Reader Question: I envision the real estate service is delivered differently than a physical product. I can touch a product, examine it, use it according to instructions to “test” if it works. Outside of the legal documents, much of the real estate service is oral. I cannot “test” it in a traditional sense. Can you share examples of specific “tests” to perform to pick one real estate agent from several?
Monty’s Answer: Much of the communication that takes place throughout the real estate process is oral. The telephone and personal conversations with real estate agents often take place during the most critical events, such as a home showing, negotiation, or a listing presentation.
In addition to the legal documents, there are other physical “deliverables” that play essential roles in the real estate process. Two notable examples are the competitive market analysis (CMA), a written document describing the agent’s opinion of your home’s value, and specific multiple listing (MLS) documents, such as property data sheets and statistical market data.
Two big reasons testing is important
Three separate opinions of value will produce different conclusions. More data and different viewpoints enable you to make more informed decisions than offered by one opinion.
The National Association of Realtors (NAR) commissioned a study in 2015 to determine future threats to the real estate industry. It is titled the “Danger Report.” When the consultant asked real estate agents what threatened them, they answered, “Masses of marginal agents are destroying our reputation,” and, “The real estate industry is saddled with a large number of part-time, untrained, unethical, and/or incompetent agents. This knowledge gap threatens the credibility of the industry.”
Separating the helpful agents from the “masses” is not easy. Many of the agents complaining about the marginal agents are themselves marginal, only they may not realize it. Most real estate agents are friendly, outgoing, and social creatures. They may even be your friends or relatives. Unfortunately, being connected, personality, and outgoing traits have little to do with competency. The good agents carry similar characteristics, so how does someone picking an agent tell them apart?
Testing them before you hire them is the best way to minimize the many risks involved in a real estate transaction. And, yes, it takes alertness and effort on the customers part, but when tens of thousands of dollars are potentially at stake, it is well worth your spent time.
When to test
The testing occurs during the process of interviewing the agents. Much of the agent training revolves around qualifying and converting prospects into customers and clients. So the testing begins when you meet them at an open house; when you contact a recommended agent by telephone; or during a face-to-face interview. The screening is very unobtrusive and involves requesting specific MLS data, reviewing their CMA deliverable, or following up on a promise or a statement they made.
The CMA — Without disclosing your value opinion, ask each agent for their opinion of what your home is worth. You want to know the best price the market will bear and the lowest price you should consider. You want a range of value in print. Confirm they understand your request. A good agent will put time into a “deliverable CMA” with neighborhood sold comparables and price adjustments for differences of each comparable from your home. The adjusted value of each sold comparable, suggests the highest and lowest price, or range of value, for your home. You will see in writing what they think, and why.
MLS Market Data — Tell each agent you want MLS market data in your price range and your area. Ask them for actual MLS data that shows how many homes similar to yours have sold in the past year, and how many listings have expired or are still for sale. Ask to see 12 months of all neighborhood sales. It is helpful when you price your home, or deal with an offer, knowing if it is a buyer, seller, or balanced market.
Agent Statements — Each agent will most likely share the reasons they are the best choice to handle your listing. There are many comments they could make, such as, “I specialize in this area.” They may promise to send you some information you requested, or call you back with the name of a handyman. If you take notes and follow up, you can verify their words and follow-up ability.
View these sample deliverables at http://bit.ly/2qh3BNe.
— Richard Montgomery is the author of “House Money - An Insider’s Secrets to Saving Thousands When You Buy or Sell a Home.” He is a real estate industry veteran who advocates industry reform and offers readers unbiased real estate advice. Ask him questions at DearMonty.com.