05/05/2023
Here’s more proof that the way a home is sold will make or cost you money, usually a great deal of it, this time from a world-renowned economist and best-selling writer. (The link to the video is in the comments.)
More proof that selling in one day or too quickly will cost you money.
If you've worked with me or heard me talk about real estate, you know I sound different than most of what you'll typically hear from the industry.
That's because when I became a realtor, I did a deep dive into optimizing client outcomes, not just on optimizing my sales volume. I didn't focus on creating the perception of value, but on learning to provide real value. Because I knew that by focusing on my sales volume, I hurt my clients’ outcomes.
One of the things I’ve learned is that it's incredibly hard for people to get their heads around the fact the real estate industry isn't trying to sell their homes for top dollar, and based on how they're sold, most homes don't.
It’s incredibly hard for people to understand that many parts of even the “best” typical home sale cost them money - easily tens of thousands of dollars, and more commonly than you’d think possible, six figures (for homes under a million.)
It all comes down to incentives - aka money and time. Selling for top dollar takes more time and more skill. It can predictably make you, as a home seller, considerably more for your most valuable asset. But the profit on that increase is a tiny fraction of what an agent or broker can make by spending that time on another sale. And they can double their income by representing the seller and buyer, which means no one but the agent comes close to optimizing their outcome, at least in all but rare occasions.
When the industry says a home has sold for top dollar, they just mean "a lot” based on what it was purchased for, or by using some other metric that in no way means a home sold for top dollar. (Like selling in one day, or for over asking, or with a bunch of offers.). It does not mean the home sold for top dollar or even came close.
Among countless other things, I learned that actively negotiating multiple offers rather than using “best and final” will raise selling prices by as much as 11%. The authors didn’t explore this type of negotiating, and their numbers don’t reflect it. And they get the agent/broker percentages wrong. But the data about selling too quickly speaks for itself.
The video is from economist Steven Levitt from the University of Chicago, via Harvard and MIT, and Stephen Dubner, co-authors of four best-selling books in the Freakonomics series. If you don’t know the books or podcasts, they’re wonderful, and explore “the hidden side of everything", which is something I've spent my life trying to do. (Full disclosure, I sent Stephen my book proposal, and he loved it and sent it to his agent. He even said he could see it being for real estate what "What to Expect When You're Expecting" is to pregnancy. Ironically, I hadn't seen this video until this week.)
The hard and crazy truth is, most of what most of us think about real estate is wrong, and costs most of us a huge amount of money, let alone time, hassle, and pain.
None of that's necessary. You just need to know how and why it happens.
Yes, I’m in sales. And I would love to help you sell your home for top dollar, or buy as wisely and well as possible. I know how to do both, and love doing so. It’s both rewarding and a lot of fun.
