When to Recommend Upgrades to Clients
February 6, 2019 |
A listing agent is often asked by the seller, “What improvements should I make to the house to get the best price?” This puts the Realtor directly in the limelight as to his/her expertise in the area market and, going forward, may determine whether he/she will get future referrals from the seller based on performance. Are Realtors expected to be as knowledgeable as general contractors, appraisers, and building suppliers?
The biggest challenge to the agent is the cost of the upgrades versus the return in the sale. The Realtor may look at a home and tell the seller to do a major upgrade such as remodeling the kitchen or something simple like installing new carpet in the living room. The cost of the improvement must contribute significantly to the proceeds due to the seller at closing or the agent risks being labeled a failure.
For example, let’s say a Realtor suggests a $30,000 remodeling project in the kitchen but the seller only nets $15,000 at closing. The agent could be regarded as a failure and, quite frankly, the label will have been earned.
Realtors are regarded as experts in their field. That expertise includes having adequate knowledge of the cost of upgrades or improvements, The final effect they will have on the sale of the house. If Realtors haven’t prepared themselves to wear those numerous hats, then they will not be successful in their business. This doesn’t mean an agent must arrive at the listing appointment driving a bobcat and wearing a hard hat. It does mean the agent must have knowledge of which upgrades make the most sense for that particular home, in that particular neighborhood, as well as an informed estimate of the cost.
It then follows that the agent must know when to step back, be patient, and advise the seller to get professional estimates rather than hurriedly getting the house on the market and hoping for the best.
Listing agents must be aware of repairs that absolutely must be made prior to the house being placed on the market. For example, there are specific electric panels no longer deemed safe and, therefore, the home will fail inspection if not replaced beforehand. Problems with chipped paint, both inside and out, cause home inspections with the VA and FHA to fall flat on a regular basis. Foundations allowing water to seep into the basement and leaking roofs are certainly going to be a red flag to potential buyers and home inspectors.
Could the house be placed on the market with major flaws?
However, buyers will absolutely demand a significant price reduction to overcome the issues. Or the buyer pool could be reduced to cash-only transactions. If the repairs were not addressed with the seller, prior to that happening, then the agent did not fulfill the fiduciary duties to the client.
Sir Francis Bacon said, “knowledge is power” – that certainly holds true for today’s successful Realtors. It is not enough for a listing agent to be able to explain the Consumer Guide to Agency Relationships, correctly fill out the listing agreement, and place a sign in the front yard. Realtors require adequate knowledge of all things connected to and affiliated with real estate.