As a Realtor dedicated to improving the transactions of my clients, I often look to other industries to see what is working and what isn’t. The other week I looked at the residential heating and cooling industry, where there definitely seems to be two competing models. Here are two scenarios.
You call a heating and cooling company to come out and take a look at your air conditioner, which isn’t working right. The technician comes out, takes a look at your unit, tells you what the issue is, let’s say a part malfunction, you tell them to fix it, and they are done and you wait until something goes wrong down the road. In this scenario, the repair technician is coming out to fix your issue.
In the second scenario, you again call a heating and cooling company to come out and take a look at your malfunctioning air conditioner. This time, the technician comes out and alerts you that they will first have to perform a diagnostic test, which will cost about $180 or so. After this test, they will provide you with the report. There’s like 300 things on this report. On the report, it shows that you have low air flow in one duct, the system is a decade old and new systems are more efficient, and there might be a broken part. The technician asks, “would you like me to have so and so come out and talk about system replacement?” You say no, you just want the broken part fixed. Then the technician says, “ok, I’ve noticed you don’t have a humidifier installed, would you like to take a look at the newest models?” You say no, just fix the broken part. The technician says, “ok, I’ve noticed that you have a restrictive air filter. The newer ones allow for higher airflow and helps the equipment run longer, would you like me to order one for you?”
Which service do you prefer, scenario one or two? I go for scenario 1, every time. I don’t want to be sold something every time something can be fixed. It’s quite annoying to me, and this pattern of upsell, upsell, upsell causes me to lack trust in the organization. As someone in real estate sales, I wonder if I’m more attuned to this technique than the general public. If you truly don’t know anything about heating and cooling, and a nice technician tells you all this stuff that will make your unit better, do you even know you are being sold?
In the real estate sales world, agents can upsell on the buy side. They way to do it is not the same as in heating and cooling repair. I despise the practice, and I will show you the numbers behind it to explain why.
Let’s say you are looking at a house to buy in Clayton that has an asking price of $800,000. You’ve been approved for more than $900,000. As you are looking with your real estate agent, the agent always seems to give their opinion on the $800,000 houses in a negative way, and when you see a house for more than $900,000 the agent always seems to get excited about the house. Oddly enough, you seem to physically go see more $900,000 houses than ones in the $800,000 range and below. What’s going on? There are two possibilities.
The first possibility is that in the current market, the good value homes really are at the high range of your affordability. In this case, the agent is just doing their job. In the current market, it can be hard to find a great house in certain areas at lower prices and the differences in values can be pretty dramatic.
The second possibility is a little more nefarious. That agent is going for the upsell. Here’s a little math on the real estate commission side to show you what is going on. Let’s assume a 2.7% payout to the buyer agent. This number is just a guess; sellers negotiate commission payouts in an open market.
An $800,000 sale at 2.7% is $21,600.00 in commissions
A $900,000 sale at 2.7% is $24,300 in commissions
The difference is $2,700, and that number isn’t enough for me to not be able to sleep at night. At Deerwood Realty, the focus is on the client and their transaction. If we put ourselves before our clients, we are not part of the real estate world that I want to be a part of. When buyers put their trust in you to help find them a quality home, you MUST put them first. Upselling may be fine in other industries, but I don’t see where it has a place in real estate sales.
John Schink is a real estate broker in the St. Louis metropolitan area who specializes in full service listings and buyer agency. He is a member of both the Saint Louis and Jefferson County Boards of Real Estate. If you are looking to buy a home for sale in Saint Louis, Missouri or the surrounding metropolitan area or considering selling your home, or for general real estate related inquiries, he can be reached at 314-707-4821 or [email protected]