COMMISSION IS AN EXPENSE-TREAT IT AS SUCH.

The real estate industry has undergone some material changes in the past decade. Access to better information on both the part of the agent community, and the seller-buyer pool, has changed a lot about the way property is bought and sold. Unfortunately, there’s been little change in the way agents are paid.
Allow me to clear up a few things…first and foremost, commissions and fees are 100% negotiable…period. It’s an expense, and likely the largest expense you’ll have when it comes to selling your home. For that reason alone, you should educate yourself and truly compare what each agent can offer you before you sign a contract.
Nearly everyone knows someone who has a real estate license, and too many people blindly trust that their “friend” or relative is going to give the best service, for the best value. Not always the case.
You can pay too little and not get what you want, or pay too much and not get what you want. The agent that offers to sell your home for a low fee may offer you more, or less than the average agent. Conversely, there’s no guarantee that the agent who charges you “the going rate,” (which is a weak argument at best for justifying a fee) will deliver any more than the agent charging you 1%.
The bottom line, know exactly what you’re getting for that fee, and then hold that agent accountable. There is no “one size fits all” in real estate, as every transaction is unique. The fees paid should be commensurate with the job done…no more, no less. I’ve charged as little as $1500, and as much as 8.4%, and always earned every penny of it.

REDUCE COLLEGE HOUSING EXPENSES

As most parents are painfully aware, the cost of higher education in California has grown exponentially over the past decade or so. While many focus on the cost of tuition, the housing costs make up a larger portion of the overall expense.
My wife and I put three children through college, and to mitigate those expenses, we chose to buy and in some cases lease property to accomplish two things. One, to reduce the cost of housing while the children were in college…and two, to help them own their first home after they graduated.
In all cases, we were able to significantly reduce our housing expenses, and in every case we were able to help our child into home ownership…without breaking the bank.
Every situation is different, depending on where the child is attending, but the solutions are out there…here’s an example.
We always required our children to live the first year in the dorms, to acclimate them to college life. In the second year, however, for our youngest, we found a nice 4 bedroom home in a good part of town, within biking distance to school, and plenty of part-time job opportunities in the area.
The home was listed on the MLS for sale, after viewing it I crunched some numbers, and elected to go with a lease-option offer rather than a purchase offer. I knew the owners were investors, and that we had a shot at acceptance. The listing agent didn’t really understand these types of transactions, and stood to lose some commission, so I requested that I present the offer.
Long story made short, I made them an offer they couldn’t refuse, and that I was comfortable making, and for 5000 down I tied up the property for 3 years…the time remaining for my child in college.
After renting out the other three bedrooms, my net housing expense for the next three years was 350/mo., well below what a dorm or an apartment would have cost. Additionally, she was able to live in a very nice home, and was in a position to buy it at the end of the term.
You’re only limited by your imagination when it comes to putting deals like this together. I’ve done dozens of them, and can walk you through the options. It gets even better if you buy, with tax benefits…but the bottom line is getting your child in safe, comfortable housing, and mitigating the rising costs of education.

OPEN HOUSES-RISK VS. REWARD

“FREE ICE CREAM,” FREE HOT DOGS AND SODA,” “FREE MIMOSAS”…these are just a few of the open house teasers I noticed while driving around San Diego last weekend. Are these clever marketing ideas, or not? They’ll certainly attract hungry people…serious home buyers, not so much. Times have changed, and the way property is bought and sold has changed, commanding that we adapt or face the consequences. Consider these statistics:

*less than 1% of open house attendees make a purchase on the subject property.

*less than 40% of home buyers even attend open houses.

*most agents do little, if anything, to screen prospective attendees or verify their ability to purchase the property. This means ANYONE gets into your home.

Speaking from experience, open houses do not sell homes…they create leads for agents. For the small number of homes that do sell via an open house, it is reasonable to conclude that if that same property was marketed well, it would have sold anyway, without the unnecessary risk.

Abandon “old thinking” for a moment, and let’s apply some common sense. There is simply no good reason to let an unfiltered, unsupervised, and perhaps unqualified mob of people into your home, especially when it doesn’t increase your chances of selling. It’s a risk management nightmare that gives you a less than 1% chance of selling your home to one of those people. Meanwhile, they have complete access to your home.

If you insist on having open houses, then at the very least insist on the following:

*a sufficient number of agents/assistants to monitor the entire property.

*lock up all valuables and important papers.

*no food or drink that could result in spills.

*require in advance that any attendees provide a written proof of their ability to purchase. That’s their ticket in.

In my opinion, this would be the minimum standard…IF you’re going to have an open house. But why go through all of that? Prepare the home for market, capture the property’s best features on film and text, and syndicate that information to the places where home buyers are looking…the internet. Then, the only people coming to your home are people who may actually buy it.

Back to the FREE stuff…that may bring traffic, but dragging 50 people through your home means nothing without an offer to purchase. If it doesn’t bring you an offer, all you did is let a bunch of strangers in your home for no reason. Well, I digress…they did get FREE stuff.

That said, I enjoy the interaction at open houses, and of course generating new buyer leads…I just don’t think it’s the prudent thing to in most cases. As with anything else in real estate, there is no “one size fits all.” An open house may be the most efficient way to get traffic through your property, given the circumstances. If you choose to do or allow one, please consider the information provided here. For myself, I’ll generate those same leads in a different way, including the one that will buy your home…without the risk.

IT’S A SELLERS MARKET

THIS IS ABSOLUTELY A SELLER’S MARKET!
Typically, a real estate market is defined by supply and demand. Levels of available inventory often are used to indicate where the “leverage” lies. One to four weeks of inventory in the measured area, for the measured time frame, indicates a “Seller’s market,” as inventory levels are low and demand is high. Five to seven weeks of inventory indicates a “balanced” market, in that neither the buyers or sellers have any real advantage due to supply and demand. Eight weeks of inventory and up indicates that the measured area is a “buyer’s market,” as the levels of supply exceed the demand, putting the leverage back in the buyer’s hands.
I state the “measured area,” because it can change from one neighborhood to the next, or one town to the next. I ran Riverbank’s numbers today, using data I mined from the local MLS…here’s what it tells me:
*There are currently 42 active listings in Riverbank.
*Over the past 90 days, 53 homes were sold, or 17.66/month.
*That indicates that if we’re using the 90 day history, we have 2.38 months of inventory currently.
*However, it’s the Spring selling season, so I wanted to see the trend for the past 30 days, which shows a different picture:
*24 homes were sold in the past 30 days, reducing the inventory metric to 1.75 months of inventory.
Sellers have the leverage, folks. if you’re thinking of selling, NOW is the time. Rates are low, inventory levels are low…it won’t get any better for you than this.
If you want to see how these numbers look in your specific neighborhood, call me and I’ll run them for you.

MAKE THE OFFER

I see too many agents, and too many buyers pass on properties they would otherwise move on, simply because the seller’s price and their price are “too far apart.” The asking price is simply that…the asking price. At the end of the day, who determines the selling price? The buyer pool does. Most sellers and many agents arrive at an asking price using the wrong criteria, or in some cases, have the wrong motive. As a result, many homes are simply priced too high. Don’t let that discourage you, allow it to motivate you. There are a number of good deals out there, simply because the property is priced wrong, and too many people are afraid to “irritate the seller” or “waste their time” writing an offer when they’re too far apart on price. Understanding the seller’s motivation for selling, the market conditions, and a little salesmanship can turn a “no deal” into a “great buy.” I’ve represented buyers and even bought property myself for as much as 30% below asking price…NEVER be afraid to make the offer. What’s the worst thing that could happen? What’s the best thing that could happen?
Remember, the answer is always NO if you never ask.

What exactly constitutes “full service?”

Like most service industries, the range and scope of competing entities in the same business can often be very different…and perhaps they should be. Competitors will always try to find ways to separate themselves from their competition, as they should. Our business is no different. However, we’re not talking about finding someone to mow your yard, or paint your house…we’re talking about what may be the single biggest asset you’ll ever own. As such, it commands more attention from you when finding the right person to assist you.
You need assistance with preparation of the property, pricing and positioning in the marketplace, capturing the best assets of the property, marketing to the appropriate audience, negotiation, planning for a smooth transition out, and more.
So when one Broker claims they offer “full service,” what does that mean exactly? Well, unfortunately, the claim is subjective, and does not have a well defined and consistent framework.
As the real estate industry adapts to changes in the marketplace, new business models appear, offering an alternative to the “old way” of doing business. Flat fees, lower fees, and a mixed bag of services offered. The point is, it doesn’t matter what you call it, as long as the job gets done. As a seller, you should at a minimum, be sure to get the following:
*A competent agent that you feel is qualified to guide you through the process, and who is sensitive to your needs.
*Good advice in the preparation of your property for market, including professional staging if appropriate.
*Guidance on pricing, including data to support the advice, as well as positioning in the marketplace against the current competition.
*Guidance on a strategic move…will you move out and then sell, or sell and then move out?
*Exposure for your listing. It doesn’t matter how great the property is, or how well it’s priced, if no one sees it.
*Professional photography. I think we can agree that most, if not all agents are not skilled photographers. 10 minutes looking at listings on the internet will provide proof of that. I hire professional photographers, and you should insist on it.
*Internet exposure. 92% of home buyers use the internet…you have to be there. I syndicate my listings to over 800 websites (more than anyone else), and “feature” my listings on 4 of the top 5 websites. That guarantees my listings the best exposure.
*Negotiation skills. You should feel comfortable that once your property starts receiving offers, that your agent is qualified and capable to negotiate on your behalf. There is no replacement for that…experience, training, and life skills are the only way to get that.
*Communication. Above all, your agent needs to be an effective and consistent communicator. Read their past client reviews or testimonials, or talk to people they work with. Simply engage them prior to listing with them, and see how they communicate with you.

The bottom line, get the things you need, for the best price you can negotiate, and remember that it is negotiable. There is no “one size fits all.”
Full service means getting everything you need to get the mission accomplished, so be sure to do so.

There’s always more than one way to get the job done

It’s important for people to understand that when it comes to buying and selling real estate, you are not limited to the methods that “conventional wisdom” dictates. In fact, I would offer that conventional wisdom is self-serving, and archaic.
You don’t need a bank to buy a property, and if you truly understand the source of where mortgage money comes from, you would never do business with a bank again. That said, you are only limited by your imagination when it comes to assembling win/win purchase deals. Investors have been doing it for decades, and if they can do it, why not you? The only difference between you and them is that they were willing to do it…to step outside the box. It’s not because they have more money than you, as many investors buy property with little if any of their own money. So it’s not about money, it’s about taking a few steps that most others won’t do…that’s it.
I see too many people rob themselves of an opportunity to own their own home, because they believe it’s out of their reach. It’s simply not so, in most cases, where there’s a will, there’s a way.
I’ve used dozens of strategies to buy and sell property, both for my clients and myself. I can’t say I’ve used them all, because as you are reading this, someone is inventing a new strategy…all perfectly legal, just creative.

Are you paying too much for taxes and insurance?

In most areas by now, homeowners have received a new property tax bill, and they likely have increased since last year. It’s a good time to check that assessment and make sure you are being charged fairly against the value of your property. As a Broker, I’ve seen county valuations (those done by county appraisers) off by as much as 30%. That’s a lot of money if it’s not in your favor. Many people don’t even realize that you can challenge those inaccurate assessments…again, if they’re not in your favor. It’s a relatively easy process. It starts with having an accurate valuation done of your home, which I can help you with. While your at it, check those insurance rates. Many people have maintained long standing relationships with their insurance company/agent, and tend to just forget about it every year…only to find out once they do look at it and conduct a little due diligence, that they’re paying far too much. It’s not uncommon for me to see someone paying 500-700 dollars a year too much.

Who pays the commission?

I’ll bet if I asked 100 realtors that question, at least 99 of them would tell me “the seller pays the commission…for both agents.” While that is the generally accepted answer, it’s just not so…and for good reason.
Where does the ‘money’ come from to pay the commissions? Sure, eventually it comes from the Seller’s proceeds, but first it must come from the BUYER. Without the buyer’s funds, there are no proceeds.
Was it added to the price of the home? Probably not, but it was factored into the price. Had the seller not signed an agreement to pay 5-8% commissions, he/she would have likely offered the property at a lower price…so effectively, yes, it is ‘built in.’ Since most of the properties sold are done so through a Broker, in can be said that prices are artificially inflated due to the inclusion of commission fees. It’s the old, “everyone else is doing it, so I might as well” mentality. The seller has determined a price he/she is willing to sell for, based on the fact that they will give back 5-8%.
If a buyer needs credits for closing costs, etc., and pads the price but then asks the seller for a credit, who is paying those funds? The BUYER is. The seller is simply agreeing to allow the buyer to finance them.
It’s no different for commissions.

While I’m certain that many will disagree with me, their reasons just don’t hold water. Consider the following. Why would the seller want to pay for the buyer’s agent? Why would the buyer want their agent to be paid by the seller…the opposing party? If the buyer’s agent is being compensated by the seller, who is that agent loyal to? If you were on trial for murder, would you want the DA to pay for your counsel? While the example is a bit extreme, the point to be made is this…the industry has conditioned people to think that this is the standard, but it violates all rules of common sense and good business.
In my opinion, buyers should pay for their own representation, as should sellers. It eliminates any possible conflict of interest, and is just good business.
That said, the industry says otherwise…but it’s your property. You do what you feel is best for you.

There is no “one size fits all” when it comes to commission

Despite what appears to be S.O.P. for decades now in the real estate industry, I don’t believe there is a “one size fits all solution” for every seller. Properties are unique in attributes and condition, and micro markets are unique as well. The level of effort it takes to sell a property is different in nearly every case. So why do most agents charge, or attempt to charge, the same commission for every one of them? They shouldn’t, and I don’t. Rather, like any other service business, the commission charged should reflect the service rendered…no more and no less.
There are turnkey properties and fixer uppers, hands-off sellers and hands-on sellers. Some agents will spend a dozen hours on a sale, while spending 100 hours on another. While many agents feel it “balances itself out,” I disagree. In that case, one seller was undercharged, and the other overcharged…not a good business model. The commission charged should be negotiated based on these and other factors…so don’t hesitate to ask an agent to justify what they will charge, or to negotiate what you feel is fair, given all the factors.