Real-Estate Round-Up: Simple Math

I’m a very logical thinker. As a real estate professional that is mostly good because it keeps me focused on what is measurable and true. Real estate, however, for the consumer is a very emotional process. When the market is spinning as fast as it currently is, the emotion of real estate can get in the way of what is logical, measurable, and true.

Back to the simple math of real estate; $1,000,000 less 4% is $960,000; $1,200,000 less 6% is $1,128,000. Those four numbers are the difference between a full-service Realtor who oversees only as many clients as they can personally and professionally manage, without losing the integrity of the transaction, and the discount Realtor who is doing as many deals as they can with no concern for the outcome beyond closing your transaction as fast as they can, so they can move on to the next transaction.

What I see, and what makes me shake my head, is the number of home sellers who are enticed by how much money they can save, rather than how much equity they can bank. The simple math equation is happening throughout Fallbrook. Sellers are falling for the “paying less” because they think that will equate to more proceeds or equity at the end of the transaction. Nothing could be further from the truth.

Right now, experienced, full time, successful Realtors are working harder than ever before. Yes, it’s true, homes are selling fast, but selling a home is not a race. It’s a test of wits. It’s a test of knowledge and negotiation to sort through multiple offers. It’s a timeline with plenty of hurdles, that if your Realtor is working too many transactions at a time, will cost you. Make no mistake, there are only 24 hours in a day and only seven days in a week. If your Realtor is in it to move on to the next transaction because your property is only one of the many horses in the stable, what is their goal? Simple, closing the transaction. At what cost? Simply, a lower purchase price, because, after all, they discounted themselves, so why not discount your property to reach their end game, which is closing the escrow.

I know this sounds, perhaps, brash, aggressive, or even unkind. I’m sorry if it offends you or your Realtor but ask them for the proof that they sell their listings for more than their competition. Ask to speak to their past six clients. Ask those clients how often they spoke to their Realtor? Or how often did they go to voicemail or to an assistant? Or how long did it take for someone on that Realtor’s team to call you back? Is your transaction totally with an assistant or via email and DocuSign?

If all you’ve become is a notch in their belt, then you should pay them less. But what about you? You don’t win in that scenario. You simply end up with a fast, impersonal, closed escrow. You are not seeing more zeros in your bank account. You are actually seeing fewer zeros in your bank account.

Here’s a real-life example: Discount Broker told a client of ours that they could sell their home for $1,299,000. They only charged 4% commission. We listed and sold that same property for $1,800,000. Yes, we charge 6%, but who made the big bucks in our scenario? The seller. The seller put over $440,000 more in their bank account by paying a little more to us. Story #2: Discount Broker sells a home for $842,000. We list the exact same model match just five doors away and sell it for $880,000. The seller we represent is putting nearly $19,000 more in their bank account by paying us a little more.

These are just two stories from the past month. This happens every week, every month, and every year. We just shake our heads every time we see a listing come up that is underpriced and that is paying less to the buyer’s agent, which is a reflection of the total commission paid. We could share contact information with any of the sellers we represent, and the story would always be the same. They gladly paid us more, so they could gladly receive more proceeds at the close of escrow.

Simple math is simple and logical. So, my question is this; why do sellers go with the emotional tease of paying less, when consistently they achieve less? Those sellers are actually discounting themselves.

Kim Murphy can be reached at [email protected] or 760-415-9292 or at 130 N Main Avenue, in Fallbrook. Her broker license is #01229921, and she is on the board of directors for the California Association of Realtors.