Limited Service Yields Limited Results

Competitive pricing is not a ground breaking marketing strategy. From soup to nuts, from pork bellies to real estate, pricing that undercuts the competition is always effective to some degree.

ForSaleByOwner.com, an East Coast based internet start-up, has repackaged the concept of competitive pricing, selling a do-it-yourself listing service for $249. The ForSalebyOwner.com program suggests that rather than hire a broker, a seller should drop the asking price for his or her home by the amount of the commission saved. They even offer to provide comparable sales data to help the owner determine the best asking price, and they throw a lawn sign into the deal.

For SaleByOwner.com makes an empirical argument by quoting a couple of supposed patrons who sold their homes without hiring a broker. The fact is that over 95% of owners who try to sell their homes "by owner" end up selling their homes only after listing with a licensed broker, and most who sold without a broker ended up with less money for all their aggravation and potential liability. This information is verified via the "preliminary change of ownership" form that the state of California requires every buyer to complete, and the data is recorded with the Department of Real Estate in Sacramento.

Successful brokers these days have years of experience and thousands of hours of training for all the "hats" they wear during the course of a real estate transaction. Starting with sales, marketing and negotiations, a broker will also advise on matters of accounting, financing, contract or landlord/tenant law, construction, home staging, title and hazard insurance, health and welfare, and more. Real estate brokers in general claim to have no legal liability in any of these areas, yet they must know enough to be able to advise the buyer and seller in a transaction when they need outside professional help. Without this assistance, most transactions would fall apart. Most sellers are not equipped to handle the sale of their own home as would a real estate licensee who has brokered hundreds of transactions and who has the ability to anticipate, prevent, and smooth away any snags.

A successful broker is intimately knowledgeable about his or her market. While a national company can offer sales data to homeowners all over the country, a local broker can make adjustments to the raw data based on their first hand knowledge of the comparable property's physical condition. For example, a home might have had anew kitchen or maybe another doesn't even have a kitchen in the case of an incomplete remodel. Very often the data obtained is completely irrelevant to the subject property, coming from an adjacent neighborhood without the features that have enhanced value in the past. Home values are also affected by market conditions that can change dramatically overnight. Headline news such as the approval of a new school, a fire in Malibu, Amgen lays off employees - any one of such events can instantly shift the fine line between overpricing and under-pricing a home.

In the case of evaluating a home in a custom neighborhood, the raw sales data, typically obtained from tax assessor records, is subject to a wide range of scrutiny. Nona Green, an agent with Coldwell Banker Regional, specializes in selling custom homes in semi-rural neighborhoods of Los Angeles and Ventura Counties. She says, "A discrepancy often exists between the square footage listed with the tax assessor and the actual, permitted square footage of a home. I can't rely entirely on the raw data to assess value. Views and topography also affect value and are factors rarely supplied by Data Quick [a service company that compiles and organizes public record data]. Remarks submitted to the multiple listing services are obviously biased, so it helps to have personally viewed the comparable listings."

Six percent may seem like a lot of money to pay. In reality, it is a relatively small investment yielding a high return. The fact is that most successful Realtors have a monthly marketing expense that would quickly break the bank of a homeowner who tried to give their own property that kind of exposure. Maximum exposure for a home ensures that it will sell for the highest possible price. This is the real estate corollary to supply and demand. Given that most buyers use a broker when purchasing a home, it would be prudent for a homeowner to provide those buyers access to their home by listing it with another broker in the same network. Especially in a volatile market, considering what's at stake and that not a dime is paid by the seller until the closing check is in hand, it is definitely a wise investment to hire a qualified Realtor.