Ray Wilson

Ray Wilson, author of Bought, Not Sold, brings academic discipline and field experience to expose consumers to the reality of the realty industry.



Reality in
Realty (1999)

1. "When An 'Agent' is not an Agent"
2. "Is You Is, Or Is You ain't, My Agent?"
3. "The Dating Game"
4. "States of Confusion"

Reality in
Realty 2001
1. Career Advice
1.1 "Don't Quit Your Day Job"

2. Seller Advice
2.1 "Appraiser, Yes! CMA, No!"
2.2 "Listing Purpose & Pitfalls #1, 2, & 3"
2.3 "Listing Pitfalls #4 & 5"

3. Buyer Advice
3.1 "EBA, EBA, EBA"
3.2 "Promises, Promises, Promises..."
3.3 "You! You! You!"

4. NAR
3.1 "The 'Big Grab' versus the Big Dope"
3.2 "If not revolution, then evolution""

Reality in
Realty 2006
1. "Making Magic in Chicago"
2. "No Sign of Reform in NAR Leaders"
3. "The Wrong in the Percentage Commission"

Reality In Realty 2001:

Basic Advice to Sellers:
Appraiser, Yes! CMA, No!

© 2001, Ray Wilson

Editor's note: Ray Wilson's original and popular IRED "Reality In Realty" series viewed the subculture of the real estate industry in terms of the "reality" of the world -- the "real world" -- around it. Reality is dictated by the world of consumers, not the island of one set of providers. Ray's academic discipline as a sociologist focuses the light of that external reality on the mischief of the few who profit by control over the many -- and who want to keep it that way.

The original series exposed industry acrobatics in the redefinition of both "agency" and the history of the industry's recently abandoned fidelity to true agency. Now, in 2001, Ray's articles continue to be a reality check, holding industry behavior before the mirror of real world common sense. The refreshing perspective of Reality In Realty has simply continued, evident in recent career advice to those considering real estate careers, and in the current and planned pieces of advice to both sellers and buyers. It makes sense to regroup his 2001 work under the ongoing column heading of "Reality In Realty 2001" and to anticipate that viewers will be watching the IRED homepage for each new appearance.

You would be wise to do two things, two distinctly separate things, before placing your home on the market.

  1. Get a professional estimate of the market value of your property;
  2. Choose your market method -- full agency, limited agency, non-agency service, or FSBO (For Sale By Owner).

The separation of these two elements is so important, that I am taking my own advice. I am separating out discussion of #2 from any further discussion here. It will be the subject of my next column. Staying now with #1, you would be most unwise, (given the information in this column) to proceed with the traditonal approach of letting your agent (or licensees seeking to be your "agent") so much as suggest a market value.

"Nothing so delays the sale of a property as the owner's inflated view of the value, and nothing so speeds up a sale and guarantees a loss as the owner's underestimation of property value. And nothing in the traditional listing process is so unreliable and untrustworthy as the estimate of value placed on it by someone with a vested interest in the value -- i.e., specifically an agent who wants to list it, use it to attract buyers for other properties, and sell it for a commission."
(Bought, Not Sold, pages 289-290)

You certainly want the person who can get you the highest price for your home. That unavoidable fact is the main reason (of many) that estimating the "gettable" price must be removed as a factor in the agent's pitch to list your home. Agents cannot effectively compete for a listing while saying they will get a lower price than a competitor who might either be unscrupulous or simply not know any better. The truth is that agents generally do not "know better" than professionals whose profession actually is appraising value. Oddly enough, these people are called "appraisers" and they will be far better trained in that task than a salesperson.

By definition, value is not a function of what you want or need, but of what the market will pay, and even relatively ethical licensees can convince themselves that an "ungettable" price can be "got." Moreover, other factors come into play:

  • An underpriced home will sell very fast with little effort or expense, bringing the firm a quick and tidy profit

  • An overpriced home -- say, a $200,000 home listed for $250,000 -- will still draw in $250,000 buyers and profit for the firm from sale of properties other than yours.

  • At any price which fails to get your listing, the firm will get no profit whatsoever.

As I wrote in the above Bought, Not Sold quote, the wrong price can cost you big time. On the other hand, getting the right price might not cost you anything at all. Before the final transaction, an appraisal will almost certainly be required by a lender or a smart buyer, for no one who knows better will put any value on your agent's "CMA" (Comparative Market Analysis). You, however, can put value on it and to your advantage. When the agent makes the CMA part of his/her pitch -- implying it is worth an appraisal -- then simply give it that value. Tell the agent you have already paid for an appraisal, and subtract it from the commission you will agree to pay for the services you really need -- i.e., getting out and selling your house (a real issue in the choice of agent, to be covered in my next column).

The cost of an appraisal will be paid, and in different places or as a result of negotiation, it can fall on the buyer or seller -- but that really means on both! When the buyer pays, that influences the offering price downward. A seller with a bank-acceptable appraisal already done can use it to influence price upward. An independent appraisal with a credible market price not only eliminates the need for the agent's CMA effort, but makes the whole sales effort that much easier and quicker (though not as quick as underpricing).

Everyone gains from an accurate estimate of value -- but it is important to remember that usually only the seller loses when the estimate is wrong. Buyers learn market value quickly from their shopping around and simply don't offer on overpriced houses. They snatch underpriced homes with the oblivious sellers never seeing their loss. The cost to the seller of the time delay until an overpriced home finally drops to real value is about 10% per month of the net after-sale return. It is all preventable with an appraisal.

There is one more benefit to sellers -- one that makes a convenient segue to the coming column on choosing your agent (or non-agent). Once you've gone through the professional appraisal on your house and know its comparative value -- you are in a much better position to judge the comparative value of those who are competing for your business. You will know what you've got; but let them talk about it, giving them all the rope they need to either hang themselves or tie up the deal. You and your agent will both gain in a relationship where you can trust in having made an informed choice.