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Category Archives: real estate

Broker Fees?

I’ve seen an annoying new trend.  Buyer and Seller “Broker Fees”.  It may go by various names, but amounts to the same thing…  what Clark Howard would call a Junk Fee.

Entrance to Baltimore

Entrance to Baltimore

These are quite different from the other fees that may be involved in a real estate transaction, and there are a LOT of fees.  The lenders have fees, the closing attorney has fees, there are state fees, county fees, insurance fees, delivery fees…  Simply put, buyers and sellers are paying plenty of fees.  Adding some BS junk fee like a paperwork fee, transaction fee, administrative fee or broker fee is just adding insult to injury.

There is already a commission or sales fee that the real estate broker and agent are sharing.  There is no reason to add another official sounding fee on top of this that is after the negotiated amounts.

And, that is how it usually works… the seller negotiates the fee for selling their home, and everyone shakes hands… and then the agent mentions that there is a $495 paperwork fee or something along those lines.  They say it is required… maybe not saying that they are the ones requiring it…

In the case of buyers, after going through the buyer’s agency agreement and telling the buyer that the commission is generally paid by the seller, they hit the buyer up for a transaction fee… again, saying it is a requirement.

There are various reasons for this…  What it mostly comes down to is that people and companies in the real estate industry are hurting for income.  But, many of our clients aren’t exactly rolling in money… and even if they were, it isn’t right to tack on junk just because we think we can… Some agents are working for companies that charge US a closing fee for closing a transaction instead of charging a split and the agents are passing it along.  It should be part of their cost of doing business.

I just say NO!

No additional fees.  You will know EXACTLY what you are paying for my services prior to delivery and prior to completing the negotiations.  I try to deliver more for EVERY client than other agents… but that doesn’t mean I need to add junk fees on top of fair fee structure.

And there are some different options available for sellers… but that is another post.

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Deals…

Dealing money
Image by Phil Dragash via Flickr

There are some great deals out there…  I’m working on a couple of them with buyer clients right now.  And many of them are not hanging around for long.

Financing isn’t going to get cheaper, and in many cases, waiting for the price to drop further could be counter-productive if the cost of financing increases…

Just food for thought.

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How much earnest money is enough?

337/365: The Big Money
Image by DavidDMuir via Flickr

This is a common question from both buyers and sellers…

For Sellers…

The object is to get enough that it would be painful for the buyers to walk away without cause after the contingencies are settled.  For instance, $100 is obviously too low.  Just about anyone would be willing to walk away from that without too many worries.

But, what about $2,000? Well, if it is a $200,000 property, that might be a substantial amount, but for a $2,000,000 property, maybe not so much.

The bottom line is that you can ask for more if the amount offered isn’t realistic.  With VERY few exceptions, the buyer will need to put up a minimum of 3.5% as a down payment on the property in order to get financed.  The earnest money WILL be credited to them at closing, so 1% doesn’t seem that onerous… but some buyers may balk.

For Buyers…

Actually, I recommend the same amount in most cases.  There are some exceptions, but not many.  Keep this in mind, the idea is to make the seller comfortable with the transaction.  It IS part of the negotiating strategy.  And since the object of the buyer is to get the best price for the property, making the seller comfortable is a big part of that… and assuring the seller that the buyer will actually close WILL make the seller more comfortable.

I have had sellers ask for amounts that I thought were onerous for the buyers, but not that often.  Most agents don’t think about it until there is a problem.  But, the sellers generally DO think about it when they are looking at multiple offers, or they have EVER had a buyer fail to close.

In both cases we aren’t talking about failures because of inspection issues or other cause.

This specifically relates to contracts with contingencies released.  When there are hidden issues uncovered during the inspection, the buyer has a right to drop the contract (assuming it is written that way).  But if any financing and inspection contingencies are cleared, and the buyer backs out without a valid reason, the seller HAS been damaged.  The property has been removed from the market, and in many cases it is stigmatized… other buyers may assume that the reason for the failure was related to the property’s condition.

In that case, the seller should be compensated for their damage…

Also, remember that often the seller HAS the right to sue the (former) buyer for damages.  While we often assume that the the buyer is only on the hook for the earnest money, that isn’t actually the case… the buyer could be on the hook for more.

from LilburnDwellings

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Pricing isn’t about Price. It’s about…

exterior_2
Image by lane.bailey via Flickr

I can almost hear you say, “Pricing isn’t about price?  Then what the heck is it about?”

Here is the bottom line.  Just about every home on the market has a narrow range it WILL sell in.  Whether it is priced at $50,000 or $500,000, there is a price at which it will sell.  Below that price and we tend to see multiple offers.  Above that price and we tend to see reducred activity.

Obviously marketing and presentation come in to play… if nobody knows it is there, or when they come to see it the home lacks attraction, then the price ceases to be the major factor.  But it still comes back to price.

First, I’ll give you a chance to review…  Price ≠ Value

Next, let’s discuss ways to NOT price a property…

  • What someone owes on the property has absolutely no bearing on the value of the property.
  • What someone paid for the property has no bearing on the value of the property.
  • How much money someone needs in order to move has no bearing on the value of the property.

Each of those are external.  Back when the market was hot, I didn’t hear people saying that they owed $147,615 on their property and so that was what it needed to sell for… and I never heard them saying that they only paid $200,000 for a property and so that was all they needed to sell it for… even if the other houses around them were selling for $400,000.  It was all about how much other properties were selling for.

The situation is a little different today…  Sellers are doing the math on what they paid or what they owe.  I understand… I can’t afford to sell my house either… and partially because of that (and mostly because we love where we live) we aren’t looking for homes.

So, how DO we price a property?

Pricing is a strategy.  Obviously it has a little bearing on the final sales price… but not as much as most people (including many real estate agents) assume.  If it is priced too low, it will attract bidding.  If it is priced too high, it will attract nothing.

So, if we use pricing as a strategy, what are we trying to accomplish?  Well, there are two different options… and neither of them ends in $___,900.

Strategy #1 – We want to get the house in front of the right people! For most homes, this is the right strategy.  When consumers search, they tend to use predictable patterns.  At the low end of the spectrum, they use $10,000 increments.  The search might be $80,000 to $100,000.  As we move up in price, we quickly start to see $25,000 increments, with searches like $250,000 to $275,000.  Then we will see $50,000 and finally $100,000 increments.

Of course there will be people searching for slightly different end points, but this is the way most searches go.  Real estate agents tend to play with the end points a little, but consumers don’t play as much.  So…

Use round numbers that correspond to the searches at your price level and price on a “node.” So, instead of $99,000, price at $100,000.  Instead of $251,000, price at $250,000.  The reason to price on a node is that you can catch searches in two places…  $200,000 to $250,000 AND $250,000 to $300,000.  Pricing at $249,900 drops you out of one of those searches.

Look realistically at the market and at the prices the specific property can compete in.  Get it in those searches.  That might mean that you add that the seller is negotiable if you are a little higher than you should be ($96,000 home in a $100,000 search range), or it might mean that you have to hold the line on negotiations ($213,000 home in a $200,000 search range).  If buyers see a price that is WAY too high, they won’t bother look…

Strategy #2 – Use a “precise” number for pricing. I think this is more appropriate for a seller’s market, but there is some data that suggests that (what I call) random number pricing, is better for holding list price and selling price in a tighter range.  By that I mean that instead of listing at $100,000, one might list at $97,372 or $103,826.  Consumers percieve these prices to be “real” as opposed to $99,900… which they think of and refer to as $100,000, anyway.

In this case, we need to be VERY realistic in the value of the property.  We can’t price in a lot of “wiggle room” or fluff because it will not be searched by as many buyers as a property priced on a node.  And honestly, I can’t vouch for the data, but I can understand the logic.  I think that it is best reserved for properties that fall too far from a node to effectively use that for pricing.

Bonus Strategy – Good Luck with Crazy 8s. In China, the number 8 is seen as good luck.  This also holds for other cultures in the area.  I had a property that wasn’t getting any love at $185,000, but got two offers at $188,888…  I have seen research that in some markets this can be an effective way to round out the price.

What is clear is that pricing ending in $900 doesn’t really work.  Sure, we see it at the grocery store and every other place we shop, and there is a psycologocal reasoning behind it… but it doesn’t carry to real estate.  Especially at the top end.  There is simply NO way that a buyer for a house at $1,999,999 isn’t going to think in terms of $2,000,000 as the price for the property… and neither are they going to look at two properties, one priced at $1,999,900 and the other priced at $2,000,000 and think one is cheaper…  Even a $10,000 difference at that point is mute.

Bottom line

Pricing is a strategy, and isn’t really about price… it is about WHO will see a property.  What picking a price, the goal is to get the property in front of people that will like it AND have the capacity to buy it.

from GwinnettGarageGuy.com

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Wanna be a TV star?

The Canadian HGTV logo
Image via Wikipedia

HGTV is looking forsome buyers in the Atlanta area that are ready to get a deal done.  They want fun and energetic buyers.

If you think this would be interesting, let me know.  We can put in an application.

Also, if you selling a home and having trouble, there may be opportunities to have your home shown on HGTV along with some advice from their expert, Sabrina, on things you might do to help get it sold.

Shoot me a message if you are interested in either of these opportunities.

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