Getting ready to sell your home? If you're like many home owners, you want to hire a real estate agent who has the experience that comes with selling many properties. Experience is important. Results are important, too. When it comes to results there are three key questions you can ask during the interview process:
What are the odds your home will sell?
How long will it take to sell your home?
How close will your selling price be to your list price?
We recently dug into these questions by reviewing listing data from the South Central Wisconsin MLS. We focused our review on the top 26 listing agents in South Central Wisconsin (based on 2014 sold listing volume). Our analysis covered listings for single family homes. To keep the data consistent, we excluded condos and new construction.
What we found is performance varies tremendously from agent to agent. As you will see in the numbers below, selling more homes doesn't necessarily translate into achieving better results. Surprisingly, some top-selling agents actually expire more listings than they sell. Other top-producers have an average sales price that is more than 10% below the list.
On the flip side there are a few Madison real estate agents who consistently outperform the competition. These top-performing real estate agents have very few listings which expire. In addition the top-performers sell most of their homes quickly and for prices very close to the list.
We've summarized the results for all 26 agents below. For each statistic we've ranked the agents and also calculated the MLS average. Note we've blinded the results to keep the focus on the numbers, not the agents.
Interview question #1: What is your listing success rate?
This is perhaps the most fundamental question you can ask a real estate agent. After all, you want to hire a real estate agent who has a strong track record of getting homes sold.
A listing can either sell or it can expire without selling. The listing success rate measures how often an agent's listings sell. The higher the number, the better. Here's how you calculate the listing success rate:
listing success rate = (# of sold listings)/[(# of sold listings) + (# of expired listings)]
A high number reflects strong performance, and the top-performing real estate agents in our study had listing success rates above 80%. These agents had at least 4 listings sell for every listing that expired.
The lowest performing agents had listing success rates below 50%. In other words, the lowest performing agents had more listings expire than sell. Although these agents were among the top-selling agents for all of 2014, they were also among the "most-expiring".
The average listing success rate across the entire South Central Wisconsin MLS was 64.5%. In other words, across the entire MLS roughly two listings sold for every listing that expired. This number makes it clear you don't want to settle for an average listing. Hire an agent whose performance is much better than the norm.
How can you determine an agent's listing success rate? One way is to ask the agent for the percentage of his listings that sell. A better way is to ask the agent for a list of all properties he's sold and expired over the last year. You can use the list to easily calculate his success rate. The list will also give you a good feel for the types of properties your agent has experience selling.
Interview question #2: What is your average days on market?
The "days on market" is another key performance measure. This measure reflects the number of days that pass between the listing date and accepted offer date. The lower the number, the better. You want to hire an agent who has a strong track record of selling properties quickly.
The best-performing agents in our study had an average days on market well below 60 days (two months). Within this group the top two performers had an average days on market of 21.3 and 32.5 days (about one month and under).
The average days on market for the entire MLS was 95 days (about 3 months). If you're like most sellers you don't want to wait three months to receive your accepted offer. You want your property to sell much more quickly than the average listing.
How can you figure out how long it takes an agent to sell his listings? Once again, ask the agent for the list of properties he's sold over the last year. Then review the days on market for each property - and ask questions.
For the properties that sold quickly, what were the keys to success? For the properties that took longer to sell, what were the reasons? More often than not the reasons will center around pricing.
If you see a long list of properties with a very high days on market, that could be a red flag and an indication of consistent over-pricing. When properties are priced too high, they will sit on the market. And when properties sit on the market they will have price reductions.
Which leads us to our third key question...
Interview question #3: What is your average sales price as a percentage of the original list price?
This measure is all about the money. As a prospective home seller, the last thing you want is a long series of price reductions with a contract price that is tens of thousands of dollars under the list. You want some assurance your home will sell for a price that is very close to your original list price.
The key phrase here is "original list price".
Unfortunately this statistic is most often quoted as the sales price as a percentage of the most recent list price. This version of the measure can be misleading because it ignores price reductions. Seek clarification when an agent quotes her sales price as a percentage of the list. Make sure the agent's performance is based on the original list price, not the most recent list price. This quick example shows why.
In the above example the sales price as a percentage of the most recent list price is 99%. This number sounds very impressive but it's also very misleading. The better and more transparent way to calculate this measure is to base it on the original list price. Using the original list price as the basis for this calculation, this agent's ratio is only 90% (not so impressive).
Using the original list price as the basis for our calculation, our study showed results varied significantly from agent-to-agent. The top-performing real estate agents in our study had an average sales price that was within 3 percent of the original list. The lowest performers had an average sales price more than 10 percent below the original list. The average for the entire MLS was almost 7 percent under the original list.
When you apply these percentages to a $300,000 listing the numbers get very interesting. For a $300,000 listing, the top performers will sell the home for within $9,000 of the original list. The average performers will sell the home for about $20,000 under the list, while the lowest performers will sell the home for more than $30,000 under the list.
Data Summary - Three Pictures of Agent Performance
The best listing success rate was 95.5%. The average was 64.5%. The lowest success rate was 47.8%.
The lowest days on market was 21.3 days. The average was 95 days. The highest was 391 days.
The highest sold price as a percentage of the original list was 98.1%. The average was 93.2%. The lowest was 81.7%.
The Best Performing Real Estate Agents
There were 3 Madison real estate agents in our study who consistently out-performed the competition across all 3 measures. Agents who performed well in one area tended to perform well across all three.
It's also interesting to note our study included several brokerages with a discount/limited service model. None of these discount brokers were among the top-performers. All of the top-performers were agents with a full-service brokerage model.
The Lowest Performing Real Estate Agents
When we took a closer look at the lowest-performing agents, we expected this list to be made up entirely of limited service/discount brokers. Surprisingly, all of the lowest performers were agents with a full-service real estate model. The discount/limited service brokers performed better than expected with one broker cracking the top 10. The best-performing discount/limited service broker ranked 9th out of 26. The 3 other discount/limited service brokers ranked 14th, 16th, and 22nd
Factors that can Influence the Numbers
When comparing real estate agents it's important to understand how one agent's client base differs from another's. An agent's geographic market and typical price point can impact all 3 statistics. For example, an agent with a focus on rural properties will tend to score lower on all three measures when compared to an agent whose focus typically includes properties in central Madison. Likewise, an agent with a focus on luxury properties will often rank lower when compared to the agent whose average price point is $250,000.
Tips for Hiring the Right Listing Agent
The data shows results can vary tremendously from agent to agent. Top-producing or not, there are some outstanding agents in our market who consistently deliver exceptional results. You can use the three statistics above to help you know when you've found one. Many home owners end up hiring a friend or relative to sell their home. It can be comforting to hire someone you already know, but the numbers show it's important to do your due diligence, too. Asking the right questions will help ensure you hire the right person.
Here are 10 great questions to ask your future listing agent:
Why are you in real estate?
What sets you apart from other listing agents?
How many properties have you sold in the last year?
How many listings have you expired?
What is your listing success rate, your days on market, and your average sold price compared to the original list?
Who pays for your marketing costs, you or your client?
Can you provide me with references of recent home selling clients?
This last question is particularly important. Be sure you check for references. Talking to a few previous clients can provide some great insight into the type of service you can expect from your agent.
Another great step you can take is to ask for an online link to your agent's sold and expired listings. Take a close look at the listings and be sure they include quality staging, crisp photos, and full-motion video tours. Look for creative listing descriptions. Form your own impressions about the presentation of each listing. Is it apparent your agent invests a significant amount of time, thought, and money into his listings? If the answer is "yes", you've probably found the right one.
This article is published courtesy of: Dan Miller, REALTOR Mad City Dream Homes & RE/MAX Preferred