Jerry Seinfeld has a joke about how he made new friends when he was a little kid, "If he's outside of my house NOW, he's my friend."
In Los Angeles, we do the same thing when looking for an agent.
- Owner: "I need to sell my house."
- Friend: "You should use my friend, Jimmy, he's great."
- Owner: "Great, what's his number?"
Is Jimmy actually "great"? Maybe he is. Maybe he's not.
As humans, we love to do two things:
- Give advice even if we don't know anything.
- Help our friends.
If that Owner trusts his Friend, then he will hire Jimmy. If he does not trust his Friend, Jimmy's phone does not ring. Does this friend know anything about Jimmy's skills? Does he even care?
I have had friends refer me to other people who have not worked with me before. They have heard me talk about real estate, but that's about it.
We are putting a lot of faith in that friend's ability to find and recognize talent. As far as we know, all Jimmy did was get his license and make a friend with someone the Owner knows.
And if we look at the stats, that is exactly what happens:
For example, in Los Feliz in 2016, there were 265 new listings, but only 159 actually closed. In other words, only 60% of the listings that hit the market sold. Might as well flip a coin.
Those 265 listings were divided between 180 different agents, and 134 of them only had one listing... of which only 86 of the 134 (65%) actually sold that one listing.
Most owners interview two agents who were referred to them by friends, and pick the one that scares them the least.
For that reason, most agents have an extensive rolodex of "friends" they call on regularly. Then when they're called to the living room to get a listing, all they have to do is be less scary than their competition.
Besides the fact they know the same person as you, there has to be a better way to tell if these agents are any good, right?
Luckily for us, there is.