Whether you like it or not, once you enter into a listing agreement with a friend, you’ve just created a business relationship. In this post we highlight some of the things to watch out for when listing with friends or family.
1. This is how they make money, interests may be unaligned
Once you start to sell your home using a friend, you are entering into a business relationship with one of your most valuable assets on the line.
In Stephen J. Dubner and Steven Levitt’s book Freakonomics, they famously laid out how fast interests are misaligned between the realtor and client. Even if it’s your friend. Take for instance you’re selling a home and you want to get $310,000 for it. You get an offer in for $300,000 your realtor has very little incentive to fight hard to get that extra 10k for you. They will be making a 3% commission, so on $310k that’s $9,300 and on $300k they are looking at $9,000. So, only a difference of $300 in their eyes. They will want to do everything to make sure a deal closes regardless of if it’s an extra 10k for you. Whether they say it out loud or not this will be in the back of their head. For you and your friend this may cause some hefty tension.
2. If they cut you a deal, they may not give full attention
Emotions will run high when you’re selling your home, it is your most valuable asset after all. You will expect professional communication and answers when warranted. However, your friend probably cut you a deal, they aren’t making the commission they’d normally make selling your home. Why should they put in the same effort? Even if they say they’ll give you top notch service, don’t you think this will be bouncing around in the back of their head?
Before I started at ListingSpark, my friend was my agent on my first home purchase. He’s a good friend so, of course he cut me a deal. However, he had other clients, and they were his top priority. He knows I am not going to hire another realtor. So, I received subpar communication. It was still nerve racking at times. When there are offers on the line and back and forth between other agents, it will drive you mad if you don’t know what’s going on. We have people list their homes with us all the time because of this exact thing. They want full insight into their listing. That’s one of the reasons that ListingSpark exists, it’s not just to cut commissions for the seller, but to allow them to have full control and insight into what’s going on with their listing.
Subpar communication isn’t only dangerous because it will keep you in the dark, but time sensitive items could kill a deal. If you are in a back in forth negotiation, and your friend is radio silent, you may lose a deal cause the buyers walk away from lack of response. This happens way too often.
When you sign on to have an agent to help with buying a home, they will be privy to all of your financial information. Sometimes this is best left to someone strictly in a business relationship. Not many people would want to go to a psychologist they knew and tell them all their thoughts and feelings. A lot of people feel the same way about their finances. How might your realtor friend look at you when they find out how much you make? Or, how many outstanding debts you really have. This can create some uncomfortable situations as well.
4. They just might be a bad agent!
There’s a saying in the real estate community that the only difference between a driver’s license and a real estate license is that not everyone has a drivers license. It’s funny because it seems so true. It only takes a few weeks online to get a license. 20% of agents do about 80% of the deals. That leaves 80% of agents out there doing a couple deals a year at best. At ListingSpark we have to deal with these agents all the time. Some agents will outright ask us to help them read a contractt! It’s insane! Just because your aunt has been an agent for 20 years doesn’t mean she’s any good. No offense, but we see this all the time. This creates huge issues between friends and family members. It will ruin a relationship when a friend botches a deal. How do you even fire your friend or family member. Not to mention you’re still on the hook to pay them 3% if the botched deal closes!
Let us know what you think. Ask us about how to find the right agent, or for more controll and NO commission listings, check us out at ListingSpark.com!
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