Perceived Value of Real Estate Services

I was talking with another Realtor recently who had been the listing agent on a home sold to Buyers I had represented. I was shocked to learn today that his Sellers thought he did a lousy job on that deal. The reason for their unhappiness – the home sold too fast.

When I did the market analysis for my Buyers on this listing, my price came out exactly the same as the list price, so I felt comfortable advising the Buyers to offer full price. “They have it priced right” I told my Buyers.

Offering less than market value ran the risk that another offer would come in that looked better while we negotiated below the asking price. It was right before a summer weekend; the home had only been on the market for two days and was located in an area where sales were very strong. It wasn’t worth trying to mess around with a low offer, so we wrote an offer that we hoped the Seller could say ‘yes’ to without changes. The offer was submitted and accepted.

After the inspection, we negotiated some repairs into the deal (usually easier to do when your paying full price) and I was impressed at how well the listing agent handled these repairs for the Sellers, and kept me informed of what was being done and when. In short, he knew good repair people who accomplished the repairs at a much lower price than the Sellers would have had to give up had we gone with cash repair allowances, which saved the Sellers money. He communicated very well the entire time, all the way through the closing, and impressed me as a competent and very capable Realtor.

Now I found out that the Sellers were angry because they thought the home sold too fast, which meant (in their minds) that it was listed at too low of an asking price, which they thought was the Realtor’s fault. They thought, since a full price offer came in after just two days on the market, that it should have been listed about $7,000 higher, he told me.

I couldn’t help laughing at hearing this because, as I told the other agent, my market analysis would have come out just exactly the same no matter what the list price had been. We prepare offers based on market conditions, not the list price. In fact, when we come across homes that are priced well above market value, it makes it less likely that our Buyer will want to submit an offer because they often (correctly or not) perceive that the Seller is not motivated and is going to be unreasonable.

Also, had the home been listed $7,000 over market value, it’s very possible, after doing our market analysis, we would have offered $10,000 below the asking price ($3,000 below market value), to leave some room to negotiate up to market value. So, the idea that the home was sold too cheap is simply not true. It sold for exactly market value. The listing agent priced it right and that’s why it sold in 2 days for full price.

But the Sellers were so upset with the sales price that they extracted a 0.5% commission rebate plus some closing costs (over $1,500 total) out of the Realtor’s commission. And they still were not happy. The agent seemed pretty good natured about it, didn’t seem bitter or angry, but it really is a shame that his clients did not like the outcome he created for them in selling the home.

We both marveled at how the quality of the service we provide as Realtors is so often entirely subject to the perceptions and interpretations of those we serve.

I believe this Realtor did a fine job for his Sellers. The home was properly prepared and staged. It showed very well and had excellent photos taken, which really helped my out-of-town buyers visualize how nice the home was. He took great care of the Sellers during inspection negotiations and the completion of the repairs, and stayed on top of the deal all the way through closing. He did everything a good agent should do, as far as I could tell.

But his Sellers will not be recommending him to friends or family. He won’t be receiving referrals from them, much less a Thank You card. Instead, they have probably been spreading ill will, telling others how their Realtor “blew it” and cost them the extra money they are convinced their home would have sold for had they priced it higher. The Sellers felt like victims. The Sellers felt ripped off.

A job well done, by most reasonable standards, resulted in unhappy real estate customers.

How do we avoid this as Realtors? We don’t. It happens sometimes. It happens to us all. From a Buyer side, the same thing can happen when an offer below list price is accepted right away without a counter-offer. The natural inclination is for the Buyer to wonder “maybe we should have offered even less. Maybe we’re paying too much. Why didn’t the agent tell us to make a lower offer?”

This second-guessing can never be answered or resolved though, because one never knows how different circumstances or different numbers would have caused a different outcome. We can only guess and wonder.

Yet, as in the example of this other agent, as human beings, we often treat our speculation as fact. We base our opinions and reactions on perceived or imagined scenarios with 100% certainty that the better outcome we imagine as being lost is exactly how it would have been. Then we choose to feel angry and disappointed instead of grateful and happy.

For these other Sellers, they are 100% convinced that their home would have sold for $7,000 more, but I know for a fact that my particular Buyers would not have been willing to pay more than they did. I do NOT know for a fact though whether some other buyers would have come along later and been willing to pay over-market value for the home. I can only say that it’s very unlikely.

The bottom line though, the way I look at it, if the customer isn’t happy, I failed. I may be able to say I did everything right, or that I “did a good job”, and that a good outcome was achieved by all reasonable measures, but if my customer feels let down, I will still wonder what I could have done differently.

10 thoughts on “Perceived Value of Real Estate Services”

  1. Steve,

    I think the problem is that the real estate market is not a completly transparent or liquid market like the stock, bond, or commodities market. Those markets are completly liquid and transparent. Everyone knows exactly what the fair price is down to the penny at any given moment and you can always find a buyer or seller at those prices. Even if there is no buyer or seller at the moment, there are always market makers whose job is to make sure you always have someone to buy from or sell to at the current fair prices.

    Real estate does not have this type of liquidity, so no one ever really knows if they are getting “ripped off” or not. There is also lack of transparency too. Even if all sales and prices are reported to the MLS (which they are not), it doesn’t include any incentivies that the seller might have given.

  2. As a home owner, I just recently closed on the sale of my home in Miami, FL. For a number of reasons, primarily greed, we decided to sell the home on our own, “By Owner.” We advertised it and listed it based on prevailing market conditions and I admit we had some help from our good friend who is an experienced and professional Realtor. Within a few weeks we had an offer on the house for $410,000.00. Asking price was $425,000.00. We accepted the offer but it fell through in negotiations. We showed the house 20 times and no real offers. So, we took the next logical step and contracted with a discount Realtor. This particular agent immediately raised the asking price to $479,000.00. We were dumbfounded but acquiesced based on her professional opinion. She demonstrated market conditions and prior recent sales that appeared to represent the house we were selling as equivalent and we received one offer at $450,000.00. We asked our realtor for advice: should we just accept it or counter to $465.000.00? She did not give us any indication of what we should do, “It is your choice.” Unfortunately we countered and the buyer withdrew his offer. We let the three month contract with this realty company expire and contracted with our Realtor friend. She was kind enough to list it and offered us a 1% reduction in commission if her listing sells to a direct buyer; otherwise her company will charge the full 6%. We were just fine with that. Her first move was to reanalyze the market and lowered the price to $450.000.00. The house showed well, people loved it but the market in Miami took a steep downward turn during these months recently and we sold the house for $420,000.00, noting $10,000.00 over what we might have gotten if we sold it on our own.
    Moral: Asking price is EVERYTHING. EVERYONE thinks their house is the best and worth $20.000.00 more than it is worth in real markets. We were fools to think we could get more than it’s worth and invested our trust in a discount broker who has very little incentive to do any actual work like advise on negotiations. A solid, professional realtor is your best friend and we did great with our friend who sold our house in a few months given rapidly changing market conditions in Miami and earned her commission, every penny of it. Do we harbor distain for her for not selling at the highest price we could get? No. We earned 54% clear profit in 2.4 years on the sale of this home. Greed had no place in this deal. We are actually thankful to have gotten out when we did. Markets are down in Miami due to supply way above demand and over-valuation of properties. So, put you egos aside and let the professional sell your home.

  3. Hi Leon,

    I think you have it exactly right. Home values can be placed in a range, but putting an exact number on a home is difficult. When I do a market analysis, I know that the number I come up with represents a snapshot in time, and it’s subject to whether or not the particular buyers and sellers in a deal agree on a price near that number.


  4. Hi Larry,

    Thanks for sharing your Florida market story. The biggest thing I come away with is the attitude of your Realtor friend who hung in there with you, offering help even though you didn’t pick him first (or second), but ultimately was able to sell the home for you. Too many of us Realtors get offended or feel like our friends “owe us” their business just because we know them, and get hurt feelings when they pick someone else.

    I here some crazy stories of market undulations in parts of Florida and California right now, so it sounds like you came out OK nonetheless.



  5. What I like to do is show the seller exactly which homes I’m using for comparison. Next, I’ll go and show them similar competing homes, so we know exactly what we are up against. Next, I give them a range of prices and a range of days they can expect it to sell. I tell them the middle point will get you so many days. A few % below will ensure a quick sale, and a few % or more above you are risking it sitting on the market. Next, I just give them a choice. What is your objective, and are you willing to take the risk to get more? Everything is transparent. At least there’s no shadyness about where I’m getting my data from. They see everything, and most like the fact that I lay it out in front of them like this.

  6. Btw, Steve, the way this agent friend of yours could have avoided this scenario, or at least softened the blow was to show them numbers that demonstrate how this area of town is so hot that most homes sell in a week or two. This way they would at least expect it. Some people are under the impression that it should take exactly 30 days to sell, no less, no more.

  7. I do agree that professional services are much more helpful.

    But the fact remains that the home would have sold much earlier and for much more had the seller accepted the 450 k offer in the first place. The only fault of the discount broker was that she refused to give her personal opinion. What would you rather have- 30k more (450 k minus the selling price of 420 k) or a piece of advice? I would prefer 30 k anyday.

  8. >

    That’s the problem Nis. A good realtor can more than earn his commission with a simple 2 minute advice, while a bad realtor can cost you more. What do you value someone’s experience? If they can get more money in your pocket, sometimes it’s worth to pay them more commission. Unfortunately, that part of the job is hard to notice. People can easily value manual labor and crap they buy in stores, but they don’t value professional opinion. If it takes a few minutes to give, than it must not be worth much. That’s why so many think realtors don’t do much because their job often entails giving advice, which is quick to give but takes a long time to learn.


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