How to judge a broker? Use the success rate and the stop rate.
When an owner makes the major decision to sell, it often comes with, understandably, a lot of stress. Legitimate questions include: What price can I expect? Who can I trust to properly market my most valuable asset? Who will represent my interests before those of others? Who will give me the best possible results?
So many brokers paint an illusory picture of their resumes and accomplishments, but very few actually have the statistical background to back up their superficial claims of success. Some even omit very important statistics while bragging about their results. As I said before, the most important number a seller should ask brokers at the first meeting is neither the commission rate nor the listing price, it should be the success rate. of the broker. Again, this is a simple ratio of the total number of listings that brokers have personally placed on the market divided by the number of those particular listings that they have successfully closed. Unfortunately, very few brokers follow this ratio or even understand its importance.
When you ask and question people, you can learn a lot not from what they say, but from the way they say it. Just ask a broker how many of their career ads are expired and unsold and watch them dodge the question and crawl. Undeniably, the most important number when registering is the asking price. This is why the second most important number to determine (and also a number essential to achieve a high success rate), is what I call the âSale To Original Priceâ ratio (or âSTOP Ratioâ).
There is a law of marketing that says maximum exposure equals maximum price. By overpricing an ad, the broker inherently reduces the number of potential buyers and therefore lowers the final sale price. For example, buyers with a maximum budget of $ 1 million probably won’t even consider, let alone visit and offer homes in the range of $ 1.2 million. On the other hand, real buyers with a budget closer to the unduly inflated asking price will be very disappointed and unwilling to make an offer after visiting a $ 1M property claiming to be $ 1.2M. To make matters worse, as the days go by, the market will inevitably view the list as outdated and possibly even flawed. This will absolutely lower the eventual sale price. Unfortunately, it’s very common, especially in Rockaway, to see homes selling for 25-30% less than their original asking price.
Brokers know the instinctively mistaken desire of sellers to hear a high price and a low commission in an interview. Rather than educating the potential client on the often fatal and always costly mistake of overpricing and sub-commissioning, they accept an absolutely impossible asking price just to lock down the list. Unfortunately, the quantity of listings outweighs the quality of listings according to current real estate practices. They will usually say anything just to get a list. Remember this though, a price reduction is an indication of fault and failure. I’m really not talking about a nominal 1% to 2% reduction to recoup the attention lost in a slow market. I’m talking about a relatively large price reduction or a series of reductions. This can only mean that the broker failed to properly inquire as well as the seller at the start of registration. As a result, the market is misled and properties are devalued. STOP Ratio measures the destructive and lazy practice of brokers’ usual overvaluation while the success rate exposes their many ads that do not sell. This is why you have never heard of these statistics. For the record, both numbers should hover around 100%. Anything less is inexcusable.