When considering the purchase of a product or service, how many times in your life have you thought any or all of the following?
- If it sounds too good to be true, it probably is;
- There is no such thing as a free lunch
- Nothing in life is truly free;
- There is a cost to everything;
- Cheaper is generally not better;
- It is worth the money it cost me;
- At these prices, there is always a catch;
- What glitters is not always gold;
- Buy it right the first time or buy it again;
- Lowest cost does not mean best value;
- You generally get what you pay for.
How many times in life have you found these expressions to be true? For me, they were true more times than not. In the same context, when you think about the purchase of a product or service, what is the one question that you most commonly ask? Perhaps the following question comes to mind often.
Sellers often ask how much is it going to cost me?
This is a fairly typical question but when asked the focus is generally on the price of the product or service. While price is an important consideration, what about some of the other elements of cost such as time, effort, effect, and risk? Time is money to many people. If the acquisition of something takes a great deal of time, does it not make sense that time is also important? What about effort? Does the acquisition of something require skill sets or knowledge that need to be obtained through additional education or training? What is the effect on you, either good or bad? For example, does the acquisition process involve stress? Does the stress adversely affect you or others close to you? What about risk? Is there a risk involved that could come back to you and bite you?
The cost of acquisition is only one side of the equation. We usually have to give something to get something. Cost is what we have to give up. The benefit is what we get in return. Does the benefit outweigh all of the cost?
Value = Benefit / Cost
Benefiting from something is important. Perhaps more important is the end result. What was the end result? Was it what was desired? Real estate services are no exception to this discussion. Take, for example, a person who wants to sell their home. They have several options that can include:
- Try to sell it themselves;
- Hire a discount brokerage/agent;
- Enlist the services of a full service brokerage and agent.
Some home sellers consider the first option as a means of saving money. This comes back to the earlier discussion about price only being one factor in the cost of doing something. When considering this option, consider whether or not you have knowledge and skills to effectively market the home in the current market. Should you receive an offer, consider also if you know what is required to write a legally enforceable contract consistent with current laws, regulations and practices. What methods will you use to sell your home? What must be disclosed by law? What if your home does not sell? How well do you know the current Comox Valley real estate market? Are you planning to cooperate with brokerages/agents who work with buyers? If so, will you offer adequate compensation to get them to work with you? In addition to being adequate, the money must be paid in accordance with the law. Do you know what this means? I recall listening to a seller and her plans to sell her home herself. What she discussed as her plan to compensate a real estate agent who brought her a buyer was in violation of the law.
Next is the “discount” option. While the discount brokerage and real estate agent may choose to accept less commission for the services that they offer, they also expect that other brokerages/agents offering higher levels and types of service with greater expenses will accept less for the services that they offer their clients. It costs more to offer more. When two comparable homes are listed for sale and one offers adequate compensation to cooperating brokerages/agents and the other does not, which home do you think will be shown? Real estate agents operate businesses. Like any other business, they must cover their expenses, and make some money to stay in business. As an aside, what is interesting about the discount option is that these types of agents readily accept full commissions on the buying end of transactions when they bring a buyer to a seller who is represented by a full service agent. As discount businesses, why are they not accepting discount commissions on this end of the transaction as well? Also interesting is the following question. What does the discount brokerage/agent do when they cannot sell the home? Do they refer the seller to a full service agent and ask for a significant referral fee from that agent? Is the referral fee comparable to what they would have received as a “discount” commission on the selling end of the transaction? With such a business model, how much incentive would they have to sell your home?
Finally, there is the full-service option. Some full-service agents work part time and some work full time. What is meant by full-service varies between agents, including ones who are licensed through the same brokerage. Each provides a minimum level and type of service but what services they will provide and how will vary. This should come as no surprise. The education, training, and experience of individual agents will vary as much as the knowledge and skill sets they possess. They all have their own levels of competence, and they all have their own character. Assuming that two full-time, full-service agents work for the same brokerage and that they charge the same commission, but provide different levels of service, which offers the most value?
Planning to sell your Comox Valley home? Contact me directly or through REMAX Ocean Pacific Realty, and let’s discuss the real estate services that I offer my clients, and the strategy and plan that I will use to sell your home in the current market.
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