Ask An Agent: Do You Need A Realtor For A Real Estate Transaction?
Kevin Crigger is the type of agent that studies real estate pro formas and makes his mark in every market. As a multiple award-winning broke with Johnson & Daniel who has had multi-million dollar transactions, Crigger is the perfect person to ask whether or not you need a realtor for a real estate transaction.
Do you need to use a realtor for a real estate transaction or can you do it yourself?
A realtor definitely brings value to the equation, provided an individual engages with the right professional. Obviously, we understand that, in a free-market, different business models exist and various service offerings correlate with them. It’s really about choosing the realtor offering that makes the most sense for you.
You have realtors who are obviously very experienced in certain types of products, areas of the city and price-point to some degree as well. There’s certainly a focus on specialty in the business. For example, certain people are more comfortable at higher price-points – more luxury focused product where there’s fewer direct com parables. In which case, the person you’re working with needs to distill their experience around various sales and how your property relates to them.
Speaking of luxury homes, luxury condominiums specifically, I wouldn’t say there are comps to work off of in terms of comparables sold. In most of those cases, there’s relevant market activity, so it’s understandable that a home down the street, which may be larger in size or where land may be identical, is at a very different level of finish. In some cases, it’s about size of street — a ravine lot versus a lot backing onto a subsequent property. There’s a lot to look at in terms of valuation. Just because your neighbour sold for X doesn’t mean your property is going to sell for X. Having an experienced realtor, who can give you an opinion of value based on understanding of the market, is a key factor because pricing is a major component of a sales strategy.
In this day and age, there’s pretty much a DIY version of everything. Does that ultimately represent the best option for the consumer? I personally don’t believe so. The beauty of our market is the consumer can decide on their own. I think when a seller looks at the statistics for for-sale-by-owner properties they see that this option equates to a small amount of the market, looking at days on market and price-point. There are more studies that have been done in the U.S. than in Canada related to the for-sale-by-owner phenomenon and typically homes sold by realtors sell for more in a shorter amount of time.
READ: A Bad First Experience With A Real Estate Agent Led Her To Become A Great Agent: Meet Zuzana Misik
I certainly get the argument for not having to pay commissions, but in a fee-for-service business, a realtor typically only gets compensated if the home sells. Realtors typically front-ending cost associated with preparing the property, marketing the property, positioning the property and often there is a long suite of services that are included in their fee-for -service. Now, the fact that’s a commission and not really looked at as a fee-for-service, is part of the dichotomy.
Because this fee-for-service is a contingency and you only receive that fee if you sell the property for the client, there’s very little risk to the seller up front. The risk really rests with the realtors investing their time, energy and money in the preparation of the property. By contrast, in for-sale-by-owner scenarios, nowhere near that amount of resources is invested in the preparation or marketing of the property.
If you tour homes for sale, you’ll see that homes that sell for the most money in the shortest amount of time look like nowhere any of us live. They’re staged and feedback is provided in terms of fix-ups to do prior to listing and really how best to position the property at its absolute best without a massive investment. As realtors, we also invest heavily in the marketing of our client’s properties. We put together a custom approach for each and every property.
Part of the fee for service relates to the hard cost of preparing the property and the rest relates to the experience itself. This is similar to the ways in which you hire a named partner from a law firm. Typically, their time is ascribed a higher cost than a brand new articling student. In real estate, fee for services vary as well and this is part of the overall cost.
Often times, people only look at the selling side of things. But on the buying side, engaging a professional is key. It’s a massive investment to buy a home – the largest single investment most people make in their lifetime – and if you haven’t engaged a realtor, you really have no one representing your interests. The other piece of the equation is that your realtor has a fiduciary obligation to you. They’re providing a service to you so there’s a lot of value in working with a realtor on both sides of the transaction.
The negotiation piece is also key because having a realtor removes the emotion. Typically your home, whether you’re buying or selling, is an incredibly sentimental place. It’s your refuge, where you hang your hat and where you live your life and have tons of amazing memories. Everyone loves where they live, but having a realtor as a professional guide through the sale certainly takes the emotion out of the sale and keeps it to more of a business transaction. In turn, this keeps your eye on the business side of the equation and maximizes value for you.