How Many Houses Do You Sell in a Year?

[Part of a series on how NOT to select a rep.]

When we are being interviewed by a potential client and this question is asked, our first response is "none".  That is because we don't "sell" houses.  Our clients sell/buy.  We help.

But the question is often asked on the premise that the more you sell, the better you are and the more you can do.  Sales are results, so more sales equals better results, right?

We think not.  Certainly, an agent must have a number of successful transactions per year to be considered "successful" ... and to pay bills and eat. But beyond some point, more sales may mean poorer, or at least different, performance and service levels.

There are only so many days in a year and hours in a day. We limit the number of active clients we will take on at any one time (to 10, though a constant 10 would have us lowering the number in a hurry!).  If we assist in the sale of a home a week during the high seasons, we are happy and not really looking for any more business (maybe less).

Why? Because we want to have a life while providing top service.  And because we decided we want to be fully involved throughout the process with our clients.

That is not saying we are the best (that's a story for a different place and time).  It's just our opinion that a number higher than that requires either reduced service or a different business model.

The reduced service is pretty obvious and unpleasant. The point to be emphasized again: More is not continuously better.

The different service model can work well, but you need to understand what it means.  Typically it means a small -- or not so small -- "firm" of professionals and service staff who, to a greater or lesser extent, specialize.  The "names" of the firm typically do the signing up -- listings or buyers.  For a listing, much day to day contact will be with a staff person.  If it's a buyer, or a seller who is also buying, a "buyer agent" may be assigned to that effort.

It's fundamentally the same model as a consulting, accounting, or advertising firm.  In those businesses, you only see the senior partners between signing and cheque-collecting when there is a big, BIG problem!  It works great with a well-managed firm with good training and a steady supply of young keen fresh meat!

I'm rambling.  The point is that that is how an agent "sells" 200 houses a year. They don't. [First, to be repetitive, an agent doesn't sell anything ... except maybe themselves].  A mini-brokerage, firm, team, whatever manages the sale of those homes.

To choose between someone involved in 20 sales or 200 or 300 sales, you need to decide on what kind of model you want and who you want to be working with.  The specific number of sales itself is not relevant.

Previously in this series of posts:

• The introduction to this series is here. 
• The chat about the not-validity of evaluating an agent by the ratio of sale price to listing price (You know the drill: "SOLD OVER ASKING!!") is here.
• How about the guy with the lowest "average-days-on-market"? Debunked here

Days NOT on Market

I'm reviving a series on how NOT to select a rep. The intro was posted previously. You can find it here. There was also a chat about the not-validity of evaluating an agent by the ratio of sale price to listing price (You know the drill: "SOLD OVER ASKING!!") ... That piece is here.

Another common suggested criteria is "Average days-on-market".  A low number is deemed an indicator that the agent prices and markets well, allowing properties to sell high and quickly.

We agree that a properly priced home will generally attract the right buyers and receive the best offers.  And, as a result, it will typically mean a prompt sale.  But list price is ultimately the seller's decision and there can be reasons to "test" higher prices.  We can (and will) decline the listing if we have major problems with the plan, but sometimes the logic is there.

For example, a common reason for "testing" a higher-than-likely price is an estate sale.  An executor may feel pressure to demonstrate to the heirs that every attempt was made to attract the highest price.

All that said, the ultimate "days-on-market" stat is often deceptively low for much the same basic reason that sale:listing price ratios are meaningless. 

98% of list ! NO, NO, NO, NO !!!!

[See update at end]
This is a pet peeve of mine. In two days, two flyers in my own mailbox from fellow agents emphasizing a property sold for, respectively, 95% and 98% of list price. Before anybody gets excited, the senders have done nothing wrong and what they say is true.

But I would STRONGLY suggest that you not give ANY weight to the fact that the property sold for a high percentage of list. Why? Let's check out these two mailings.

The first one is really pretty straightforward and accurate, claiming a 95% sale-to-listing ratio and a quick 10 day sale. This is very good in today's market, where the days-on-market and sale-to-list ratios are starting to look like the numbers we saw in "the old days". My only point is that this property was a fairly unique, higher end home, and the 5% below list represents almost $80,000!

The second one more clearly shows why we don't use these statistics and why we don't think people should use them to evaluate a representative. The home in question is promoted as having sold for 98% of list. It did. 98% of the LAST list. The full story is that the home was listed for 68 days at its original price. It was then re-listed at a slightly lower price. Sometime later the price was reduced another $20,000 and ultimately sold for almost $12,000 below that number.

This was quite likely a fair price. The time and pricing changes were likely quite understandable given that the whole thing was happening while the market was trying to decide what to do in response to economy spasms.

But, the way we look at it, the property sold in 3 1/2 months for 93.7% of the original list. That very likely indicates good work under the circumstances. But I doubt you will ever see it on a postcard.

This post qualifies as part of a series. My intro to how NOT to select a rep. was posted previously. You can find it here.

[Update: A client recently pointed out how this statistic could be useful.  The client agreed with me that using the sale:list ratio of the majority of agents would in no way distinguish or rank them.  However, she suggested that an unusually low ... OR HIGH ... ratio would be a good reason to eliminate an agent.

You aren't likely to hear anybody bragging about a low ratio.  But the point was that it would indicate an agent who encouraged or accepted prices that were too high AND did little to market them.  The result: limited reruns, reductions, etc and a home taking a long time to sell. 

OK, that was pretty much just academic.  Not many agents are like that.  If they were, they would have figured out how to disguise the statistic and/or you would never hear about it.  But too hight??  Yup, my client suggested that a high ratio implies properties being under-listed to encourage a quick sale not necessarily at the best price.  I'm not sure that would happen in the recent/current sellers' market where under-pricing is a viable -- and often annoying -- strategy.  But in a more balanced market, as many are now predicting ... good point. April 17, 2011]

Door #1 ... no, door #2, ... no .... oh Monty, how do I pick an agent?

Introducing a series on how (not) to pick an agent…
There are a lot of reasons used to select a real estate representative. Unfortunately the search for “good”, “logical”, “rational” “statistical” selection criteria is rather futile. It’s a hard job.
It’s just as hard for a good agent to express what makes them unique and/or an agent you should consider. Poor us.
In the end, many agents advertise their strength in the areas that buyers and sellers have decided or been told meet the above criteria. And they usually mean … nothing.
In our opinion, what you should be looking for is an agent or “consultant”
• that is most concerned about your satisfaction and success,
• who you can trust to work for you and you alone,
• who will be completely honest with you at all times and
• who will keep you informed and be available throughout the process.
Unfortunately, it is near-impossible to objectively measure any of these.
So you don’t. Instead …
• You assume that all agents are in it for themselves and the gold and you should just hire the toughest, self-centred, biggest producer of them all.
• Or you decide to hire the “nicest”.
• Or the one with the slickest presentation.
• Or you decide that they’re all the same so you might as well go with your brother-in-law’s kid who just got her licence.
• Or you go back to the “objective” measures and go with “sale-to-list-price” ratios; number or size of deals; average days-on-market; etc.
Wrong. Nice try, and we understand how difficult and frustrating it all is. But still wrong.
Coming up: A series on assorted “myths” in selecting an agent. We’ll try to be succinct and clear about how the business works and why a given selection criteria is of little use (or worse, could lead in a wrong direction). We’ll try to help with some of the ways that are good ways to select an agent. But we are the first to admit this list is shorter and harder to use.
So, yes, we’re trying to help but we’ll make the decision harder. Hopefully better. But definitely harder.

Related posts:
... "98% of list ... NO NO NO!!"
..."Days NOT on market"
... "How many houses do you sell..."

... or just click the "selection" item in the tag list on the blog (in case I add a post and forget to update these links ... it happens!)