokers. "One
time I had a broker tell me that unless I told her the results of my
inspection - which is confidential between myself and my client - she
wouldn't let me get up on the roof. I got out my ladder and told her
that unless she was big enough to stop me, I was going up there. She
wasn't big enough."
8. "I'm not a lawyer, but I play one in your house."
Most states strictly regulate the contracts used in real estate
transactions, stipulating the use of boilerplate agreements that offer
little room for creativity - but some brokers can't keep their
clause-adding instincts in check. "I see [brokers] pushing the envelope
all the time with amendments and addenda," says Gordon. "They draft
language that can have consequences without really understanding it -
but they want to keep the sale going."
For example, Gordon points out, it's fairly common for "a transaction to
close on one day but possession doesn't happen until a later date, in
which case the buyer rents the house back to the seller for those days."
Gordon warns that issues of responsibility for the house require more
than a couple lines from the broker's pen. If a clause is worded
improperly, you as the buyer could end up liable for damage done by your
"rental tenant." Same goes for purchases of non-real-estate items (such
as patio furniture) and owner carryback (in which the seller provides
some of the financing). "In both cases payment terms might not get
spelled out clearly," Gordon says, "and can result in one party taking
advantage of the other." Whether you're the buyer or the seller, it's
worth the legal fees, he says, to get the offer contract reviewed by
your lawyer before you sign.
9. "My Web site is a dead end."
Considering that over 50% of house hunters look on the Web, according to
the National Association of Realtors, sellers might assume that using a
broker with a site can help make a sale happen. But some brokers' sites
are better than others, and you need to look beyond a well-designed home
page to figure that out.
One common flaw: posting houses that sold long ago. While the mistake
can be simple negligence, others think that it's a bait-and-switch-style
ploy. "It brings people in, but it gets them upset when they find out
that the property's [gone]," says Frank D'Ostilio Jr., president of
William Orange Realty in the New Haven, Conn., area. "If a broker has to
advertise properties that are already sold, it tells you that he doesn't
have enough inventory to keep his [roster of houses] full."
Aside from checking up on a site's prominently placed listings,
prospective sellers should also make sure that a site is easy to
navigate. Roger Lautt, a Chicago-based broker with Re/max Exclusive
Properties, has had his own site up for the past five years. "You want
to use a broker who keeps himself relatively high on the search
engines," advises Lautt, adding that he pays a Webmaster to make sure
this happens for his site, which is linked with Realtor.com, Yahoo! and
the Re/max site. "One of the big things a broker should have on his site
is community information," Lautt says - schools, recreation facilities,
commuting options, maps - "which attracts people who are thinking of
moving to the community."
10. "You may not need me at all."
Brokers like to create a lot of mystique about selling homes, insisting
that the process is complicated and best left to professionals with
multiple listings and loads of house hunters. Not so, say homeowners who
have sold their homes themselves (about 20 to 30% do so each year).
William Supple, publisher of the sale-by-owner real estate magazine
Picket Fence Preview and author of How to Sell Your Own Home, says that
"properly priced and advertised, a house sells itself," adding that
sellers should plant a yard sign and post online ads with local sites
aligned with print publications (call current advertisers to see if the
given site is effective). After all, when it comes to the inevitable
negotiations between buyers and sellers, Supple figures that brokers and
their commissions get in the way: "Usually, the haggling occurs over a 5
to 10% difference, and that is, more or less, the broker's cut of the
sale price. You don't need him."
Just be sure you price your home well. The way most self-sellers hurt
themselves, Supple says, is in setting either an unreasonably high or
tragically low asking price. "Hire an independent appraiser for $200,"
he suggests, "and he will tell you [the parameters of] what to charge."
In a strong market with low interest rates, he adds, the asking price
can be 10 or 15% above what the appraiser thinks it will go for; in a
weak market it might be wise to price at or below the appraisal.