Heard a story the other night from a friend who is a REALTOR(R), while talking about the hot hot seller’s market we’re in now in many places around the country. (As an aside, doesn’t this mean that early 2013 is not a great time to buy?)
Apparently, she had a house on the market for all of 48 hours before she got 12 offers, 6 of them all-cash. But that’s not the interesting part.
The interesting part is that two of the offers came from buyers represented by agents she didn’t like very much. She called them difficult to work with, and a couple other unsavory descriptions as well.
Now, it so happened that the highest offers were all-cash, from agents she had decent relationships with, so that was that. But it got me wondering….
What if the highest all-cash offer came from an agent that my friend really didn’t like, with whom maybe she’s had a failed deal or two in the past, etc.? Of course, she’s bound by fiduciary duty to present all offers to the seller, but we also know that agents advise their sellers on the pros and cons of the offer.
So we got into some hypotheticals, and I thought I’d share them with you all, and get your thoughts.
Baseline: Other Agent is Neutral
Let’s say the baseline case is that both agents are reasonably competent people, and have interacted professionally before in some way. Maybe they did one transaction in the past, where nothing went wrong, but nothing was amazing either. Maybe they have a nod-at-each-other-at-Starbucks type of a non-relationship. Just a solid, amicable, professional relationship.
Other Agent is Incompetent
Suppose the reason my friend didn’t like the other agent was that he was incompetent. Anyone who’s spent any time in real estate has heard war stories from agents about how they ended up holding the other agent’s hands through the deal, did almost all of the paperwork, etc. etc. because the other agent was incompetent.
Most of the time, that means the competent agent ends up doing a ton more work, but still getting paid only half of the commission. But once in a while, the incompetence of the other agent could mean the deal falling through altogether. Maybe he forgets to file a critical piece of paper. Maybe he just doesn’t know how to convince his client to come up a bit, or concede something in negotiation. But I know I’ve heard from agent friends that they had to jump through hoops and work miracles to save a deal due to the incompetence of the agent on the other side.
Other Agent is a Bitch
The other hypothetical is that the other agent may be totally competent, but my friend and her simply just don’t get a long. “She’s a total bitch,” each would say of the other.
Now it gets tricky. In theory, both are professionals and can set aside whatever personal animosity each feels for the other during the course of the transaction for their respective clients. But real estate agents are human beings, and there’s very little doubt that the transaction would probably be a rough one. The lack of trust might mean three phone calls when one might do otherwise. It might mean putting everything in writing, in case each wants to find something to report on the other to the Board. It might mean looking for ways to get one over on each other, instead of giving in negotiations. Who knows?
Other Agent is The BFF
There’s the other end of the extreme: the other agent is my friend’s Best Friend Foreva! They vacation together. Their families know each others. They’ve been at some industry event together doing lemon drop shots until 3am, walking back while singing “Sweet Caroline” at the top of their lungs. They’ve done dozens of transactions together, always having fun, and respect and love each other to death.
How Should the Seller Think of These?
My question is, if I’m the seller, how should I think of, and how should I value, each of these scenarios?
Let’s say I get a $300K offer from the Baseline case — neutral professional relationship — for my house.
The Incompetent Agent presents an offer for $350K. I’m pretty sure I’d tell my agent to work it out, hold hands, jump through hoops, hire the other agent a coach, do whatever she’s gotta do. Because it’s $50K! But if the offer was $305K, I personally would accept the lower offer, because of the reduced risk of the deal falling apart.
The Bitch Agent goes through the same analysis. If the difference is $20K, guess what? My agent is going to smoke the peace pipe, swallow her pride, and get it done. If the difference is $5K, maybe I accept the lower offer from the neutral Baseline, because it might mean a quicker, easier close.
The BFF is a bit different, and trickier. Because now, I have to worry that my agent might not fight as hard for me, because the agent on the other side is her BFF. If the BFF is coming in higher, great! If the BFF is lower than the Neutral, by even $5K, I might wonder. Conversely, I might think that my agent could leverage her BFF relationship and get the other agent to fight a little less hard on her client. Hard to trust that, though.
Now, realistically, my agent isn’t likely to say, “Oh, take this lower offer, because Susie on the other side is my BFF! We’ll fly through that deal!” (Well, at least, she shouldn’t, because I might like you a whole lot, but my interest as a seller might not be the same as your interest as an agent in working with your BFF.) She might say, “Take the lower offer, because I’ve worked with Susie on ten other deals, and she’s a total professional, and this will be smooth and problem free if Susie’s on the other side.” And that would sound really good to me.
It wouldn’t sound $15K good, though, in all likelihood.
So here’s the question: What is the difference in dollar terms (or percentage terms) between two offers — one presented by an agent with whom you have a good relationship vs. one presented by an agent with whom you have a bad relationship — at which you would advise your client to consider taking the lower/good-relationship offer?
How much is a good agent-to-agent relationship actually worth in the marketplace?
PS: After I wrote this, I realized there’s an even more interesting case.
What if the other agent is the buyer’s agent on my agent’s team? Yes, yes, I know, she’s supposedly 100% defending her client’s interests and would climb over the table and throttle my agent to get her buyer client the best deal possible. But let’s just say I find that incredibly hard to believe, since the buyer’s agent is completely reliant on my agent to send her leads, does weekly training with my agent, and for all intents and purposes, works for my agent.
What is it worth to me, as a seller, to have the other agent almost quite literally under the thumb of my agent?