Friday, April 2, 2021

Brokers and Time and Supply and Demand

Do brokers understand supply and demand?

So today we have extremely low inventory resulting in multiple offers for most residential properties.

And what do the brokers do?  They leave the homes on the market for just a few days.  The median days on market (DOM) count for my area is three days.  But you would be surprised how many houses go under contract in zero days.  That's right, the house is on the market, not for days, but for mere hours.

Why?  And, how?

Demand takes time.  That is, for all potential buyers to see a property, it takes time.  And if a seller wants the highest and best offer, you've got to give buyers an opportunity to see what they are buying.

But here's the thing.  While the seller may very well want the highest and best offer, the broker not so much.  It is not that the broker does not want it, it is rather that the broker does not care.  To the seller, a $10,000 higher offer is a vacation to Hawaii.  To the broker, it's three hundred bucks, tops.  Why wait through the weekend?  Just talk the seller into an acceptable offer and get back to your primary job, prospecting (client acquisition).

And worse, if the broker has lined up a buyer himself, where he makes substantially more money, often double, he has a perverse incentive to limit the access of other buyers.  We call this dual agency, and I would argue that it is impossible to get the highest and best offer in these situations.  I know Mr. Seller, we were going to leave the house on the market for the weekend, but I have this buyer with a solid offer, today.  These days, this often happens because the broker refused to cooperate with other brokers and their buyers.  We call this Coming Soon.

The end result is that brokers work less and/or get paid more.  Either way, the brokers intentionally limit demand.  It is not that brokers do not understand supply and demand.  I think they do.  It is that they are using it to their own advantage rather than to the advantage of their client, the seller.

Now, what is a seller to do?  Well brokers behave this way because you allow it.  Don't!  Tell your broker that you will be leaving the house on the market for a week.  Or at least, through the weekend.

As for dual agency, ask about it before you sign the listing contract.  And disallow it.  If your broker argues in favor of it, you are dealing with someone unethical.  Period.

Find yourself another broker.

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