Efficient Home Selling

By Charles Jones

What is the best way to sell a home?

"Marketing to other agents who are working with customers and clients already seeking homes in the general area is the most efficient, fastest, and most cost-effective approach to reaching the broadest home-buying audience, ensuring the highest sales price the market will bear, in the shortest amount of time, for the least amount of marketing costs."

What is true, but no one says?

Finding Buyers is hard and expensive; Finding a specific buyer, for a specific property, is nearly fiscally impossible.

The truth that no one articulates is that when sellers agree to compensate other agents, they are not paying for buyer-representation, they are paying for marketing, transportation, and transaction facilitation. Yes, the other agent will represent the buyer's interest, but only because the law forces this arrangement. Most agents are actively marketing and advertising at great effort and expense for generic buyers and sellers every day, and the seller is hoping that someone, anyone brings them an offer they can agree to. The seller does not care if his agent brings the buyer, or another agent brings the buyer, they just want a buyer.

Quick History: Back in the 1990's consumer groups, the DOJ, State governments and other interested parties forced the real estate industry to separate the fiduciary responsibilities of buyers and sellers. They did this because buyers did not have any representation at all. All agents legally represented the seller exclusively. As a matter of fact, an agent could lose their license if they gave a prospective buyer any information that would cause the buyer to offer less than the full asking price. Agents working with buyers were not allowed to give a CMA unless it supported the value. Agents were not allowed to show a prospective buyer the sales prices of the area. By law, buyers were truly at a huge disadvantage. This caused many lawsuits until the laws were changed. Although the law changed the fiduciary duties, it did not change the fact that the compensation was paid for marketing.

With the change in law, Listing agents hold a fiduciary responsibility to sellers and agents working with buyers owe a fiduciary relationship to the buyer. But, the value to the seller is the fact that 98% of the time another agent through their hard work, marketing, and reputation has attracted, and identified a "real honest-to-God", motivated-qualified buyer.

What did not change, is the fact, that the seller and listing brokers offered other brokers compensation for assistance in marketing the property. It has always been the most efficient way to sell. Let's take Austin Texas, there are over 16,000 licensed agents most of whom are marketing themselves and their companies trying to find buyers and sellers.

The amount of time, money, and effort that 16,000 agents put forth trying to find qualified buyers, dwarfs the amount of time, money, and effort a single seller or listing agent can spend themselves.

By splitting the marketing duties among 16,000 agents in a winner-takes-all competition, the seller is far more likely to sell their home for the most amount of money, in the least amount of time, with the least amount of marketing dollars spent.

This is the ecosystem as it has been for 100 years. It is not collusive, it is efficient for the seller, the listing agent and the buyer.

Proofs:

Home Builders/Developers

The most sophisticated sellers are the nation's largest home builders, they sell thousands more homes than any individual seller, year after year. For each subdivision, these builders and developers spend millions of dollars on advertising and marketing, trying to bring prospective buyers to their subdivisions in hopes of selling them a home.

In addition to the marketing money they spend, these same builders and developers gladly pay between 2% and 5% of the sales price for compensation to area real estate agents to help the builders market and sell their homes. Why?

Are builders foolish? They don't have to pay compensation, so why do they? They are not a part of an association that requires them to offer compensation to real estate agents. Yet, being the most sophisticated sellers in the country they gladly pay, Why?

Answer: Nobody knows where the buyers are coming from and it is too expensive to directly advertise for a particular home. The most efficient way to sell the home is to market to agents working with customers and clients already seeking a home in the general area.

Listing Agents

Can we agree that if Listing Agents could easily sell their own listing and make double the income, they would do so enthusiastically? I am sure you would agree that making 4% to 6% is better than making 2% to 3%, correct? If the average agent sells 8 homes a year, and they could double their income just by selling their own listings, they would be foolish not to do so, correct? Why don't they?

Did you know that in 2024 in the Austin Board of Realtors MLS, only 1.9% of homes were sold by the same agent that listed the property? If finding a buyer for a particular home was easy, why are 98% of the homes sold by another agent?

Did you know that only 4.8% of homes were sold by the same company that listed the property? If finding a buyer for a particular home was easy, why can't the agents from the same company find them, before another agent does?

If finding buyers was easy, why do home sellers use agents at all?

If finding buyers was easy, why would any agent pay half his commission to another agent outside his company?

Answer: Nobody knows where the buyers are coming from and it is too expensive to directly advertise for a particular home. The most efficient way to sell the home is to market to other agents working with customers and clients already seeking a home in the general area.

For Sale By Owner stats

• According to Zillow statistics 36% of all sellers attempt to sell the home themselves as a For Sale By Owner first.

  • 80% Fail

  • 20% succeed

• in 2023 only 7% of homes are successfully sold "For Sale By Owner"

• 80% of For Sales By Owner properties don't sale until they are listed with an agent.

• Of those that sell For Sale By Owner,

  • 57% personally knew the buyer.

  • Therefore only 3% of homes sold, are sold For Sale By Owner to strangers, and

  • 60% of these buyers used a buyers agent.

• Which means only 1.86% of Sellers were able to sell their home to a stranger without any help from a buyer's agent. Why?

• Coincidently only 1.9% of Agents sell their own listings as stated above, so it appears that approximately 2% of the time the seller or their agent will find a buyer directly the other 98% of the time an unknown agent will find a qualified buyer and help that buyer find the home that meets their needs. Why?

Conclusion

The statistics reveal that the vast majority of homes are sold by agents other than the listing agent, highlighting the efficacy of a networked approach. This system leverages the collective efforts of thousands of agents to find qualified buyers, proving far more effective and economical than singular marketing attempts. Even the most seasoned home builders recognize the value of offering compensation to agents, as it optimizes their sales process and ensures broader market reach.

Ultimately, the real estate ecosystem, despite evolving regulations and practices, remains a testament to the power of cooperative marketing among agents. This approach continues to deliver the highest returns for sellers, affirming its status as the most efficient method for home sales.