Millennials now make up the largest group of first-time home buyers at 66 percent. More real estate information is available online today than there has ever been before; everything from public records and photos to home value estimates are all at one’s fingertips.
Given this, and the rise of tech “disruptors,” one might expect that the use of real estate agents would be on the decline. However, despite this younger demographic of buyers and plethora of available information, only 12 percent of all home buyers navigated the home buying process without an agent and only 8 percent of home sellers decided to go for sale by owner (FSBO) in 2016. Why, with so much data available, do most people (including Millennials) continue to use an agent to buy and sell real estate?
Based on my experience and study, the process has grown much more complicated, the risks much greater, and the value proposition agents bring has undergone a massive shift. Here are my top reasons why both buyers and sellers continue to use agents:
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Hyper-Local Expertise. Whereas real estate agents used to be the gatekeepers of property information, now people are drowning in information and thirsty for wisdom. For example, even if home buyers have identified the home of their dreams, when they look at several of the major listing portals to get an idea of the home’s market value, they are likely to encounter widely diverging estimates. Quality real estate agents can combine sophisticated valuation formulas with hyper-local expertise to give sellers a much better understanding of a home’s true value. This is especially true in places like Boulder, where homes on one side of a street might have panoramic Flatirons views while homes on the other side have no views.
Negotiation Advocate. An excellent agent is likely to have had extensive negotiation training and a lot of experience as a repeat player in the process. An agent’s knowledge and skill in this area can help you achieve advantages that may not have occurred to you independently. There are also advantages to having an agent with limited authority and less emotional connection represent you in a negotiation process.
Process. As a repeat player in the real estate game, a great agent should have a refined process to help make a very complicated transaction as smooth as possible. This not only makes the process more enjoyable, but also can insulate you from significant legal and financial exposure.
Network. A good real estate agent will have an extensive professional network that benefits his or her clients. First, a good agent will know many of the other local agents, which can help them find potential homes for their clients before they hit the market. In markets with low inventory this can be especially valuable. Second, a good agent should have a network of professionals he or she can refer buyers to as needs arise.
Faster Sales. There have been several studies that demonstrate sellers who use an agent to sell their home sell it faster, on average, than those who choose to sell by themselves. In many cases, this can be a very valuable benefit (for example, if your job requires you to move).
Higher Net Proceeds. A study recently published found that FSBO properties tend to sell “significantly below” similar homes sold through agents – and in many cases below the average differential of the prevailing commission rate (see http://collateralanalytics.com/saving-real-estate-commissions-at-any-price/). Essentially, this means that people who go FSBO not only choose to take on the process, negotiations, paperwork, and legal risk, by themselves, but they also walk away with less money on the back end.
Pricing Strategy. Just as buyers face information overload, sellers can be overwhelmed by a surfeit of information when trying to determine the market value of their home and how to maximize its value. A high-quality agent can use hyper-local expertise to give you a more accurate opinion of your home’s value – not pricing too high so you scare away buyers or too low so you leave money on the table.
Negotiation Advocate. 88 percent of buyers have a real estate agent negotiating on their behalf. Not having your own advocate can put you at a significant disadvantage. In fact, a good listing agent will help you achieve your best possible negotiating position before you even hit the market (because he knows that once you sign a contract with a buyer, the power dynamic shifts to the buyer, which can take an unrepresented seller by surprise).
Real estate, like life, continues to become more complicated – and the stakes (property values and legal risks) continue to grow. Nowhere is that more the case than in the Boulder Valley. With all the value and clarity modern agents bring, it’s no wonder most people choose to use them.