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Real Estate Professionals

Real Estate Professionals --
Meeting the Needs of Home Sellers
by Dr. Paul C. Bishop, Harika "Anna" Barlett and Jessica Lautz, NAR Survey Research

Selling a home is a major decision for most households. Whether that decision is driven by the desire for a larger (or just different) home, a relocation due to a job change or personal situation, or plans to retire in a different community, selling one's home can be a major challenge.

Fortunately, sellers can choose from many options when looking to successfully complete a home sale. Sellers can work with a real estate agent who will manage the entire transaction, or they can take on the entire selling and marketing responsibility themselves, without the assistance of an agent.

In fact, most home sellers do work with a real estate professional. Results from the recently released 2007 NAR Profile of Home Buyers and Sellers indicate that among recent home sellers, 85 percent were assisted by a real estate agent. How those home sellers select their real estate agent, what they expect their agent to do for them in the home sales transaction, and whether or not they would use that agent again are just a few of the questions that the report answers. Highlights from The Profileare presented below.

Home selling experience
Some home sellers have considerable experience in the buying and selling of homes. The typical home seller has owned three homes; about one third have owned two homes. Not surprisingly, older sellers typically have owned more homes than younger ones; 43 percent of sellers 45 to 64 years old, have owned at least four homes, while more than a third of sellers who are 65 or older have owned at least five homes. Despite their previous experience of home buying and selling, the majority of these sellers still rely on the expertise and knowledge of real estate professionals to help them in selling a home.

Finding a real estate professional
Most home sellers rely on referrals from a friend or family member or on their own experience with a particular agent when they look for a real estate professional to assist in their home sale. Among recent sellers, 41 percent reported that they found the agent they used in their home sale as a result of a referral, while 23 percent used the agent in a previous home sale or purchase transaction. Although there are a number of other ways that sellers can find an agent, they are far less common.

The most important factor when choosing a real estate professional, cited by 38 percent of recent sellers, is the reputation of the agent. For an additional 20 percent of sellers, the agent's honesty and trustworthiness was the most important consideration. Both of these qualities are closely tied to the manner in which most sellers find an agent - through referrals or as a result of their own experience with a particular agent, both of which can serve to validate reputation and trustworthiness.

"Please Help Me"
Sellers can choose the level of service they would like their real estate agent to provide. Some sellers want their agent to perform many tasks and manage the process from start to finish; others choose to perform some tasks themselves. In most cases, real estate agents assisted recent home sellers with many tasks. Seventy-four percent of sellers worked with their agents to determine the asking price, while 81 percent reported that their agent entered their property in the Multiple Listing Service.

Most sellers continue to favor full-service brokerage, where real estate agents provide a range of services that generally entail managing the entire process of selling a home. Limited services, which may include discount brokerage, and minimal services also are important business models for sellers who want to take an active role in the process such as holding open houses, contacting potential buyers, negotiating terms or preparing the contract. Comparable to findings in the previous year's profile, the 2007 report found 81 percent of sellers use full-service brokerage, 9 percent choose limited services and 9 percent use minimal service, such as simply listing a property on a multiple listing service.

Expectations and performance
Sellers have several expectations of their real estate agent depending on the particular circumstances of each sales transaction. These expectations vary among sellers in part because some sellers are willing to take on more of the tasks associated with selling a home, while other sellers want an agent to closely manage the entire process.

Most sellers expect an agent to market the home, with 90 percent of sellers reporting their home was placed on a MLS and 88 percent saying their home was listed on the Internet; eight in 10 had yard signs. For one-quarter of sellers, the most important expectation is that the real estate agent will help sell the home within a specific timeframe. Nearly an equal percentage expects their agent to help find a buyer for their home.

Eight in 10 sellers, using all kinds of brokerage services, said their agent reviewed sales contracts and purchase offers, managed paperwork and contracts, negotiated with buyers and scheduled showings. Three-quarters worked with their agent in determining the asking price, and said their agents coordinated home inspections and appraisals.

FSBOs and commissions
While the majority of home sellers use a real estate agent to sell their home, some take on the tasks associated with completing a sale themselves. Many of these "for sale by owner" (FSBO) sales are between a seller and buyer who knew each other prior to the sale, which in most cases would not require the assistance of a real estate professional. The percentage of sellers who sell their home themselves has changed little in recent years. The level of for-sale-by-owner transactions remains at a record-low market share of 12 percent, the same as in 2006. The level of FSBOs has declined since reaching a cyclical peak of 18 percent in 1997.

Why do people try to sell a home themselves? One in five FSBO sellers sold their home to a friend or relative. But the chief reason that sellers choose to sell their home without the assistance of a real estate agent, cited by 56 percent, is that they do not want to pay a fee or commission. Seventy percent of open-market FSBO sellers - that is, FSBO sellers who sold their home to a buyer whom they did not know - cited the fee or commission as the main reason.

But it is important to note that often a real estate agent's commission is one of several points of negotiation when sellers choose an agent. In fact, sometimes the real estate agent herself initiates the discussion of the commission or fee for selling the home; other times the seller raises the topic. Among recent sellers, 39 percent reported that the real estate agent raised the topic of compensation, while an additional 31 percent of sellers reported that they initiated the negotiation over the fee or commission.

"Repeat" business
Real estate brokerage is a "people" business, and consumers' satisfaction with their real estate professional is essential for generating repeat or referral business with the same or new clients.

Whether or not sellers would recommend the agent who assisted in their sale is a critical measure of the sellers' satisfaction. Moreover, the important role of referrals and word-of-mouth in the process of selecting an agent suggests that potential home sellers value the experience of others when choosing
an agent.

Among recent sellers, 62 percent reported that they would definitely use the same agent again or recommend that agent to others. An additional 19 percent would probably use the agent again.

Real estate is a very competitive industry. There are well over a million REALTORS® serving property buyers and sellers. What is particularly unique to these professionals is that they share vital information with their competitors. The industry is also very entrepreneurial. Real estate professionals constantly experiment with business models and cater to a wide array of consumer interests and preferences. NAR embraces this competition, and to succeed in this marketplace, REALTORS® must place a high priority on client satisfaction. The 2007 NAR Profile of Home Buyers and Sellersreveals that REALTORS® and other real estate professionals are effectively answering the needs of home sellers.

In August 2007, NAR mailed an eight-page questionnaire to 150,000 consumers who purchased a home between July 2006 and June 2007. The survey yielded 9,966 usable responses with a response rate, after adjusting for undeliverable addresses, of 6.9 percent. Consumer names and addresses were obtained from Experian, a firm that maintains an extensive database of recent home buyers derived from county records. information about sellers comes from those buyers who also sold a home. All information in The Profile is characteristic of the 12-month period ending June 2007, with the exception of income data, which was reported for 2006. In some sections comparisons are also given for results obtained in previous surveys. Not all results are directly comparable due to changes in questionnaire design and sample size. The median is the primary statistical measure used throughout the report. Due to rounding and omissions for space, percentage distributions may not add to 100.