Why You Don't Want A "Top Producer" Listing Your Property

The completely frenzied micro-market currently manifesting in the Eastlake area of San Diego is a wonderful illustration of several pieces of advice I consistently give. First, What Happens When You Over-Price Real Estate?: properties priced correctly are getting multiple offers, properties priced a little under are seeing bidding wars, and properties overpriced just a tad are sitting for months until the price gets reduced low enough to counter the very high "days on market" counter. Second, all of the subsidiary ideas in How to Sell Your Home Quickly and For The Best Possible Price also get illustrated: Properties that are clean, uncluttered, and easy for buyers to get in to see (as well as priced correctly) are seeing multiple offers within a week, while corresponding properties without those virtues are sitting with no offers. Buyers and their agents are even learning to avoid short sales, other things being equal.

But the most important thing is something that you kind of have to be a buyer or a buyer's agent to appreciate, and that is to be very careful you don't list your property with someone who doesn't have the time to dedicate to selling your property quickly and for the best possible price.

Here's the situation: You've got this one agent or brokerage. Their signs are all over on listings. "Must be pretty good," people think, and they call that agent, who comes out, schmoozes them, may even talk them into pricing the property correctly, and gets a signed listing agreement.

This agent then promptly disappears to schmooze more prospective listings. When previewing or showing properties where the owner is home, I've made a habit of asking a question of them that really asks about talking to their agent. It's damningly consistent how often these people tell me they can't so much as talk to their actual agent. Even talking to the agent's office staff is dubious. The agent themselves? No way.

I managed to talk to one such agent last week. She told me "I have no idea how many offers I've got on the property. My office staff is handling that. I'm too busy because my transaction coordinator isn't doing their job."

Say WHAT? Whose job do you think all of that is? That transaction coordinator doesn't have their name and signature on the listing agreement. They didn't sign it, representing that they would diligently work to sell the property on the best possible terms. The office staff, including the transaction coordinator, is there to dot the is and cross the ts to enable the agent to handle more "big stuff". They are not there so that the agent can disengage themselves from the listing, or go heap more work onto the pile that the poor office staff has to deal with. Yet when I managed to indirectly suggest she should perhaps not accept any more listings until she had a handle on the ones she already had, she acted like I was some kind of alien monster, here on planet Earth to consume the poor hardworking agents such as herself, and usurp their Rolls-Royces. She's making money hand over fist - but her clients are getting hosed.

When I make offers - offers with reasonable deadlines to respond - they are sitting there, without response, for the week I give them, and usually several weeks beyond. It took one company six weeks to respond to a one week deadline offer, and I've got others where if they do eventually respond, the clock is sitting at nine weeks or more. Some of them are plying the time-honored (and horribly weak) technique of the "best and highest" offer - but even they're not picking one for weeks. This is pathetic. And then they have the gall to complain when they eventually do call back that my client has moved on and is no longer interested in their property. Just because it's like I'm talking to a black hole is no excuse to terminate the conversation, eh?

Not that the response to the "normal" listings and lender owned listings is great, but the response to short sales are far and away the worst. It seems that many agents are just having their back offices send all of the offers directly to the lender. No response to the offer, no negotiation and consultation with the actual owner of the property, no fully negotiated purchase contract, and definitely no fighting to get any particular offer accepted. Then they get upset when, after two months of this nonsense, most of the offers have moved on, including the highest, and none of the remaining offers are willing to match that highest offer that the lender just approved. Never mind that the lender might well have approved any of the offers if the agent had dug in and negotiated it correctly and fought for that offer. Never mind that the agent could certainly have gotten more money out of most - if not all - of the offers simply by coming up with reasons why it was in the prospective buyer's best interest to do so.

These poor people in the back office have no clue which offers are strong and backed up by a buyer's actual ability to perform, either. For that matter, neither do most listing agents. Letter from some lender asserting without evidence that the buyer is supposedly able to qualify for a loan in the amount of whatever loan amount is required? Worthless.
What was the qualifying rate used to justify that conclusion and is it still available? What's their debt to income ratio and is there any wiggle room if the rates are a little bit higher, if there is some unreported debt, or if there's some kind of special tax assessment? Is the allowable loan to value ratio going to work for this property? Do these buyers have the cash to close? Nor is pre-qualifying with their favorite lender any better - not to mention that requiring a buyer to do anything with any particular third party - even simply requring prequalification with a given lender is illegal under RESPA.

To make up for the back office and agent's incompetence at deciding whether a given offer is backed by an ability to perform, listing agents are attempting to impose onerous and abusive requirements for buyers in order to make that agent's life easy - not to get the most money from the quickest sale and the fewest problems. I just read a listing that said no offers will be submitted without seven different illegal requirements, and a host of others that certainly act to discourage buyers with even halfway competent agents. Starting the "due diligence" period as soon as the offer goes in, before there is a fully negotiated contract, so the buyer has to spend money when they might not even get a contract, and when they technically do not have the right to have inspectors at the property? Requiring buyers to qualify with or even to use particular lenders? Requiring the contact information for the buyers themselves, allowing them to bypass the buyer's agent and contact the buyer directly? All of those are violations of major legal principles involved in real estate - and I've seen them on many listings within the past few weeks. Nor are they in the nature of "fiduciary duty" because they enable both the agent and their principle to be hauled into court for violations of the law, costing far more than the principal could possibly make even if they buyers didn't understand their legal rights. Quite frankly, what these requests most often do is scare away qualified buyers who are competently advised, as well as causing the property to be worth less to the ones that do stick around.

The way to get good responses is first, to not put onerous conditions upon the property in the first place, and second, to respond in a timely fashion to every offer. Whether you counter-offer or explain that there are better offers on the table is determined by circumstances. But by responding to prospective buyers, engaging them in the process, and letting them know you take them seriously, the listing agent and their client are building psychological buy in for the buyers. They are giving the buyers a reason to believe that there is a real possibility of getting this property, and given such, they will focus upon this property. Until there's a fully negotiated purchase contract, those buyers are free to wander off in search of other properties, and if not responded to in a timely fashion, pretty much all of them will. Why not, when there is no response? Even "Talk to the hand!" is more response than I'm getting out of most listing agents these days.

Any time you have multiple offers, that is a golden opportunity to play them off against each other, netting more for the clients. These "top producers" are completely blowing these opportunities, which incidentally would net them more money in commissions, as well, but they're too busy signing new listing contracts to properly service the ones they've got. I'd be too ashamed of myself to associate myself with these listings. I'd certainly never brag about it in the vein of "I sold all these properties!" Have they no professional pride whatsoever? Kind of like someone who's supposed to be a maker of fine cabinetry bragging about creating steaming piles of excrement.

Let's examine the economics of the situation. Say that an agent can have thirty listings, of which three or four will close in any given month and a couple more agreements will expire. Suppose they are getting 90% of the sales price a dedicated agent with two active listings who sells them all quickly will get. Let's say the "top producer" averages 3.5 sales per month, while the not so top producer who actually serves their client interests averages 1.8. Let's do the math.

First off, that "top producer" has thirty signs on thirty properties out there advertising them and their services. The agent who serves client interest has two at any given time - and not the same two for very long. It's repetition and consistency that sell services to more members of the public who don't understand how these things work. Most yard signs (not my occasional listings - thanks to an idea I got from Greg Swann) advertise the agent, not the listing. But people driving by the same sign every day for six months are a lot more likely to call the agent to sell their property than the ones who drive by the same sign for only four to six weeks. Benefit: "top producing" bozo, not consumer. This turkey is selling about 12% of their listings per month, as opposed to the other agent we're considering, who sells 90% of their listings per month.

Let's examine who makes how much, as far as the agents go: "top producer" gets 3.5 commission checks per month for 90% of the commission, because they found a buyer that produced 90% of the sales price. Let's say the median price in the area is $400,000, and commissions are 3%. 90% of $400k is $360,000 times 3 percent times 3.5 checks per month means they average $37,800 per month in revenue to their brokerage, of which some goes to the brokerage and some to them. The agent who really gets the property sold gets $400,000 times 3% times 1.8 checks per month, which means they average revenue to their brokerage is $21,600 per month. Which agent do you think the brokerage values more?

Now let's look at individual consumers. Let's assume 8% overall cost of selling the property, and a loan for 70% of the value of the property, in this case, $280,000. The person who chooses the "top producer" walks away with $51,200. The person who chooses the agent who actually makes the effort to sell their property walks away with $88,000 - more than sixty percent more money in their pocket. If the loan is for 90% of value, or $360,000, the "top producer" client is going to be short $28,800, while the real agent's client is still going to walk away with $8000 in their pocket. Not to mention that the property sells quickly, so you don't have all the monthly expenses of maintaining it even though it may be vacant. If you bought for $300,000 and have a $280,000 loan at 6% here in San Diego, that's about $1800 per month that the consumer saves, considering insurance, for every month the property didn't sit on the market unsold. All of this is real money! Not to mention the clients of the agent who limits how many clients they work with have a 90% per month probability of ending up happy, while the "top producer's" clients only have a 12% chance of ending up with a sold property, and they are not going to end up nearly so happy.

So if you still want a "top producer" after reading all of this, be my guest. They're easy to find. Just look for all the yard signs sitting in the yard for months - if the listing didn't fail completely. Look for corporate advertising blanketing a particular market channel. But if you look a little bit harder, you can find a competent agent who has the time and will actually work hard to sell your property, properly manage the offers they do get, and sell the property for a better price much more quickly, ending up in much more money in your pocket.

Caveat Emptor

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